<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1995
1933 ACT REGISTRATION NO. 33-59655
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-14
<TABLE>
<S> <C>
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. 1 /X/
POST-EFFECTIVE AMENDMENT NO. / /
</TABLE>
---------------------
VAN KAMPEN AMERICAN CAPITAL
RESERVE FUND
(Exact Name of Registrant as Specified in Declaration of Trust)
2800 POST OAK BOULEVARD, HOUSTON, TEXAS 77056
(Address of Principal Executive Offices)
TELEPHONE NUMBER: (713) 993-0500
---------------------
<TABLE>
<S> <C>
RONALD A. NYBERG, ESQ. Copy to:
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
ONE PARKVIEW PLAZA GEORGE M. BARTLETT, ESQ.
OAKBROOK TERRACE, ILLINOIS 60181 O'MELVENY & MYERS
(Name and Address of Agent for Service) 400 SOUTH HOPE STREET
LOS ANGELES, CALIFORNIA 90071
</TABLE>
---------------------
PURSUANT TO THE PROVISIONS OF RULE 24F-2 OF THE INVESTMENT COMPANY ACT OF
1940, THE REGISTRANT HAS PREVIOUSLY ELECTED TO REGISTER AN INDEFINITE NUMBER OF
SHARES AND WILL FILE A RULE 24F-2 NOTICE WITH THE COMMISSION FOR ITS FISCAL YEAR
ENDING MAY 31, 1995 ON OR BEFORE JULY 28, 1995. THEREFORE, NO FILING FEE IS DUE
AT THIS TIME.
PURSUANT TO A BUSINESS COMBINATION EFFECTIVE AS OF JULY 31, 1995, VAN
KAMPEN AMERICAN CAPITAL RESERVE FUND, A DELAWARE BUSINESS TRUST (THE
"REGISTRANT"), IS THE SUCCESSOR OF AMERICAN CAPITAL RESERVE FUND, INC., A
MARYLAND CORPORATION. REGISTRANT HEREBY EXPRESSLY ADOPTS THE REGISTRATION
STATEMENT ON FORM N-14 OF AMERICAN CAPITAL RESERVE FUND, INC. (FILE NO.
33-59655) AS REGISTRANT'S OWN REGISTRATION STATEMENT FOR ALL PURPOSES OF THE
SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934 AND ADOPTS ANY
PRIOR RULE 24F-2 NOTICES OF AMERICAN CAPITAL RESERVE FUND, INC.
- --------------------------------------------------------------------------------
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<PAGE> 2
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
Cross-reference sheet pursuant to rule 481(a) of Regulation C
under the Securities Act of 1933
<TABLE>
<CAPTION>
FORM N-14 ITEM NO. PROXY STATEMENT/PROSPECTUS CAPTION*
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<S> <C> <C>
PART A INFORMATION REQUIRED IN THE PROSPECTUS
Item 1. Beginning of Registration
Statement and Outside Front
Cover Page of Prospectus....... Outside front cover page of Proxy
Statement/Prospectus
Item 2. Beginning and Outside Back
Cover Page of Proxy
Statement/Prospectus........... Table of Contents
Item 3. Fee Table, Synopsis Information
and Risk Factors............... Summary; Risk Factors; Fee Comparisons
Item 4. Information about the
Transaction.................... Summary; The Proposed Reorganization
Item 5. Information about the
Registrant..................... Outside front cover page of Proxy
Statement/Prospectus; Summary; The Proposed
Reorganization; Other Information; Prospectus and
Statement of Additional Information of the Van
Kampen American Capital Reserve Fund (incorporated
by reference)
Item 6. Information about the Company
Being Acquired................. Prospectus and Statement of Additional Information
of Van Kampen American Capital Money Market Fund
(incorporated by reference)
Item 7. Voting Information............. Voting Information and Requirements
Item 8. Interest of Certain Persons and
Experts........................ Summary; Reasons for the Proposed Reorganization;
Legal Matters
Item 9. Additional Information Required
for Reoffering by Persons
Deemed to be Underwriters...... Not applicable
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page..................... Cover Page
Item 11. Table of Contents.............. Table of Contents
Item 12. Additional Information about
the Registrant................. Incorporation of Documents by Reference
Item 13. Additional Information about
the Company Being Acquired..... Incorporation of Documents by Reference
Item 14. Financial Statements........... Financial Statements
PART C OTHER INFORMATION
</TABLE>
Items 15-17. Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Registration Statement.
* References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.
<PAGE> 3
DEAR VAN KAMPEN AMERICAN CAPITAL MONEY MARKET FUND SHAREHOLDER:
Enclosed is information asking you for your vote on a reorganization (the
"Reorganization") pursuant to an Agreement and Plan of Reorganization (the
"Agreement") for the Van Kampen American Capital Money Market Fund (the "VK
Fund"). The Reorganization calls for VK Fund shareholders to become shareholders
of the Van Kampen American Capital Reserve Fund (the "AC Fund"), a mutual fund
which pursues a substantially similar investment objective.
The enclosed materials include a combined Proxy Statement/Prospectus
containing information you need to make an informed decision. However, we
thought it would also be helpful for you to have, at the start, answers to some
of the important questions you might have about the proposed Reorganization. We
hope you find these explanations useful as you review your materials before
voting. For more detailed information about the Reorganization, please refer to
the combined Proxy Statement/Prospectus.
HOW WILL THE REORGANIZATION AFFECT ME?
Assuming shareholders of the VK Fund approve the Reorganization, the assets
and liabilities of the VK Fund will be combined with those of the AC Fund and
you will become a shareholder of the AC Fund. You will receive shares of the AC
Fund equal in value at the time of issuance to the shares of the VK Fund that
you hold immediately prior to the Reorganization. Class A shareholders of the VK
Fund will receive Class A Shares of the AC Fund and Class B shareholders of the
VK Fund will receive Class B Shares of the AC Fund.
WHY IS THE REORGANIZATION BEING RECOMMENDED?
As we reported to you earlier, the parent company of Van Kampen American
Capital Asset Management, Inc. ("AC Adviser"), the investment adviser to the AC
Fund, was acquired in December 1994 by Van Kampen American Capital, Inc.
("VKAC"), and was subsequently merged into VKAC. VKAC, through its wholly owned
subsidiaries, distributes and manages the Van Kampen American Capital funds. AC
Adviser is an affiliate of Van Kampen American Capital Investment Advisory Corp.
("VK Adviser"), the investment adviser to the VK Fund. The primary purposes of
the proposed Reorganization are to seek to achieve future economies of scale and
eliminate certain costs associated with operating the VK Fund and the AC Fund
separately. The Reorganization will result in combining the assets and
liabilities of the VK Fund with the assets and liabilities of the AC Fund and
consolidating their operations.
The Reorganization is intended to provide various benefits to shareholders of
the VK Fund who become shareholders of the AC Fund (as well as to existing and
<PAGE> 4
future investors in the AC Fund). For example, higher net asset levels should
enable the AC Fund to spread fixed and relatively fixed costs, such as
accounting, legal and printing expenses, over a larger asset base, thereby
potentially reducing per share expense levels. Higher net asset levels also may
benefit portfolio management by permitting larger individual portfolio
investments that may result in reduced transaction costs or more favorable
pricing and by providing the opportunity for greater portfolio diversity. These
benefits, in turn, should have a favorable effect on the relative performance of
the AC Fund.
The consummation of the Reorganization is subject to the satisfaction of a
number of conditions (including approval by the VK Fund's shareholders), which
are summarized below in "The Proposed Reorganization -- Terms of the Agreement"
section of the accompanying combined Proxy Statement/Prospectus. These
conditions are stated in the Agreement, which is attached as Exhibit A to the
combined Proxy Statement/Prospectus.
WILL I HAVE TO PAY ANY SALES LOAD, COMMISSION OR OTHER TRANSACTIONAL FEE IN
CONNECTION WITH THE REORGANIZATION?
No. The full value of your shares of the VK Fund will be exchanged for shares
of the corresponding class of the AC Fund without any sales load, commission or
other transactional fee being imposed. As more fully discussed in the combined
Proxy Statement/Prospectus, the holding period for shareholders acquiring Class
B shares of the AC Fund in the Reorganization subject to a contingent deferred
sales charge will be measured from the time the holder initially purchased such
Class B shares from a Van Kampen American Capital open-end fund that were
subsequently exchanged into Class B shares of the VK Fund. AC Adviser will bear
the costs, whether or not the Reorganization is completed, associated with the
Reorganization, such as printing and mailing costs and other expenses associated
with the Special Meeting.
HOW WILL THE FEES PAID BY THE AC FUND COMPARE TO THOSE PAYABLE BY THE VK FUND?
It is anticipated that, on a per share basis, the total of the various fees
and expenses incurred by the AC Fund will be less, upon completion of the
Reorganization, than the total of such fees and expenses applicable to the VK
Fund. The fees and expenses actually paid to date by the VK Fund have been less
than the total of such fees and expenses applicable to the VK Fund as a result
of voluntary fee waivers and expense reimbursements made by the VK Adviser.
However, if the Reorganization is not consummated, VK Adviser does not currently
intend to continue such voluntary fee waivers and expense reimbursements.
<PAGE> 5
WHAT WILL I HAVE TO DO TO OPEN AN ACCOUNT IN THE AC FUND? WHAT HAPPENS TO MY
ACCOUNT IF THE REORGANIZATION IS APPROVED?
If the Reorganization is approved, your interest in Class A or B shares of the
VK Fund will automatically be converted into the same class of shares of the AC
Fund and we will send you written confirmation that this change has taken place.
You will receive the same class of shares of the AC Fund equal in value to your
Class A or B shares of the VK Fund. No certificates for AC Fund shares will be
issued in connection with the Reorganization, although such certificates will be
available upon request. If you currently hold certificates representing your
shares of the VK Fund, it is not necessary to surrender such certificates.
WHO WILL ADVISE THE AC FUND AND PROVIDE OTHER SERVICES?
AC Adviser provides advisory services to the AC Fund under an arrangement that
is substantially similar to that currently in effect between the VK Fund and VK
Adviser. The contractual advisory fees payable by the AC Fund are no higher than
the contractual advisory fees applicable to the VK Fund. Van Kampen American
Capital Distributors, Inc. serves as distributor of shares of both the AC Fund
and the VK Fund. In addition, State Street Bank & Trust Company, 225 Franklin
Street, P.O. Box 1713, Boston, Massachusetts 02105-1713 is the custodian of both
the AC Fund and the VK Fund. ACCESS Investor Services, Inc., P.O. Box 418256,
Kansas City, Missouri 64141-9256 serves as the transfer agent for both the AC
Fund and the VK Fund.
WILL I HAVE TO PAY ANY FEDERAL TAXES AS A RESULT OF THE REORGANIZATION?
The Reorganization is intended to qualify as a "reorganization" within the
meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"). If the Reorganization so qualifies, in general, a shareholder of
the VK Fund will recognize no gain or loss upon its receipt of solely the shares
of the AC Fund in connection with the Reorganization. Additionally, the VK Fund
would not recognize any gain or loss as a result of the transfer of all of its
assets and liabilities solely in exchange for the shares of the AC Fund or as a
result of its liquidation. The AC Fund expects that it will not recognize any
gain or loss as a result of the Reorganization, that it will take a carryover
basis in the assets acquired from the VK Fund and that its holding period of
such assets will include the period during which the assets were held by the VK
Fund. See "The Proposed Reorganization -- Federal Income Tax Consequences" in
the combined Proxy Statement/ Prospectus.
WHAT IF I REDEEM MY VK FUND SHARES BEFORE THE REORGANIZATION TAKES PLACE?
If you choose to redeem your shares of the VK Fund before the Reorganization
takes place, the redemption will be treated as a normal sale of shares and will
be a
<PAGE> 6
taxable transaction, unless your account is not subject to taxation, such as an
individual retirement account or other tax-qualified retirement plan.
We hope these answers help to clarify the Reorganization proposal for you. If
you still have questions, do not hesitate to call us at 1-800-341-2911. Please
give this matter your prompt attention. We need to receive your proxy before the
shareholder meeting scheduled for September 15, 1995. If shareholders approve
the Reorganization, it is expected to take effect on September 29, 1995.
Thank you for your investment in the Van Kampen American Capital Money Market
Fund.
Very truly yours,
Van Kampen American Capital Money
Market Fund
Dennis J. McDonnell
President and Trustee
<PAGE> 7
VAN KAMPEN AMERICAN
CAPITAL MONEY MARKET FUND
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
(800) 341-2911
NOTICE OF SPECIAL MEETING
SEPTEMBER 15, 1995
A Special Meeting of Shareholders of the Van Kampen American Capital Money
Market Fund (the "VK Fund"), a series of the Van Kampen American Capital Money
Market Trust, will be held at the Hyatt Regency Oak Brook, 1909 Spring Road, Oak
Brook, Illinois 60521, on September 15, 1995 at 2:00 p.m. (the "Special
Meeting") for the following purposes:
(1) To approve a plan of reorganization pursuant to which the VK Fund would
transfer all of its assets and liabilities to the Van Kampen American Capital
Reserve Fund (the "AC Fund") in exchange for corresponding Class A and B
shares of beneficial interest of the AC Fund, the VK Fund would distribute
such Class A and B shares of the AC Fund to the holders of Class A and B
shares of the VK Fund and the VK Fund would be dissolved.
(2) To transact such other business as may properly come before the Special
Meeting.
The Special Meeting is scheduled to be held jointly with the special meetings
of the respective shareholders of five other Van Kampen American Capital Funds
because the shareholders of each of such funds are expected to consider and vote
on similar matters. In the event that any shareholder of any Van Kampen American
Capital Fund present at the special meetings objects to the holding of a joint
meeting and moves for an adjournment of the meeting of such fund to a time
immediately after the other special meetings so that such fund's special meeting
may be held separately, the persons named as proxies will vote in favor of such
adjournment. Shareholders of each Van Kampen American Capital Fund will vote
separately on each of the proposals relating to their fund, and an unfavorable
vote on a proposal by the shareholders of one fund will not affect the
implementation of such a proposal by another fund if the proposal is approved by
the shareholders of that fund.
Shareholders of record as of the close of business on August 1, 1995 are
entitled to vote at the Special Meeting or any adjournment thereof.
For the Board of Trustees,
Ronald A. Nyberg
Secretary
August 7, 1995
------------------------
PLEASE VOTE PROMPTLY BY SIGNING AND
RETURNING THE ENCLOSED PROXY.
------------------------
<PAGE> 8
VAN KAMPEN AMERICAN CAPITAL MONEY MARKET FUND
PROXY STATEMENT/PROSPECTUS
RELATING TO THE ACQUISITION OF ASSETS AND LIABILITIES OF
VAN KAMPEN AMERICAN CAPITAL MONEY MARKET FUND
BY AND IN EXCHANGE FOR SHARES OF
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
This Proxy Statement/Prospectus is being furnished to shareholders of the Van
Kampen American Capital Money Market Fund ( the "VK Fund"), a series of the Van
Kampen American Capital Money Market Trust, a Delaware business trust (the "VKAC
Money Market Trust"), and relates to the Special Meeting of Shareholders of the
VK Fund (the "Special Meeting") called for the purpose of approving the proposed
reorganization of the VK Fund (the "Reorganization") which would result in
shareholders of the VK Fund in effect exchanging their VK Fund for shares of the
Van Kampen American Capital Reserve Fund, a Delaware business trust (the "AC
Fund"). The Reorganization would be accomplished as follows: (1) the AC Fund
would acquire all of the then existing assets and liabilities of the VK Fund in
exchange for Class A and B shares of beneficial interest of the AC Fund (the
"Shares"); (2) the VK Fund would distribute the Shares to the VK Fund's
shareholders holding the same respective class of shares; and (3) the VK Fund
would dissolve and all outstanding shares of the VK Fund would be cancelled.
The AC Fund is an open-end, diversified management investment company which is
authorized to issue an unlimited number of shares of beneficial interest, par
value $.01 per share, for each series authorized by its Board of Trustees. The
investment objective of the AC Fund is to seek protection of capital and high
current income through investments in U.S. dollar denominated money market
securities, which is substantially similar to the investment objective of the VK
Fund. (See "Summary -- Comparisons of the VK Fund and the AC Fund -- Investment
Objectives and Policies" below.) There can be no assurance that the AC Fund will
achieve its investment objective. The address, principal executive office and
telephone number of the VK Fund is One Parkview Plaza, Oakbrook Terrace,
Illinois 60181, (708) 684-6000 or (800) 341-2911. The address, principal
executive office and telephone number of the AC Fund is 2800 Post Oak Boulevard,
Houston, Texas 77056, (800) 421-5666. The enclosed proxy and this Proxy
Statement/Prospectus are first being sent to VK Fund shareholders on or about
August 7, 1995.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
<PAGE> 9
This Proxy Statement/Prospectus contains information shareholders of the VK
Fund should know before voting on the Reorganization and constitutes an offering
of Class A and B Shares of the AC Fund only. Please read it carefully and retain
it for future reference. A Statement of Additional Information dated August 4,
1995, relating to this Proxy Statement/Prospectus (the "Reorganization SAI") has
been filed with the Securities and Exchange Commission (the "SEC") and is
incorporated herein by reference. A Prospectus and Statement of Additional
Information containing additional information about the AC Fund, each dated
August 1, 1995, have been filed with the SEC and are incorporated herein by
reference. A copy of the AC Fund Prospectus accompanies this Proxy
Statement/Prospectus. A Prospectus and Statement of Additional Information
containing additional information about the VK Fund, each dated August 1, 1995,
have been filed with the SEC and are incorporated herein by reference. Copies of
any of the foregoing may be obtained without charge by calling or writing to the
VK Fund at the telephone number or address shown above. If you wish to request
the Reorganization SAI, please ask for the "Reorganization SAI."
No person has been authorized to give any information or make any
representation not contained in this Proxy Statement/Prospectus and, if so given
or made, such information or representation must not be relied upon as having
been authorized. This Proxy Statement/Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities in any jurisdiction in
which, or to any person to whom, it is unlawful to make such offer or
solicitation.
------------------------
The AC Fund is subject to the information requirements of the Securities
Exchange Act of 1934, as amended, and the Investment Company Act of 1940, as
amended (the "Act"), and in accordance therewith files reports and other
information with the SEC. Such reports, other information and proxy statements
filed by the AC Fund can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549 and at its Regional Office at 500 West Madison Street, Chicago, Illinois.
Copies of such material can also be obtained from the SEC's Public Reference
Branch, Office of Consumer Affairs and Information Services, Washington, D.C.
20549, at prescribed rates.
The date of this Proxy Statement/Prospectus is August 4, 1995.
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
APPROVAL OR DISAPPROVAL OF THE PROPOSED
REORGANIZATION.................................................... 4
A. SUMMARY...................................................... 4
The Reorganization........................................... 4
Comparisons of the AC Fund and the VK Fund................... 5
Investment Objectives and Policies......................... 7
Advisory and Other Fees.................................... 8
Distribution, Purchase, Redemption and Exchange of Shares.... 9
Federal Income Tax Consequences.............................. 16
Reasons for the Proposed Reorganization...................... 16
B. RISK FACTORS................................................. 19
Nature of Investment......................................... 19
C. INFORMATION ABOUT THE FUNDS.................................. 19
D. THE PROPOSED REORGANIZATION.................................. 20
Terms of the Agreement....................................... 20
Description of Securities to be Issued....................... 21
Shares of Beneficial Interest.............................. 21
Voting Rights of Shareholders.............................. 22
Continuation of Shareholder Accounts and Plans; Share
Certificates................................................. 22
Federal Income Tax Consequences.............................. 23
Capitalization............................................... 25
Comparative Performance Information.......................... 25
Ratification of Investment Objective, Policies and
Restrictions of the AC Fund.................................. 26
Legal Matters.............................................. 26
Expenses..................................................... 26
F. RECOMMENDATION OF THE VK BOARD............................... 27
OTHER MATTERS THAT MAY COME BEFORE THE SPECIAL
MEETING........................................................... 27
OTHER INFORMATION................................................... 27
A. SHAREHOLDINGS OF THE VK FUND AND THE AC FUND................. 27
B. SHAREHOLDER PROPOSALS........................................ 28
VOTING INFORMATION AND REQUIREMENTS................................. 28
EXHIBIT A........................................................... A-1
EXHIBIT B........................................................... A-2
</TABLE>
3
<PAGE> 11
APPROVAL OR DISAPPROVAL OF THE PROPOSED REORGANIZATION
A. SUMMARY
The following is a summary of, and is qualified by reference to, the more
complete information contained in this Proxy Statement/Prospectus, including the
Agreement and Plan of Reorganization by and between the AC Fund and the VKAC
Money Market Trust attached hereto as Exhibit A (the "Agreement"), the
prospectus of the VK Fund dated August 1, 1995 (the "VK Fund Prospectus")
incorporated herein by reference and the prospectus of the AC Fund dated August
1, 1995 (the "AC Fund Prospectus") incorporated herein by reference and
accompanying this Proxy Statement/Prospectus. This Proxy Statement/Prospectus
constitutes an offering of Class A and B Shares of the AC Fund only.
THE REORGANIZATION
On May 11, 1995, the Board of Trustees of the VKAC Money Market Trust (the "VK
Board") approved the Agreement. The Agreement provides that the VK Fund will
transfer all of its assets and liabilities to the AC Fund in exchange for Class
A and B Shares of the AC Fund. At the Closing (as defined herein), the AC Fund
will issue Shares of the AC Fund to the VK Fund, which AC Fund Shares will have
an aggregate net asset value equal in amount to the net asset value of the VK
Fund net assets as of the Closing. The Agreement provides that the VK Fund will
dissolve following the Closing pursuant to a plan of liquidation and dissolution
to be adopted by the VK Board following the Closing and as part of such
dissolution, will distribute to each shareholder of the VK Fund Shares of the
respective class of the AC Fund equal in value to their existing shares in the
VK Fund. All members of the VK Board who were not affiliated with the VK Adviser
were elected as trustees of the AC Fund on July 21, 1995.
The VK Board has unanimously determined that the Reorganization is in the best
interests of the shareholders of each class of shares of the VK Fund and that
such shareholders will not be diluted as a result of the Reorganization.
Similarly, the Board of Trustees of the AC Fund (the "AC Board") has unanimously
determined that the Reorganization is in the best interest of the AC Fund and
that the interests of the shareholders of the AC Fund will not be diluted as a
result of the Reorganization. Management of the respective funds believes that
the proposed Reorganization of the VK Fund into the AC Fund should allow the AC
Fund to achieve future economies of scale and to eliminate certain costs of
operating the VK Fund and the AC Fund separately.
Van Kampen American Capital Asset Management, Inc. ("AC Adviser") has agreed
to pay all expenses of the Reorganization incurred by the AC Fund and the
4
<PAGE> 12
VK Fund. Accordingly, the VK Fund and its shareholders will not bear any
expenses of the Reorganization.
The VK Board is asking shareholders of the VK Fund to approve the
Reorganization at the Special Meeting to be held on September 15, 1995. If
shareholders of the VK Fund approve the Reorganization, it is expected that the
Closing will be on September 29, 1995, but it may be at a different time, as
described herein.
THE VK BOARD RECOMMENDS THAT YOU VOTE FOR THE REORGANIZATION. APPROVAL OF THE
REORGANIZATION REQUIRES THE FAVORABLE VOTE OF THE HOLDERS OF A MAJORITY OF THE
OUTSTANDING SHARES ENTITLED TO VOTE. SEE "VOTING INFORMATION AND REQUIREMENTS."
COMPARISONS OF THE AC FUND AND THE VK FUND
The principal changes which would result from the Reorganization are listed
below:
(1) The holders of Class A and B shares of the VK Fund would become holders of
the same class of Shares, respectively, AC Fund. The VK Fund and the AC
Fund have substantially similar investment objectives and follow similar
investment strategies.
(2) The AC Fund is managed by AC Adviser, an affiliate of the VK Fund's
adviser, Van Kampen American Capital Investment Advisory Corp. ("VK
Adviser"). The advisory fee for the AC Fund is a monthly fee computed on
average daily net assets at an annual rate of 0.500% on the first $150
million of net assets; 0.450% on the next $100 million of net assets;
0.400% on the next $100 million of net assets; and 0.350% on net assets
over $350 million. The advisory fee for the VK Fund is a monthly fee
computed on average daily net assets at an annual rate of 0.500% on the
first $250 million of net assets; 0.475% on the next $250 million of net
assets; 0.425% on the next $250 million of net assets and 0.275% on net
assets over $750 million. As of May 31, 1995, the AC Fund's net assets
were approximately $324.5 million. As of May 31, 1995, the VK Fund's net
assets were approximately $28.6 million.
(3) The VK Fund offers two classes of shares. The AC Fund offers three classes
of shares. The VK Fund offers Class A shares at the net asset value per
share without a sales charge. In addition, the VK Fund offers Class B
shares which are not subject to a sales charge when purchased, but which
generally are subject to a contingent deferred sales charge (3.00% if
redeemed within the first year after purchase and reduced thereafter to
zero seven years after purchase). Class B shares of the VK Fund may be
acquired only by exchange of Class B shares from other Van Kampen American
Capital open-end funds and are offered for temporary investment purposes
between investments in such other funds. None of the three classes of AC
Fund
5
<PAGE> 13
shares is subject to a sales charge when purchased. However, Class B
and C shares generally are subject to a contingent deferred sales charge
(4.00% if redeemed within the first year after purchase and reduced
thereafter to zero six years after purchase in the case of the Class B
shares and 1.00% if redeemed within the first year after purchase and
reduced to zero thereafter in the case of the Class C shares). Class B
Shares acquired in the Reorganization will remain subject to the
contingent deferred sales charge applicable to Class B shares of the VK
Fund. Class B shares of the VK Fund convert automatically to Class A
shares of the VK Fund seven years after purchase. Class B shares of the
AC Fund convert to Class A shares of the AC Fund six years after
purchase. Class B Shares acquired in the Reorganization will remain
subject to the conversion schedule applicable to Class B shares of the VK
Fund.
