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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000
FILE NO. 811-2611
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 21 [X]
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VAN KAMPEN EXCHANGE FUND
A CALIFORNIA LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN THE AGREEMENT OF LIMITED PARTNERSHIP)
1 PARKVIEW PLAZA
PO BOX 5555
OAKBROOK TERRACE, IL 60181-5555
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (630) 684-6000
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)
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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
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VAN KAMPEN EXCHANGE FUND
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Van Kampen Exchange Fund (the "Registrant") is an open-end diversified
management investment company, registered under the Investment Company Act of
1940, as amended (the "1940 Act"), and formed on December 4, 1975 under the
Uniform Limited Partnership Act of California. Registrant commenced business as
an investment company on December 13, 1976.
Items 1, 2, 3, 5 and 9 of Part A are omitted pursuant to General
Instruction B.2. of Form N-1A.
This Prospectus, which incorporates by reference the entire Statement of
Additional Information, concisely sets forth certain information about the
Registrant that a prospective investor should know before investing in shares of
the Registrant. Shareholders should read this Prospectus carefully and retain it
for future reference. A copy of the Statement of Additional Information may be
obtained without charge by calling (800) 341-2911 or for Telecommunications
Device for the Deaf at (800) 421-2833. The Statement of Additional Information
has been filed with the Securities and Exchange Commission ("SEC") and is
available along with other related materials at the SEC's internet web site
(http://www.sec.gov).
This Prospectus is dated April 28, 2000.
ITEM 4. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RELATED
RISKS.
The Registrant's principal investment objective is long-term growth of
capital, while the production of current income is an important secondary
objective. Under normal market conditions, the Registrant seeks to achieve these
objectives by investing primarily in common stocks or convertible securities of
companies believed to have long-term growth potential. The Registrant does not
intend to engage to any significant degree in active or frequent trading of
portfolio securities. The Registrant's portfolio turnover is reported in its
financial statements. The Registrant may, however, for defensive purposes,
temporarily invest all or a portion of its assets in other types of securities,
including investment grade bonds, preferred stocks and money market obligations
such as government securities, certificates of deposit and commercial paper. In
taking a temporary defensive position, the Registrant would not be pursuing and
may not achieve its investment objective. The foregoing policies may not be
changed without approval of a majority of the Registrant's outstanding voting
securities, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"). The Registrant's temporary investments will consist of U.S.
Treasury Bills and U.S. Treasury Bonds, both issued by and supported by the full
faith and credit of the United States Government, and commercial paper rated
P-1, if by Moody's Investors Service, Inc., or A-1 if by Standard & Poor's and
repurchase agreements with domestic banks and broker-dealers.
The Registrant is subject to market risk. Market risk is the possibility
that the market values of securities owned by the Registrant will decline.
Market risk may affect a single issuer, industry, sector of the economy or the
market as a whole. Investments in common stocks and convertible securities
generally are affected by changes in the stock markets, which fluctuate
substantially over time, sometimes suddenly and sharply.
ITEM 6. MANAGEMENT, ORGANIZATION, AND CAPITAL STRUCTURE.
The business and affairs of the Registrant are managed under the direction
of the Board of Managing General Partners of the Registrant. Subject to the
Managing General Partners' oversight, the Adviser (defined below) determines the
investment of Registrant's assets, provides administrative services and manages
Registrant's business and affairs.
Van Kampen Asset Management Inc. ("Asset Management" or the "Adviser"), 1
Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555 serves as
investment adviser to Registrant. 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
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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 financial advisers nationwide. Van Kampen
Investments is an indirect wholly owned subsidiary of Morgan Stanley Dean Witter
& Co. Morgan Stanley Dean Witter & Co. 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 Registrant 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 Registrant (the
"Advisory Agreement"), the Registrant pays the Adviser a fee monthly calculated
at the annual rate of 0.50% of average daily net assets of the Registrant. Under
the Advisory Agreement, Registrant also reimburses the Adviser for the cost of
the Registrant's accounting services, which include maintaining its financial
books and records and calculating its daily net asset value. For the fiscal year
ended December 31, 1999, advisory fees paid by the Registrant equaled 0.50% of
the Registrant's average net assets.
The Fund is managed by a management team headed by Jeff D. New. Mr. New has
been primarily responsible for managing the Fund's investment portfolio since
May 1998. Mr. New has been Senior Vice President and Portfolio Manager of the
Adviser and Van Kampen Investment Advisory Corp. ("Advisory Corp.") since
December 1997. Prior to December 1997, Mr. New was Vice President and Portfolio
Manager of the Adviser and Advisory Corp. Prior to June 1994, Mr. New was
Associate Portfolio Manager of the Adviser. Michael Davis, co-manager of the
Fund since March 1998, is responsible for the day-to-day management of the
Fund's investment portfolio. Mr. Davis has been Vice President and Portfolio
Manager of the Adviser and Advisory Corp. since March 1998. Mr. Davis has worked
in the investment industry since 1983 and prior to March 1998, Mr. Davis was the
owner of Davis Equity, a stock research company.
Operating expenses paid by the Registrant include transfer agency fees,
custodial fees, legal and accounting fees, the costs of reports and proxies to
partners, managing general partners' fees, and all other business expenses not
specifically assumed by the Adviser. For the fiscal year ended December 31,
1999, the Registrant's other operating expenses were 0.25% of average net
assets.
The Registrant and the Adviser have adopted Codes of Ethics designed to
recognize the fiduciary relationship between the Registrant and the Adviser and
its employees. The Codes permit directors, trustees, officers and employees to
buy and sell securities for their personal accounts subject to certain
restrictions. Persons with access to certain sensitive information are subject
to preclearance and other procedures designed to prevent conflicts of interest.
ITEM 7. SHAREHOLDER INFORMATION.
The Registrant has outstanding units of partnership interest ("shares")
with equal rights to participate in distributions made by Registrant and equal
rights to Registrant's assets. Each share is entitled to one vote and there is
no cumulative voting. If the Registrant were unable to pay its liabilities,
partners receiving distributions could be liable to creditors of Registrant to
the extent of such distributions, plus interest.
The Registrant will determine its net asset value as of the close of each
business day on the New York Stock Exchange. The Registrant's net assets equal
the value of its portfolio securities, plus all cash and other assets (including
dividends and interest accrued but not collected) less all liabilities
(including accrued expenses but excluding partner capital contributions). The
Registrant's portfolio securities are valued at the last sales price on the
exchange where principally traded, or, if no sale occurred on that day, at the
mean between the closing bid and asked prices; securities not so traded are
valued in like manner, if market quotations are available, or at the mean
between the highest bid and the lowest asked prices if there is no last sales
price or closing bid and asked prices. The value of any other securities and
assets is the fair value as determined in good faith by the Adviser based on
procedures approved by the Managing General Partners.
Shareholders may redeem shares at any time, without charge by the
Registrant, at the next determined net asset value per share by submitting a
written request in proper form to the Registrant's transfer agent, Van Kampen
Investor Services, Inc. ("Investor Services"), PO Box 218256, Kansas City, MO
64121-8256,
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by placing the redemption request through an authorized dealer or by calling the
Registrant. Redemptions are priced at the next determined net asset value per
share after acceptance by Investor Services of the request and any other
necessary documents in proper order and payment for shares redeemed will be made
within seven days thereafter. Redemptions are not made on days during which the
New York Stock 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 New York Stock Exchange is closed for other than customary weekends
or holidays; (b) the SEC determines trading on the New York Stock Exchange is
restricted; (c) the SEC determines an emergency exists as a result of which
disposal by the Registrant of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Registrant to fairly
determine the value of its net assets; or (d) the SEC, by order, so permits.
