<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000
REGISTRATION NO. 33-74024
NO. 811-8286
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- --------------------------------------------------------------------------------
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. 9 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 11 [X]
</TABLE>
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)
1 PARKVIEW PLAZA, PO BOX 5555, OAKBROOK TERRACE, ILLINOIS 60181-5555
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
(630) 684-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
A. THOMAS SMITH III
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
VAN KAMPEN INVESTMENTS INC.
1 PARKVIEW PLAZA
PO BOX 5555
OAKBROOK TERRACE, ILLINOIS 60181-5555
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
Copies to:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 407-0700
Approximate Date of Proposed Public Offering: As soon as practicable following
effectiveness of this Registration Statement.
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
TITLE OF SECURITIES BEING REGISTERED: SHARES OF BENEFICIAL INTEREST, PAR VALUE
$0.01 PER SHARE.
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- --------------------------------------------------------------------------------
<PAGE> 2
VAN KAMPEN
GLOBAL MANAGED ASSETS FUND
Van Kampen Global Managed Assets Fund is a
mutual fund with the investment objective to
seek to provide total return through a managed
balance of foreign and domestic equity and
debt securities.
Shares of the Fund have not been approved or
disapproved by the Securities and Exchange
Commission (SEC) or any state regulator, and
neither the SEC nor any state regulator has
passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary
is a criminal offense.
This prospectus is dated APRIL 28, 2000.
[VAN KAMPEN FUNDS LOGO]
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary................................ 3
Fees and Expenses of the Fund...................... 5
Investment Objective, Policies and Risks........... 6
Investment Advisory Services....................... 12
Purchase of Shares................................. 14
Redemption of Shares............................... 21
Distributions from the Fund........................ 22
Shareholder Services............................... 23
Federal Income Taxation............................ 24
Financial Highlights............................... 26
</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 representation 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.
<PAGE> 4
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The Fund is a mutual fund with the investment objective 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 or depreciation.
INVESTMENT STRATEGIES
The Fund's investment adviser seeks to achieve the Fund's investment objective
by investing in equity securities and debt securities of issuers in the U.S. and
foreign countries. The Fund's investment adviser uses a "top-down" investment
approach that emphasizes country and/or sector selection and weighting rather
than individual security selection. Within a particular country or sector, the
Fund seeks securities of issuers designed to track the markets of that country
or sector. The composition of the Fund's portfolio will vary over time based
upon the evaluation of economic and market trends by the Fund's investment
adviser and the anticipated relative return available from a particular country
or sector and type of security. Portfolio securities are typically sold when the
Fund's investment adviser's assessment for total return of countries or sectors
materially changes. The Fund may invest in any country, including developed or
undeveloped countries. Under normal market conditions, the Fund invests at least
65% of its total assets in securities of issuers located in at least three
different countries (including the U.S.). Under normal market conditions, the
Fund invests at least 25% of its total assets in high-quality debt securities.
The Fund may purchase and sell certain derivative instruments, such as options,
futures, options on futures, and currency-related transactions involving
options, futures or forward contracts, for various portfolio management
purposes.
INVESTMENT RISKS
An investment in the Fund is subject to investment risks, and you could lose
money on your investment in the Fund. There can be no assurance that the Fund
will achieve its investment objective.
MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. Investments in equity
securities generally are affected by changes in the stock markets, which
fluctuate substantially over time, sometimes suddenly and sharply. Foreign
markets may, but often do not, move in tandem with changes in U.S. markets, and
foreign markets, especially developing or emerging markets countries, may have
more price volatility than U.S. markets. During an overall stock market decline,
stock prices of small- or medium-sized companies (in which the Fund may invest)
often fluctuate more than stock prices of larger companies.
The Fund's investments in debt securities generally are affected by changes in
interest rates and the creditworthiness of the issuer. The market prices of such
securities tend to fall as interest rates rise, and such declines tend to be
greater among debt securities with longer duration.
CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments
of interest or principal. Because the Fund invests in high-quality debt
securities, it is subject to a lower level of credit risk than a fund investing
more in medium- or lower-quality securities. Foreign fixed income securities may
involve greater risks than those issued by U.S. companies or the U.S.
government. Economic, political and other events unique to a country or region
will affect those markets and their issuers but may not affect the U.S. market
or similar U.S. issuers. A substantial portion of the Fund's fixed income
investments may be denominated in a foreign currency. Changes in the values of
those currencies compared to the U.S. dollar may affect the value of the Fund's
investments. These risks are greater in emerging market countries.
FOREIGN RISKS. Because the Fund will own securities of foreign issuers, it will
be subject to risks not usually associated with owning securities of U.S.
issuers. These risks can include fluctuations in foreign currencies, foreign
currency exchange controls, political and economic instability, differences in
financial reporting, differences in securities regulation and trading, and
foreign taxation issues. The risks of investing in developing or emerging
markets (in which the Fund may invest) are greater than the risks generally
associated with foreign investments including greater political uncertainties,
an economy's dependence on international development assistance, currency
transfer restrictions, and greater delays and disruptions in settlement
transactions.
3
<PAGE> 5
RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures, options on futures and
currency-related transactions involving options, futures or forward contracts
are examples of derivatives. Derivative instruments involve risks different from
the direct investment in underlying securities. These risks include imperfect
correlation between the value of the instruments and the underlying assets;
risks of default by the other party to certain transactions; risks that the
transactions may result in losses that partially or completely offset gains in
portfolio positions; and risks that the transactions may not be liquid.
NON-DIVERSIFICATION RISKS. The Fund is classified as a "non-diversified" fund,
which means the Fund may invest a greater portion of its assets in a more
limited number of issuers than a "diversified" fund. As a result, the Fund may
be subject to greater risk than a diversified fund because changes in the
financial condition or market assessment of a single issuer may cause greater
fluctuations in the value of the Fund's shares.
MANAGER RISK. As with any managed fund, the Fund's investment adviser may not be
successful in selecting the best-performing securities or investment techniques,
and the Fund's performance may lag behind that of similar funds.
INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:
- - Seek total return over the long term
- - Are willing to take on the increased risks associated with investing in
foreign securities
- - Can withstand volatility in the value of their shares of the Fund
- - Wish to add to their investment portfolio a fund that invests primarily in
equity and debt securities of issuers in the U.S. and foreign countries
An investment in the Fund is not a deposit of any bank or other insured
depository institution. An investment in the Fund is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
An investment in the Fund may not be appropriate for all investors. The Fund is
not intended to be a complete investment program, and investors should consider
their long-term investment goals and financial needs when making an investment
decision about the Fund. An investment in the Fund is intended to be a long-term
investment and the Fund should not be used as a trading vehicle.
ANNUAL PERFORMANCE
One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the five calendar years prior to the
date of this prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that the past performance of the Fund is not indicative of its future
performance.
<TABLE>
<CAPTION>
ANNUAL RETURN
-------------
<S> <C>
1995 13.30
1996 12.44
1997 8.94
1998 15.84
1999 11.51
</TABLE>
The Fund's return for the three-month period ended March 31, 2000 was -0.27%.
The annual return variability of the Fund's Class B Shares and Class C Shares
would be substantially similar to that shown for the Class A Shares because all
of the Fund's shares are invested in the same portfolio of securities; however,
the actual annual returns of the Class B Shares and Class C Shares would be
lower than the annual returns shown for the Fund's Class A Shares because of
differences in the expenses borne by each class of shares.
During the five-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 11.25% (for the quarter ended December 31, 1999) and the
lowest quarterly return was -6.41% (for the quarter ended September 30, 1998).
4
<PAGE> 6
COMPARATIVE PERFORMANCE
As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with two broad-based market indices
that the Fund's investment adviser believes are appropriate benchmarks for the
Fund: Morgan Stanley Capital International World Index* and J.P. Morgan Global
Traded Government Index**. The Fund's performance figures include the maximum
sales charges paid by investors. The indices' performance figures do not include
any commissions or sales charges that would be paid by investors purchasing the
securities represented by these indices. An investment can not be made directly
in the indices. Average annual total returns are shown for the periods ended
December 31, 1999 (the most recently completed calendar year prior to the date
of this prospectus). Remember that the past performance of the Fund is not
indicative of its future performance.
<TABLE>
<CAPTION>
Average Annual
Total Returns
for the
Periods Ended Past Past Since
December 31, 1999 1 Year 5 Years Inception
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen Global
Managed Assets
Fund --Class A
Shares 6.17% 11.29% 9.67%(1)
Morgan Stanley
Capital
International
World Index 27.31% 18.90% 17.10%(2)
J.P. Morgan
Global Traded
Government Index -5.08% 6.69% 6.44%(1)
.................................................................
Van Kampen Global
Managed Assets
Fund --Class B
Shares 6.72% 11.30% 9.74%(1)
Morgan Stanley
Capital
International
World Index 27.31% 18.90% 17.10%(2)
J.P. Morgan
Global Traded
Government Index -5.08% 6.69% 6.44%(1)
.................................................................
Van Kampen Global
Managed Assets
Fund --Class C
Shares 9.79% 11.47% 9.78%(1)
Morgan Stanley
Capital
International
World Index 27.31% 18.90% 17.10%(2)
J.P. Morgan
Global Traded
Government Index -5.08% 6.69% 6.44%(1)
.............................................................
</TABLE>
Inception dates: (1) 5/16/94, (2) 5/31/94
* The MSCI World Index is an unmanaged index of common stocks and includes
securities representative of the market structure of 22 developed market
countries in North America, Europe, and the Asia/Pacific region.
** The J.P. Morgan Traded Global Bond Index is an unmanaged index of securities
and includes Australia, Belgium, Canada, Denmark, Finland, France, Germany,
Ireland, Italy, Japan, The Netherlands, Portugal, South Africa, Spain,
Sweden, the United Kingdom and the United States.
FEES AND EXPENSES
OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- ----------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 4.75%(1) None None
................................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption
proceeds) None(2) 4.00%(3) 1.00%(4)
................................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
................................................................
Redemption fees None None None
................................................................
Exchange fee None None None
................................................................
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
- ----------------------------------------------------------------
Management fees 1.00% 1.00% 1.00%
................................................................
Distribution and/or
service (12b-1) 0.25% 1.00%(6) 1.00%(6)
fees(5)
................................................................
Other expenses 2.63% 2.67% 2.65%
................................................................
Total annual fund
operating expenses 3.88% 4.67% 4.65%
................................................................
</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 deferred sales charge 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> 7
(3) The maximum deferred sales charge is 4.00% in the first and second year
after purchase, declining thereafter as follows:
Year 1-4.00%
Year 2-4.00%
Year 3-3.00%
Year 4-2.50%
Year 5-1.50%
After-None
See "Purchase of Shares -- Class B Shares."
(4) The maximum deferred sales charge is 1.00% in the first year after purchase
and 0.00% thereafter. See "Purchase of Shares -- Class C Shares."
(5) 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 "Purchase of Shares."
(6) Because distribution and/or service (12b-1) fees are paid out of the Fund's
assets on an ongoing basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales
charges.
Example:
The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year (except for the ten-year
amounts for Class B Shares which reflect the conversion of Class B Shares to
Class A Shares after eight years). Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $847 $1,602 $2,375 $4,384
...............................................................
Class B Shares $868 $1,708 $2,504 $4,591*
...............................................................
Class C Shares $566 $1,402 $2,345 $4,732
...............................................................
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $847 $1,602 $2,375 $4,384
...............................................................
Class B Shares $468 $1,408 $2,354 $4,591*
...............................................................
Class C Shares $466 $1,402 $2,345 $4,732
...............................................................
</TABLE>
* Based on conversion to Class A Shares after eight years.
INVESTMENT OBJECTIVE,
POLICIES AND RISKS
The Fund's investment objective 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 or depreciation. The Fund's investment objective may be
changed by the Fund's Board of Trustees without shareholder approval, but no
change is anticipated. If there is a change in the investment objective of the
Fund, the Fund will notify shareholders and shareholders should consider whether
the Fund remains an appropriate investment in light of their then current
financial positions and needs. There are risks inherent in all investments in
securities; accordingly there can be no assurance that the Fund will achieve its
investment objective.
The Fund's investment adviser seeks to achieve the Fund's investment objective
by investing in equity and debt securities of issuers in the U.S. and foreign
countries based upon the investment adviser's top-down evaluation of economic
and market trends by the Fund's investment adviser and the anticipated relative
total return available from a particular country and/or sector and type of
security. Within a particular country or sector, the Fund's investment adviser
selects securities designed to track the markets of such country or sector.
Under normal market conditions, the Fund invests at least 65% of its total
assets in securities of issuers located in at least three different countries
(including the U.S.). Under normal market conditions, the Fund invests at least
25% of its total assets in high-quality debt securities.
6
<PAGE> 8
The Fund's investment adviser, subject to the direction of the Fund's Board of
Trustees, provides the Fund with an overall investment program consistent with
the Fund's objective and policies. The Fund's investments may be shifted among
the world's various capital markets, including developed and undeveloped
countries, and among different types of securities in accordance with the
investment adviser's ongoing analysis of economic or market trends, developments
affecting the markets and securities in which the Fund may invest and the
anticipated relative total returns available from particular countries, sectors
or securities. Accordingly, the composition of the Fund's portfolio will vary
over time and, at any given time, may be invested substantially in equity or
debt securities. Achieving the Fund's investment objective depends on the
ability of the Fund's investment adviser to assess the effect of such economic
and market trends on different sectors of the market. 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, among other things,
increased short-term capital gains and increased brokerage charges or other
transaction costs to the Fund.
In selecting securities for investment, the Fund's investment adviser utilizes a
"top-down" approach that emphasizes country and sector selection and weighting
rather than individual security selection. This approach reflects the investment
adviser's philosophy for this Fund that a broad selection of securities
representing exposure to world markets based upon the economic outlook and
current valuation levels for each country and certain sectors is an effective
way to maximize the return and minimize the risk associated with global
investment.
The Fund's investment adviser determines country and sector allocations for the
Fund on an ongoing basis. The Fund invests primarily in those countries
(including the U.S. and other industrialized countries throughout the world)
that comprise the Morgan Stanley Capital International World Index. In addition,
the Fund may invest a portion of its assets in securities of developing or
emerging markets countries.
By analyzing a variety of macroeconomic and political factors, the Fund's
investment adviser develops fundamental projections on interest rates,
currencies, corporate profits and economic growth for each country. These
country projections are then used to determine what the Fund's investment
adviser believes to be a fair value for the securities market of each country or
sector. The final country and sector allocation decision is then reached by
considering the expected total return in light of various considerations such as
market size, volatility, liquidity and country risk.
Within a particular country or sector, investments are made through the purchase
of securities designed to track the markets for that particular country or
sector.
The Fund may invest in equity securities including common stocks, preferred
stocks, warrants or options to acquire such securities and depository receipts.
Common stocks are shares of a corporation or other entity that entitle the
holder to a pro rata share of the profits of the corporation, if any, without
preference over any other class of securities, including such entity's debt
securities, preferred stock and other senior equity securities. Common stock
usually carries with it the right to vote and frequently an exclusive right to
do so. Preferred stock generally has a preference as to dividends and
liquidation over an issuer's common stock but ranks junior to debt securities in
an issuer's capital structure. Unlike interest payments on debt securities,
preferred stock dividends are payable only if declared by the issuer's board of
directors. Preferred stock also may be subject to optional or mandatory
redemption provisions. Generally, warrants or options to acquire equity
securities are securities that may be exchanged for a prescribed amount of such
equity security of the issuer within a particular period of time at a specified
price or in accordance with a specified formula.
The Fund may invest in issuers of small-, medium- or large-capitalization
companies. The securities of small- or medium-sized companies may be subject to
more abrupt or erratic market movements than securities of larger companies or
the market averages in general. In addition, such companies typically are
subject to a greater degree of change in earnings and business prospects than
are larger companies. Thus, to the extent the Fund invests in small- and
medium-sized companies, the Fund may be subject to greater investment risk than
that assumed through investment in the equity securities of larger-
capitalization companies.
The Fund invests in debt securities issued or guaranteed by the U.S. or foreign
governments or
7
<PAGE> 9
their agencies, authorities or instrumentalities and in high-quality debt
securities of U.S. and foreign corporations. The Fund's investments in U.S.
government securities may include U.S. treasury securities and securities issued
or guaranteed by agencies or instrumentalities of the U.S. government, such as
collateralized mortgage obligations and other mortgage-related securities. The
Fund's foreign investments may include 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 up to 25% of its total
assets in debt securities issued by certain "supranational" entities, which
include entities designated or supported by governments to promote economic
reconstruction or development, international banking organizations and related
government agencies. An example of a supranational entity is the International
Bank for Reconstruction and Development (commonly referred to as the "World
Bank"). A more complete description of supranational entities in which the Fund
may invest is contained in the Fund's Statement of Additional Information. The
Fund limits its investments to debt securities which are rated at the time of
purchase within the two highest grades assigned by Standard and Poor's ("S&P")
or Moody's Investors Services, Inc. ("Moody's") or unrated debt securities
considered by the Fund's investment adviser to be of comparable quality.
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. 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
generally is available for an unsponsored ADR than a sponsored ADR. The Fund may
invest in ADRs through both sponsored and unsponsored arrangements. EDRs are
receipts issued in Europe by banks or depositories which evidence a similar
ownership arrangement.
The Fund is a "non-diversified" investment company, which means the Fund may
invest more of its assets in a smaller number of individual issuers than a
"diversified" investment company, which may result in increased volatility and
greater risk because changes in the financial condition or market assessment of
a single issuer or a few issuers can more substantially impact the Fund.
The Fund generally will not 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; however, 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. Debt securities issued by government or political
subdivisions are not part of this calculation because such issues are not
considered members of any industry. In this event, the Fund would be subject to
greater risks associated with investment in banks.
RISKS OF INVESTING IN
SECURITIES OF FOREIGN ISSUERS
An investment in the Fund involves risks similar to those of investing in
foreign securities directly. The Fund invests in securities denominated in U.S.
dollars and in currencies other than U.S. dollars. The percentage of assets
invested in securities of a particular country or denominated in a particular
currency will vary in accordance with the investment adviser's assessment of the
relative yield, appreciation potential and the relationship of a country's
currency to the U.S. dollar, which is based upon such factors as fundamental
economic strength, credit quality and interest rate trends. Investments in
foreign securities present certain risks not ordinarily associated with
investments in securities of U.S. issuers. These risks include fluctuations in
foreign currency exchange rates, political, economic or legal developments
(including war or other instability, expropriation of assets, nationalization
and confiscatory taxation), the imposition of foreign exchange limitations
(including currency blockage) withholding taxes on dividend or interest payments
or capital transactions or other restrictions, higher transaction costs and
difficulty in
8
<PAGE> 10
enforcing contractual obligations or taking judicial action. Also, foreign
securities may not be as liquid and may be more volatile than comparable
domestic securities.
In addition, there often is less publicly available information about many
foreign issuers, and issuers of foreign securities are subject to different,
often less comprehensive, auditing, accounting and financial reporting
disclosure requirements than domestic issuers. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the U. S., and, with respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of foreign exchanges,
brokers and dealers than there is in the U.S., the Fund may experience
settlement difficulties or delays not usually encountered in the U.S.
The Fund's investments in securities of developing or emerging markets are
subject to greater risks than the Fund's investments in securities of developed
markets since emerging markets tend to have economic structures that are less
diverse and mature and political systems that are less stable than developed
countries.
In addition to the increased risks of investing in foreign securities, there are
often increased transactions costs associated with investing in foreign
securities, including the costs incurred in connection with converting
currencies, higher foreign brokerage or dealer costs, and higher settlement
costs or custodial costs.
Since the Fund invests in securities denominated or quoted in currencies other
than the U.S. dollar, the Fund will be affected by changes in foreign currency
exchange rates (and exchange control regulations) which affect the value of
investments in the Fund and the accrued income and appreciation or depreciation
of the investments. Changes in foreign currency exchange ratios relative to the
U.S. dollar will affect the U.S. dollar value of the Fund's assets denominated
in that currency and the Fund's yield on such assets. In addition, the Fund will
incur costs in connection with conversions between various currencies. The Fund
may purchase and sell foreign currency on a spot basis (that is, cash basis) in
connection with the settlement of transactions in securities traded in such
foreign currency. The Fund also may enter into contracts with banks, brokers or
dealers to purchase or sell securities or foreign currencies at a future date
("forward contracts"). A forward contract is a negotiated agreement between the
contracting parties to exchange a specified security or amount of currency at a
specified future time at a specified rate. In a forward foreign currency
contract, the rate can be higher or lower than the spot rate between the
currencies that are the subject of the contract.
The Fund may attempt to protect against adverse changes in the value of the U.S.
dollar in relation to a foreign currency by entering into a forward contract for
the purchase or sale of the amount of foreign currency invested or to be
invested, or by buying or selling a foreign currency option or futures contract
for such amount. Such strategies may be employed before the Fund purchases a
foreign security traded in the currency which the Fund anticipates acquiring or
between the date the foreign security is purchased or sold and the date on which
payment therefor is made or received. Seeking to protect against a change in the
value of a foreign currency in the foregoing manner does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such transactions reduce or
preclude the opportunity for gain if the value of the currency should move in
the direction opposite to the position taken. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had not
entered into such contracts.
9
<PAGE> 11
WHEN-ISSUED AND DELAY DELIVERY TRANSACTIONS
The Fund may purchase and sell securities on a "when-issued" or "delayed
delivery" basis whereby the Fund buys or sells a security with payment and
delivery taking place in the future. The payment obligation and the interest
rate are fixed at the time the Fund enters into the commitment. No income
accrues to the Fund on securities in connection with such transactions prior to
the date the Fund actually takes delivery of such securities. These transactions
are subject to market risk as the value or yield of a security at delivery may
be more or less than the purchase price or the yield generally available on
securities when delivery occurs. In addition, the Fund is subject to
counterparty risk because it relies on the buyer or seller, as the case may be,
to consummate the transaction, and failure by the other party to complete the
transaction may result in the Fund missing the opportunity of obtaining a price
or yield considered to be advantageous. The Fund will only make commitments to
purchase such securities with the intention of actually acquiring these
securities, but the Fund may sell these securities prior to settlement if it is
deemed advisable. No specific limitation exists as to the percentage of the
Fund's assets which may be used to acquire securities on a "when-issued" or
"delayed delivery" basis.
USING OPTIONS, FUTURES CONTRACTS
AND RELATED OPTIONS
The Fund may, but is not required to, use various strategic transactions,
including options, futures contracts and options on futures contracts in several
different ways depending upon the status of the Fund's portfolio and the Fund's
investment adviser's expectations concerning the securities or currency markets.
Although the Fund's investment adviser seeks to use the practices to further the
Fund's investment objective, no assurance can be given that the use of these
practices will achieve this result.
In times of stable or rising stock prices, the Fund generally seeks to be fully
invested in equity and debt securities. Even when the Fund is fully invested,
however, prudent management requires that at least a small portion of assets be
available as cash to honor redemption requests and for other short-term needs.
The Fund may also have cash on hand that has not yet been invested. The portion
of the Fund's assets that is invested in cash or cash equivalents does not
fluctuate with market prices, so that, in times of rising market prices, the
Fund may underperform the market in proportion to the amount of cash or cash
equivalents in its portfolio. By purchasing index futures contracts, however,
the Fund can compensate for the cash portion of its assets and may obtain
performance equivalent to investing all of its assets in securities.
If the Fund's investment adviser forecasts a market decline, the Fund may seek
to reduce its exposure to the securities markets by increasing its cash
position. By selling index futures contracts instead of portfolio securities, a
similar result can be achieved to the extent that the performance of the futures
contracts correlates to the performance of the Fund's portfolio securities.
Sales of futures contracts frequently may be accomplished more rapidly and at
less cost than the actual sale of securities. Once the desired hedged position
has been effected, the Fund could then liquidate securities in a more deliberate
manner, reducing its futures position simultaneously to maintain the desired
balance, or it could maintain the hedged position.
The Fund can engage in options (or stock index options or stock index futures
options) to manage the portfolio's risk in advancing or declining markets. For
example, the value of a put option generally increases as the underlying
security declines below a specified level. Value is protected against a market
decline to the degree the performance of the put correlates with the performance
of the Fund's investment portfolio. If the market remains stable or advances,
the Fund can refrain from exercising the put and its portfolio will participate
in the advance, having incurred only the premium cost for the put.
Generally, the Fund expects that options will be sold on securities exchanges.
However, the Fund is authorized to purchase and sell listed and over-the-
counter options ("OTC Options"). OTC Options are subject to certain additional
risks including default by the other party to the transaction and the liquidity
of the transactions.
In addition to futures and options on securities, the Fund may engage in foreign
currency futures and options. The Fund may use currency options to increase its
gross income or to protect it against declines in the U.S. dollar value of
foreign currency denominated securities and against increases in the U.S. dollar
cost of such securities to be acquired. As in the case of other kinds of
options, however, the selling 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
10
<PAGE> 12
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 in which
the Fund invests are traded on U.S. and foreign exchanges or over-the-counter.
There is no specific percentage limitation on the Fund's investments in options
on foreign currencies.
In certain cases, the options and futures markets provide investment or risk
management opportunities that are not available from direct investments in
securities. In addition, some strategies can be performed with greater ease and
at lower cost by utilizing the options and futures markets rather than
purchasing or selling portfolio securities or currencies. However, such
transactions involve risks different from the direct investment in underlying
securities. For example, there may be imperfect correlation between the value of
the instruments and the underlying assets. In addition, the use of such
instruments includes the risks of default by the other party to certain
transactions. The Fund may incur losses in using these instruments that
partially or completely offset gains in portfolio positions. These transactions
may not be liquid and involve manager risk. In addition, such transactions may
involve commissions and other costs, which may increase the Fund's expenses and
reduce its return.
A more complete discussion of options, futures contracts and related options and
their risks is contained in the Fund's Statement of Additional Information which
may be obtained by investors free of charge as described on the back cover of
this prospectus.
OTHER INVESTMENTS AND RISK FACTORS
For cash management purposes, the Fund may engage in repurchase agreements with
broker-dealers, banks and other recognized financial institutions to earn a
return on temporarily available cash. Such transactions are subject to the risk
of default by the other party.
The Fund may invest up to 15% of its net assets in illiquid securities and
certain restricted securities. Such securities may be difficult or impossible to
sell at the time and the price that the Fund would like. Thus, the Fund may have
to sell such securities at a lower price, sell other securities instead to
obtain cash or forego other investment opportunities.
The Fund may lend its portfolio securities to broker-dealers and other financial
institutions in an amount up to 15% of its total assets in order to generate
income on the loaned security and any collateral received. The Fund may incur
lending fees and other costs in connection with securities lending, and
securities lending is subject to the risk of default by the other party.
Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.
Because of the Fund's managed approach, the Fund may engage in substantial
short-term trading. The Fund may sell securities without regard to the length of
time they have been held in order to take advantage of new investment
opportunities, when the Fund's investment adviser believes the potential for
total return has lessened, or for other reasons. The Fund's portfolio turnover
is shown under the Prospectus heading "Financial Highlights." The portfolio
turnover rate may vary from year to year. A high portfolio turnover rate (100%
or more) increases a fund's transactions costs (including brokerage commissions
or dealer costs) and a higher portfolio turnover rate may result in the
realization of more short-term capital gains than if a fund had lower portfolio
turnover rate. Increases in a fund's transaction costs would adversely impact
the fund's performance. The turnover rate will not be a limiting factor,
however, if the Fund's investment adviser considers portfolio changes
appropriate.
TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may on a temporary basis hold cash (U.S. dollars
or foreign currencies) or invest a portion or all of its assets in money market
instruments of U.S. or foreign issuers, which include securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities or foreign
governments, prime commercial paper, certificates of deposit, bankers'
acceptances, repurchase agreements. During times of international political or
economic uncertainty, all or a portion of the Fund's assets may be in U.S.
issuers and denominated in U.S. dollars. Under normal market conditions, the
potential for total return on these securities will tend to be lower than the
11
<PAGE> 13
potential for total return on other securities that may be owned by the Fund. In
taking such a defensive position, the Fund would not be pursuing and may not
achieve its investment objective.
INVESTMENT ADVISORY SERVICES
INVESTMENT ADVISER
Van Kampen Asset Management Inc. is the Fund's investment adviser (the "Adviser"
or "Asset Management"). The Adviser is a wholly owned subsidiary of Van Kampen
Investments Inc. ("Van Kampen Investments"). Van Kampen Investments is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $100 billion under management or supervision as of March 31, 2000. Van
Kampen Investments' more than 50 open-end and 39 closed-end funds and more than
2,700 unit investment trusts are professionally distributed by leading
authorized dealers nationwide. Van Kampen Funds Inc., the distributor of the
Fund (the "Distributor") and the sponsor of the funds mentioned above, is also a
wholly owned subsidiary of Van Kampen Investments. Van Kampen Investments is an
indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. The
Adviser's principal office is located at 1 Parkview Plaza, Oakbrook Terrace,
Illinois 60181-5555.
ADVISORY AGREEMENT. The Fund retains the Adviser to manage the investment of its
assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed based upon an annual rate applied to the average daily net assets of
the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets % Per Annum
- -----------------------------------------------
<S> <C> <C> <C>
First $500 million 1.00 of 1.00%
...............................................
Next $500 million 0.95 of 1.00%
...............................................
Over $1 billion 0.90 of 1.00%
...............................................
</TABLE>
For the Fund's fiscal year ended December 31, 1999, the effective advisory fee
was 1.00% of the Fund's average daily net assets.
The Fund's average daily net assets are determined by taking the average of all
the determinations of the net assets during a given calendar month. Such fee is
payable for each calendar month as soon as practical after the end of that
month.
Under the Advisory Agreement, the Adviser furnishes offices, necessary
facilities and equipment and provides administrative services to the Fund. The
Fund pays all charges and expenses of its day-to-day operations, including
service fees, distribution fees, custodian fees, legal and independent
accountant fees, the costs of reports and proxies to shareholders, compensation
of trustees of the Trust (other than those who are affiliated persons of the
Adviser, Distributor or Van Kampen Investments) and all other ordinary business
expenses not specifically assumed by the Adviser.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Investment
Advisory Corp. ("Advisory Corp.").
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc. is the Fund's investment
subadviser (the "Subadviser"). The Subadviser is an indirect wholly owned
subsidiary of Morgan Stanley Dean Witter & Co. The Subadviser conducts a
worldwide portfolio management business and provides a broad range of portfolio
management services to customers in the United States and abroad. At December
31, 1999, the Subadviser, together with its affiliated institutional asset
management companies, managed assets of approximately $184.8 billion, including
assets under fiduciary advice. The Subadviser's principal office is located at
1221 Avenue of the Americas, New York, New York 10020. On December 1, 1998,
Morgan Stanley Asset Management Inc, changed its name to Morgan Stanley Dean
Witter Investment Management Inc. but continues to do business in certain
instances using the name Morgan Stanley Asset Management.
SUBADVISORY AGREEMENT. The Adviser has entered into a subadvisory agreement with
the Subadviser to assist the Adviser in performing its investment advisory
functions. The Adviser pays the Subadviser on a monthly basis a portion of the
net advisory fees the Adviser receives from the Fund.
12
<PAGE> 14
GENERAL
From time to time, the Adviser, the Subadviser or the Distributor may
voluntarily undertake to reduce the Fund's expenses by reducing the fees payable
to them or by reducing other expenses of the Fund in accordance with such
limitations as the Adviser, the Subadviser or Distributor may establish.
PERSONAL INVESTMENT POLICIES. The Fund, the Adviser, the Subadviser and the
Distributor have adopted Codes of Ethics designed to recognize the fiduciary
relationships among the Fund, the Adviser, the Subadviser, the Distributor and
their respective employees. The Codes of Ethics permit directors, trustees,
officers and employees to buy and sell securities for their personal accounts
subject to certain restrictions. Persons with access to certain sensitive
information are subject to pre-clearance and other procedures designed to
prevent conflicts of interest.
PORTFOLIO MANAGEMENT. Barton M. Biggs and Ann D. Thivierge have been responsible
for the day-to-day management of the equity portion of the Fund's portfolio
since April 1, 1997.
Mr. Biggs has been Chairman and a director of the Morgan Stanley Dean Witter
Group since 1980. Mr. Biggs is also a Managing Director of the Morgan Stanley
Dean Witter Group and of Morgan Stanley & Co. Incorporated and is a director and
chairman of various registered investment companies to which the Morgan Stanley
Dean Witter Group and certain of its affiliates provide investment advisory
services. Mr. Biggs holds a B.A. from Yale University and an M.B.A. from New
York University.
Ms. Thivierge is a Managing Director of the Morgan Stanley Dean Witter Group and
Morgan Stanley & Co. Incorporated. She is a member of the Subadviser's asset
allocation committee. Ms. Thivierge has been with the Morgan Stanley Dean Witter
Group 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.
J. David Germany, Michael B. Kushma, Paul E. O'Brien, Christian Roth and David
Stanley are responsible for the day-to-day management of the fixed income
portion of the Fund's investment portfolio.
J. David Germany joined the Morgan Stanley Dean Witter Group in 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 Funds advised by the Adviser's
affiliate Miller Anderson & Sherrerd, LLP 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 an 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 Morgan
Stanley Dean Witter Group in 1995 where he took responsibility for the global
fixed income portfolio. Mr. Kushma received an A.B. in economics from Princeton
University in 1979, an M. Sc. in economics from the London School of Economics
in 1981 and an M.Phil. in economics from Columbia University in 1983.
Paul F. O'Brien joined the Morgan Stanley Dean Witter Group 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.
Christian G. Roth, a Principal of Morgan Stanley & Co. Incorporated, joined the
Morgan Stanley Dean Witter Group in 1991. He has been a Portfolio Manager with
the Morgan Stanley Dean Witter Group since 1993. Prior to joining the Morgan
Stanley Dean Witter Group, Mr. Roth served as a Senior Associate in the Merchant
Banking Group of Dean Witter Capital Corporation. Mr. Roth received
13
<PAGE> 15
a B.S. from the Wharton School of Business at the University of Pennsylvania. He
is a Chartered Financial Analyst and a member of the Financial Analysts of
Philadelphia.
David Stanley, a Vice President of the Morgan Stanley Dean Witter Group, joined
the Morgan Stanley Dean Witter Group in 1994 as a Fixed Income Manager. Prior to
joining the Morgan Stanley Dean Witter Group, he was with Aetna Capital
Management International, where he had sole responsibility for managing all
European and Global bond funds. Previously, he spent over five years at Marina
and General Mutual Life Assurance Society, where he managed Sterling and Global
bond funds. Mr. Stanley graduated from Manchester University.
Messrs. Germany, Kushma and O'Brien have shared primary responsibility for
managing the Fund's assets since September 1997. Messrs. Roth and Stanley have
shared primary responsibility for managing the Fund's assets since July 1999 and
January 2000, respectively. All portfolio managers are subject to the ultimate
supervision of the Subadviser's Investment Management Committee.
PURCHASE OF SHARES
GENERAL
The Fund offers three classes of shares designated as Class A Shares, Class B
Shares and Class C Shares. By offering three classes of shares, the Fund permits
each investor to choose the class of shares that is most beneficial given the
amount to be invested and the length of time the investor expects to hold the
shares.
Initial investments must be at least $1,000 for each class of shares, and
subsequent investments must be at least $25 for each class of shares. Minimum
investment amounts may be waived by the Distributor for plans involving periodic
investments.
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 A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan and the service plan (each as described below)
under which its distribution fee and/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 offering price of the Fund's shares is based upon the Fund's net asset value
per share (plus sales charges, where applicable). The net asset values per share
of the Class A Shares, Class B Shares and Class C Shares are generally expected
to be substantially the same. In certain circumstances, however, the per share
net asset values of the classes of shares may differ from one another,
reflecting the daily expense accruals of the higher distribution fees and
transfer agency costs applicable to the Class B Shares and Class C Shares and
the differential in the dividends that may be paid on each class of shares.
The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Trustees reserves the right to calculate the net
asset value per share and adjust the offering price based thereon more
frequently than once daily if deemed desirable. Net asset value per share for
each class is determined by dividing the value of the Fund's portfolio
securities, cash and other assets (including accrued interest) attributable to
such class, less all liabilities (including accrued expenses) attributable to
such class, by the total number of shares of the class outstanding. Such
computation is made by using prices as of the close of trading on the Exchange
and (i) valuing securities listed or traded on a national securities exchange at
the last reported sale price, (ii) valuing unlisted and listed securities for
which the last sales price is not available at the mean between the last
reported bid and ask prices, (iii) valuing long-term debt securities at the mean
of representative quoted bid and asked prices for such securities or, if such
prices are not available, at prices for securities of comparable maturity,
quality and type, however, when the Adviser deems it appropriate, prices
obtained for the day of valuation from a bond pricing service will be
14
<PAGE> 16
used, (iv) 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, (v) 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, (vi) valuing options and
futures contracts and options on futures contracts which are traded on exchanges
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, (vii) valuing over-the-counter options at the average of the last bid
prices obtained from dealers and (viii) valuing any securities for which market
quotations are not readily available and any other assets at fair value as
determined in good faith by the Adviser in accordance with procedures
established by the Fund's Board of Trustees.
Trading in securities on many foreign securities exchanges (including European
and Far Eastern securities exchange) and over-the-counter markets is normally
completed before the close of business on each business day in New York (i.e., a
day on which the Exchange is open). In addition, securities trading in a
particular country or countries may not take place on all business days for the
Exchange or may take place on days which are not business days for the Exchange.