(4) The VK Fund and the AC Fund have adopted plans (each, a "Plan") for
distribution-related expenses pursuant to Rule 12b-1 under the Act and
expenses for providing ongoing shareholder services. The VK Fund Plan with
respect to Class A shares provides that the VK Fund may spend an aggregate
amount up to 0.25% per year of the average daily net assets attributable
to Class A shares in connection with the ongoing provision of services to
holders of such shares by Van Kampen American Capital Distributors, Inc.
("VKAC Distributors"), the distributor of the VK Fund shares and by
financial intermediaries in connection with the maintenance of such
shareholders' accounts. The VK Fund Plan with respect to Class B shares
provides that VK Fund can charge up to 0.75% of the average daily net
assets attributable to Class B shares for reimbursement of certain
distribution-related expenses and can charge up to 0.25% of average daily
net assets attributable to Class B shares for the provision of ongoing
services to shareholders. The AC Fund Plan with respect to Class A shares
allows for a service fee payment of up to 0.15% per annum of its average
daily net assets attributable to Class A shares to be paid to VKAC
Distributors, the distributor of the AC Fund shares, for shareholder
servicing-related expenses. The AC Fund Plan with respect to Class B and
Class C shares allows for a distribution fee to VKAC Distributors at an
annual rate of up to 0.75% and a service fee at an annual rate up to 0.15%
of the AC Fund's aggregate daily net assets attributable to the Class B
and C Shares to reimburse VKAC Distributors for service fees paid by it to
certain financial institutions (which may include banks), securities
dealers and other industry professionals and for its distribution costs.
Certain other comparisons between the VK Fund and the AC Fund are discussed
below.
6
<PAGE> 14
INVESTMENT OBJECTIVES AND POLICIES
The AC Fund and the VK Fund have substantially similar investment objectives
and also share similar investment practices, but there are also certain
differences in their investment policies, practices and restrictions. The
investment objective of the AC Fund is to seek protection of capital and high
current income through investments in U.S. dollar denominated money market
securities. The investment objective of the VK Fund is to provide high current
income consistent with the preservation of capital and liquidity through
investments in a broad range of money market instruments that will mature within
12 months of the date of purchase. Both funds invest principally in a
diversified portfolio of United States agency and government obligations,
commercial paper and repurchase agreements.
As money market funds, both funds are required to comply with the credit
quality, diversification and portfolio security maturity requirements of the Act
applicable to money market funds. Both funds invest in obligations issued or
guaranteed as to principal and interest by the U.S. Government, its agencies and
instrumentalities. The AC Fund invests in bank obligations including
certificates of deposit, time deposits and bankers' acceptances issued by
domestic banks, foreign branches or subsidiaries of domestic banks and domestic
or foreign branches of foreign banks which at the time of investment are rated
in the two highest categories, A-1 or A-2 by Standard & Poor's Corporation
("S&P") or Prime-1 or Prime-2 by Moody's Investors Service, Inc. ("Moody's").
The VK Fund invests in similar types of bank obligations issued by domestic
banks (or a foreign branch thereof) subject to regulation by the U.S. Government
and rated at least A-2 by S&P or Prime-2 by Moody's but may also invest in
unrated securities of comparable quality. Both the VK Fund and the AC Fund may
invest in commercial paper rated at the time of investment at least A-2 by S&P
or Prime-2 by Moody's. Currently, the AC Fund's policy is to limit investments
in commercial paper to obligations rated A-1 or Prime-1, respectively, by S&P or
Moody's.
The VK Fund may not invest in Federal Housing Administration or Veterans'
Administration pooled mortgages, or obligations of the Asian Development Bank,
the Inter-American Development Bank or the International Bank for Reconstruction
and Development (World Bank) or more than 10% of its assets in bank obligations
payable in Euro Dollars. The VK Fund may not invest in bank time deposits
maturing in more than 7 days or invest more than 10% of its assets in bank time
deposits maturing between two business days and 7 calendar days. The AC Fund has
no similar restrictions. For a complete description of the AC Fund's investment
objectives and policies, see the respective sections in the AC Fund's Prospectus
and Statement of Additional Information entitled "Investment Objectives and
Policies". For a complete description of the VK Fund's investment objectives and
policies, see the respective sections in the VK Fund's Prospectus and Statement
of Additional Information entitled "Investment Objective and Policies".
7
<PAGE> 15
The AC Fund is managed by AC Adviser while the VK Fund is managed by VK
Adviser. AC Adviser and VK Adviser are wholly-owned subsidiaries of Van Kampen
American Capital, Inc. ("VKAC") which has been developing investment strategies
and products for individuals, businesses and institutions since 1974. AC Adviser
and VK Adviser are the primary investment advisers to the Van Kampen American
Capital funds. VKAC is a diversified asset management company with more than two
million retail investor accounts, extensive capabilities for arranging
institutional portfolios, and over $50 billion under management or supervision.
VKAC's more than 40 open-end and 38 closed-end funds and more than 2,700 unit
investment trusts are professionally distributed by leading financial advisers
nationwide. The business address of AC Adviser is 2800 Post Oak Boulevard,
Houston, Texas 77056. AC Adviser and its investment advisory agreement with the
AC Fund are more fully described in the AC Fund Prospectus and Statement of
Additional Information.
ADVISORY AND OTHER FEES
The VK Fund pays the VK Adviser a monthly fee based on its average daily net
asset value at the annual rates of 0.500% of the first $250 million; 0.475% of
the next $250 million; 0.425% of the next $250 million and 0.275% over $750
million. However, such fee has historically been reduced as a result of
voluntary fee waivers and expense reimbursements by the VK Adviser. The
effective rate of advisory fees for the period ended December 31, 1994 was 0.03%
of the average daily net assets of the VK Fund. In addition, the VK Fund bears
most expenses associated with its operations and the issuance and repurchase or
redemption of its securities, except for the compensation of trustees and
officers affiliated with the VK Adviser, VKAC Distributors or VKAC. Total
operating expenses for the VK Fund for the period ended December 31, 1994 were
1.03% and 1.80% of the average daily net assets attributable to the Class A and
B Shares, respectively, after giving effect to voluntary expense reimbursement
by VK Adviser. Absent such voluntary expense reimbursement, such total operating
expenses for the period ending December 31, 1994 would have been 1.50% and 2.27%
of the average daily net assets attributable to the Class A and B Shares,
respectively. The fees and expenses actually paid to date by the VK Fund have
been less than the total of such fees and expenses applicable to the VK Fund as
a result of voluntary fee waivers and expense reimbursements made by VK Adviser.
However, if the Reorganization is not consummated, VK Adviser does not currently
intend to continue such voluntary fee waivers and expense reimbursements.
The AC Fund pays the AC Adviser a monthly fee based on its average daily net
asset value at the annual rates of 0.50% of the first $150 million; 0.45% on the
next $100 million; 0.40% on the next $100 million and 0.35% on net assets over
$350 million. The effective advisory fee for the fiscal year ended May 31, 1995,
was 0.44% of the AC Fund's average daily net asset value. Similar to the VK
Fund, the
8
<PAGE> 16
AC Fund also bears most expenses associated with its operation and the issuance
and repurchase or redemption of its securities, except for the compensation of
trustees and officers affiliated with the AC Adviser and VKAC. The total
operating expenses of the AC Fund for the fiscal year ended May 31, 1995 were
1.00%, 1.76% and 1.76%% of the average daily net assets attributable to its
Class A, Class B and Class C shares, respectively. For a complete description of
the AC Fund's advisory services, see the respective sections in the AC Fund's
Prospectus and Statement of Additional Information entitled "Investment Advisory
Services" and "Investment Advisory Agreement." For a complete description of the
VK Fund's advisory services, see the respective sections in the VK Fund's
Prospectus and Statement of Additional Information entitled "Investment Advisory
Services" and "Investment Advisory and Other Services -- Investment Advisory
Agreement."
The AC Fund has adopted Plans for each of the Class A, B and C Shares
hereinafter referred to as the "Class A Plan," "Class B Plan," and the "Class C
Plan." Under the Class A Plan, the AC Fund pays a service fee to VKAC
Distributors, at an annual rate of up to 0.15% of the Fund's aggregate average
daily net assets attributable to the Class A shares. Under the Class B Plan and
Class C Plan, the AC Fund pays a service fee to VKAC Distributors at an annual
rate of up to 0.15% and a distribution fee at an annual rate of up to 0.75% of
the Fund's aggregate average daily net assets attributable to the Class B shares
and Class C shares, respectively, to reimburse VKAC Distributors for service
fees paid by it to certain financial institutions (which may include banks),
securities dealers and other industry professionals (collectively, "Service
Organizations") and for distribution costs. VKAC Distributors uses the Class A
Plan , Class B Plan and Class C Plan fees to compensate Service Organizations
for personal services and/or maintenance of shareholder accounts. The expenses
of the AC Fund attributable to such Class A Plan, Class B Plan and Class C Plan
for the fiscal year ended May 31, 1995 were 0.14%, 0.90% and 0.90% of the
average daily net assets attributable to the Class A, Class B and Class C
shares, respectively. For a complete description of these arrangements, see the
respective sections in the AC Fund's Prospectus and Statement of Additional
Information entitled "Distribution Plans."
The VK Fund has adopted a Plan with respect to each class of its shares. The
expenses of the VK Fund for the period ended December 31, 1994 were 0.25% and
1.00% of the VK Fund's average daily net asset value attributable to the Class A
and B shares, respectively. For a complete description of these arrangements,
see the respective sections in the VK Fund's Prospectus and Statement of
Additional Information entitled, "The Distribution and Service Plans."
DISTRIBUTION, PURCHASE, REDEMPTION AND EXCHANGE OF SHARES
Class A shares of the VK Fund and Class A shares of the AC Fund may be
purchased at net asset value, without the imposition of a sales charge. Class B
9
<PAGE> 17
shares of the VK Fund may be acquired only by exchange of Class B shares of
other Van Kampen American Capital open-end funds and are subject to a contingent
deferred sales charge (3.00% if redeemed within the first year after purchase
and reduced thereafter to zero seven years after purchase). Class B shares of
the AC Fund are not subject to a sales charge when purchased, but are subject to
a contingent deferred sales charge (4.00% if redeemed within the first year
after purchase and reduced thereafter to zero six years after purchase). Class B
shares of the VK Fund acquired through use of the exchange privilege are subject
to the contingent deferred sales charge applicable to such shares upon the
investor's initial purchase of Class B shares from one of the other Van Kampen
American Capital open-end funds. The Class B shares of the VK Fund will convert
automatically to Class A shares of the VK Fund seven years after the end of the
month in which the shareholder's initial order to purchase such Class B shares
of one of the Van Kampen American Capital open-end funds was accepted. Class B
shares of the AC Fund will convert automatically to Class A shares six years
after the end of the calendar month in which the shareholder's order to purchase
was accepted. Class B Shares of the AC Fund acquired in the Reorganization will
remain subject to the contingent deferred sales charge and conversion schedule
applicable to Class B shares of the VK Fund. Unlike the VK Fund, the AC Fund
offers Class C shares. Class C shares may be purchased at net asset value and
are subject to a contingent deferred sales charge of 1.00% on redemptions made
within one year of purchase, which charge is reduced to zero thereafter. Class C
shares convert automatically to Class A shares ten years after the end of the
calendar month in which the shareholder's order to purchase was accepted.
The minimum initial investment in Class A, B and C shares of the AC Fund and
the Class A and B shares of the VK Fund is $500, although shares of the AC Fund
acquired in connection with the Reorganization will not be subject to the
minimum investment limitation. The minimum subsequent investment in Class A, B
and C Shares of the AC Fund and Class A and B shares the VK Fund is $50. For a
complete description of these arrangements with respect to the AC Fund, see the
respective sections in the AC Fund's Prospectus and Statement of Additional
Information entitled "Purchase of Shares" and "Purchase and Redemption of
Shares." For a complete description of these arrangements with respect to the VK
Fund, see the respective sections in the VK Fund's Prospectus and Statement of
Additional Information entitled "Purchasing Shares of the Fund."
Shares of either the VK Fund or the AC Fund may be purchased by check, by
electronic transfer or by bank wire and offer exchange privileges among all
other Van Kampen American Capital open-end mutual funds distributed by VKAC
Distributors (except Van Kampen American Capital Government Target Fund).
Shares of the AC Fund and the VK Fund properly presented for redemption may be
redeemed or exchanged at the next determined net asset value per share (subject
10
<PAGE> 18
to any applicable deferred sales charge). Shares of either the VK Fund or the AC
Fund may be redeemed or exchanged by mail or by special redemption privileges
(telephone exchange, telephone redemption by check or electronic transfer). If a
shareholder of either fund attempts to redeem shares within a short time after
they have been purchased by check, the respective fund may delay payment of the
redemption proceeds until such fund can verify that payment for the purchase of
the shares has been (or will be) received. No further purchases of the shares of
the VK Fund may be made after the date on which the shareholders of the VK Fund
approve the Reorganization, and the stock transfer books of the VK Fund will be
permanently closed as of the date of Closing. Only redemption requests and
transfer instructions received in proper form by the close of business on the
day prior to the date of Closing will be fulfilled by the VK Fund. Redemption
requests or transfer instructions received by the VK Fund after that date will
be treated by the VK Fund as requests for the redemption or instructions for
transfer of the shares of the AC Fund credited to the accounts of the
shareholders of the VK Fund. Redemption requests or transfer instructions
received by the VK Fund after the close of business on the day prior to the date
of Closing will be forwarded to the AC Fund. For a complete description of these
redemption arrangements with respect to the AC Fund, see the respective sections
in the AC Fund's Prospectus and Statement of Additional Information entitled
"Redemption of Shares" and "Purchase and Redemption of Shares." For a complete
description of these redemption arrangements with respect to the VK Fund, see
the respective sections in the VK Fund's Prospectus and Statement of Additional
Information entitled "Redemption of Shares."
11
<PAGE> 19
The differences in the distribution, purchase and redemption procedures and
fee structure of the shares of the AC Fund and the shares of the VK Fund are
highlighted in the table below.
FEE COMPARISONS
<TABLE>
<CAPTION>
VK AC
CLASS A SHARES FUND* FUND** PRO FORMA
- --------------------------------------------------- ----- ------ ---------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES FOR CLASS A SHARES
Maximum Sales Load Imposed on Purchase of a Share
(as a percentage of Offering Price).............. None None None
Maximum Deferred Sales Charge
(as a percentage of the lower of the original
purchase price or redemption proceeds)........... None None None
ANNUAL FUND OPERATING EXPENSES FOR CLASS A SHARES
(as a percentage of average net assets)
Management Fees.................................... 0.50%(1) 0.44% 0.44%
Rule 12b-1 Fees.................................... 0.25% 0.14% 0.14%
Other Expenses..................................... 0.75% 0.42% 0.42%
Total Fund Operating Expenses
(before waivers and reimbursements).............. 1.50%(1) 1.00% 1.00%
Expense Example of Total Operating Expenses
Assuming Redemption at the End of the Period
(before waivers and reimbursements)(4)
One Year......................................... $ 15 $ 10 $ 10
Three Years...................................... $ 47 $ 32 $ 32
Five Years....................................... $ 82 $ 55 $ 55
Ten Years........................................ $ 179 $ 122 $ 122
Expense Example of Total Operating Expenses
Assuming No Redemption at the End of the Period
(before waivers and reimbursements)(4)
One Year......................................... $ 15 $ 10 $ 10
Three Years...................................... $ 47 $ 32 $ 32
Five Years....................................... $ 82 $ 55 $ 55
Ten Years........................................ $ 179 $ 122 $ 122
</TABLE>
12
<PAGE> 20
<TABLE>
<CAPTION>
VK AC
CLASS A SHARES FUND* FUND** PRO FORMA
- --------------------------------------------------- ----- ------ ---------
<S> <C> <C> <C>
Total Fund Operating Expenses
(after waivers and reimbursements)............... 1.03% 1.00% 1.00%
Expense Example of Total Operating Expenses
Assuming Redemption at the End of the Period
(after waivers and reimbursements)(4)
One Year......................................... $ 11 $ 10 $ 10
Three Years...................................... $ 33 $ 32 $ 32
Five Years....................................... $ 57 $ 55 $ 55
Ten Years........................................ $ 126 $ 122 $ 122
Expense Example of Total Operating Expenses
Assuming No Redemption at the End of the Period
(after waivers and reimbursements)(4)
One Year......................................... $ 11 $ 10 $ 10
Three Years...................................... $ 33 $ 32 $ 32
Five Years....................................... $ 57 $ 55 $ 55
Ten Years........................................ $ 126 $ 122 $ 122
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES FOR CLASS B SHARES
Maximum Sales Load Imposed on Purchase of a Share
(as a percentage of Offering Price).............. None None None
Maximum Deferred Sales Charge (as a percentage of
the lower of the original purchase price or
redemption proceeds)............................. 3.00%(2) 4.00%(3) 4.00%
ANNUAL FUND OPERATING EXPENSES FOR CLASS B SHARES
(as a percentage of average net assets)
Management Fees.................................... 0.50%(1) 0.44% 0.44%
Rule 12b-1 Fees.................................... 1.00% 0.90% 0.90%
Other Expenses..................................... 0.77% 0.42% 0.42%
Total Fund Operating Expenses
(before waivers and reimbursements).............. 2.27%(1) 1.76% 1.76%
Expense Example of Total Operating Expenses
Assuming Redemption at the End of the Period
(before waivers and reimbursements)(4)
One Year......................................... $ 53 $ 58 $ 58
Three Years...................................... $ 81 $ 85 $ 85
Five Years....................................... $ 122 $ 110 $ 110
Ten Years........................................ $ 232 $ 169 $ 169
</TABLE>
13
<PAGE> 21
<TABLE>
<CAPTION>
VK AC
CLASS B SHARES FUND* FUND** PRO FORMA
- --------------------------------------------------- ----- ------ ---------
<S> <C> <C> <C>
Expense Example of Total Operating Expenses
Assuming No Redemption at the End of the Period
(before waivers and reimbursements)(4)
One Year......................................... $ 23 $ 18 $ 18
Three Years...................................... $ 71 $ 55 $ 55
Five Years....................................... $ 122 $ 95 $ 95
Ten Years........................................ $ 232 $ 169 $ 169
Total Fund Operating Expenses
(after waiver and reimbursements)................ 1.80% 1.76% 1.76%
Expense Example of Total Operating Expenses
Assuming Redemption at the End of the Period
(after waivers and reimbursements)(4)
One Year......................................... $ 48 $ 58 $ 58
Three Years...................................... $ 67 $ 85 $ 85
Five Years....................................... $ 97 $ 110 $ 110
Ten Years........................................ $ 182 $ 169 $ 169
Expense Example of Total Operating Expenses
Assuming No Redemption at the End of the Period
(after waivers and reimbursements)(4)
One Year......................................... $ 18 $ 18 $ 18
Three Years...................................... $ 57 $ 55 $ 55
Five Years....................................... $ 97 $ 95 $ 95
Ten Years........................................ $ 182 $ 169 $ 169
CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES FOR CLASS C SHARES
Maximum Sales Load Imposed on Purchase of a Share
(as a percentage of Offering Price).............. N/A None None
Maximum Deferred Sales Charge
(as a percentage of the lower of the original
purchase price or redemption proceeds)........... N/A 1.00%(3) 1.00%
ANNUAL FUND OPERATING EXPENSES FOR CLASS C SHARES
(as a percentage of average net assets)
Management Fees.................................... N/A 0.44% 0.44%
Rule 12b-1 Fees.................................... N/A 0.90% 0.90%
Other Expenses..................................... N/A 0.42% 0.42%
Total Fund Operating Expenses...................... N/A 1.76% 1.76%
</TABLE>
14
<PAGE> 22
<TABLE>
<CAPTION>
VK AC
CLASS C SHARES FUND* FUND** PRO FORMA
- --------------------------------------------------- ----- ------ ---------
<S> <C> <C> <C>
Expense Example of Total Operating Expenses
Assuming Redemption at the End of the Period(4)
One Year......................................... N/A $ 28 $ 28
Three Years...................................... N/A $ 55 $ 55
Five Years....................................... N/A $ 95 $ 95
Ten Years........................................ N/A $ 207 $ 207
Expense Example of Total Operating Expenses
Assuming No Redemption at the End of the
Period(4)
One Year......................................... N/A $ 18 $ 18
Three Years...................................... N/A $ 55 $ 55
Five Years....................................... N/A $ 95 $ 95
Ten Years........................................ N/A $ 207 $ 207
</TABLE>
- ---------------
(1) Before voluntary expense waiver. After application of the expense waiver,
Management Fees would be 0.03% for each class of shares, and Total Fund
Operating Expenses would be 1.03% and 1.80% for Class A and B shares,
respectively.
(2) Class B shares of the VK Fund are subject to a contingent deferred sales
charge equal to 3.00% of the lesser of the then current net asset value or
the original purchase price on Class B shares redeemed during the first year
after purchase, which charge is reduced each year thereafter to zero over a
four year period as follows: Year 1 -- 3.00%; Year 2 -- 2.00%; Year 3 --
1.00%; Year 4 -- 0.00%.
(3) Class B shares of the AC Fund are subject to a contingent deferred sales
charge equal to 4.00% of the lesser of the then current net asset value or
the original purchase price on Class B shares redeemed during the first year
after purchase, which charge is reduced each year thereafter to zero over a
six year period as follows: Year 1 -- 4.00%; Year 2 -- 4.00%; Year 3 --
3.00%; Year 4 -- 2.50%; Year 5 -- 1.50%; Year 6 -- 0.00%. Class C shares of
the AC Fund are subject to a contingent deferred sales charge equal to 1.00%
of the lesser of the then current net asset value or the original purchase
price on Class C shares redeemed during the first year after purchase, which
charge is reduced to zero thereafter.
(4) Expenses examples reflect what an investor would pay on a $1,000 investment,
assuming a 5% annual return with either redemption or no redemption at the
end of each time period as noted in the above table. The Pro Forma column
reflects expenses estimated to be paid on new shares purchased from the
combined fund subsequent to the Reorganization. For those shares issued in
connection with the Reorganization, the following expenses would be incurred
15
<PAGE> 23
based upon the purchase of the VK Fund immediately prior to the Reorganization
and the Pro Forma expense ratio:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
With Redemption at End of Period
Class A............................... $ 10 $32 $ 55 $ 122
Class B............................... $ 48 $65 $ 95 $ 178
Without Redemption at End of Period
Class A............................... $ 10 $32 $ 55 $ 122
Class B............................... $ 18 $55 $ 95 $ 178
</TABLE>
* For the semi-annual period ended December 31, 1994 on an annualized basis.
** For the annual period ended May 31, 1995.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is intended to qualify as a "reorganization" within the
meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"). If the Reorganization so qualifies, in general a shareholder of
the VK Fund will recognize no gain or loss upon the receipt solely of the shares
of the AC Fund pursuant to the Reorganization. Additionally, the VK Fund would
not recognize any gain or loss as a result of the exchange of all of its assets
for the shares of the AC Fund or as a result of its liquidation. The AC Fund
expects that it will not recognize any gain or loss as a result of the
Reorganization, that it will take a carryover basis in the assets acquired from
the VK Fund and that its holding period of such assets will include the period
during which the assets were held by the VK Fund. See "The Proposed
Reorganization -- Federal Income Tax Consequences."
The above information is only a summary of more complete information contained
in this Proxy Statement/Prospectus and the related Statement of Additional
Information.
REASONS FOR THE PROPOSED REORGANIZATION
On December 20, 1994, The Van Kampen Merritt Companies, Inc. acquired from The
Travelers Inc. all of the outstanding capital stock of American Capital
Management & Research, Inc., the parent company of the AC Adviser. Immediately
after the acquisition, American Capital Management & Research, Inc. was merged
into The Van Kampen Merritt Companies, Inc. and the combined entity was renamed
Van Kampen American Capital, Inc. ("VKAC"). The VK Adviser and the AC Adviser
currently are each wholly-owned subsidiaries of VKAC.
On February 10, 1995, the VK Board and the AC Board held a joint meeting to
discuss with management ("Management") of the VK Adviser and the AC Adviser the
costs and potential benefits to shareholders of, among other things, (i)
combining certain funds advised by the VK Adviser and the AC Adviser,
16
<PAGE> 24
including the VK Fund and the AC Fund in order to seek to achieve certain
economies of scale and efficiencies, (ii) permitting exchangeability of shares
between funds advised by the VK Adviser and the AC Adviser, (iii) selecting a
common transfer agent to facilitate exchangeability and enhance shareholder
services, and (iv) consolidating the VK Board and the AC Board into a combined
board of trustees (collectively, the "Consolidation").
The VK Board and the AC Board created a joint committee (the "Joint
Committee") to consider the possible costs and benefits to shareholders
associated with the proposed Consolidation, including the combination of the VK
Fund and the AC Fund. The Joint Committee held meetings on February 20, 1995,
March 27, 1995 and April 3, 1995 to consider issues relating to the
Consolidation, review information requested from and provided by Management and
review information requested from and provided by third-party analytical
services.
The VK Board and the AC Board held joint meetings on March 14, 1995 and April
6-7, 1995 to review the findings and recommendations of the Joint Committee. The
VK Board unanimously approved each element of the Consolidation, including the
combination of the VK Fund and the AC Fund, on April 7, 1995, subject to
approval of the Consolidation by the AC Board. The AC Board met on May 11, 1995,
and unanimously approved each element of the Consolidation, including the
combination of the VK Fund and the AC Fund. Each of the VK Board and the AC
Board also approved submitting the necessary proposals to the respective
shareholders of the VK Fund and the AC Fund to effect the Consolidation.
At separate shareholder meetings held on July 21, 1995, shareholders of the VK
Fund and the AC Fund approved the reorganization of the VK Fund and the AC Fund
into Delaware business trusts (or series thereof) and the combination of the VK
Board and the AC Board. Shareholders of the VK Fund are now being asked to
approve its consolidation with the AC Fund in order to (i) eliminate the
duplication of services that currently exists as a result of the separate
operations of the funds, (ii) seek to achieve economies of scale by combining
the assets of the funds and (iii) potentially reduce transaction costs and
obtain greater portfolio diversity.