The shares redeemed (other than redemptions under a systematic withdrawal
plan) may be paid in cash or securities, at the option of Registrant, and will
ordinarily be paid in whole or in part in securities. Registrant's valuation
will determine the quantity of securities tendered. Registrant will select
securities for tender in redemptions based on tax or investment considerations.
While there is no charge when shares are redeemed or repurchased through
the Registrant or through Van Kampen Funds Inc., an affiliate of the Adviser,
dealers may make a charge for effecting a repurchase. Payment for shares
redeemed may be postponed or the right of redemption suspended as provided by
the rules of the SEC.
The Registrant makes quarterly distributions of net investment income,
exclusive of capital gains, to the partners. The Managing General Partners
determine each year whether and to what extent any realized capital gains are to
be distributed and such distributions, if any, will be made annually.
Distributions, when made, are made equally among the outstanding shares held by
shareholders. Dividends and capital gains distributions are automatically
applied to purchase additional shares of the Registrant at the next determined
net asset value unless the shareholder instructs otherwise.
The Registrant is classified as a partnership for federal income tax
purposes. Each partner is required to report on his personal federal income tax
return his share of Registrant's income, gains, losses, deductions and expenses
for the taxable year of the Registrant ending within or with his taxable year,
regardless of whether cash or other properties are distributed. For federal
income tax purposes, capital gain or loss is allocated equally among shares
outstanding on the day recognized, and all other items of Registrant's income,
gain, loss, deduction and expense during a year are allocated to each partner in
the proportion which the total number of shares such partner held on each day
during the year bears to the total of the outstanding shares of the Registrant
on each day during the year.
The tax basis to each partner for his shares in Registrant is determined by
reference to the basis of the securities and any money that he contributed to
the Registrant in exchange for his shares, and increased by his share of the
Registrant's taxable income and decreased (but not below zero) principally by
the Registrant's distributions and his share of the Registrant's net losses. If
cash distributed exceeds basis, the excess will be taxable as gain from the sale
of a capital asset. The Registrant's tax basis in the securities contributed by
the partners is the same as that of the partners contributing such securities.
Redemptions for cash will generally be taxable as capital gains to the
extent that such cash exceeds a partner's adjusted tax basis in his shares of
the Registrant. The receipt of securities on redemption is not a taxable event
to the partner or to the Registrant. The partner's basis in securities received
on redemption will be the same as the Registrant's. Net long-term capital gains
realized by the Registrant will be taxable to the partners at the current
capital gain rates.
ITEM 8. DISTRIBUTION ARRANGEMENTS.
Not Applicable.
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VAN KAMPEN EXCHANGE FUND
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE AND TABLE OF CONTENTS.
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information should be read in conjunction with the Van
Kampen Exchange Fund (the "Registrant") prospectus (the "Prospectus") dated as
of the same date as this Statement of Additional Information. This Statement of
Additional Information does not include all of the information a prospective
investor should consider before purchasing shares of the Registrant. Investors
should obtain and read the Prospectus prior to purchasing shares of the
Registrant. A Prospectus may be obtained without charge by writing or calling
Van Kampen Funds Inc. (the "Distributor"), 1 Parkview Plaza, Oakbrook Terrace,
Illinois 60181-5555, at (800) 341-2911.
This Statement of Additional Information is dated April 28, 2000.
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PAGE
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Fund History................................................ B-1
Description of the Fund and its Investment Risks............ B-1
Management of the Fund...................................... B-3
Control Persons and Principal Holders of Securities......... B-8
Investment Advisory and Other Services...................... B-9
Brokerage Allocation and Other Practices.................... B-10
Capital Stock and Other Securities.......................... B-11
Purchase, Redemption and Pricing of Shares.................. B-11
Taxation of the Fund........................................ B-11
Underwriters................................................ B-11
Calculation of Performance Data............................. B-11
Report of Independent Accountants........................... F-1
Financial Statements........................................ F-2
Notes to Financial Statements............................... F-8
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ITEM 11. FUND HISTORY.
The Registrant was formed on December 4, 1975 under the Uniform Limited
Partnership Act of California. Registrant commenced business as an investment
company on December 13, 1976 under the name American General Exchange Fund.
On September 9, 1983, the name of the Registrant was changed from American
General Exchange Fund to American Capital Exchange Fund. The name of the
Registrant was changed from American Capital Exchange Fund to Van Kampen
American Capital Exchange Fund (a California Limited Partnership) on April 26,
1996. The Registrant began using its current name on December 9, 1998.
ITEM 12. DESCRIPTION OF THE FUND AND ITS INVESTMENT RISKS.
The Registrant is a diversified open-end management investment company
registered under the Investment Company Act of 1940, as amended ("1940 Act").
The Registrant's principal investment objective is long-term growth of capital,
while the production of current income is an important secondary objective.
Under normal market conditions, the Registrant seeks to achieve these objectives
by investing primarily in common stocks or convertible securities of companies
believed to have long-term growth potential. In seeking to attain its investment
objectives of long-term growth of capital, and, secondarily, production of
income, Registrant will acquire securities for long-term appreciation and does
not intend to engage to any significant degree in short-term trading. Capital
gains taxes will be considered in determining the sale of portfolio securities.
However, sales will be effected whenever believed to be in the best interests of
the Partners, even though capital gains may be recognized thereby.
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Registrant has no present intention of investing in corporate bonds,
preferred stocks or certificates of deposit in an amount in excess of 5% of the
value of its net assets.
Registrant has adopted certain fundamental investment restrictions which
may not be changed without approval by the vote of a majority of its outstanding
voting shares, which is defined by the 1940 Act, as the lesser of (i) 67% or
more of the voting securities present at a meeting, if the holders of more than
50% of the outstanding voting securities are present or represented by proxy, or
(ii) more than 50% of the outstanding voting securities. The percentage
limitations contained in the restrictions and policies set forth herein apply at
the time of purchase of the 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. Registrant may not:
(1) Purchase securities on margin or make short sales.
(2) Purchase or write any options, puts, calls, straddles, spreads or
combinations thereof.
(3) Borrow money, except from banks for a purpose other than the purchase
of securities, such borrowing not to exceed 5% of the Registrant's
total assets at market value at the time of borrowing. Any such
borrowing may be secured provided that not more than 10% of the total
assets at market value at the time of pledging may be used as security
for such borrowings.
(4) Engage in the underwriting of securities or invest in securities
subject to restrictions on resale.
(5) Invest more than 25% of its assets at market value at the time of
purchase in securities of companies all of which conduct their
principal activities in the same industry.
(6) Invest in real estate (including interests in real estate investment
trusts) or invest in oil, gas or mineral exploration or development
programs, except in publicly traded securities of issuers which engage
in such business.
(7) Buy or sell commodities or commodity contracts.
(8) Make loans of money or securities to other persons provided that this
limitation shall not prevent the purchase of a portion of an issue of
bonds, notes, debentures or other debt securities which are publicly
distributed or of a type customarily purchased by institutional
investors.