Changes in valuations on certain securities may occur at times or on days on
which the Fund's net asset value is not calculated and on which the Fund does
not effect sales, redemptions and exchanges of its shares. The Fund calculates
net asset value per share, and therefore effects sales, redemptions and
exchanges of its shares, as of the close of trading on the Exchange each day the
Exchange is open for trading. Such calculation does not take place
contemporaneously with the determination of the prices of certain foreign
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 may be valued at fair value as determined in good faith by the
Adviser based in accordance with procedures established by the Fund's Board of
Trustees.
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 Investment Company
Act of 1940, as amended (the "1940 Act"). The Fund also has adopted a service
plan (the "Service Plan") with respect to each class of its shares. Under the
Distribution Plan and the Service Plan, the Fund pays distribution fees in
connection with the sale and distribution of its shares and service fees in
connection with the provision of ongoing services to shareholders and the
maintenance of the shareholders' accounts.
The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution fees and service fees and other expenses of the Fund associated
with that class of shares. To assist investors in comparing classes of shares,
the tables under the Prospectus heading "Fees and Expenses of the Fund" provide
a summary of sales charges and expenses and an example of the sales charges and
expenses of the Fund applicable to each class of shares.
The shares are offered to the public on a continuous basis through the
Distributor as principal underwriter, which is located at 1 Parkview Plaza,
Oakbrook Terrace, Illinois 60181-5555. Shares also are offered through members
of the NASD who are acting as securities dealers ("dealers") and NASD members or
eligible non-NASD members who are acting as brokers for agents or investors
("brokers"). "Dealers" and "brokers" are sometimes referred to herein as
"authorized dealers."
Shares may be purchased on any business day by completing the account
application form and forwarding the account application, directly or through an
authorized dealer, to the Fund's shareholder service agent, Van Kampen Investor
Services Inc. ("Investor Services"), a wholly owned subsidiary of Van Kampen
Investments. When purchasing shares of the Fund, investors must specify whether
the purchase is for Class A Shares, Class B Shares or Class C Shares by
selecting the correct Fund number on the account application. Sales personnel of
authorized dealers distributing the
15
<PAGE> 17
Fund's shares are entitled to receive compensation for selling such shares and
may receive differing compensation for selling Class A Shares, Class B Shares or
Class C Shares.
The offering price for shares is based upon the next calculation of net asset
value per share (plus sales charges, where applicable) after an order is
received by Investor Services. Orders received by authorized dealers prior to
the close of the Exchange are priced based on the date of receipt provided such
order is transmitted to Investor Services prior to Investor Services' close of
business on such date. Orders received by authorized dealers after the close of
the Exchange or transmitted to Investor Services after its close of business are
priced based on the date of the next computed net asset value per share provided
they are received by Investor Services prior to Investor Services' close of
business on such date. It is the responsibility of authorized dealers to
transmit orders received by them to Investor Services so they will be received
in a timely manner.
The Fund and the Distributor reserve the right to refuse any order for the
purchase of shares. The Fund also reserves the right to suspend the sale of the
Fund's shares in response to conditions in the securities markets or for other
reasons. Shares of the Fund may be sold in foreign countries where permissible.
Investor accounts will automatically be credited with additional shares of the
Fund after any Fund distributions, such as dividends and capital gain dividends,
unless the investor instructs the Fund otherwise. Investors wishing to receive
cash instead of additional shares should contact the Fund at (800) 341-2911 or
by writing to the Fund, c/o Van Kampen Investor Services Inc., PO Box 218256,
Kansas City, MO 64121-8256.
CLASS A SHARES
Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 4.75% of the offering price (or 4.99% of the net amount
invested), reduced on investments of $100,000 or more as follows:
CLASS A SHARES
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
As % of As % of
Size of Offering Net Amount
Investment Price Invested
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $100,000 4.75% 4.99%
..........................................................
$100,000 but less than
$250,000 3.75% 3.90%
..........................................................
$250,000 but less than
$500,000 2.75% 2.83%
..........................................................
$500,000 but less than
$1,000,000 2.00% 2.04%
..........................................................
$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 may impose a
contingent deferred sales charge of 1.00% on certain redemptions made within
one year of the purchase. The contingent deferred sales charge is assessed on
an amount equal to the lesser of the then current market value or the cost of
the shares being redeemed. Accordingly, no sales charge is imposed on
increases in net asset value above the initial purchase price.
No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.
Under the Distribution Plan and the Service Plan, the Fund may spend up to a
total of 0.25% per year of the Fund's average daily net assets with respect to
the Class A Shares of the Fund. From such amount, under the Service Plan, the
Fund may spend up to 0.25% per year of the Fund's average daily net assets with
respect to the Class A Shares of the Fund.
CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:
16
<PAGE> 18
CLASS B SHARES
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
as a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
- ------------------------------------------------
<S> <C> <C> <C>
First 4.00%
................................................
Second 4.00%
................................................
Third 3.00%
................................................
Fourth 2.50%
................................................
Fifth 1.50%
................................................
Sixth and After None
................................................
</TABLE>
The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. 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 contingent deferred sales charge, if any, varies depending on
the number of years from the time of payment for each purchase of Class B Shares
until the time of redemption of such shares.
In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed that the shares being redeemed first are any shares in
the shareholder's Fund account that are not subject to a contingent deferred
sales charge followed by shares held the longest in the shareholder's account.
Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to the Class B Shares of the Fund.
In addition, the Fund may spend up to 0.25% per year of the Fund's average daily
net assets with respect to the Class B Shares of the Fund.
CLASS C SHARES
Class C Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge of 1.00% of the dollar amount subject to charge
if redeemed within one year of purchase.
The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. 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 purchase Class A
Shares.
In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed that the shares being redeemed first are any shares in
the shareholder's Fund account that are not subject to a contingent deferred
sales charge followed by shares held the longest in the shareholder's account.
Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to the Class C Shares of the Fund.
In addition, under the Service Plan, the Fund may spend up to 0.25% per year of
the Fund's average daily net assets with respect to the Class C Shares of the
Fund. The aggregate distribution and service fees are currently 1.00% per year
of the average daily net assets attributable to Class C Shares of the Fund. The
aggregate distribution and service fees are 0.90% per year of the average daily
net assets attributable to Class C Shares of the Fund with respect to accounts
existing before April 1, 1995.
CONVERSION FEATURE
Class B Shares purchased on or after June 1, 1996, including Class B Shares from
reinvestment of distributions through the dividend reinvestment plan,
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, including Class B Shares from reinvestment of distributions
through the dividend reinvestment plan, 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, including Class C
Shares from reinvestment of distributions through the dividend reinvestment
plan, 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
17
<PAGE> 19
schedule applicable to a share of the Fund acquired through the exchange
privilege from another Van Kampen fund participating in the exchange program is
determined by reference to the Van Kampen fund 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 capital gain dividends
constituting "preferential dividends" under the federal income tax law 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.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge is waived on redemptions of Class B Shares
and Class C Shares (i) within one year following the death or disability (as
disability is defined by federal income tax law) of a shareholder, (ii) for
required minimum distributions from an individual retirement account ("IRA") or
certain other retirement plan distributions, (iii) for withdrawals under the
Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, (iv) if no commission or transaction fee is paid to
authorized dealers at the time of purchase of such shares and (v) if made by the
Fund's involuntary liquidation of a shareholder's account as described under the
Prospectus heading "Redemption of Shares." Subject to certain limitations, a
shareholder who has redeemed Class C Shares of the Fund may reinvest in Class C
Shares at net asset value with credit for any contingent deferred sales charge
if the redemption is made within 180 days after the redemption. For a more
complete description of contingent deferred sales charge waivers, please refer
to the Fund's Statement of Additional Information or contact your authorized
dealer.
QUANTITY DISCOUNTS
Investors purchasing Class A Shares may, under certain circumstances described
below, be entitled to pay reduced or no sales charges. 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 pay the lowest applicable sales charge. Quantity discounts may
be modified or terminated at any time. For more information about quantity
discounts, investors should contact their authorized dealer or the Distributor.
A person eligible for a reduced sales charge includes an individual, his or her
spouse and children under 21 years of age and any corporation, partnership or
sole proprietorship which is 100% owned, either alone or in combination, by any
of the foregoing; a trustee or other fiduciary purchasing for a single trust or
for a single fiduciary account, or a "company" as defined in Section 2(a)(8) of
the 1940 Act.
As used herein, "Participating Funds" refers to certain open-end investment
companies advised by Asset Management 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 Class A Shares 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 Class A Shares
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 currently owned.
LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating investments over a 13-month period
to determine the sales charge as outlined in the Class A Shares sales charge
table. The size of investment shown in the Class A Shares sales charge table
includes purchases of shares of the Participating Funds over a 13-month period
based on the total amount of intended purchases plus the value of all shares of
the Participating Funds previously purchased and still owned. An investor may
elect to compute the 13-month period starting up to 90 days before the date of
execution of a Letter of Intent. Each investment made during the period receives
the reduced sales charge applicable to the total amount of the investment goal.
The initial purchase must be for an amount equal to at least 5% of the minimum
total
18
<PAGE> 20
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 backdating provisions, an adjustment will be made at the time of
expiration of the Letter of Intent to give effect to the lower sales charge.
Such adjustment in sales charge will be used to purchase additional shares. The
Fund initially will escrow shares totaling 5% of the dollar amount of the Letter
of Intent to be held by Investor Services in the name of the shareholder. In the
event the Letter of Intent goal is not achieved within the specified period, the
investor must pay the difference between the sales charge applicable to the
purchases made and the reduced sales charges previously paid. Such payments may
be made directly to the Distributor or, if not paid, the Distributor will
liquidate sufficient escrowed shares to obtain the difference.
OTHER PURCHASE PROGRAMS
Purchasers of Class A Shares may be entitled to reduced or no initial sales
charges in connection with the unit investment trust reinvestment program 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 PROGRAM. 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 per share 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 investment 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 terms and conditions that apply to the program,
should contact their authorized dealer or the Distributor.
The administrator of such a unit investment trust must have an agreement with
the Distributor pursuant to which the administrator will (1) submit a single
bulk order and make payment with a single remittance for all investments in the
Fund during each distribution period by all investors who choose to invest in
the Fund through the program and (2) provide Investor Services with appropriate
backup data for each investor participating in the program in a computerized
format fully compatible with Investor Services' processing system.
In order to obtain these special benefits, all dividends and other distributions
from the Fund must be reinvested in additional shares and there can not be 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 quarterly basis only, even if their investments are made more
frequently. The Fund reserves the right to modify or terminate this program at
any time.
NET ASSET VALUE PURCHASE OPTIONS. 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 Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families and
their beneficial accounts.
(2) Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries; employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser; and such persons' families and their beneficial accounts.
(3) Directors, officers, employees and, when permitted, registered
representatives, of financial institutions that have a selling group
agreement with the Distributor and their spouses and children under 21 years
of age when purchasing for any accounts they beneficially own, or, in the
case of any such financial institution, when purchasing for retirement plans
for such institution's employees; provided that such purchases are otherwise
permitted by such institutions.
(4) Registered investment advisers who charge a fee for their services, trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay authorized dealers through
which purchases are
19
<PAGE> 21
made an amount up to 0.50% of the amount invested, over a 12-month period.
(5) Trustees and other fiduciaries purchasing shares for retirement plans which
invest in multiple fund 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 Internal Revenue Code of 1986, as
amended (the "Code"), or custodial accounts held by a bank created pursuant
to Section 403(b) of the Code and sponsored by nonprofit 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 January 1, 2000, that (1) the
total plan assets are at least $1 million 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 January 1, 2000 based on net asset
value purchase privileges previously in effect will be qualified to purchase
shares of the Participating Funds at net asset value. Section 403(b) and
similar accounts for which Van Kampen Trust Company serves as custodian will
not be eligible for net asset value purchases based on the aggregate
investment made by the plan or the number of eligible employees, except
under certain uniform criteria established by the Distributor from time to
time. For purchases on February 1, 1997 and thereafter, a commission will be
paid on purchases as follows: 1.00% on sales to $2 million, plus 0.80% on
the next $1 million, plus 0.50% on the next $47 million, plus 0.25% on the
excess over $50 million.
(9) Individuals who are members of a "qualified group." For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the Fund
and Participating Funds, (iv) has a membership that the authorized dealer
can certify as to the group's members and (v) satisfies other uniform
criteria established by the Distributor for the purpose of realizing
economies of scale in distributing such shares. A qualified group does not
include one whose sole organizational nexus, for example, is that its
participants are credit card holders of the same institution, policy holders
of an insurance company, customers of a bank or broker-dealer, clients of an
investment adviser or other similar groups. Shares purchased in each group's
participants account in connection with this privilege will be subject to a
contingent deferred sales charge of 1.00% in the event of redemption within
one year of purchase, and a commission will be paid to authorized dealers
who initiate and are responsible for such sales to each individual as
follows: 1.00% on sales to $2 million, plus 0.80% on the next $1 million and
0.50% on the excess over $3 million.
The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents, and a person's spouse's parents.
Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with Investor Services by the
investment adviser, trust company or bank trust department, provided that
Investor Services receives federal funds for the purchase by the close of
business on the next business day following acceptance of the order. An
authorized dealer may charge a transaction fee for placing an order to purchase
shares pursuant
20
<PAGE> 22
to this provision or for placing a redemption order with respect to such shares.
Authorized dealers will be paid a service fee as described above on purchases
made under options (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.
REDEMPTION OF
SHARES
Generally shareholders may redeem for cash some or all of their shares without
charge by the Fund (other than applicable sales charge) at any time. As
described under the Prospectus heading "Purchase of Shares," redemptions of
Class B Shares and Class C Shares may be subject to a contingent deferred sales
charge. In addition, certain redemptions of Class A Shares for shareholder
accounts of $1 million or more may be subject to a contingent deferred sales
charge. Redemptions completed through an authorized dealer or a
custodian/trustee of a retirement plan account may involve additional fees
charged by the dealer or custodian/trustee.
Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the request and any other necessary documents in
proper form as described below. Such payment may be postponed or the right of
redemption suspended as provided by the rules of the SEC. Such payment may,
under certain circumstances, be paid wholly or in part by a distribution-in-kind
of portfolio securities. A distribution-in-kind will result in recognition by
the shareholder of a gain or loss for federal income tax purposes when such
securities are distributed, and the shareholder may have brokerage costs and a
gain or loss for federal income tax purposes upon a shareholder's subsequent
disposition of such securities. If the shares to be redeemed have been recently
purchased by check, Investor Services may delay the payment redemption proceeds
until it confirms the purchase check has cleared, which may take up to 15 days.
A taxable gain or loss may be recognized by the shareholder upon redemption of
shares.
WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor Services
Inc., PO Box 218256, Kansas City, MO 64121-8256. The request for redemption
should indicate the number of shares or dollar amount to be redeemed, the Fund
name and class designation of such shares and the shareholder's account number.
The redemption request must be signed by all persons in whose names the shares
are registered. Signatures must conform exactly to the account registration. If
the proceeds of the redemption exceed $50,000, or if the proceeds are not to be
paid to the record owner at the record address, or if the record address has
changed within the previous 30 days, signature(s) must be guaranteed by one of
the following: a bank or trust company; a broker-dealer; a credit union; a
national securities exchange, registered securities association or clearing
agency; a savings and loan association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption request to be in proper form.
In some cases, however, additional documents may be necessary. In the case of
shareholders holding certificates, the certificates for the shares being
redeemed must be properly endorsed for transfer and must accompany the
redemption request. In the event a redemption is requested by and registered to
a corporation, partnership, trust, fiduciary, estate or other legal entity
owning shares of the Fund, generally 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. Retirement plan
distribution requests should be sent to the custodian/trustee to be forwarded to
Investor Services. Contact the custodian/trustee for further information.
In the case of written redemption requests sent directly to Investor Services,
the redemption price is the net asset value per share next determined after the
request in proper form is received by Investor Services.
AUTHORIZED DEALER REDEMPTION REQUESTS. Shareholders may place redemption
requests through an authorized dealer. The redemption price for such shares is
the net asset value per share next calculated after an order in proper form is
received by an authorized dealer provided such order is transmitted to the
Distributor prior to the Distributor's close of
21
<PAGE> 23
business on such day. It is the responsibility of authorized dealers to transmit
redemption requests received by them to the Distributor so they will be received
prior to such time. Redemptions completed through an authorized dealer may
involve additional fees charged by the dealer.
TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. A shareholder
automatically has telephone redemption privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. For accounts that are not established with telephone redemption
privileges, a shareholder may call the Fund at (800) 341-2911 to request that a
copy of the Telephone Redemption Authorization form be sent to the shareholder
for completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Shares may also be redeemed by phone through FundInfo(R)
(automated phone system), which is accessible 24 hours a day, seven days a week
at (800) 847-2424. Van Kampen Investments and its subsidiaries, including
Investor Services, and the Fund employ procedures considered by them to be
reasonable to confirm that instructions communicated by telephone are genuine.
Such procedures include requiring certain personal identification information
prior to acting upon telephone instructions, tape-recording telephone
communications and providing written confirmation of instructions communicated
by telephone. If reasonable procedures are employed, none of Van Kampen
Investments, Investor Services or the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. Telephone
redemptions may not be available if the shareholder cannot reach Investor
Services by telephone, whether because all telephone lines are busy or for any
other reason; in such case, a shareholder would have to use the Fund's other
redemption procedure previously described. Requests received by Investor
Services prior to 4:00 p.m., New York time, will be processed at the next
determined net asset value per share. These privileges are available for most
accounts other than retirement accounts or accounts with shares represented by
certificates. If an account has multiple owners, Investor Services may rely on
the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions payable by wire transfer are expected to be wired on the next
business day following the date of redemption. The Fund reserves the right at
any time to terminate, limit or otherwise modify this redemption privilege.
OTHER REDEMPTION INFORMATION. The Fund may redeem any shareholder account that
has a value on the date of the notice of redemption less than the minimum
initial investment as specified in this prospectus. At least 60 days' advance
written notice of any such involuntary redemption will be provided to the
shareholder and such shareholder will be given an opportunity to purchase the
required value of additional shares at the next determined net asset value
without sales charge. Any involuntary redemption may only occur if the
shareholder account is less than the minimum initial investment due to
shareholder redemptions.
DISTRIBUTIONS FROM THE FUND
In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.
DIVIDENDS. Dividends from stocks and interest earned from other investments are
the Fund's main sources of net investment income. The Fund's present policy,
which may be changed at any time by the Fund's Board of Trustees, is to
distribute net investment income at least annually as dividends to shareholders.
Dividends are automatically applied to purchase additional shares of the Fund at
the next determined net asset value unless the shareholder instructs otherwise.
The per share dividends on Class B Shares and Class C Shares may be lower than
the per share
22
<PAGE> 24
dividends on Class A Shares as a result of the higher distribution fees and
transfer agency costs applicable to such classes of shares.
CAPITAL GAIN DIVIDENDS. The Fund may realize capital gains or losses when it
sells securities, depending on whether the sales prices for the securities are
higher or lower than purchase prices. The Fund distributes any capital gains to
shareholders at least annually. As in the case of dividends, capital gain
dividends are automatically reinvested in additional shares of the Fund at the
next determined net asset value unless the shareholder instructs otherwise.
SHAREHOLDER SERVICES
Listed below are some of the shareholder services the Fund offers to investors.
For a more complete description of the Fund's shareholder services, such as
investment accounts, share certificates, retirement plans, automated clearing
house deposits, dividend diversification and the systematic withdrawal plan,
please refer to the Statement of Additional Information or contact your
authorized dealer.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gain dividends in shares of the
Fund. Such shares are acquired at net asset value per share (without sales
charge) on the applicable payable date of the dividend or capital gain dividend.
Unless the shareholder instructs otherwise, the reinvestment plan is automatic.
This instruction may be made by telephone by calling (800) 341-2911 ((800)
421-2833 for the hearing impaired) or by writing to Investor Services. The
investor may, on the account application or prior to any declaration, instruct
that dividends and/or capital gain dividends be paid in cash, be reinvested in
the Fund at the next determined net asset value, or be invested in another
Participating Fund at the next determined net asset value.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder can authorize Investor Services to debit the shareholder's bank
account on a regular basis to invest predetermined amounts in the Fund.
Additional information is available from the Distributor or your authorized
dealer.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund based on the next computed net asset value per
share of each fund after requesting the exchange without any sales charge,
subject to certain limitations. Shares of the Fund may be exchanged for shares
of any Participating Fund only if shares of that Participating Fund are
available for sale; however, during periods of suspension of sales, shares of a
Participating Fund may be available for sale only to existing shareholders of a
Participating Fund. Shareholders seeking an exchange into a Participating Fund
should obtain and read the current prospectus for such fund prior to
implementing an exchange. A prospectus of any of the Participating Funds may be
obtained from any authorized dealer or the Distributor.
To be eligible for exchange, shares of the Fund must have been registered in the
shareholder's name for at least 30 days prior to the exchange. Shares of the
Fund registered in a shareholder's name for less than 30 days may only 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 shares that are subject to a contingent deferred sales charge are exchanged
among Participating Funds, the holding period for purposes of computing the
contingent deferred sales charge is based upon the date of the initial purchase
of such shares from a Participating Fund. When such shares are redeemed and not
exchanged for shares of another Participating Fund, the shares are subject to
the contingent deferred sales charge schedule imposed by the Participating Fund
from which such shares were originally purchased.
Exchanges of shares are sales of shares of one Participating Fund and purchases
of shares of another Participating Fund. The sale may result in a gain or loss
for federal income tax purposes. If the shares sold have been held for less than
91 days, the sales charge paid on such shares is carried over and included in
the tax basis of the shares acquired.
A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services, by contacting the telephone transaction line at (800)
421-5684, through FundInfo(R) (automated phone system) at (800) 847-2424 or
through the internet at www.vankampen.com. A shareholder automatically has these
exchange privileges unless the shareholder indicates otherwise by checking the
applicable box on
23
<PAGE> 25
the account application form. Van Kampen Investments and its subsidiaries,
including Investor Services, and the Fund employ procedures considered by them
to be reasonable to confirm that instructions communicated by telephone are
genuine. Such procedures include requiring certain personal identification
information prior to acting upon telephone instructions, tape-recording
telephone communications, and providing written confirmation of instructions
communicated by telephone. If reasonable procedures are employed, none of Van
Kampen Investments, Investor Services or the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. If the
exchanging shareholder does not have an account in the fund whose shares are
being acquired, a new account will be established with the same registration,
dividend and capital gain dividend options (except dividend diversification) and
authorized dealer of record as the account from which shares are exchanged,
unless otherwise specified by the shareholder. In order to establish a
systematic withdrawal plan for the new account or reinvest dividends from the
new account into another fund, however, an exchanging shareholder must submit a
specific request. The Fund reserves the right to reject any order to acquire its
shares through exchange. In addition, the Fund and other Participating Funds may
restrict exchanges by shareholders engaged in excessive trading by limiting or
disallowing the exchange privileges to such shareholders. For further
information on these restrictions, see the Fund's Statement of Additional
Information. The Fund may modify, restrict or terminate the exchange privilege
at any time on 60 days' notice to its shareholders of any termination or
material amendment.
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 such shareholder's 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 of the fund which the
shareholder is redeeming will be redeemed at the net asset value per share next
determined on the date of receipt. Shares of the fund that the shareholder is
purchasing will also normally be purchased at the net asset value per share,
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.
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.vankampen.com for further instruction. Van Kampen Investments and its
subsidiaries, including Investor Services, and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated
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, none of Van Kampen Investments,
Investor Services or the Fund will be liable for following instructions received
through the internet which it reasonably believes to be genuine. If an account
has multiple owners, Investor Services may rely on the instructions of any one
owner.
FEDERAL INCOME
TAXATION
Distributions of the Fund's investment company taxable income (consisting
generally of taxable income and net short-term capital gain) are taxable to
shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gain (which is the excess of net long-term capital
gain over net short-term capital loss) as capital gain dividends, if any, are
taxable to shareholders as long-term capital gains, whether paid in cash or
reinvested in additional shares, and regardless of how long the shares of the
Fund have been held by such shareholders. The Fund expects that its
distributions will consist primarily of ordinary income and capital gain
dividends. Distributions in
24
<PAGE> 26
excess of the Fund's earnings and profits will first reduce the adjusted tax
basis of a holder's shares and, after such adjusted tax basis is reduced to
zero, will constitute capital gains to such holder (assuming such shares are
held as a capital asset). Although distributions generally are treated as
taxable in the year they are paid, distributions declared in October, November
or December, payable to shareholders of record on a specified date in such month
and paid during January of the following year will be treated as having been
distributed by the Fund and received by the shareholders on the December 31st
prior to the date of payment. The Fund will inform shareholders of the source
and tax status of all distributions promptly after the close of each calendar
year.
The sale or exchange of shares may be a taxable transaction for federal income
tax purposes. Shareholders who sell their shares will generally recognize a gain
or loss in an amount equal to the difference between their adjusted tax basis in
the shares sold and the amount received. If the shares are held as a capital
asset, the gain or loss will be a capital gain or loss. Any recognized capital
gains may be taxed at different rates depending on how long the shareholder held
such shares.
The Fund is required, in certain circumstances, to withhold 31% of dividends and
certain other payments, including redemptions, paid to shareholders who do not
furnish to the Fund their correct taxpayer identification number (in the case of
individuals, their social security number) and certain required certifications
or who are otherwise subject to backup withholding.
Foreign shareholders, including shareholders who are nonresident aliens, may be
subject to U.S. withholding tax on certain distributions (whether received in
cash or in shares) at a rate of 30% or such lower rate as prescribed by an
applicable treaty. Prospective foreign investors should consult their tax
advisers concerning the tax consequences to them of an investment in shares.
The Fund intends to qualify as a regulated investment company under federal
income tax law. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its investment company taxable income, the Fund
will not be required to pay federal income taxes on any income it distributes to
shareholders. If the Fund distributes less than an equal amount to the sum of
98% of its ordinary income and 98% of its capital gain net income, then the Fund
will be subject to a 4% excise tax on the undistributed amounts.
The federal income tax discussion set forth above is for general information
only. Prospective investors should consult their own tax advisers regarding the
specific federal tax consequences of purchasing, holding and disposing of
shares, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.
25
<PAGE> 27
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the Statement of Additional Information and may be obtained by
shareholders without charge by calling the telephone number on the back cover of
this prospectus. This information should be read in conjunction with the
financial statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Class A Shares Class B Shares
Year Ended December 31, Year Ended December 31,
1999(b) 1998(b) 1997 1996(b) 1995 1999(b) 1998(b) 1997 1996(b) 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $10.339 $10.162 $10.530 $10.15 $9.19 $10.038 $9.911 $10.379 $10.10 $9.17
------- ------ ------ ------ ------- ------- ------ ------
Net Investment Income/Loss... (.111) (.066) (0.088) -0- .08 (.185) (.151) (.146) (.106) (.01)
Net Realized and Unrealized
Gain......................... 1.231 1.643 1.014 1.242 1.1375 1.192 1.606 .972 1.247 1.1375
------- ------- ------ ------ ------ ------- ------- ------- ------ ------
Total from Investment
Operations................... 1.120 1.577 .926 1.242 1.2175 1.007 1.455 .826 1.141 1.1275
------- ------- ------ ------ ------ ------- ------- ------- ------ ------
Less:
Distributions from and in
Excess of Net Investment
Income..................... .038 .072 -0- -0- .0775 0 -0- -0- -0- .0175
Distributions from and in
Excess of Net Realized
Gain....................... .760 1.328 1.294 .862 .1800 .760 1.328 1.294 .862 .1800
------- ------- ------ ------ ------ ------- ------- ------- ------ ------
Total Distributions............ .798 1.400 1.294 .862 .2575 .760 1.328 1.294 .862 .1975
------- ------- ------ ------ ------ ------- ------- ------- ------ ------
Net Asset Value, End of the
Period....................... $10.661 $10.339 $10.162 $10.530 $10.15 $10.285 $10.038 $9.911 $10.379 $10.10
======= ======= ====== ====== ====== ======= ======= ======= ====== ======
Total Return*(a)............... 11.51% 15.84% 8.94% 12.44% 13.30% 10.72% 14.96% 8.10% 11.51% 12.31%
Net Assets at End of the Period
(In millions)................ $7.3 $8.5 $11.2 $8.5 $15.5 $8.6 $9.6 $10.0 $9.9 $8.1
Ratio of Expenses to Average
Net Assets*.................. 3.88% 4.11% 3.66% 2.87% 2.79% 4.67% 4.89% 4.42% 3.76% 3.73%
Ratio of Net Investment
Income/Loss to Average Net
Assets*...................... (1.08%) (.60%) (.67%) .00% .81% (1.85%) (1.42%) (1.45%) (1.01%) (.09%)
Portfolio Turnover............. 193% 222% 231% 91% 135% 193% 222% 231% 91% 135%
*If certain expenses had not
been assumed by the Adviser,
total return would have been
lower and the ratios would
have been as follows:
Ratio of Expenses to Average
Net Assets................... N/A N/A N/A 3.17% 3.68% N/A N/A N/A 4.06% 4.61%
Ratio of Net Investment
Income/Loss to Average Net
Assets....................... N/A N/A N/A (.30%) (.07%) N/A N/A N/A (1.30%) (.97%)
<CAPTION>
Class C Shares
Year Ended December 31,
1999(b) 1998(b) 1997 1996(b) 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $10.057 $9.927 $10.395 $10.12 $9.20
------- ------- ------ ------
Net Investment Income/Loss... (.182) (.147) (0.139) (.104) (.02)
Net Realized and Unrealized
Gain......................... 1.208 1.605 .965 1.241 1.1375
------- ------- ------- ------ ------
Total from Investment
Operations................... 1.026 1.458 .826 1.137 1.1175
------- ------- ------- ------ ------
Less:
Distributions from and in
Excess of Net Investment
Income..................... 0 -0- -0- -0- .0175
Distributions from and in
Excess of Net Realized
Gain....................... .760 1.328 1.294 .862 .1800
------- ------- ------- ------ ------
Total Distributions............ .760 1.328 1.294 .862 .1975
------- ------- ------- ------ ------
Net Asset Value, End of the
Period....................... $10.323 $10.057 $9.927 $10.395 $10.12
======= ======= ======= ====== ======
Total Return*(a)............... 10.79% 14.93% 8.09% 11.49% 12.16%
Net Assets at End of the Period
(In millions)................ $1.7 $1.4 $1.7 $1.7 $1.9
Ratio of Expenses to Average
Net Assets*.................. 4.65% 4.91% 4.46% 3.78% 3.79%
Ratio of Net Investment
Income/Loss to Average Net
Assets*...................... (1.84%) (1.38%) (1.50%) (.99%) (.18%)
Portfolio Turnover............. 193% 222% 231% 91% 135%
*If certain expenses had not
been assumed by the Adviser,
total return would have been
lower and the ratios would
have been as follows:
Ratio of Expenses to Average
Net Assets................... N/A N/A N/A 4.07% 4.67%
Ratio of Net Investment
Income/Loss to Average Net
Assets....................... N/A N/A N/A (1.28%) (1.06%)
</TABLE>
(a) Total Return is based upon Net Asset Value which does not include payment of
maximum sales charge or contingent deferred sales charge.
(b) Based on average shares outstanding.
N/A -- Not Applicable
26
<PAGE> 28
BOARD OF TRUSTEES
AND OFFICERS
BOARD OF TRUSTEES
<TABLE>
<S> <C>
J. Miles Branagan Richard F. Powers, III*
Jerry D. Choate Phillip B. Rooney
Linda Hutton Heagy Fernando Sisto
R. Craig Kennedy Wayne W. Whalen*, Chairman
Mitchell M. Merin* Suzanne H. Woolsey
Jack E. Nelson
</TABLE>
OFFICERS
Richard F. Powers, III*
President
Stephen L. Boyd*
Executive Vice President & Chief Investment Officer
A. Thomas Smith III*
Vice President and Secretary
John H. Zimmermann, III*
Vice President
Michael H. Santo*
Vice President
Peter W. Hegel*
Vice President
John L. Sullivan*
Vice President, Chief Financial Officer and Treasurer
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
FOR MORE INFORMATION
EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday
DEALERS
For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666
TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call (800) 421-2833
FUNDINFO(R)
For automated telephone services, call (800) 847-2424
WEB SITE
www.vankampen.com
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Investment Adviser
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Investment Subadviser
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
1221 Avenue of the Americas
New York, New York 10020
Distributor
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Global Managed Assets Fund
Custodian
STATE STREET BANK AND TRUST COMPANY
225 West Franklin Street, PO Box 1713
Boston, MA 02105-1713
Attn: Van Kampen Global Managed Assets Fund
Legal Counsel
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
200 East Randolph Drive
Chicago, IL 60601
<PAGE> 29
VAN KAMPEN
GLOBAL MANAGED ASSETS FUND
PROSPECTUS
APRIL 28, 2000
A Statement of Additional Information, which
contains more details about the Fund, is
incorporated by reference in its entirety into
this prospectus.
You will find additional information about the
Fund in its annual and semiannual report to
shareholders. The annual report explains the
market conditions and investment strategies
affecting the Fund's performance during its
last fiscal year.
You can ask questions or obtain a free copy of
the Fund's reports or its Statement of
Additional Information by calling (800)
341-2911 from 7:00 a.m. to 7:00 p.m., Central
time, Monday through Friday.
Telecommunications Device for the Deaf users
may call (800) 421-2833. A free copy of the
Fund's reports can also be ordered from our
web site at www.vankampen.com.
Information about the Fund, including its
reports and Statement of Additional
Information, has been filed with the
Securities and Exchange Commission (SEC). It
can be reviewed and copied at the SEC's Public
Reference Room in Washington, DC or on the
EDGAR database on the SEC's internet web site
(http://www.sec.gov). Information on the
operation of the SEC's Public Reference Room
may be obtained by calling the SEC at
1-202-942-8090. You can also request copies of
these materials upon payment of a duplicating
fee, by electronic request at the SEC's e-
mail address ([email protected]), or by
writing the Public Reference Section of the
SEC, Washington, DC 20549-0102.
[VAN KAMPEN FUNDS LOGO]
The Fund's Investment Company Act
File No. is 811-8286.
GMA PRO 4/00
<PAGE> 30
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN
GLOBAL MANAGED ASSETS FUND
Van Kampen Global Managed Assets Fund is a mutual fund with the investment
objective to seek to provide total return through a managed balance of foreign
and domestic equity and debt securities.
The Fund is organized as a non-diversified series of Van Kampen Global
Managed Assets Fund, an open-end, management investment company (the "Trust").
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information should be read in conjunction with the
Fund's 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 that a prospective investor should consider before
purchasing shares of the Fund. Investors should obtain and read the Prospectus
prior to purchasing shares of the Fund. A Prospectus may be obtained without
charge by writing or calling Van Kampen Funds Inc. at 1 Parkview Plaza, PO Box
5555, Oakbrook Terrace, Illinois 60181-5555 or (800) 341-2911 (or (800) 421-2833
for the hearing impaired).
---------------------------------------------
TABLE OF CONTENTS
---------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information......................................... B-2
Investment Objective, Policies and Risks.................... B-4
Options, Futures Contracts and Related Options.............. B-9
Investment Restrictions..................................... B-19
Trustees and Officers....................................... B-22
Investment Advisory Agreement............................... B-31
Other Agreements............................................ B-32
Distribution and Service.................................... B-32
Transfer Agent.............................................. B-36
Portfolio Transactions and Brokerage Allocation............. B-36
Shareholder Services........................................ B-38
Redemption of Shares........................................ B-41
Contingent Deferred Sales Charge-Class A.................... B-41
Waiver of Class B and Class C Contingent Deferred Sales
Charges................................................... B-42
Taxation.................................................... B-44
Fund Performance............................................ B-49
Other Information........................................... B-53
Securities Ratings.......................................... B-53
Report of Independent Accountants........................... F-1
Financial Statements........................................ F-2
Notes to Financial Statements............................... F-31
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED APRIL 28, 2000.
<PAGE> 31
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 under the name Van Kampen American Capital Global
Managed Assets Fund as a series of the Trust. The Trust is organized as a
business trust under the laws of the State of Delaware. On July 14, 1998, the
Fund and the Trust adopted their present names.
Van Kampen Asset Management Inc. (the "Adviser" or "Asset Management"), Van
Kampen Funds Inc. (the "Distributor"), and Van Kampen Investor Services Inc.
("Investor Services") are wholly owned subsidiaries of Van Kampen Investments
Inc. ("Van Kampen Investments"), which is an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. ("Morgan Stanley Dean Witter"). The principal
office of the Fund, the Trust, the Adviser, the Distributor and Van Kampen
Investments is located at 1 Parkview Plaza, Oakbrook Terrace, Illinois
60181-5555. The principal office of Investor Services is located at 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153. Morgan Stanley Dean Witter
Investment Management Inc. ("MSDWIM" or the "Subadviser") is a wholly owned
subsidiary of Morgan Stanley Dean Witter. The principal office of the Subadviser
is located at 1221 Avenue of the Americas, New York, New York 10020.
Morgan Stanley Dean Witter is a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management; and credit services.
The authorized capitalization of the Trust consists of an unlimited number
of shares of beneficial interest, par value $0.01 per share, which can be
divided into series, such as the Fund, and further subdivided into classes of
each series. Each share represents an equal proportionate interest in the assets
of the series with each other share in such series and no interest in any other
series. No series is subject to the liabilities of any other series. The
Declaration of Trust provides that shareholders are not liable for any
liabilities of the Trust or any of its series, requires inclusion of a clause to
that effect in every agreement entered into by the Trust or any of its series
and indemnifies shareholders against any such liability.
The Fund currently offers 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 Declaration of Trust. Each
class of shares of the Fund generally is identical in all respects except that
each class bears certain distribution expenses and has exclusive voting rights
with respect to its distribution fee. Shares of the Trust entitle their holders
to one vote per share; however, separate votes are taken by each series on
matters affecting an individual series and separate votes are taken by each
class of a series on matters affecting an individual class of such series. For
example, a change in investment policy for a series would be voted upon by
shareholders of only the series involved and a change in the distribution fee
for a class of a series would be voted upon by shareholders of only the class of
such series involved. Except as otherwise described in the Prospectus or herein,
shares do not have cumulative voting rights, preemptive rights or any
conversion, subscription or exchange rights.