In connection with approving the combination of the VK Fund with the AC Fund,
the VK Board considered the costs resulting from the separate operations of the
AC Fund and the VK Fund in light of their substantially similar investment
objectives, policies and restrictions. The VK Board also considered the
potential expense savings, economies of scale, reduced per-share expenses and
benefits to the portfolio management process that could result from combining
the assets and operations of the AC Fund and the VK Fund. In this regard, the VK
Board reviewed information provided by the AC Adviser, VK Adviser and VKAC
Distributors relating to the anticipated cost savings to the shareholders of the
AC Fund and the VK Fund as a result of the Reorganization.
17
<PAGE> 25
In particular, the VK Board considered the probability that the elimination of
duplicative operations and the increase in asset levels of the AC Fund after the
Reorganization would result in the following potential benefits for investors,
although there can, of course, be no assurances in this regard:
(1) ELIMINATION OF SEPARATE OPERATIONS. Consolidating the VK Fund and the
AC Fund should eliminate the duplication of services that currently exists as
a result of their separate operations. For example, currently the VK Fund and
the AC Fund are managed separately by different affiliated investment
advisers. Consolidating the separate operations of the VK Fund with those of
the AC Fund should promote more efficient operations on a more cost-effective
basis.
(2) ACHIEVEMENT OF REDUCED PER SHARE EXPENSES AND ECONOMIES OF
SCALE. Combining the assets of the VK Fund with the assets of the AC Fund
also should lead to reduced expenses, on a per share basis, by allowing fixed
and relatively fixed costs, such as accounting, legal and printing expenses,
to be spread over a larger asset base. An increase in the net asset levels of
the AC Fund also could result in achieving future economies of scale, which
should also reduce per share expenses. Any significant reductions in expenses
on a per share basis should, in turn, have a favorable effect on the relative
total return of the AC Fund.
(3) BENEFITS TO THE PORTFOLIO MANAGEMENT PROCESS. Higher net asset levels
also should enable the AC Fund to purchase larger individual portfolio
investments that may result in reduced transaction costs and/or other more
favorable pricing and provide the opportunity for greater portfolio diversity.
In determining whether to recommend approval of the Reorganization to
shareholders of the VK Fund, the VK Board considered a number of factors,
including, but not limited to: (1) capabilities and resources of AC Adviser and
other service providers to the AC Fund in the areas of marketing, investment and
shareholder services; (2) expenses and advisory fees applicable to the VK Fund
and the AC Fund before the Reorganization and the estimated expense ratios of
the AC Fund after the Reorganization; (3) the comparative investment performance
of the VK Fund and the AC Fund, as well as the performance of the AC Fund
compared to its peers; (4) the terms and conditions of the Agreement and whether
the Reorganization would result in dilution of the VK Fund shareholder
interests; (5) the advantages of eliminating the competition and duplication of
effort inherent in marketing two funds having similar investment objectives, in
addition to the economies of scale realized through the combination of the two
funds; (6) the compatibility of the funds' service features available to
shareholders, including the retention of applicable holding periods and exchange
privileges; (7) the costs estimated to be incurred by the respective funds as a
result of the Reorganization; and (8) the anticipated tax consequences of the
Reorganization. Based upon these
18
<PAGE> 26
and other factors, the VK Board unanimously determined that the Reorganization
is in the best interests of the shareholders of the VK Fund.
B. RISK FACTORS
NATURE OF INVESTMENT
Each of the AC Fund and the VK Fund invest primarily in U.S. dollar
denominated money market securities consisting of obligations of the U.S.
Government and its agencies, bank obligations, commercial paper and repurchase
agreements. Investment in either of the AC Fund or the VK Fund may not be
appropriate for all investors. The investment objectives and policies of the AC
Fund and the VK Fund, and the risks associated with an investment in either
Fund, are substantially similar. For additional information see the respective
sections of the AC Fund's Prospectus and Statement of Additional Information
entitled "Investment Objectives and Policies" and "Investment Practices and
Restrictions" and the respective sections of the VK Fund's Prospectus and
Statement of Additional Information entitled "Investment Objectives and
Policies" and "Investment Practices."
C. INFORMATION ABOUT THE FUNDS
AC Fund. Information about the AC Fund is included in its current Prospectus
dated August 1, 1995, which accompanies this Proxy Statement/Prospectus.
Additional information about the AC Fund is included in its Statement of
Additional Information dated the same date as the AC Fund Prospectus. Copies of
AC Fund Statement of Additional Information may be obtained without charge by
calling (800) 421-5666. The AC Fund files proxy material, reports and other
information with the SEC. These reports can be inspected and copied at the
Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such material can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549 at prescribed rates.
VK Fund. Information about the VK Fund is included in its current Prospectus
dated August 1, 1995. Additional information about the VK Fund is included in
its current Statement of Additional Information dated the same date as the VK
Fund Prospectus. Copies of the VK Fund Statement of Additional Information may
be obtained without charge by calling (800) 341-2911. The VK Fund files proxy
material, reports and other information with the SEC. These reports can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can also
be obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C. 20549
at prescribed rates.
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<PAGE> 27
As Delaware business trusts, or series thereof, each of the AC Fund and the VK
Fund are governed by their respective Agreements and Declarations of Trust
(each, a "Declaration"), their respective Bylaws and applicable Delaware law.
D. THE PROPOSED REORGANIZATION
The material features of the Agreement are summarized below. This summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Agreement, a copy of which
is attached hereto as Exhibit A. The affirmative vote of a majority of the
outstanding shares entitled to vote is required to approve the Reorganization at
a meeting of shareholders at which a quorum is present.
TERMS OF THE AGREEMENT
Pursuant to the Agreement, the AC Fund will acquire all of the assets and the
liabilities of the VK Fund on the Closing Date in exchange for Class A and B
shares, respectively, of the AC Fund.
Subject to VK Fund shareholder approval of the Reorganization, the closing
(the "Closing") will occur within 15 business days after the later of the
receipt of all necessary regulatory approvals and the final adjournment of the
Special Meeting or such later date as soon as practicable thereafter as the AC
Fund and the VK Fund may mutually agree.
On the date of Closing, the VK Fund will transfer to the AC Fund all of the
assets and liabilities of the VK Fund. The AC Fund will in turn transfer to the
VK Fund a number of Class A and B Shares, respectively, of the AC Fund equal in
value to the value of the net assets of the VK Fund transferred to the AC Fund
as of the date of Closing as determined in accordance with the valuation method
described in the AC Fund's then current prospectus. In order to minimize any
potential for undesirable federal income and excise tax consequences in
connection with the Reorganization, the VK Fund and the AC Fund may distribute
on or before the Closing all or substantially all of their respective
undistributed net investment income as of such date.
The VK Fund expects to distribute the Class A and B Shares, respectively, of
the AC Fund to the shareholders of the VK Fund promptly after the Closing and
then dissolve pursuant to a plan of liquidation and dissolution adopted by the
VK Board.
The VK Fund and the AC Fund have made certain standard representations and
warranties to each other regarding their capitalization, status and conduct of
business.
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<PAGE> 28
Unless waived in accordance with the Agreement, the obligations of the parties
to the Agreement are conditioned upon, among other things:
1. approval of the Reorganization by the VK Fund's shareholders;
2. the absence of any rule, regulation, order, injunction or proceeding
preventing or seeking to prevent the consummation of the transactions
contemplated by the Agreement;
3. the receipt of all necessary approvals, registrations and exemptions
under federal and state laws;
4. the truth in all material respects as of the Closing of the
representations and warranties of the parties and performance and
compliance in all material respects with the parties' agreements,
obligations and covenants required by the Agreement;
5. the effectiveness under applicable law of the registration statement of
the AC Fund of which this Proxy Statement/Prospectus forms a part and the
absence of any stop orders under the Securities Act pertaining thereto;
and
6. receipt of opinions of counsel relating to, among other things, the tax
free nature of the Reorganization.
The Agreement may be terminated or amended by the mutual consent of the
parties either before or after approval thereof by the shareholders of the VK
Fund, provided that no such amendment after such approval shall be made if it
would have a material adverse effect on the interests of VK Fund shareholders.
The Agreement may also be terminated by the non-breaching party if there has
been a material misrepresentation, material breach of any representation or
warranty, material breach of contract or failure of any condition to Closing.
The VK Board recommends that you vote to approve the Reorganization, as it
believes the Reorganization is in the best interests of the VK Fund's
shareholders and that the interests of the VK Fund's existing shareholders will
not be diluted as a result of consummation of the proposed Reorganization.
DESCRIPTION OF SECURITIES TO BE ISSUED
SHARES OF BENEFICIAL INTEREST
Beneficial interests in the AC Fund being offered hereby are represented by
transferable Class A and B Shares, par value $.01 per share. The AC Fund's
Declaration permits the trustees, as they deem necessary or desirable, to create
one or more separate investment portfolios and to issue a separate series of
shares for each portfolio and, subject to compliance with the Act, to further
sub-divide the shares of a series into one or more class of shares for such
portfolio.
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<PAGE> 29
VOTING RIGHTS OF SHAREHOLDERS
Holders of shares of the AC Fund are entitled to one vote per share on matters
as to which they are entitled to vote. The Declaration of the VKAC Money Market
Trust and the Declaration of the AC Fund are substantially identical, except
that the Declaration of the VKAC Money Market Trust permits the VK Board or
shareholders to remove a trustee with or without cause by the act of two-thirds
of such trustees or shareholders, respectively. The Declaration of the AC Fund
permits (i) the AC Fund to remove a trustee with cause by the act of two-thirds
of the trustees and (ii) shareholders holding a majority of the shares of each
series outstanding to remove a trustee with or without cause. The Declaration of
the AC Fund also requires the approval of 80% of the trustees in office or
majority vote of the shares of each series then outstanding to amend these
provisions.
Each of the AC Fund and the VK Fund operate as a diversified, open-end
management investment company registered with the SEC under the Act. Therefore,
in addition to the specific voting rights described above, shareholders of the
AC Fund, as well as shareholders of the VK Fund, are entitled, under current
law, to vote with respect to certain other matters, including changes in
fundamental investment policies and restrictions and the ratification of the
selection of independent auditors. Moreover, under the Act, shareholders owning
not less than 10% of the outstanding shares of the AC Fund or VK Fund may
request that the respective board of trustees call a shareholders' meeting for
the purpose of voting upon the removal of trustee(s).
CONTINUATION OF SHAREHOLDER ACCOUNTS AND PLANS; SHARE CERTIFICATES
If the Reorganization is approved, the AC Fund will establish an account for
each VK Fund shareholder containing the appropriate number of shares of the AC
Fund. The shareholder services and shareholder programs of the VK Fund and the
AC Fund have already been substantially conformed as part of the Consolidation.
Shareholders of the VK Fund who are accumulating VK Fund shares under the
dividend reinvestment plan, or who are receiving payment under the systematic
withdrawal plan with respect to VK Fund shares, will retain the same rights and
privileges after the Reorganization in connection with the AC Fund Class A and B
Shares, respectively, received in the Reorganization through substantially
similar plans maintained by the AC Fund. Van Kampen American Capital Trust
Company will continue to serve as custodian for the assets of VK Fund
shareholders held in IRA accounts after the Reorganization. Such IRA investors
will be sent appropriate documentation to confirm Van Kampen American Capital
Trust Company's custodianship.
It will not be necessary for shareholders of the VK Fund to whom certificates
have been issued to surrender their certificates. Upon liquidation of the VK
Fund, such certificates will become null and void.
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<PAGE> 30
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
consequences of the Reorganization to shareholders of the VK Fund and
shareholders of the AC Fund. It is based upon the Code, legislative history,
Treasury regulations, judicial authorities, published positions of the Internal
Revenue Service (the "Service") and other relevant authorities, all as in effect
on the date hereof and all of which are subject to change or different
interpretations (possibly on a retroactive basis). This summary is limited to
shareholders who hold their VK Fund shares as capital assets. No advance rulings
have been or will be sought from the Service regarding any matter discussed in
this Proxy Statement/Prospectus. Accordingly, no assurances can be given that
the Service could not successfully challenge the intended federal income tax
treatment described below. Shareholders should consult their own tax advisors to
determine the specific federal income tax consequences of all transactions
relating to the Reorganization, as well as the effects of state, local and
foreign tax laws.
The Reorganization is intended to qualify as a "reorganization" within the
meaning of Section 368(a)(1) of the Code. It is a condition to closing that the
VK Fund receive an opinion from Skadden, Arps, Slate, Meagher & Flom
substantially to the effect that, for federal income tax purposes:
1. The acquisition by the AC Fund of the assets of the VK Fund in exchange
solely for Class A and B Shares of the AC Fund and the assumption by the AC Fund
of the liabilities of the VK Fund will qualify as a tax-free reorganization
within the meaning of Section 368(a)(1) of the Code.
2. No gain or loss will be recognized by the VK Fund or the AC Fund upon the
transfer to the AC Fund of the assets of the VK Fund in exchange solely for the
Class A and B Shares of the AC Fund and the assumption by the AC Fund of the
liabilities of the VK Fund.
3. The AC Fund's basis in the VK Fund assets received in the Reorganization
will, in each instance, equal the basis in such assets in the hands of the AC
Fund immediately prior to the transfer, and the AC Fund's holding period of such
assets will, in each instance, include the period during which the assets were
held by the VK Fund.
4. No gain or loss will be recognized by the shareholders of the VK Fund upon
the exchange of their shares of the VK Fund solely for the Class A or B Shares,
respectively, of the AC Fund.
5. The aggregate tax basis of the Class A and B Shares of the AC Fund received
by the shareholders of the VK Fund will be the same as the aggregate tax basis
of the shares of the VK Fund surrendered in exchange therefor.
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<PAGE> 31
6. The holding period of the Class A and B Shares of the AC Fund received by
the shareholders of the VK Fund will include the holding period of the shares of
the VK Fund surrendered in exchange therefor if such surrendered shares of the
VK Fund are held as capital assets by such shareholder.
In rendering its opinion, Skadden, Arps, Slate, Meagher & Flom may rely upon
certain representations of the management of the VK Fund and the AC Fund and
assume that the Reorganization will be consummated as described in the Agreement
and that redemptions of shares of the VK Fund occurring prior to the Closing
will consist solely of redemptions in the ordinary course of business.
The AC Fund intends to be taxed under the rules applicable to regulated
investment companies as defined in Section 851 of the Code, which are the same
rules currently applicable to the VK Fund and its shareholders.
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<PAGE> 32
CAPITALIZATION
The following table sets forth the capitalization of the VK Fund and the AC
Fund as of May 31, 1995 and the pro forma combined capitalization of both as if
the Reorganization had occurred on that date. These numbers may differ at the
time of Closing.
CAPITALIZATION TABLE AS OF MAY 31, 1995
<TABLE>
<CAPTION>
VK FUND AC FUND PRO FORMA
----------- ------------ ------------
<S> <C> <C> <C>
NET ASSETS
Class A Shares............. $21,829,620 $319,680,102 $341,509,722
Class B Shares............. 6,712,140 4,189,960 10,902,100
Class C Shares............. N/A 588,477 588,477
----------- ------------ ------------
Total...................... $28,541,760 $324,458,539 $353,000,299
============ ============= =============
NET ASSET VALUE PER SHARE
Class A Shares............. $1.00 $1.00 $1.00
Class B Shares............. 1.00 1.00 1.00
Class C Shares............. N/A 1.00 1.00
SHARES OUTSTANDING
Class A Shares............. 21,899,865 319,694,843 341,594,708
Class B Shares............. 6,711,933 4,189,806 10,901,739
Class C Shares............. N/A 588,487 588,487
----------- ------------ ------------
Total...................... 28,611,798 324,473,136 353,084,934
============ ============= =============
SHARES AUTHORIZED
Class A Shares............. Unlimited Unlimited Unlimited
Class B Shares............. Unlimited Unlimited Unlimited
Class C Shares............. N/A Unlimited Unlimited
</TABLE>
COMPARATIVE PERFORMANCE INFORMATION
The average annual total return for the VK Fund for the one-year, three-year,
five-year and ten-year periods ended May 31, 1995 and for the period beginning
April 22, 1983 (the date Class A Shares of the VK Fund were first offered for
sale to the public) through May 31, 1995 in respect to the Class A Shares were
4.35%, 3.04%, 4.08%, 5.59% and 6.26%, respectively. The average annual total
return for the VK Fund for the period beginning July 11, 1994 (the date Class B
Shares of the VK Fund were first offered for sale to the public) through May 31,
1995 in respect to Class B Shares was 3.56%. The average annual total return for
the AC Fund for the one-year, three-year, five-year and ten-year periods ended
May 31, 1995 and for the period beginning July 12, 1974 (the date Class A Shares
of the AC Fund were
25
<PAGE> 33
first offered for sale to the public) through May 31, 1995 were 4.43%, 3.05%,
4.02%, 5.65% and 7.61%, respectively for Class A Shares. Class B and Class C
shares of the AC Fund became available for purchase on May 1, 1995.
The total return figures above assume reinvestment of all dividends and
distributions and do not include payment of the CDSC. They are not necessarily
indicative of future results. The performance of a fund is a result of
conditions in the securities markets, portfolio management and operating
expenses. Although information such as that shown above is useful in reviewing a
fund's performance and in providing some basis for comparison with other
investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods.
RATIFICATION OF INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS OF THE AC FUND
Approval of the Reorganization will constitute the ratification by VK Fund
shareholders of the investment objectives, policies and restrictions,
Distribution Plan and Advisory Agreement of the AC Fund. For a discussion of the
investment objective, policies and restrictions of the AC Fund, see "Summary --
Comparisons of the AC Fund and the VK Fund" and the AC Fund Prospectus
accompanying this Proxy Statement/Prospectus. Approval of the Reorganization
will constitute approval of amendments to any of the fundamental investment
restrictions of the VK Fund that might otherwise be interpreted as impeding the
Reorganization, but solely for the purpose of and to the extent necessary for,
consummation of the Reorganization.
LEGAL MATTERS
Certain legal matters concerning the issuance of Class A and B Shares of the
AC Fund will be passed on by O'Melveny & Myers, 400 South Hope Street, Los
Angeles, California 90071, counsel to the AC Fund. Lawrence J. Sheehan, a former
partner of, and currently of counsel to said firm is a Trustee of the AC Fund.
On July 21, 1995, Mr. Sheehan was elected as a Trustee of the VK Fund.
Certain legal matters concerning the federal income tax consequences of the
Reorganization will be passed upon by Skadden, Arps, Slate, Meagher & Flom, 333
West Wacker Drive, Chicago, Illinois 60606, counsel to the VKAC Money Market
Trust and the VK Fund. Wayne W. Whalen, a partner of Skadden, Arps, Slate,
Meagher & Flom, is a Trustee of the VKAC Money Market Trust. On July 21, 1995,
Mr. Whalen was elected as a Trustee of the AC Fund.
EXPENSES
The expenses of the Reorganization, whether or not the Reorganization is
completed, including expenses incurred by the VK Fund will be borne by AC
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<PAGE> 34
Adviser. Accordingly, the VK Fund and its shareholders will not bear any
expenses of the Reorganization. The VK Board has determined that the
arrangements regarding the payment of expenses and other charges relating to the
Reorganization are fair and equitable.
F. RECOMMENDATION OF BOARD OF TRUSTEES
The VK Board has unanimously approved the Agreement and has determined that
participation in the Reorganization is in the best interests of the shareholders
of the VK Fund. THE VK BOARD RECOMMENDS VOTING FOR APPROVAL OF THE PROPOSED
REORGANIZATION.
OTHER MATTERS THAT MAY COME BEFORE THE SPECIAL MEETING
It is not anticipated that any action will be asked of the shareholders of the
VK Fund other than as indicated above, but if other matters are properly brought
before the Special Meeting, it is intended that the persons named in the proxy
will vote in accordance with their judgment.
OTHER INFORMATION
A. SHAREHOLDINGS OF THE VK FUND AND THE AC FUND
At the close of business on July 21, 1995, there were 20,886,242 Class A
shares and 6,536,023 Class B shares, respectively, of the VK Fund.
As of July 17, 1995, the Trustees and officers as a group owned less than 1%
of the VK Fund's shares.
To the knowledge of the VK Fund, as of July 17, 1995, no person owned of
record or beneficially 5% or more of the VK Fund's Class A shares or Class B
shares.
At the close of business on July 21, 1995, there were 376,916,361 Class A
shares, 18,166,270 Class B shares and 2,456,328 Class C shares, respectively, of
the AC Fund.
As of July 14, 1995, no person was known by management to own beneficially or
of record as much as 5% of the outstanding Class A shares of the AC Fund except
as follows: 24.68% was owned by Van Kampen American Capital Trust Company, 2800
Post Oak Boulevard, Houston, Texas 77056.
As of July 14, 1995, no person was known by management to own beneficially or
of record as much as 5% of the outstanding Class B shares of the AC Fund except
as follows: 17.31% was owned by Van Kampen American Capital Trust Company, 2800
Post Oak Boulevard, Houston, Texas 77056 and 8.59% was owned by National
27
<PAGE> 35
Financial Services Corp., @ Southern Nat'l Investment Services, Inc., 200 S.
College St., Suite 204, Charlotte, North Carolina 28202-2005.
As of July 14, 1995, no person was known by management to own beneficially or
of record as much as 5% of the outstanding Class C shares of the AC Fund except
as follows: 7.40% was owned by Donaldson Lufkin Jenrette Securities Corp., Attn:
Mutual Fund Department, P.O. Box 2052, Jersey City, New Jersey 07303-2052, 7.40%
was owned by Van Kampen American Capital Trust Company, 2800 Post Oak Boulevard,
Houston, Texas 77056, 5.16% was owned by National Financial Services Corp., @
Southern Nat'l Investment Services, Inc., 200 S. College St., Suite 204,
Charoltte, North Carolina 28202-2005 and 9.21% was owned by Smith Barney Inc.,
388 Greenwich Street, 11th Floor, New York, New York 10013-2375.
Certain officers, directors and employees of VKAC own, in the aggregate, not
more than 7% of the common stock of VK/AC Holding, Inc. and have the right to
acquire, upon the exercise of options, approximately an additional 11% of the
common stock of VK/AC Holding, Inc.
B. SHAREHOLDER PROPOSALS
As a general matter, the VK Fund does not intend to hold future regular annual
or special meetings of shareholders unless required by the Act. Any shareholder
who wishes to submit proposals for consideration at a meeting of shareholders of
the VK Fund should send such proposal to the VK Fund at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181. To be considered for presentation at a
shareholders' meeting, rules promulgated by the SEC require that, among other
things, a shareholder's proposal must be received at the offices of the AC Fund
a reasonable time before a solicitation is made. Timely submission of a proposal
does not necessarily mean that such proposal will be so presented.
VOTING INFORMATION AND REQUIREMENTS
Each valid proxy given by a shareholder of the VK Fund will be voted by the
persons named in the proxy in accordance with the designation on such proxy on
the Reorganization proposal and as the persons named in the proxy may determine
on such other business as may come before the Special Meeting on which
shareholders are entitled to vote. If no designation is made, the proxy will be
voted by the persons named in the proxy as recommended by the VK Board "FOR"
approval of the Reorganization.
Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the VK Fund a written notice of revocation, by delivering a
duly executed proxy bearing a later date, or by attending the Special Meeting
and voting in person.
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<PAGE> 36
The giving of a proxy will not affect your right to vote in person if you
attend the Special Meeting and wish to do so.
The presence in person or by proxy of the holders of a majority of the
outstanding shares entitled to vote is required to constitute a quorum at the
Special Meeting. APPROVAL OF THE REORGANIZATION WILL REQUIRE THE FAVORABLE VOTE
OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF THE VK FUND ENTITLED
TO VOTE AT THE SPECIAL MEETING AT WHICH A QUORUM IS CONSTITUTED. Shares not
voted with respect to a proposal due to an abstention or broker non-vote will be
deemed votes not cast with respect to such proposal, but such shares will be
deemed present for quorum purposes.
In the event that sufficient votes in favor of the Reorganization are not
received by the scheduled time of the Special Meeting, the persons named in the
proxy may propose and vote in favor of one or more adjournments of the Special
Meeting to permit further solicitation of proxies. If sufficient shares were
present to constitute a quorum, but insufficient votes had been cast in favor of
the Reorganization to approve it, proxies would be voted in favor of adjournment
only if the VK Board determined that adjournment and additional solicitation was
reasonable and in the best interest of the shareholders of the VK Fund, taking
into account the nature of the proposal, the percentage of the votes actually
cast, the percentage of negative votes, the nature of any further solicitation
that might be made and the information provided to shareholders about the
reasons for additional solicitation. Any such adjournment will require the
affirmative vote of the holders of a majority of the shares voted at the session
of the Special Meeting to be adjourned.
Proxies of shareholders of the VK Fund are solicited by the VK Board of the VK
Fund. The cost of solicitation will be paid by AC Adviser. In order to obtain
the necessary quorum at the Special Meeting, additional solicitation may be made
by mail, personal interview, telephone, facsimile, telegraph or personal
interview by representatives of the VK Fund, or VK Adviser or VKAC, or by
dealers or their representatives, In addition, such solicitation servicing may
also be provided by Applied Mailing Systems, a solicitation firm located in
Boston, Massachusetts, at a cost estimated to be approximately $3,500 plus
reasonable expenses.
August 4, 1995
PLEASE SIGN AND RETURN YOUR PROXY PROMPTLY.
YOUR VOTE IS IMPORTANT AND YOUR PARTICIPATION
IN THE AFFAIRS OF YOUR FUND DOES MAKE A DIFFERENCE.
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<PAGE> 37
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as of
July 31, 1995, by and between the Van Kampen American Capital Reserve
Fund, a Delaware business trust formed under the laws of the State of Delaware
(the "AC Fund") and the Van Kampen American Capital Money Market Trust, a
Delaware business trust created under the laws of the State of Delaware (the
"VKM Trust") on behalf of its series, the Van Kampen American Capital Money
Market Fund (the "VKM Fund").