(9) Invest more than 5% of its total assets at market value at the time of
purchase in the securities of any one issuer (other than obligations of
the United States Government or any instrumentalities thereof).
(10) Purchase securities if such purchase would result in the Registrant
owning more than 10% of the outstanding voting securities of any one
issuer at the time of purchase.
(11) Invest in securities of companies which have a record, together with
their predecessors, of less than three years of continuous operation.
(12) Purchase securities issued by any other investment company or
investment trust.
(13) Purchase or hold securities of any company if any of its General
Partners, or officers or directors of Registrant's investment adviser,
who beneficially own more than 0.50% of the securities of that company
together own beneficially more than 5% of the securities of such
company.
(14) Invest in companies for the purpose of exercising control or
management. (Registrant's officers may be authorized to vote proxies
issued with respect to its portfolio securities consistently with its
investment objectives).
(15) Invest in or hold warrants unless received with respect to securities
held by Registrant.
(16) Invest in foreign securities unless listed at the time of purchase on
the New York Stock Exchange.
(17) Invest more than 5% of its total assets at market value at the time of
purchase in equity securities which are not readily marketable.
Registrant does not issue senior securities.
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ITEM 13. MANAGEMENT OF THE FUND.
The Managing General Partners and executive officers and their principal
occupations for the past five years are listed below.
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NAME AND POSITION HELD PRINCIPAL OCCUPATIONS
ADDRESS WITH REGISTRANT DURING PAST 5 YEARS
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David C. Arch Managing General Chairman and Chief Executive Officer of
1800 Swift Drive Partner Blistex Inc., a consumer health care
Oak Brook, IL 60523 products manufacturer. Director of Elmhurst
Date of Birth: 07/17/45 College and the Illinois Manufacturers'
Age: 54 Assoc. Trustee of each of the other funds in
the Fund Complex (as defined below).
Rod Dammeyer Managing General Managing Partner of Equity Group Corporate
Two North Riverside Plaza Partner Investments, Inc., a company that makes
Suite 600 private equity investments in other
Chicago, IL 60606 companies, and Vice Chairman and Director of
Date of Birth: 11/05/40 Anixter International Inc. Founded in 1957,
Age: 59 Anixter International is the world-leading
communication products distribution company,
with more than 5,000 employees serving
customers from 180 cities in 40 countries
(employed by Anixter since 1985). Member of
the Board of Directors of TeleTech Holdings
Inc., Matria Healthcare Inc., Stericycle,
Inc., Transmedia Networks, Inc., Jacor
Communications, Inc., CNA Surety, Corp., IMC
Global Inc., Antec Corporation and Groupo
Azucarero Mexico (GAM). Prior to April 1999,
Director of Metal Management, Inc. Prior to
1998, Mr. Dammeyer was a Director of Lukens,
Inc., Capsure Holdings Corp., Revco D.S.,
Inc., the Chase Manhattan Corporation
National Advisory Board and Sealy, Inc.
Prior to 1997, President, Chief Executive
Officer and a Director of Great American
Management & Investment, Inc., a diversified
manufacturing company, and a Director of
Santa Fe Energy Resources, Inc., Falcon
Building Products, Inc., Lomas Financial
Corporation, Santa Fe Pacific Corporation,
Q-Tel, S.A. de C.V. and Servicios
Financieros Quadrum, S.A. Trustee of each of
the other funds in the Fund Complex.
Howard J Kerr Managing General Prior to 1998, President and Chief Executive
736 North Western Ave. Partner Officer of Pocklington Corporation, Inc., an
P.O. Box 317 investment holding company. Director of
Lake Forest, IL 60045 Canbra Foods, Ltd., a Canadian oilseed
Date of Birth: 11/17/35 crushing, refining, processing and packaging
Age: 64 operation. Trustee of each of the other
funds in the Fund Complex.
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NAME AND POSITION HELD PRINCIPAL OCCUPATIONS
ADDRESS WITH REGISTRANT DURING PAST 5 YEARS
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Theodore A. Myers Managing General Financial consultant. From 1997 to 1998
550 Washington Avenue Partner Senior Financial Advisor (and January to
Glencoe, IL 60022 June 1996, an Executive Vice President,
Date of Birth: 08/03/30 Chief Financial Officer and Director) of
Age: 69 Qualitech Steel Corporation, a producer of
high quality engineered steels for
automotive, transportation and capital goods
industries. Director of COVA Series Trust of
COVA Financial Life Insurance (formerly
known as Xerox Life). Prior to 1997,
Director of McClouth Steel and a Member of
the Arthur Anderson Chief Financial Officer
Advisory Committee. Trustee of each of the
funds in the Fund Complex.
Hugo F. Sonnenschein Managing General President of the University of Chicago.
5801 South Ellis Avenue Partner Member of the Board of Trustees of the
Suite 502 University of Rochester and a member of its
Chicago, IL 60637 investment committee. Member of the National
Date of Birth: 11/14/40 Academy of Sciences and a fellow of the
Age: 59 American Academy of Arts and Sciences.
Trustee of each of the funds in the Fund
Complex.
Wayne W. Whalen* Managing General Partner in the law firm of Skadden, Arps,
333 W. Wacker Dr. Partner Slate, Meagher & Flom (Illinois), legal
Chicago, IL 60606 counsel to the Registrant, and other
Date of Birth: 08/22/39 investment companies advised by the
Age: 60 Advisers. Trustee/Director of other
investment companies advised by the Advisers
and Trustee of each of the funds in the Fund
Complex.
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* Mr. Whalen is an interested person (as defined by the 1940 Act, as amended) of
the Registrant by reason of his firm acting as legal counsel to the
Registrant.
B-4
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OFFICERS
Messrs. Powers, Santo, Hegel, Smith, Wood and Sullivan are located at 1
Parkview Plaza, Oakbrook Terrace, IL 60181-5555. Mr. Boyd is located at 2800
Post Oak Blvd., Houston, TX 77056.
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POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH THE REGISTRANT DURING PAST 5 YEARS
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Richard F. Powers, III...... Chief Executive Officer Chairman, Director, President and Chief
Date of Birth: 02/02/46 Executive Officer of Van Kampen
Age: 54 Investments, Inc. ("Van Kampen
Investments"), and Chairman, Director and
Chief Executive Officer of Van Kampen Asset
Management, Inc. ("Asset Management"), Van
Kampen Investment Advisory Corp. ("Advisory
Corp.") (Asset Management and Advisory
Corp. are collectively referred to herein
as the "Advisers"), the Distributor, Van
Kampen Advisors Inc. and Van Kampen
Management Inc., and serves as Director or
Officer of certain other subsidiaries of
Van Kampen. Mr. Powers is also a Trustee
and President of other open-end funds
advised by the Advisers and Chairman of the
Board, Trustee and President of each of the
other funds in the Fund Complex. Prior to
May 1998, Mr. Powers was Executive Vice
President and Director of Marketing of
Morgan Stanley Dean Witter & Co. and
Director of Dean Witter Discover & Co. and
Dean Witter Realty. Prior to 1996, Director
of Dean Witter Reynolds Inc.
Michael H. Santo............ Vice President Executive Vice President, Chief
Date of Birth: 10/22/55 Administrative Officer and Director of Van
Age: 44 Kampen Investments, the Advisers, the
Distributor, Van Kampen Advisors, 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.............. Vice President Executive Vice President and Portfolio
Date of Birth: 06/25/56 Manager of the Advisers, Van Kampen
Age: 43 Management Inc. and Van Kampen Advisors
Inc. Vice President of each of the funds in
the Fund Complex and certain other
investment companies advised by the
Advisers or their affiliates. Prior to
September of 1996, Director of McCarthy,
Crisanti & Maffei, Inc. Prior to July of
1996, Director of VSM Inc.