The 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
B-2
<PAGE> 32
by written request require a meeting to consider the removal of Trustees by a
vote of a majority of the shares then outstanding cast in person or by proxy at
such meeting. The Fund will assist such holders in communicating with other
shareholders of the Fund to the extent required by the Investment Company Act of
1940, as amended (the "1940 Act"), or rules or regulations promulgated by the
Securities and Exchange Commission ("SEC").
In the event of liquidation, each of the shares of the Fund is entitled to
its portion of all of the Fund's net assets after all debts and expenses of the
Fund have been paid. Since Class B Shares and Class C Shares have higher
distribution fees and transfer agency costs, the liquidation proceeds to holders
of Class B Shares and Class C Shares are likely to be less than to holders of
Class A Shares.
The Trustees may amend the Declaration of Trust (including with respect to
any series) in any manner without shareholder approval, except that the Trustees
may not adopt any amendment adversely affecting the rights of shareholders of
any series without approval by a majority of the shares of each affected series
outstanding and entitled to vote (or such higher vote as may be required by the
1940 Act or other applicable law) and except that the Trustees cannot amend the
Declaration of Trust to impose any liability on shareholders, make any
assessment on shares or impose liabilities on the Trustees without approval from
each affected shareholder or Trustee, as the case may be.
Statements contained in this Statement of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information forms a part, each such statement being
qualified in all respects by such reference.
B-3
<PAGE> 33
As of April 3, 2000, no person was known by the Fund to own beneficially or
to hold of record 5% or more of the outstanding Class A Shares, Class B Shares
or Class C Shares of the Fund, except as follows:
<TABLE>
<CAPTION>
Amount of
Ownership at Class Percentage
Name and Address of Record Holder April 3, 2000 of Shares Ownership
--------------------------------- ------------- --------- ----------
<S> <C> <C> <C>
Van Kampen Trust Company........................ 186,565 A 33.95%
2800 Post Oak Blvd. 227,107 B 30.78%
Houston, TX 77056 24,397 C 18.23%
Edward Jones & Co............................... 88,845 A 16.17%
Attn: Mutual Fund 9,154 C 6.84%
Shareholder Accounting
201 Progress Parkway
Maryland Heights, MO 63043-3009
Merrill Lynch Pierce Fenner & Smith Inc......... 45,432 B 6.16%
For the Sole Benefit of its Customers 7,757 C 5.79%
Attn: Fund Administration
4800 Deer Lake Drive East
2nd Floor
Jacksonville, FL 32246-6484
Roselle V. Anderson, Trustee.................... 9,092 C 6.79%
Anderson Trust
3234 Rossmoor Parkway #3
Walnut Creek, CA 94595-3838
Van Kampen Trust Company Custodian.............. 8,015 C 5.99%
IRA R/O Susan M. Brothers
3638 W. Berry Avenue
Littleton, Colorado 80123-2812
</TABLE>
- ------------------------------------
Van Kampen Trust Company acts as custodian for certain employee benefit
plans
and individual retirement accounts.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The following disclosure supplements the disclosure set forth under the
same caption in the Prospectus and does not, standing alone, present a complete
or accurate explanation of the matters disclosed. Readers must refer also to
this caption in the Prospectus for a complete presentation of the matters
disclosed below.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreements with broker-dealers, banks and
other recognized financial institutions 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 security and the seller
agrees to repurchase the obligation at a future time and set price, thereby
determining the yield during the holding period. Repurchase agreements involve
certain risks in the event of default by the other party. The Fund may enter
into repurchase agreements with broker-dealers, banks and other recognized
financial institutions deemed to be creditworthy by the Adviser under guidelines
B-4
<PAGE> 34
approved by the Fund's Board of Trustees. The Fund will not invest in repurchase
agreements maturing in more than seven days if any such investment, together
with any other illiquid securities held by the Fund, would exceed the Fund's
limitation on illiquid securities described herein. The Fund does not bear the
risk of a decline in the value of the underlying security unless the seller
defaults under its repurchase obligation. In the event of the bankruptcy or
other default of a seller of a repurchase agreement, the Fund could experience
both delays in liquidating the underlying securities and losses including: (a)
possible decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto; (b) possible lack of access to
income on the underlying security during this period; and (c) expenses of
enforcing its rights.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater diversity of
investments for the Fund than would be available to the Fund investing
separately. The manner in which the joint account is managed is subject to
conditions set forth in an exemptive order from the SEC permitting this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.
Repurchase agreements are fully collateralized by the underlying securities
and are considered to be loans under the 1940 Act. The Fund pays for such
securities only upon physical delivery or evidence of book entry transfer to the
account of a custodian or bank acting as agent. The seller under a repurchase
agreement will be required to maintain the value of the underlying securities
marked-to-market daily at not less than the repurchase price. The underlying
securities (normally securities of the U.S. government, its agencies or
instrumentalities) may have maturity dates exceeding one year.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in illiquid securities,
which includes securities that are not readily marketable, repurchase agreements
which have a maturity of longer than seven days and generally includes
securities that are restricted from sale to the public without registration
under the Securities Act of 1933, as amended (the "1933 Act"). The sale of such
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of liquid
securities trading on national securities exchanges or in the over-the-counter
markets. Restricted securities are often purchased at a discount from the market
price of unrestricted securities of the same issuer reflecting the fact that
such securities may not be readily marketable without some time delay.
Investments in securities for which market quotations are not readily available
are valued at fair value as determined in good faith by the Adviser in
accordance with procedures approved by the Fund's Board of Trustees. Ordinarily,
the Fund would invest in restricted securities only when it receives the
issuer's commitment to register the securities without expense to the Fund.
However, registration and underwriting expenses (which typically range from 7%
to 15% of the gross proceeds of the securities sold) may be paid by the Fund.
Restricted securities which can be offered
B-5
<PAGE> 35
and sold to qualified institutional buyers under Rule 144A under the 1933 Act
("144A Securities") and are determined to be liquid under guidelines adopted by
and subject to the supervision of the Fund's Board of Trustees are not subject
to the limitation on illiquid securities. Such 144A Securities are subject to
monitoring and may become illiquid to the extent qualified institutional buyers
become, for a time, uninterested in purchasing such securities. Factors used to
determine whether 144A Securities are liquid include, among other things, a
security's trading history, the availability of reliable pricing information,
the number of dealers making quotes or making a market in such security and the
number of potential purchasers in the market for such security. For purposes
hereof, investments by the Fund in securities of other investment companies will
not be considered investments in restricted securities to the extent permitted
by (i) the 1940 Act, (ii) the rules and regulations promulgated by the SEC under
the 1940 Act, as amended from time to time, or (iii) an exemption or other
relief (such as "no action" letters issued by the staff of the SEC interpreting
or providing guidance on the 1940 Act or regulations thereunder) from the
provisions of the 1940 Act, as amended from time to time.
LENDING OF SECURITIES
Consistent with applicable legal and regulatory requirements, the Fund may
lend an amount up to 15% of the value of its total assets to broker-dealers,
banks and other financial institutional borrowers of securities provided that
such loans are at all times secured by cash collateral that is at least equal to
the market value, determined daily, of the loaned securities and are callable at
any time by the Fund. The advantage of such loans is that the Fund continues to
receive the interest or dividends on the loaned securities, while at the same
time earning interest on the collateral which is invested in short-term
obligations or on agreed-upon amount of interest from the borrower of the
security. The Fund may pay reasonable finders', administrative and custodial
fees in connection with loans of its securities. There is no assurance as to the
extent to which securities loans can be effected.
If the borrower fails to maintain the requisite amount of collateral, the
loan automatically terminates, and the Fund could use the collateral to replace
the securities while holding the borrower liable for any excess of replacement
cost over collateral. As with any extensions of credit, there are risks of delay
in recovery and in some cases even loss of rights in the collateral should the
borrower of the securities fail financially. However, these loans of portfolio
securities will only be made to firms deemed by the Adviser to be creditworthy
and when the consideration which can be earned from such loans is believed to
justify the attendant risks. On termination of the loan, the borrower is
required to return the securities to the Fund; any gain or loss in the market
price during the loan would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in whole or in
part as may be appropriate, to permit the exercise of such rights if the matters
involved would have a material effect on the Fund's investment in the securities
which are the subject of the loan.
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FOREIGN SECURITIES TRANSACTIONS
The Fund's investments in supranational entities may include, but are not
limited to, 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 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.
FORWARD FOREIGN CURRENCY CONTRACT
The Fund may enter into a forward foreign currency 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 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's custodian will place cash or liquid securities in a segregated
account having a value equal to the aggregate amount of the Fund's commitments
under forward contracts. 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.
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WHEN-ISSUED AND DELAYED DELIVERY
The Fund may purchase or sell debt securities on a "when-issued" or
"delayed delivery" basis. 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 until delivery and payment take place. No income accrues to
the Fund on securities in connection with such transactions prior to the date
the Fund actually takes delivery of such securities. These transactions are
subject to market fluctuation; the value of the securities at delivery may be
more or less than their purchase price, and yields generally available on
securities when delivery occurs may be higher or lower than yields on the
securities obtained pursuant to such transactions. The Fund may either settle a
commitment by taking delivery of the securities or may either resell or
repurchase a commitment on or before the settlement date in which event the Fund
may reinvest the proceeds in another when-issued commitment. The Fund's use of
when-issued and delayed delivery transactions may increase its overall
investment exposure and thus its potential for gain or loss. When engaging in
such transactions, 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 commitment (in the case of a 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.
Since the market value of both the securities or currency subject to the
commitment and the securities or currency held in the segregated account may
fluctuate, the use of commitments may magnify the impact of interest rate
changes on the Fund's net asset value.
A commitment sale is covered if the Fund owns or has the right to acquire
the underlying securities or currency subject to the commitment. A 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. By entering into a commitment sale
transaction, the Fund foregoes or reduces the potential for both gain and loss
in the security which is being hedged by the commitment sale. See the Prospectus
for further information.
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 required to recognize gain from the short sale for federal
income tax purposes at the time it enters into the short sale, even though it
does not receive the sales proceeds until it delivers the securities. The Fund
is said to have a short position in the securities sold until it delivers such
securities 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.
The Fund may close out a short position by
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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.
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"). If the Fund
qualifies as a regulated investment company under the Code, it will be relieved
of any liability for federal income tax to the extent its earnings are
distributed to shareholders. In order to qualify, among other requirements, the
Fund must 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. Since the Fund, as a non-diversified investment company, may invest in a
smaller number of individual issuers than a diversified investment company, an
investment in the Fund may, under certain circumstances, present greater risks
to an investor than an investment in a diversified company.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for a fiscal year by the average
monthly value of the Fund's portfolio securities during such fiscal year. The
turnover rate may vary greatly from year to year as well as within a year.
OPTIONS, FUTURES CONTRACTS AND RELATED OPTIONS
The Fund may, but is not required to, use various investment strategies as
described below to earn income, facilitate portfolio management and mitigate
risks. Techniques and instruments may change over time as new instruments and
strategies are developed or as regulatory changes occur. Although the Fund's
Adviser seeks to use such transactions to further the Fund's investment
objective, no assurance can be given that the use of these transactions will
achieve this result.
SELLING CALL AND PUT OPTIONS
Purpose. The principal reason for selling options is to obtain, through
receipt of premiums, a greater current return than would be realized on the
underlying securities alone. Such current return could be expected to fluctuate
because premiums earned from an option selling program and dividend or interest
income yields on portfolio securities vary as economic and market conditions
change. Selling options on portfolio securities is likely to result in a higher
portfolio turnover rate.
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Selling Options. The purchaser of a call option pays a premium to the
seller (i.e., the writer) for the right to buy the underlying security from the
seller at a specified price during a certain period. The Fund would write call
options only 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 seller (i.e., the
writer) for the right to sell the underlying security to the writer at a
specified price during a certain period. The Fund would sell 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 sold by the Fund. The Fund would realize a
gain (loss) if the premium plus commission paid in the closing purchase
transaction is lesser (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 sell options that are listed on an exchange as well as
options which are privately negotiated in over-the-counter transactions. The
Fund could close out its position as a seller 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 seller, but would provide an asset of
equal value to its obligation under the option sold. 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 sold, it will be required to maintain the
securities subject to the call or the collateral securing the option 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 staff of the SEC
currently takes the position that, in general, over-the-counter options on
securities purchased by the Fund, and portfolio securities "covering" the amount
of the Fund's obligation pursuant to an over-the-counter option sold by it (the
cost of the sell-back plus the in-the-money amount, if any) are illiquid, and
are subject to the Fund's limitation on illiquid securities described herein.
Risks of Writing Options. By selling a call option, the Fund loses the
potential for gain on the underlying security above the exercise price while the
option is outstanding; by
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selling 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 against anticipated
increases in the prices of securities it wishes to acquire. Alternatively, call
options could be purchased for capital appreciation. Since the premium paid for
a call option is typically a small fraction of the price of the underlying
security, a given amount of funds will purchase call options covering a much
larger quantity of such security than could be purchased directly. By purchasing
call options, the Fund could benefit from any significant increase in the price
of the underlying security to a greater extent than had it invested the same
amount in the security directly. However, because of the very high volatility of
option premiums, the Fund would bear a significant risk of losing the entire
premium if the price of the underlying security did not rise sufficiently, or if
it did not do so before the option expired.
Put options may be purchased to protect 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.
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 several exchanges.
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
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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.
OPTIONS ON FOREIGN CURRENCIES
The Fund may purchase and write options on foreign currencies for hedging
purposes in a manner similar to that in which forward contracts or futures
contracts on foreign currencies will be utilized. For example, a decline in the
dollar value of a foreign currency in which 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
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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
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 the 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. A stock index
futures contract is an agreement pursuant to which a party agrees to take or
make delivery of an amount of cash equal to a specified dollar amount multiplied
by the difference between the stock index value at a specified time and the
price at which the futures contract originally was struck. No physical delivery
of the
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underlying stocks in the index is made. 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
several indices on various exchanges. Differences in the stocks included in the
indices 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 specified debt security (such as U.S. Treasury bonds or notes) at
a specified future time and at a specified price. The Fund also may invest in
foreign stock index futures traded outside the United States which involve
additional risks including fluctuations in foreign exchange rates, foreign
currency exchange controls, political and economic instability, differences in
financial reporting and securities regulation and trading, and foreign taxation
issues.
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 between 2% and 10%) 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
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purchase of a futures contract would serve 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 would substantially reduce 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. Ordinarily transaction costs
associated with futures transactions are lower than 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. These include the risk of imperfect
correlation between movements in the price of the futures contracts and of the
underlying securities or index; the risk of market distortion; the risk of
illiquidity; 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 upon which the futures contract is
based. If the price of the futures contract moves less than the price of the
securities being hedged, the hedge will not be fully effective. To compensate
for the imperfect correlation, the Fund could buy or sell futures contracts in a
greater 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 underlying the futures contract.
Conversely, the Fund could buy or sell futures contracts in a lesser dollar
amount than the dollar amount of securities being hedged if the historical
volatility of the securities being hedged is less than the historical volatility
of the securities underlying the futures contracts. It is also possible that the
value of futures contracts held by the Fund could decline at the same time as
portfolio securities being hedged; if this occurred, the Fund would lose money
on the futures contract in addition to suffering a decline in value in the
portfolio securities being hedged.
There is also the risk that the price of futures contracts may not
correlate perfectly with movements in the securities or index underlying the
futures contract due to certain market distortions. First, all participants in
the futures market are subject to margin depository and maintenance
requirements. Rather than meet additional margin depository requirements,
investors may close futures contracts through offsetting transactions, which
could distort the normal relationship between the futures market and the
securities 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 Adviser may still not result in a successful hedging
transaction.
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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 Adviser's 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.
Although the Fund intends to enter into futures contracts only if there is
an active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most U.S. futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
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, as described above, there is no
guarantee that the price of the securities being hedged will, in fact, correlate
with the price movements in a futures contract and thus provide an offset to
losses on the futures contract.
The Fund will not enter into futures contracts or options 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.
OPTIONS ON FUTURES CONTRACTS
The Fund could also purchase and write options on futures contracts. An
option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a
B-16
<PAGE> 46
position in a futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise price at any time
during the option period. As a writer of an option on a futures contract, the
Fund would be subject to initial margin and maintenance requirements similar to
those applicable to futures contracts. In addition, net option premiums received
by the Fund are required to be included as initial margin deposits. When an
option on a futures contract is exercised, delivery of the futures position is
accompanied by cash representing the difference between the current market price
of the futures contract and the exercise price of the option. The Fund could
purchase put options on futures contracts in lieu of, and for the same 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
contracts.
Risks of Transactions in Options on Futures Contracts. In addition to the
risks described above which apply to all options transactions, there are several
special risks relating to options on futures. The Adviser will not purchase
options on futures on any exchange unless in the Adviser's opinion, a liquid
secondary exchange market for such options exists. Compared to the use of
futures, the purchase of options on futures involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances, such as when
there is no movement in the price of the underlying security or index, 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.
ADDITIONAL RISKS OF OPTIONS, FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Each of the 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.
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 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, 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
B-17
<PAGE> 47
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.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Many derivative transactions, in addition to other requirements, require
that the Fund segregate cash and liquid securities with its custodian to the
extent the Fund's obligations are not otherwise "covered" as described above. In
general, either the full amount of any obligation by the Fund to pay or deliver
securities or assets must be covered at all times by the securities, instruments
or currency required to be delivered (or securities convertible into the needed
securities without additional consideration), or, subject to applicable
regulatory restrictions, an amount of cash or liquid securities at least equal
to the current
B-18
<PAGE> 48
amount of the obligation must be segregated with the custodian. The segregated
assets cannot be sold or transferred unless equivalent assets are substituted in
their place or it is no longer necessary to segregate them. In the case of a
futures contract or an option thereon, the Fund must deposit initial margin and
possible daily variation margin in addition to segregating cash and liquid
securities sufficient to meet its obligation to purchase or provide securities
or currencies, or to pay the amount owed at the expiration of an index-based
futures contract. Derivative transactions may be covered by other means when
consistent with applicable regulatory policies. The Fund may also enter into
offsetting transactions so that its combined position, coupled with any
segregated cash and liquid securities, equals its net outstanding obligation.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions
which may not be changed without shareholder approval by the vote of a majority
of its outstanding voting securities which is defined by the 1940 Act as the
lesser of (i) 67% or more of the voting securities present at a meeting, if the
holders of more than 50% of the Fund's outstanding voting securities of the Fund
are present or represented by proxy; or (ii) more than 50% of the Fund's
outstanding voting securities. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time of purchase of
securities. With respect to the limitations on illiquid securities and
borrowings, the percentage limitations apply at the time of purchase and on an
ongoing basis. The Fund shall not:
1. 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 U.S. 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).
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) U.S. 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
B-19
<PAGE> 49
(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
B-20
<PAGE> 50
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 are not
listed on the New York Stock Exchange (the "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 1933 Act 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.
B-21
<PAGE> 51
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and officers of the Fund and
executive officers of the Fund's investment adviser and their principal
occupations for the last five years and their affiliations, if any, with Van
Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment
Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset
Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Management
Inc., Van Kampen Advisors Inc., Van Kampen Insurance Agency of Illinois Inc.,
Van Kampen Insurance Agency of Texas Inc., Van Kampen System Inc., Van Kampen
Recordkeeping Services Inc., American Capital Contractual Services, Inc., Van
Kampen Trust Company, Van Kampen Exchange Corp. and Van Kampen Investor Services
Inc. ("Investor Services"). Advisory Corp. and Asset Management sometimes are
referred to herein collectively as the "Advisers". For purposes hereof, the term
"Fund Complex" includes each of the open-end investment companies advised by the
Advisers (excluding Van Kampen Exchange Fund).
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Trustee/Director of each of
1632 Morning Mountain Road the funds in the Fund Complex. Co-founder, and
Raleigh, NC 27614 prior to August 1996, Chairman, Chief Executive
Date of Birth: 07/14/32 Officer and President, MDT Corporation (now
Age: 67 known as Getinge/Castle, Inc., a subsidiary of
Getinge Industrier AB), a company which
develops, manufactures, markets and services
medical and scientific equipment.
Jerry D. Choate........................... Director of Amgen Inc., a biotechnological
53 Monarch Bay Drive company. Trustee/Director of each of the funds
Dana Point, CA 92629 in the Fund Complex. Prior to January 1999,
Date of Birth: 09/16/38 Chairman and Chief Executive Officer of The
Age: 61 Allstate Corporation ("Allstate") and Allstate
Insurance Company. Prior to January 1995,
President and Chief Executive Officer of
Allstate. Prior to August 1994, various
management positions at Allstate.
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an
Sears Tower executive search firm. Trustee/Director of each
233 South Wacker Drive of the funds in the Fund Complex. Prior to
Suite 7000 1997, Partner, Ray & Berndtson, Inc., an
Chicago, IL 60606 executive recruiting and management consulting
Date of Birth: 06/03/48 firm. Formerly, Executive Vice President of ABN
Age: 51 AMRO, N.A., a Dutch bank holding company. Prior
to 1992, Executive Vice President of La Salle
National Bank. Trustee on the University of
Chicago Hospitals Board, Vice Chair of the
Board of The YMCA of Metropolitan Chicago and a
member of the Women's Board of the University
of Chicago. Prior to 1996, Trustee of The
International House Board, a fellowship and
housing organization for international graduate
students.
</TABLE>
B-22
<PAGE> 52
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
R. Craig Kennedy.......................... President and Director, German Marshall Fund of
11 DuPont Circle, N.W. the United States, an independent U.S.
Washington, D.C. 20016 foundation created to deepen understanding,
Date of Birth: 02/29/52 promote collaboration and stimulate exchanges
Age: 48 of practical experience between Americans and
Europeans. Trustee/Director of each of the
funds in the Fund Complex. Formerly, advisor to
the Dennis Trading Group Inc., a managed
futures and option company that invests money
for individuals and institutions. Prior to
1992, President and Chief Executive Officer,
Director and Member of the Investment Committee
of the Joyce Foundation, a private foundation.
Mitchell M. Merin*........................ President and Chief Operating Officer of Asset
Two World Trade Center Management of Morgan Stanley Dean Witter since
66th Floor December 1998. President and Director since
New York, NY 10048 April 1997 and Chief Executive Officer since
Date of Birth: 08/13/53 June 1998 of Morgan Stanley Dean Witter
Age: 46 Advisors Inc. and Morgan Stanley Dean Witter
Services Company Inc. Chairman, Chief Executive
Officer and Director of Morgan Stanley Dean
Witter Distributors Inc. since June 1998.
Chairman and Chief Executive Officer since June
1998, and Director since January 1998, of
Morgan Stanley Dean Witter Trust FSB. Director
of various Morgan Stanley Dean Witter
subsidiaries. President of the Morgan Stanley
Dean Witter Funds and Discover Brokerage Index
Series since May 1999. Trustee/Director of each
of the funds in the Fund Complex. Previously
Chief Strategic Officer of Morgan Stanley Dean
Witter Advisors Inc. and Morgan Stanley Dean
Witter Services Company Inc. and Executive Vice
President of Morgan Stanley Dean Witter
Distributors Inc. April 1997-June 1998, Vice
President of the Morgan Stanley Dean Witter
Funds and Discover Brokerage Index Series May
1997-April 1999, and Executive Vice President
of Dean Witter, Discover & Co.
Jack E. Nelson............................ President and owner, Nelson Investment Planning
423 Country Club Drive Services, Inc., a financial planning company
Winter Park, FL 32789 and registered investment adviser in the State
Date of Birth: 02/13/36 of Florida. President and owner, Nelson Ivest
Age: 64 Brokerage Services Inc., a member of the
National Association of Securities Dealers,
Inc. and Securities Investors Protection Corp.
Trustee/Director of each of the funds in the
Fund Complex.
</TABLE>
B-23
<PAGE> 53
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Richard F. Powers, III*................... Chairman, President and Chief Executive Officer
1 Parkview Plaza of Van Kampen Investments. Chairman, Director
P.O. Box 5555 and Chief Executive Officer of the Advisers,
Oakbrook Terrace, IL 60181-5555 the Distributor, Van Kampen Advisors Inc. and
Date of Birth: 02/02/46 Van Kampen Management Inc. Director and officer
Age: 54 of certain other subsidiaries of Van Kampen
Investments. Trustee/Director and President of
each of the funds in the Fund Complex. Trustee,
President and Chairman of the Board of other
investment companies advised by the Advisers
and their affiliates, and Chief Executive
Officer of Van Kampen Exchange Fund. Prior to
May 1998, Executive Vice President and Director
of Marketing at Morgan Stanley Dean Witter and
Director of Dean Witter Discover & Co. and Dean
Witter Realty. Prior to 1996, Director of Dean
Witter Reynolds Inc.
Phillip B. Rooney......................... Vice Chairman (since April 1997) and Director
One ServiceMaster Way (since 1994) of The ServiceMaster Company, a
Downers Grove, IL 60515 business and consumer services company.
Date of Birth: 07/08/44 Director of Illinois Tool Works, Inc., a
Age: 55 manufacturing company and the Urban Shopping
Centers Inc., a retail mall management company.
Trustee, University of Notre Dame.
Trustee/Director of each of the funds in the
Fund Complex. Prior to 1998, Director of Stone
Smurfit Container Corp., a paper manufacturing
company. From May 1996 through February 1997 he
was President, Chief Executive Officer and
Chief Operating Officer of Waste Management,
Inc., an environmental services company, and
from November 1984 through May 1996 he was
President and Chief Operating Officer of Waste
Management, Inc.
Fernando Sisto............................ Professor Emeritus. Prior to August 1996, a
155 Hickory Lane George M. Bond Chaired Professor with Stevens
Closter, NJ 07624 Institute of Technology, and prior to 1995,
Date of Birth: 08/02/24 Dean of the Graduate School, Stevens Institute
Age: 75 of Technology. Director, Dynalysis of
Princeton, a firm engaged in engineering
research. Trustee/Director of each of the funds
in the Fund Complex.
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps,
333 West Wacker Drive Slate, Meagher & Flom (Illinois), legal counsel
Chicago, IL 60606 to the funds in the Fund Complex, and other
Date of Birth: 08/22/39 investment companies advised by the Advisers or
Age: 60 Van Kampen Management Inc. Trustee/Director of
each of the funds in the Fund Complex, and
Trustee/Managing General Partner of other
investment companies advised by the Advisers or
Van Kampen Management Inc.
</TABLE>
B-24
<PAGE> 54
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
Suzanne H. Woolsey........................ Chief Operating Officer of the National Academy
2101 Constitution Ave., N.W. of Sciences/National Research Council, an
Room 206 independent, federally chartered policy
Washington, D.C. 20418 institution, since 1993. Director of Neurogen
Date of Birth: 12/27/41 Corporation, a pharmaceutical company, since
Age: 58 January 1998. Director of the German Marshall
Fund of the United States, Trustee of Colorado
College, and Vice Chair of the Board of the
Council for Excellence in Government. Trustee/
Director of each of the funds in the Fund
Complex. Prior to 1993, Executive Director of
the Commission on Behavioral and Social
Sciences and Education at the National Academy
of Sciences/National Research Council. From
1980 through 1989, Partner of Coopers &
Lybrand.
</TABLE>
- ------------------------------------
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. Whalen is an interested person of the Fund by reason of
his firm currently acting as legal counsel to the Fund. Messrs. Merin and
Powers are interested persons of the Fund and the Advisers by reason of their
positions with Morgan Stanley Dean Witter or its affiliates.
B-25
<PAGE> 55
OFFICERS
Messrs. Smith, Santo, Hegel, Sullivan and Zimmermann are located at 1
Parkview Plaza, PO Box 5555, Oakbrook Terrace, IL 60181-5555. Mr. Boyd is
located at 2800 Post Oak Blvd., Houston, TX 77056.
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
A. Thomas Smith III.................. Executive Vice President, General Counsel,
Date of Birth: 12/14/56 Secretary and Director of Van Kampen Investments,
Age: 43 the Advisers, Van Kampen Advisors Inc., Van Kampen
Vice President and Secretary Management Inc., the Distributor, American Capital
Contractual Services, Inc., Van Kampen Exchange
Corp., Van Kampen Recordkeeping Services Inc.,
Investor Services, Van Kampen Insurance Agency of
Illinois Inc. and Van Kampen System Inc. Vice
President and Secretary/Vice President, Principal
Legal Officer and Secretary of other investment
companies advised by the Advisers or their
affiliates. Vice President and Secretary of each of
the funds in the Fund Complex. Prior to January
1999, Vice President and Associate General Counsel
to New York Life Insurance Company ("New York
Life"), and prior to March 1997, Associate General
Counsel of New York Life. Prior to December 1993,
Assistant General Counsel of The Dreyfus
Corporation. Prior to August 1991, Senior
Associate, Willkie Farr & Gallagher. Prior to
January 1989, Staff Attorney at the Securities and
Exchange Commission, Division of Investment
Management, Office of Chief Counsel.
Michael H. Santo..................... Executive Vice President, Chief Administrative
Date of Birth: 10/22/55 Officer and Director of Van Kampen Investments, the
Age: 44 Advisers, the Distributor, Van Kampen Advisors
Vice President Inc., Van Kampen Management Inc. and Van Kampen
Investor Services Inc., and serves as a Director or
Officer of certain other subsidiaries of Van Kampen
Investments. Vice President of each of the funds in
the Fund Complex and certain other investment
companies advised by the Advisers and their
affiliates. Prior to 1998, Senior Vice President
and Senior Planning Officer for Individual Asset
Management of Morgan Stanley Dean Witter and its
predecessor since 1994. From 1990-1994, First Vice
President and Assistant Controller in Dean Witter's
Controller's Department.
Peter W. Hegel....................... Executive Vice President of the Advisers, Van
Date of Birth: 06/25/56 Kampen Management Inc. and Van Kampen Advisors Inc.
Age: 43 Vice President of each of the funds in the Fund
Vice President Complex and certain other investment companies
advised by the Advisers or their affiliates. Prior
to September 1996, Director of McCarthy, Crisanti &
Maffei, Inc, a financial research company.
</TABLE>
B-26
<PAGE> 56
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
Stephen L. Boyd...................... Executive Vice President and Chief Investment
Date of Birth: 11/16/40 Officer of Van Kampen Investments, and President
Age: 59 and Chief Operating Officer of the Advisers.
Executive Vice President and Chief Executive Vice President and Chief Investment
Investment Officer Officer of each of the funds in the Fund Complex
and certain other investment companies advised by
the Advisers or their affiliates. Prior to April
2000, Vice President and Chief Investment Officer
of the Advisers. Prior to October 1998, Vice
President and Senior Portfolio Manager with AIM
Capital Management, Inc. Prior to February 1998,
Senior Vice President and Portfolio Manager of Van
Kampen American Capital Asset Management, Inc., Van
Kampen American Capital Investment Advisory Corp.
and Van Kampen American Capital Management, Inc.
John L. Sullivan..................... Senior Vice President of Van Kampen Investments and
Date of Birth: 08/20/55 the Advisers. Vice President, Chief Financial
Age: 44 Officer and Treasurer of each of the funds in the
Vice President, Chief Financial Fund Complex and certain other investment companies
Officer and Treasurer advised by the Advisers or their affiliates.
John H. Zimmermann, III.............. Senior Vice President and Director of Van Kampen
Date of Birth: 11/25/57 Investments, President and Director of the
Vice President Distributor, and President of Van Kampen Insurance
Age: 42 Agency of Illinois Inc. Vice President of each of
the funds in the Fund Complex. From November 1992
to December 1997, Mr. Zimmermann was Senior Vice
President of the Distributor.
</TABLE>
Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 63 operating funds in the Fund Complex. Each trustee/director who is not an
affiliated person of Van Kampen Investments, the Advisers or the Distributor
(each a "Non-Affiliated Trustee") is compensated by an annual retainer and
meeting fees for services to the funds in the Fund Complex. Each fund in the
Fund Complex provides a deferred compensation plan to its Non-Affiliated
Trustees that allows trustees/directors to defer receipt of their compensation
and earn a return on such deferred amounts. Deferring compensation has the
economic effect as if the Non-Affiliated Trustee reinvested his or her
compensation into the funds. Each fund in the Fund Complex provides a retirement
plan to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.
The compensation of each Non-Affiliated Trustee includes an annual retainer
in an amount equal to $50,000 per calendar year, due in four quarterly
installments on the first business day of each quarter. Payment of the annual
retainer is allocated among the funds in the Fund Complex on the basis of the
relative net assets of each fund as of the last business day of the preceding
calendar quarter. The compensation of each Non-Affiliated Trustee includes a per
meeting fee from each fund in the Fund Complex in the amount of $200 per
quarterly or special meeting attended by the Non-Affiliated Trustee, due on the
B-27
<PAGE> 57
date of the meeting, plus reasonable expenses incurred by the Non-Affiliated
Trustee in connection with his or her services as a trustee, provided that no
compensation will be paid in connection with certain telephonic special
meetings.
Under the deferred compensation plan, each Non-Affiliated Trustee generally
can elect to defer receipt of all or a portion of the compensation earned by
such Non-Affiliated Trustee until retirement. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to the return on the
common shares of such Fund or other funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund Complex. To
the extent permitted by the 1940 Act, the Fund may invest in securities of those
funds selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the Fund.
Under the retirement plan, a Non-Affiliated Trustee who is receiving
compensation from such Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500 per year for each of
the ten years following such retirement from such Fund. Non-Affiliated Trustees
retiring prior to the age of 60 or with fewer than 10 years but more than 5
years of service may receive reduced retirement benefits from such Fund. Each
trustee/director has served as a member of the Board of Trustees of the Fund
since he or she was first appointed or elected in the year set forth below. The
retirement plan contains a Fund Complex retirement benefit cap of $60,000 per
year.
B-28
<PAGE> 58
Additional information regarding compensation and benefits for trustees is
set forth below for the periods described in the notes accompanying the table.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Fund Complex
-------------------------------------------
Aggregate
Aggregate Estimated
Pension or Maximum Total
Retirement Annual Compensation
Year First Aggregate Benefits Benefits from before
Appointed or Compensation Accrued as the Fund Deferral from
Elected to from the Part of Upon Fund
Name(1) the Board Fund(2) Expenses(3) Retirement(4) Complex(5)
------- ------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan 1993 $ 1,225 $40,303 $60,000 $126,000
Jerry D. Choate(1) 1999 817 0 60,000 88,700
Linda Hutton Heagy 1995 1,225 5,045 60,000 126,000
R. Craig Kennedy 1995 1,225 3,571 60,000 125,600
Jack E. Nelson 1995 1,225 21,664 60,000 126,000
Phillip B. Rooney 1997 1,025 7,787 60,000 113,400
Fernando Sisto 1993 1,225 72,060 60,000 126,000
Wayne W. Whalen 1995 1,225 15,189 60,000 126,000
Suzanne H. Woolsey(1) 1999 817 0 60,000 88,700
</TABLE>
- ------------------------------------
(1) Trustees not eligible for compensation are not included in the Compensation
Table. Mr. Choate and Ms. Woolsey became members of the Board of Trustees
for the Fund and other funds in the Fund Complex on May 26, 1999 and
therefore do not have a full year of information to report.
(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended December 31, 1999. The
following trustees deferred compensation from the Fund during the fiscal
year ended December 31, 1999: Mr. Branagan, $1,225; Mr. Choate, $611; Ms.
Heagy, $1,225; Mr. Kennedy, $613; Mr. Nelson, $1,225; Mr. Rooney, $1,025;
Mr. Sisto, $613; and Mr. Whalen, $1,225. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to either the
return on the common shares of the Fund or other funds in the Fund Complex
as selected by the respective Non-Affiliated Trustee, with the same economic
effect as if such Non-Affiliated Trustee had invested in one or more funds
in the Fund Complex. To the extent permitted by the 1940 Act, each fund may
invest in securities of those funds selected by the Non-Affiliated Trustees
in order to match the deferred compensation obligation. The cumulative
deferred compensation (including interest) accrued with respect to each
trustee, including former trustees, from the Fund as of December 31, 1999 is
as follows: Mr. Branagan, $5,494; Mr. Caruso, $524; Mr. Choate, $848; Mr.
Gaughan, $115; Ms. Heagy, $5,218; Mr. Kennedy, $4,291; Mr. Miller, $1,792;
Mr. Nelson, $10,728; Mr. Rees, $193; Mr. Robinson, $4,034; Mr. Rooney,
$4,977; Mr. Sisto, $4,117; Mr. Whalen, $7,133; and Mr. Yovovich, $1,451. The
deferred compensation plan is described above the Compensation Table.
B-29
<PAGE> 59
(3) The amounts shown in this column represent the sum of the retirement
benefits accrued by the operating investment companies in the Fund Complex
for each of the trustees for the funds' respective fiscal years ended in
1999. The retirement plan is described above the Compensation Table.
(4) For each trustee, this is the sum of the estimated maximum annual benefits
payable by the funds in the Fund Complex for each year of the 10-year period
commencing in the year of such trustee's anticipated retirement. The
retirement plan is described above the Compensation Table.