W I T N E S S E T H:
WHEREAS, on December 20, 1994, (the "AC Acquisition Date") The Van Kampen
Merritt Companies, Inc. ("TVKMC") acquired all of the issued and outstanding
shares of American Capital Management & Research, Inc. ("American Capital") and
subsequently changed the combined entity's name to Van Kampen American Capital,
Inc.;
WHEREAS, American Capital and TVKMC, through their affiliated companies,
sponsor and manage a number of registered investment companies; and
WHEREAS, Van Kampen American Capital Distributors, Inc., successor by merger
between Van Kampen Merritt Inc. and American Capital Marketing, Inc., acts as
the sponsor and principal underwriter for both the AC Fund and the VKM Fund;
WHEREAS, the VKM Trust was organized as a Massachusetts business trust, and
subsequently reorganized as a Delaware business trust, pursuant to an Agreement
and Declaration of Trust (the "Declaration of Trust") dated May 10, 1995,
pursuant to which it is authorized to issue an unlimited number of shares of
beneficial interest with par value of $0.01 per share, which at present have
been divided into different series, each series constituting a separate and
distinct series of the VKM Trust, including the VKM Fund;
WHEREAS, Van Kampen American Capital Investment Advisory Corp. (formerly, Van
Kampen Merritt Investment Advisory Corp.) ("Advisory Corp.") provides
investment advisory and administrative services to the VKM Fund;
WHEREAS, the AC Fund was organized as a Maryland corporation on March 28,
1974, and subsequently reorganized as a Delaware business trust, pursuant to an
Agreement and Declaration of Trust subsequently amended and restated as of June
20, 1995 and is authorized to issue an unlimited number of shares of
beneficial interest with par value of $0.01 per share;
WHEREAS, Van Kampen American Capital Asset Management, Inc. (formerly,
American Capital Asset Management, Inc.) ("VKAC Asset Management") provides
investment advisory and administrative services to the AC Fund;
WHEREAS, the Board of Trustees of each of the VKM Trust and the AC Fund have
determined that entering into this Agreement for the AC Fund to acquire the
assets and liabilities of the VKM Fund is in the best interests of the
shareholders of each respective fund; and
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<PAGE> 38
WHEREAS, the parties intend that this transaction qualify as a reorganization
within the meaning as described in Section 368(a) of the Internal Revenue Code
of 1986, as amended, (the "Code");
NOW, THEREFORE, in consideration of the mutual promises contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. PLAN OF TRANSACTION.
A. TRANSFER OF ASSETS. Upon satisfaction of the conditions precedent set
forth in Sections 7 and 8 hereof, the VKM Trust will convey, transfer and
deliver to the AC Fund at the closing, provided for in Section 2 hereof, all of
the existing assets of the VKM Fund (including accrued interest to the Closing
Date) consisting of nondefaulted, liquid, U.S. dollar denominated money market
securities, due bills, cash and other marketable securities acceptable to the
AC Fund as more fully set forth on Schedule 1 hereto, and as amended from time
to time prior to the Closing Date (as defined below), free and clear of all
liens, encumbrances and claims whatsoever (the assets so transferred
collectively being referred to as the "Assets").
B. CONSIDERATION. In consideration thereof, the AC Fund agrees that on the
Closing Date the AC Fund will (i) deliver to the VKM Trust, in exchange for
such Assets, full and fractional Class A and Class B shares of the AC Fund
having a net asset value per share calculated as provided in Section 3A hereof,
in an amount equal to the aggregate dollar value of the Assets determined
pursuant to Section 3A of this Agreement net of any liabilities of the VKM Fund
described in Secion 3E hereof (the "Liabilities") (collectively, the "AC Fund
Shares") and (ii) assume all of the VKM Fund's Liabilities. All AC Fund Shares
delivered to the VKM Trust in exchange for such Assets shall be delivered at
net asset value without sales load, commission or other transactional fee being
imposed.
2. CLOSING OF THE TRANSACTION.
CLOSING DATE. The closing shall occur within fifteen (15) business days
after the later of receipt of all necessary regulatory approvals and the final
adjournment of the meeting of shareholders of the VKM Fund at which this
Agreement will be considered and approved or such later date as soon as
practicable thereafter, as the parties may mutually agree (the "Closing Date").
On the Closing Date, the AC Fund shall deliver to the VKM Trust the AC Fund
Shares in the amount determined pursuant to Section 1B hereof and the VKM Trust
thereafter shall, in order to effect the distribution of such shares to the VKM
Fund stockholders, instruct the AC Fund to register the pro rata interest in
the AC Fund Shares (in full and fractional shares) of each of the holders of
record of shares of the VKM Fund in accordance with their holdings of either
Class A or Class B shares and shall provide as part of such instruction a
complete and updated list of such holders (including addresses and taxpayer
identification numbers), and the AC Fund agrees promptly to comply with said
instruction. The AC Fund shall have no obligation to inquire as to the
validity, propriety or correctness of such instruction, but shall assume that
such instruction is valid, proper and correct.
3. PROCEDURE FOR REORGANIZATION.
A. VALUATION. The value of the Assets and Liabilities of the VKM Fund to be
transferred and assumed, respectively, by the AC Fund shall be computed as of
the Closing Date, in the manner set forth in the most recent Prospectus and
Statement of Additional Information of the AC Fund (collectively, the "AC Fund
Prospectus"), copies of which have been delivered to the VKM Trust.
B. DELIVERY OF FUND ASSETS. The Assets shall be delivered to State Street
Bank and Trust Company, 225 Franklin Street, Post Office Box 1713, Boston,
Massachusetts 02105-1713, as custodian for the AC Fund (the "Custodian") for
the benefit of the AC Fund, duly endorsed in proper form for transfer in such
condition as to constitute a good delivery thereof, free and clear of all
liens, encumbrances and claims whatsoever, in accordance with the custom of
brokers, and shall be accompanied by all necessary state stock transfer stamps,
the cost of which shall be borne by the VKM Fund.
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C. FAILURE TO DELIVER SECURITIES. If the VKM Trust is unable to make
delivery pursuant to Section 3B hereof to the Custodian of any of the VKM
Fund's securities for the reason that any of such securities purchased by the
AC Fund have not yet been delivered to it by the VKM Fund's broker or brokers,
then, in lieu of such delivery, the VKM Trust shall deliver to the Custodian,
with respect to said securities, executed copies of an agreement of assignment
and due bills executed on behalf of said broker or brokers, together with such
other documents as may be required by the AC Fund or Custodian, including
brokers' confirmation slips.
D. SHAREHOLDER ACCOUNTS. The AC Fund, in order to assist the VKM Trust in
the distribution of the AC Fund Shares to the VKM Fund shareholders after
delivery of the AC Fund Shares to the VKM Trust, will establish pursuant to the
request of the VKM Trust an open account with the AC Fund for each shareholder
of the VKM Fund and, upon request by the VKM Trust, shall transfer to such
account the exact number of full and fractional shares of the AC Fund then held
by the VKM Trust specified in the instruction provided pursuant to Section 2
hereof. The AC Fund is not required to issue certificates representing AC Fund
Shares unless requested to do so by a shareholder. Upon liquidation or
dissolution of the VKM Fund, certificates representing shares of beneficial
interest of the VKM Fund shall become null and void.
E. LIABILITIES. The Liabilities shall include all of VKM Fund's
liabilities, debts, obligations, and duties of whatever kind or nature, whether
absolute, accrued, contingent, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable at the Closing Date,
and whether or not specifically referred to in this Agreement.
F. EXPENSES. Whether or not the transactions contemplated herein are
consummated VKAC Asset Management agrees to pay (i) for the reasonable outside
expenses for the transactions contemplated herein; including, but not by way of
limitation, the preparation of the AC Fund's Registration Statement on Form
N-14 (the "Registration Statement") and the solicitation of VKM Fund
shareholder proxies; (ii) VKM Trust's counsel's reasonable attorney's fees,
which fees shall be payable pursuant to receipt of an itemized statement, and
(iii) the cost of rendering the tax opinion, more fully referenced in Section
7F below.
G. DISSOLUTION. As soon as practicable after the Closing Date but in no
event later than one year after the Closing Date, the VKM Trust shall
voluntarily dissolve and completely liquidate the VKM Fund, by taking, in
accordance with the Delaware Business Trust Law and Federal securities laws,
all steps as shall be necessary and proper to effect a complete liquidation and
dissolution of the VKM Fund. Immediately after the Closing Date, the stock
transfer books relating to the VKM Fund shall be closed and no transfer of
shares shall thereafter be made on such books.
4. VKM TRUST'S REPRESENTATIONS AND WARRANTIES.
The VKM Trust, on behalf of the VKM Fund, hereby represents and warrants to
the AC Fund which representations and warranties are true and correct on the
date hereof, and agrees with the AC Fund that:
A. ORGANIZATION. The VKM Trust, a Delaware Business Trust duly formed and
in good standing under the laws of the State of Delaware and is duly authorized
to transact business in the State of Delaware. The VKM Fund is a separate
series of the VKM Trust duly designated in accordance with the applicable
provisions of the Declaration of Trust. The VKM Trust and the VKM Fund are
qualified to do business in all jurisdictions in which they are required to be
so qualified, except jurisdictions in which the failure to so qualify would not
have a material adverse effect on either the VKM Trust or VKM Fund. The VKM
Trust has all material federal, state and local authorizations necessary to own
on behalf of the VKM Fund all of the properties and assets allocated to the VKM
Fund and to carry on its business and the business of the VKM Fund as now being
conducted, except authorizations which the failure to so obtain would not have
a material adverse effect on the VKM Trust or the VKM Fund.
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B. REGISTRATION. The VKM Trust is registered under the Investment Company
Act of 1940, as amended (the "1940 Act") as an open-end, diversified
management company and such registration has not been revoked or rescinded.
The VKM Fund is duly designated as a series of the VKM Trust pursuant to the
terms of the Declaration of Trust. VKM Trust is in compliance in all material
respects with the 1940 Act and the rules and regulations thereunder with
respect to its activities and those undertaken on behalf of the VKM Fund.
All of the outstanding shares of beneficial interest of the VKM Fund have been
duly authorized and are validly issued, fully paid and non-assessable and not
subject to pre-emptive or dissenters' rights.
C. AUDITED FINANCIAL STATEMENTS. The statement of assets and liabilities
and the portfolio of investments and the related statements of operations and
changes in net assets of the VKM Fund audited as of and for the year ended June
30, 1994, and, as soon as reasonably available, same for the year ended June 30,
1995, true and complete copies of which have been heretofore furnished to the
AC Fund, fairly represent the financial condition and the results of operations
of the VKM Fund as of and for their respective dates and periods in conformity
with generally accepted accounting principles applied on a consistent basis
during the periods involved.
D. FINANCIAL STATEMENTS. The VKM Trust shall furnish to the AC Fund (i) an
unaudited statement of assets and liabilities and the portfolio of investments
and the related statements of operations and changes in net assets of the VKM
Fund for the period ended June 30, 1995; and (ii) within five (5) business days
after the Closing Date an unaudited statement of assets and liabilities and the
portfolio of investments and the related statements of operations and changes
in net assets as of and for the interim period ending on the Closing Date; such
financial statements will represent fairly the financial position and portfolio
of investments and the results of the VKM Fund's operations as of, and for the
period ending on, the dates of such statements in conformity with generally
accepted accounting principles applied on a consistent basis during the periods
involved and the results of its operations and changes in financial position
for the periods then ended; and such financial statements shall be certified by
the Treasurer of the VKM Trust as complying with the requirements hereof.
E. CONTINGENT LIABILITIES. There are, and as of the Closing Date will be, no
contingent Liabilities of the VKM Fund not disclosed in the financial
statements delivered pursuant to Sections 4C and 4D which would materially
affect the VKM Fund's financial condition, and there are no legal,
administrative, or other proceedings pending or, to its knowledge, threatened
against the VKM Trust or the VKM Fund which would, if adversely determined,
materially affect the VKM Fund's financial condition. All Liabilities were
incurred by the VKM Fund in the ordinary course of its business.
F. MATERIAL AGREEMENTS. The VKM Trust is in compliance as to the VKM Fund
with all material agreements, rules, laws, statutes, regulations and
administrative orders affecting the VKM Fund's operations or its assets; and
except as referred to in the VKM Fund's Prospectus and Statement of Additional
Information, there are no material agreements outstanding relating to the VKM
Fund to which the VKM Trust is a party.
G. STATEMENT OF EARNINGS. As promptly as practicable, but in any case no
later than 30 calendar days after the Closing Date, KPMG Peat Marwick L.L.P.,
auditors for the VKM Trust, shall furnish the AC Fund with a statement of the
earnings and profits of the VKM Fund within the meaning of the Code as of the
Closing Date.
H. RESTRICTED SECURITIES. None of the securities comprising the assets of
the VKM Fund at the date hereof are, or on the Closing Date or any subsequent
delivery date will be, "restricted securities" under the Securities Act of
1933, (the "Securities Act") or the rules and regulations of the Securities and
Exchange Commission (the "SEC") thereunder, or will be securities for which
market quotations are not readily available for purposes of Section 2(a)(41)
under the 1940 Act.
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I. TAX RETURNS. At the date hereof and on the Closing Date, all Federal
and other material tax returns and reports of the VKM Fund required by law to
have been filed by such dates shall have been filed, and all Federal and other
taxes shown thereon shall have been paid so far as due, or provision shall have
been made for the payment thereof, and to the best of VKM Trust's knowledge no
such return is currently under audit and no assessment has been asserted with
respect to any such return.
J. CORPORATE AUTHORITY. The VKM Trust has the necessary power under its
Declaration of Trust to enter into this Agreement and to consummate the
transactions contemplated herein. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein
have been duly authorized by the VKM Trust's Board of Trustees, and except for
obtaining approval of the holders of the shares of beneficial interest of the
VKM Fund, no other corporate acts or proceedings by the VKM Trust or the VKM
Fund are necessary to authorize this Agreement and the transactions
contemplated herein. This Agreement has been duly executed and delivered by
VKM Trust and constitutes a legal, valid and binding obligation of VKM Trust
enforceable in accordance with its terms subject to bankruptcy laws and other
equitable remedies.
K. NO VIOLATION; CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement by the VKM Trust does not and will not (i)
result in a material violation of any provision of the Declaration of Trust of
the VKM Trust or the Designation of Series of the VKM Fund, or any amendment
thereto, (ii) result in a material violation of any statute, law, judgment,
writ, decree, order, regulation or rule of any court or governmental authority
applicable to VKM Trust, (iii) result in a material violation or breach of, or
constitute a default under any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument or obligation to which the VKM Trust
is subject, or (iv) result in the creation or imposition or any lien, charge or
encumbrance upon any property or assets of the VKM Trust. Except as set forth
in Schedule 2 to this Agreement, (i) no consent, approval, authorization, order
or filing with or notice to any court or governmental authority or agency is
required for the consummation by the VKM Trust of the transactions contemplated
by this Agreement and (ii) no consent of or notice to any third party or entity
is required for the consummation by the VKM Trust of the transactions
contemplated by this Agreement.
L. ABSENCE OF CHANGES. From the date of this Agreement through the Closing
Date, there shall not have been:
(1) any change in the business, results of operations, assets, or financial
condition or the manner of conducting the business of the VKM Fund, other than
changes in the ordinary course of its business, or any pending or threatened
litigation, which has had or may have a material adverse effect on such
business, results of operations, assets or financial condition;
(2) issued any option to purchase or other right to acquire shares of the
VKM Fund granted by the VKM Trust to any person other than subscriptions to
purchase shares at net asset value in accordance with terms in the Prospectus
for the VKM Fund;
(3) any entering into, amendment or termination of any contract or
agreement with respect to the VKM Fund by the VKM Trust, except as otherwise
contemplated by this Agreement;
(4) any indebtedness incurred, other than in the ordinary course of
business, by the VKM Fund for borrowed money or any commitment to borrow money
entered into by the VKM Fund or the VKM Trust on behalf of the VKM Fund;
(5) any amendment of the Declaration of Trust of the VKM Trust or of the
Designation of Series of the VKM Fund; or
(6) any grant or imposition of any lien, claim, charge or encumbrance
(other than encumbrances arising in the ordinary course of business with
respect to covered options) upon any asset of the VKM Fund other than a lien
for taxes not yet due and payable.
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M. TITLE. On the Closing Date, the VKM Fund will have good and marketable
title to the Assets, free and clear of all liens, mortgages, pledges,
encumbrances, charges, claims and equities whatsoever, other than a lien for
taxes not yet due and payable and full right, power and authority to sell,
assign, transfer and deliver such Assets; upon delivery of such Assets, the AC
Fund will receive good and marketable title to such Assets, free and clear of
all liens, mortgages, pledges, encumbrances, charges, claims and equities other
than a lien for taxes not yet due and payable.
N. PROXY STATEMENT. The VKM Trust's Proxy Statement, at the time of delivery
by the VKM Trust to its shareholders in connection with a special meeting of
shareholders to approve this transaction, and the VKM Trust's Prospectus and
Statement of Additional Information with respect to the VKM Fund on the forms
incorporated by reference into such Proxy Statement and as of their respective
dates (collectively, the "VKM Trust's Proxy Statement/Prospectus"), and at the
time the Registration Statement becomes effective, the Registration Statement
insofar as it relates to the VKM Trust and the VKM Fund and each of them at all
times subsequent thereto and including the Closing Date, as amended or as
supplemented if it shall have been amended or supplemented, conform and will
conform, in all material respects, to the applicable requirements of the
applicable Federal and state securities laws and the rules and regulations of
the SEC thereunder, and do not and will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representations or
warranties in this Section 4N apply to statements or omissions made in reliance
upon and in conformity with written information concerning the AC Fund or their
affiliates furnished to VKM Trust by the AC Fund.
O. BROKERS. There are no brokers or finders fees payable by VKM Trust or
VKM Fund in connection with the transactions provided for herein.
P. TAX QUALIFICATION. The VKM Fund has qualified as a regulated investment
company within the meaning of Section 851 of the Code for each of its taxable
years; and has satisfied the distribution requirements imposed by Section 852
of the Code for each of its taxable years.
Q. FAIR MARKET VALUE The fair market value on a going concern basis of the
Assets will equal or exceed the Liabilities to be assumed by the AC Fund and
those to which the Assets are subject.
R. VKM TRUST'S LIABILITIES. Except as otherwise provided for herein, the
VKM Trust shall use reasonable efforts, consistent with its ordinary operating
procedures, to repay in full any indebtedness for borrowed money for the
account of the VKM Fund and have discharged or reserved against all of the VKM
Fund's known debts, liabilities and obligations including expenses, costs and
charges whether absolute or contingent, accrued or unaccrued.
5. THE AC FUND'S REPRESENTATIONS AND WARRANTIES.
The AC Fund, hereby represents and warrants to the VKM Trust, which
representations and warranties are true and correct on the date hereof and
agrees with the VKM Trust that:
A. ORGANIZATION. The AC Fund is a Delaware Business Trust duly formed and
in good standing under the laws of the State of Delaware and is duly authorized
to transact business in the State of Delaware. The AC Fund is qualified to do
business as a foreign corporation in all jurisdictions in which it is required
to be so qualified, except jurisdictions in which the failure to so qualify
would not have a material adverse effect on the AC Fund. The AC Fund has all
material federal, state and local authorization necessary to own all of its
properties and assets and to carry on its business and the business thereof as
now being conducted, except authorizations which the failure to so obtain would
not have a material adverse effect on the AC Fund.
B. REGISTRATION. The AC Fund is registered under the 1940 Act as an
open-end, non-diversified management company and; such registration has not
been revoked or rescinded. The AC Fund is in compliance in all material
respects with the 1940 Act and the rules and regulations thereunder. All of
the outstanding shares of the AC Fund have been duly authorized and are validly
issued, fully paid and non-assessable and not subject to pre-emptive dissenters'
rights.
C. AUDITED FINANCIAL STATEMENTS. The statement of assets and liabilities
and the portfolio of investments and the related statements of operations and
changes in net assets of the AC Fund audited
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<PAGE> 43
as of and for the year ended May 31, 1995, true and complete copies of which
have been heretofore furnished to the VKM Trust fairly represent the financial
condition and the results of operations of the AC Fund as of and for their
respective dates and periods in conformity with generally accepted accounting
principles applied on a consistent basis during the periods involved.
D. FINANCIAL STATEMENTS. The AC Fund shall furnish to the VKM Trust (i) an
unaudited statement of assets and liabilities and the portfolio of investments
and the related statements of operations and changes in net assets of the AC
Fund for the period ended June 30, 1995, and (ii) within five (5) business
days after the Closing Date, an unaudited statement of assets and liabilities
and the portfolio of investments and the related statements of operations and
changes in net assets as of and for the interim period ending on the Closing
Date; such financial statements will represent fairly the financial position
and portfolio of investments of the AC Fund and the results of its operations
as of, and for the period ending on, the dates of such statements in conformity
with generally accepted accounting principles applied on a consistent basis
during the period involved and fairly present the financial position of the AC
Fund as at the dates thereof and the results of its operations and changes in
financial position for the periods then ended; and such financial statements
shall be certified by the Treasurer of the AC Fund as complying with the
requirements hereof.
E. CONTINGENT LIABILITIES. There are no contingent liabilities of the AC
Fund not disclosed in the financial statements delivered pursuant to Sections
5C and 5D which would materially affect the AC Fund's financial condition, and
there are no legal, administrative, or other proceedings pending or, to its
knowledge, threatened against the AC Fund which would, if adversely determined,
materially affect the AC Fund's financial condition.
F. MATERIAL AGREEMENTS. The AC Fund is in compliance with all material
agreements, rules, laws, statutes, regulations and administrative orders
affecting its operations or its assets; and except as referred to in the AC
Funds Prospectus there are no material agreements outstanding to which the AC
Fund is a party.
G. TAX RETURNS. At the date hereof and on the Closing Date, all Federal and
other material tax returns and reports of the AC Fund required by laws to have
been filed by such dates shall have been filed, and all Federal and other taxes
shall have been paid so far as due, or provision shall have been made for the
payment thereof, and to the best of the AC Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to any
such return.
H. CORPORATE AUTHORITY. The AC Fund has the necessary power to enter into
this Agreement and to consummate the transactions contemplated herein. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein have been duly authorized by the AC Fund's
Board of Trustees, no other corporate acts or proceedings by the AC Fund are
necessary to authorize this Agreement and the transactions contemplated herein.
This Agreement has been duly executed and delivered by the AC Fund and
constitutes a valid and binding obligation of the AC Fund enforceable in
accordance with its terms subject to bankruptcy laws and other equitable
remedies.
I. NO VIOLATION; CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement by the AC Fund does not and will not (i) result
in a material violation of any provision of the Declaration of Trust of the AC
Fund, or any amendment thereto, (ii) result in a material violation of any
statute, law, judgment, writ, decree, order, regulation or rule of any court or
governmental authority applicable to the AC Fund or (iii) result in a violation
or breach of, or constitute a default under, or result in the creation or
imposition or any lien, charge or encumbrance upon any property or assets of
the AC Fund pursuant to any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument or obligation to which the AC Fund
is subject. Except as set forth in Schedule 3 to this Agreement, (i) no
consent, approval, authorization, order of or filing with notice to any court or
governmental authority or agency is required for the consummation by the AC
Fund of the transactions contemplated by this Agreement and (ii) no consent of
or notice to any third party or entity is required for the consummation by the
AC Fund of the transactions contemplated by this Agreement.
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<PAGE> 44
J. ABSENCE OF PROCEEDINGS. There are no legal, administrative or other
proceedings pending or, to its knowledge, threatened against the AC Fund which
would materially affect its financial condition.
K. SHARES OF THE AC FUND: REGISTRATION. The AC Fund Shares to be issued
pursuant to Section 1 hereof will be duly registered under the Securities Act
and all applicable state securities laws.
L. SHARES OF THE AC FUND: AUTHORIZATION. The shares of the AC Fund to be
issued pursuant to Section 1 hereof have been duly authorized and, when issued
in accordance with this Agreement, will be validly issued and fully paid and
non-assessable by the AC Fund and conform in all material respects to the
description thereof contained in the AC Fund's Prospectus furnished to the VKM
Trust.
M. ABSENCE OF CHANGES. From the date hereof through the Closing Date, there
shall not have been any change in the business, results of operations, assets
or financial condition or the manner of conducting the business of the AC Fund,
other than changes in the ordinary course of its business, which has had a
material adverse effect on such business, results of operations, assets or
financial condition.
N. REGISTRATION STATEMENT. The Registration Statement and the Prospectus
contained therein filed on Form N-14, the ("Registration Statement"), as of the
effective date of the Registration Statement, and at all times subsequent
thereto up to and including the Closing Date, as amended or as supplemented if
they shall have been amended or supplemented, will conform, in all material
respects, to the applicable requirements of the applicable Federal securities
laws and the rules and regulations of the SEC thereunder, and will not include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representations or warranties in this Section apply to statements or
omissions made in reliance upon and in conformity with written information
concerning the VKM Trust or the VKM Fund furnished to the AC Fund by the VKM
Trust.
O. TAX QUALIFICATION. The AC Fund has qualified as a regulated investment
company within the meaning of Section 851 of the Code for each of its taxable
years; and has satisfied the distribution requirements imposed by Section 852
of the Code for each of its taxable years. For purposes of this Section, any
reference to the AC Fund shall include its predecessors, a Maryland corporation
organized on March 28, 1974 and subsequently reorganized by merger with and
into the Fund.
6. COVENANTS.
During the period from the date of this Agreement and continuing until the
Closing Date the VKM Trust and AC Fund each agrees that (except as expressly
contemplated or permitted by this Agreement):
A. OTHER ACTIONS. The VKM Fund shall operate only in the ordinary course of
business consistent with prior practice. No party shall take any action that
would, or reasonably would be expected to, result in any of its representations
and warranties set forth in this Agreement being or becoming untrue in any
material respect.
B. GOVERNMENT FILINGS; CONSENTS. The VKM Trust and the AC Fund shall file
all reports required to be filed by the VKM Trust and the AC Fund with the SEC
between the date of this Agreement and the Closing Date and shall deliver to the
other party copies of all such reports promptly after the same are filed.
Except where prohibited by applicable statutes and regulations, each party
shall promptly provide the other (or its counsel) with copies of all other
filings made by such party with any state, local or federal government agency
or entity in connection with this Agreement or the transactions contemplated
hereby. Each of the VKM Trust and the AC Fund shall use all reasonable
efforts to obtain all consents, approvals, and authorizations required in
connection with the consummation of the transactions contemplated by this
Agreement and to make all necessary filings with the Secretary of State of the
State of Delaware.