</TABLE>
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<TABLE>
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POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH THE REGISTRANT DURING PAST 5 YEARS
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A. Thomas Smith III......... Vice President, Principal Executive Vice President, General Counsel,
Date of Birth: 12/14/56 Legal Officer and Secretary Secretary and Director of the Advisers, Van
Age: 43 Kampen Advisors Inc., Van Kampen Management
Inc., Van Kampen Investments, the
Distributor, American Capital Contractual
Services, Inc., Van Kampen Exchange Corp.,
Van Kampen Recordkeeping Services Inc., Van
Kampen Investor Services, Inc., Van Kampen
Insurance Agency of Illinois Inc. and Van
Kampen System Inc. Vice President and
Secretary of each of the funds in the Fund
Complex. From January 1994 through January
1999, counsel to New York Life Insurance
Company, serving as Vice President and
Associate General Counsel since March of
1997. Prior to March 1997, Associate
General Counsel of New York Life. Assistant
General Counsel of The Dreyfus Corporation
from September 1991 to December 1993 and a
Senior Associate of Willkie Farr &
Gallagher from February 1989 to August
1991. From January 1986 to January 1989,
Staff Attorney with the U.S. Securities and
Exchange Commission in the Division of
Investment Management's Office of Chief
Counsel.
John L. Sullivan............ Vice President, Treasurer Senior Vice President of the Advisers, Van
Date of Birth: 08/20/55 and Chief Financial Officer Kampen Management Inc. and Van Kampen
Age: 44 Investments. Treasurer of each of the funds
in the Fund Complex and certain other
investment companies advised by the
Advisers or their affiliates.
Stephen L. Boyd............. Executive Vice President and Executive Vice President and Chief
Date of Birth: 11/16/40 Chief Investment Officer Investment Officer of Van Kampen
Age: 59 Investments, and President and Chief
Operating Officer of the Advisers, Van
Kampen Management Inc. and Van Kampen
Advisors Inc. Executive Vice President and
Chief Investment Officer of each of the
funds in the Fund Complex and certain other
investment companies advised by the
Advisers or their affiliates. Prior to
April 2000, Executive Vice President of the
Advisers and Van Kampen Management Inc. and
Chief Investment Officer for Equity
Investments of the Advisers since September
1998. 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 with Van Kampen American Capital
Asset Management, Inc., Van Kampen American
Capital Investment Advisory Corp. and Van
Kampen American Capital Management, Inc.
</TABLE>
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<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH THE REGISTRANT DURING PAST 5 YEARS
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Edward C. Wood III.......... Vice President Senior Vice President of Van Kampen
Date of Birth: 01/11/56 Investments, the Advisers, Van Kampen
Age: 44 Insurance Agency of Illinois, Inc. and Van
Kampen Management Inc. Senior Vice
President and Chief Operating Officer of
the Distributor. Vice President of each of
the funds in the Fund Complex and certain
other investment companies advised by the
Advisers or their affiliates.
</TABLE>
The following table shows aggregate compensation paid to each of the
Registrant's Managing General Partners by the Registrant for the Registrant's
last fiscal year ended December 31, 1999 and from the Fund Complex (defined
below) for the calendar year ended December 31, 1999. The officers and Managing
General Partners act as officers and trustees of other funds in the Fund Complex
(defined below). The compensation of officers and Managing General
Partners/Trustees who are affiliated persons (as defined in the 1940 Act) of the
Adviser is paid by the Adviser. Funds in the Fund Complex, including the
Registrant, pay compensation to Managing General Partners/Trustees who are not
affiliated with the Adviser or Van Kampen Investments ("Non-Affiliated
Trustees"). The funds in the Fund Complex pay (i) an annual Fund Complex
retainer (generally equal to the product of $2,500 times the number of funds in
the Fund Complex), which is then allocated among the funds in the Fund Complex
based on each fund's relative net assets, and (ii) a meeting fee of $250 per
fund per meeting as well as reimbursement of expenses incurred in connection
with such meetings. Each of the funds in Fund Complex other than the Registrant
has adopted a deferred compensation plan for Non-Affiliated Trustees that allows
such trustees to defer receipt of compensation and earn a return on such
deferred amounts based upon the return of common shares of funds in the Fund
Complex as selected by such trustee. Each of the funds in the Fund Complex other
than the Registrant has adopted a retirement plan for Non-Affiliated Trustees
which provides retirement benefits to Non-Affiliated Trustees that have at least
ten years of service for a fund (including years of service prior to adoption of
the retirement plan) and retire at or after attaining the age of 62 equal to
$2,500 per fund for each of the ten years following such trustee's retirement.
COMPENSATION TABLE
<TABLE>
<CAPTION>
FUND COMPLEX
-------------------------------------------------------------
TOTAL
AGGREGATE ESTIMATED AGGREGATE ESTIMATED COMPENSATION
YEAR OF COMPENSATION PENSION OR RETIREMENT AGGREGATE BEFORE DEFERRAL
ELECTION/ FROM THE BENEFITS ACCRUED ANNUAL BENEFITS FROM THE
NAME APPOINTMENT REGISTRANT(2) AS PART OF EXPENSES(3) UPON RETIREMENT(4) FUND COMPLEX(5)
---- ----------- ------------- ---------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
David C. Arch............. 1998 $1,708 $14,441 $97,500 $153,250
Rod Dammeyer.............. 1998 1,708 24,988 97,500 153,250
Howard J Kerr............. 1998 1,708 45,978 96,250 153,250
Steven Muller(1).......... 1998 1,708 23,371 7,500 153,250
Theodore A. Myers......... 1998 1,708 79,221 81,750 153,250
Hugo F. Sonnenschein...... 1998 1,708 24,553 97,500 153,250
Wayne W. Whalen........... 1998 1,708 27,763 97,500 153,250
</TABLE>
- ---------------
(1) Mr. Muller resigned as a Managing General Partner on December 31, 1999.
(2) The amounts shown in this column represent the Aggregate Compensation from
the Registrant for each Managing General Partner for the Registrant's
fiscal year ending December 31, 1999.
(3) Funds in the Fund Complex other than the Registrant have adopted retirement
plans for trustees who are not affiliated persons of the Adviser or Van
Kampen Investments. The amounts shown in this column represent the sum of
the estimated pension or retirement benefit accruals expected to be accrued
by such funds for their respective fiscal years ended 1999.
B-7
<PAGE> 12
(4) Funds in the Fund Complex other than the Registrant have adopted retirement
plans for trustees who are not affiliated persons of the Adviser or Van
Kampen Investments. The amounts shown in this column represents the sum of
the estimated annual benefits payable per year by such funds for each year
of the 10-year period commencing in the year of such trustee's anticipated
retirement.