(5) The amounts shown in this column represent the aggregate compensation paid
by all of the funds in the Fund Complex as of December 31, 1999 before
deferral by the trustees under the deferred compensation plan. Because the
funds in the Fund Complex have different fiscal year ends, the amounts shown
in this column are presented on a calendar year basis. Certain trustees
deferred all or a portion of their aggregate compensation from the Fund
Complex during the calendar year ended December 31, 1999. The deferred
compensation earns a rate of return determined by reference to the return on
the shares of the funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such Non-
Affiliated Trustee had invested in one or more funds in the Fund Complex. To
the extent permitted by the 1940 Act, the Fund may invest in securities of
those investment companies selected by the Non-Affiliated Trustees in order
to match the deferred compensation obligation. The Advisers and their
affiliates also serve as investment adviser for other investment companies;
however, with the exception of Mr. Whalen, the Non-Affiliated Trustees were
not trustees of such investment companies. Combining the Fund Complex with
other investment companies advised by the Advisers and their affiliates, Mr.
Whalen received Total Compensation of $279,250 during the calendar year
ended December 31, 1999.
The Fund, the Adviser, the Subadviser and the Distributor have adopted
Codes of Ethics (collectively, the "Code of Ethics") that set forth general and
specific standards relating to the securities trading activities of their
employees. The Code of Ethics does not prohibit employees from acquiring
securities that may be purchased or held by the Fund, but is intended to ensure
that all employees conduct their personal transactions in a manner that does not
interfere with the portfolio transactions of the Fund or other Van Kampen funds,
or that such employees take unfair advantage of their relationship with the
Fund. Among other things, the Code of Ethics prohibits certain types of
transactions absent prior approval, imposes various trading restrictions (such
as time periods during which personal transactions may or may not be made) and
requires quarterly reporting of securities transactions and other matters. All
reportable securities transactions and other required reports are to be reviewed
by appropriate personnel for compliance with the Code of Ethics. Additional
restrictions apply to portfolio managers, traders, research analysts and others
who may have access to nonpublic information about the trading activities of the
Fund or other Van Kampen funds or who otherwise are involved in the investment
advisory process. Exceptions to these and other provisions of the Code of Ethics
may be granted in particular circumstances after review by appropriate
personnel.
As of April 3, 2000, the trustees and officers of the Fund as a group owned
less than 1% of the shares of the Fund.
B-30
<PAGE> 60
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of the Fund's assets, including the placing of
orders for the purchase and sale of portfolio securities. The Adviser obtains
and evaluates economic, statistical and financial information to formulate
strategy and implement the Fund's investment objective. The Adviser also
furnishes offices, necessary facilities and equipment, provides administrative
services to the Fund, renders periodic reports to the Board of Trustees and
permits its officers and employees to serve without compensation as trustees of
the Trust or officers of the Fund if elected to such positions. The Fund,
however, bears the cost of its day-to-day operations, including service fees,
distribution fees, custodian fees, legal and independent accountant fees, the
costs of reports and proxies to shareholders, compensation of trustees of the
Trust (other than those who are affiliated persons of the Adviser, Distributor
or Van Kampen Investments) and all other ordinary business expenses not
specifically assumed by the Adviser. The Advisory Agreement also provides that
the Adviser shall not be liable to the Fund for any actions or omissions in the
absence of willful misfeasance, bad faith, negligence or reckless disregard of
its obligations and duties under the Advisory Agreement.
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 other direct or indirect majority owned subsidiary of Van Kampen
Investments in connection with the purchase and sale of portfolio investments
less any direct expenses incurred by such subsidiary of Van Kampen Investments,
in connection with obtaining such commissions, fees, brokerage or similar
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 for the Adviser or any other direct or indirect
majority owned subsidiary of Van Kampen Investments 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 1.5% of the first $30
million of the Fund's average daily net assets plus 1% of any excess over $30
million, 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 the 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 a vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of the Trustees who are not parties to the agreement or
interested persons of any such party by votes cast in person at a meeting called
for such purpose. The Advisory Agreement provides that it shall terminate
automatically if assigned and that it may be terminated without penalty by
either party on 60 days' written notice.
B-31
<PAGE> 61
During the fiscal years ended December 31, 1999, 1998 and 1997, the Adviser
received approximately $173,000, $227,000 and $225,800, respectively, in
advisory fees from the Fund.
OTHER AGREEMENTS
Accounting Services Agreement. The Fund has entered into an accounting
services agreement pursuant to which Advisory Corp. provides accounting services
supplementary to those provided by the custodian. Such services are expected to
enable the Fund to more closely monitor and maintain its accounts and records.
The Fund pays all costs and expenses related to such services, including all
salary and related benefits of accounting personnel, as well as the overhead and
expenses of office space and the equipment necessary to render such services.
The Fund shares together with the other Van Kampen funds in the cost of
providing such services with 25% of such costs shared proportionately based on
the respective number of classes of securities issued per fund and the remaining
75% of such costs based proportionately on the respective net assets per fund.
During the fiscal years ended December 31, 1999, 1998 and 1997, Advisory
Corp. received approximately $9,100, $39,700 and $21,500, respectively, in
accounting services fees from the Fund.
DISTRIBUTION AND SERVICE
The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
authorized dealers on a continuous basis. The Distributor's obligation is an
agency or "best efforts" arrangement under which the Distributor is required to
take and pay for only such shares of the Fund as may be sold to the public. The
Distributor is not obligated to sell any stated number of shares. The
Distributor bears the cost of printing (but not typesetting) prospectuses used
in connection with this offering and certain other costs including the cost of
supplemental sales literature and advertising. The Distribution and Service
Agreement is renewable from year to year if approved (a)(i) by the Fund's
Trustees or (ii) by a vote of a majority of the Fund's outstanding voting
securities and (b) by 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 sale of shares of the Fund
for the last three fiscal years are shown in the chart below.
<TABLE>
<CAPTION>
Total Amounts
Underwriting Retained by
Commissions Distributor
------------ -----------
<S> <C> <C>
Fiscal year ended December 31, 1999..................... $ 27,237 $ 2,957
Fiscal year ended December 31, 1998..................... $ 32,675 $ 2,507
Fiscal year ended December 31, 1997..................... $ 45,169 $ 3,483
</TABLE>
B-32
<PAGE> 62
With respect to sales of Class A Shares of the Fund, the total sales
charges and concessions reallowed to authorized dealers at the time of purchase
are as follows:
CLASS A SHARES SALES CHARGE TABLE
<TABLE>
<CAPTION>
Total Sales Charge
------------------------- Reallowed
As % of As % of Net To Dealers
Size of Offering Amount As a % of
Investment Price Invested Offering Price
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $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 the Fund may impose a contingent deferred sales
charge of 1.00% on certain redemptions made within one year of the purchase. A
commission or transaction fee will be paid by the Distributor at the time of
purchase directly out of the Distributor's assets (and not out of the Fund's
assets) to authorized dealers who initiate and are responsible for purchases
of $1 million or more computed on a percentage of the dollar value of such
shares sold as follows: 1.00% on sales to $2 million, plus 0.80% on the next
$1 million and 0.50% on the excess over $3 million. For single purchases of
$20 million or more by an individual retail investor the Distributor will pay,
at the time of purchase and directly out of the Distributor's assets (and not
out of the Fund's assets), a commission or transaction fee of 1.00% to
authorized dealers who initiate and are responsible for such purchases. The
commission or transaction fee of 1.00% will be computed on a percentage of the
dollar value of such shares sold.
With respect to sales of Class B Shares and Class C Shares of the Fund, a
commission or transaction fee generally will be paid by the Distributor at the
time of purchase directly out of the Distributor's assets (and not out of the
Fund's assets) to authorized dealers who initiate and are responsible for such
purchases computed based on a percentage of the dollar value of such shares sold
of 4.00% on Class B Shares and 1.00% on Class C Shares.
Proceeds from any contingent deferred sales charge and any distribution
fees on Class B Shares and Class C Shares of the Fund are paid to the
Distributor and are used by the Distributor to defray its distribution related
expenses in connection with the sale of the Fund's shares, such as the payment
to authorized dealers for selling such shares. With respect to Class C Shares,
the authorized dealers generally are paid the ongoing commission and transaction
fees of up to 0.75% of the average daily net assets of the Fund's Class C Shares
annually commencing in the second year after purchase.
In addition to reallowances or commissions described above, the Distributor
may from time to time implement programs under which an authorized dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any authorized dealer that sponsors
sales contests or recognition programs conforming to criteria established by the
Distributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the authorized dealer at the public offering price during such programs.
Also, the Distributor in its discretion may from time to time, pursuant to
B-33
<PAGE> 63
objective criteria established by the Distributor, pay fees to, and sponsor
business seminars for, qualifying authorized dealers for certain services or
activities which are primarily intended to result in sales of shares of the Fund
or other Van Kampen funds. Fees may include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited registered
representatives for meetings or seminars of a business nature. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its quarterly sales of shares of the Fund and other Van
Kampen funds and increases in net assets of the Fund and other Van Kampen funds
over specified thresholds. All of the foregoing payments are made by the
Distributor out of its own assets. Such fees paid for such services and
activities with respect to the Fund will not exceed in the aggregate 1.25% of
the average total daily net assets of the Fund on an annual basis. These
programs will not change the price an investor will pay for shares or the amount
that a Fund will receive from such sale.
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to 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 the Distribution and Service Agreement with the Distributor of each
class of the Fund's shares and sub-agreements between the Distributor and
members of the NASD who are acting as securities dealers and NASD members or
eligible non-members who are acting as brokers or agents and similar agreements
between the Fund and financial intermediaries who are acting as brokers
(collectively, "Selling Agreements") that may provide for their customers or
clients certain services or assistance, which may include, but not be limited
to, processing purchase and redemption transactions, establishing and
maintaining shareholder accounts regarding the Fund, and such other services as
may be agreed to from time to time and as may be permitted by applicable
statute, rule or regulation. Brokers, dealers and financial intermediaries that
have entered into sub-agreements with the Distributor and sell shares of the
Fund are referred to herein as "financial intermediaries."
Certain financial intermediaries may be prohibited under law from providing
certain underwriting or distribution services. If a financial intermediary were
prohibited from acting in any capacity or providing any of the described
services, the Distributor would consider what action, if any, would be
appropriate. The Distributor does not believe that termination of a relationship
with a financial intermediary would result in any material adverse consequences
to the Fund.
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and
B-34
<PAGE> 64
also by a vote of the disinterested Trustees, cast in person at a meeting called
for the purpose of voting on the Plans. Each of the Plans may not be amended to
increase materially the amount to be spent for the services described therein
with respect to any class of shares without approval by a vote of a majority of
the outstanding voting shares of such class, and all material amendments to
either of the Plans must be approved by the Trustees and also by the
disinterested Trustees. Each of the Plans may be terminated with respect to any
class of shares at any time by a vote of a majority of the disinterested
Trustees or by a vote of a majority of the outstanding voting shares of such
class.
For Class A Shares in any given year in which the Plans are in effect, the
Plans generally provide for the Fund to pay the Distributor the lesser of (i)
the amount of the Distributor's actual expenses incurred during such year less
any deferred sales charges (if any) it received during such year (the "actual
net expenses") or (ii) the distribution and service fees at the rates specified
in the Prospectus (the "plan fees"). Therefore, to the extent the Distributor's
actual net expenses in a given year are less than the plan fees for such year,
the Fund only pays the actual net expenses. Alternatively, to the extent the
Distributor's actual net expenses in a given year exceed the plan fees for such
year, the Fund only pays the plan fees for such year. For Class A Shares, there
is no carryover of any unreimbursed actual net expenses to succeeding years.
The Plans for Class B Shares and Class C Shares are similar to the Plans
for Class A Shares, except that any actual net expenses which exceed plan fees
for a given year are carried forward and are eligible for payment in future
years by the Fund so long as the Plans remain in effect. Thus, for each of the
Class B Shares and Class C Shares, in any given year in which the Plans are in
effect, the Plans generally provide for the Fund to pay the Distributor the
lesser of (i) the applicable amount of the Distributor's actual net expenses
incurred during such year for such class of shares plus any actual net expenses
from prior years that are still unpaid by the Fund for such class of shares or
(ii) the applicable plan fees for such class of shares. Except as may be
mandated by applicable law, the Fund does not impose any limit with respect to
the number of years into the future that such unreimbursed actual net expenses
may be carried forward (on a Fund level basis). These unreimbursed actual net
expenses may or may not be recovered through plan fees or contingent deferred
sales charges in future years.
Because of fluctuation in net asset value, the plan fees with respect to a
particular Class B Share or Class C Share may be greater or less than the amount
of the initial commission (including carrying cost) paid by the Distributor with
respect to such share. In such circumstances, a shareholder of a share may be
deemed to incur expenses attributable to other shareholders of such class. As of
December 31, 1999, there were $696,281 and $34,109 of unreimbursed
distribution-related expenses with respect to Class B Shares and Class C Shares,
respectively, representing 8.08% and 2.02% of the Fund's average daily net
assets attributable to Class B Shares and Class C Shares, respectively. If the
Plans are terminated or not continued, the Fund would not be contractually
obligated to pay the Distributor for any expenses not previously reimbursed by
the Fund or recovered through contingent deferred sales charges.
For the fiscal year ended December 31, 1999, the Fund's aggregate expenses
paid under the Plans for Class A Shares were $18,254 or 0.25% of the Class A
Shares' average daily net assets. Such expenses were paid to reimburse the
Distributor for payments made to financial intermediaries for servicing Class A
shareholders and for administering the
B-35
<PAGE> 65
Class A Share Plans. For the fiscal year ended December 31, 1999, the Fund's
aggregate expenses paid under the Plans for Class B Shares were $89,246 or 1.00%
of the Class B Shares' average daily net assets. Such expenses were paid to
reimburse the Distributor for the following payments: $66,333 for commissions
and transaction fees paid to financial intermediaries in respect of sales of
Class B Shares of the Fund and $22,913 for fees paid to financial intermediaries
for servicing Class B shareholders and administering the Class B Share Plans.
For the fiscal year ended December 31, 1999, the Fund's aggregate expenses paid
under the Plans for Class C Shares were $15,437 or 1.00% of the Class C Shares'
average daily net assets. Such expenses were paid to reimburse the Distributor
for the following payments: $10,294 for commissions and transaction fees paid to
financial intermediaries in respect of sales of Class C Shares of the Fund and
$5,143 for fees paid to financial intermediaries for servicing Class C
shareholders and administering the Class C Share Plans.
The Distributor has entered into agreements with the following firms: (i)
Merrill Lynch Pierce, Fenner & Smith, Incorporated, (ii) Norwest Bank Minnesota,
N.A./Wells Fargo Bank, N.A., (iii) Invesco Retirement and Benefit Services,
Inc., (iv) Lincoln National Life Insurance Company, (v) National Preferred
Compensation, Inc. and (vi) Union Bank of California, N.A. Shares of the Fund
shall be offered pursuant to such firm's retirement plan alliance program(s).
Trustees and other fiduciaries of retirement plans seeking to invest in multiple
fund families through broker-dealer retirement plan alliance programs should
contact the firms mentioned above for further information concerning the
program(s) including, but not limited to, minimum investment and operational
requirements.
TRANSFER AGENT
The Fund's transfer agent, shareholder service agent and dividend
disbursing agent is Van Kampen Investor Services Inc. The transfer agency prices
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive benchmarks.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
The Adviser is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of prices and any brokerage commissions on such transactions. While
the Adviser will be primarily responsible for the placement of the Fund's
portfolio business, the policies and practices in this regard will at all times
be subject to review by the Board of Trustees of the Fund.
The Adviser is responsible for placing portfolio transactions and does so
in a manner deemed fair and reasonable to the Fund and not according to any
formula. The primary consideration in all portfolio transactions is prompt
execution of orders in an effective manner at the most favorable price. In
selecting broker-dealers and in negotiating prices and any brokerage commissions
on such transactions, the Adviser considers the firm's reliability, integrity
and financial condition and the firm's execution capability, the size and
breadth of the market for the security, the size of and difficulty in executing
the order, and the best net price. There are many instances when, in the
judgment of the Adviser, more than one firm can offer comparable execution
services. In selecting among such firms,
B-36
<PAGE> 66
consideration may be given to those firms which supply research and other
services in addition to execution services. The Adviser is authorized to pay
higher commissions to brokerage firms that provide it with investment and
research information than to firms which do not provide such services if the
Adviser determines that such commissions are reasonable in relation to the
overall services provided. No specific value can be assigned to such research
services which are furnished without cost to the Adviser. Since statistical and
other research information is only supplementary to the research efforts of the
Adviser to the Fund and still must be analyzed and reviewed by its staff, the
receipt of research information is not expected to reduce its expenses
materially. The investment advisory fee is not reduced as a result of the
Adviser's receipt of such research services. Services provided may include (a)
furnishing advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; (b) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts; and (c) effecting
securities transactions and performing functions incidental thereto (such as
clearance, settlement and custody). Research services furnished by firms through
which the Fund effects its securities transactions may be used by the Adviser in
servicing all of its advisory accounts; not all of such services may be used by
the Adviser in connection with the Fund. The Adviser also may place portfolio
transactions, to the extent permitted by law, with brokerage firms affiliated
with the Fund, the Adviser or the Distributor and with brokerage firms
participating in the distribution of the Fund's shares if it reasonably believes
that the quality of execution and the commission are comparable to that
available from other qualified firms. Similarly, to the extent permitted by law
and subject to the same considerations on quality of execution and comparable
commission rates, the Adviser may direct an executing broker to pay a portion or
all of any commissions, concessions or discounts to a firm supplying research or
other services or to a firm participating in the distribution of the Fund's
shares.
The Adviser may place portfolio transactions at or about the same time for
other advisory accounts, including other investment companies. The Adviser seeks
to allocate portfolio transactions equitably whenever concurrent decisions are
made to purchase or sell securities for the Fund and another advisory account.
In some cases, this procedure could have an adverse effect on the price or the
amount of securities available to the Fund. In making such allocations among the
Fund and other advisory accounts, the main factors considered by the Adviser are
the respective sizes of the Fund and other advisory accounts, the respective
investment objective, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and opinions of the persons responsible
for recommending the investment.
Effective October 31, 1996, Morgan Stanley & Co. Incorporated ("Morgan
Stanley") became an affiliate of the Adviser. Effective May 31, 1997, Dean
Witter Reynolds, Inc. ("Dean Witter") became an affiliate of the Adviser. The
Fund's Board of Trustees has adopted certain policies incorporating the
standards of Rule 17e-1 issued by the SEC under the 1940 Act which require that
the commissions paid to affiliates of the Fund must be reasonable and fair
compared to the commissions, fees or other remuneration received or to be
received by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time. The rule and procedures
also contain review requirements and require the Adviser to furnish reports to
the Trustees and to
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maintain records in connection with such reviews. After consideration of all
factors deemed relevant, the Trustees will consider from time to time whether
the advisory fee for the Fund will be reduced by all or a portion of the
brokerage commission given to affiliated brokers.
The Fund paid the following commissions to all brokers and affiliated
brokers during the years shown:
Commissions Paid:
<TABLE>
<CAPTION>
Affiliated Brokers
--------------------
All Morgan Dean
Brokers Stanley Witter
------- ------- ------
<S> <C> <C> <C>
Fiscal year ended December 31, 1999............... $11,304 $ -0- $ -0-
Fiscal year ended December 31, 1998............... $29,314 $ 20 $ -0-
Fiscal year ended December 31, 1997............... $41,941 $ -0- $ -0-
Fiscal year 1999 Percentages:
Commissions with affiliate to total commissions... 0.07% -0-
Value of brokerage transactions with affiliate to
total transactions............................. 0.003% -0-
</TABLE>
During the fiscal year ended December 31, 1999, the Fund paid no brokerage
commissions on transactions to brokers selected primarily on the basis of
research services provided to the Adviser.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. Below is a
description of such services. The following information supplements the section
in the Fund's Prospectus captioned "Shareholder Services."
INVESTMENT ACCOUNT
Each shareholder has an investment account under which the investor's
shares of the Fund are held by Investor Services, the Fund's transfer agent.
Investor Services performs bookkeeping, data processing and administrative
services related to the maintenance of shareholder accounts. Except as described
in the Prospectus and this Statement of Additional Information, after each share
transaction in an account, the shareholder receives a statement showing the
activity in the account. Each shareholder who has an account in any of the
Participating Funds (as defined in the Prospectus) will receive statements
quarterly from Investor Services showing any reinvestments of dividends and
capital gain dividends and any other activity in the account since the preceding
statement. Such shareholders also will receive separate confirmations for each
purchase or sale transaction other than reinvestment of dividends and capital
gain dividends and systematic purchases or redemptions. Additional shares may be
purchased at any time through authorized dealers or by mailing a check directly
to Investor Services.
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SHARE CERTIFICATES
Generally, the Fund will not issue share certificates. However, upon
written or telephone request to the Fund, a share certificate will be issued
representing shares (with the exception of fractional shares) of the Fund. A
shareholder will be required to surrender such certificates upon an exchange or
redemption of the shares represented by the certificate. In addition, if such
certificates are lost the shareholder must write to Van Kampen Funds Inc., c/o
Investor Services, PO Box 218256, Kansas City, MO 64121-8256, requesting an
"Affidavit of Loss" and obtain a Surety Bond in a form acceptable to Investor
Services. On the date the letter is received, Investor Services will calculate
the fee for replacing the lost certificate equal to no more than 1.50% of the
net asset value of the issued shares, and bill the party to whom the replacement
certificate was mailed.
RETIREMENT PLANS
Eligible investors may establish individual retirement accounts ("IRAs");
SEP; 401(k) plans; Section 403(b)(7) plans in the case of employees of public
school systems and certain non-profit organizations; or other pension or profit
sharing plans. Documents and forms containing detailed information regarding
these plans are available from the Distributor. Van Kampen Trust Company serves
as custodian under the IRA, 403(b)(7) and Money Purchase and Profit Sharing
Keogh plans. Details regarding fees, as well as full plan administration for
profit sharing, pension and 401(k) plans, are available from the Distributor.
AUTOMATED CLEARING HOUSE("ACH") DEPOSITS
Shareholders can use ACH to have redemption proceeds deposited
electronically into their bank accounts. Redemption proceeds transferred to a
bank account via the ACH plan are available to be credited to the account on the
second business day following normal payment. In order to utilize this option,
the shareholder's bank must be a member of ACH. In addition, the shareholder
must fill out the appropriate section of the account application. The
shareholder must also include a voided check or deposit slip from the bank
account into which redemption proceeds are to be deposited together with the
completed application. Once Investor Services has received the application and
the voided check or deposit slip, such shareholder's designated bank account,
following any redemption, will be credited with the proceeds of such redemption.
Once enrolled in the ACH plan, a shareholder may terminate participation at any
time by writing Investor Services or by calling (800) 341-2911 ((800) 421-2833
for the hearing impaired).
DIVIDEND DIVERSIFICATION
A shareholder may upon written request, or by completing the appropriate
section of the account application form or by calling (800) 341-2911 ((800)
421-2833 for the hearing impaired), elect to have all dividends and capital gain
dividends paid on a class of shares of the Fund invested into shares of the same
class of any 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
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<PAGE> 69
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 per
share as of the payable date of the distribution.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a monthly, quarterly, semiannual or annual
withdrawal plan if the shareholder owns shares in a single account valued at
$10,000 or more at the next determined net asset value per share at the time the
plan is established. If a shareholder owns shares in a single account valued at
$5,000 or more at the next determined net asset value per share at the time the
plan is established, the shareholder may establish a quarterly, semiannual or
annual withdrawal plan. This plan provides for the orderly use of the entire
account, not only the income but also the capital, if necessary. Each payment
represents the proceeds of a redemption of shares on which any capital gain or
loss will be recognized. The planholder may arrange for regular checks in any
amount, not less than $25. Such a systematic withdrawal plan may also be
maintained by an investor purchasing shares for a retirement plan established on
a form made available by the Fund. See "Shareholder Services -- Retirement
Plans."
Class B Shareholders and Class C Shareholders who establish a systematic
withdrawal plan may redeem up to 12% annually of the shareholder's initial
account balance without incurring a contingent deferred sales charge. Initial
account balance means the amount of the shareholder's investment at the time the
election to participate in the plan is made.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gain dividends
on shares held in accounts with systematic withdrawal plans are reinvested in
additional shares at the next determined net asset value per share. If periodic
withdrawals continuously exceed reinvested dividends and capital gain dividends,
the shareholder's original investment will be correspondingly reduced and
ultimately exhausted. Redemptions made concurrently with the purchase of
additional shares ordinarily will be disadvantageous to the shareholder because
of the duplication of sales charges. Any gain or loss realized by the
shareholder upon redemption of shares is a taxable event. The Fund reserves the
right to amend or terminate the systematic withdrawal program upon 30 days'
notice to its shareholders.
EXCHANGE PRIVILEGE
All shareholders are limited to eight exchanges per fund during a rolling
365-day period.
Exchange privileges will be suspended on a particular fund if more than
eight exchanges out of that fund are made during a rolling 365-day period. If
exchange privileges are suspended, subsequent exchange requests during the
stated period will not be processed. Exchange privileges will be restored when
the account history shows fewer than eight exchanges in the rolling 365-day
period.
This policy change does not apply to money market funds, systematic
exchange plans, or employer-sponsored retirement plans.
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REINSTATEMENT PRIVILEGE
A Class A Shareholder or Class B Shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class A Shares of the Fund. A Class C Shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class C Shares of the Fund with credit given for any contingent deferred sales
charge paid upon such redemption. Such reinstatement is made at the net asset
value per share (without sales charge) next determined after the order is
received, which must be made within 180 days after the date of the redemption.
Reinstatement at net asset value per share is also offered to participants in
those eligible retirement plans held or administered by Van Kampen Trust Company
for repayment of principal (and interest) on their borrowings on such plans.
REDEMPTION OF SHARES
Redemptions are not made on days during which the New York Stock Exchange
(the "Exchange") is closed. The right of redemption may be suspended and the
payment therefor may be postponed for more than seven days during any period
when (a) the Exchange is closed for other than customary weekends or holidays;
(b) the SEC determines trading on the Exchange is restricted; (c) the SEC
determines an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund to fairly determine the value of its net assets; or (d)
the SEC, by order, so permits.
In addition, if the Board of Trustees determines that payment wholly or
partly in cash would be detrimental to the best interests of the remaining
shareholders of the Fund, the Fund may pay the redemption proceeds in whole or
in part by a distribution-in-kind of portfolio securities held by the Fund in
lieu of cash in conformity with applicable rules of the SEC. A
distribution-in-kind will result in recognition by the shareholder of a gain or
loss for federal income tax purposes when such securities are distributed, and
the shareholder may have brokerage charges and a gain or loss for federal income
tax purposes upon a shareholder's subsequent disposition of such securities.
CONTINGENT DEFERRED SALES CHARGE-CLASS A
As described in the Prospectus under "Purchase of Shares -- Class A
Shares," there is no sales charge payable on Class A Shares at the time of
purchase on investments of $1 million or more, but a contingent deferred sales
charge ("CDSC-Class A") may be imposed on certain redemptions made within one
year of purchase. For purposes of the CDSC-Class A, when shares of one fund are
exchanged for shares of another fund, the purchase date for the shares of the
fund exchanged into will be assumed to be the date on which shares were
purchased in the fund from which the exchange was made. If the exchanged shares
themselves are acquired through an exchange, the purchase date is assumed to
carry over from the date of the original election to purchase shares subject to
a CDSC-Class A rather than a front-end load sales charge. In determining whether
a CDSC-Class A is payable, it is assumed that shares being redeemed first are
any shares in the shareholder's account not subject to a contingent deferred
sales charge followed by shares held the longest in the shareholder's account.
The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost
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<PAGE> 71
of the shares being redeemed. Accordingly, no sales charge is imposed on
increases in net asset value above the initial purchase price. In addition, no
sales charge is assessed on shares derived from reinvestment of dividends or
capital gain dividends.
WAIVER OF CLASS B AND CLASS C
CONTINGENT DEFERRED SALES CHARGES
As described in the Prospectus under "Redemption of Shares," redemptions of
Class B Shares and Class C Shares will be subject to a contingent deferred sales
charge ("CDSC-Class B and C"). The CDSC-Class B and C is waived on redemptions
of Class B Shares and Class C Shares in the circumstances described below:
REDEMPTION UPON DEATH OR DISABILITY
The Fund will waive the CDSC-Class B and C on redemptions following the
death or disability of a Class B shareholder and Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the 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.
REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS
The Fund will waive the CDSC-Class B and C when a total or partial
redemption is made in connection with certain distributions from retirement
plans. The CDSC Class B and C will be waived upon the tax-free rollover or
transfer of assets to another retirement plan invested in one or more
Participating Funds; in such event, as described below, the Fund will "tack" the
period for which the original shares were held on to the holding period of the
shares acquired in the transfer or rollover for purposes of determining what, if
any, CDSC-Class B and C is applicable in the event that such acquired shares are
redeemed following the transfer or rollover. The charge also will be waived on
any redemption which results from the return of an excess contribution pursuant
to Section 408(d)(4) or (5) of the Code, the return of excess deferral amounts
pursuant to Code Section 401(k)(8) or 402(g)(2), the financial hardship of the
employee pursuant to U.S. Treasury Regulations Section 1.401(k)-(1)(d)(2) or
from the death or disability of the employee (see Code Section 72(m)(7) and
72(t)(2)(A)(ii)). In addition, the charge
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<PAGE> 72
will be waived on any minimum distribution required to be distributed in
accordance with Code Section 401(a)(9).
The Fund does not intend to waive the CDSC-Class B and C for any
distributions from IRAs or other retirement plans not specifically described
above.
REDEMPTION PURSUANT TO THE FUND'S SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to participate in a systematic withdrawal plan with
respect to the shareholder's investment in the Fund. Under the systematic
withdrawal plan, a dollar amount of a participating shareholder's investment in
the Fund will be redeemed systematically by the Fund on a periodic basis, and
the proceeds sent to the designated payee of record. The amount to be redeemed
and frequency of the systematic withdrawals will be specified by the shareholder
upon his or her election to participate in the systematic withdrawal plan. The
CDSC-Class B and C will be waived on redemptions made under the systematic
withdrawal plan.
The amount of the shareholder's investment in the Fund at the time the
election to participate in the systematic withdrawal plan is made with respect
to the Fund is hereinafter referred to as the "initial account balance." The
amount to be systematically redeemed from the Fund without the imposition of a
CDSC-Class B and C may not exceed a maximum of 12% annually of the shareholder's
initial account balance. The Fund reserves the right to change the terms and
conditions of the systematic withdrawal plan and the ability to offer the
systematic withdrawal plan.
NO INITIAL COMMISSION OR TRANSACTION FEE
The Fund will waive the CDSC-Class B and C in circumstances under which no
commission or transaction fee is paid to authorized dealers at the time of
purchase of shares. See "Purchase of Shares -- Waiver of Contingent Deferred
Sales Charge" in the Prospectus.
INVOLUNTARY REDEMPTIONS OF SHARES
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the value of the
account up to the required minimum balance. The Fund will waive the CDSC-Class B
and C upon such involuntary redemption.
REINVESTMENT OF REDEMPTION PROCEEDS
A shareholder who has redeemed Class C Shares of the Fund may reinvest at
net asset value, with credit for any CDSC-Class C paid on the redeemed shares,
any portion or all of his or her redemption proceeds (plus that amount necessary
to acquire a fractional share to round off his or her purchase to the nearest
full share) in Class C Shares of the Fund, provided that the reinvestment is
effected within 180 days after such redemption and the shareholder has not
previously exercised this reinvestment privilege with respect to Class C Shares
of the Fund. Shares acquired in this manner will be
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deemed to have the original cost and purchase date of the redeemed shares for
purposes of applying the CDSC-Class C to subsequent redemptions.
REDEMPTION BY ADVISER
The Fund may waive the CDSC-Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
TAXATION
FEDERAL INCOME TAXATION OF THE FUND
The Fund has elected and qualified, and intends to continue to qualify each
year, to be treated as a regulated investment company under Subchapter M of the
Code. To qualify as a regulated investment company, the Fund must comply with
certain requirements of the Code relating to, among other things, the source of
its income and diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its investment company taxable income (generally including taxable
income and net short-term capital gain, but not net capital gain, which is the
excess of net long-term capital gain over net short-term capital loss), and
meets certain other requirements, it will not be required to pay federal income
taxes on any income it distributes to shareholders. The Fund intends to
distribute at least the minimum amount of investment company taxable income
necessary to satisfy the 90% distribution requirement. The Fund will not be
subject to federal income tax on any net capital gain distributed to
shareholders.
In order to avoid a 4% excise tax, the Fund will be required to distribute,
by December 31st of each year, at least an amount equal to the sum of (i) 98% of
its ordinary income for such year and (ii) 98% of its capital gain net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31st of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain net income retained by, and subject to federal income tax in the
hands of, the Fund will be treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the Fund would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. 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.
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Some of the Fund's investment practices are subject to special provisions
of the Code that may, among other things, defer the use of certain losses of the
Fund, affect the holding period of the securities held by the Fund and the alter
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.
PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (i) at least
75% of its gross income is passive income or (ii) an average of at least 50% of
its assets produce, or are held for the production of, passive income. Under
certain circumstances, a regulated investment company that holds stock of a PFIC
will be subject to federal income tax on (i) a portion of any "excess
distribution" received on such stock or (ii) any gain from a sale or disposition
of such stock (collectively, "PFIC income"), plus interest on such amounts, even
if the regulated investment company distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be included in
the regulated investment company's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders. If the Fund invests in a PFIC and elects to treat the PFIC
as a "qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain, which most likely would have to be distributed to satisfy the 90%
distribution requirement and the distribution requirement for avoiding income
and excise taxes. In most instances it will be very difficult to make this
election due to certain requirements imposed with respect to the election.
As an alternative to making the above-described election to treat the PFIC
as a qualified electing fund, the Fund may make an election to annually
mark-to-market PFIC stock that it owns (a "PFIC Mark-to-Market Election").
"Marking-to-market," in this context, means recognizing as ordinary income or
loss each year an amount equal to the difference between the Fund's adjusted tax
basis in such PFIC stock and its fair market value. Losses will be allowed only
to the extent of net mark-to-market gain previously included by the Fund
pursuant to the election for prior taxable years. The Fund may be required to
include in its taxable income for the first taxable year in which it makes a
PFIC Mark-to-Market Election an amount equal to the interest charge that would
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<PAGE> 75
otherwise accrue with respect to distributions on, or dispositions of, the PFIC
stock. This amount would not be deductible from the Fund's taxable income. The
PFIC Mark-to-Market Election applies to the taxable year for which made and to
all subsequent taxable years, unless the Internal Revenue Service (the "IRS")
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 TO SHAREHOLDERS
Distributions of the Fund's investment company taxable income are taxable
to shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gain as capital gain dividends, if any, are taxable to
shareholders as long-term capital gains regardless of the length of time shares
of the Fund have been held by such shareholders. Distributions in excess of the
Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). For a summary of the maximum tax rates applicable to capital
gains (including capital gain dividends), see "Capital Gains Rates" below.
Tax-exempt shareholders not subject to federal income tax on their income
generally will not be taxed on distributions from the Fund.
Shareholders receiving distributions in the form of additional shares
issued by the Fund will be treated for federal income tax purposes as receiving
a distribution in an amount equal to the fair market value of the shares
received, determined as of the distribution date. The basis of such shares will
equal the fair market value on the distribution date.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Some portion of
the distributions from the Fund may be eligible for the dividends received
deduction for corporations if the Fund receives qualifying dividends during the
year and if certain requirements of the Code are satisfied.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31st prior to the date of payment.
In addition, certain other distributions made after the close of a taxable year
of the Fund may be "spilled back" and treated as paid by the Fund (except for
purposes of the 4% excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distribution was actually made.
Income from investments in foreign securities received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. Shareholders of the Fund may be
entitled to claim United States foreign tax credits
B-46
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with respect to such taxes, subject to certain provisions and limitations
contained in the Code. If more than 50% of the value of the Fund's total assets
at the close of the taxable year consists of stock or securities of foreign
corporations and, in the case of foreign withholding taxes paid with respect to
dividends from foreign corporations, the Fund satisfies certain holding period
and other requirements, the Fund will be eligible to file, and may file, an
election with the IRS pursuant to which shareholders of the Fund will be
required (i) to include their respective pro rata portions of such taxes in
their United States income tax returns as gross income and (ii) to treat such
respective pro rata portions as taxes paid by them. Each shareholder will be
entitled, subject to certain limitations, either to deduct his pro rata portion
of such foreign taxes in computing his taxable income or to credit them against
his United States federal income tax liability. No deduction for such foreign
taxes may be claimed by a shareholder who does not itemize deductions. Each
shareholder of the Fund will be notified annually regarding 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 the 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 United States
federal income tax attributable to the shareholder's foreign source taxable
income. This limitation generally applies separately to certain specific
categories of foreign source income including "passive income," which includes
dividends and interest. Because the application of the foregoing rules depends
on the particular circumstances of each shareholder, shareholders are urged to
consult their 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 gains. 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.
SALE OF SHARES
The sale of shares (including transfers in connection with a redemption or
repurchase of shares) may be a taxable transaction for federal income tax
purposes. Selling shareholders will generally recognize gain or loss in an
amount equal to the difference between their adjusted tax basis in the shares
and the amount received. If such shares are held as a capital asset, the gain or
loss will be a capital gain or loss. For a summary of the maximum tax rates
applicable to capital gains (including capital gain dividends), see "Capital
Gains Rates" below. Any loss recognized upon a taxable disposition of shares
held for six months or less will be treated as a long-term capital loss to the
extent of any capital gain dividends received with respect to such shares. For
purposes of determining whether shares have been held for six months or less,
the holding period is suspended for any periods during which the shareholder's
risk of loss is diminished as a result of holding
B-47
<PAGE> 77
one or more other positions in substantially similar or related property or
through certain options or short sales.
CAPITAL GAINS RATES
The maximum tax rate applicable to net capital gains recognized by
individuals and other non-corporate taxpayers investing in the Fund is (i) the
same as the maximum ordinary income tax rate for capital assets held for one
year or less or (ii) 20% for capital assets held for more than one year. The
maximum long-term capital gains rate for corporations is 35%.