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<PAGE> 45
C. PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY
STATEMENT/PROSPECTUS. In connection with the Registration Statement and the
VKM Fund's Proxy Statement/Prospectus, each party hereto will cooperate with
the other and furnish to the other the information relating to the VKM Trust,
VKM Fund or the AC Fund, as the case may be, required by the Securities Act or
the Exchange Act and the rules and regulations thereunder, as the case may be,
to be set forth in the Registration Statement or the Proxy
Statement/Prospectus, as the case may be. The VKM Trust shall promptly prepare
and file with the SEC the Proxy Statement/Prospectus and the AC Fund shall
promptly prepare and file with the SEC the Registration Statement, in which the
Proxy Statement/Prospectus will be included as a prospectus. In connection
with the Registration Statement, insofar as it relates to the VKM Trust and its
affiliated persons, the AC Fund shall only include such information as is
approved by the VKM Trust for use in the Registration Statement. The AC Fund
shall not amend or supplement any such information regarding the VKM Trust and
such affiliates without the prior written consent of the VKM Trust which
consent shall not be unreasonably withheld. The AC Fund shall promptly notify
and provide the VKM Trust with copies of all amendments or supplements filed
with respect to the Registration Statement. The AC Fund shall use all
reasonable efforts to have the Registration Statement declared effective under
the Securities Act as promptly as practicable after such filing. The AC Fund
shall also take any action (other than qualifying to do business in any
jurisdiction in which it is now not so qualified) required to be taken under
any applicable state securities laws in connection with the issuance of the AC
Fund's shares in the transactions contemplated by this Agreement, and the AC
Fund shall furnish all information concerning the VKM Fund and the holders of
the AC Fund's shares of beneficial interest as may be reasonably requested in
connection with any such action.
D. ACCESS TO INFORMATION. During the period prior to the Closing Date, the
VKM Trust shall make available to the AC Fund a copy of each report, schedule,
registration statement and other document (the "Documents") filed or received
by it during such period pursuant to the requirements of Federal or state
securities laws or Federal or state banking laws (other than Documents which
such party is not permitted to disclose under applicable law or which are not
relevant to the VKM Fund). During the period prior to the Closing Date, the AC
Fund shall make available to the VKM Fund each Document pertaining to the
transactions contemplated hereby filed or received by it during such period
pursuant to Federal or state securities laws or Federal or state banking laws
(other than Documents which such party is not permitted to disclose under
applicable law).
E. SHAREHOLDERS MEETING. The VKM Trust shall call a meeting of the VKM Fund
shareholders to be held as promptly as practicable for the purpose of voting
upon the approval of this Agreement and the transactions contemplated herein,
and shall furnish a copy of the Proxy Statement/Prospectus and form of proxy to
each shareholder of the VKM Fund as of the record date for such meeting of
shareholders. The VKM Trust's Board of Trustees shall recommend to the VKM Fund
shareholders approval of this Agreement and the transactions contemplated
herein, subject to fiduciary obligations under applicable law.
F. COORDINATION OF PORTFOLIOS. The VKM Trust and AC Fund, covenant and
agree to coordinate the respective portfolios of the VKM Fund and AC Fund from
the date of the Agreement up to and including the Closing Date in order that at
Closing, when the Assets are added to the AC Fund's portfolio, the resulting
portfolio will meet the AC Fund's investment objective, policies and
restrictions, as set forth in the AC Fund Prospectus, a copy of which has been
delivered to VKM Trust.
G. DISTRIBUTION OF THE SHARES. At Closing the VKM Trust covenants that it
shall cause to be distributed the AC Fund Shares in the proper pro rata amount
for the benefit of the VKM Fund's shareholders and such that neither the VKM
Trust nor the VKM Fund shall continue to hold amounts of said shares so as to
cause a violation of Section 12(d)(1) of the 1940 Act. VKM Trust covenants
further that, pursuant to Section 3G, it shall liquidate and dissolve the VKM
Fund as promptly as practicable after the Closing Date. The VKM Trust
covenants to use all reasonable efforts to cooperate with the AC Fund and the
AC Fund's transfer agent in the distribution of said shares.
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<PAGE> 46
H. BROKERS OR FINDERS. Except as disclosed in writing to the other party
prior to the date hereof, each of the VKM Trust and the AC Fund represents that
no agent, broker, investment banker, financial advisor or other firm or person
is or will be entitled to any broker's or finder's fee or any other commission
or similar fee in connection with any of the transactions contemplated by this
Agreement, and each party shall hold the other harmless from and against any
all claims, liabilities or obligations with respect to any such fees,
commissions or expenses asserted by any person to be due or payable in
connection with any of the transactions contemplated by this Agreement on the
basis of any act or statement alleged to have been made by such first party or
its affiliate.
I. ADDITIONAL AGREEMENTS. In case at any time after the Closing Date any
further action is necessary or desirable in order to carry out the purposes of
this Agreement, the proper officers and trustees of each party to
this Agreement shall take all such necessary action.
J. PUBLIC ANNOUNCEMENTS. For a period of time from the date of this
Agreement to the Closing Date, the VKM Trust and the AC Fund will consult with
each other before issuing any press releases or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
herein and shall not issue any press release or make any public statement prior
to such consultation, except as may be required by law or the rules of any
national securities exchange on which such party's securities are traded.
K. TAX STATUS OF REORGANIZATION. The intention of the parties is that the
transaction will qualify as a reorganization within the meaning of Section
368(a) of the Code. Neither the VKM Trust, the VKM Fund nor the AC Fund shall
take any action, or cause any action to be taken (including, without
limitation, the filing of any tax return) that is inconsistent with such
treatment or results in the failure of the transaction to qualify as a
reorganization within meaning of Section 368(a) of the Code. At or prior to
the Closing Date, the VKM Trust, the VKM Fund and the AC Fund will take such
action, or cause such action to be taken, as is reasonably necessary to enable
Skadden, Arps, Slate, Meagher & Flom, counsel to the VKM Trust and the VKM
Fund, to render the tax opinion required herein.
L. DECLARATION OF DIVIDEND. At or immediately prior to the Closing Date, the
VKM Fund shall declare and pay to its stockholders a dividend or other
distribution in an amount large enough so that it will have distributed in an
substantially all (and in any event not less than 98%) of its investment
company taxable income (computed without regard to any deduction for dividends
paid) and realized net capital gain, if any, for the current taxable year
through the Closing Date.
7. CONDITIONS TO OBLIGATIONS OF THE VKM TRUST
The obligations of the VKM Trust hereunder with respect to the consummation
of the Reorganization are subject to the satisfaction, or written waiver by the
VKM Trust, of the following conditions:
A. SHAREHOLDER APPROVAL. This Agreement and the transactions contemplated
herein shall have been approved by the affirmative vote of the holders of a
majority of the shares of beneficial interest of the VKM Fund present in person
or by proxy at a meeting of said shareholders in which a quorum is constituted.
B. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Each of the representations
and warranties of the AC Fund contained herein shall be true in all material
respects as of the Closing Date, and as of the Closing Date there shall have
been no material adverse change in the financial condition, results of
operations, business properties or assets of the AC Fund since May 31, 1995, and
the VKM Trust shall have received a certificate of the President or Vice
President of the AC Fund satisfactory in form and
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<PAGE> 47
substance to the VKM Trust so stating. The AC Fund shall have performed and
complied in all material respects with all agreements, obligations and
covenants required by this Agreement to be so performed or complied with by it
on or prior to the Closing Date.
C. REGISTRATION STATEMENT EFFECTIVE. The Registration Statement shall have
become effective and no stop orders under the Securities Act pertaining thereto
shall have been issued.
D. REGULATORY APPROVAL. All necessary approvals, registrations, and
exemptions under federal and state securities laws shall have been obtained.
E. NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the transactions contemplated by
this Agreement shall be in effect, nor shall any proceeding by any state, local
or federal government agency or entity asking any of the foregoing be pending.
There shall not have been any action taken, or any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the transactions
contemplated by this Agreement, which makes the consummation of the
transactions contemplated by this Agreement illegal or which has a material
adverse affect on the business operations of the AC Fund.
F. TAX OPINION. The VKM Trust and the VKM Fund shall have obtained an
opinion from Skadden, Arps, Slate, Meagher & Flom, counsel for the VKM Trust
and the VKM Fund, dated as of the Closing Date, addressed to the VKM Trust and
the VKM Fund, that the consummation of the transactions set forth in this
Agreement comply with the requirements of a reorganization as described in
Section 368(a) of the Code substantially in the form attached as Annex A.
G. OPINION OF COUNSEL. The VKM Trust shall have received the opinion of
O'Melveny & Myers, counsel for AC Fund, dated as of the Closing Date, addressed
to the VKM Trust and VKM Fund, substantially in the form and to the effect
that: (i) the AC Fund is duly formed and existing as a trust under the laws of
the State of Delaware; (ii) the AC Fund is registered as an open-end,
diversified management company under the 1940 Act; (iii) this Agreement and
the reorganization provided for herein and the execution of this Agreement have
been duly authorized by all necessary trust action of the AC Fund and this
Agreement has been duly executed and delivered by the AC Fund and (assuming the
Agreement is a valid and binding obligation of the other parties thereto) is a
valid and binding obligation of the AC Fund; (iv) neither the execution or
delivery by the AC Fund of this Agreement nor the consummation by the AC Fund
of the transactions contemplated thereby contravene the AC Fund's Declaration
of Trust or, to their knowledge, violate any provision of any statute, or any
published regulation or any judgment or order disclosed to them by the AC Fund
as being applicable to the AC Fund; (v) to their knowledge based solely on the
certificate of an appropriate officer of the AC Fund attached there is no
pending, or threatened litigation involving the AC Fund except as disclosed
therein (vi) the AC Fund's Shares being issued pursuant to this Agreement have
been duly authorized and upon issuance thereof in accordance with this
Agreement will be validly issued, fully paid and non-assessable; (vii) except
as to financial statements and schedules and other financial and statistical
data included or incorporated by reference therein and subject to usual and
customary qualifications with respect to Rule 10b-5 type opinions as of the
effective date of the Registration Statement filed pursuant to the Agreement,
the portions thereof pertaining to the AC Fund comply as to form in all
material respects with their requirements of the Securities Act, the Securities
Exchange Act and the 1940 Act and the rules and regulations of the Commission
thereunder and no facts have come to counsel's attention which cause them to
believe that as of the effectiveness of the portions of the Registration
Statement applicable to the AC Fund, the Registration Statement contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; and (viii) to their knowledge and subject to the qualifications set
forth below, the execution and delivery by the AC Fund of the Agreement and the
consummation of the transactions therein contemplated do not require, under
11
<PAGE> 48
the laws of the State of Delaware, or the Federal laws of the United
States, the consent, approval, authorization, registration, qualification or
order of, or filing with, any court or governmental agency or body (except such
as have been obtained under the Securities Act, the 1940 Act or the rules and
regulations thereunder.) Counsel need express no opinion, however, as to any
such consent, approval, authorization, registration, qualification, order or
filing (a) which may be required as a result of the involvement of other
parties to the Agreement in the transactions contemplated by the Agreement
because of their legal or regulatory status or because of any other facts
specifically pertaining to them; (b) the absence of which does not deprive the
VKM Trust or VKM Fund of any material benefit under such agreements; or (c)
which can be readily obtained without significant delay or expense to the VKM
Trust or VKM Fund, without loss to the VKM Trust or VKM Fund of any material
benefit under the Agreement and without any material adverse effect on them
during the period such consent, approval authorization, registration,
qualification or order was obtained. The foregoing opinion relates only to
consents, approvals, authorizations, registrations, qualifications, orders or
fillings under (a) laws which are specifically referred to in the opinion, (b)
laws of the State of Delaware and the Federal laws of the United States of
America which, in our experience, are normally applicable to transactions of
the type provided for in the Agreement and (c) court orders and judgments
disclosed to them by the AC Fund in connection with the opinion. Counsel's
opinion as to the validity and binding nature of this Agreement may be limited
to the present law of the State of Delaware. Counsel's other opinions may
be limited to the present Federal law of the United States and the present
general corporation and trust laws of the State of Delaware.
H. OFFICER CERTIFICATES. The VKM Trust shall have received a certificate of
an authorized officer of the AC Fund, dated as of the Closing Date, certifying
that the representations and warranties set forth in Section 5 are true and
correct on the Closing Date, together with certified copies of the resolutions
adopted by the Board of Directors shall be furnished to the VKM Trust.
8. CONDITIONS TO OBLIGATIONS OF THE AC FUND
The obligations of the AC Fund hereunder with respect to the consummation of
the Reorganization are subject to the satisfaction, or written waiver by the AC
Fund of the following conditions:
A. SHAREHOLDER APPROVAL. This Agreement and the transactions contemplated
herein shall have been approved by the affirmative vote of the holders of a
majority of the shares of beneficial interest of the VKM Fund present in person
or by proxy at a meeting of said shareholders in which a quorum is constituted.
B. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Each of the representations
and warranties of the VKM Trust contained herein shall be true in all material
respects as of the Closing Date, and as of the Closing Date there shall have
been no material adverse change in the financial condition, results of
operations, business, properties or assets of the VKM Fund since June 30, 1994
and the AC Fund shall have received a certificate of the President or Vice
President of the VKM Trust satisfactory in form and substance to the AC Fund
so stating. The VKM Trust and the VKM Fund shall have performed and complied
in all material respects with all agreements, obligations and covenants
required by this Agreement to be so performed or complied with by them on or
prior to the Closing Date.
C. REGISTRATION STATEMENT EFFECTIVE. The Registration Statement shall have
become effective and no stop orders under the Securities Act pertaining thereto
shall have been issued.
D. REGULATORY APPROVAL. All necessary approvals, registrations, and
exemptions under federal and state securities laws shall have been obtained.
E. NO INJUNCTIONS OR RESTRAINTS: ILLEGALITY. No injunction preventing the
consummation of the transactions contemplated by this Agreement shall be in
effect, nor shall any proceeding by any state, local or federal government
agency or entity seeking any of the foregoing be pending. There shall not be
12
<PAGE> 49
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the transactions contemplated by this
Agreement, which makes the consummation of the transactions contemplated by
this Agreement illegal.
F. TAX OPINION. The AC Fund shall have obtained an opinion from Skadden,
Arps, Slate, Meagher & Flom, counsel for the VKM Trust and the VKM Fund, dated
as of the Closing Date, addressed to the AC Fund, that the consummation of the
transactions set forth in this Agreement comply with the requirements of
a reorganization as described in Section 368(a) of the Code substantially in
the form attached as Annex A.
G. OPINION OF COUNSEL. The AC Fund shall have received the opinion of
Skadden, Arps, Slate, Meagher & Flom, counsel for the VKM Trust, dated as of
the Closing Date, addressed to the AC Fund substantially in the form of and to
the effect that: (i) the VKM Trust is duly formed and in good standing as a
business trust under the laws of the State of Delaware; (ii) the Board of
Trustees of the VKM Trust has duly designated the VKM Fund as a series of the
VKM Trust pursuant to the terms of the Declaration of Trust of the VKM Trust;
(iii) the VKM Fund is registered as an open-end, diversified management company
under the 1940 Act; (iv) this Agreement and the reorganization provided for
herein and the execution of this Agreement have been duly authorized and
approved by all requisite action of VKM Trust and this Agreement has been duly
executed and delivered by the VKM Trust and (assuming the Agreement is a valid
and binding obligation of the other parties thereto) is a valid and binding
obligation of the VKM Trust; (v) neither the execution or delivery by the VKM
Trust of this Agreement nor the consummation by the VKM Trust or VKM Fund of
the transactions contemplated thereby contravene the VKM Trust's Declaration of
Trust, or, to the best of their knowledge, violate any provision of any statute
or any published regulation or any judgment or order disclosed to them by the
VKM Trust as being applicable to the VKM Trust or the VKM Fund; (vi) to the
best of their knowledge based solely on the certificate of an appropriate
officer of the VKM Trust attached hereto, there is no pending or threatened
litigation which would have the effect of prohibiting any material business
practice or the acquisition of any material property or the conduct of any
material business of the VKM Fund or might have a material adverse effect on
the value of any assets of the VKM Fund; (vii) except as to financial
statements and schedules and other financial and statistical data included or
incorporated by reference therein and subject to usual and customary
qualifications with respect to Rule 10b-5 type opinions, as of the effective
date of the Registration Statement filed pursuant to the Agreement, the
portions thereof pertaining to VKM Trust and the VKM Fund comply as to form in
all material respects with the requirements of the Securities Act, the
Securities Exchange Act and the 1940 Act and the rules and regulations of the
Commission thereunder and no facts have come to counsel's attention which would
cause them to believe that as of the effectiveness of the portions of the
Registration Statement applicable to VKM Trust and VKM Fund, the Registration
Statement contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; and (viii) to the best of their knowledge
and information and subject to the qualifications set forth below, the
execution and delivery by the VKM Trust of the Agreement and the consummation
of the transactions therein contemplated do not require, under the laws of the
States of Delaware or Illinois or the federal laws of the United States, the
consent, approval, authorization, registration, qualification or order of, or
filing with, any court or governmental agency or body (except such as have been
obtained). Counsel need express no opinion, however, as to any such consent,
approval, authorization, registration, qualification, order or filing (a) which
may be required as a result of the involvement of other parties to the
Agreement in the transactions contemplated by the Agreement because of their
legal or regulatory status or because of any other facts specifically
pertaining to them; (b) the absence of which does not deprive the AC Fund of
any material benefit under the Agreement; or (c) which can be readily obtained
without significant delay or expense to the AC Fund, without loss to the AC
Fund of any material benefit under the Agreement and without any material
adverse effect on the AC Fund during the period such consent, approval,
authorization, registration, qualification or order was obtained. The
foregoing opinion relates only to consents, approvals, authorizations,
registrations, qualifications, orders or filings under (a) laws which are
specifically referred to in this opinion, (b) laws of the States of Delaware
and Illinois and the Federal laws of the United States of America which, in
counsel's experience, are normally applicable to transactions of the type
provided for in the Agreement and (c) court orders and judgments disclosed to
13
<PAGE> 50
them by the VKM Trust in connection with this opinion. In addition, although
counsel need not specifically considered the possible applicability to the VKM
Trust of any other laws, orders or judgments, nothing has come to their
attention in connection with their representation of the VKM Trust and the VKM
Fund in this transaction that has caused them to conclude that any other
consent, approval, authorization, registration, qualification, order or filing
is required.
H. THE ASSETS. The Assets, as set forth in Schedule 1, as amended, shall
consist solely of nondefaulted, liquid U.S. dollar denominated money market
securities, cash and other marketable securities which are in conformity with
the AC Fund's investment objective, policy and restrictions as set forth in the
AC Fund's prospectus and statement of additional information, copies of which
have been delivered to the VKM Trust.
I. SHAREHOLDER LIST. The VKM Trust shall have delivered to the AC Fund an
updated list of all shareholders of the VKM Fund, as reported by VKM Trust's
transfer agent, as of one (1) business day prior to the Closing Date with each
shareholder's respective holdings in the VKM Fund, taxpayer identification
numbers, Form W-9 and last known address.
J. OFFICER CERTIFICATES. The AC Fund shall have received a certificate of
an authorized officer of VKM Trust, dated as of the Closing Date, certifying
that the representations and warranties set forth in Section 4 are true and
correct on the Closing Date, together with certified copies of the resolutions
adopted by the Board of Trustees and shareholders shall be furnished to the VKM
Trust.
9. AMENDMENT, WAIVER AND TERMINATION.
(A) The parties hereto may, by agreement in writing authorized by their
respective Boards of Trustees, amend this Agreement at any time before or after
approval thereof by the shareholders of the VKM Fund; provided, however, that
after receipt of VKM Fund shareholder approval, no amendment shall be made by
the parties hereto which substantially changes the terms of Sections 1, 2 and 3
hereof without obtaining VKM Fund's shareholder approval thereof or that affect
any applications for exemptive relief from the SEC or any orders with respect
thereto without obtaining the approval fo the staff of the SEC.
(B) At any time prior to the Closing Date, either of the parties may by
written instrument signed by it (i) waive any inaccuracies in the
representations and warranties made to it contained herein and (ii) waive
compliance with any of the covenants or conditions made for its benefit
contained herein. No delay on the part of either party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or
privilege, or any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
(C) This Agreement may be terminated, and the transactions contemplated
herein may be abandoned at any time prior to the Closing Date:
(i) by the mutual consents of the Board of Trustees of the VKM Trust and
the AC Fund;
(ii) by the VKM Trust, if the AC Fund breaches in any material respect
any of its representations, warranties, covenants or agreements contained in
this Agreement;
(iii) by the AC Fund, if the VKM Trust breaches in any material respect
any of its representations, warranties, covenants or agreements contained in
this Agreement;
14
<PAGE> 51
(iv) by either the VKM Trust or the AC Fund, if the Closing has not
occurred on or prior to September 30, 1995 (provided that the rights to
terminate this Agreement pursuant to this subsection (C) (iv) shall not be
available to any party whose failure to fulfill any of its obligations under
this Agreement has been the cause of or resulted in the failure of the Closing
to occur on or before such date);
(v) by the AC Fund in the event that: (a) all the conditions
precedent to the VKM Trust's obligation to close, as set forth in Section 7 of
this Agreement, have been fully satisfied (or can be fully satisfied at the
Closing); (b) the AC Fund gives the VKM Trust written assurance of its intent
to close irrespective of the satisfaction or non-satisfaction of all conditions
precedent to the AC Fund's obligation to close, as set forth in Section 8 of
this Agreement; and (c) the VKM Trust then fails or refuses to close within the
earlier of five (5) business days or September 30, 1995; or
(vi) by the VKM Trust in the event that: (a) all the conditions precedent
to the AC Fund's obligation to close, as set forth in Section 8 of this
Agreement, have been fully satisfied (or can be fully satisfied at the
Closing); (b) the VKM Trust gives the AC Fund written assurance of its intent
to close irrespective of the satisfaction or non-satisfaction of all the
conditions precedent to the VKM Trust's obligation to close, as set forth in
Section 7 of this Agreement; and (c) the AC Fund then fails or refuses to close
within the earlier of five (5) business days or September 30, 1995.
10. REMEDIES
In the event of termination of this Agreement by either or both of the VKM
Trust and AC Fund pursuant to Section 9(C), written notice thereof shall
forthwith be given by the terminating party to the other party hereto, and this
Agreement shall therefore terminate and become void and have no effect, and the
transactions contemplated herein and thereby shall be abandoned, without
further action by the parties hereto.
11. SURVIVAL OF WARRANTIES AND INDEMNIFICATION.
(A) SURVIVAL. The representations and warranties included or provided for
herein, or in the Schedules or other instruments delivered or to be delivered
pursuant hereto, shall survive the Closing Date for a three year period except
that any representation or warranty with respect to taxes shall survive for the
expiration of the statutory period of limitations for assessments of tax
deficiencies as the same may be extended from time to time by the taxpayer.
The covenants and agreements included or provided for herein shall survive and
be continuing obligations in accordance with their terms. The period for which
a representation, warranty, covenant or agreement survives shall be referred to
hereinafter as the "Survival Period." Notwithstanding anything set forth in
the immediately preceding sentence, the VKM Trust's and the AC Fund's right to
seek indemnity pursuant to this Agreement shall survive for a period of ninety
(90) days beyond the expiration of the Survival Period of the representation,
warranty, covenant or agreement upon which indemnity is sought. In no event
shall the VKM Trust or the AC Fund be obligated to indemnify the other if
indemnity is not sought within ninety (90) days of the expiration of the
applicable Survival Period.
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<PAGE> 52
(i) all debts, liabilities and obligations of the VKM Trust of any nature,
whether accrued, absolute, contingent or otherwise, including liabilities or
obligations relating to the Assets (whether or not disclosed to the AC Fund and
whether or not known by the VKM Trust); and
(ii) taxes of any kind in respect of the VKM Fund whether imposed on the VKM
Fund or on any shareholder of the VKM Fund.
(B) INDEMNIFICATION. Each party (an "Indemnitor") shall indemnify and hold
the other and its officers, directors, agents and persons controlled by or
controlling any of them (each an "Indemnified Party") harmless from and against
any and all losses, damages, liabilities, claims, demands, judgments,
settlements, deficiencies, taxes, assessments, charges, costs and expenses of
any nature whatsoever (including reasonable attorneys' fees) including amounts
paid in satisfaction of judgments, in compromise or as fines and penalties, and
counsel fees reasonably incurred by such Indemnified Party in connection with
the defense or disposition of any claim, action, suit or other proceeding,
whether civil or criminal, before any court or administrative or investigative
body in which such Indemnified Party may be or may have been involved as a
party or otherwise or with which such Indemnified Party may be or may have been
threatened, (collectively, the "Losses") arising out of or related to any
claim of a breach of any representation, warranty or covenant made herein by
the Indemnitor; provided, however, that no Indemnified Party shall be
indemnified hereunder against any Losses arising directly from such Indemnified
Party's (i) willful misfeasance, (ii) bad faith, (iii) gross negligence or (iv)
reckless disregard of the duties involved in the conduct of such Indemnified
Party's position.
(C) INDEMNIFICATION PROCEDURE. The Indemnified Party shall use its best
efforts to minimize any liabilities, damages, deficiencies, claims, judgments,
assessments, costs and expenses in respect of which indemnity may be sought
hereunder. The Indemnified Party shall given written notice to Indemnitor
within the earlier of ten (10) days of receipt of written notice to Indemnitor
or thirty (30) days from discovery by Indemnified Party of any matters which
may give rise to a claim for indemnification or reimbursement under this
Agreement. The failure to give such notice shall not affect the right of
Indemnified Party to indemnity hereunder unless such failure has materially and
adversely affected the rights of the Indemnitor; provided that in any event
such notice shall have been given prior to the expiration of the Survival
Period. At any time after ten (10) days from the giving of such notice,
Indemnified Party may, at its option, resist, settle or otherwise compromise,
or pay such claim unless it shall have received notice from Indemnitor that
Indemnitor intends, at Indemnitor's sole cost and expense, to assume the
defense of any such matter, in which case Indemnified Party shall have the
right, at no cost or expense to Indemnitor, to participate in such defense. If
Indemnitor does not assume the defense of such matter, and in any event until
Indemnitor states in writing that it will assume the defense, Indemnitor shall
pay all costs of Indemnified Party arising out of the defense until the defense
is assumed; provided, however, that Indemnified Party shall consult with
Indemnitor and obtain Indemnitor's consent to any payment or settlement of any
such claim. Indemnitor shall keep Indemnified Party fully apprised at all
times as to the status of the defense. If Indemnitor does not assume the
defense, Indemnified Party shall keep Indemnitor apprised at all times as to
the status of the defense. Following indemnification as provided for
hereunder, Indemnitor shall be subrogated to all rights of Indemnified Party
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made.