(5) The "Fund Complex" currently consists of 41 investment companies (including
the Registrant) advised by the Adviser or its affiliates that have the same
members on each investment company's Board of Trustees/Managing General
Partners. The amounts shown in this column are accumulated from the
Aggregate Compensation of the 41 investment companies in the Fund Complex
for the calendar year ended December 31, 1999 before deferral by the
trustees under the deferred compensation plan. The Adviser also serves as
investment adviser for other investment companies; however, with the
exception of Mr. Whalen, the Non-Affiliated Trustees are not trustees of
other investment companies. Combining the Fund Complex with other
investment companies advised by the Adviser or its affiliates, Mr. Whalen
received Total Compensation of $279,250 for the year ended December 31,
1999.
Skadden, Arps, Slate, Meagher & Flom (Illinois) serves as legal counsel to the
Registrant.
The Fund, the Adviser and the Distributor have adopted Codes of Ethics
(collectively, the "Code of Ethics") that set forth general and specific
standards relating to the securities trading activities of their employees. The
Code of Ethics does not prohibit employees from acquiring securities that may be
purchased or held by the Fund, but is intended to ensure that all employees
conduct their personal transactions in a manner that does not interfere with the
portfolio transactions of the Fund or other Van Kampen funds, or that such
employees take unfair advantage of their relationship with the Fund. Among other
things, the Code of Ethics prohibits certain types of transactions absent prior
approval, imposes various trading restrictions (such as time periods during
which personal transactions may or may not be made) and requires quarterly
reporting of securities transactions and other matters. All reportable
securities transactions and other required reports are to be reviewed by
appropriate personnel for compliance with the Code of Ethics. Additional
restrictions apply to portfolio managers, traders, research analysts and others
who may have access to nonpublic information about the trading activities of the
Fund or other Van Kampen funds or who otherwise are involved in the investment
advisory process. Exceptions to these and other provisions of the Code of Ethics
may be granted in particular circumstances after review by appropriate
personnel.
ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of April 3, 2000, no person was known by the Registrant to own
beneficially or to hold of record 5% or more of the outstanding shares of the
Registrant, except as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
NAME AND ADDRESS OF HOLDER OF OWNERSHIP OWNERSHIP
-------------------------- ------------ ----------
<S> <C> <C>
Comerica Bank of Detroit and Edward Mardigian, TR 45,045 17.01%
DTD 8/2/77 with Helen Mardigian
P.O. Box 75000
Detroit, MI 48275-0001
Richard F. McCarthy and Walter R. McCarthy, 15,000 5.66%
Trustees for the Richard F. McCarthy Trust
DTD 09/27/89
540 Indian Mound St., E 1-D
Wayzata, MN 55391-1745
George O. and Sidney M. Thorson, a partnership 14,939 5.64%
P.O. Box 1847
Friday Harbor, WA 98250-1847
</TABLE>
At April 3, 2000, all Managing General Partners and officers as a group
owned less than 1% of Registrant's outstanding voting securities.
B-8
<PAGE> 13
ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES.
The Adviser and Van Kampen Investor Services Inc., the Registrant's
shareholder service agent, are wholly owned subsidiaries of Van Kampen
Investments, which 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. Investors Services principal office is
located at 7501 Tiffany Springs Parkway, Kansas City, MO 64153.
Morgan Stanley Dean Witter & Co. 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.
Registrant and the Adviser are parties to an investment advisory agreement
(the "Agreement"). Under the Advisory Agreement, Registrant pays to the Adviser
as compensation for the services rendered, facilities furnished, and expenses
paid by it a fee payable monthly computed on average daily net assets of
Registrant at annual rate of 0.50%. The Adviser received approximately $457,800,
$392,400 and $351,434, in advisory fees from the Registrant during the fiscal
years ended December 31, 1999, 1998 and 1997, respectively.
The average net asset value is determined by taking the average of all of
the determinations of net asset value for each business day during a given
calendar month. Such fee is payable for each calendar month as soon as
practicable after the end of that month. The fee payable to the Adviser is
reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the Adviser or any other direct or indirect
majority owned subsidiary of Van Kampen Investments, in connection with the
purchase and sale of portfolio investments of the Registrant, less any direct
expenses incurred by such subsidiary of Van Kampen Investments in connection
with obtaining such payments. The Adviser agrees to use its best efforts to
recapture tender solicitation fees and exchange offer fees for the Registrant's
benefit, and to advise the Managing General Partners of Registrant of any other
commissions, fees, brokerage or similar payments which may be possible under
applicable laws for the Adviser or any other direct or indirect majority owned
subsidiary of Van Kampen Investments to receive in connection with Registrant's
portfolio transactions or other arrangements which may benefit Registrant.
The agreement also provides that, in the event the ordinary business
expenses of Registrant for any fiscal year exceed 1 1/2% of the first $30
million of the Registrant's average net assets, plus one percent 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 Registrant monthly an amount sufficient
to make up the deficiency, subject to readjustment during the year. Ordinary
business expenses do not include (1) interest and taxes, (2) brokerage
commissions and (3) certain litigation and indemnification expenses as described
in the Advisory Agreement.
The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Registrant's Managing General Partners
or (ii) by vote of a majority of the Registrant's outstanding voting securities
and (b) by the affirmative vote of a majority of the Managing General Partners
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 30 days written notice.
Under the Agreement, Registrant retains the Adviser to manage the
investment of its assets and to place orders for the purchase and sale of its
portfolio securities. The Adviser is responsible for obtaining and evaluating
economic, statistical, and financial data and for formulating and implementing
investment programs in furtherance of Registrant's investment objectives. The
Adviser also furnishes at no cost to Registrant (except as noted herein) the
services of sufficient executive and clerical personnel for Registrant as are
necessary to prepare registration statements, partner reports, and notices and
proxy solicitation materials. In addition, the Adviser furnishes at no cost to
Registrant the services of a Chief Executive Officer and other executive and
clerical personnel, as needed.
Under the Agreement, Registrant bears the cost of its accounting services,
which includes maintaining its financial books and records and calculating its
daily net asset value. The costs of such accounting services include the
salaries and overhead expenses of the Registrant's Principal Financial and
Accounting Officer and
B-9
<PAGE> 14
the personnel operating under his direction. For the fiscal years ended December
31, 1999, 1998 and 1997, the Registrant paid approximately $32,200, $37,400 and
$15,313, respectively, for such services. A portion of these amounts were paid
to the Adviser in reimbursement of personnel, facilities and equipment costs
attributable to the provision of accounting services to Registrant. The services
provided by the Adviser are at cost which is allocated among the investment
companies advised or sub-advised by the Adviser. Registrant also pays transfer
agency fees, custodian fees, legal and auditing fees, the costs of reports to
partners and all other ordinary expenses not specifically assumed by the
Adviser.
The custodian of all the assets of Registrant is State Street Bank and
Trust Company located at 225 Franklin Street, Boston, Massachusetts 02110.
Independent accountants for the Fund perform an annual audit of the Fund's
financial statements. KPMG LLP, located at 303 East Wacker Drive, Chicago
Illinois, 60601, has ceased being the Fund's independent accountants effective
April 14, 2000. The Managing General Partners and management of the Fund are in
the process of engaging new independent accountants for the audits of the Fund's
financial statements.
Investor Services, PO Box 218256, Kansas City, MO 64121-8256, a wholly
owned subsidiary of Van Kampen Investments, serves as shareholder service agent
for the Fund. The transfer agency fees are determined through negotiations with
the Fund's Board of Trustees and are based on competitive market benchmarks.
ITEM 16. BROKERAGE ALLOCATION AND OTHER PRACTICES.