NON-U.S. SHAREHOLDERS
A shareholder who is not (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized under the laws of the
United States or any state thereof, (iii) an estate, the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States fiduciaries who have
the authority to control all substantial decisions of the trust (a "Non-U.S.
Shareholder") generally will be subject to withholding of United States federal
income tax at a 30% rate (or lower applicable treaty rate) on dividends from the
Fund (other than capital gain dividends) that are not "effectively connected"
with a United States trade or business carried on by such shareholder.
Non-effectively connected capital gain dividends and gain realized from the
sale of shares will not be subject to United States federal income tax in the
case of (i) a Non-U.S. Shareholder that is a corporation and (ii) an individual
Non-U.S. Shareholder who is not present in the United States for more than 182
days during the taxable year (assuming that certain other conditions are met).
However, certain Non-U.S. Shareholders may nonetheless be subject to backup
withholding on capital gain dividends and gross proceeds paid to them upon the
sale of their shares. See "Backup Withholding" below.
If income from the Fund or gains realized from the sale of shares is
effectively connected with a Non-U.S. Shareholder's United States trade or
business, then such amounts will be subject to United States federal income tax
on a net basis at the tax rates applicable to United States citizens or domestic
corporations. Non-U.S. Shareholders that are corporations may also be subject to
an additional "branch profits tax" with respect to income from the Fund that is
effectively connected with a United States trade or business.
United States Treasury regulations, generally effective for payments made
after December 31, 2000, modify the withholding, back-up withholding and
information reporting rules, including the procedures to be followed by foreign
investors in establishing foreign status. Prospective foreign investors should
consult their tax advisers concerning the applicability and effect of such
Treasury regulations on an investment in shares of the Fund.
The tax consequences to a Non-U.S. Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Non-U.S. Shareholders may be required to provide appropriate
documentation to establish their entitlement to the benefits of such a treaty.
Foreign investors are advised to consult their
B-48
<PAGE> 78
tax advisers with respect to the tax implications of purchasing, holding and
disposing of shares of the Fund.
BACKUP WITHHOLDING
The Fund may be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividends and redemption proceeds paid to
non-corporate shareholders. This tax may be withheld from dividends if (i) the
shareholder fails to furnish the Fund with its correct taxpayer identification
number, (ii) the IRS notifies the Fund that the shareholder has failed to
properly report certain interest and dividend income to the IRS and to respond
to notices to that effect or (iii) when required to do so, the shareholder fails
to certify that he or she is not subject to backup withholding. Redemption
proceeds may be subject to withholding under the circumstances described in (i)
above.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from payments made to a shareholder may be refunded or
credited against such shareholder's U.S. federal income tax liability, if any,
provided that the required information is furnished to the IRS.
INFORMATION REPORTING
The Fund must report annually to the IRS and to each shareholder (other
than a Non-U.S. Shareholder) the amount of dividends paid to such shareholder
and the amount, if any, of tax withheld pursuant to backup withholding rules
with respect to such dividends. In the case of a Non-U.S. Shareholder, the Fund
must report to the IRS and such shareholder the aggregate amount of dividends
paid that are subject to backup withholding (if any) and the amount of tax
withheld with respect to such dividends pursuant to the backup withholding
rules. This information may also be made available to the tax authorities in the
Non-U.S. Shareholder's country of residence. Generally, dividends paid to
Non-U.S. Shareholders that are subject to the 30% federal income tax withholding
described above under "Non-U.S. Shareholders" are not subject to backup
withholding.
GENERAL
The federal income tax discussion set forth above is for general
information only. Prospective investors and shareholders should consult their
advisers regarding the specific federal tax consequences of purchasing, holding
and disposing of shares, as well as the effects of state, local and foreign tax
law and any proposed tax law changes.
FUND PERFORMANCE
From time to time the Fund may advertise its total return for prior
periods. Any such advertisement would include at least average annual total
return quotations for one-year, five-year and ten-year periods. Other total
return quotations, aggregate or average, over other time periods may also be
included.
The total return of the Fund for a particular period represents the
increase (or decrease) in the value of a hypothetical investment in the Fund
from the beginning to the
B-49
<PAGE> 79
end of the period. Total return is calculated by subtracting the value of the
initial investment from the ending value and showing the difference as a
percentage of the initial investment; the calculation assumes the initial
investment is made at the current maximum public offering price (which includes
the maximum sales charge for Class A Shares); that all income dividends or
capital gain dividends during the period are reinvested in Fund shares at net
asset value; and that any applicable contingent deferred sales charge has been
paid. The Fund's total return will vary depending on market conditions, the
securities comprising the Fund's portfolio, the Fund's operating expenses and
unrealized net capital gains or losses during the period. Total return is based
on historical earnings and asset value fluctuations and is not intended to
indicate future performance. No adjustments are made to reflect any income taxes
payable by shareholders on dividends and capital gain dividends paid by the Fund
or to reflect the fact 12b-1 fees previously may have been less than the current
12b-1 fees for certain classes of shares as specified in the Prospectus.
Average annual total return quotations are computed by finding the average
annual compounded rate of return over the period that would equate the initial
amount invested to the ending redeemable value.
Total return is calculated separately for Class A Shares, Class B Shares
and Class C Shares of the Fund. Total return figures for Class A Shares include
the maximum sales charge. Total return figures for Class B Shares and Class C
Shares include any applicable contingent deferred sales charge. Because of the
differences in sales charges and distribution fees, the total returns for each
class of shares will differ.
The Fund may, in supplemental sales literature, advertise non-standardized
total return figures representing the cumulative, non-annualized total return of
each class of shares of the Fund from a given date to a subsequent given date.
Cumulative non-standardized total return is calculated by measuring the value of
an initial investment in a given class of shares of the Fund at a given time,
deducting the maximum initial sales charge, if any, determining the value of all
subsequent reinvested distributions, and dividing the net change in the value of
the investment as of the end of the period by the amount of the initial
investment and expressing the result as a percentage. Non-standardized total
return will be calculated separately for each class of shares.
Non-standardized total return calculations do not reflect the imposition of
a contingent deferred sales charge, and if any contingent deferred sales charge
imposed at the time of redemption were reflected, it would reduce the
performance quoted.
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 gains 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
B-50
<PAGE> 80
futures transactions engaged in by the Fund. Distribution rates will be computed
separately for each class of the Fund's shares.
From time to time marketing materials may provide a portfolio manager
update, an adviser update and discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top sector holdings and largest holdings. Materials may also
mention how the Distributor believes the Fund compares relative to other Van
Kampen funds. Materials may also discuss the Dalbar Financial Services study
from 1984 to 1994 which studied investor cash flow into and out of all types of
mutual funds. The ten-year study found that investors who bought mutual fund
shares and held such shares outperformed investors who bought and sold. The
Dalbar study conclusions were consistent regardless of whether shareholders
purchased their fund shares in direct or sales force distribution channels. The
study showed that investors working with a professional representative have
tended over time to earn higher returns than those who invested directly. The
performance of the funds purchased by the investors in the Dalbar study and the
conclusions based thereon are not necessarily indicative of future performance
of such funds or conclusions that may result from similar studies in the future.
The Fund may also be marketed on the internet.
In reports or other communications to shareholders or in advertising
material, the Fund may compare its performance with that of other mutual funds
as listed in the rankings or ratings prepared by Lipper Analytical Services,
Inc., CDA, Morningstar Mutual Funds or similar independent services which
monitor the performance of mutual funds with the Consumer Price Index, the Dow
Jones Industrial Average, Standard & Poor's indices, NASDAQ Composite Index,
other appropriate indices of investment securities, or with investment or
savings vehicles. The performance information may also include evaluations of
the Fund published by nationally recognized ranking or rating services and by
nationally recognized financial publications. Such comparative performance
information will be stated in the same terms in which the comparative data or
indices are stated. Such advertisements and sales material may also include a
yield quotation as of a current period. In each case, such total return and
yield information, if any, will be calculated pursuant to rules established by
the SEC and will be computed separately for each class of the Fund's shares. For
these purposes, the performance of the Fund, as well as the performance of other
mutual funds or indices, do not reflect sales charges, the inclusion of which
would reduce the Fund's performance. The Fund will include performance data for
each class of shares of the Fund in any advertisement or information including
performance data of the Fund.
The Fund may also utilize performance information in hypothetical
illustrations. For example, the Fund may, from time to time: (1) illustrate the
benefits of tax-deferral by comparing taxable investments to investments made
through tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar cost averaging by comparing investments made
pursuant to a systematic investment plan to investments made in a rising market;
(3) illustrate allocations among different types of mutual funds for investors
at different stages of their lives; and (4) in reports or other communications
to shareholders or in advertising material, illustrate the benefits of
compounding at various assumed rates of return.
The Fund's Annual Report and Semiannual Report contain additional
performance information. A copy of the Annual Report or Semiannual Report may be
obtained without
B-51
<PAGE> 81
charge by calling or writing the Fund at the telephone number and address
printed on the cover of this Statement of Additional Information.
CLASS A SHARES
The Fund's average annual total return, assuming payment of the maximum
sales charge, for Class A Shares of the Fund for (i) the one-year period ended
December 31, 1999 was 6.17%, (ii) the five-year period ended December 31, 1999
was 11.29% and (iii) the approximately five-year, seven-month period since May
16, 1994, the commencement of distribution for Class A Shares of the Fund,
through December 31, 1999 was 9.67%.
The Fund's cumulative non-standardized total return, including payment of
the maximum sales charge, with respect to the Class A Shares from its inception
to December 31, 1999 was 68.09%.
The Fund's cumulative non-standardized total return, excluding payment of
the maximum sales charge, with respect to the Class A Shares from its inception
to December 31, 1999 was 76.46%.
CLASS B SHARES
The Fund's average annual total return, assuming payment of the contingent
deferred sales charge, for Class B Shares of the Fund for (i) the one-year
period ended December 31, 1999 was 6.72%, (ii) the five-year period ended
December 31, 1999 was 11.30% and (iii) the approximately five-year, seven-month
period since May 16, 1994 the commencement of distribution for Class B Shares of
the Fund, through December 31, 1999 was 9.74%.
The Fund's cumulative non-standardized total return, including payment of
the contingent deferred sales charge, with respect to the Class B Shares from
May 16, 1994 (the commencement of distribution of Class B Shares) to December
31, 1999 was 68.72%.
The Fund's cumulative non-standardized total return, excluding payment of
the contingent deferred sales charge, with respect to the Class B Shares from
May 16, 1994 (the commencement of distribution of Class B Shares) to December
31, 1999 was 68.72%.
CLASS C SHARES
The average annual total return, assuming payment of the contingent
deferred sales charge, for Class C Shares of the Fund for (i) the one-year
period ended December 31, 1999 was 9.79%, (ii) the five-year period ended
December 31, 1999 was 11.47% and (iii) the approximately five-year, seven-month
period since May 16, 1994, the commencement of distribution for Class C Shares
of the Fund, through December 31, 1999 was 9.78%.
The Fund's cumulative non-standardized total return, including payment of
the contingent deferred sales charge, with respect to the Class C Shares from
May 16, 1994 (the commencement of distribution of Class C Shares) to December
31, 1999 was 69.05%.
B-52
<PAGE> 82
The Fund's cumulative non-standardized total return, excluding payment of
the contingent deferred sales charge, with respect at the Class C Shares from
May 16, 1994 (the commencement of distribution of Class C Shares) to December
31, 1999 was 69.05%.
These results are based on historical earnings and asset value fluctuations
and are not intended to indicate future performance. Such information should be
considered in light of the Fund's investment objective and policies as well as
the risks incurred in the Fund's investment practices.
OTHER INFORMATION
CUSTODY OF ASSETS
All securities owned by the Fund and all cash, including proceeds from the
sale of shares of the Fund and of securities in the Fund's investment portfolio,
are held by State Street Bank and Trust Company, 225 West Franklin Street,
Boston, Massachusetts 02110, as custodian. The custodian also provides
accounting services to the Fund.
SHAREHOLDER REPORTS
Semiannual statements are furnished to shareholders, and annually such
statements are audited by the independent accountants.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 200 East Randolph Drive, Chicago, Illinois
60601, the independent accountants for the Fund, performs an annual audit of the
Fund's financial statements.
LEGAL COUNSEL
Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom (Illinois).
SECURITIES RATINGS
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
B-53
<PAGE> 83
present which make the long-term risks appear somewhat larger than in Aaa
securities.
Standard & Poor's ("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".
B-54
<PAGE> 84
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Van Kampen 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 Global Managed Assets
Fund (the "Fund") at December 31, 1999, 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 accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 11, 2000
F-1
<PAGE> 85
PORTFOLIO OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS 73.3%
AUSTRALIA 1.6%
Amcor, Ltd.............................................. 967 $ 4,529
AMP, Group Finance Services, Ltd. (a)................... 28 1,689
AMP, Ltd. (a)........................................... 1,411 15,590
AMP Diversified Property Trust.......................... 673 1,038
AMP Reinsurance Note (a)................................ 1,004 -0-
Australian Gas & Light Co., Ltd......................... 577 3,388
Brambles Industries, Ltd................................ 325 8,987
Broken Hill Proprietary Co., Ltd........................ 1,506 19,775
Coca-Cola Amati, Ltd.................................... 1,425 3,892
Coles Myer, Ltd......................................... 1,675 8,652
Colonial, Ltd. (a)...................................... 1,354 6,053
CSL, Ltd................................................ 158 2,272
Email, Ltd.............................................. 437 694
FH Faulding & Co., Ltd.................................. 162 1,064
Fosters Brewing Group, Ltd.............................. 2,627 7,537
General Property Trust.................................. 2,107 3,431
Goodman Fielder, Ltd.................................... 1,644 1,468
Leighton Holdings, Ltd.................................. 377 1,460
Lend Lease Corp......................................... 807 11,306
Mayne Nickless, Ltd..................................... 562 1,450
National Australia Bank, Ltd............................ 2,056 31,447
News Corp., Ltd......................................... 2,793 27,119
News Corp., Ltd. - Preferred Shares..................... 2,480 21,247
Normandy Mining, Ltd.................................... 1,463 1,037
North, Ltd.............................................. 627 1,478
Orica, Ltd.............................................. 91 490
Pacific Dunlop, Ltd..................................... 1,594 2,256
Publishing & Broadcasting Ltd........................... 163 1,245
QBE Insurance Group, Ltd................................ 508 2,368
Rio Tinto, Ltd.......................................... 167 3,587
Santos, Ltd............................................. 896 2,441
Southcorp Holdings, Ltd................................. 963 3,395
Stockland Trust Group (a)............................... 13 27
</TABLE>
See Notes to Financial Statements
F-2
<PAGE> 86
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA (CONTINUED)
Stockland Trust Group................................... 378 $ 794
Suncorp Metway.......................................... 470 2,533
TAB Corp. Holdings, Ltd................................. 484 3,277
Telstra Corp., Ltd...................................... 6,106 33,191
Wesfarmers, Ltd......................................... 281 2,319
Westfield Trust......................................... 1,946 3,820
Westfield Trust (a)..................................... 65 128
Westpac Banking Corp., Ltd.............................. 2,820 19,453
WMC, Ltd................................................ 1,335 7,362
Woolworths, Ltd......................................... 1,713 5,893
-----------
281,182
-----------
AUSTRIA 0.8%
Austria Tabakwerke, AG.................................. 149 7,205
Austrian Airlines....................................... 199 3,769
Bank Austria, AG........................................ 711 40,109
Bau Holdings, AG........................................ 31 1,171
BBAG Oest Brau-Beteiligungs, AG......................... 59 2,377
Bohler-Uddeholm, AG..................................... 37 1,707
BWT, AG................................................. 11 1,479
Flughafen Wien, AG...................................... 142 4,937
Generali, AG............................................ 47 7,881
Lenzing, AG............................................. 6 326
Mayr Melnhof Karton, AG................................. 80 3,707
Oest Elektrizitats, Class A............................. 204 28,667
OMV, AG................................................. 174 16,914
VA Technologie, AG...................................... 94 6,202
Wienerberger Baustoffindustrie, AG...................... 456 9,917
-----------
136,368
-----------
CANADA 1.4%
Abitibi Consolidated, Inc............................... 200 2,342
Agnico-Eagle Mines, Ltd................................. 700 5,140
Alberta Energy Co., Ltd................................. 100 3,118
Alcan Aluminum.......................................... 200 8,230
Bank of Montreal........................................ 200 6,831
</TABLE>
See Notes to Financial Statements
F-3
<PAGE> 87
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
CANADA (CONTINUED)
Bank of Nova Scotia..................................... 300 $ 6,453
Barrick Gold Corp....................................... 200 3,568
BCE, Inc................................................ 300 27,257
BCT.Telus Communications, Inc........................... 58 1,412
BCT.Telus Communications, Inc. - Non Voting Shares...... 19 459
Bombardier, Inc., Class B............................... 500 10,270
Canadian Imperial Bank of Commerce...................... 200 4,780
Canadian Occidental Petroleum........................... 100 1,974
Canadian Pacific........................................ 200 4,302
Gulf Canada Resource (a)................................ 500 1,645
Imasco, Ltd............................................. 300 8,303
Imperial Oil, Ltd....................................... 400 8,590
International Forest Products, Ltd., Class A (a)........ 500 1,368
Laidlaw, Inc............................................ 200 1,046
National Bank of Canada................................. 100 1,282
Newbridge Networks Corp. (a)............................ 100 2,255
Nexfor, Inc............................................. 87 506
Noranda, Inc............................................ 200 2,688
Nortel Networks Corp.................................... 800 80,831
Petro CDA............................................... 300 4,250
Placer Dome, Inc........................................ 200 2,134
Power Corp. of Canada................................... 200 3,429
Royal Bank of Canada.................................... 200 8,798
Seagram Co., Ltd........................................ 200 8,964
Suncor Energy, Inc...................................... 100 4,184
Talisman Energy, Inc. (a)............................... 100 2,556
Thomson Corp............................................ 400 10,530
TransCanada PipeLines, Ltd.............................. 564 4,884
Weston George, Ltd...................................... 100 3,828
-----------
248,207
-----------
FINLAND 1.3%
Kesko (a)............................................... 158 2,005
Merita Oyj.............................................. 889 5,239
Metra Oyj............................................... 61 1,137
</TABLE>
See Notes to Financial Statements
F-4
<PAGE> 88
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
FINLAND (CONTINUED)
Metso Oyj (a)........................................... 141 $ 1,832
Nokia Oyj............................................... 998 180,960
Outokumpu Oyj (a)....................................... 85 1,203
Oyj Hartwall Abp........................................ 57 827
Raisio Group, PLC (a)................................... 147 582
Sampo, Ser A............................................ 96 3,356
Sonera Oyj.............................................. 322 22,073
Tietoenator Oyj......................................... 65 4,060
UPM-Kymmene Oyj (a)..................................... 244 9,832
-----------
233,106
-----------
FRANCE 3.7%
Accor, SA............................................... 210 10,148
Air Liquide............................................. 38 6,362
Alcatel, SA............................................. 125 28,709
Aventis, SA............................................. 441 25,633
AXA-UAP................................................. 251 34,994
Banque Nationale de Paris (a)........................... 242 22,330
Banque Nationale de Paris (a)........................... 26 120
Canal Plus.............................................. 108 15,721
Cap Gemini.............................................. 51 12,946
Carrefour, SA........................................... 306 56,440
CIE Fonciere Klepierre (a).............................. 170 16,440
Compagnie de Saint Gobain............................... 82 15,422
France Telecom.......................................... 572 75,656
Groupe Danone........................................... 75 17,679
Groupe Le Fin De Cons (a)............................... 50 5,641
Immeubles De Franc (a).................................. 115 2,100
L'Oreal................................................. 41 32,897
LVMH (Moet Hennessy Louis Vuitton)...................... 79 35,389
Michelin (CGDE), Class B................................ 144 5,657
Pernod Ricard........................................... 57 3,261
Peugeot Citroen......................................... 50 11,353
Pinault-Printemps-Redoute, SA........................... 87 22,962
Sagem, SA............................................... 10 6,951
</TABLE>
See Notes to Financial Statements
F-5
<PAGE> 89
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
FRANCE (CONTINUED)
Sanofi, SA (a).......................................... 348 $ 14,492
Schneider, SA........................................... 117 9,187
Silic................................................... 10 1,603
Simco................................................... 168 13,598
Societe Fonciere Lyonnaise.............................. 60 7,851
Societe Generale........................................ 70 16,289
Sodexho Alliance........................................ 26 4,602
Suez Lyonnaise des Eaux................................. 118 18,912
Thomson CSF............................................. 127 4,195
Total, SA, Class B (a).................................. 456 60,864
Unibail, SA............................................. 33 4,165
Vivendi (a)............................................. 273 24,654
-----------
645,223
-----------
GERMANY 4.1%
Allianz, AG (Vinkulierte Regd).......................... 208 69,878
BASF, AG................................................ 267 13,717
Bayer Hypo Vereinsbank, AG.............................. 365 24,929
Bayer, AG............................................... 250 11,836
Beiersdorf, AG.......................................... 150 10,073
Continental, AG......................................... 117 2,340
DaimlerChrysler, AG (a)................................. 752 58,481
Deutsche Bank, AG....................................... 450 38,010
Deutsche Telekom, AG.................................... 2,036 145,003
Douglas Hldg, AG........................................ 100 4,306
Dresdner Bank, AG....................................... 333 18,114
Fresenius Medical....................................... 50 4,276
Gehe, AG................................................ 50 1,939
IVG Holding, AG......................................... 145 2,257
Linde, AG............................................... 100 5,470
Lufthansa, AG (Vinkulierte Regd)........................ 333 7,749
Man, AG - Preferred Shares.............................. 100 3,757
Mannesmann, AG.......................................... 340 82,028
Metro, AG............................................... 217 11,673
Munchener Ruckvers (a).................................. 150 38,048
</TABLE>
See Notes to Financial Statements
F-6
<PAGE> 90
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
GERMANY (CONTINUED)
Preussag, AG............................................ 120 $ 6,685
RWE, AG................................................. 397 15,557
SAP, AG................................................. 17 8,374
SAP, AG - Non Voting Preferred Shares................... 50 30,120
Siemens, AG............................................. 467 59,416
Thyssen Krupp, AG....................................... 200 6,094
Veba, AG................................................ 433 21,046
Viag, AG................................................ 642 11,770
Volkswagen, AG.......................................... 250 14,090
Volkswagen, AG - Non Voting Preferred Shares............ 100 3,203
-----------
730,239
-----------
HONG KONG 0.0%
Hong Kong Land Holding - $US (a)........................ 86 127
-----------
ITALY 3.0%
Alitalia, SpA........................................... 1,909 4,548
Assicurazioni Generali.................................. 1,425 47,084
Autogrill, SpA (a)...................................... 274 3,450
Banca Commerciale Italiana.............................. 435 2,368
Banco Ambrosiano Veneto, SpA............................ 6,290 25,535
BCA Intesa SpA.......................................... 435 747
BCA Pop Di Milano....................................... 726 5,653
BCO Di Roma............................................. 5,668 7,286
Benetton Group, SpA..................................... 3,535 8,119
Beni Stabili SpA (a).................................... 1,832 646
Burgo (Cartiere), SpA................................... 1 7
Credito Italiano........................................ 5,724 28,138
Enel, SpA (a)........................................... 8,070 33,818
Ente Nazionale Idrocarburi, SpA......................... 10,812 59,467
Fiat, Priv, SpA......................................... 3 43
Fiat, SpA............................................... 260 7,425
Impregilo, SpA.......................................... 8 5
Instituto Nazionale delle Assicurazioni (INA)........... 4,368 11,572
La Rinascente, SpA...................................... 2 13
Magneti Marelli......................................... 353 1,348
</TABLE>
See Notes to Financial Statements
F-7
<PAGE> 91
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
ITALY (CONTINUED)
Mediaset, SpA........................................... 1,740 $ 27,063
Mediobanca, SpA......................................... 901 9,194
Montedison, SpA......................................... 3,764 6,161
Montedison, Di Risp, SpA................................ 3,514 3,363
Olivetti, SpA........................................... 2,581 7,475
Parmalat Finanziara, SpA................................ 3 4
Pirelli, SpA............................................ 3,306 9,075
Reno de Medici, SpA..................................... 1 3
Riunione Adriatica di Sicurta, SpA...................... 798 8,006
Sao Paolo Imi, SpA (a).................................. 1,832 24,895
Sirti, SpA.............................................. 1 4
Telecom Italia, Di Risp, SpA............................ 517 3,151
Telecom Italia, SpA..................................... 3,810 53,732
Telecom Italia Mob, Di Risp, SpA........................ 1,770 8,434
Telecom Italia Mob, SpA................................. 9,983 111,525
-----------
519,357
-----------
JAPAN 16.8%
Acom Co., Ltd........................................... 100 9,797
Advantest............................................... 200 52,853
Ajinomoto Co., Inc...................................... 1,000 10,424
Asahi Bank, Ltd......................................... 2,900 17,882
Asahi Breweries......................................... 1,000 10,943
Asahi Chemical Industry Co.............................. 800 4,111
Asahi Glass Co.......................................... 2,800 21,678
Bank of Tokyo........................................... 3,200 44,600
Benesse Corp............................................ 100 24,078
Bridgestone Corp........................................ 1,000 22,022
Canon, Inc.............................................. 2,000 79,475
Central Japan Railway................................... 2 12,548
CSK Corp................................................ 100 16,247
Dai Nippon Printing..................................... 800 12,763
Daiwa House Industries.................................. 1,000 7,439
Daiwa Securities........................................ 1,400 21,911
Denso Corp.............................................. 1,000 23,882
</TABLE>
See Notes to Financial Statements
F-8
<PAGE> 92
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
East Japan Railway...................................... 4 $ 21,572
Fanuc................................................... 400 50,935
Fuji Bank............................................... 3,600 34,989
Fuji Photo Film Co...................................... 1,000 36,508
Fujitsu................................................. 5,000 228,051
Hitachi................................................. 6,800 109,151
Honda Motor Co.......................................... 1,000 37,193
Industrial Bank of Japan (a)............................ 3,000 28,922
Ito-Yokado Co., Ltd..................................... 1,000 108,642
Japan Air Lines Co...................................... 6,000 17,794
Jusco Co................................................ 1,000 17,432
Kajima Corp............................................. 6,000 17,911
Kansai Electric Power................................... 1,000 17,432
Kao Corp................................................ 1,000 28,531
Kinki Nippon Railway.................................... 6,000 24,078
Kirin Brewery Co........................................ 1,800 18,939
Kyocera Corp............................................ 500 129,686
Marui Co................................................ 1,000 14,936
Matsushita Electric Industries.......................... 5,000 138,495
Mitsubishi Chemical..................................... 800 2,819
Mitsubishi Electric Corp................................ 4,800 31,007
Mitsubishi Estate....................................... 1,800 17,565
Mitsubishi Heavy Industries............................. 6,000 20,025
Mitsubishi Trust & Banking Co........................... 2,000 17,618
NEC Corp................................................ 2,000 47,666
Nintendo Co............................................. 200 33,239
Nippon Express Co....................................... 2,800 15,484
Nippon Oil Co........................................... 3,000 13,213
Nippon Steel Corp....................................... 9,800 22,925
Nippon Telegraph & Telephone Corp....................... 10 171,283
Nissan Motor Co. (a).................................... 2,800 11,017
Nomura Securities....................................... 1,400 25,281
Oji Paper Co............................................ 3,000 18,058
Osaka Gas Co............................................ 3,000 7,223
</TABLE>
See Notes to Financial Statements
F-9
<PAGE> 93
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
Promise Co.............................................. 100 $ 5,090
Sakura Bank............................................. 3,800 22,018
Sankyo Co............................................... 1,000 20,554
Sanyo Electric Co....................................... 4,000 16,247
Sekisui House........................................... 1,800 15,944
Sharp Corp.............................................. 2,000 51,189
Softbank Corp........................................... 210 201,018
Sony Corp............................................... 900 266,908
Sumitomo Bank, Ltd...................................... 2,000 27,386
Sumitomo Chemical....................................... 1,000 4,698
Sumitomo Electric Industries............................ 2,000 23,118
Taisho Pharmacy Co...................................... 1,000 29,363
Takeda Chemical Industries.............................. 1,000 49,427
Takefuji Corp........................................... 100 12,518
Toho Co................................................. 100 14,623
Tohoku Electric Power................................... 1,400 20,828
Tokai Bank.............................................. 3,000 18,910
Tokyo Electric Power.................................... 1,300 34,863
Tokyo Marine & Fire Insurance Co........................ 800 9,357
Toray Industries, Inc................................... 1,000 3,876
Toshiba Corp............................................ 7,000 53,440
Toyota Motor Corp....................................... 2,800 135,656
Yasuda Trust & Banking.................................. 400 622
-----------
2,965,926
-----------
NETHERLANDS 2.3%
ABN AMRO Holdings, NV................................... 1,080 26,981
AEGON, NV............................................... 385 37,193
Ahold Koninklijke, NV................................... 407 12,050
Akzo Nobel, NV.......................................... 92 4,615
Buhrmann, NV............................................ 246 3,705
Elsevier, NV............................................ 189 2,258
Hagemeyer, NV........................................... 94 2,177
Heineken, NV............................................ 194 9,462
ING Groep, NV........................................... 774 46,735
</TABLE>
See Notes to Financial Statements
F-10
<PAGE> 94
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
NETHERLANDS (CONTINUED)
KLM Royal Dutch Air Lines, NV........................... 78 $ 2,004
Kon KPN, NV............................................. 347 33,871
Philips Electronics, NV................................. 249 33,862
Rodamco................................................. 100 4,039
Royal Dutch Petroleum Co................................ 1,565 95,930
STMicroelectronics...................................... 174 26,783
TNT Post Groep, NV...................................... 410 11,750
Uni-Invest, NV.......................................... 730 9,413
Unilever, NV............................................ 416 22,981
Unilever, NV - Preferred Shares (a)..................... 466 2,361
Vedior, NV.............................................. 95 976
Wolters Kluwer, NV...................................... 388 13,133
-----------
402,279
-----------
NORWAY 0.0%
Steen & Strom Invest ASA................................ 10 134
-----------
PORTUGAL 1.2%
BCO Comercial Portugues, SA............................. 5,985 33,220
BCO Espirito Santo e Comercial de Lisboa................ 500 14,052
BPI-SGPS, SA............................................ 3,330 14,189
Brisa-Auto Estradas de Portugal, SA..................... 1,500 11,514
Corticeira Amorim SGPS, SA.............................. 100 983
Elec De Portugal........................................ 3,100 54,118
Jeronimo Martins, SPGS, SA.............................. 400 10,235
Portucel Industrial-Empresa Produtora de Celulose....... 500 3,440
Portugal Telecom, SA.................................... 5,155 56,551
Soares Da Costa, SA..................................... 100 306
Sonae Investimentos..................................... 300 15,836
UNICER-Uniao Cervejeira, SA............................. 300 5,947
-----------
220,391
-----------
SINGAPORE 0.8%
City Developments, Ltd.................................. 1,000 5,854
Creative Technologies Corp.............................. 100 1,813
DBS Group Holdings, Ltd................................. 1,163 19,063
DBS Land, Ltd........................................... 1,500 2,954
</TABLE>
See Notes to Financial Statements
F-11
<PAGE> 95
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
SINGAPORE (CONTINUED)
Hotel Properties........................................ 1,000 $ 901
Keppel Corp., Ltd....................................... 1,000 2,618
NatSteel, Ltd........................................... 1,000 1,993
Neptune Orient Lines, Ltd............................... 537 719
Overseas Chinese Bank................................... 2,100 19,292
Parkway Holdings, Ltd................................... 1,000 2,270
Sembcorp Industries, Ltd. (a)........................... 2,000 2,726
Singapore Airlines, Ltd................................. 2,000 22,696
Singapore Press Holdings, Ltd........................... 1,000 21,675
Singapore Tech Engineering.............................. 4,000 6,196
Singapore Telecommunications............................ 6,300 13,012
United Industrial Corp., Ltd............................ 2,000 1,129
United Overseas Bank, Ltd............................... 1,056 9,320
United Overseas Land, Ltd............................... 1,000 937
-----------
135,168
-----------
SPAIN 1.3%
Acerinox, SA............................................ 24 959
Argentaria Corp......................................... 488 11,469
Autopistas Cesa......................................... 300 2,916
Azucarera Ebro Agricolas, SA ........................... 83 1,211
BCO Bilbao Vizcaya, SA.................................. 1,756 25,012
BCO Santander Central Hispanoamericano (a).............. 2,824 31,975
Corporacion Mapfre, SA.................................. 136 2,252
Empresa Nacional de Celulosas, SA....................... 48 960
Endesa, SA.............................................. 855 16,976
Fomento Construcciones y Contratas, SA.................. 150 3,052
Gas Natural SDG, SA..................................... 288 6,635
Iberdrola, SA........................................... 926 12,835
Inmobiliaria Colonial, SA (a)........................... 100 453
Metrovacesa, SA......................................... 443 7,676
Prima Inmobiliaria, SA.................................. 720 6,237
Respol, SA.............................................. 903 20,940
Tabacalera, SA, Class A................................. 183 2,618
Telefonica, SA (a)...................................... 2,298 57,409
</TABLE>
See Notes to Financial Statements
F-12
<PAGE> 96
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
SPAIN (CONTINUED)
TelePizza, SA (a)....................................... 215 $ 910
Union Electrica Fenosa, SA.............................. 228 3,983
Vallehermoso, SA........................................ 1,960 13,821
Viscofan Industria Navarra De Envolturas Celulosicas,
SA.................................................... 78 621
-----------
230,920
-----------
SWEDEN 1.6%
Atlas Copco, AB, Class A................................ 100 2,956
Castellum, AB........................................... 720 7,023
Diligentia.............................................. 1,040 8,555
Drott AB, Class B....................................... 595 6,783
Electrolux, AB.......................................... 400 10,060
Ericsson Telefon LM, Class B............................ 1,900 122,141
Foreningssparbk......................................... 550 8,080
Hennes & Mauritz, AB, Class B........................... 800 26,795
Netcom Systems, AB...................................... 100 7,028
OM Gruppen, AB.......................................... 100 2,174
Sandvik, AB............................................. 400 12,528
Securitas, AB, Class B.................................. 200 3,620
Skandia Forsakrings, AB................................. 500 15,102
Skandinaviska Enskilda Banken, Class A.................. 600 6,064
Skanska, AB, Class B.................................... 100 3,725
SKF, AB, Class B........................................ 100 2,433
SSAB Svenska Stal, AB, Class A.......................... 50 776
Svenska Cellulosa, AB, Class B.......................... 200 5,923
Svenska Handelsbanken, Class A (a)...................... 700 8,802
Tornet Fastighet........................................ 385 5,339
Trelleborg, AB, Class B................................. 100 899
Volvo, AB, Class A...................................... 100 2,527
Volvo, AB, Class B...................................... 400 10,342
WM-Data, AB............................................. 100 6,182
-----------
285,857
-----------
SWITZERLAND 2.2%
ABB, AG................................................. 200 24,461
Credit Suisse Group..................................... 200 39,754
</TABLE>
See Notes to Financial Statements
F-13
<PAGE> 97
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
SWITZERLAND (CONTINUED)
Nestle, SA.............................................. 30 $ 54,958
Novartis, AG............................................ 50 73,416
Roche Holdings Bearer, AG............................... 1 16,328
Roche Holdings Genusscheine, AG......................... 5 59,348
Schweizerische Rueckversicherungs-Gesellschaft.......... 10 20,543
SGS Holdings............................................ 5 6,374
Sulzer, AG.............................................. 10 6,500
Swatch Group, AG........................................ 10 11,518
Swisscom, AG (a)........................................ 40 16,178
UBS, AG (a)............................................. 157 42,398
Zurich Allied, AG (a)................................... 40 22,810
-----------
394,586
-----------
UNITED KINGDOM 5.1%
31 Group, PLC........................................... 126 2,249
Abbey National.......................................... 279 4,473
Albert Fisher Group..................................... 809 150
Alldays, PLC............................................ 29 29
Allders................................................. 38 76
Allied Zurich........................................... 289 3,408
AMEC.................................................... 113 447
Amvescap, PLC (a)....................................... 143 1,663
Anglian Water........................................... 587 5,253
Arm Holdings, PLC (a)................................... 40 2,704
Associated British Ports Holdings....................... 2,175 9,978
BAA, PLC (a)............................................ 464 3,238
BBA Group............................................... 19 157
Barclays................................................ 352 10,115
Barratt Developments.................................... 277 1,289
Bass.................................................... 233 2,932
Beazer Group............................................ 936 2,177
Berisford............................................... 502 2,733
Berkeley Group.......................................... 204 2,346
BG Group, PLC........................................... 894 5,734
BICC Group.............................................. 115 169
</TABLE>
See Notes to Financial Statements
F-14
<PAGE> 98
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
BOC Group............................................... 687 $ 14,815
Boots Co................................................ 262 2,565
BP Amoco, PLC........................................... 4,296 43,365
BPB..................................................... 1,000 5,977
British Aerospace....................................... 955 6,278
British Airways......................................... 347 2,264
British American Tobacco................................ 629 3,556
British Land Co......................................... 8,070 53,706
British Sky Broadcast................................... 422 6,817
British Telecommunications.............................. 1,134 27,476
Burford Holdings........................................ 1,610 2,653
Burmah Castrol.......................................... 514 9,083
Cable & Wireless........................................ 851 14,598
Cadbury Schweppes, PLC.................................. 722 4,350
Canary Wharf Group, PLC (a)............................. 145 902
Capita Group, PLC....................................... 44 800