12. SURVIVAL
The provisions set forth in Sections 10, 11 and 16 hereof shall survive the
termination of this Agreement for any cause whatsoever.
13. NOTICES.
All notices hereunder shall be sufficiently given for all purposes hereunder
if in writing and delivered personally or sent by registered mail or certified
mail, postage prepaid. Notice to the VKM Trust shall be addressed to the VKM
Trust c/o Van Kampen American Capital Investment Advisory Corp., One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: General Counsel or at such
other address and to the attention of such other person as the VKM Trust may
designate by written notice to the AC Fund. Notice to AC Fund shall be
addressed to the AC Fund c/o Van Kampen American Capital Asset Management,
Inc., 2800 Post Oak Boulevard, Houston, Texas 77056, Attention: General
Counsel, with a copy to George M. Bartlett, O'Melveny & Myers, 400 South Hope
Street, Los Angeles,
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<PAGE> 53
California 900710-2899, or at such other address as AC Fund may designate by
written notice to the VKM Trust. Any notice shall be deemed to have been
served or given as of the date such notice is delivered personally or mailed.
14. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their successors and assigns. This Agreement shall not be assigned
by any party without the prior written consent of the other parties.
15. BOOKS AND RECORDS.
The VKM Trust and the AC Fund agree that copies of the books and records of
the VKM Fund relating to the Assets including, but not limited to all files,
records, written materials; e.g., closing transcripts, surveillance files and
credit reports shall be delivered by the VKM Trust to the AC Fund at the
Closing Date. In addition to, and without limiting the foregoing, the VKM Trust
and the AC Fund agree to take such action as may be necessary in order that the
AC Fund shall have reasonable access to such other books and records as may be
reasonably requested, all for three years after the Closing Date for the three
tax years ending December 31, 1992, December 31, 1993 and December 31, 1994
namely, general ledger, journal entries, voucher registers; distribution
journal; payroll register; monthly balance owing report; income tax returns;
tax depreciation schedules; and investment tax credit basis schedules.
16. GENERAL.
This Agreement supersedes all prior agreements between the parties (written
or oral), is intended as a complete and exclusive statement of the terms of the
Agreement between the parties and may not be amended, modified or changed or
terminated orally. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been executed by the VKM Trust and
the AC Fund and delivered to each of the parties hereto. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. This Agreement is for the
sole benefit of the parties thereto, and nothing in this Agreement, expressed
or implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to principles of conflicts or choice of law.
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<PAGE> 54
17. LIMITATION OF LIABILITY.
Copies of the Declarations of Trust of the VKM Trust and AC Fund are on file
with the Secretary of State of the State of Delaware, and notice, is hereby
given and the parties hereto acknowledge and agree that this instrument is
executed on behalf of the Trustees of the VKM Trust and AC Fund, respectively,
as Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or shareholders of the VKM Trust or
the AC Fund individually but binding only upon the assets and property of this
VKM Trust or AC Fund, as the case may be.
IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to be
executed and delivered by their duly authorized officers as of the day and year
first written above.
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND,
a Delaware business trust
By:_____________________________________
Title:__________________________________
Attest: _________________________
Title: _________________________
VAN KAMPEN AMERICAN CAPITAL MONEY MARKET
TRUST, a Delaware business trust
By:_____________________________________
Title:__________________________________
Attest: _________________________
Title: _________________________
18
<PAGE> 55
SCHEDULE 1 [LIST OF MARKETABLE SECURITIES] [AS AMENDED AT CLOSING]
<PAGE> 56
SCHEDULE 2 [VKM TRUST CONSENTS]
<PAGE> 57
SCHEDULE 3 [AC FUND CONSENTS]
<PAGE> 58
ANNEX A [TAX FREE OPINION: SKADDEN, ARPS, SLATE, MEAGHER & FLOM]
<PAGE> 59
- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
RESERVE FUND
- --------------------------------------------------------------------------------
Van Kampen American Capital Reserve Fund, formerly known as American Capital
Reserve Fund, Inc. (the "Fund"), is a mutual fund seeking protection of capital
and high current income through investments in U.S. dollar denominated money
market securities.
INVESTMENTS IN THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. ALTHOUGH THE FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
The Fund's investment adviser is Van Kampen American Capital Asset
Management, Inc. This Prospectus sets forth certain information that a
prospective investor should know before investing in the Fund. Please read it
carefully and retain it for future reference. The address of the Fund is 2800
Post Oak Blvd., Houston, Texas 77056, and its telephone number is (800)421-5666.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR STATE REGULATORS NOR HAS THE COMMISSION OR STATE
REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information, dated August 1, 1995, containing
additional information about the Fund, has been filed with the Securities and
Exchange Commission ("SEC") and is hereby incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be obtained
without charge by calling (800)421-5666 or, for Telecommunications Device For
the Deaf, (800)772-8889.
------------------
VAN KAMPEN AMERICAN CAPITAL SM
------------------
THIS PROSPECTUS IS DATED AUGUST 1, 1995.
<PAGE> 60
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Prospectus Summary............................................... 3
Shareholder Transaction Expenses................................. 5
Annual Fund Operating Expenses and Example....................... 6
Financial Highlights............................................. 8
The Fund......................................................... 10
Investment Objective and Policies................................ 10
Investment Practices............................................. 13
Investment Advisory Services..................................... 13
Alternative Sales Arrangements................................... 15
Purchase of Shares............................................... 17
Shareholder Services............................................. 22
Redemption of Shares............................................. 26
Distribution Plans............................................... 30
Determination of Net Asset Value................................. 32
Distributions from the Fund...................................... 32
Tax Status....................................................... 33
Fund Performance................................................. 33
Description of Shares of the Fund................................ 34
Additional Information........................................... 35
</TABLE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
2
<PAGE> 61
- ------------------------------------------------------------------------------
PROSPECTUS SUMMARY
- ------------------------------------------------------------------------------
THE FUND. Van Kampen American Capital Reserve Fund (the "Fund) is a
diversified, open-end management investment company organized as a Delaware
business trust.
MINIMUM PURCHASE. $500 minimum initial investment and $50 minimum for each
subsequent investment (or less as described under "Purchase of Shares").
INVESTMENT OBJECTIVE. Protection of capital and high current income. There is,
however, no assurance that the Fund will be successful in achieving its
objective.
INVESTMENT POLICY. The Fund seeks to maintain a constant net asset value of
$1.00 per share by investing in a diversified portfolio of money market
instruments. It seeks high current income from these short-term investments to
the extent consistent with protection of capital.
RISK FACTORS. Investments in the Fund are neither insured nor guaranteed by the
U.S. Government. Although the Fund seeks to maintain a stable net asset value of
$1.00 per share there is no assurance that the Fund will be able to do so.
INVESTMENT RESULTS. The investment results of the Fund are shown in the
"Financial Highlights" table.
ALTERNATIVE SALES ARRANGEMENTS. The Fund offers three classes of shares to the
general public, each with its own sales charge structure: Class A shares, Class
B shares and Class C shares. Unless investors intend to exchange their Fund
shares for Class B shares or Class C shares of other Van Kampen American Capital
funds, they should purchase the Fund's Class A shares because there is no
distribution fee. Even investors who do intend to exchange their Fund shares for
Class B or Class C shares of other Van Kampen American Capital Funds may prefer
to purchase Class A shares of the Fund and then redeem those shares and use the
proceeds to purchase Class B or Class C shares of other Van Kampen American
Capital funds. See "Alternative Sales Arrangements -- Factors for
Consideration." Each class of shares represents an interest in the same
portfolio of investments of the Fund. The per share dividends on Class B and
Class C shares will be lower than the per share dividends on Class A shares. See
"Alternative Sales Arrangements." For information on redeeming shares see
"Redemption of Shares."
Class A Shares. These shares are offered at net asset value per share. The Fund
pays an annual service fee of up to 0.15% of its average daily net assets
attributable to such class of shares. See "Purchase of Shares -- Class A Shares"
and "Distribution Plans."
Class B Shares. These shares are offered at net asset value per share and are
subject to a maximum contingent deferred sales charge of four percent of redemp-
3
<PAGE> 62
tion proceeds during the first year, declining each year thereafter to zero
percent after the fifth year. See "Redemption of Shares." The Fund pays a
combined annual distribution fee and service fee of up to .90% of its average
daily net assets attributable to such class of shares. See "Purchase of
Shares -- Class B Shares" and "Distribution Plans." Class B shares will convert
automatically to Class A shares six years after the end of the calendar month in
which the shareholder's order to purchase was accepted. See "Alternative Sales
Arrangements -- Conversion Feature."
Class C Shares. These shares are offered at net asset value per share and are
subject to a contingent deferred sales charge of one percent on redemptions made
within one year of purchase. See "Redemption of Shares." The Fund pays a
combined annual distribution fee and service fee of up to .90% of its average
daily net assets attributable to such class of shares. See "Purchase of
Shares -- Class C Shares" and "Distribution Plans." Class C shares will convert
automatically to Class A shares ten years after the end of the calendar month in
which the shareholder's order to purchase was accepted. See "Alternative Sales
Arrangements -- Conversion Feature."
DISTRIBUTIONS FROM THE FUND. Dividends from net investment income and capital
gains, if any, are declared and paid daily. All dividends and distributions are
automatically reinvested in shares of the Fund at net asset value per share
(without sales charge) unless payment in cash is requested. See "Distributions
from the Fund."
INVESTMENT ADVISER. Van Kampen American Capital Asset Management, Inc. (the
"Adviser") is the investment adviser to the Fund.
DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the
"Distributor").
The above is qualified in its entirety by reference to the more detailed
information appearing elsewhere in this Prospectus.
4
<PAGE> 63
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
--------- ----------------- -------------
<S> <C> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
offering price)............... None None None
Maximum sales charge imposed on
reinvested dividends (as a
percentage of offering
price)........................ None None None
Deferred sales charge (as a
percentage of the lesser of
original purchase price or
redemption proceeds).......... None Year 1--4.00% Year 1--1.00%
Year 2--4.00%
Year 3--3.00%
Year 4--2.50%
Year 5--1.50%
After--None
Redemption fees (as a percentage
of amount redeemed)........... None None None
Exchange fee.................... None None None
</TABLE>
5
<PAGE> 64
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES(4) SHARES(4)
--------- --------- ---------
<S> <C> <C> <C>
Management fees (as a percentage of
average daily net assets)............. .44% .44% .44%
12b-1 Fees (as a percentage of average
daily net assets)(1).................. .14% .90%(3) .90%(3)
Other Expenses (as a percentage of
average daily net assets)(2).......... .42% .42% .42%
Total Fund Operating Expenses (as a
percentage of average daily net
assets)............................... 1.00% 1.76% 1.76%
</TABLE>
- ------------------------------------------------------------------------------
(1) Up to .15% for Class A shares and .90% for Class B and C shares. See
"Distribution Plans."
(2) See "Investment Advisory Services."
(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by NASD Rules.
(4) Based on Class B and C shares being in effect for the entire fiscal year.
6
<PAGE> 65
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
EXAMPLE: YEAR YEARS YEARS YEARS
------ ------ ------ ------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (i) an
operating expense ratio of 1.00% for
Class A shares, 1.76% for Class B shares
and 1.76% for Class C shares, (ii) a 5%
annual return and (iii) redemption at the
end of each time period:
Class A............................... $10 $32 $ 55 $122
Class B............................... $59 $88 $113 $169*
Class C............................... $28 $55 $ 95 $207
You would pay the following expenses on
the same $1,000 investment assuming no
redemption at the end of each time
period:
Class A............................... $10 $32 $ 55 $122
Class B............................... $18 $55 $ 95 $169*
Class C............................... $18 $55 $ 95 $207
</TABLE>
- ------------------------------------------------------------------------------
*Based on conversion to Class A shares after six years.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The "Example" reflects expenses based on the "Annual Fund
Operating Expenses" table as shown above carried out to future years and are
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required to utilize a five percent annual return
assumption. Class B shares acquired through the exchange privilege are subject
to the deferred sales charge schedule relating to the Class B shares of the Fund
from which the purchase of Class B shares was originally made. Accordingly,
future expenses as projected could be higher than those determined in the above
table if the investor's Class B shares were exchanged from a fund with a higher
contingent deferred sales charge. THE INFORMATION CONTAINED IN THE ABOVE TABLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of such costs and expenses, see "Purchase of Shares," "Investment
Advisory Services" and "Redemption of Shares."
7
<PAGE> 66
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected data for a share of beneficial interest outstanding throughout each
of the periods indicated)
The following information for each of the five most recent fiscal years has
been audited by Price Waterhouse LLP, independent accountants, whose report
thereon was unqualified. This information should be read in conjunction with the
related financial statements and notes thereto included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------------
YEAR ENDED MAY 31
------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ------------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................ .0535 .0329 .0353 .052 .0758 .0893 .0891
Expenses..................................... (.0101) (.0100) (.0109) (.0105) (.0094) (.0092) (.0076)
---------- ---------- ---------- ---------- ---------- ---------- ------------
Net investment income........................ .0434 .0229 .0244 .0415 .0664 .0801 .0815
Net realized and unrealized gain on
securities.................................. -- -- -- -- -- -- .000007
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total from investment operations............. .0434 .0229 .0244 .0415 .0664 .0801 .081507
---------- ---------- ---------- ---------- ---------- ---------- ------------
LESS DISTRIBUTIONS
Dividends from net investment income......... (.0434) (.0229) (.0244) (.0415) (.0664) (.0801) (.0815)
Distributions from net realized gain on
securities.................................. -- -- -- -- -- -- (.000007)
---------- ---------- ---------- ---------- ---------- ---------- ------------
Total dividends and distributions............ (.0434) (.0229) (.0244) (.0415) (.0664) (.0801) (.081507)
---------- ---------- ---------- ---------- ---------- ---------- ------------
Net asset value, end of period............... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ========== ========== ============
TOTAL RETURN(2).............................. 4.43% 2.32% 2.44% 4.20% 6.80% 8.33% 8.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)......... $319.7 $463.8 $279.3 $329.2 $402.3 $426.1 $474.2
Ratios to average net assets (annualized)
Expenses.................................... 1.00% 1.03% 1.09% 1.05% .94% .91% .76%
Net investment income....................... 4.28% 2.36% 2.44% 4.19% 6.68% 7.99% 8.19%
<CAPTION>
CLASS A
-------------------------------------
YEAR ENDED MAY 31
-------------------------------------
1988 1987 1986
------------ ------------ ---------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period......... $1.00 $1.00 $1.00
------------ ------------ ---------
INCOME FROM INVESTMENT OPERATIONS
Investment income............................ .0729 .0647 .0802
Expenses..................................... (.0078) (.0092) (.0093)
------------ ------------ ---------
Net investment income........................ .0651 .0555 .0709
Net realized and unrealized gain on
securities.................................. .000015 .000102 .0002
------------ ------------ ---------
Total from investment operations............. .065115 .055602 .0711
------------ ------------ ---------
LESS DISTRIBUTIONS
Dividends from net investment income......... (.0651) (.0556) (.0709)
Distributions from net realized gain on
securities.................................. (.000015) (.000002) (.0002)
------------ ------------ ---------
Total dividends and distributions............ (.065115) (.055602) (.0711)
------------ ------------ ---------
Net asset value, end of period............... $1.00 $1.00 $1.00
============ ============ =========
TOTAL RETURN(2).............................. 6.71% 5.71% 7.37%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)......... $500.7 $377.8 $227.9
Ratios to average net assets (annualized)
Expenses.................................... .78% .92% .93%
Net investment income....................... 6.56% 5.60% 7.16%
</TABLE>
(Table continued on following page)
8
<PAGE> 67
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------- ---------------
APRIL 18, APRIL 18,
1995(1) THROUGH 1995(1) THROUGH
MAY 31, MAY 31,
1995 1995
--------------- ---------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period...................................................... $1.00 $1.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Investment income......................................................................... .0073 .0076
Expenses.................................................................................. (.0026) (.0027)
-------- --------
Net investment income..................................................................... .0047 .0049
Net realized and unrealized gain on securities............................................ -- --
-------- --------
Total from investment operations.......................................................... .0047 .0049
-------- --------
LESS DISTRIBUTIONS
Dividends from net investment income...................................................... (.0047) (.0049)
Distributions from net realized gains on securities....................................... -- --
-------- --------
Total dividends and distributions......................................................... (.0047) (.0049)
-------- --------
Net asset value, end of period............................................................ $1.00 $1.00
======== ========
TOTAL RETURN(2)........................................................................... .47% .49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)...................................................... $4.2 $0.6
Ratios to average net assets (annualized)
Expenses................................................................................. 1.76%(3) 1.76(3)
Net investment income.................................................................... 3.52%(3) 3.52(3)
</TABLE>
- ---------------
(1) Commencement of operations.
(2) Total return has not been annualized and does not consider the effect of
sales charges.
(3) Ratios based on the class of shares being in effect for the entire fiscal
year.
9
<PAGE> 68
- ------------------------------------------------------------------------------
THE FUND
- ------------------------------------------------------------------------------
The Fund is an open-end, diversified management investment company. This type
of company is commonly known as a mutual fund. A mutual fund provides, for those
who have similar investment goals, a practical and convenient way to invest in a
diversified portfolio of securities by combining their resources in an effort to
achieve such goals.
Fourteen Trustees have the responsibility for overseeing the affairs of the
Fund. The Adviser, 2800 Post Oak Boulevard, Houston, Texas 77056, determines the
investment of the Fund's assets, provides administrative services and manages
the Fund's business and affairs. The Adviser together with its predecessors, has
been in the investment advisory business since 1926.
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- ------------------------------------------------------------------------------
The Fund seeks protection of capital and high current income through
investments in U.S. dollar denominated money market securities. These securities
may include obligations of the U.S. Government and its agencies, bank
obligations, commercial paper and repurchase agreements secured by such
obligations. Such securities are described below.
The Fund seeks to maintain a constant net asset value of $1.00 per share by
investing in a diversified portfolio of money market instruments with remaining
maturities of 13 months or less with a dollar-weighted average maturity of 90
days or less as defined in the rules of the SEC. It seeks high current income
from these short-term investments to the extent consistent with protection of
capital. Of course, there can be no guarantee that the Fund will achieve its
objective or be able at all times to maintain its net asset value per share at
$1.00. In addition, the daily dividend rate paid by the Fund may be expected to
fluctuate. The Fund uses the amortized cost method for valuing portfolio
securities purchased at a discount. See "Determination of Net Asset Value."
OBLIGATIONS OF THE U.S. GOVERNMENT AND ITS AGENCIES. The Fund may invest in
obligations issued or guaranteed as to principal and interest by the U.S.
Government, its agencies and instrumentalities which are supported by any of the
following: (a) the full faith and credit of the U.S. Government, (b) the right
of the issuer to borrow an amount limited to a specific line of credit from the
U.S. Government, (c) discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. Such agencies or
instrumentalities include, but are not limited to, the Federal National Mortgage
Association, the Government National Mortgage Association, Federal Land Banks,
and the Farmer's Home Administration.
10
<PAGE> 69
BANK OBLIGATIONS. The Fund may invest in certificates of deposit, time
deposits and bankers' acceptances issued by domestic banks, foreign branches or
subsidiaries of domestic banks, and domestic or foreign branches of foreign
banks which at the time of investment are rated in the two highest categories by
Standard & Poor's Corporation ("S&P") (A-1 and A-2) or by Moody's Investors
Service ("Moody's") (Prime-1 and Prime-2). The ratings of Moody's and S&P
represent their opinions of the quality of the bank obligations they undertake
to rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. The Fund's current policy is to limit investments
in bank obligations to obligations rated A-1 or Prime-1.
Certificates of deposit are certificates representing the obligation of a bank
to repay funds deposited with it for a specified period of time. Time deposits
are non-negotiable deposits maintained in a bank for a specified period of time
(in no event longer than seven days) at a stated interest rate. Time deposits
which may be held by the Fund will not benefit from insurance from the Federal
Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation. Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity.
The purchase of obligations of foreign banks may subject the Fund to
additional investment risks that are different in some respect from those
incurred in investing in obligations of domestic banks. Foreign banks and
foreign branches or subsidiaries of domestic banks are not necessarily subject
to the same or similar regulatory requirements that apply to domestic banks,
such as mandatory reserve requirements, loan limitations and accounting, audit
and financial record keeping requirements. In addition, less information may be
publicly available about a foreign bank or about a foreign branch of a domestic
bank. Because evidences of ownership of obligations of foreign branches or
subsidiaries of foreign banks usually are held outside the United States, the
Fund will be subject to additional risks which include possible adverse
political and economic developments, possible seizure or nationalization of
foreign deposits and possible adopting of governmental restrictions which might
adversely affect the payment of principal and interest on the foreign
obligations or might restrict the payment of principal and interest to investors
located outside the country of the issuer, whether from currency blockage or
otherwise. Income earned or received by the Fund from sources within foreign
countries may be reduced by withholding and other taxes imposed by such
countries.
COMMERCIAL PAPER. The Fund may invest in short-term obligations of companies
which at the time of investment are (a) rated in the two highest categories by
S&P (A-1 and A-2) or by Moody's (Prime-1 and Prime-2), or (b) if not rated,
issued by
11
<PAGE> 70
a company which at the date of investment has any outstanding long-term debt
securities rated at least A by S&P or by Moody's.
Commercial paper consists of short-term (usually from 1 to 270 days) unsecured
promissory notes issued by corporations in order to finance their current
operations. (See Appendix in the Statement of Additional Information for an
explanation of these ratings.) The Fund's current policy is to limit investments
in commercial paper to obligations rated A-1 or Prime-1.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
domestic banks (or a foreign branch or subsidiary thereof) which have a
short-term debt rating of high quality (in one of the two highest categories) by
either Moody's or S&P and with primary government securities dealers reporting
to the Federal Reserve Bank of New York. A repurchase agreement is a short-term
investment in which the purchaser (i.e., the Fund) acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, usually not more than seven days from the date of purchase, thereby
determining the yield during the purchaser's holding period. No repurchase
agreement may exceed one year, and the Fund may not invest in repurchase
agreements maturing in more than seven days if such investment, together with
any other illiquid securities held by the Fund, exceeds 10% of the value of the
net assets. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, the Fund could experience both delays in liquidating the
underlying securities and loss including: (a) possible decline in the value of
the underlying security during the period while the Fund seeks to enforce its
rights thereto, (b) possible lack of access to income on the underlying security
during this period, and (c) expenses of enforcing its rights.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that substantially all of the funds advised or subadvised by
the Adviser would otherwise invest separately into a joint account. The cash in
the joint account is then invested and the funds that contributed to the joint
account share pro rata in the net revenue generated. The Adviser believes that
the joint account produces greater efficiencies and economies of scale that may
contribute to reduced transaction costs, higher returns, higher quality
investments and greater diversity of investments for the Fund that would be
available to the Fund investing separately. The manner in which the joint
account is managed is subject to conditions set forth in the SEC order obtained
by the Fund authorizing this practice, which conditions are designed to ensure
the fair administration of the joint account and to protect the amounts in that
account.
12
<PAGE> 71
- ------------------------------------------------------------------------------
INVESTMENT PRACTICES
- ------------------------------------------------------------------------------
BROKERAGE PRACTICES. The Adviser is responsible for the placement of orders
for the purchase and sale of portfolio securities for the Fund. Most
transactions made by the Fund are principal transactions at net prices which
incur little or no brokerage costs. Dealers are selected on the basis of their
professional capability for the type of transaction and the value and quality of
execution services rendered on a continuing basis. The Adviser is authorized to
place portfolio transactions with brokerage firms participating in the
distribution of shares of the Fund and other Van Kampen American Capital mutual
funds if it reasonably believes that the quality of the execution and the
commission are comparable to that available from other qualified firms.
No commissions were paid by the Fund during the past three fiscal years.
INVESTMENT RESTRICTIONS. The Fund has adopted certain investment restrictions
which, like the investment objective, may not be changed without the approval of
a majority (as defined in the Investment Company Act of 1940 ("1940 Act") vote
of the Fund's shareholders. The Fund may not borrow money, except from banks for
temporary or emergency purposes, such as to accommodate heavy redemption
requests, and then in amounts not exceeding 10% of the value of the Fund's total
net assets. The Fund may not mortgage, pledge, or hypothecate any assets except
in connection with any such borrowing and in amounts not exceeding the lesser of
the dollar amount borrowed or five percent of the value of the Fund's assets at
the time of such borrowing. The Fund may not lend money, except through the
purchase or holding of the types of debt securities in which the Fund may
invest. Other investment restrictions are described in the Statement of
Additional Information. Except to the extent governed by such restrictions, the
investment policies described under "Investment Objective and Policies" can be
changed by the Trustees.
- ------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------------------------------
THE ADVISER. The Adviser is a wholly-owned subsidiary of Van Kampen American
Capital, Inc. ("Van Kampen American Capital"). Van Kampen American Capital is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and
nearly $50 billion under management or supervision. Van Kampen American
Capital's more than 40 open-end and 38 closed-end funds and more than 2,700 unit
investment trusts are professionally distributed by leading financial advisers
nationwide.