The Adviser is responsible for decisions to buy and sell securities for the
Registrant and for the placement of its portfolio business and the negotiation
of the commissions paid on such transactions. While the Adviser will be
primarily responsible for the placement of the Registrant's portfolio business,
the policies and practices in this regard will at all times be subject to review
by the Managing General Partners of the Registrant. It is the policy of the
Adviser to seek prompt execution of orders in an effective manner at the best
security price available with respect to each transaction. In over-the-counter
transactions, orders are placed directly with a principal market maker unless it
is believed that a better price and execution can be obtained by using a broker.
Except to the extent that the Registrant may pay higher brokerage commissions
for brokerage and research services (as described below) on a portion of its
transactions executed on securities exchanges, the Adviser seeks the best
security price at the most favorable commission rate. The Registrant paid no
brokerage commissions during the fiscal years ended December 31, 1999, 1998 and
1997, respectively.
In selecting dealers and in negotiating commissions, the Adviser considers
the firm's reliability, the quality of its execution services on a continuing
basis and its financial condition. When more than one firm is believed to meet
these criteria, preference may be given to firms which also provide research
services to Registrant or the Adviser.
The Adviser may cause an account to pay a broker or dealer who supplies
brokerage and research services, a commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting the transaction. Brokerage and research services
include (a) furnishing advice as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities, (b) furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts, and (c) effecting
securities transactions and performing functions incidental thereto (such as
clearance, settlement and custody).
The Registrant's Managing General Partners have authorized the Adviser to
cause the Registrant to incur brokerage commissions in an amount higher than the
lowest available rate in return for research services provided to the Adviser.
The Adviser is of the opinion that the continued receipt of supplemental
investment research services from dealers is essential to its provision of high
quality portfolio management services to Registrant. The Adviser undertakes that
such higher commissions will not be paid by Registrant unless (a) the Adviser
determines in good faith that the amount is reasonable in relation to the
services in terms of the
B-10
<PAGE> 15
particular transaction or in terms of the Adviser's overall responsibilities
with respect to the accounts as to which it exercises investment discretion, (b)
such payment is made in compliance with applicable state and federal laws, and
(c) in the opinion of the Adviser, the total commissions paid by Registrant are
reasonable in relation to the expected benefits to Registrant over the long
term. The investment advisory fee paid by Registrant under the investment
advisory agreement is not reduced as a result of the Adviser's receipt of
research services.
The Adviser places portfolio transactions for the Registrant and other
advisory accounts, including other investment companies. Research services
furnished by firms through which Registrant effects its securities transactions
may be used by the Adviser in servicing all of its accounts; not all of such
services may be used by the Adviser in connection with Registrant. In the
opinion of the Adviser, the benefits from research services to each of the
accounts (including Registrant) managed by the Adviser cannot be measured
separately. Because the volume and nature of the trading activities of the
accounts are not uniform, the amount of commissions in excess of the lowest
available rate paid by each account for brokerage and research services will
vary. However, in the opinion of the Adviser, such costs to Registrant will not
be disproportionate to the benefits received by Registrant on a continuing
basis.
The Adviser seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by Registrant and
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities available to Registrant. In
making such allocations among Registrant and other advisory accounts, the main
factors considered by the Adviser are the relative net assets, respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held, and opinions of the persons responsible
for recommending the investment.
The Adviser also may place portfolio transactions, to the extent permitted
by law, with brokerage firms affiliated with the Registrant or the Adviser 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.
ITEM 17. CAPITAL STOCK AND OTHER SECURITIES.
See Items 4 and 7.
ITEM 18. PURCHASE, REDEMPTION AND PRICING OF SHARES.
No shares are being offered to the public. The redemption price per share
is equivalent to the net asset value per share as more fully described in Item
7.
ITEM 19. TAXATION OF THE FUND.
See Item 7.
ITEM 20. UNDERWRITERS.
Not Applicable.
ITEM 21. CALCULATION OF PERFORMANCE DATA.
Not Applicable.
ITEM 22. FINANCIAL STATEMENTS.
B-11
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Exchange Fund
We have audited the accompanying statement of assets and liabilities of Van
Kampen Exchange Fund (a California Limited Partnership), including the portfolio
of investments, as of December 31, 1999, the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Exchange Fund management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit it obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above preset fairly, in all material respects, the financial position of Van
Kampen Exchange Fund as of December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Chicago, Illinois
February 10, 2000
F-1
<PAGE> 17
PORTFOLIO OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 97.4%
AEROSPACE & DEFENSE 0.8%
Honeywell International, Inc. ......................... 12,528 $ 722,709
-----------
CONSUMER DISTRIBUTION 0.7%
Cardinal Health, Inc. ................................. 1,245 59,604
IKON Office Solutions, Inc. ........................... 86,993 592,640
-----------
652,244
-----------
CONSUMER DURABLES 1.0%
Dana Corp.............................................. 13,677 409,455
SPX Corp. (a).......................................... 6,824 551,465
-----------
960,920
-----------
CONSUMER NON-DURABLES 3.5%
International Flavors & Fragrances, Inc. .............. 49,712 1,876,628
McCormick & Co., Inc. ................................. 48,259 1,435,705
-----------
3,312,333
-----------
CONSUMER SERVICES 0.2%
Luby's Cafeterias, Inc. ............................... 13,367 152,050
-----------
ENERGY 12.1%
Amerada Hess Corp. .................................... 21,200 1,203,100
Apache Corp. .......................................... 11,406 421,309
Baker Hughes Inc. ..................................... 25,634 539,916
BP Amoco PLC--ADR (United Kingdom)..................... 33,876 2,009,270
Exxon Mobil Corp. ..................................... 53,151 4,281,978
Halliburton Co. ....................................... 30,320 1,220,380
Kerr-McGee Corp. ...................................... 10,900 675,800
Schlumberger, Ltd...................................... 16,080 904,500
Transocean Sedco Forex, Inc. .......................... 3,113 104,872
-----------
11,361,125
-----------
FINANCE 4.0%
American International Group, Inc. .................... 27,792 3,005,010
Household International, Inc. ......................... 21,372 796,107
-----------
3,801,117
-----------
HEALTHCARE 31.5%
American Home Products Corp. .......................... 56,000 2,208,500
Baxter International, Inc. ............................ 5,000 314,063
</TABLE>
See Notes to Financial Statements
F-2
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
Johnson & Johnson, Inc. ............................... 54,432 $ 5,068,980
Merck & Co., Inc. ..................................... 50,376 3,378,340
Schering-Plough Corp. ................................. 195,374 8,242,341
Warner-Lambert Co. .................................... 127,290 10,429,824
-----------
29,642,048
-----------
PRODUCER MANUFACTURING 0.6%
Fluor Corp. ........................................... 12,831 588,622
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 8.5%
Air Products & Chemicals, Inc. ........................ 109,090 3,661,333
Alcan Aluminum, Ltd.................................... 10,774 443,754
Georgia Pacific Corp. ................................. 37,376 1,896,832
Georgia Pacific Corp.--Timber Group.................... 18,688 460,192
Louisiana Pacific Corp. ............................... 25,970 370,073
Lubrizol Corp. ........................................ 37,620 1,161,517
-----------
7,993,701
-----------
TECHNOLOGY 34.5%
Intel Corp. ........................................... 375,554 30,912,789
International Business Machines Corp. ................. 15,016 1,621,728
-----------
32,534,517