Capital Shop Centers.................................... 1,880 10,264
Caradon................................................. 1,305 3,267
Carpetright............................................. 351 3,033
Centrica, PLC........................................... 1,103 3,203
Cobham, PLC............................................. 431 5,448
Commercial Union........................................ 334 5,390
Delta................................................... 64 129
Diageo.................................................. 932 7,437
Dialog Corp............................................. 70 106
Dixons Group, PLC....................................... 92 2,214
Emap.................................................... 122 2,522
EMI Group............................................... 1,108 10,917
Enterprise Oil.......................................... 752 5,102
FirstGroup.............................................. 726 2,814
FKI..................................................... 635 2,487
Frogmore Estates, PLC................................... 150 1,144
GKN, PLC................................................ 648 10,614
Glaxo Wellcome.......................................... 748 21,193
</TABLE>
See Notes to Financial Statements
F-15
<PAGE> 99
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Granada Group........................................... 469 $ 4,735
Grantchester Holdings................................... 9,420 23,128
Great Portland Estates, PLC............................. 4,210 13,057
Great Universal Stores.................................. 201 1,169
Halifax Group........................................... 710 7,753
Hammerson, PLC.......................................... 2,340 16,064
Hanson.................................................. 726 6,086
Hays.................................................... 188 3,000
House Of Fraser......................................... 218 268
HSBC Holdings........................................... 1,763 24,434
Hyder................................................... 1,080 5,042
IMI..................................................... 699 2,992
Imperial Chemical Industries............................ 79 835
Invensys, PLC........................................... 2,486 13,144
Jarvis.................................................. 437 1,609
Johnson Matthey......................................... 837 8,234
Kingfisher.............................................. 484 5,371
Laird Group............................................. 49 192
Land Securities......................................... 5,554 62,239
Lasmo................................................... 1,975 3,828
Legal & General Group................................... 1,556 4,248
Lex Service............................................. 783 4,705
LIMIT................................................... 1,752 4,217
Lloyds TSB Group........................................ 1,388 17,241
Logica (a).............................................. 84 2,171
London Clubs International.............................. 616 1,214
London Forfaiting....................................... 113 58
Lonmin, PLC............................................. 516 5,226
Low & Bonar............................................. 10 23
Marconi................................................. 828 14,605
Marks & Spencer......................................... 571 2,730
Mayflower Corp.......................................... 3 11
Meggitt................................................. 14 44
MEPC.................................................... 4,569 34,318
</TABLE>
See Notes to Financial Statements
F-16
<PAGE> 100
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Misys................................................... 1,050 $ 16,299
National Power.......................................... 430 2,480
Next.................................................... 456 4,375
NFC..................................................... 1,159 4,662
Nycomed Amersham (a).................................... 135 850
Ocean Group............................................. 13 243
P & O Finance........................................... 201 3,334
Parity Group, PLC....................................... 816 5,009
Pennon Group............................................ 446 3,876
Pilkington.............................................. 3,266 4,447
Prudential Corp......................................... 585 11,415
Psion (a)............................................... 16 672
Quintain Estate & Dev................................... 200 562
Racal Electronics....................................... 315 2,837
Railtrack Group......................................... 115 1,932
Rank Group.............................................. 805 2,601
Reed International...................................... 299 2,246
Rentokil Initial........................................ 577 2,097
Reuters Group........................................... 318 4,417
Rexam................................................... 35 142
Rio Tinto............................................... 136 3,264
Rolls Royce............................................. 1,073 3,726
Rugby Group............................................. 388 852
Sage Group, Ltd. (a).................................... 260 3,183
Sainsbury J Finance..................................... 646 3,650
Schlumberger, Ltd. - US$................................ 300 16,875
Scotia Holdings......................................... 90 189
Scottish & Southern Energy, PLC......................... 651 5,179
Sema Group.............................................. 98 1,757
Skillsgroup............................................. 45 218
Slough Estates, PLC..................................... 1,585 9,025
Smith & Nephew (a)...................................... 238 800
Smithkline Beecham...................................... 1,157 14,671
Smiths Industries....................................... 160 2,391
</TABLE>
See Notes to Financial Statements
F-17
<PAGE> 101
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Stagecoach Holdings..................................... 1,292 $ 3,318
TBI, PLC................................................ 450 549
Tesco................................................... 1,082 3,286
Torotrak................................................ 15 66
Trinity Mirror, PLC..................................... 214 2,280
Unilever................................................ 782 5,747
Vodafone AirTouch....................................... 8,277 41,258
Vodafone AirTouch PLC - US$ (b)......................... 200 9,900
Wates City Of London Properties, PLC.................... 1,010 1,485
Wickes.................................................. 17 74
William Baird........................................... 669 616
WPP Group............................................... 1,023 16,029
Yorkshire Water......................................... 545 3,055
Zeneca Group............................................ 386 16,037
-----------
895,776
-----------
UNITED STATES 26.1%
Abbott Laboratories, Inc. (b)........................... 900 32,681
Adobe Systems, Inc. (b)................................. 400 26,900
Albertson's, Inc........................................ 300 9,675
Alcoa, Inc. (b)......................................... 500 41,500
Allegheny Technologies Inc.............................. 350 7,766
Allstate Corp........................................... 500 12,000
Amazon.com, Inc......................................... 100 7,613
America Online, Inc. (b)................................ 600 45,262
American Express Co. (b)................................ 200 33,250
American Home Products Corp. (b)........................ 700 27,606
American International Group, Inc. (b).................. 738 79,796
American Power Conversion Corp.......................... 200 5,275
AMR Corp. (a)........................................... 200 13,400
Anheuser-Busch Cos., Inc. (b)........................... 300 21,262
Applied Materials, Inc. (a)............................. 200 25,337
AT&T Corp. (b).......................................... 1,798 91,248
AT&T Corp. - Liberty Media Group., Class A (b).......... 600 34,050
Automatic Data Processing, Inc.......................... 300 16,163
</TABLE>
See Notes to Financial Statements
F-18
<PAGE> 102
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Avon Products, Inc...................................... 300 $ 9,900
Baker Hughes, Inc....................................... 300 6,319
Bank of New York Co., Inc............................... 400 16,000
Bank One Corp........................................... 600 19,237
Baxter International, Inc............................... 100 6,281
Bell Atlantic Corp. (b)................................. 1,100 67,719
BellSouth Corp. (b)..................................... 900 42,131
Boeing Co. (b).......................................... 500 20,781
Bristol-Myers Squibb Co. (b)............................ 1,000 64,187
Burlington Northern Santa Fe Corp....................... 400 9,700
Campbell Soup Co........................................ 300 11,606
Caterpillar, Inc........................................ 200 9,413
CBS Corp................................................ 200 12,788
Cendant Corp. (a)....................................... 500 13,281
Champion International Corp............................. 100 6,194
Charles Schwab Corp..................................... 400 15,350
Chase Manhattan Corp.................................... 200 15,538
Chevron Corp. (b)....................................... 300 25,987
CIGNA Corp.............................................. 300 24,169
Cisco Systems, Inc. (a) (b)............................. 1,500 160,687
Citigroup, Inc. (b)..................................... 1,650 91,678
Clorox Co............................................... 200 10,075
Coca-Cola Co. (b)....................................... 1,200 69,900
Computer Associates International, Inc.................. 300 20,981
Constellation Energy Group.............................. 500 14,500
Corning, Inc............................................ 200 25,787
Crown Cork & Seal Co., Inc.............................. 300 6,713
CVS Corp................................................ 200 7,988
Dayton Hudson Corp...................................... 300 22,031
Deere & Co.............................................. 200 8,675
Dell Computer Corp. (a) (b)............................. 1,100 56,100
Delphi Automotive Systems Corp.......................... 479 7,544
Dow Chemical Co. (b).................................... 200 26,725
Duke Energy Corp. (b)................................... 500 25,062
</TABLE>
See Notes to Financial Statements
F-19
<PAGE> 103
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
E. I. Du Pont de Nemours & Co. (b)...................... 500 $ 32,937
Eastman Kodak Co........................................ 100 6,625
eBay, Inc............................................... 100 12,519
Electronic Data Systems Corp. (b)....................... 400 26,775
Eli Lilly & Co. (b)..................................... 600 39,900
EMC Corp. (a) (b)....................................... 500 54,625
Equity Office Properties Trust.......................... 300 7,388
Exxon Mobil Corp. (b)................................... 1,628 131,156
FDX Corp. (a)........................................... 200 8,188
Federal National Mortgage Assn (b)...................... 500 31,219
First Data Corp......................................... 300 14,794
First Union Corp........................................ 500 16,406
Ford Motor Co. (b)...................................... 500 26,719
Gannett, Inc. (b)....................................... 300 24,469
Gap, Inc................................................ 550 25,300
General Electric Co. (b)................................ 1,500 232,125
General Motors Corp..................................... 300 21,806
Genuine Parts Co........................................ 500 12,406
Gillette Co. (b)........................................ 700 28,831
H. J. Heinz & Co........................................ 400 15,925
HEALTHSOUTH Corp. (a)................................... 400 2,150
Hewlett-Packard Co. (b)................................. 500 56,969
Hilton Hotels Corp...................................... 300 2,888
Home Depot, Inc. (b).................................... 900 61,706
Household International, Inc............................ 300 11,175
Illinois Tool Works, Inc................................ 200 13,513
Intel Corp. (b)......................................... 1,500 123,469
International Business Machines Corp. (b)............... 800 86,400
International Paper Co.................................. 200 11,288
Johnson & Johnson, Inc. (b)............................. 600 55,875
JP Morgan & Co., Inc. (b)............................... 400 50,650
Kimberly Clark Corp..................................... 300 19,575
Kroger Co. (a).......................................... 500 9,438
Latin American Discovery Fund, Inc. (b) (c)............. 12,800 137,600
</TABLE>
See Notes to Financial Statements
F-20
<PAGE> 104
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Lucent Technologies, Inc. (b)........................... 1,365 $ 102,119
Marsh & McLennan Cos., Inc.............................. 200 19,137
Masco Corp.............................................. 400 10,150
MBNA Corp............................................... 600 16,350
McDonald's Corp. (b).................................... 700 28,219
MCI WorldCom, Inc. (a) (b).............................. 1,200 63,675
Mckesson HBOC, Inc...................................... 74 1,670
Merck & Co., Inc. (b)................................... 1,000 67,062
Merrill Lynch & Co., Inc................................ 300 25,050
Micron Technology, Inc. (a)............................. 200 15,550
Microsoft Corp. (a) (b)................................. 2,200 256,850
Minnesota Mining & Manufacturing Co. (b)................ 300 29,362
Monsanto Co. (b)........................................ 800 28,500
Morgan Stanley Asia Pacific Fund, Inc. (b) (c).......... 6,200 73,237
Motorola, Inc. (b)...................................... 400 58,900
National City Corp...................................... 500 11,844
Newmont Mining Corp..................................... 400 9,800
Nike, Inc., Class B..................................... 200 9,913
Omnicom Group, Inc...................................... 100 10,000
Oracle Corp. (a) (b).................................... 750 84,047
PE Corp. - PE Biosystems Group.......................... 100 12,031
Peoplesoft, Inc. (a).................................... 100 2,131
Pfizer, Inc. (b)........................................ 1,600 51,900
Philip Morris Cos., Inc. (b)............................ 1,100 25,506
PNC Bank Corp........................................... 200 8,900
Procter & Gamble Co. (b)................................ 600 65,737
Readers Digest Association, Inc., Class A............... 200 5,850
Sara Lee Corp........................................... 700 15,444
SBC Communications, Inc. (b)............................ 700 34,125
Sears, Roebuck & Co..................................... 300 9,131
Southern Co............................................. 500 11,750
Staples, Inc............................................ 100 2,075
Starwood Hotels & Resorts, Class B...................... 200 4,700
SunTrust Banks, Inc..................................... 300 20,644
</TABLE>
See Notes to Financial Statements
F-21
<PAGE> 105
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONTINUED)
Teledyne Technologies, Inc.............................. 100 $ 944
Tenet Healthcare Corp. (a).............................. 200 4,700
Texas Instruments, Inc. (b)............................. 300 29,062
Time Warner, Inc. (b)................................... 600 43,462
Transocean Sedco Forex, Inc............................. 58 1,957
United Technologies Corp................................ 400 26,000
UnumProvident Corp...................................... 200 6,413
US Bancorp.............................................. 300 7,144
USX - Marathon Group.................................... 300 7,406
Viacom, Inc., Class B (a)............................... 400 24,175
Vulcan Materials Co..................................... 100 3,994
Wachovia Corp........................................... 100 6,800
Wal-Mart Stores, Inc. (b)............................... 2,000 138,250
Walgreen Co............................................. 500 14,625
Walt Disney Co. (b)..................................... 1,100 32,175
Washington Mutual, Inc.................................. 200 5,200
Waste Management, Inc................................... 500 8,594
Water Pik Tech, Inc..................................... 35 335
Wells Fargo & Co. (b)................................... 900 36,394
Whirlpool Corp.......................................... 100 6,506
Williams Cos., Inc...................................... 200 6,113
Xerox Corp.............................................. 400 9,075
Yahoo!, Inc. (b)........................................ 200 86,537
-----------
4,591,840
-----------
TOTAL COMMON AND PREFERRED STOCKS AND EQUIVALENTS 73.3%.... 12,916,686
-----------
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 22.1%
Canada Government - CA$
(200,000 par, 5.250% coupon, 09/01/03 maturity)............... 134,305
Canada Government - CA$
(70,000 par, 8.750% coupon, 12/01/05 maturity)................ 54,383
Denmark Kingdom - DKK
(1,000,000 par, 7.000% coupon, 11/15/07 maturity)............. 147,830
Government of France - FRF
(400,000 par, 4.500% coupon, 07/12/03 maturity)............... 400,804
</TABLE>
See Notes to Financial Statements
F-22
<PAGE> 106
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
Government of France - FRF
(150,000 par, 5.250% coupon, 04/25/08 maturity)............... $ 150,271
Government of France - FRF
(100,000 par, 5.500% coupon, 10/25/07 maturity)............... 102,186
Bundesrepublik Deut - DEM
(300,000 par, 6.500% coupon, 07/04/27 maturity)............... 322,272
Republic of Italy - ITL
(150,000 par, 6.750% coupon, 02/01/07 maturity)............... 162,594
Republic of Italy - JPY
(10,000,000 par, 3.750% coupon, 06/08/05 maturity)............ 111,647
Republic of Italy - JPY
(15,000,000 par, 5.000% coupon, 12/15/04 maturity)............ 175,463
Kingdom of Netherlands - NLG
(220,000 par, 3.000% coupon, 02/15/02 maturity)............... 215,622
Kingdom of Sweden - SEK
(700,000 par, 6.000% coupon, 02/09/05 maturity)............... 84,154
Kingdom of Sweden - SEK
(1,000,000 par, 13.000% coupon, 06/15/01 maturity)............ 130,767
United Kingdom Treasury - GBP
(90,000 par, 8.000% coupon, 12/07/00 maturity)................ 147,122
United Kingdom Treasury - GBP
(80,000 par, 8.500% coupon, 07/16/07 maturity)................ 149,383
Federal National Mortgage Association - AUD
(50,000 par, 6.375% coupon, 08/15/07 maturity)................ 30,836
Federal National Mortgage Association - AUD
(60,000 par, 6.500% coupon, 07/10/02 maturity)................ 39,175
Federal National Mortgage Association - JPY
(10,000,000 par, 2.125% coupon, 10/09/07 maturity)............ 102,365
KFW International Finance - JPY
(10,000,000 par, 1.000% coupon, 12/20/04 maturity)............ 98,135
U.S. Treasury Bonds - US $(500,000 par, 8.125% coupon,
08/15/19 maturity) (b)........................................ 569,764
U.S. Treasury Bonds - US $(250,000 par, 12.000% coupon,
05/15/05 maturity) (b)........................................ 310,585
U.S. Treasury Notes - US $(150,000 par, 6.250% coupon,
02/15/07 maturity) (b)........................................ 147,587
</TABLE>
See Notes to Financial Statements
F-23
<PAGE> 107
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
- --------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
U.S. Treasury Notes - US $(100,000 par, 7.250% coupon,
05/15/04 maturity) (b).......................................... $ 103,250
-----------
TOTAL GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 22.1%... 3,890,500
-----------
SUPRA-NATIONAL 1.8%
European Investment Bank - JPY
(15,000,000 par, 4.625% coupon, 02/26/03 maturity)............ 166,061
Inter-American Development Bank - JPY
(15,000,000 par, 1.900% coupon, 07/08/09 maturity)............ 149,604
-----------
TOTAL SUPRA-NATIONAL............................................ 315,665
-----------
CORPORATE OBLIGATIONS 0.0%
Jeronimo Martins - PTE (174,000 par, 0.000% coupon, 12/30/04
maturity)..................................................... 102
-----------
TOTAL LONG-TERM INVESTMENTS 97.2%
(Cost $14,089,612)............................................ 17,122,953
-----------
REPURCHASE AGREEMENT 1.8%
State Street Bank & Trust Co., dated 12/31/99, due 01/03/00, to
be repurchased at $317,066, collateralized by $265,000 U.S.
Treasury Bill, 10.375%, due 11/15/12, valued at $325,619 (Cost
$317,000) (b)................................................. 317,000
-----------
TOTAL INVESTMENTS 99.0%
(Cost $14,406,612)............................................ 17,439,953
FOREIGN CURRENCY 0.3% (VARIOUS DENOMINATIONS)
(Cost $50,567)................................................ 50,520
OTHER ASSETS IN EXCESS OF LIABILITIES 0.7%...................... 133,426
-----------
NET ASSETS 100.0%............................................... $17,623,899
===========
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends
(b) Assets segregated as collateral for open futures transactions and foreign
currency contracts.
(c) Related party security. See notes to Financial Statements.
AUD - Australian Dollar
CA$ - Canadian Dollar
DEM - German Mark
DKK - Danish Krone
FRF - French Franc
GBP - British Pound
ITL - Italian Lira
JPY - Japanese Yen
NLG - Dutch Guilder
PTE - Portuguese Escudo
SEK - Swedish Krona
US$ - United States Dollar
See Notes to Financial Statements
F-24
<PAGE> 108
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $14,406,612)........................ $17,439,953
Foreign Currency (Cost $50,567)............................. 50,520
Cash........................................................ 393
Margin Deposit on Futures................................... 32,895
Receivables:
Variation Margin on Futures............................... 247,461
Interest.................................................. 91.555
Dividends................................................. 16,356
Investments Sold.......................................... 3,902
Fund Shares Sold.......................................... 1,068
Other....................................................... 3,509
-----------
Total Assets.......................................... 17,887,612
-----------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 55,183
Investment Advisory Fee................................... 29,143
Distributor and Affiliates................................ 17,521
Capital Gain Distribution................................. 1,133
Trustees' Deferred Compensation and Retirement Plans........ 36,294
Foreign Currency Contracts.................................. 20,704
Accrued Expenses............................................ 103,735
-----------
Total Liabilities..................................... 263,713
-----------
NET ASSETS.................................................. $17,623,899
===========
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $14,550,228
Net Unrealized Appreciation................................. 3,043,747
Accumulated Net Realized Gain............................... 65,744
Accumulated Net Investment Loss............................. (35,820)
-----------
NET ASSETS.................................................. $17,623,899
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $7,325,862 and 687,166 shares of
beneficial interest issued and outstanding)............. $ 10.66
Maximum sales charge (4.75%* of offering price)......... .53
-----------
Maximum offering price to public........................ $ 11.19
===========
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $8,612,541 and 837,387 shares of
beneficial interest issued and outstanding)............. $ 10.29
===========
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $1,685,496 and 163,274 shares of
beneficial interest issued and outstanding)............. $ 10.32
===========
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
F-25
<PAGE> 109
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 287,237
Dividends (Net of foreign withholding taxes of $15,649)..... 199,246
----------
Total Income............................................ 486,483
----------
EXPENSES:
Custody..................................................... 188,766
Investment Advisory Fee..................................... 172,979
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $17,370, $88,266 and $15,232,
respectively)............................................. 120,868
Shareholder Services........................................ 94,565
Reports to Shareholders..................................... 67,870
Registration................................................ 49,030
Trustees' Fees and Related Expenses......................... 12,461
Amortization of Organizational Costs........................ 1,040
Legal....................................................... 960
Other....................................................... 44,990
----------
Total Expenses.......................................... 753,529
----------
NET INVESTMENT LOSS......................................... $ (267,046)
==========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $1,430,447
Futures................................................... 87,342
Forward Commitments....................................... (86,179)
Foreign Currency Transactions............................. (262,871)
----------
Net Realized Gain........................................... 1,168,739
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 2,216,687
----------
End of the Period:
Investments............................................. 3,033,341
Futures................................................. 31,899
Foreign Currency Translation............................ (789)
Forward Currency Contracts.............................. (20,704)
----------
3,043,747
----------
Net Unrealized Appreciation During the Period............... 827,060
----------
NET REALIZED AND UNREALIZED GAIN............................ $1,995,799
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $1,728,753
==========
</TABLE>
See Notes to Financial Statements
F-26
<PAGE> 110
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Loss............................. $ (267,046) $ (230,552)
Net Realized Gain............................... 1,168,739 3,218,575
Net Unrealized Appreciation During the Period... 827,060 108,563
----------- -----------
Change in Net Assets from Operations............ 1,728,753 3,096,586
----------- -----------
Distributions in Excess of Net Investment
Income*....................................... (25,278) (76,480)
Distributions from Net Realized Gain*........... (1,266,539) (2,388,475)
----------- -----------
Total Distributions............................. (1,291,817) (2,464,955)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.................................... 436,936 631,631
----------- -----------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold....................... 3,136,039 6,233,096
Net Asset Value of Shares Issued Through
Dividend Reinvestment......................... 1,177,360 2,280,988
Cost of Shares Repurchased...................... (6,686,875) (12,579,170)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.................................. (2,373,476) (4,065,086)
----------- -----------
TOTAL DECREASE IN NET ASSETS.................... (1,936,540) (3,433,455)
NET ASSETS:
Beginning of the Period......................... 19,560,439 22,993,894
----------- -----------
End of the Period (Including accumulated net
investment loss of $35,820 and $23,161,
respectively)................................. $17,623,899 $19,560,439
=========== ===========
*Distributions by Class
- --------------------------------------------------------------------------------------
Distributions in Excess of Net Investment
Income:
Class A Shares................................ $ (25,278) $ (76,480)
Class B Shares................................ -0- -0-
Class C Shares................................ -0- -0-
----------- -----------
$ (25,278) $ (76,480)
=========== ===========
Distributions from Net Realized Gain:
Class A Shares................................ $ (501,835) $(1,080,329)
Class B Shares................................ (647,697) (1,144,103)
Class C Shares................................ (117,007) (164,043)
----------- -----------
$(1,266,539) $(2,388,475)
=========== ===========
</TABLE>
See Notes to Financial Statements
F-27
<PAGE> 111
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
Class A Shares 1999(b) 1998(b) 1997 1996(b) 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $10.339 $10.162 $10.530 $ 10.15 $ 9.19
------- ------- ------- ------- -------
Net Investment Income/Loss..... (.111) (.066) (.088) -0- .08
Net Realized and Unrealized
Gain......................... 1.231 1.643 1.014 1.242 1.1375
------- ------- ------- ------- -------
Total from Investment
Operations................... 1.120 1.577 .926 1.242 1.2175
------- ------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income..................... .038 .072 -0- -0- .0775
Distributions from and in
Excess of Net Realized
Gain....................... .760 1.328 1.294 .862 .18
------- ------- ------- ------- -------
Total Distributions............ .798 1.400 1.294 .862 .2575
------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $10.661 $10.339 $10.162 $10.530 $ 10.15
======= ======= ======= ======= =======
Total Return* (a).............. 11.51% 15.84% 8.94% 12.44% 13.30%
Net Assets at End of the Period
(In millions)................ $ 7.3 $ 8.5 $ 11.2 $ 8.5 $ 15.5
Ratio of Expenses to Average
Net Assets*.................. 3.88% 4.11% 3.66% 2.87% 2.79%
Ratio of Net Investment
Income/Loss to Average Net
Assets*...................... (1.08%) (.60%) (.67%) .00% .81%
Portfolio Turnover............. 193% 222% 231% 91% 135%
* If certain expenses had not been assumed by Van Kampen, total return would
have been lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets................... N/A N/A N/A 3.17% 3.68%
Ratio of Net Investment
Income/Loss to Average Net
Assets....................... N/A N/A N/A (.30%) (.07%)
</TABLE>
(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) Based on average shares outstanding.
N/A -- Not Applicable.
See Notes to Financial Statements
F-28
<PAGE> 112
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
Class B Shares 1999(b) 1998(b) 1997 1996(b) 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $10.038 $ 9.911 $10.379 $ 10.10 $ 9.17
------- ------- ------- ------- -------
Net Investment Loss............ (.185) (.151) (.146) (.106) (.01)
Net Realized and Unrealized
Gain......................... 1.192 1.606 .972 1.247 1.1375
------- ------- ------- ------- -------
Total from Investment
Operations................... 1.007 1.455 .826 1.141 1.1275
------- ------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income....................... -0- -0- -0- -0- .0175
Distributions from and in
Excess of Net Realized
Gain....................... .760 1.328 1.294 .862 .18
------- ------- ------- ------- -------
Total Distributions............ .760 1.328 1.294 .862 .1975
------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $10.285 $10.038 $ 9.911 $10.379 $ 10.10
======= ======= ======= ======= =======
Total Return* (a).............. 10.72% 14.96% 8.10% 11.51% 12.31%
Net Assets at End of the Period
(In millions)................ $ 8.6 $ 9.6 $ 10.0 $ 9.9 $ 8.1
Ratio of Expenses to Average
Net Assets*.................. 4.67% 4.89% 4.42% 3.76% 3.73%
Ratio of Net Investment Loss to
Average Net Assets*.......... (1.85%) (1.42%) (1.45%) (1.01%) (.09%)
Portfolio Turnover............. 193% 222% 231% 91% 135%
*If certain expenses had not been assumed by Van Kampen, total return would have
been lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets................... N/A N/A N/A 4.06% 4.61%
Ratio of Net Investment Loss to
Average Net Assets........... N/A N/A N/A (1.30%) (.97%)
</TABLE>
(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) Based on average shares outstanding.
N/A -- Not Applicable.
See Notes to Financial Statements
F-29
<PAGE> 113
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
Class C Shares 1999(b) 1998(b) 1997 1996(b) 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................... $10.057 $ 9.927 $10.395 $ 10.12 $ 9.20
------- ------- ------- ------- -------
Net Investment Loss............ (.182) (.147) (.139) (.104) (.02)
Net Realized and Unrealized
Gain......................... 1.208 1.605 .965 1.241 1.1375
------- ------- ------- ------- -------
Total from Investment
Operations................... 1.026 1.458 .826 1.137 1.1175
------- ------- ------- ------- -------
Less:
Distributions from and in
Excess of Net Investment
Income..................... -0- -0- -0- -0- .0175
Distributions from and in
Excess of Net Realized
Gain....................... .760 1.328 1.294 .862 .18
------- ------- ------- ------- -------
Total Distributions............ .760 1.328 1.294 .862 .1975
------- ------- ------- ------- -------
Net Asset Value, End of the
Period....................... $10.323 $10.057 $ 9.927 $10.395 $ 10.12
======= ======= ======= ======= =======
Total Return* (a).............. 10.79% 14.93% 8.09% 11.49% 12.16%
Net Assets at End of the Period
(In millions)................ $ 1.7 $ 1.4 $ 1.7 $ 1.7 $ 1.9
Ratio of Expenses to Average
Net Assets*.................. 4.65% 4.91% 4.46% 3.78% 3.79%
Ratio of Net Investment Loss to
Average Net Assets*.......... (1.84%) (1.38%) (1.50%) (.99%) (.18%)
Portfolio Turnover............. 193% 222% 231% 91% 135%
* If certain expenses had not been assumed by Van Kampen, total return would
have been lower and the ratios would have been as follows:
Ratio of Expenses to Average
Net Assets................... N/A N/A N/A 4.07% 4.67%
Ratio of Net Investment Loss to
Average Net Assets........... N/A N/A N/A (1.28%) (1.06%)
</TABLE>
(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) Based on average shares outstanding.
N/A -- Not Applicable.
See Notes to Financial Statements
F-30
<PAGE> 114
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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 to provide 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 sale price is not
available, are valued at the mean of the last reported bid and asked price.
Fixed income securities are stated at value using market quotations or
indications of value obtained from an independent pricing service. 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 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
F-31
<PAGE> 115
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
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.
C. INCOME AND EXPENSES--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. 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. Income and expenses of the Fund are allocated on a pro rata basis to
each class of shares, except for distribution and service fees and transfer
agency costs which are unique to each class of shares.
D. FOREIGN CURRENCY TRANSLATION--Assets and liabilities denominated in foreign
currencies and commitments under forward 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 reimbursed Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $15,000. These costs were amortized on a
straight line basis over the 60-month period ending May 15, 1999.
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, 1999, for federal income tax purposes cost of long- and
short-term investments is $14,451,991, the aggregate gross unrealized
appreciation is $3,760,739
F-32
<PAGE> 116
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
and the aggregate gross unrealized depreciation is $772,777, resulting in net
unrealized appreciation on long- and short-term investments of $2,987,962.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses relating to wash sale
transactions.
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 federal
income tax purposes, permanent differences between book and tax basis reporting
have been identified and appropriately reclassified. As a result, permanent book
and tax basis differences relating to net realized currency gains totaling
$154,319 and net gains of $6,999 from Passive Foreign Investment Companies sold
were reclassified from accumulated net realized gain/loss to accumulated net
investment loss. A permanent difference of $55 related to distributions was
reclassified from accumulated net investment loss to accumulated net realized
gain/loss. A permanent difference related to a net operating loss totaling
$118,292 has been reclassified from accumulated net investment loss to capital.
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. The Adviser has entered into a subadvisory agreement with Morgan
Stanley Dean Witter Investment Management Inc. (the "Subadviser"), who provides
advisory services to the Fund and the Adviser with respect to the Fund's
investment 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, 1999, the Fund recognized expenses of
approximately $1,000 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.
F-33
<PAGE> 117
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
For the year ended December 31, 1999, the Fund recognized expenses of
approximately $9,100 representing Van Kampen's cost of providing accounting
services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the year ended December 31,
1999, the Fund recognized expenses of approximately $73,400. Transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
During the period, the Fund owned shares of the following Morgan Stanley
Funds which are managed by the Subadviser:
<TABLE>
<CAPTION>
TRANSACTIONS
DURING THE PERIOD
---------------------
% OF NET ASSETS COST OF PROCEEDS
AT DECEMBER 31, 1999 PURCHASES OF SALES
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Latin American Discovery
Fund, Inc.................. .78% -0- -0-
Morgan Stanley Asia Pacific
Fund, Inc.................. .42% -0- -0-
</TABLE>
At December 31, 1999, Van Kampen owned 10,604, 53 and 53 shares of Classes
A, B and C of the Fund, respectively.
F-34
<PAGE> 118
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
At December 31, 1999, capital aggregated $5,397,978, $7,694,972 and
$1,457,278 for Classes A, B and C, respectively. For the year ended December 31,
1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A......................................... 165,799 $ 1,687,560
Class B......................................... 107,809 1,063,957
Class C......................................... 38,631 384,522
-------- -----------
Total Sales....................................... 312,239 $ 3,136,039
======== ===========
Dividend Reinvestment:
Class A......................................... 49,856 $ 502,652
Class B......................................... 59,993 585,510
Class C......................................... 9,104 89,198
-------- -----------
Total Dividend Reinvestment....................... 118,953 $ 1,177,360
======== ===========
Repurchases:
Class A......................................... (348,962) $(3,554,541)
Class B......................................... (289,679) (2,853,251)
Class C......................................... (28,422) (279,083)
-------- -----------
Total Repurchases................................. (667,063) $(6,686,875)
======== ===========
</TABLE>
F-35
<PAGE> 119
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
At December 31, 1998, capital aggregated $6,809,856, $8,959,090 and
$1,273,050 for Classes A, B and C, respectively. For the year ended December 31,
1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 425,556 $ 4,563,674
Class B.................................... 85,315 901,857
Class C.................................... 73,498 767,565
---------- ------------
Total Sales.................................. 584,369 $ 6,233,096
========== ============
Dividend Reinvestment:
Class A.................................... 108,757 $ 1,109,902
Class B.................................... 105,262 1,037,178
Class C.................................... 13,537 133,908
---------- ------------
Total Dividend Reinvestment.................. 227,556 $ 2,280,988
========== ============
Repurchases:
Class A.................................... (819,174) $ (8,755,915)
Class B.................................... (244,540) (2,594,678)
Class C.................................... (116,317) (1,228,577)
---------- ------------
Total Repurchases............................ (1,180,031) $(12,579,170)
========== ============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares purchased
on or after June 1, 1996, and any dividend reinvestment plan Class B shares
received on such shares, automatically convert to Class A shares eight years
after the end of the calendar month in which the shares were purchased. Class B
shares purchased before June 1, 1996, and any dividend reinvestment plan Class B
shares received on such shares, automatically convert to Class A shares six
years after the end of the calendar month in which the shares were purchased.
For the year ended December 31, 1999, no Class B shares converted to Class A
shares. Class C shares purchased before January 1, 1997, and any dividend
reinvestment plan Class C shares received on such shares, automatically convert
to Class A shares ten years after the end of the calendar month in which such
shares were purchased. Class C shares purchased on or after January 1, 1997 do
not possess a conversion feature. For the year ended December 31, 1999, no Class
C shares converted to Class A shares. The CDSC will be imposed on most
redemptions made within five years
F-36
<PAGE> 120
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
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>
For the year ended December 31, 1999, Van Kampen, as Distributor for the
Fund, received net commissions on sales of the Fund's Class A shares of
approximately $3,000 and CDSC on the redeemed shares of approximately $10,100.
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 $27,178,896 and
$31,035,103, 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. Forward commitments are
privately negotiated transactions between the Fund and dealers. Purchasing
securities on a forward basis involves a risk that the market value at the time
of delivery may be lower than the agreed upon purchase
F-37
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
price resulting in an unrealized loss. Selling securities on a forward basis
involves different risks and can result in losses more significant than those
arising from the purchase of such securities. Risks may arise as a result of the
potential inability of the counterparties to meet the terms of their
commitments. While forward commitments are outstanding, the Fund maintains
sufficient collateral of cash or securities in a segregated account with its
custodian.
Summarized on the following pages are the specific types of derivative
financial instruments used by the Fund.
A. FORWARD PURCHASE COMMITMENTS--The Fund trades certain securities under the
terms of forward commitments, whereby the settlement occurs at a specific future
date. The commitments are marked to market on a daily basis with changes in
value reflected as a component of unrealized appreciation or depreciation on
forward commitments. There were no forward purchase commitments open as of
December 31, 1999.
B. 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 realizes a gain or loss on
the transaction at the time the forward commitment is closed. However,
settlement of both the purchase and sale is still scheduled to occur in the
denominated foreign currency at a future date. The net foreign currency
difference on the trade is marked to market daily and included as a component of
unrealized appreciation/depreciation on foreign currency translation. There were
no closed but unsettled forward commitments open as of December 31, 1999.
C. FORWARD CURRENCY CONTRACTS--A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Upon the settlement of the contract, a realized gain or loss is recognized
and is included as a component of realized gain/loss on forwards.
F-38
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
The following forward currency contracts were outstanding as of December 31,
1999:
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
DESCRIPTION VALUE DEPRECIATION
- ------------------------------------------------------------------------
<S> <C> <C>
LONG CONTRACTS
European Currency Unit,
60,000 expiring 02/02/00.................. $ 60,589 $ (1,115)
90,000 expiring 02/02/00.................. 90,661 (226)
14,832 expiring 03/07/00.................. 15,018 18
128,000 expiring 03/10/00................. 129,625 (8,820)
Japanese Yen,
34,601,000 expiring 03/17/00.............. 342,895 22,040
7,232,770 expiring 03/17/00............... 71,676 676
---------- --------
$ 710,464 $ 12,573
---------- --------
SHORT CONTRACTS
European Currency Unit,
150,000 expiring 02/02/00................. 151,472 293
Japanese Yen,
10,425,400 expiring 03/17/00.............. 103,315 (6,640)
27,246,380 expiring 03/17/00.............. 270,011 (4,011)
27,390,020 expiring 03/17/00.............. 271,434 (5,434)
102,430 expiring 03/17/00................. 1,015 (15)
102,970 expiring 03/17/00................. 1,020 (20)
53,744,000 expiring 03/17/00.............. 532,601 (14,986)
10,166,000 expiring 03/17/00.............. 100,745 (745)
8,583,000 expiring 03/17/00............... 85,057 (1,719)
---------- --------
$1,516,670 (33,277)
---------- --------
$(20,704)
========
</TABLE>
D. 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. These contracts are generally
used to provide the return of an Index without purchasing all of the securities
underlying the Index or to manage the Fund's overall exposure to the equity
markets. Upon entering into futures contracts, the Fund maintains, in a
segregated account with its custodian, cash or liquid securities with a value
equal to its obligation under the futures contracts. During the period the
futures
F-39
<PAGE> 123
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
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, 1999, were
as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1998............................ 5
Futures Opened.............................................. 116
Futures Closed.............................................. (120)
Futures Split (Matif CAC 40 8-for-1)........................ 7
----
Outstanding at December 31, 1999............................ 8
====
</TABLE>
The futures contracts outstanding as of December 31, 1999, and the
descriptions and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
- -------------------------------------------------------------------------
<S> <C> <C>
OSA NIKKEI 300
March 2000--Long Contracts
(Current Notional Value of 3,223,000 JPY
per contract)........................... 7 $ 7,263
EURX-DAX
March 2000--Long Contract
(Current Notional Value of 175,675 EUR per
contract)............................... 1 24,636
-- -------
8 $31,899
== =======
</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, 1999, are payments retained by Van Kampen of
approximately $78,200.