Van Kampen American Capital Distributors, Inc., the distributor of the Fund
and its sponsor of the funds mentioned above, is also a wholly-owned subsidiary
of
13
<PAGE> 72
Van Kampen American Capital. Van Kampen American Capital is a wholly owned
subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc. is controlled, through the
ownership of a substantial majority of its common stock, by The Clayton &
Dubilier Private Equity Fund IV Limited Partnership ("C&D L.P."), a Connecticut
limited partnership. C&D L.P. is managed by Clayton, Dubilier & Rice, Inc. a New
York based private investment firm. The General Partner of C&D L.P. is Clayton &
Dubilier Associates IV Limited Partnership ("C&D Associates L.P."). The general
partners of C&D Associates L.P. are Joseph L. Rice, III, B. Charles Ames,
William A. Barbe, Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr.,
Hubbard C. Howe and Andrall E. Pearson, each of whom is a principal of Clayton,
Dubilier & Rice, Inc. In addition, certain officers, directors and employees of
Van Kampen American Capital own, in the aggregate, not more than 7% of the
common stock of VK/AC Holding, Inc. and have the right to acquire, upon the
exercise of options, approximately an additional 11% of the common stock of
VK/AC Holding, Inc. Presently, and after giving effect to the exercise of such
options, no officer or trustee of the Fund owns 5% or more of the common stock
of VKAC Holding, Inc.
ADVISORY AGREEMENT. The Fund retains the Adviser to manage the investment of
its assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed on average daily net assets of the Fund at the annual rate of 0.50% of
the first $150 million of net assets; 0.45% on the next $100 million of net
assets; 0.40% on the next $100 million of net assets; and 0.35% on net assets
over $350 million. Under the Advisory Agreement, the Fund also reimburses the
Adviser for the cost of the Fund's accounting services, which include
maintaining its financial books and records and calculating its daily net asset
value. Operating expenses paid by the Fund include shareholder service agency
fees, service fees, distribution fees, custodial fees, legal and accounting
fees, the costs of reports and proxies to shareholders, trustees' fees, and all
other business expenses not specifically assumed by the Adviser. Advisory
(management) fees and total operating expense ratios are shown under the caption
"Annual Fund Operating Expenses and Example" herein.
From time to time as the Adviser and/or the Distributor may deem appropriate,
they may voluntarily undertake to reduce the Fund's expenses by reducing the
fees payable to them to the extent of, or bearing expenses in excess of, such
limitations as they may establish.
The Adviser may utilize at its own expense credit analysis, research and
trading support services provided by its affiliate, Van Kampen American Capital
Investment Advisory Corp.
PERSONAL INVESTING POLICIES. The Fund and the Adviser have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
14
<PAGE> 73
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.
- ------------------------------------------------------------------------------
ALTERNATIVE SALES ARRANGEMENTS
- ------------------------------------------------------------------------------
The Alternative Sales Arrangements permits an investor to choose the method of
purchasing shares that is most beneficial given the amount of the purchase and
the length of time the investor expects to hold the shares.
CLASS A SHARES. Class A shares are sold at net asset value. Class A shares are
subject to an ongoing service fee at an annual rate of up to 0.15% of the Fund's
aggregate average daily net assets attributable to the Class A shares. See
"Purchase of Shares -- Class A Shares."
CLASS B SHARES. Class B shares are sold at net asset value and are subject to
a deferred sales charge if they are redeemed within five years of purchase.
Class B shares are subject to an ongoing service fee at an annual rate of up to
0.15% of the Fund's aggregate average daily net assets attributable to the Class
B shares and an ongoing distribution fee at an annual rate of up to 0.75% of the
Fund's aggregate average daily net assets attributable to the Class B shares.
The ongoing distribution fee paid by Class B shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those related to
Class A shares. See "Purchase of Shares -- Class B Shares." Class B shares will
automatically convert to Class A shares six years after the end of the calendar
month in which the shareholder's order to purchase was accepted. See "Conversion
Feature" below for discussion on applicability of conversion feature to Class B
shares.
CLASS C SHARES. Class C shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within one year of purchase. Class C shares
are subject to an ongoing service fee at an annual rate of up to 0.15% of the
Fund's aggregate average daily net assets attributable to the Class C shares and
an ongoing distribution fee at an annual rate of up to 0.75% of the Fund's
aggregate average daily net assets attributable to the Class C shares. The
ongoing distribution fee paid by Class C shares will cause such shares to have a
higher expense ratio and to pay lower dividends than those related to Class A
shares. See "Purchase of Shares -- Class C Shares." Class C shares will convert
automatically to Class A shares ten years after the end of the calendar month in
which the shareholder's order to purchase was accepted. See "Conversion Feature"
below for discussion on applicability of conversion feature to Class C shares.
CONVERSION FEATURE. Class B shares and Class C shares will automatically
convert to Class A shares six years or ten years, respectively, after the end of
the
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<PAGE> 74
month in which the shares were purchased and will no longer be subject to the
distribution fee. Such conversion will be on the basis of the relative net asset
values per share, without the imposition of any sales load, fee or other charge.
The purpose of the conversion feature is to relieve the holders of the Class B
shares and Class C shares that have been outstanding for a period of time
sufficient for the Distributor to have been substantially compensated for
distribution expenses related to the Class B shares or Class C shares as the
case may be from the burden of the ongoing distribution fee.
For purposes of conversion to Class A, shares purchased through the
reinvestment of dividends and distributions paid on Class B shares and Class C
shares in a shareholder's Fund account will be considered to be held in a
separate sub-account. Each time any Class B shares or Class C shares in the
shareholder's Fund account (other than those in the sub-account) convert to
Class A, an equal pro rata portion of the Class B shares or Class C shares in
the sub-account will also convert to Class A.
The conversion of Class B shares and Class C shares to Class A shares is
subject to the continuing availability of an opinion of counsel or a private
letter ruling from the Internal Revenue Service to the effect that (i) the
assessment of the distribution fee and higher transfer agency costs with respect
to Class B shares and Class C shares does not result in the Fund's dividends or
distributions constituting "preferential dividends" under the Internal Revenue
Code, as amended (the "Code"), and (ii) the conversion of shares does not
constitute a taxable event under federal income tax law. The conversion of Class
B shares and Class C shares may be suspended if an opinion or ruling is no
longer available at the time such conversion is to occur that such conversion
does not constitute a taxable event. In that event, no further conversions of
Class B shares or Class C shares would occur, and shares might continue to be
subject to the distribution fee for an indefinite period which may extend beyond
the period ending six years or ten years, respectively, after the end of the
calendar month in which the shareholder's order to purchase was accepted.
FACTORS FOR CONSIDERATION. Class B and Class C shares of the Fund are made
available primarily to allow investors to directly purchase Class B and Class C
shares and later exchange such shares directly into Class B and Class C shares
of the other Participating Funds listed in "Shareholder Services -- Exchange
Privilege." Investors purchasing shares of the Fund without regard to the
availability of exchanges should purchase Class A shares because there is no
distribution fee and, therefore, Class A shares will have a higher yield than
Class B and Class C shares. Investors who wish to have the ability to exchange
their shares for Class B or Class C shares of other Participating Funds (as
defined herein) should consider purchasing the class they ultimately intend to
hold in that Participating Fund. Such investors should also consider purchasing
Class A shares of the Fund and then
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<PAGE> 75
redeeming those shares when they wish to invest in Class B shares or Class C
shares of other Participating Funds. Since Class A shares are not subject to an
ongoing distribution fee, purchasing Class A shares and then redeeming them to
purchase Class B or Class C shares of another Participating Fund is likely to
result in a higher return to the investor than purchasing Class B or Class C
shares of the Fund and then exchanging them for Class B or Class C shares of
another Participating Fund.
GENERAL. The distribution expenses incurred by the Distributor in connection
with the sale of Class B and Class C shares will be reimbursed from the proceeds
of the ongoing distribution fee and any contingent deferred sales charge
incurred upon redemption within five years or one year, respectively, of
purchase. Distribution expenses by the Distributor in connection with the sale
of Class A shares are not reimbursed by the Fund. Sales personnel of
broker-dealers distributing the Fund's shares and other persons entitled to
receive compensation for selling such shares may receive differing compensation
for selling Class B and Class C shares. Sales personnel are not entitled to
receive compensation for selling Class A shares.
Dividends paid by the Fund with respect to Class A, Class B and Class C shares
will be calculated in the same manner at the same time on the same day, except
that the distribution fees and any incremental transfer agency costs relating to
Class B or Class C shares will be borne by the respective class. See
"Distributions from the Fund." Shares of the Fund may be exchanged, subject to
certain limitations, for shares of the same class of other mutual funds advised
by the Adviser. See "Shareholder Services -- Exchange Privilege."
The Trustees of the Fund have determined that currently no conflict of
interest exists between the classes of shares. On an ongoing basis, the Trustees
of the Fund, pursuant to their fiduciary duties under the 1940 Act and state
laws, will seek to ensure that no such conflict arises.
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PURCHASE OF SHARES
- ------------------------------------------------------------------------------
GENERAL
The Fund offers three classes of shares to the general public on a continuous
basis through the Distributor as principal underwriter, which is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181. Shares are also offered
through members of the National Association of Securities Dealers, Inc. ("NASD")
who are acting as securities dealers ("dealers") and NASD members or eligible
non-NASD members who are acting as brokers or agents for investors ("brokers").
The term "dealers" and "brokers" are sometimes referred to herein as "authorized
dealers." Class A shares are sold at net asset value, without sales charge;
Class B and Class C shares are sold at net asset value, without sales charge,
and are subject to a
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<PAGE> 76
contingent deferred sales charge upon certain redemptions. See "Alternative
Sales Arrangements" for a discussion of factors to consider in selecting which
class of shares to purchase. Contact the Investor Services Department at (800)
421-5666 for further information and appropriate forms.
Shares of the Fund may be purchased on any business day through the
shareholder service agent, ACCESS Investor Services, Inc., a wholly-owned
subsidiary of Van Kampen American Capital ("ACCESS"). When purchasing shares of
this Fund, investors must specify whether the purchase is Class A, Class B or
Class C. All orders and drafts become effective when the wire or check payment
is converted into federal funds. A check order or draft is normally converted
into federal funds on the second business day following receipt of payment by
ACCESS. These payments should be sent to ACCESS, P.O. Box 419319, Kansas City,
Missouri 64141-6319. When payment is by wire transfer of federal funds, such
order becomes effective upon receipt provided that prior notice has been given
as described below; other bank wire payments are normally converted into federal
funds on the day following receipt.
Initial investments must be at least $500 and subsequent investments must be
at least $50. Both minimums may be waived by the Distributor for plans involving
periodic investments. The Fund and the Distributor reserve the right to refuse
any order for the purchase of shares. Shares of the Fund may be sold in foreign
countries where permissible. The Fund also reserves the right to suspend the
sale of the Fund's shares in response to conditions in the securities markets or
for other reasons.
Each class of shares represents an interest in the same portfolio of
investments of the Fund, has the same rights and is identical in all respects,
except that (i) Class B and Class C shares bear the expenses of the deferred
sales arrangement and any expenses (including the distribution fee and
incremental transfer agency costs) resulting from such sales arrangement, (ii)
generally, each class has exclusive voting rights with respect to approvals of
the Rule 12b-1 distribution plan pursuant to which its distribution fee and/or
service fee is paid which relate to a specific class, and (iii) Class B and
Class C shares are subject to a conversion feature. Each class has different
exchange privileges and certain different shareholder service options available.
See "Distribution Plans" and "Shareholder Services -- Exchange Privilege." The
net income attributable to Class B and Class C shares and the dividends payable
on Class B and Class C shares will be reduced by the amount of the distribution
fee and incremental expenses associated with such distribution fees. Sales
personnel of broker-dealers distributing the Fund's shares and other persons
entitled to receive compensation for selling such shares may receive differing
compensation for selling Class A, Class B or Class C shares.
INITIAL INVESTMENT BY BANK WIRE. To open an account by wire an investor should
telephone ACCESS at (800) 421-6714 (Alaska and Hawaii residents
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<PAGE> 77
should call collect at (816) 283-3979), and provide the account registration,
the address, tax identification number, the amount being wired and the name of
the wiring bank. ACCESS furnishes the investor with an account number. The
investor's bank should wire the specified amount along with the account number
and registration to State Street Bank and Trust Company ("State Street Bank"),
225 Franklin Street, Boston, Massachusetts 02102, attention ACCESS/VKAC Reserve
Account No. 9900-446-7. The investor should then immediately mail a properly
completed application form accompanied by this Prospectus to ACCESS. To receive
immediate credit to an account, the investor must call ACCESS, at the telephone
number listed above, by 11:00 a.m. Kansas City time with the intent to wire
funds and State Street Bank must then receive such funds by 4:00 p.m. Boston
time.
INITIAL INVESTMENT BY MAIL. To open an account by mail an investor should send
a check payable to Van Kampen American Capital Reserve Fund along with a
completed application form to ACCESS.
SUBSEQUENT INVESTMENTS BY BANK WIRE. The investor's bank should wire the
specified amount along with the account number and registration to State Street
Bank. To receive immediate credit to an account, the investor must call ACCESS
at (800) 421-6714 (Alaska and Hawaii residents should call collect at (816)
283-3979), by 11:00 a.m. Kansas City time with the intent to wire funds and
State Street Bank must then receive such funds by 4:00 p.m. Boston time.
SUBSEQUENT INVESTMENTS BY MAIL. Subsequent investments in the amount of $50 or
more may be sent to ACCESS, indicating the account registration and account
number.
CLASS A SHARES
Class A shares are offered at net asset value without sales charge.
The Fund will permit unitholders of unit investment trusts to reinvest
distributions from such trusts in Class A shares of the Fund, any Participating
Fund, the Van Kampen American Capital Money Market Fund ("VK Money Market") and
the Van Kampen American Capital Tax Free Money Market Fund ("VK Tax Free") with
no minimum or subsequent investment requirement. In order to qualify for this
privilege, the administrator of such a unit investment trust must have an
agreement with the Distributor pursuant to which the administrator will (1)
submit a single bulk order and make payment with a single remittance for all
investments in the Fund during each distribution period by all investors who
choose to invest in the Fund through the program and (2) provide ACCESS with
appropriate backup data for each participating investor in a computerized format
fully compatible with ACCESS's processing system. In addition, the Fund also
requires that all dividends and other distributions by the Fund be reinvested in
additional shares without any
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<PAGE> 78
systematic withdrawal program. There will be no minimum for reinvestments from
unit investment trusts. The Fund will send account activity statements to
investors on a quarterly basis only, even if an investors' investment period is
more frequent. Persons desiring more information with respect to this program,
including the applicable terms and conditions thereof, should contact their
securities broker or dealer or the Distributor. The Fund reserves the right to
modify or terminate this program at any time.
CLASS B SHARES
Class B shares are offered at net asset value. Class B shares which are
redeemed within five years of purchase are subject to a contingent deferred
sales charge at the rates set forth in the following table charged as a
percentage of the dollar amount subject thereto. The charge is assessed on an
amount equal to the lesser of the then current market value or the cost of the
shares being redeemed. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price. In addition, no charge is
assessed on shares derived from reinvestment of dividends or capital gains
distributions. The Distributor will reject any order of $500,000 or more for
Class B shares.
The amount of the contingent deferred sales charge, if any, varies depending
on the number of years from the time of payment for the purchase of Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the purchases
of shares, all payments during a month are aggregated and deemed to have been
made on the last day of the month.
<TABLE>
<CAPTION>
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CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
- --------------------------------------------------------------------------------
<S> <C>
First...................................................... 4%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 2.5%
Fifth...................................................... 1.5%
Sixth...................................................... None
- --------------------------------------------------------------------------------
</TABLE>
In determining whether a contingent deferred sales charge is applicable to a
redemption, it is assumed that the redemption is first, of any shares in the
shareholder's Fund account that are not subject to a contingent deferred sales
charge, second, of shares held for over five years or shares acquired pursuant
to reinvestment of dividends or distributions and third, of shares held longest
during the five-year period.
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<PAGE> 79
A commission or transaction fee of four percent of the purchase amount will be
paid to broker-dealers and other Service Organizations at the time of purchase.
Additionally, the Distributor may, from time to time, pay additional promotional
incentives, in the form of cash or other compensation, to Service Organizations
that sell Class B shares of the Fund.
CLASS C SHARES
Class C shares are offered at net asset value. Class C shares which are
redeemed within the first year of purchase are subject to a contingent deferred
sales charge of one percent. The charge is assessed on an amount equal to the
lower of the then current market value or the cost of the shares being redeemed.
Accordingly, no sales charge is imposed on increases in net asset value above
the initial purchase price. In addition, no charge is assessed on shares derived
from reinvestment of dividends or capital gains distributions. The Distributor
will reject any order of $1 million or more for Class C shares.
In determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation is determined in the manner that results in the
lowest possible rate being charged. Therefore, it is assumed that the redemption
is first of any shares in the shareholder's Fund account that are not subject to
a contingent deferred sales charge and second of shares held for more than one
year or shares acquired pursuant to reinvestment of dividends or distributions.
A commission or transaction fee of one percent of the purchase amount will be
paid to broker-dealers and other Service Organizations at the time of purchase.
Broker-dealers and other Service Organizations will also be paid ongoing
commissions and transaction fees of up to 0.75% of the average daily net assets
of the Fund's Class C shares for the second through tenth year after purchase.
Additionally, the Distributor may, from time to time, pay additional promotional
incentives, in the form of cash or other compensation, to Service Organizations
that sell Class C shares of the Fund.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge may be waived on redemptions of Class B
and Class C shares (i) following the death or disability (as defined in the
Code) of a shareholder, (ii) in connection with certain distributions from an
IRA or other retirement plan, (iii) pursuant to the Fund's systematic withdrawal
plan but limited to 12% annually of the initial value of the account; and (iv)
effected pursuant to the right of the Fund to liquidate a shareholder's account
as described herein under "Redemption of Shares." The contingent deferred sales
charge is also waived on redemptions of Class C shares as it relates to the
reinvestment of redemption proceeds in shares of the same class of the Fund
within 120 days after redemption.
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<PAGE> 80
See the Statement of Additional Information for further discussion of waiver
provisions.
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SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
The Fund offers a number of shareholder services designed to facilitate the
investment in its shares at little or no extra cost to the investor. Below is a
description of such services.
SHAREHOLDER SERVICES APPLICABLE TO ALL CLASSES
INVESTMENT ACCOUNT. Each shareholder has an investment account under which
shares are held by ACCESS. Except as described below, after each share
transaction in an account, the shareholder receives a statement showing the
activity in the account. Each shareholder who has an account in certain of the
Participating Funds may receive statements quarterly from ACCESS showing any
reinvestment of dividends and capital gains distributions and any other activity
in the account since the preceding statement. Such shareholders also will
receive separate confirmations for each purchase or sale transaction other than
reinvestment of dividends and capital gains distributions and systematic
purchases or redemptions. Additions to an investment account may be made at any
time by purchasing shares through authorized investment dealers or by mailing a
check directly to ACCESS.
SHARE CERTIFICATES. As a rule, the Fund will not issue share certificates.
However, upon written or telephone request to the Fund, a share certificate will
be issued, representing shares (with the exception of fractional shares) of the
Fund. A shareholder will be required to surrender such certificates upon
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen American Capital Funds, c/o ACCESS, P.O. Box 418256,
Kansas City, MO 64141-9256, requesting an "affidavit of loss" and obtain a
Surety Bond in a form acceptable to ACCESS. On the date the letter is received
ACCESS will calculate no more than 2.00% of the net asset value of the issued
shares, and bill the party to whom the certificate was mailed.
AUTOMATIC INVESTMENT PLAN. Investors desiring a monthly investment are given
the option to utilize an automatic investment plan whereby the Distributor is
empowered to draft the shareholder's account monthly (minimum $50) with the
proceeds of the draft to be invested in Fund shares.
RETIREMENT PLANS. Eligible investors may establish individual retirement
accounts ("IRAs"); SEP, and pension and profit sharing plans; 401(k) plans; or
Section 403(b)(7) plans in the case of employees of public school systems and
certain non-profit organizations. Documents and forms containing detailed
information regarding these plans are available from the Distributor. Van Kampen
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<PAGE> 81
American Capital Trust Company serves as custodian under the IRA, 403(b)(7)
and Keogh plans. Details regarding fees, as well as full plan administration for
profit sharing, pension and 401(k) plans, are available from the Distributor.
AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS. Holders of Class A shares can use
ACH to have redemption proceeds deposited electronically into their bank
accounts. Redemptions transferred to a bank account via the ACH plan are
available to be credited to the account on the second business day following
normal payment. In order to utilize this option, the shareholder's bank must be
a member of Automated Clearing House. In addition, the shareholder must fill out
the appropriate section of the account application. The shareholder must also
include a voided check or deposit slip from the bank account into which
redemptions are to be deposited together with the completed application. Once
ACCESS has received the application and the voided check or deposit slip, such
shareholder's designated bank account, following any redemption, will be
credited with the proceeds of such redemption. Once enrolled in the ACH plan, a
shareholder may terminate participation at any time by writing ACCESS.
DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application accompanied by this
Prospectus or by calling (800) 421-5666, (800) 772-8889 for the hearing
impaired), elect to have all dividends and other distributions paid on a Class
A, Class B or Class C account in the Fund invested into a pre-existing Class A,
Class B or Class C account in any of the Participating Funds, VK Money Market or
VK Tax Free. Both accounts must be of the same class. If a qualified,
pre-existing account does not exist, the shareholder must establish a new
account subject to minimum investment and other requirements of the fund into
which distributions would be invested. Distributions are invested into the
selected fund at its net asset value as of the payable date of the distribution.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of other open-end investment companies distributed by the Distributor
other than The Govett Funds, Inc. (the "Participating Funds"), upon payment of
the excess, if any, of the sales charge rate applicable to the shares being
acquired over the sales charge rate, if any, previously paid. Shares of any
Participating Fund and the Fund may be exchanged for shares of any other
Participating Fund if shares of that Participating Fund are available for sale;
however, shares of a Participating Fund may not be available to potential
investors who are not already shareholders of the Participating Fund.
Shares of the Participating Funds may be exchanged without sales charge for
shares of the same class of the Fund provided that shares of certain Van Kampen
American Capital fixed-income funds may not be exchanged within 30 days of
acquisition without Adviser approval. Shares of Van Kampen American Capital
Government Target Fund may be exchanged for Class A shares of the Fund
23
<PAGE> 82
without sales charge. Class B and Class C shareholders of the Fund have the
ability to exchange their shares ("original shares") for the same class of
shares of any other Van Kampen American Capital fund that offers such shares
("new shares") in an amount equal to the aggregate net asset value of the
original shares, without the payment of any contingent deferred sales charge
otherwise due upon redemption of the original shares. Such shares remain subject
to the contingent deferred sales charge imposed by the fund initially purchased
by the shareholder upon their redemption from the Van Kampen American Capital
complex of Funds. Class A shareholders who acquired their shares in exchange for
Class B or Class C shares of a Participating Fund may exchange their Class A
shares for the same class of shares of a Participating Fund (also, "new shares")
as the class of shares they disposed of in acquiring their current shares (also,
"original shares") without incurring a contingent deferred sales charge. For
purposes of computing the contingent deferred sales charge payable upon a
disposition of the new shares, the holding period for the original shares is
added to the holding period of the new shares.
Shares of the fund to be acquired must be registered for sale in the
investor's state. Exchanges of shares are sales and may result in a gain or loss
for federal income tax purposes.
A shareholder wishing to make an exchange may do so by sending a written
request to ACCESS or by contacting the telephone transaction line at (800)
421-5684. A shareholder automatically has telephone exchange privileges unless
designated otherwise in the application form accompanied by this Prospectus. Van
Kampen American Capital and its subsidiaries, including ACCESS (collectively,
"VKAC"), and the Fund employ procedures considered by them to be reasonable to
confirm that instructions communicated by telephone are genuine. Such procedures
include requiring certain personal identification information prior to acting
upon telephone instructions, tape recording telephone communications, and
providing written confirmation of instructions communicated by telephone. If
reasonable procedures are employed, neither VKAC nor the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine.
VKAC and the Fund may be liable for any losses due to unauthorized or fraudulent
instructions if reasonable procedures are not followed. Exchanges are effected
at the net asset value next calculated after the request is received in good
order with adjustment for any additional sales charge. See "Purchase of Shares"
and "Redemption of Shares." If the exchanging shareholder does not have an
account in the fund whose shares are being acquired, a new account will be
established with the same registration, dividend and capital gain options
(except dividend diversification) and dealer of record as the account from which
shares are exchanged, unless otherwise specified by the shareholder. In order to
establish a systematic withdrawal plan for the new account or reinvest dividends
from the new account into another fund, however, an exchanging shareholder must
file a specific written request. The Fund reserves the right to reject any order
to acquire its shares through exchange. In
24
<PAGE> 83
addition, the Fund may modify, restrict or terminate the exchange privilege at
any time on 60 days' notice to its shareholders of any termination or material
amendment.
A prospectus of any of these mutual funds may be obtained from any authorized
dealer or the Distributor. An investor considering an exchange to one of such
funds should refer to the prospectus for information regarding such fund.
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the next determined net asset value after receipt of
instructions may establish a monthly, quarterly, semi-annual or annual
withdrawal plan. This plan provides for the orderly use of the entire account,
not only the income but also the capital, if necessary. Each withdrawal
constitutes a redemption of shares on which any capital gain or loss will be
recognized. The planholder may arrange for monthly, quarterly, semiannual, or
annual checks in any amount, not less than $50.
A Class B or Class C shareholder or a Class A shareholder who acquired his or
her shares in the Fund in exchange for Class B or Class C shares of another Van
Kampen American Capital mutual fund may redeem up to 12% annually of the
shareholder's initial account balance without incurring a contingent deferred
sales charge. Initial account balance means the amount of the shareholder's
investment in the Fund at the time the election to participate in the plan is
made. For more detail regarding waiver of contingent deferred sales charges,
please refer to the prospectus of the original fund. See "Purchase of
Shares -- Waiver of Contingent Deferred Sales Charge" and the Statement of
Additional Information.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under the plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends and capital gains distributions, the shareholder's
original investment will be correspondingly reduced and ultimately exhausted.
SHAREHOLDER SERVICES APPLICABLE TO CLASS A SHAREHOLDERS ONLY
CHECK WRITING PRIVILEGE. A shareholder holding Class A shares of the Fund (a)
for which certificates have not been issued, (b) which are in a non-escrow
status and (c) which were not acquired in exchange for Class B or Class C shares
of another Van Kampen American Capital mutual fund may appoint ACCESS as agent
by completing the AUTHORIZATION FOR REDEMPTION BY CHECK form and the appropriate
section of the application and returning the form and application to ACCESS.
Once the form is properly completed, signed and returned to ACCESS, a supply of
checks drawn on State Street Bank will be sent to the shareholder.