-----------
TOTAL LONG-TERM INVESTMENTS 97.4%
(Cost $7,354,165)............................................... 91,721,386
REPURCHASE AGREEMENT 1.7%
State Street Bank & Trust Co. ($1,640,000 par collateralized by
U.S. Government obligations in a pooled account, dated 12/31/99,
to be sold on 01/03/00 at $1,640,410) (Cost $1,640,000)......... 1,640,000
-----------
TOTAL INVESTMENTS 99.1%
(Cost $8,994,165)............................................... 93,361,386
OTHER ASSETS IN EXCESS OF LIABILITIES 0.9%....................... 843,513
-----------
NET ASSETS 100.0%................................................ $94,204,899
===========
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
See Notes to Financial Statements
F-3
<PAGE> 19
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $8,994,165)......................... $93,361,386
Cash........................................................ 943,873
Receivables:
Dividends................................................. 85,204
Interest.................................................. 137
Other....................................................... 77,052
-----------
Total Assets.......................................... 94,467,652
-----------
LIABILITIES:
Payables:
Investment Advisory Fee................................... 39,860
Income Distributions...................................... 31,260
Affiliates................................................ 3,951
Managing General Partners' Retirement Plan.................. 119,548
Accrued Expenses............................................ 68,134
-----------
Total Liabilities..................................... 262,753
-----------
NET ASSETS.................................................. $94,204,899
===========
NET ASSETS WERE COMPRISED OF:
266,754 units of limited partnership interest............... $92,939,686
3,411 units of non-managing general partnership interest.... 1,188,515
220 units of managing general partnership interest.......... 76,698
-----------
NET ASSETS.................................................. $94,204,899
===========
NET ASSET VALUE PER UNIT ($94,204,899 divided by 270,385
units of partnership interest outstanding)................ $ 348.41
===========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE> 20
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................... $ 994,171
Interest.................................................... 180,739
-----------
Total Income............................................ 1,174,910
-----------
EXPENSES:
Investment Advisory Fee..................................... 457,835
Managing General Partners' Fees and Related Expenses........ 66,774
Shareholder Reports......................................... 62,922
Accounting.................................................. 32,248
Custody..................................................... 24,242
Legal....................................................... 2,395
Other....................................................... 40,677
-----------
Total Expenses............................................ 687,093
Less Credits Earned on Overnight Cash Balances............ 43
-----------
Net Expenses.............................................. 687,050
-----------
NET INVESTMENT INCOME....................................... $ 487,860
===========
REALIZED AND UNREALIZED GAIN/LOSS
Net Realized Gain........................................... $ 1,777,935
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 76,547,458
End of the Period......................................... 84,367,221
-----------
Net Unrealized Appreciation During the Period............... 7,819,763
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 9,597,698
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $10,085,558
===========
</TABLE>
See Notes to Financial Statements
F-5
<PAGE> 21
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 Income.......................... $ 487,860 $ 573,557
Net Realized Gain.............................. 1,777,935 2,475,843
Net Unrealized Appreciation During the
Period....................................... 7,819,763 17,188,549
----------- -----------
Change in Net Assets from Operations........... 10,085,558 20,237,949
----------- -----------
Distributions from Net Investment Income....... (352,177) (366,286)
Distributions from Net Realized Gain........... (136,841) -0-
----------- -----------
Total Distributions........................ (489,018) (366,286)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................... 9,596,540 19,871,663
----------- -----------
FROM PARTNERSHIP UNIT TRANSACTIONS:
Proceeds from Units Issued Through Dividend
Reinvestment................................. 80,661 49,579
Cost of Units Repurchased...................... (3,389,034) (2,278,503)
----------- -----------
NET CHANGE IN NET ASSETS FROM
PARTNERSHIP UNIT TRANSACTIONS................ (3,308,373) (2,228,924)
----------- -----------
TOTAL INCREASE IN NET ASSETS................... 6,288,167 17,642,739
NET ASSETS:
Beginning of the Period........................ 87,916,732 70,273,993
----------- -----------
End of the Period (Including accumulated
undistributed net investment income of
$2,961,067 and
$2,825,384, respectively).................... $94,204,899 $87,916,732
=========== ===========
CHANGE IN PARTNERSHIP UNITS OUTSTANDING:
Units Issued Through Dividend Reinvestment..... 245 180
Units Repurchased.............................. (10,219) (8,376)
----------- -----------
Decrease in Partnership Units
Outstanding.............................. (9,974) (8,196)
=========== ===========
</TABLE>
See Notes to Financial Statements
F-6
<PAGE> 22
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one unit of partnership
interest outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31 (a)
---------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period............. $313.586 $243.538 $205.349 $ 151.88 $115.36
-------- -------- -------- -------- -------
Net Investment Income..... 1.772 2.010 1.908 1.488 1.62
Net Realized and
Unrealized Gain......... 34.822 69.318 37.561 53.261 36.18
-------- -------- -------- -------- -------
Total from Investment
Operations................ 36.594 71.328 39.469 54.749 37.80
-------- -------- -------- -------- -------
Less:
Distributions from Net
Investment Income....... 1.280 1.280 1.280 1.28 1.28
Distributions from Net
Realized Gain........... .490 -0- -0- -0- -0-
-------- -------- -------- -------- -------
Total Distributions......... 1.770 1.280 1.280 1.28 1.28
-------- -------- -------- -------- -------
Net Asset Value, End of the
Period.................... $348.410 $313.586 $243.538 $205.349 $151.88
======== ======== ======== ======== =======
Total Return................ 11.48% 29.36% 19.23% 36.21% 32.89%
Net Assets at End of the
Period (In millions)...... $ 94.2 $ 87.9 $ 70.3 $ 61.8 $ 47.8
Ratio of Expenses to Average
Net Assets................ .75% .74% .75% .93% .88%
Ratio of Net Investment
Income to Average Net
Assets.................... .53% .73% .80% .87% 1.16%
Portfolio Turnover.......... 0% 0% 0% 0% 0%
</TABLE>
(a) Based on average units outstanding.
See Notes to Financial Statements
F-7
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Exchange Fund (the "Fund"), a California limited partnership, is a
partnership registered under the Investment Company Act of 1940, as amended, as
a diversified open-end investment management company. The Fund seeks capital
appreciation in a portfolio of common stock. The Fund commenced investment
operations on December 16, 1976.
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.
Fixed income investments are stated at value using market quotations. Unlisted
securities and listed securities for which the last sales price is not available
are valued at the mean between the last reported bid and ask price. For those
securities where quotations or prices are not available, valuations are
determined in accordance with procedures established in good faith by the
Managing General Partners. 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 whereby 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 book entry transfer to the account of the custodian bank.
F-8
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
The seller is required to maintain the value of the underlying security at not
less than the repurchase proceeds due the Fund.
C. INVESTMENT INCOME--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Discounts are amortized over
the life of each applicable security. Premiums on debt securities are not
amortized.
D. FEDERAL INCOME TAXES--The Fund has met the qualifications to be classified as
a partnership for federal income tax purposes and intends to maintain this
qualification in the future. A partnership is not subject to federal income tax.
At December 31, 1999, for federal income tax purposes the cost of long- and
short-term investments is $4,727,379; the aggregate gross unrealized
appreciation is $88,634,007 and the aggregate gross unrealized depreciation is
$0, resulting in net unrealized appreciation on long- and short-term investments
of $88,634,007.