F-40
<PAGE> 124
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
7. BORROWINGS
In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, has entered in to a $650,000,000 committed line of credit
facility with a group of banks which expires on November 28, 2000, but is
renewable with the consent of the participating banks. Each Fund is permitted to
utilize the facility in accordance with the restrictions of its prospectus. In
the event the demand for the facility meets or exceeds $650 million on a
complex-wide basis, each Fund will be limited to its pro-rata percentage based
on the net assets of each participating fund. Interest on borrowings is charged
under the agreement at a rate of 0.50% above the federal funds rate per annum.
An annual commitment fee of 0.09% per annum is charged on the unused portion of
the credit facility, which each Fund incurs based on its pro-rata percentage of
quarterly net assets. The Fund did not borrow against the credit facility during
the period.
8. SUBSEQUENT EVENT
On January 27, 2000, the Board approved a Plan of Liquidation for the Fund. The
Plan of Liquidation will be presented to the shareholders of the Fund for
approval. As a result of the Board's approval, the Fund is suspending the
continuous offering of its shares to new investors of the Fund effective at the
close of business February 2, 2000. Currently, existing shareholders of the Fund
as of February 2, 2000 may continue to purchase shares of the Fund. Dividends
subject to automatic reinvestment in the Fund according to previous instructions
of existing shareholders will continue to be reinvested in shares of the Fund.
F-41
<PAGE> 125
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
<TABLE>
<C> <S> <C>
(a) (1) First Amended and Restated Agreement and Declaration of
Trust(2)
(2) Certificate of Amendment(2)
(3) Second Certificate of Amendment(6)
(4) Amended and Restated Certificate of Designation(5)
(5) Second Amended and Restated Certificate of Designation(6)
(b) Amended and Restated Bylaws(2)
(c) (1) Specimen Class A Share Certificate(3)
(2) Specimen Class B Share Certificate(3)
(3) Specimen Class C Share Certificate(3)
(d) (1) Investment Advisory Agreement(5)
(2) Amendment One to the Investment Advisory Agreement+
(3) Investment Sub-Advisory Agreement(5)
(e) (1) Distribution and Service Agreement(5)
(2) Form of Dealer Agreement(3)
(3) Form of Broker Fully Disclosed Selling Agreement(3)
(4) Form of Bank Fully Disclosed Selling Agreement(3)
(f) (1) Form of Trustee Deferred Compensation Plan(7)
(2) Form of Trustee Retirement Plan(7)
(g) (1) Custodian Agreement(4)
(2) Transfer Agency and Service Agreement(5)
(h) (1) Data Services Agreement(3)
(2) Fund Accounting Agreement(5)
(i) (1) Opinion of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(3)
(2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)+
(j) (1) Consent of PricewaterhouseCoopers LLP+
(2) Consent of Trustees(1)
(k) Not applicable
(l) Investment Letter(7)
(m) (1) Plan of Distribution Pursuant to Rule 12b-1(3)
(2) Form of Shareholder Assistance Agreement(3)
(3) Form of Administrative Services Agreement(3)
(4) Service Plan(3)
(n) Not Applicable
(o) Amended Multiple Class Plan(3)
(p) (1) Form of Code of Ethics+
(2) Form of Code of Ethics of the Subadviser+
(q) Power of Attorney+
(z) (1) List of Certain Investment Companies in Response to Item
27(a)+
(2) List of Officers and Directors of Van Kampen Funds Inc. in
Response to Item 27(b)+
</TABLE>
- ---------------
(1) 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.
C-1
<PAGE> 126
(2) 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.
(3) 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.
(4) Incorporated herein by reference to Post-Effective Amendment No. 75 to Van
Kampen American Capital Growth and Income Fund's Registration Statement on
Form N-1A, File Number 2-21657, filed March 27, 1997.
(5) Incorporated herein by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A, File Number 33-74024,
filed April 27, 1998.
(6) Incorporated herein by reference to Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form N-1A, File Number 33-74024,
filed February 25, 1999.
(7) Incorporated herein by reference to Post-Effective Amendment No. 81 to Van
Kampen Harbor Fund's Registration Statement on Form N-1A, File Numbers
2-12685 and 811-734, filed April 29, 1999.
+ Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See the Statement of Additional Information.
ITEM 25. INDEMNIFICATION.
Pursuant to Del. Code Ann. Title 12, Section 3817, a Delaware business
trust may provide in its governing instrument for the indemnification of its
officers and trustees from and against any and all claims and demands
whatsoever.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust, as amended. Article 8; Section 8.4 of the Agreement
and Declaration of Trust provides that each officer and trustee of the
Registrant shall be indemnified by the Registrant against all liabilities
incurred in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which the officer or trustee may
be or may have been involved by reason of being or having been an officer or
trustee, except that such indemnity shall not protect any such person against a
liability to the Registrant or any shareholder thereof to which such person
would otherwise be subject by reason of (i) not acting in good faith in the
reasonable belief that such person's actions were not in the best 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.
C-2
<PAGE> 127
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.
Pursuant to Section 7 of the Distribution and Service Agreement, the
Registrant agrees to indemnify and hold harmless Van Kampen Funds Inc. (the
"Distributor") and each of its trustees and officers and each person if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damages or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damages,
or expense and reasonable counsel fees) arising by reason of any person
acquiring any shares, based upon the ground that the Registration Statement,
prospectus, shareholder reports or other information filed or made public by the
Registrant (as from time to time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements, in light of the circumstances, not
misleading under the 1933 Act, or any other statute or the common law. The
Registrant does not agree to indemnify the Distributor or hold it harmless to
the extent that the statement or omission was made in reliance upon, and in
conformity with, information furnished to the Registrant by or on behalf of the
Distributor. In no case is the indemnity of the Registrant in favor of the
Distributor or any person indemnified to be deemed to protect the Distributor or
any person against any liability to the Fund or its security holders to which
the Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under the
agreement.
Pursuant to the agreement by which Van Kampen Investor Services Inc.
("Investor Services") is appointed transfer agent of the Fund, the Registrant
agrees to indemnify and hold Investor Services harmless against any losses,
damages, costs, charges, payments, liabilities and expenses (including
reasonable counsel fees) arising out of or attributable to:
(1) the performance of Investor Services under the agreement provided that
Investor Services acted in good faith with due diligence and without negligence
or willful misconduct.
(2) reliance by Investor Services on, or reasonable use by, Investor
Services of information records and documents which have been prepared on behalf
of, or have been furnished by, the Fund, or the carrying out by Investor
Services of any instructions or requests of the Fund.
(3) the offer or sale of the Fund's shares in violation of any federal or
state law or regulation or ruling by any federal agency unless such violation
results from any failure by Investor Services to comply with written
instructions from the Fund that such offers or sales were not permitted under
such law, rule or regulation.
(4) the refusal of the Fund to comply with terms of the agreement, or the
Fund's lack of good faith, negligence or willful misconduct or breach of any
representation or warranty made by the Fund under the agreement provided that if
the reason for such failure is attributable to any action of the Fund's
investment adviser or distributor or any person providing accounting or legal
services to the Fund, Investor Services only will be entitled to indemnification
if such entity is otherwise entitled to the indemnification from the Fund.
See also "Investment Advisory Agreement" in the Statement of Additional
Information.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" and "Investment Advisory Agreement" in the Statement of Additional
Information for information regarding the business of
C-3
<PAGE> 128
Van Kampen Asset Management Inc. (the "Adviser"). For information as to the
business, profession, vocation and employment of a substantial nature of
directors and officers of the Adviser, reference is made to the Adviser's
current Form ADV (File No. 801-1669) filed under the Investment Advisers Act of
1940, as amended, incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) The sole principal underwriter is Van Kampen Funds Inc., which acts as
principal underwriter for certain investment companies and unit investment
trusts. See Exhibit (z)(1).
(b) Van Kampen Funds Inc. is an affiliated person of an affiliated person
of the Registrant and is the only principal underwriter for the Registrant. The
name, principal business address and positions and offices with Van Kampen Funds
Inc. of each of its directors and officers are disclosed in Exhibit (z)(2).
Except as disclosed under the heading, "Trustees and Officers" in Part B of this
Registration Statement, none of such persons has any position or office with
Registrant.
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents of the Registrant required by
Section 31(a) of the Investment Company Act of 1940, as amended, and the Rules
thereunder to be maintained (i) by Registrant will be maintained at its offices,
located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555, or at Van
Kampen Investor Services Inc., 7501 Tiffany Springs Parkway, Kansas City,
Missouri 64153, or at the State Street Bank and Trust Company, 1776 Heritage
Drive, North Quincy, MA 021171; (ii) by the Adviser, will be maintained at its
offices, located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555; and
(iii) by Van Kampen Funds Inc., the principal underwriter, will be maintained at
its offices located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-4
<PAGE> 129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant,
VAN KAMPEN GLOBAL MANAGED ASSETS FUND, certifies that it meets all of the
requirements for effectiveness of this Amendment to the Registration Statement
pursuant to Rule 485(b) under the 1933 Act and has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Oakbrook Terrace and State of
Illinois, on the 28th day of April, 2000.
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
By: /s/ A. THOMAS SMITH III
------------------------------------
A. Thomas Smith III
Secretary
Pursuant to the requirements of the 1933 Act, this Amendment to the
Registration Statement has been signed on April 28, 2000 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLES
---------- ------
<C> <S>
Principal Executive Officer:
/s/ RICHARD F. POWERS, III* Trustee and President
- -----------------------------------------------------
Richard F. Powers, III
Principal Financial Officer:
/s/ JOHN L. SULLIVAN* Vice President, Chief Financial Officer and
- ----------------------------------------------------- Treasurer
John L. Sullivan
Trustees:
/s/ J. MILES BRANAGAN* Trustee
- -----------------------------------------------------
J. Miles Branagan
/s/ JERRY D. CHOATE* Trustee
- -----------------------------------------------------
Jerry D. Choate
/s/ LINDA HUTTON HEAGY* Trustee
- -----------------------------------------------------
Linda Hutton Heagy
/s/ R. CRAIG KENNEDY* Trustee
- -----------------------------------------------------
R. Craig Kennedy
/s/ JACK E. NELSON* Trustee
- -----------------------------------------------------
Jack E. Nelson
/s/ MITCHELL M. MERIN* Trustee
- -----------------------------------------------------
Mitchell M. Merin
/s/ PHILLIP B. ROONEY* Trustee
- -----------------------------------------------------
Phillip B. Rooney
/s/ FERNANDO SISTO* Trustee
- -----------------------------------------------------
Fernando Sisto
/s/ WAYNE W. WHALEN* Trustee
- -----------------------------------------------------
Wayne W. Whalen
/s/ SUZANNE H. WOOLSEY* Trustee
- -----------------------------------------------------
Suzanne H. Woolsey
* Signed by A. Thomas Smith III pursuant to a power of attorney filed herewith.
/s/ A. THOMAS SMITH III
- -----------------------------------------------------
A. Thomas Smith III
Attorney-in-Fact
</TABLE>
April 28, 2000
<PAGE> 130
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
INDEX TO EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 9 TO FORM N-1A
AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
(d) (2) Amendment One to the Investment Advisory Agreement
(i) (2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)
(j) Consent of PricewaterhouseCoopers LLP
(p) (1) Form of Code of Ethics
(p) (2) Form of Code of Ethics of the Subadviser
(q) Power of Attorney
(z) (1) List of Certain Investment Companies in Response to Item
27(a)
(z) (2) List of Officers and Directors of Van Kampen Funds Inc. in
Response to Item 27(b)
</TABLE>
<PAGE> 1
(d)(2)
AMENDMENT ONE
-------------
TO THE
INVESTMENT ADVISORY AGREEMENT
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
DATED MAY 31, 1997
THIS AMENDMENT ONE to the Investment Advisory Agreement dated May 31,
1997 by and between Van Kampen Global Managed Assets Fund, a Delaware business
trust (hereinafter referred to as the "Fund") and Van Kampen Asset Management
Inc., a Delaware Corporation (hereinafter referred to as the "Adviser").
W I T N E S S E T H
-------------------
WHEREAS, the Fund wishes to amend the current Investment Advisory
Agreement in accordance with the terms set forth by The Board of Trustees of the
Fund at a Meeting held on April 17, 2000;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Section 3 of
the Agreement be amended as follows:
(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 following annual rate:
1.00% on the first $500 million of the Fund's average daily
net assets; 0.95% on the next $500 million of the Fund's average
daily net assets; and 0.90% of any excess over $1 billion.
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 Van Kampen Investments 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 Van Kampen Investments Inc. to
receive in connection with the 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 the most restrictive expense
limitation applicable in the states where the FUND's shares are
qualified for sale, 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
1
<PAGE> 2
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, as amended from time to
time.
If the ADVISER shall serve for less than the whole of any month, the
foregoing compensation shall be prorated.
IN WITNESS WHEREOF, the parties have caused this Amendment One to be
executed this 17th day of April, 2000.
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
By: /s/ John L. Sullivan
---------------------------------
John L. Sullivan
Vice President, Chief Financial Officer and Treasurer
VAN KAMPEN ASSET MANAGEMENT INC.
By: /s/ Stephen L. Boyd
---------------------------------
Stephen L. Boyd
President and Chief Operating Officer
<PAGE> 1
Exhibit(i)(2)
[Letterhead of Skadden, Arps, Slate, Meagher & Flom (Illinois)]
April 28, 2000
Van Kampen Global Managed Assets Fund
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Re: Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A for the
Van Kampen Global Managed Assets Fund
(the "Registration Statement")
(File Nos. 33-74024 and 811-8286)
---------------------------------
We hereby consent to the reference to our firm under the heading "Legal
Counsel" in the Registration Statement. In giving this consent, we do not
hereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom (Illinois)
<PAGE> 1
EXHIBIT (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 9 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 11, 2000, relating to the financial statements and financial highlights
of Van Kampen 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 to the reference to us under
the heading "Independent Accountants" in such Statement of Additional
Information.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
April 26, 2000
<PAGE> 1
EXHIBIT(p)(1)
FORM OF
CODE OF ETHICS
I. INTRODUCTION
Each of the Van Kampen Open-End Funds listed on Schedule 1 attached hereto
(each a "Fund" and collectively the "Funds"), Van Kampen Asset Management Inc.
("Asset Management"), Van Kampen Investment Advisory Corp. ("Advisory Corp.")
(each of Asset Management and Advisory Corp. are sometimes referred herein as
the "Adviser" or collectively as the "Advisers") and Van Kampen Funds Inc. (the
"Distributor") (the Advisers and the Distributor are collectively referred to
as "Van Kampen") has adopted this Code of Ethics. The Advisers are fiduciaries
that provide investment advisory services to the Funds and private investment
management accounts, and the Distributor acts as the principal underwriter for
the Funds.
II. GENERAL PRINCIPLES
A. Shareholder and Client Interests Come First
Every trustee/director, officer and employee of a Fund and every
director, officer and employee of Van Kampen owes a fiduciary duty to
the investment account and the respective investors of such Fund or
private investment management account (collectively, the "Clients").
This means that in every decision relating to investments, such
persons must recognize the needs and interests of the Clients and be
certain that at all times the Clients' interests are placed ahead of
any personal interest of such person.
B. Avoid Actual and Potential Conflicts of Interest
The restrictions and requirements of this Code are designed to
prevent behavior which conflicts, potentially conflicts or raises the
appearance of an actual or potential conflict with the interests of
Clients. It is of the utmost importance that the personal securities
transactions of trustee/directors, officers and employees of a Fund
and directors,
1
<PAGE> 2
officers and employees of Van Kampen be conducted in a manner
consistent with both the letter and spirit of the Code, including
these principles, to avoid any actual or potential conflict of
interest or any abuse of such person's position of trust and
responsibility.
C. Avoiding Personal Benefit
Trustee/directors, officers and employees of the Funds and directors,
officers and employees of Van Kampen should ensure that they do not
acquire personal benefit or advantage as a result of the performance
of their normal duties as they relate to Clients. Consistent with the
principle that the interests of Clients must always come first is the
fundamental standard that personal advantage deriving from management
of Clients' money is to be avoided.
III. OBJECTIVE
Section 17(j) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), makes it unlawful for certain persons associated
investment companies to engage in conduct which is deceitful, fraudulent or
manipulative, or which involves false or misleading statements, in connection
with the purchase or sale of a security held or proposed to be acquired by an
investment company. In addition, Section 204A of the Investment Advisers Act of
1940, as amended (the "Investment Advisers Act"), requires investment advisers
to establish, maintain and enforce written policies and procedures designed to
prevent misuse of material non-public information. The objective of this Code
is to require trustee/directors, officers and employees of the Funds and
directors, officers and employees of Van Kampen to conduct themselves in
accordance with the general principles set forth above, as well as to prevent
trustee/directors, officers and employees of the Funds or the Distributor from
engaging in conduct prohibited by the Investment Company Act and directors,
officers and employees of the Advisers from engaging in conduct prohibited by
the Investment Company Act and the Investment Advisers Act.
IV. DEFINITIONS
A. "Access Person" means (i) any trustee/director or officer of a
Fund, (ii) any director or officer of a Fund's Adviser, (iii) any
employee of a Fund or the Fund's Adviser (or any company in a control
relationship
2
<PAGE> 3
to the Fund or Adviser) who, in connection with such person's regular
functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a Covered Security by a Client, or
whose functions relate to the making of any recommendations with
respect to such purchases or sales; (iv) any natural person in a
control relationship to the Fund or the Fund's Adviser who obtains
information concerning recommendations made to a Client with regard to
the purchase or sale of a Covered Security by such Client, and (v) any
director or officer of the Distributor, who, in the ordinary course of
business, makes, participates in or obtains information regarding, the
purchase or sale of a Covered Security by a Client for which it acts
as principal underwriter, or whose functions relate to the making of
any recommendations with respect to such purchases or sales.
B. "Beneficial Ownership" is interpreted in the same manner as it is
under Rule 16a-1(a)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), in determining whether a person is the
beneficial owner of a security for purposes of Section 16 of the 1934
Act and the rules and regulations thereunder, which includes "any
person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest in" a security. The term "pecuniary
interest" is further defined to mean "the opportunity, directly or
indirectly, to profit or share in any profit derived from a
transaction in the subject securities." "Beneficial ownership"
includes (i) securities held by members of a person's immediate family
sharing the same household and includes any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law" and includes adoptive relationships
and (ii) aright to acquire securities through the exercise or
conversion of any derivative security, whether or not presently
exercisable.
Any report required to be made by this Code may contain a statement
that the report shall not be construed as an admission by the person
making such report that he has any direct or indirect Beneficial
Ownership in the security to which the report relates.
C. "Chief Compliance Officer" is the individual set forth in Exhibit A.
3
<PAGE> 4
D. "Code of Ethics Review Committee" consists of the individuals set
forth in Exhibit A.
E. "Control" has the same meaning as in Section 2(a)(9) of the Investment
Company Act.
F. "Covered Security" refers not only to the instruments set forth in
Section 2(a)(36) of the Investment Company Act but to any instrument
into which such instrument may be converted or exchanged, any warrant
of any issuer that has issued the instrument and any option written
relating to such instrument, provided, however, that it does not
include: (a) any direct obligation of the United States Government,
(b) banker's acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements, and (c) shares issued by any open-end
investment companies registered under the Investment Company Act.
G. "Disinterested Trustee/Director" means a trustee or director of an
Fund who is not an "interested person" of such Fund within the meaning
of Section 2(a)(19) of the Investment Company Act.
H. "Employee Account" means any brokerage account or unit investment
trust account in which the Van Kampen Employee has any direct or
indirect beneficial ownership.
I. "General Counsel" is the individual set forth in Exhibit A.
J. "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, as amended (the
"Securities Act"), the issuer of which, immediately before the
registration, was not subject to the reporting requirements of
sections 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
K. "Investment Personnel" means (i) any employee of a Fund (or of any
company in a control relationship to the Fund), (ii) Portfolio
Managers, security analysts, traders and any other employees of a
Fund's Adviser (or of any company in a control relationship to the
Fund's Adviser) who, in connection with his or her regular functions
or
4
<PAGE> 5
duties, makes or participates in making investment recommendations
regarding the purchase or sale of securities by the Fund or other
Clients; and (iii) any natural person who controls a Fund or Adviser
and who obtains information concerning recommendations made to such
Fund or other Client regarding the purchase or sale of securities.
L. "Limited Offering" is an offering that is exempt from registration
under the Securities Act pursuant to Section 4(2) or Section 4(6) of
the Securities Act or pursuant to Rule 504, Rule 505 or Rule 506 under
the Securities Act.
M. "Portfolio Manager" means any person who exercises investment
discretion on behalf of an Adviser for a Client.
N. "Van Kampen Employee" includes any director, officer or employee of
Van Kampen.
V. STANDARDS OF CONDUCT FOR PERSONAL SECURITIES TRANSACTIONS
A. Van Kampen Employee Brokerage Accounts
1. All brokerage accounts of Van Kampen Employees must be maintained
through Morgan Stanley Dean Witter & Co. ("MSDW") and/or Morgan
Stanley Dean Witter Online ("MSDWO"). No other brokerage accounts
are permitted unless permission is granted by the Chief
Compliance Officer or General Counsel.
If any Van Kampen Employee maintains accounts outside MSDW or
MSDWO, such person must transfer such accounts to a MSDW branch
or MSDWO within 120 days from his or her date of hire.
a. Each Van Kampen Employee must inform the appropriate person
in the compliance department as set forth in Exhibit A, in
writing, of their MSDW and MSDWO brokerage accounts, or, if
applicable, their outside
5
<PAGE> 6
brokerage accounts. The Van Kampen compliance department
shall direct the brokerage firm to provide duplicate
confirmations and account statements to the Van Kampen
compliance department.
1) Van Kampen Employees shall notify the appropriate
persons in the Van Kampen compliance department as set
forth in Exhibit A when opening a brokerage account.
B. Pre-Clearance
1. Except as set forth below, all Van Kampen Employees must
pre-clear purchases or sales of Covered Securities in their
Employee Accounts with the appropriate person in the Van Kampen
compliance department as set forth in Exhibit A.
2. Exceptions from the Pre-Clearance Requirement.
a. Persons otherwise subject to pre-clearance are not required
to pre-clear the acquisition of the following Covered
Securities:
1) Covered Securities acquired through automatic
reinvestment plans.
2) Covered Securities acquired through employee
purchase plans.
3) Covered Securities acquired through the exercise of
rights issued by an issuer pro-rata to all holders of a
class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so
acquired.
4) Morgan Stanley Dean Witter & Co. common stock
(including exercise of stock option grants),
6
<PAGE> 7
a) The restrictions imposed by the Firm on senior
management and other persons in connection with
transactions in such stock are not affected by
this exemption.
5) Units in unit investment trusts.
3. Pre-cleared securities transactions must be effected timely.
a. All approved Covered Securities transactions must take place
on the same day that the authorization is obtained. If the
transaction is not completed on the date of clearance, a new
clearance must be obtained.
b. Purchases through an issuer direct purchase plan must be
pre-cleared on the date the purchaser writes the check to
the issuer's agent
1) Authorization for purchases through an issuer direct
purchase plan are effective until the issuer's agent
purchases the Covered Securities.
4. Pre-Clearance Procedure
a. Van Kampen Employees shall pre-clear their transactions by
submitting a Trade Authorization Form (a copy of which is
attached as Exhibit B) to the appropriate persons in the
compliance department as set forth in Exhibit A.
1) The compliance department shall pre-clear the purchase
or sale of a Covered Security if the transaction does
not violate the Code.
7
<PAGE> 8
a) The compliance department shall verify that the
transaction is in compliance with the Code.
b) The compliance department shall sign the Trade
Authorization Form.
c) The compliance department shall communicate
authorization of the trade to the Van Kampen
Employee.
d) The time at which the trade authorization is
communicated to the Van Kampen Employee shall be
documented on the Trade Authorization Form.
e) The compliance department shall maintain the
originally executed Trade Authorization Form. A
copy of the executed Trade Authorization Form will
be forwarded to the Van Kampen Employee.
f) The compliance department shall review Van Kampen
Employee duplicate confirmations and statements to
verify that all personal transactions in Covered
Securities have been properly pre-cleared.
C. Other Restrictions
1. Van Kampen Employee trades for which pre-clearance has been
obtained, including short sales and permissible option trades,
are subject to 30-day holding period from the trade date.
2. Van Kampen Employees are prohibited from trading in futures,
options on futures, and forward contacts. Van Kampen
8
<PAGE> 9
Employees may trade listed equity and index options and equity
warrants, however, there is a 30-day holding period from the
trade date. In addition, Van Kampen Employees are also prohibited
from trading in warrants or options (with the exception of listed
warrants or options) on physical commodities and currencies.
3. Van Kampen Employees shall not purchase Covered Securities during
an initial or secondary public offering.
4. Van Kampen Employees shall not enter into limit orders which
extend beyond one day.
5. Van Kampen Employees shall not participate in an investment club.
6. Van Kampen Employees shall not purchase shares of an investment
company that is managed by Van Kampen if such investment company
is not generally available to the public.
7. Van Kampen Employees shall not purchase shares of an open end
investment company that is managed by Van Kampen if as a result
of such purchase the Van Kampen Employee shall own 1% or more of
the assets of such investment company.
8. Van Kampen Employees are prohibited from the following activities
unless they have obtained prior written approval from the Code of
Ethics Review Committee:
a. Van Kampen Employees may not purchase a Covered Security in
a private placement or any other Limited Offering.
b. Van Kampen Employees may not serve on the boards of
directors of a public or private company. Requests to serve
on the board of a religious, charitable or educational
organization as set forth in Section 503(c) of the IRS Code
will generally be approved.
9
<PAGE> 10
D. Additional Responsibilities of Access Persons
In addition to the requirements set forth above, the following
prohibitions and reporting obligations are applicable to Access
Persons.
1. Access Persons shall not purchase or sell a Covered Security on a
day during which a Client has a pending purchase or sale order in
that same Covered Security.
2. Initial/Annual Reporting: Within ten days after becoming an
Access Person and thereafter, annually, each Access Person must
furnish a report to the Chief Compliance Officer showing (i) the
date of the report, (ii) the title, number of shares and
principal amount of each Covered Security owned directly or
indirectly by the Access Person on the date such person become an
Access Person (for initial reports) or as of a date no more than
30 prior to the date of the report (for annual reports) and (iii)
the name of any broker, dealer or bank with an account holding
any securities for the direct or indirect benefit of the Access
Person as of the date such person became an Access Person (for
initial reports) or as of a date no more than 30 prior to the
date of the report (for annual reports).
a. Exclusion: A Disinterested Trustee/Director who would be
required to make this report solely by reason of being a
Fund trustee/director is excluded from the initial and
annual reporting requirement for Access Persons.
3. Quarterly Reporting: On a calendar quarterly basis, each Access
Persons must furnish a report to the Chief Compliance Officer
within ten days after the end of each calendar quarter, on forms
sent to the Access Person each quarter:
a. With respect to any transactions in Covered Securities in
which the Access Person had direct or indirect Beneficial
Ownership, a report showing (i) the date of the report; (ii)
the date of the transaction, the title, the interest rate
and maturity date (if applicable), the num-
10
<PAGE> 11
ber of shares, and the principal amount of each Covered
Security involved; (iii) the nature of the transaction
(i.e., purchase, sale or any other type of acquisition or
disposition); (iv) the price at which the transaction was
effected; and (v) the name of the broker, dealer or bank
with or through which the transaction was effected; and
b. With respect to any account established by the Access Person
in which any securities were held during the quarter for
direct or indirect benefit of the Access Person, a report
showing (i) the date of the report; (ii) the name of the
broker, dealer or bank with which established the account;
and (iii) the date the account was established.
c. Exclusion: A Disinterested Trustee/Director who would be
required to make this report solely by reason of being a
Fund trustee/director is excluded from the quarterly
reporting requirement for Access Persons unless the
trustee/director knew or, in the ordinary course of
fulfilling his or her official duties as a Fund
trustee/director, should have known that during the 15-day
period immediately before or after the trustee/director's
transaction in a Covered Security, the Fund purchased or
sold the Covered Security, or the Fund or its investment
adviser considered purchasing or selling the Covered
Security.
d. Exclusion: An Access Person need not make a quarterly
transaction report if the report would duplicate information
contained in broker trade confirmations or account
statements received by the Fund, the Adviser and the
Distributor with respect to the Access Person in the time
period required above if all of the information required by
that paragraph is contained in the broker trade
confirmations or account statements, or in the records of
the Fund, the Adviser and the Distributor.
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<PAGE> 12
E. Additional Responsibilities of Investment Personnel
In addition to the requirements set forth above, the following
prohibitions and reporting obligations are applicable to Investment
Personnel.
1. Investment Personnel shall not sell a Covered Security purchased
within the previous 60 calendar days from the trade date, except
that a Covered Security held for at least 30 days from the trade
date may be sold at a loss or no gain. Any profits realized on
trades executed within the 60-day holding period shall be
disgorged to the Client or a charitable organization as
determined by the Chief Compliance Officer.
2. All Investment Personnel shall disclose all personal and
beneficial Covered Securities holdings upon the commencement of
employment and thereafter on an annual basis to the compliance
department.
3. Investment Personnel of a Fund or its investment adviser must
obtain approval from the Fund or the Fund's investment adviser
before directly or indirectly acquiring beneficial ownership in
any securities in an Initial Public Offering or in a Limited
Offering.
F. Additional Responsibilities of Portfolio Managers
In addition to the requirements set forth above for Van Kampen
Employees, Access Persons and Investment Personnel, the following
additional requirements are applicable to Portfolio Managers.
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<PAGE> 13
1. A Portfolio Manager may not buy or sell a Covered Security within
7 calendar days before or after any Client, over which such
Portfolio Manager exercises investment discretion, trades in such
Covered Security.
2. A Portfolio Manager may not purchase shares of a closed-end
investment company over which such Portfolio Manager exercises
investment discretion.
G. Insiders
1. Each Van Kampen Employee shall comply with all laws and
regulations, and prohibitions against insider trading. Trading on
or communicating material non-public information, or "inside
information," of any sort, whether obtained in the course of
research activities, through a Client relationship or otherwise,
is strictly prohibited.
2. Van Kampen Employees shall not disclose any non-public
information relating to a Client's account portfolio or
transactions or to the investment recommendations of Van Kampen,
nor shall any Van Kampen Employee disclose any non-public
information relating to the business or operations of the members
of Van Kampen, unless properly authorized to do so.
3. No Van Kampen Employee who is required to file a statement of
ownership pursuant to Section 16 of the Exchange Act may purchase
or sell or sell and purchase a company-sponsored closed-end
investment company within a six month period and realize a profit
on such transaction.
H. Exceptions
1. Notwithstanding the foregoing, the Chief Compliance Officer or
his or her designee, in keeping with the general principles and
objectives of this Code, may refuse to grant clearance of a
personal transaction in their sole discretion without being
required to specify any reason for the refusal.
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<PAGE> 14
2. Upon proper request by a Van Kampen Employee, a Code of Ethics
Review Committee (the "Committee") will consider for relief or
exemption from any restriction, limitation or procedure contained
herein, which restriction, limitation or procedure is claimed to
cause a hardship for such Van Kampen Employee. The Chief
Compliance Officer will in his sole discretion determine whether
the request is appropriate for consideration by the Committee.
The Committee shall meet on an ad hoc basis, as deemed necessary
upon the Van Kampen Employee's written request outlining the
basis for his or her request for relief. The decision is within
the sole discretion of the Committee.
VI. ADMINISTRATION OF THE CODE
A. The administration of this Code shall be the responsibility of the
Chief Compliance Officer or his or her designee whose duties shall
include:
1. Continuously maintaining a list of all Access Persons who are
under a duty to make reports or pre-clear transactions under this
Code.
2. Providing each such person with a copy of this Code and informing
them of their duties and obligations hereunder.
3. Reviewing all quarterly securities transactions and holdings
reports required to be filed pursuant to this Code, and
maintaining a record of such review, including the name of the
compliance personnel performing the review.
4. Reviewing all initial and annual securities position reports
required to be filed pursuant to this Code, and maintaining a
record of such review, including the name of the compliance
personnel performing the review.
5. Preparing listings of all transactions effected by persons
subject to reporting requirements under the Code and comparing
all reported personal securities transactions with completed
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<PAGE> 15
portfolio transactions of the Clients and securities being
considered for purchase or sale by Clients to determine whether a
violation of this Code may have occurred.
6. Conducting such inspections or investigations as shall reasonably
be required to detect and report any apparent violations of this
Code to any person or persons appointed by Van Kampen to deal
with such information and to the Fund's Board of
Directors/Trustees.
7. Submitting a written report, no less frequently than annually, to
the Board of Directors/Trustees of each Fund containing a
description of issues arising under the Code or procedures since
the last report, including, but not limited to, material
violations of the Code or procedures and sanctions imposed in
response to material violations.
8. Submitting a certification, no less frequently than annually, to
the Board of Directors/Trustees of each Fund from the Fund, the
respective Adviser and the Distributor that it has adopted
procedures reasonably necessary to prevent Access Persons from
violating the Code.
VII. RECORDS
The Fund, the Advisers and the Distributor shall, at its principal place
of business, maintain records of the following:
A. A copy of any code of ethics adopted by the such entity which is or
has been in effect during the past five years must be maintained in an
easily accessible place;
B. A copy of any record or report of any violation of the code of ethics
of such entity and any action taken thereon maintained in an easily
accessible place for at least five years after the end of the fiscal
year in which the violation occurs;
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<PAGE> 16
C. A copy of each report made by an Access Person as required by this
Code, including any information provided in lieu of the reports,
must be maintained for at least five years after the end of the
fiscal year in which the report is made or the information is
provided, the first two years in an easily accessible place;
D. A record of all persons, currently or within the past five years,
who are or were required to make reports under this Code, or who are
or were responsible for reviewing these reports, must be maintained
in an easily accessible place; and
E. A copy of each written report required to be provided to the Board
of Directors/Trustees of each Fund containing a description of
issues arising under the Code or procedures since the last report,
including, but not limited to, material violations of the Code or
procedures and sanctions imposed in response to material violations
must be maintained for at least five years after the end of the
fiscal year in which it is made, the first two years in an
easily accessible place.
F. A Fund or investment adviser must maintain a record of any
decision, and the reasons supporting the decision, to approve the
acquisition by Investment Personnel of securities in an Initial
Public Offering or in a Limited Offering.
G. A copy of any decision and reasons supporting such decision to
approve a pre-clearance transaction pursuant to this Code, made
within the past five years after the end of the fiscal year in which
such approval is granted.
VIII. SANCTIONS
Upon discovering a violation of this Code, Van Kampen may impose such
sanctions as it deems appropriate, including, but not limited to, a reprimand
(orally or in writing), demotion, and suspension or termination of employment.
The General Counsel of Van Kampen, in his sole discretion, is authorized to
determine the choice of sanctions to be imposed in specific cases, including
termination of employment of any employee.
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<PAGE> 17
IX. APPROVAL OF CODE OF ETHICS
A. Van Kampen shall provide to the Board of Directors/Trustees of each
Fund the following:
1. A copy of the Fund's Code, the Adviser's Code and the
Distributor's Code for such Board's review and approval.
2. Promptly, a copy of any amendments to such Codes.
3. Upon request, copies of any reports made pursuant to the Code by
any person as to an investment company client.
4. Immediately, without request by an investment company client, all
material information regarding any violation of the Code by any
person as to such investment company client.
5. Certification, no less frequently than annually, to the Board of
Directors/Trustees of each Fund from the Fund, the respective
Adviser and the Distributor that it has adopted procedures
reasonably necessary to prevent Access Persons from violating the
Code.
B. Prior to adopting this Code, the Board of Trustees/Directors of
each Fund, including a majority of Disinterested Trustee/Directors,
reviewed and approved this Code with respect to the Fund, each adviser
of the Fund and the principal underwriter of the Fund, including all
procedures or provisions related to the enforcement of this Code. The
Board based its approval of this Code on, among other things, (i)
certifications from the Fund, the respective Adviser and the
Distributor that it has adopted procedures reasonably necessary to
prevent violations of the Code and (ii) a determination that such Code
is adequate and contains provisions reasonably necessary to prevent
Access Persons from engaging in any conduct prohibited by Rule
17j-1(b).
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<PAGE> 18
X. EFFECTIVE DATE
All Van Kampen Employees are required to sign a copy of this Code
indicating their agreement to abide by the terms of the Code.
In addition, Van Kampen Employees will be required to certify
annually that (i) they have read and understand the terms of this Code and
recognize the responsibilities and obligations incurred by their being subject
to this Code, and (ii) they are in compliance with the requirements of the Code.
Approved this _____ day of _______________.
18
<PAGE> 1
EXHIBIT (p)(2)
MORGAN STANLEY DEAN WITTER AFRICA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER ASIA-PACIFIC FUND, INC.
MORGAN STANLEY DEAN WITTER EASTERN EUROPE FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS DEBT FUND, INC.
MORGAN STANLEY DEAN WITTER GLOBAL OPPORTUNITY BOND FUND, INC.
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
MORGAN STANLEY DEAN WITTER INDIA INVESTMENT FUND, INC.
THE LATIN AMERICAN DISCOVERY FUND, INC.
THE MALAYSIA FUND, INC.
THE PAKISTAN INVESTMENT FUND, INC.
THE THAI FUND, INC.
THE TURKISH INVESTMENT FUND, INC.
