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Van Kampen LIT Real Estate Fund Reorganization
Into MSDW Universal Portfolio Q&A
For Internal Use Only
Why has this Reorganization been recommended?
The Board of Trustees of the Van Kampen Portfolio reviewed and considered each
Portfolio's investment objectives, policies and risks, investment restrictions,
expense ratios, performance histories, transaction costs of the Reorganization,
tax consequences of the Reorganization, and the market potential and growth
prospects of the Portfolios. The combined Portfolios...
. would eliminate duplicative portfolio transactions for each Portfolio
. would eliminate separate management of inflows and outflows of each Portfolio
. could lead to more trading efficiencies or other economies of scale on
duplicative operations such as transfer agents, custodians and other service
providers.
What are the Investment Objectives of the Portfolios?
Van Kampen Portfolio
--------------------
The primary objective of the Van Kampen portfolio is to seek long-term growth of
capital with current income as a secondary investment objective. Under normal
market conditions, the Van Kampen portfolio invests at least 65% of its total
assets in securities of companies operating in the real estate industry,
including equity securities of Real Estate Investment Trusts (REITs, which are
instruments that pool investors' funds for investment primarily in income
producing real estate or real estate related loans or interests) and other
securities of real estate operating companies. The Van Kampen portfolio may
invest up to 35% of its total assets in securities of companies outside the real
estate industry.
MSDW Universal Portfolio
------------------------
The investment objective of the Universal portfolio is to seek above average
current income and long-term capital appreciation. Under normal circumstances,
at least 65% of the Universal Portfolio's total assets will be invested in
income producing equity securities of U.S. and non-U.S. companies principally
engaged in the U.S. real estate industry, including REITs. The Universal
Portfolio may also invest up to 35% of its total assets in securities of
companies outside the real estate industry.
Is the Universal Portfolio more risky than the Van Kampen Portfolio?
Because of the similarities in the investment objectives and policies of the
Portfolios VKAM believes that an investment in the Van Kampen Portfolio entails
risks similar to an investment in the Universal Portfolio.
What are the differences between the two portfolios?
The principal investment risk in either Portfolio is market risk, which can
cause the prices of each Portfolio's securities to fluctuate over time.
1. An important difference concerning the risks is that the Van Kampen
Portfolio is a "diversified" fund under the 1940 Act and the Universal
Portfolio is a "non-diversified" fund. Because the Universal Portfolio is
non-diversified, the risks of
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investing in the Universal Portfolio may be intensified because it may
invest in securities of a more limited number of issuers than a diversified
fund. As a result, the performance of a particular investment or a small
group of investments may affect the portfolio more than if it were
diversified.
2. Another difference between the Portfolios is that the Universal Portfolio
may invest a greater percentage of its assets than the Van Kampen Portfolio
in exchange-traded and over-the-counter derivative instruments.
Because of these differences, Shareholders should consult their financial
advisors or consultants to determine if the Universal Portfolio fits their
financial needs.
Will I be able to vote on the Reorganization?
Yes, the Reorganization is subject to approval by the shareholders of the Van
Kampen LIT Real Estate Fund. Shares of the Van Kampen Portfolio are held by
separate accounts of various insurance companies. The separate accounts invest
in shares of the Van Kampen Portfolio as instructed by the owners of variable
annuity or variable life insurance policies (or "contracts"). The separate
accounts provide pass-through voting to contract owners. If a portion of your
contract was allocated to the Van Kampen Portfolio on June 16, 2000, you are
entitled to instruct your insurance company how to vote the shares attributable
to your contract.
How do the Funds' Fees compare?
The estimated expenses are based upon each Portfolio's expenses as of December
31, 1999.
<TABLE>
<CAPTION>
Van Kampen Universal Pro Forma for
Portfolio Portfolio Combined Universal
Portfolio
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 1.00% .80% .80%
--------------------------------------------------------------------------------------------------------------
Other Expenses 0.13%* 1.10% 0.35%
--------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 1.13% 1.90% 1.15%
--------------------------------------------------------------------------------------------------------------
Fee Waivers and/or expense - 0.80%** 0.05%**
Reimbursements
--------------------------------------------------------------------------------------------------------------
Net Expenses - 1.10% 1.10%
--------------------------------------------------------------------------------------------------------------
</TABLE>
* This amount does not show the effects of VKAM's voluntary waiver and/or
expense reimbursements. VKAM has voluntarily agreed to waive its fee and/or
reimburse expenses so that the Van Kampen Portfolio's expenses do not exceed
1.10% of the Portfolio's net assets.
** MSDW Investment Management has contractually agreed to waive fees and/or
reimburse expenses in order to keep total operating expenses from exceeding
1.10% until at least December 31, 2001. In determining the actual amount of
management fee waiver and/or reimbursement for the combined Portfolio, certain
investment related expenses such as foreign country tax expense and interest
expense on borrowing are excluded from annual operating expenses. If these were
incurred, the combined Portfolio's total operating expenses after the fee
waivers and/or reimbursements would exceed the expense ratios shown above.
Who is paying the cost of the shareholder meeting?
MSDW Investment Management is paying all of the expenses relating to the Special
Meeting of the Shareholders of the Van Kampen Portfolio.
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Will I have to pay a sales load or other transaction fees associated with the
Reorganization?
No. You will not pay a sales load, commissions or transaction fees in
connection with the Reorganization.
How will the Reorganization affect my account?
Assuming that the Reorganization is approved, all assets and liabilities of the
Van Kampen Portfolio will be transferred to the Universal Portfolio. Shares of
the Universal Portfolio will then be issued to your account in an amount equal
to the net asset value of the shares of the Van Kampen Portfolio that were held
in your account.
At what price will the Van Kampen LIT Real Estate Fund shares be converted?
Assuming the Reorganization is approved, Van Kampen LIT Real Estate shares will
be converted at their net asset value immediately prior to the Reorganization.
Will this be a taxable event?
The Reorganization is intended to qualify for federal income tax purposes as a
tax-free Reorganization under Section 368(a)(1)(C) of the Internal Revenue Code
of 1986, as amended. If so qualified, the Universal Portfolio will not
recognize gain or loss in the transaction.
Will this affect the dividend schedule of either portfolio?
Dividends from the net investment income of the Van Kampen Portfolio and the
Universal Portfolio are declared and paid to shareholders on an annual basis.
For both Portfolios, net capital gains if any are distributed no less frequently
than annually. There are no intentions to change the schedule.