E. DISTRIBUTION OF INCOME AND GAINS--Quarterly distributions to partners are
recorded on the record date. Net investment income is allocated daily to each
partner, relative to the total number of units held. Capital gains or losses
will be allocated equally among units outstanding on the day recognized.
F. EXPENSE REDUCTIONS--During the year ended December 31, 1999, the Fund's
custody fee was reduced by $43 as a result of credits earned on overnight cash
balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide facilities and investment advice to the Fund for an annual fee payable
monthly of .50% based on the average daily net assets of the Fund.
For the year ended December 31, 1999, the Fund recognized expenses of
approximately $2,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the year ended December 31, 1999, the Fund recognized expenses of
approximately $32,000 representing Van Kampen Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
F-9
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
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 $15,000. Transfer agency
fees are determined through negotiations with the Fund's Managing General
Partners and are based on competitive benchmarks.
Managing general partners of the Fund who are not affiliated with the
Adviser are compensated by the Fund at the annual rate of approximately $500
plus a fee of $250 per Board meeting attended.
The Managing General Partners of the Fund instituted a Retirement Plan
effective April 1, 1996. The Plan is not funded, and obligations under the Plan
will be paid solely out of the Fund's general accounts. The Fund will not
reserve or set aside funds for the payment of its obligations under the Plan by
any form of trust or escrow. For the current Managing General Partners not
affiliated with the Adviser, the annual retirement benefit payable per year for
a ten year period is based upon the highest total annual compensation received
in any of the three calendar years preceding retirement. Managing General
Partners with more than five but less than ten years service at retirement will
receive a prorated reduced benefit. Under the Plan, for the Managing General
Partners retiring with the effectiveness of the Plan, the annual retirement
benefit payable per year for a ten year period is equal to 75% of the total
compensation received from the Fund during the 1995 calendar year.
At December 31, 1999, the Adviser and Van Kampen Exchange Corp., as non-
managing general partners of the Fund, owned 354 and 3,019 units of partnership
interest, respectively.
3. PARTNERSHIP UNIT TRANSACTIONS
Partners of the Fund may redeem units at any time. The net asset value of units
redeemed, other than redemptions under a systematic withdrawal plan, may be paid
in cash or securities, at the option of the Fund, and will ordinarily be paid in
whole or in part in securities. The Fund's valuation will determine the quantity
of securities tendered. The Fund will select securities for tender in
redemptions based on tax or investment considerations.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $-0- and $1,835,116, respectively.
F-10
<PAGE> 26
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
<TABLE>
<S> <C>
(a) Restated and Amended Certificate and Agreement of Limited
Partnership(5)
(1) Amendment to Certificate of Limited Partnership, on Form
LP-1(1)
(2) Amendment to Certificate of Limited Partnership, on Form
LP-2(2)
(3) Amendment to Certificate of Limited Partnership, on Form
LP-2(4)
(4) Amendment to Certificate of Limited Partnership, on Form
LP-2(5)
(b) Bylaws(5)
(c) Copy of Specimen Certificate(5)
(d) Investment Advisory Agreement(4)
(e) Not Applicable
(f) Not Applicable
(g)(1) Custodian Contract(3)
(2) Transfer Agency and Service Agreement(4)
(h) Not Applicable
(i) Not Applicable
(j) Consent of Independent Auditors+
(k) Not Applicable
(l) Not Applicable
(m) Not Applicable
(n) Not Applicable
(o) Not Applicable
(p) Form of Code of Ethics+
</TABLE>
- ---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A, File Number 811-2611,
filed April 26, 1995.
(2) Incorporated herein by reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A, File Number 811-2611,
filed April 29, 1996.
(3) 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, 1998.
(4) Incorporated herein by reference to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A, File Number 811-2611,
filed April 27, 1998.
(5) Incorporated herein by reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A, File Number 811-2611,
filed April 23, 1999.
+ Filed Herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
C-1
<PAGE> 27
ITEM 25. INDEMNIFICATION
Article XIII, Section 13.4 of Registrant's Restated and Amended Certificate
and Agreement of Limited Partnership provides as follows:
"The Partnership shall indemnify each General Partner (including officers
and or directors of a corporate General Partner and including former General
Partners who have not ceased to be liable as General Partners under the
Partnership Act) against judgments, fines, amounts paid in settlement, and
expenses (including attorneys' fees) reasonably incurred by him in any civil,
criminal or investigative proceeding in which he is involved or threatened to be
involved by reason of his being a General Partner of the Partnership, provided
that he acted in good faith, within what he reasonably believed to be the scope
of his authority, and for a purpose which he reasonably believed to be within
the scope of his authority, and for a purpose which he reasonably believed to be
in the best interests of the Partnership or the Limited Partners. To the extent
that a General Partner has been successful on the merits or otherwise in defense
of any such proceeding or in defense of any claim or matter therein, he shall be
deemed to have acted in good faith and in a manner he believed to be in the best
interests of the Partnership or the Limited Partners. The determination under
any other circumstances as to whether a General Partner acted in good faith,
within what he reasonably believed to be the scope of his authority, and for a
purpose which he reasonably believed to be in the best interests of the
Partnership or the Limited Partners, shall be made by action of the General
Partners who were not parties to such proceedings, or by independent legal
counsel selected by the General Partners (who may be the regular counsel for the
Partnership) in a written opinion. No General Partner shall be indemnified under
this provision against any liability to the Partnership or its Partners to which
he would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. The indemnification provided hereunder shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any applicable
statute, agreement, vote of the General Partners or Limited Partners, or
otherwise."
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management, Organization and Capital Structure" in Part A and
"Management of the Fund" in the Statement of Additional Information for
information regarding the business of the Adviser. For information as to the
business, profession, vocation and employment of a substantial nature of
directors and officers of the Adviser, reference is made to the Adviser's
current Form ADV (File No. 801-1669) filed under the Investment Advisers Act of
1940, as amended, incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
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 Van Kampen Investments Inc., 1 Parkview Plaza, Oakbrook Terrace, IL
60181-5555, Van Kampen Investor Services Inc., 7501 Tiffany Springs Parkway,
Kansas City, MO 64153, or at the State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, MA 02171; and (ii) by the Adviser, 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-2
<PAGE> 28
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant, Van Kampen Exchange Fund, has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Oakbrook Terrace, and the State of Illinois, on
the 28th day of April, 2000.
VAN KAMPEN EXCHANGE FUND
By /s/ RICHARD F. POWERS, III
------------------------------------------
Richard F. Powers, III
Chief Executive Officer
<PAGE> 29
VAN KAMPEN EXCHANGE FUND
INDEX TO EXHIBITS TO AMENDMENT NO. 21, FORM N-1A
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF
NO. EXHIBIT
- ------- --------------
<S> <C>
(j) Consent of Independent Auditors
(p) Form of Code of Ethics
</TABLE>
<PAGE> 1
EXHIBIT (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
The Managing General Partners
Van Kampen Exchange Fund (A California Limited Partnership)
We consent to the use of our report included in the Statement of Additional
Information and to the reference to our Firm under the heading "Investment
Advisory and Other Services" in the Statement of Additional Information.
/s/ KPMG LLP
Chicago, Illinois
April 28, 2000
<PAGE> 1
EXHIBIT(p)
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-
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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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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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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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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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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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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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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 _______________.
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