(THE "CLOSED-END FUNDS")
AND
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(THE "OPEN-END FUNDS", AND TOGETHER WITH THE CLOSED-END FUNDS, THE "FUNDS")
AND
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
("MSDW INVESTMENT MANAGEMENT")
AND
MILLER ANDERSON & SHERRERD, LLP
("MAS", AND TOGETHER WITH MSDW INVESTMENT MANAGEMENT, THE "INVESTMENT MANAGERS")
AND
MORGAN STANLEY & CO. INCORPORATED
("MS&Co.")
CODE OF ETHICS
1. PURPOSES
This Code of Ethics has been adopted by the Funds, the Investment
Managers and MS&Co., the principal underwriter of the Open-End Funds, in
accordance with Rule 17j-1 under the Investment Company Act of 1940, as amended
(the "Act"). Rule 17j-1 under the Act generally proscribes fraudulent or
manipulative practices with respect to purchases or sales of securities held or
to be acquired by investment companies, if effected by affiliated persons (as
defined under the Act) of such companies. Specifically, Rule 17j-1 provides
that it is unlawful for any affiliated person of or principal underwriter for a
registered investment company, or any affiliated person of an investment adviser
of or principal underwriter for a registered investment company, in connection
with the purchase or sale, directly or indirectly, by such person of a security
held or to be acquired by such registered investment company:
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<PAGE> 2
(a) To employ any device, scheme or artifice to defraud such registered
investment company;
(b) To make to such registered investment company any untrue statement of
a material fact or omit to state to such registered investment company
a material fact necessary in order to make the statements made, in
light of the circumstances under which they are made, not misleading;
(c) To engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any such registered
investment company; or
(d) To engage in any manipulative practice with respect to such registered
investment company.
While Rule 17j-1 is designed to protect only the interests of the
Funds and their stockholders, the Investment Managers apply the policies and
procedures described in this Code of Ethics to all employees of the Investment
Managers to protect the interests of their non-Fund clients as well
(hereinafter, where appropriate, non-Fund clients of the Investment Managers are
referred to as "Advisory Clients" and any reference to an Advisory Client(s)
relates only to the activities of employees of the Investment Managers).
The purpose of this Code of Ethics is to (i) ensure that Access
Persons conduct their personal securities transactions in a manner which does
not (a) create an actual or potential conflict of interest with the Funds' or an
Advisory Client's portfolio transactions, (b) place their personal interests
before the interest of the Funds and their stockholders or an Advisory Client or
(c) take unfair advantage of their relationship to the Funds or an Advisory
Client and (ii) provide policies and procedures consistent with the Act and
Rule17j-1 designed to give effect to the general prohibitions set forth in Rule
17j-l.
Among other things, the procedures set forth in this Code of Ethics
require that all (i) Access Persons review this Code of Ethics at least
annually, (ii) Access Persons, unless excepted by Sections 8. (d) or (e) of this
Code of Ethics, report transactions in Covered Securities, (iii) Access Persons
refrain from engaging in certain transactions, and (iv) employees of the
Investment Managers pre-clear with the Compliance Department or the trading desk
at MAS any transactions in Covered Securities.
2. DEFINITIONS
(a) "Access Person" means (i) any director, officer or Advisory Person of
the Funds or of the Investment Managers, and (ii) any director or
officer of MS&Co., who, in the ordinary course of business, makes,
participates in or obtains information regarding the purchase or sale
of Covered Securities by the Funds.
2
<PAGE> 3
(b) "Advisory Person" means any employee of the Funds, or of the
Investment Managers (or of any company in a control relationship to
the Funds or the Investment Managers), who, in connection with his or
her regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of Covered Securities by
the Funds or an Advisory Client, or whose functions relate to the
making of any recommendations with respect to such purchases or sales.
(c) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions
of Section 16 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, except that the determination of
direct or indirect beneficial ownership shall apply to all securities
which an Access Person has or acquires.
(d) "Control" shall have the same meaning as that set forth in Section 2
(a)(9) of the Act.
(e) "Compliance Department" means the MSDW Investment Management or MAS
Compliance Department.
(f) "Covered Security" means a security as defined in Section 2(a)(36) of
the Act, except that it does not include: (i) shares of registered
open-end investment companies, (ii) direct obligations of the
Government of the United States, and (iii) bankers" acceptances, bank
certificates of deposit, commercial paper, and high quality short-term
debt instruments, including repurchase agreements.
(g) "Disinterested Director" means a director of a Fund who is not an
"interested person" of such Fund within the meaning of Section 2(a)
(19) of the Act.
(h) "Purchase or sale (or sell)" with respect to a Covered Security means
any acquisition or disposition of a direct or indirect beneficial
interest in a Covered Security, including, inter alia, the writing or
buying of an option to purchase or sell a Covered Security.
(i) "Security held or to be acquired" means (i) any Covered Security
which, within the most recent 15 days, is or has been held by a Fund
or an Advisory Client, or is being or has been considered by a Fund or
an Advisory Client or the Investment Managers for purchase by a Fund
or an Advisory Client and (ii) any option to purchase or sell, and any
security convertible into or exchangeable for, a Covered Security
described in this paragraph.
3. PROHIBITED TRANSACTIONS
(a) No Access Person or employee of the Investment Managers shall purchase
or sell any Covered Security
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<PAGE> 4
which to his or her actual knowledge at the time of such purchase or
sale:
(i) is being considered for purchase or sale by a Fund or an
Advisory Client; or
(ii) is being purchased or sold by a Fund or an Advisory Client.
(b) No employee of the Investment Managers shall purchase or sell a
Covered Security while there is a pending "buy" or "sell" order in the
same or a related security for a Fund or an Advisory Client until that
order is executed or withdrawn.
(c) No Advisory Person shall purchase or sell a Covered Security within
seven calendar days before or after any portfolio(s) of the Funds over
which such Advisory Person exercises investment discretion or an
Advisory Client over which the Advisory Person exercises investment
discretion purchases or sells the same or a related Covered Security.
Any profits realized or unrealized by the Advisory Person on a
prohibited purchase or sale within the proscribed period shall be
disgorged to a charity.
(d) No employee of the Investment Managers shall profit from the purchase
and sale or sale and purchase of the same (or equivalent) Covered
Security within 60 calendar days, except that he or she may sell a
Covered Security for a loss after 30 calendar days. Any profits
realized within 60 calendar days on such purchase or sale shall be
disgorged to a charity.
(e) No employee of the Investment Managers shall purchase any securities
in an initial public offering.
(f) No employee of the Investment Managers shall purchase privately-placed
securities unless such purchase is pre-approved by the Compliance
Department. Any such person who has previously purchased privately-
placed securities must disclose such purchases to the Compliance
Department before such person participates in a Fund's or an Advisory
Client's subsequent consideration of an investment in the securities
of the same or a related issuer. Upon such disclosure, the Compliance
Department shall appoint another person with no personal interest in
the issuer, to conduct an independent review of such Fund's or such
Advisory Client's decision to purchase securities of the same or a
related issuer.
(g) No Access Person or employee of the Investment Managers shall
recommend the purchase or sale of any Covered Securities to a Fund or
to an Advisory Client without having disclosed to the Compliance
Department his or her interest, if any, in such Covered Securities or
the issuer thereof, including without limitation (i) his or her direct
or indirect beneficial ownership of any securities of such issuer,
(ii) any contemplated purchase or sale by such person of such
securities, (iii) any position
4
<PAGE> 5
with such issuer or its affiliates, and (iv) any present or proposed
business relationship between such issuer or its affiliates, on the
one hand, and such person or any party in which such person has a
significant interest, on the other; provided, however, that in the
event the interest of such person in such securities or the issuer
thereof is not material to his or her personal net worth and any
contemplated purchase or sale by such person in such securities cannot
reasonably be expected to have a material adverse effect on any such
purchase or sale by a Fund or an Advisory Client or on the market for
the securities generally, such person shall not be required to
disclose his or her interest in the securities or the issuer thereof
in connection with any such recommendation.
(h) No Access Person or employee of the Investment Managers shall reveal
to any other person (except in the normal course of his or her duties
on behalf of a Fund or an Advisory Client) any information regarding
the purchase or sale of any Covered Security by a Fund or an Advisory
Client or consideration of the purchase or sale by a Fund or an
Advisory Client of any such Covered Security.
4. PRE-CLEARANCE OF COVERED SECURITIES TRANSACTIONS AND PERMITTED BROKERAGE
ACCOUNTS
No employee of MSDW Investment Management shall purchase or sell Covered
Securities without prior written authorization from its Compliance Department.
No employee of MAS shall purchase or sell Covered Securities without prior
written authorization from the appropriate trading desk. Unless otherwise
indicated by the Compliance Department, pre-clearance of a purchase or sale
shall be valid and in effect only for the business day in which such
pre-clearance is given; provided, however, that the approval of an unexecuted
purchase or sale is deemed to be revoked when the employee becomes aware of
facts or circumstances that would have resulted in the denial of approval of
the approved purchase or sale were such facts or circumstances made known to the
Compliance Department or MAS trading desk, as appropriate, at the time the
proposed purchase or sale was originally presented for approval. The
Investment Managers require all of their employees to maintain their personal
brokerage accounts at MS&Co. or a broker/dealer affiliated with MS&Co.
(hereinafter, a "Morgan Stanley Account"). Outside personal brokerage accounts
are permitted only under very limited circumstances and only with express
written approval by the Compliance Department. The Compliance Department has
implemented procedures reasonably designed to monitor purchases and sales
effected pursuant to the aforementioned pre-clearance procedures.
5. Exempted Transactions
(a) The prohibitions of Section 3 and Section 4 of this Code of Ethics
shall not apply to:
(i) Purchases or sales effected in any account over which an Access
Person or an employee of the Investment Managers has no direct
or indirect influence or control;
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<PAGE> 6
(ii) Purchases or sales which are non-volitional;
(iii) Purchases which are part of an automatic purchase plan directly
with the issuer or its agent or which are part of an automatic
dividend reinvestment plan; or
(iv) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities and
sales of such rights so acquired, but only to the extent such
rights were acquired from such issuer.
(b) Notwithstanding the prohibitions of Sections 3. (a), (b) and (c) of
this Code of Ethics, the Compliance Department or MAS trading desk, as
appropriate, may approve a purchase or sale of a Covered Security by
employees of the Investment Managers which would appear to be in
contravention of the prohibitions in Sections 3. (a), (b) and (c) if
it is determined that (i) the facts and circumstances applicable at
the time of such purchase or sale do not conflict with the interests
of a Fund or an Advisory Client, or (ii) such purchase or sale is only
remotely potentially harmful to a Fund or an Advisory Client because
it would be very unlikely to affect a highly institutional market, or
because it is clearly not related economically to the securities to be
purchased, sold or held by such Fund or Advisory Client, and (iii) the
spirit and intent of this Code of Ethics is met.
6. RESTRICTIONS ON RECEIVING GIFTS
No employee of the Investment Managers shall receive any gift or other
consideration in merchandise, service or otherwise of more than de minimis value
from any person, firm, corporation, association or other entity that does
business with or on behalf of the Funds or an Advisory Client.
7. SERVICE AS A DIRECTOR
No employee of the Investment Managers shall serve on the board of
directors of a publicly-traded company without prior written authorization from
the Compliance Department. Approval will be based upon a determination that the
board service would not conflict with the interests of the Funds and their
stockholders or an Advisory Client.
8. REPORTING
(a) Unless excepted by Section 8. (d) or (e) of this Code of Ethics, each
Access Person must disclose all personal holdings in Covered
Securities to the Compliance Department for its review no later than
10 days after becoming an Access Person and annually thereafter. The
initial and annual holdings reports must contain the following
information:
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<PAGE> 7
(i) The title, number of shares and principal amount of each
Covered Security in which the Access Person has any direct or
indirect beneficial ownership;
(ii) The name of any broker, dealer or bank with or through whom the
Access Person maintained an account in which any securities
were held for the direct or indirect benefit of the Access
Person; and
(iii) The date the report was submitted to the Compliance Department
by the Access Person.
(b) Unless excepted by Section 8. (d) or (e) of this Code of Ethics, each
Access Person and each employee of the Investment Managers must report
to the Compliance Department for its review within 10 days of the end
of a calendar quarter the information described below with respect to
transactions in Covered Securities in which such person has, or by
reason of such transactions acquires any direct or indirect beneficial
interest:
(i) The date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each Covered Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
The price of the Covered Security at which the purchase or
sale was effected;
(iv) The name of the broker, dealer or bank with or through which
the purchase or sale was effected; and
(v) The date the report was submitted to the Compliance Department
by such person.
(c) Unless excepted by Section 8. (d) or (e) of this Code of Ethics, each
Access Person and each employee of the Investment Managers must report
to the Compliance Department for its review within 10 days of the end
of a calendar quarter the information described below with respect to
any account established by such person in which any securities were
held during the quarter for the direct or indirect benefit of such
person:
(i) The name of the broker, dealer or bank with whom the account
was established;
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<PAGE> 8
(ii) The date the account was established; and
(iii) The date the report was submitted to the Compliance Department
by such person.
(d) An Access Person will not be required to make any reports described in
Sections 8. (a), (b) and (c) above for any account over which the
Access Person has no direct or indirect influence or control. An
Access Person or an employee of the Investment Managers will not be
required to make the annual holdings report under Section 8. (a) and
the quarterly transactions report under Section 8. (b) with respect to
purchases or sales effected for, and Covered Securities held in: (i) a
Morgan Stanley Account, (ii) an account in which the Covered
Securities were purchased pursuant to an automatic purchase plan set
up directly with the issuer or its agent or pursuant to a dividend
reinvestment plan, or (iii) an account for which the Compliance
Department receives duplicate trade confirmations and quarterly
statements. An Access Person or an employee of MSDW Investment
Management will not be required to make a report under Section 8. (c)
for any account in which only shares of open-end registered investment
companies can be purchased or sold. Lastly, an employee of MSDW
Investment Management will no be required to make a report under
Section 8. (c) for any account established with MS&Co. or a broker/
dealer affiliated with MS&Co., or for any account which was pre-
approved by the Compliance Department.
(e) A Disinterested Director of a Fund, who would be required to make a
report solely by reason of being a Fund director, is not required to
make initial and annual holdings reports. Additionally, such
Disinterested Director need only make a quarterly transactions report
for a purchase or sale of Covered Securities if he or she, at the time
of that transaction, knew or, in the ordinary course of fulfilling his
or her official duties as a Disinterested Director of a Fund, should
have known that, during the 15-day period immediately preceding or
following the date of the Covered Securities transaction by him or
her, such Covered Security is or was purchased or sold by a Fund or
was being considered for purchase or sale by a Fund.
(f) The reports described in Sections 8. (a), (b) and (c) above may
contain a statement that the reports shall not be construed as an
admission by the person making such reports that he or she has any
direct or indirect beneficial ownership in the Covered Securities to
which the reports relate.
9. ANNUAL CERTIFICATIONS
All Access Persons and employees of the Investment Managers must certify
annually that they have read, understood and complied with the requirements of
this Code of Ethics and recognize that they are subject to this Code of Ethics
by signing the certification attached hereto as Exhibit A.
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<PAGE> 9
10. BOARD REVIEW
The management of the Funds and representatives or officers of the
Investment Managers and, with respect to the Open-End Funds, MS&Co., shall each
provide each Fund's Board of Directors, at least annually, with the following:
(a) a summary of existing procedures concerning personal investing and any
changes in the procedures made during the past year;
(b) a description of any issues arising under this Code of Ethics or
procedures since the last such report, including, but not limited to,
information about material violations of this Code of Ethics or
procedures and sanctions imposed in response to material violations;
(c) any recommended changes in the existing restrictions or procedures
based upon a Fund's or the Investment Managers' experience under this
Code of Ethics, evolving industry practices or developments in
applicable laws and regulations; and
(d) a certification (attached hereto as Exhibits B, C, D, and E, as
appropriate) that each has adopted procedures reasonably necessary to
prevent its Access Persons from violating this Code of Ethics.
11. SANCTIONS
Upon discovering a violation of this Code of Ethics, the Board of
Directors of such Fund or of the Investment Managers, as the case may be, may
impose such sanctions as it deems appropriate.
12. RECORDKEEPING REQUIREMENTS
The management of the Funds and representatives or officers of the
Investment Managers and, with respect to the Open-End Funds, MS&Co., each shall
maintain, as appropriate, the following records for a period of five years, the
first two years in an easily accessible place, and shall make these records
available to the Securities and Exchange Commission or any representative of
such during an examination of the Funds or of the Investment Managers:
(a) a copy of this Code of Ethics or any other Code of Ethics which was in
effect at any time within the previous five years;
9
<PAGE> 10
(b) a record of any violation of this Code of Ethics during the previous
five years, and of any action taken as a result of the violation;
(c) a copy of each report required by Section 8. of this Code of Ethics,
including any information provided in lieu of each such report;
(d) a record of all persons, currently or within the past five years, who
are or were subject to this Code of Ethics and who are or were
required to make reports under Section 8. of this Code of Ethics;
(e) a record of all persons, currently or within the past five years, who
are or were responsible for reviewing the reports required under
Section 8. of this Code of Ethics; and
(f) a record of any decision, and the reasons supporting the decision, to
approve the acquisition of securities described in Sections 3. (e) and
(f) of this Code of Ethics.
10
<PAGE> 11
EXHIBIT A
MORGAN STANLEY DEAN WITTER AFRICA INVESTMENT FUND, INC.
MORGAN STANLEY DEAN WITTER ASIA-PACIFIC FUND, INC.
MORGAN STANLEY DEAN WITTER EASTERN EUROPE FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS FUND, INC.
MORGAN STANLEY DEAN WITTER EMERGING MARKETS DEBT FUND, INC.
MORGAN STANLEY DEAN WITTER GLOBAL OPPORTUNITY BOND FUND, INC.
MORGAN STANLEY DEAN WITTER HIGH YIELD FUND, INC.
MORGAN STANLEY DEAN WITTER INDIA INVESTMENT FUND, INC.
THE LATIN AMERICAN DISCOVERY FUND, INC.
THE MALAYSIA FUND, INC.
THE PAKISTAN INVESTMENT FUND, INC.
THE THAI FUND, INC.
THE TURKISH INVESTMENT FUND, INC.
(THE "CLOSED-END FUNDS")
AND
MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(THE "OPEN-END FUNDS", AND TOGETHER WITH THE CLOSED-END FUNDS, THE "FUNDS")
AND
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
("MSDW INVESTMENT MANAGEMENT")
AND
MILLER ANDERSON & SHERRERD, LLP
("MAS", AND TOGETHER WITH MSDW INVESTMENT MANAGEMENT, THE "INVESTMENT
MANAGERS")
AND
MORGAN STANLEY & CO., INCORPORATED
("MS&Co.")
CODE OF ETHICS
ANNUAL CERTIFICATION
I hereby certify that I have read and understand the Code of Ethics (the
"Code") which has been adopted by the Funds, the Investment Managers and MS&Co.
and recognize that it applies to me and agree to comply in all respects with
the policies and procedures described therein. Furthermore, I hereby certify
that I have complied with the requirements of the Code in effect, as amended,
for the year ended December 31, , and that all of my reportable transactions
in Covered Securities were executed and reflected accurately in a Morgan Stanley
Account (as defined in the Code) or that I have attached a report that
satisfies the annual holdings disclosure requirement as described in Section 8.
(a) of the Code.
Date: Name:
---------------------------- --------------------------------
Signature:
--------------------------
<PAGE> 1
EXHIBIT (q)
POWER OF ATTORNEY
The undersigned, being Officers and Trustees of each of the Van Kampen
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 Pennsylvania Tax Free Income Fund being a Pennsylvania trust, and
being Officers and Directors of Van Kampen Series Fund, Inc. (the
"Corporation"), a Maryland corporation, do hereby, in the capacities shown
below, appoint Richard F. Powers, III, Stephen L. Boyd and A. Thomas Smith III,
each of Oakbrook Terrace, Illinois, as 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: January 28, 2000
Signature Title
--------- -----
/s/ Richard F. Powers, III President, Trustee/Director
- ---------------------------------------
Richard F. Powers, III
/s/ John L. Sullivan Vice President, Chief Financial
- --------------------------------------- Officer and Treasurer
John L. Sullivan
/s/ J. Miles Branagan Trustee/Director
- ---------------------------------------
J. Miles Branagan
/s/ Jerry D. Choate Trustee/Director
- ---------------------------------------
Jerry D. Choate
/s/ Linda Hutton Heagy Trustee/Director
- ---------------------------------------
Linda Hutton Heagy
/s/ R. Craig Kennedy Trustee/Director
- ---------------------------------------
R. Craig Kennedy
/s/ Mitchell M. Merin Trustee/Director
- ---------------------------------------
Mitchell M. Merin
/s/ Jack E. Nelson Trustee/Director
- ---------------------------------------
Jack E. Nelson
/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
- ---------------------------------------
Wayne W. Whalen
/s/ Suzanne H. Woolsey Trustee/Director
- ---------------------------------------
Suzanne H. Woolsey
<PAGE> 2
SCHEDULE 1
VAN KAMPEN U.S. GOVERNMENT TRUST
VAN KAMPEN TAX FREE TRUST
VAN KAMPEN TRUST
VAN KAMPEN EQUITY TRUST
VAN KAMPEN EQUITY TRUST II
VAN KAMPEN PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN TAX FREE MONEY FUND
VAN KAMPEN COMSTOCK FUND
VAN KAMPEN CORPORATE BOND FUND
VAN KAMPEN EMERGING GROWTH FUND
VAN KAMPEN ENTERPRISE FUND
VAN KAMPEN EQUITY INCOME FUND
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
VAN KAMPEN GOVERNMENT SECURITIES FUND
VAN KAMPEN GROWTH AND INCOME FUND
VAN KAMPEN HARBOR FUND
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN LIFE INVESTMENT TRUST
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN PACE FUND
VAN KAMPEN REAL ESTATE SECURITIES FUND
VAN KAMPEN RESERVE FUND
VAN KAMPEN TAX-EXEMPT TRUST
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN WORLD PORTFOLIO SERIES TRUST
<PAGE> 1
EXHIBIT (z)(1)
Item 27(a)
- ----------
Van Kampen U.S. Government Trust
Van Kampen U.S. Government Fund
Van Kampen Tax Free Trust
Van Kampen Insured Tax Free Income Fund
Van Kampen Tax Free High Income Fund
Van Kampen California Insured Tax Free Fund
Van Kampen Municipal Income Fund
Van Kampen Intermediate Term Municipal Income Fund
Van Kampen Florida Insured Tax Free Income Fund
Van Kampen New York Tax Free Income Fund
Van Kampen Trust
Van Kampen High Yield Fund
Van Kampen Managed Short Term Income Fund*
Van Kampen Strategic Income Fund
Van Kampen Equity Trust
Van Kampen Aggressive Growth Fund
Van Kampen Growth Fund
Van Kampen Select Growth Fund
Van Kampen Small Company Growth Fund*
Van Kampen Small Cap Growth Fund*
Van Kampen Small Cap Value Fund
Van Kampen Utility Fund
Van Kampen Equity Trust II
Van Kampen Tax Managed Equity Growth Fund
Van Kampen Technology Fund
Van Kampen Pennsylvania Tax Free Income Fund
Van Kampen Tax Free Money Fund
Van Kampen Prime Rate Income Trust
Van Kampen Senior Floating Rate Fund
Van Kampen Comstock Fund
Van Kampen Corporate Bond Fund
Van Kampen Emerging Growth Fund
Van Kampen Enterprise Fund
Van Kampen Equity Income Fund
Van Kampen Exchange Fund
<PAGE> 2
Van Kampen Limited Maturity Government Fund
Van Kampen Global Managed Assets Fund
Van Kampen Government Securities Fund
Van Kampen Growth and Income Fund
Van Kampen Harbor Fund
Van Kampen High Income Corporate Bond Fund
Van Kampen Life Investment Trust on behalf of its series
Asset Allocation Portfolio
Comstock Portfolio
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Global Equity Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Strategic Stock Portfolio
Morgan Stanley Real Estate Securities Portfolio
Van Kampen Pace Fund
Van Kampen Real Estate Securities Fund
Van Kampen Reserve Fund
Van Kampen Tax Exempt Trust
Van Kampen High Yield Municipal Fund
Van Kampen U.S. Government Trust for Income
Van Kampen World Portfolio Series Trust
Van Kampen Global Government Securities Fund
Van Kampen Series Fund, Inc.
Van Kampen American Value Fund
Van Kampen Asian Growth Fund
Van Kampen Emerging Markets Debt Fund*
Van Kampen Emerging Markets Fund
Van Kampen Equity Growth Fund
Van Kampen European Equity Fund
Van Kampen Focus Equity Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Equity Fund
Van Kampen Global Fixed Income Fund
Van Kampen Growth and Income Fund II*
Van Kampen High Yield & Total Return Fund
Van Kampen International Magnum Fund
Van Kampen Japanese Equity Fund*
Van Kampen Latin American Fund
Van Kampen Mid Cap Growth Fund
Van Kampen Tax Managed Global Franchise Fund
Van Kampen Value Fund
Van Kampen Worldwide High Income Fund
* Funds that have not commenced investment operations.
<PAGE> 3
<TABLE>
<S> <C>
Insured Municipals Income Trust Series 419
FLORIDA INSURED MUNICIPALS INCOME TRUST SERIES 129
MICHIGAN INSURED MUNICIPALS INCOME TRUST SERIES 160
New York Insured Municipals Income Trust Series 149
THE DOW(SM) STRATEGIC 10 TRUST February 2000
SERIES
THE DOW(SM) STRATEGIC 10 TRUST February 2000
TRADITIONAL
SERIES
THE DOW(SM) STRATEGIC 5 TRUST February 2000
SERIES
THE DOW(SM) STRATEGIC 5 TRUST February 2000
TRADITIONAL
SERIES
EAFE STRATEGIC 20 TRUST February 2000
SERIES
STRATEGIC PICKS OPPORTUNITY TRUST February 2000
SERIES
NASDAQ Strategic 10 Trust February 2000 Series
Dow 30 Index Trust Series 9
Dow & Tech Strategic 10 Trust Series 3/00
Global Energy Trust Series 12
Financial Institutions Trust Series 3a
Financial Institutions Trust Series 3b
Edward Jones Select Growth Trust February 2000
Series
Internet Trust Series 19A
Internet Trust Series 19B
Morgan Stanley High-Technology 35 Index Trust Series 11A
Morgan Stanley High-Technology 35 Index Trust Series 11B
Pharmaceutical Trust Series 9A
Pharmaceutical Trust Series 9B
Telecommunications & Bandwidth Trust Series 9A
Telecommunications and Bandwidth Trust Series 9B
Semi-Conductor Trust Series 1A
Semi-Conductor Trust Series 1B
Global Wireless Trust Series 2A
Global Wireless Trust Series 2B
Roaring 2000s Trust Series 5a
Roaring 2000s Trust Series 5b
Roaring 2000s Trust Traditional Series 4
Morgan Stanley Multinational Index Trust Series 2a
Morgan Stanley Multinational Index Trust Series 2b
Software Trust Series 2A
Software Trust Series 2B
Baird Economic Outlook Trust
Natcity - Great American Equities Trust Series 3
Natcity - Great American Value Trust Series 1
Josephthal - The New Millennium Consumer Trust, Retail.com Portfolio II
</TABLE>
<PAGE> 1
EXHIBIT (z)(2)
Item 27(b)
- ----------
<TABLE>
<S> <C> <C>
Richard F. Powers III Chairman & Chief Executive Officer Oakbrook Terrace, IL
John H. Zimmerman III President Oakbrook Terrace, IL
A. Thomas Smith III Executive Vice President, General Oakbrook Terrace, IL
Counsel & Secretary;
Vice President and Secretary of the Funds
William R. Rybak Executive Vice President, Chief
Financial Officer & Treasurer Oakbrook Terrace, IL
Michael H. Santo Executive Vice President & Chief
Operations & Technology Officer Oakbrook Terrace, IL
Colette M. Saucedo Executive Vice President & Houston, TX
Chief Administrative Officer
Steven M. Massoni Executive Vice President Oakbrook Terrace, IL
David M. Swanson Executive Vice President and Chief
Marketing Officer Oakbrook Terrace, IL
Laurence J. Althoff Sr. Vice President & Controller Oakbrook Terrace, IL
Don J. Andrews Sr. Vice President & Chief Compliance Oakbrook Terrace, IL
Officer
Sara L. Badler Sr. Vice President, Deputy Oakbrook Terrace, IL
General Counsel & Assistant Secretary;
Assistant Secretary of the Funds
James J. Boyne Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Assistant Secretary
Glenn M. Cackovic Senior Vice President Laguna Niguel, CA
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
John E. Doyle Sr. Vice President Oakbrook Terrace, IL
Richard G. Golod Sr. Vice President Annapolis, MD
Eric J. Hargens Senior Vice President Orlando, FL
Dominic C. Martellaro Senior Vice President Oakbrook Terrace, IL
Carl Mayfield Senior Vice President Oakbrook Terrace, IL
Mark R. McClure Senior Vice President Oakbrook Terrace, IL
Robert F. Muller, Jr. Senior Vice President Oakbrook Terrace, IL
Walter E. Rein Sr. Vice President Oakbrook Terrace, IL
James J. Ryan Sr. Vice President Oakbrook Terrace, IL
Frederick Shepherd Sr. Vice President Houston, TX
Patrick J. Woelfel Senior Vice President Oakbrook Terrace, IL
Weston B. Wetherell Senior Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Asst. Secretary;
Assistant Secretary of the Funds
Robert S. West Sr. Vice President Oakbrook Terrace, IL
Edward C. Wood, III Sr. Vice President,
Chief Operating Officer; Oakbrook Terrace. IL
Vice President of the Funds
James R. Yount Senior Vice President Mercer Island, WA
Patricia A. Bettlach 1st Vice President Chesterfield, MO
Gregory Heffington 1st Vice President Ft. Collins, CO
David S. Hogaboom 1st Vice President Oakbrook Terrace, IL
Maura A. McGrath 1st Vice President New York, NY
Thomas Rowley 1st Vice President St. Louis, MO
Andrew J. Scherer 1st Vice President Oakbrook Terrace, IL
James D. Stevens 1st Vice President North Andover, MA
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
James K. Ambrosio Vice President Massapequa, NY
Brian P. Arcara Vice President Buffalo, NY
Timothy R. Armstrong Vice President Wellington, FL
Leslie Ann Ashton Vice President Salt Lake City, UT
Matthew T. Baker Vice President Oakbrook Terrace, IL
Shakeel Anwar Barkat Vice President Annapolis, MD
Scott C. Bernstiel Vice President Plainsboro, NJ
Carol S. Biegel Vice President Oakbrook Terrace, IL
Christopher M. Bisaillon Vice President Oakbrook Terrace, IL
William Edwin Bond Vice President New York, NY
Michael P. Boos Vice President Oakbrook Terrace, IL
Robert C. Brooks Vice President Oakbrook Terrace, IL
Elizabeth M. Brown Vice President Houston, TX
Michael Winston Brown Vice President Colleyville, TX
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Juanita E. Buss Vice President Kennesaw, GA
Christine Cleary Byrum Vice President Tampa, FL
Richard J. Charlino Vice President Oakbrook Terrace, IL
Deanne Margaret Chiaro Vice President Oakbrook Terrace, IL
Scott A. Chriske Vice President Plano, TX
German Clavijo Vice President Atlanta, GA
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Kevin J. Connors Vice President Oakbrook Terrace, IL
Gina Costello Vice President Oakbrook Terrace, IL
Suzanne Cummings Vice President Oakbrook Terrace, IL
Michael E. Eccleston Vice President Oakbrook Terrace, IL
William J. Fow Vice President Redding, CT
Charles Friday Vice President Gibsonia, PA
Kyle D. Haas Vice President Oakbrook Terrace, IL
Daniel Hamilton Vice President Austin, TX
John G. Hansen Vice President Oakbrook Terrace, IL
Michael D. Hibsch Vice President Oakbrook Terrace, IL
Susan J. Hill Vice President Oakbrook Terrace, IL
Thomas R. Hindelang Vice President Gilbert, AZ
Bryn M. Hoggard Vice President Houston, TX
Michelle Huber Vice President Oakbrook Terrace, IL
Michael B. Hughes Vice President Oakbrook Terrace, IL
Lowell Jackson Vice President Norcross, GA
Kevin G. Jajuga Vice President Baltimore, MD
Laurie L. Jones Vice President Oakbrook Terrace, IL
Robert Daniel Kendall Vice President Oakbrook Terrace, IL
Michael C. Kinney Vice President Oakbrook Terrace, IL
Dana R. Klein Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
Patricia D. Lathrop Vice President Tampa, FL
Brian Laux Vice President Staten Island, NY
Tony E. Leal Vice President Daphne, AL
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
S. William Lehew III Vice President Charlotte, NC
Ivan R. Lowe Vice President Houston, TX
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Linda S. MacAyeal Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Brooks D. McCartney Vice President Puyallup, WA
Anne Therese McGrath Vice President Los Gatos, CA
John Mills Vice President Kenner, LA
Stuart R. Moehlman Vice President Houston, TX
Carin Elizabeth Morgan Vice President Oakbrook Terrace, IL
Ted Morrow Vice President Plano, TX
Lance O'Brian Murphy Vice President Houston, TX
Peter Nicholas Vice President Beverly, MA
James A. O'Brien Vice President New York, NY
Allyn O' Connor Vice President & Assoc. General Counsel Oakbrook Terrace, IL
Gregory S. Parker Vice President Houston, TX
Christopher Petrungaro Vice President Oakbrook Terrace, IL
Richard J. Poli Vice President Philadelphia, PA
Ronald E. Pratt Vice President Marietta, GA
Theresa Marie Renn Vice President Oakbrook Terrace, IL
Kevin Wayne Reszel Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Oakbrook Terrace, IL
Jeffrey L. Rose Vice President Houston, TX
Suzette N. Rothberg Vice President Plymouth, MN
Jeffrey Rourke Vice President Oakbrook Terrace, IL
Heather R. Sabo Vice President Richmond, VA
Brett Van Bortel Vice President Oakbrook Terrace, IL
Diane Saxon Vice President & Assistant Treasurer Oakbrook Terrace, IL
Stephanie Scarlata Vice President Bedford Corners, NY
Timothy M. Scholten Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Jeffrey M. Scott Vice President Oakbrook Terrace, IL
Gwen L. Shaneyfelt Vice President Oakbrook Terrace, IL
Jeffrey C. Shirk Vice President Swampscott, MA
Traci T. Sorenson Vice President Oakbrook Terrace, IL
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
Richard Stefanec Vice President Los Angles, CA
William C. Strafford Vice President Granger, IN
Charles S. Thompson Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Thomas J. Sauerborn Vice President New York, NY
Larry Brian Vickrey Vice President Houston, TX
Daniel B. Waldron Vice President Oakbrook Terrace, IL
Jeff Warland Vice President Oakbrook Terrace, IL
Robert A. Watson Vice President Oakbrook Terrace, IL
Sharon Wells Coicou Vice President Oakbrook Terrace, IL
Frank L. Wheeler Vice President Oakbrook Terrace, IL
Harold Whitworth, III Vice President Oakbrook Terrace, IL
Joel John Wilczewski Vice President Oakbrook Terrace, IL
Thomas M. Wilson Vice President Oakbrook Terrace, IL
Barbara A. Withers Vice President Oakbrook Terrace, IL
John Wyckoff Vice President Santa Monica, CA
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
David M. Wynn Vice President Phoenix, AZ
Patrick M. Zacchea Vice President Oakbrook Terrace, IL
Scott F. Becker Asst. Vice President Oakbrook Terrace, IL
Brian E. Binder Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Lynn Chadderton Asst. Vice President Oakbrook Terrace, IL
Phillip Ciulla Asst. Vice President Oakbrook Terrace, IL
Amy Cooper Asst. Vice President Oakbrook Terrace, IL
Paula Duerr Asst. Vice President Oakbrook Terrace, IL
Tammy Echevarria-Davis Asst. Vice President Oakbrook Terrace, IL
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Nancy Johannsen Asst. Vice President Oakbrook Terrace, IL
Thomas Johnson Asst. Vice President New York NY
Tara Jones Asst. Vice President Oakbrook Terrace, IL
Holly Lieberman Asst. Vice President Oakbrook Terrace, IL
Gregory Mino Asst. Vice President Oakbrook Terrace, IL
Barbara Novak Asst. Vice President Oakbrook Terrace, IL
Christopher Perozek Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Leah Richardson Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Regina Rosen Asst. Vice President Oakbrook Terrace, IL
Pamela S. Salley Asst. Vice President Houston, TX
David T. Saylor Asst. Vice President Oakbrook Terrace, IL
Katherine Scherer Asst. Vice President Oakbrook Terrace, IL
Heather Schmitt Asst. Vice President Oakbrook Terrace, IL
Lisa Schultz Asst. Vice President Oakbrook Terrace, IL
Laurel Shipes Asst. Vice President Oakbrook Terrace, IL
Lauren B. Sinai Asst. Vice President Oakbrook Terrace, IL
Scott Stevens Asst. Vice President Oakbrook Terrace, IL
Kristen L. Transier Asst. Vice President Houston, TX
Michael Trizil Asst. Vice President Oakbrook Terrace, IL
Damienne Trippiedi Asst. Vice President Oakbrook Terrace, IL
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Judy Wooley Asst. Vice President Houston, TX
Cathy Napoli Assistant Secretary Oakbrook Terrace, IL
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Rebecca Newman Officer Houston, TX
John Yovanovic Officer Houston, TX
Richard F. Powers III Director Oakbrook Terrace, IL
Michael H. Santo Director Oakbrook Terrace, IL
A. Thomas Smith III Director Oakbrook Terrace, IL
William R. Rybak Director Oakbrook Terrace, IL
John H. Zimmerman III Director Oakbrook Terrace, IL
</TABLE>