25
<PAGE> 84
Those checks may be made payable by the shareholder to the order of any person
in any amount of $100 or more.
When a check is presented to State Street Bank for payment, full and
fractional Class A shares required to cover the amount of the check are redeemed
from the shareholder's Class A account by ACCESS at the next determined net
asset value. Checks will not be honored for redemption of Class A shares held
less than 15 calendar days, unless such Class A shares have been paid for by
bank wire. Any Class A shares for which there are outstanding certificates may
not be redeemed by check. If the amount of the check is greater than the
proceeds of all uncertificated Class A shares held in the shareholder's account,
the check will be returned and the shareholder may be subject to additional
charges. A Class A shareholder may not liquidate the entire account by means of
a check. The check writing privilege may be terminated or suspended at any time
by the Fund or State Street Bank. A "stop payment" system is not available on
these checks. Retirement Plans and accounts that are subject to backup
withholding are not eligible for the privilege. See the Statement of Additional
Information for further information regarding the establishment of the
privilege.
- ------------------------------------------------------------------------------
REDEMPTION OF SHARES
- ------------------------------------------------------------------------------
REGULAR REDEMPTIONS. Shareholders may redeem for cash some or all of their
shares of the Fund at any time. To do so, a written request in proper form must
be sent directly to ACCESS, P.O. Box 418256, Kansas City, Missouri 64141-9256.
Shareholders may also place redemption requests through an authorized dealer.
Orders received from dealers must be at least $500 unless transmitted via the
FUNDSERV network.
As described herein under "Purchase of Shares," redemptions of Class B or
Class C shares are subject to a contingent deferred sales charge. The contingent
deferred sales charge incurred upon redemption is paid to the Distributor in
reimbursement for distribution-related expenses. A custodian of a retirement
plan account may charge fees based on the custodian's fee schedule.
The request for redemption must be signed by all persons in whose names the
shares are registered, and the names must be exactly the same as the names which
were signed when the shares were purchased. If the proceeds of the redemption
exceed $50,000, if the proceeds are not to be paid to the record owner at the
record address, or if the record address has changed within the previous 30
days, signature(s) must be guaranteed by one of the following: a bank or trust
company; a broker/dealer; a credit union; a savings and loan association; a
member firm of a national securities exchange, registered securities association
or clearing agency; or federal savings bank.
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<PAGE> 85
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. For example, although the Fund normally does
not issue certificates for shares, it does so if a special request has been made
to ACCESS. In the case of shareholders holding certificates, the certificates
for the shares being redeemed must accompany the redemption request. In the
event the redemption is requested by a corporation, partnership, trust,
fiduciary, executor or administrator, and the name and title of the
individual(s) authorizing such redemption is not shown in the account
registration, a copy of the corporate resolution or other legal documentation
appointing the authorized signer and certified within the prior 60 days must
accompany the redemption request. IRA redemption requests should be sent to the
IRA custodian to be forwarded to ACCESS. Where Van Kampen American Capital Trust
Company serves as custodian, special IRA, 403(b)(7), or Keogh distribution forms
must be obtained from and must be forwarded to Van Kampen American Capital Trust
Company, P.O. Box 944, Houston, Texas 77001-0944. Contact the custodian for
information.
In all cases, the redemption price is the net asset value per share next
determined after the request for redemption is received in proper form by
ACCESS. Payment for shares redeemed is made by check mailed within seven days
after acceptance by ACCESS of the request and any other necessary documents in
proper order. Such payment may be postponed or the right of redemption suspended
as provided by the rules of the SEC. If the shares to be redeemed have been
recently purchased by check, ACCESS may delay mailing a redemption check until
the purchase check has cleared, usually a period of up to 15 days. Such delay
can be avoided if such payment of shares is made by bank wire. Any taxable gain
or loss will be recognized by the shareholder upon redemption of shares.
The Fund may redeem any shareholder account with a net asset value on the date
of the notice of redemption less than the minimum investment as specified by the
Trustees. At least 60 days advance written notice of any such involuntary
redemption is required and the shareholder is given an opportunity to purchase
the required value of additional shares at the next determined net asset value
without sales charge. Any applicable contingent deferred sales charge will be
deducted from the proceeds of this redemption. Any involuntary redemption may
only occur if the shareholder account is less than the minimum initial
investment due to shareholder redemptions.
TELEPHONE REDEMPTIONS. In addition to the regular redemption procedures set
forth above, the Fund permits redemption of shares by telephone and for
redemption proceeds to be sent to the address of record of the account or to the
bank account of record as described below. To establish such privilege a
shareholder must complete the appropriate section of the application form
accompanied by this Prospectus or call the Fund at (800) 421-5666 to request
that a copy of the
27
<PAGE> 86
Telephone Redemption Authorization form be sent to them for completion. To
redeem shares contact the telephone transaction line at (800) 421-5684. VKAC and
the Fund employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither VKAC nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. VKAC and the
Fund may be liable for any losses due to unauthorized or fraudulent instructions
if reasonable procedures are not followed. Telephone redemptions may not be
available if the shareholder cannot reach ACCESS by telephone, whether because
all telephone lines are busy or for any other reason; in such case, a
shareholder would have to use the Fund's regular redemption procedure described
above. Requests received by ACCESS prior to 4:00 p.m., New York time, on a
regular business day will be processed at the net asset value per share
determined that day. These privileges are available for all accounts other than
retirement accounts. The telephone redemption privilege is not available for
shares represented by certificates. If an account has multiple owners, ACCESS
may rely on the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions are expected to be wired on the next business day following the date
of redemption. This service is also not available with respect to shares held in
an individual retirement account (IRA) for which Van Kampen American Capital
Trust Company acts as custodian. To establish such privilege a shareholder must
complete the appropriate section of the application form accompanied by this
Prospectus or call the Fund at 1-800 421-5666. The Fund reserves the right at
any time to terminate, limit or otherwise modify this redemption privilege.
EXPEDITED REDEMPTIONS. Shareholders of the Fund who have completed the
appropriate section of the application may request expedited redemption payment
of shares having a value of $1,000 or more, by calling (800) 421-5671 (Alaska
and Hawaii residents should call collect at (816) 283-3114). Redemption proceeds
in the form of federal funds will be wired to the bank designated in the
application. Expedited redemption requests received in good order prior to 10:00
a.m. Kansas City time are processed on the date of receipt. Redemption requests
received by ACCESS after such hour are priced at the net asset value next
determined and the proceeds are wired on the next banking day following receipt
of such request.
28
<PAGE> 87
ACCESS reserves the right to deduct the wiring costs from the proceeds of the
redemption. A shareholder may change the bank account previously designated at
any time by written notice to ACCESS with the signature of the shareholder
guaranteed. The Fund reserves the right at any time to terminate, limit or
otherwise modify this expedited redemption privilege.
REDEMPTION UPON DISABILITY. The Fund will waive the contingent deferred sales
charge on redemptions following the disability of a Class B and Class C
shareholder. An individual will be considered disabled for this purpose if he or
she meets the definition thereof in Section 72(m)(7) of the Code, which in
pertinent part defines a person as disabled if such person "is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or to be
of long-continued and indefinite duration." While the Fund does not specifically
adopt the balance of the Code's definition which pertains to furnishing the
Secretary of Treasury with such proof as he or she may require, the Distributor
will require satisfactory proof of disability before it determines to waive the
contingent deferred sales charge on Class B and Class C shares.
In cases of disability, the contingent deferred sales charge on Class B and
Class C shares will be waived where the disabled person is either an individual
shareholder or owns the shares as a joint tenant with right of survivorship or
is the beneficial owner of a custodial or fiduciary account, and where the
redemption is made within one year of the initial determination of disability.
This waiver of the contingent deferred sales charge on Class B and Class C
shares applies to a total or partial redemption, but only to redemptions of
shares held at the time of the initial determination of disability.
REINSTATEMENT PRIVILEGE. A Class A or Class B shareholder who has redeemed
shares of the Fund may reinstate any portion or all of the net proceeds of such
redemption in Class A shares of the Fund. A Class C shareholder who has redeemed
shares of the Fund may reinstate any portion or all of the proceeds of such
redemption in Class C shares of the Fund with credit given for any contingent
deferred sales charge paid upon such redemption. Such reinstatement is made at
the net asset value (without sales charge except as described under "Shareholder
Services -- Exchange Privilege") next determined after the order is received,
which must be within 120 days after the date of the redemption. See "Purchase of
Shares -- Waiver of Contingent Deferred Sales Charge" and the Statement of
Additional Information. Reinstatement at net asset value is also offered to
participants in those eligible retirement plans held or administered by Van
Kampen American Capital Trust Company for repayment of principal (and interest)
on their borrowings on such plans.
29
<PAGE> 88
- ------------------------------------------------------------------------------
DISTRIBUTION PLANS
- ------------------------------------------------------------------------------
Rule 12b-1 adopted by the SEC under the 1940 Act permits an investment company
to directly or indirectly pay expenses associated with the distribution of its
shares ("distribution expenses") and servicing of its shareholders in accordance
with a plan adopted by the investment company's board of directors and approved
by its shareholders. Pursuant to such rule, the Trustees of the Fund, and the
shareholders of each class have adopted three Distribution Plans hereinafter
referred to as the "Class A Plan," the "Class B Plan" and the "Class C Plan."
Each Distribution Plan is in compliance with the Rules of Fair Practice of the
NASD ("NASD Rules") applicable to mutual fund sales charges. The NASD Rules
limit the annual distribution charges that a mutual fund may impose on a class
of shares. The NASD Rules also limit the aggregate amount which the Fund may pay
for such distribution costs. Under the Class A Plan, the Fund pays a service fee
to the Distributor at an annual rate of up to 0.15% of the Fund's aggregate
average daily net assets attributable to the Class A shares. Under the Class B
Plan and the Class C Plan, the Fund pays a service fee to the Distributor at an
annual rate of up to 0.15% and a distribution fee at an annual rate of up to
0.75% of the Fund's aggregate average daily net assets attributable to the Class
B shares or Class C shares to reimburse the Distributor for service fees paid by
it to certain financial institutions (which may include banks), securities
dealers and other industry professionals (collectively, "Service Organizations")
and for its distribution costs.
The Distributor uses the Class A, Class B and Class C service fees to
compensate Service Organizations for personal services and/or the maintenance of
shareholder accounts. Under the Class B Plan, the Distributor receives
additional payments from the Fund in the form of a distribution fee at the
annual rate of up to 0.75% of the net assets of the Class B shares as
reimbursement for (i) upfront commissions and transaction fees of up to four
percent of the purchase price of Class B shares purchased by the clients of
broker-dealers and other Service Organizations, and (ii) other distribution
expenses as described in the Statement of Additional Information. Under the
Class C Plan, the Distributor receives additional payments from the Fund in the
form of a distribution fee at the annual rate of up to 0.75% of the net assets
of the Class C shares as reimbursements for (i) upfront commissions and
transaction fees of up to 0.75% of the purchase price of Class C shares
purchased by the clients of broker-dealers and other Service Organizations and
ongoing commissions and transaction fees of up to 0.75% of the average daily net
assets of the Fund's Class C shares, and (ii) other distribution expenses as
described in the Statement of Additional Information.
In adopting the Class A Plan, the Class B Plan and the Class C Plan, the
Trustees of the Fund determined that there was a reasonable likelihood that such
30
<PAGE> 89
Plans would benefit the Fund and its shareholders. Information with respect to
distribution and service revenues and expenses is presented to the Trustees each
year for their consideration in connection with their deliberations as to the
continuance of the Distribution Plans. In their review of the Distribution
Plans, the Trustees are asked to take into consideration expenses incurred in
connection with the distribution and servicing of each class of shares
separately. The sales charge and distribution fee, if any, of a particular class
will not be used to subsidize the sale of shares of the other classes.
Service expenses accrued by the Distributor in one fiscal year may not be paid
from the Class A service fees received from the Fund in subsequent fiscal years.
Thus, if the Class A Plan were terminated or not continued, no amounts (other
than current amounts accrued but not yet paid) would be owed by the Fund to the
Distributor.
Actual distribution expenditures paid by the Distributor with respect to Class
B or Class C shares for any given year are expected to exceed the fees received
pursuant to the Class B Plan and Class C Plan and payments received pursuant to
contingent deferred sales charges. Such excess will be carried forward and may
be reimbursed by the Fund or its shareholders from payments received through
contingent deferred sales charges in future years and from payments under the
Class B Plan and Class C Plan so long as such Plans are in effect. For example,
if in a fiscal year the Distributor incurred distribution expenses under the
Class B Plan of $1 million, of which $500,000 was recovered in the form of
contingent deferred sales charges paid by investors and $400,000 was reimbursed
in the form of payments made by the Fund to the Distributor under the Class B
Plan, the balance of $100,000, would be subject to recovery in future fiscal
years from such sources.
For the period April 18, 1995 through May 31, 1995, the unreimbursed expenses
incurred by the Distributor under the Class B Plan and carried forward were
approximately $9,000 or .41% of average daily net assets of the class under the
Class B Plan. For the same time period, the unreimbursed expenses incurred by
the Distributor under the Class C Plan and carried forward were approximately
$3,000 or .97% of average daily net assets of the class under the Class C Plan.
If the Class B Plan or Class C Plan was terminated or not continued, the Fund
would not be contractually obligated to pay and has no liability to the
Distributor for any expenses not previously reimbursed by the Fund or recovered
through contingent deferred sales charges.
Banks are currently prohibited under the Glass-Steagall Act from providing
certain underwriting or distribution services. If banking firms were prohibited
from acting in any capacity or providing any of the described services, the
Distributor would consider what action, if any, would be appropriate. The
Distributor does not believe that termination of a relationship with a bank
would result in any material
31
<PAGE> 90
adverse consequences to the Fund. In light of the Glass-Steagall Act, the
Distributor engages banks as Service Organizations only to perform
administrative and shareholder servicing functions. State securities laws
regarding registration of banks and other financial institutions may differ from
the interpretation of federal law expressed herein and banks and other financial
institutions may be required to register as dealers pursuant to certain state
laws.
- ------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
- ------------------------------------------------------------------------------
Purchases of shares are priced at the next determined net asset value after a
purchase order becomes effective which is upon receipt by the Fund of federal
funds. Net asset value per share for each class is determined once daily as of
the close of trading on the New York Stock Exchange (the "Exchange") (currently
4:00 p.m., New York time) each day the Exchange is open. Net asset value per
share for each class is determined by adding the total market value of all
portfolio securities owned by the Fund, cash and other assets, including accrued
interest and dividends attributable to such class. All liabilities attributable
to such class, including accrued expenses, are subtracted. The resulting amount
is divided by the total number of shares of the class outstanding to arrive at
the net asset value of each share of the class. The Fund's assets are valued on
the basis of amortized cost, which involves valuing a portfolio security at its
cost and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the security. While this method provides for certainty in
valuation it may result in periods in which value as determined by amortized
cost is higher or lower than the price the Fund would receive if it sold the
security.
- ------------------------------------------------------------------------------
DISTRIBUTIONS FROM THE FUND
- ------------------------------------------------------------------------------
The Fund's net income is declared as a dividend on a daily basis. Dividends
are paid to shareholders of record immediately prior to the determination of net
asset value for that day. Since shares are issued and redeemed at the time net
asset value is determined, dividends commence on the day following the date
shares are issued and are paid for the day shares are redeemed. All dividends
are automatically invested in additional full and fractional shares of the Fund
at net asset value. Shareholders may elect to receive monthly payment of
dividends in cash by written instruction to ACCESS. Shares purchased by daily
reinvestments are liquidated at the net asset value on the last business day of
the month and the proceeds of such redemption mailed to the shareholder electing
cash payment. A redeeming shareholder receives all dividends accrued through the
date of redemption.
32
<PAGE> 91
The per share dividends on Class B and Class C shares will be lower than the
per share dividends on Class A shares as a result of the distribution fees and
incremental transfer agency fees applicable to such classes of shares.
The Fund's net income for dividend purposes is calculated daily and consists
of interest accrued or discount earned, plus or minus any net realized gains or
losses on portfolio securities, less any amortization of premium and the
expenses of the Fund.
- ------------------------------------------------------------------------------
TAX STATUS
- ------------------------------------------------------------------------------
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. By qualifying as a regulated
investment company, the Fund is not subject to federal income taxes to the
extent it distributes its net investment income and net realized capital gains.
Dividends from net investment income and distributions from any net realized
short-term capital gains are taxable to shareholders as ordinary income.
However, shareholders not subject to tax on their income will not be required to
pay tax on amounts distributed to them.
Information as to the federal tax status of dividends and distributions is
provided by the Fund to shareholders annually if such amounts are $10.00 or
more.
To avoid being subject to a 31% federal back-up withholding tax on dividends,
distributions and redemption payments, a shareholder must furnish the Fund with
a certification of their correct taxpayer identification number.
The foregoing is a brief summary of some of the federal income tax
considerations affecting the Fund and its investors who are U.S. residents or
U.S. corporations. Investors should consult their tax advisers for more detailed
tax advice including state and local tax considerations. Foreign investors
should consult their own counsel for further information as to the U.S. and
their country of residence or citizenship tax consequences of receipt of
dividends and distributions from the Fund.
- ------------------------------------------------------------------------------
FUND PERFORMANCE
- ------------------------------------------------------------------------------
From time to time the Fund advertises its "yield" and "effective yield." Both
yield figures are based on historical earnings and are not intended to indicate
future performance. The "yield" of the Fund refers to the income generated by an
investment in the Fund over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The
33
<PAGE> 92
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment. The current and effective yields for the
seven-day period ending May 31, 1995, and a description of the method by which
the yield was calculated is contained in the Statement of Additional
Information.
Since yield fluctuates, yield data cannot necessarily be used to compare an
investment in the Fund's shares with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed or guaranteed fixed yield
for a stated period of time. Shareholders should remember that yield is
generally a function of the kind and quality of the instrument held in a
portfolio, portfolio maturity, operating expenses and market conditions.
Yield is calculated separately for Class A, Class B and Class C shares.
Because of the differences in distribution fees, the yields for each of the
classes will differ with Class B and Class C shares having a lower yield than
Class A shares.
In reports or other communications to shareholders or in advertising material,
the Fund may compare its performance with that of other mutual funds as listed
in the ratings or rankings prepared by Lipper Analytical Services, Inc.,
Donoghue's Money Market Report or similar independent services which monitor the
performance of mutual funds, with other appropriate indexes of investment
securities, or with investment or savings vehicles. The performance information
may also include evaluations of the Fund published by nationally recognized
ranking services and by financial publications that are nationally recognized,
such as Business Week, Forbes, Fortune, Institutional Investor, Investor's
Business Daily, Kiplinger's Personal Finance Magazine, Money, Mutual Fund
Forecaster, Stanger's Investment Advisor, U.S. News & World Report, USA Today
and The Wall Street Journal. The Fund will include performance data for Class A,
Class B and Class C shares of the Fund in any advertisement or information
including performance data of the Fund.
The Fund may also utilize performance information in hypothetical
illustrations provided in narrative form. These hypotheticals will be
accompanied by the standard performance information required by the SEC as
described above.
- ------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF THE FUND
- ------------------------------------------------------------------------------
The Fund was originally incorporated in Maryland on March 28, 1974 and
reorganized on July 31, 1995, under the laws of the state of Delaware as a
business entity commonly known as a "Delaware Business Trust." It is authorized
to issue an unlimited number of Class A, Class B and Class C shares of
beneficial interest of $0.01 par value. Other classes of shares may be
established from time to time in
34
<PAGE> 93
accordance with provisions of the Fund's Declaration of Trust. Shares issued by
the Fund are fully paid, non-assessable and have no preemptive or conversion
rights.
The Fund currently offers three classes, designated Class A shares, Class B
shares and Class C shares. Each class of shares represents an interest in the
same assets of the Fund and generally are identical in all respects except that
each class bears certain distribution expenses and has exclusive voting rights
with respect to its distribution fee. See "Distribution Plans."
Each class of share is equal as to earnings, assets and voting privileges,
except as noted above, and each class bears the expenses related to the
distribution of its shares. There are no conversion, preemptive or other
subscription rights, except with respect to the conversion of Class B shares and
Class C shares into Class A shares as described above. In the event of
liquidation, each of the shares of the Fund is entitled to its portion of all of
the Fund's net assets after all debt and expenses of the Fund have been paid.
Since Class B shares and Class C shares pay higher distribution expenses, the
liquidation proceeds to Class B shareholders and Class C shareholders are likely
to be lower than to other shareholders.
The Fund does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. More detailed information concerning the Fund is
set forth in the Statement of Additional Information.
The Fund's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or liability of the Fund but the assets of the Fund only shall be liable.
- ------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------
This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Fund with
the SEC under the Securities Act of 1933. Copies of the Registration Statement
may be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the office of the SEC in Washington, D.C.
An investment in the Fund may not be appropriate for all investors.
The Fund is not intended to be a complete investment program, and investors
should consider their long-term investment goals and financial needs when making
an investment decision with respect to the Fund.
An investment in the Fund is intended to be a long-term investment, and should
not be used as a trading vehicle.
35
<PAGE> 94
<TABLE>
<S> <C>
VAN KAMPEN AMERICAN CAPITAL
RESERVE FUND
------------------
2800 Post Oak Boulevard
Houston, TX 77056
------------------
Investment Adviser
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
2800 Post Oak Boulevard
Houston, TX 77056
Distributor
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
EXISTING SHAREHOLDERS-- ACCESS INVESTOR SERVICES, INC.
FOR INFORMATION ON YOUR P.O. Box 418256
EXISTING ACCOUNT PLEASE CALL Kansas City, MO 64141-9256
THE FUND'S TOLL-FREE
NUMBER--(800) 421-5666 Custodian
PROSPECTIVE INVESTORS--CALL STATE STREET BANK AND
YOUR BROKER OR (800) 421-5666 TRUST COMPANY
225 West Franklin Street, P.O. Box 1713
DEALERS--FOR DEALER Boston, MA 02105-1713
INFORMATION, SELLING Attn: Van Kampen American Capital Funds
AGREEMENTS, WIRE ORDERS,
OR REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE Legal Counsel
NUMBER--(800) 421-5666
O'MELVENY & MYERS
FOR SHAREHOLDER AND DEALER 400 South Hope Street
INQUIRIES THROUGH Los Angeles, CA 90071
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD) Independent Accountants
DIAL (800) 772-8889
PRICE WATERHOUSE LLP
FOR TELEPHONE TRANSACTIONS 1201 Louisiana, Suite 2900
DIAL (800) 421-5684 Houston, TX 77002
</TABLE>
<PAGE> 95
RESERVE FUND
------------------------------------------------------------------------------
P R O S P E C T U S
AUGUST 1, 1995
------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
-----------------------------------------------------------------------------
<PAGE> 96
VAN KAMPEN AMERICAN CAPITAL MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
RELATING TO THE ACQUISITION OF ASSETS AND LIABILITIES OF
VAN KAMPEN AMERICAN CAPITAL MONEY MARKET FUND
BY AND IN EXCHANGE FOR SHARES OF
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
------------------------
Statement of Additional Information
Dated August 4, 1995
------------------------
This Statement of Additional Information provides information about the
Van Kampen American Capital Reserve Fund (the "AC Fund"), an open-end
management investment company, in addition to information contained in the
Proxy Statement/Prospectus of the AC Fund, dated August 1, 1995, which also
serves as the Proxy Statement of the Van Kampen American Capital Money Market
Fund, a series of the Van Kampen American Capital Money Market Trust (the "VKAC
Trust") in connection with the issuance of shares of the AC Fund to
shareholders of the VK Fund. This Statement of Additional Information is not a
prospectus. It should be read in conjunction with the Proxy
Statement/Prospectus, into which it has been incorporated by reference and
which may be obtained by contacting the VK Fund located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, (708) 684-6000 or (800) 341-2911 or the AC
Fund located at 2800 Post Oak Boulevard, Houston, Texas 77056, (800) 421-5666.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Proposed Reorganization of the VK Fund................................................ 2
Additional Information About the AC Fund.............................................. 2
Additional Information About the VK Fund.............................................. 2
Financial Statements.................................................................. 2
Pro Forma Financial Statements........................................................ 2
</TABLE>
The AC Fund will provide, without charge, upon the written or oral request
of any person to whom this Statement of Additional Information is delivered, a
copy of any and all documents that have been incorporated by reference in the
registration statement of which this Statement of Additional Information is a
part.
1
<PAGE> 97
PROPOSED REORGANIZATION OF THE VK FUND
The shareholders of the VK Fund are being asked to approve an acquisition
of all the assets and liabilities of the VK Fund in exchange for shares of the
AC Fund (the "Reorganization").
For detailed information about the Reorganization, shareholders should
refer to the Proxy Statement/ Prospectus.
ADDITIONAL INFORMATION ABOUT THE AC FUND
Incorporated herein by reference to the Statement of Additional Information
of the AC Fund, dated August 1, 1995, attached as Appendix A to this Statement
of Additional Information.
ADDITIONAL INFORMATION ABOUT THE VK FUND
Incorporated herein by reference to the Statement of Additional Information
of the VK Fund, dated August 1, 1995, attached as Appendix B to this Statement
of Additional Information.
FINANCIAL STATEMENTS
Incorporated herein by reference in their respective entireties are (i) the
audited financial statements of the AC Fund for fiscal year ended May 31, 1995,
attached as Appendix C to this Statement of Additional Information, (ii) the
audited financial statements of the VK Fund for fiscal year ended June 30, 1994,
attached as Appendix D to this Statement of Additional Information and (iii) the
unaudited semi-annual financial statements of the VK Fund for the six months
ended December 31, 1994, attached as Appendix E to this Statement of Additional
Information.
The unaudited semi-annual financial statements of the AC Fund and the VK
Fund, respectively, reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the interim periods
presented. All such adjustments are of a normal recurring nature.
PRO FORMA FINANCIAL STATEMENTS
In connection with the Reorganization, the AC Fund will acquire all of the
assets and liabilities of the VK Fund in exchange for a number of shares of the
AC Fund equal to the value of the net assets of the VK Fund being acquired.
Based on the respective net assets of the AC Fund and the VK Fund as of May 19,
1995, the net asset value of the VK Fund does not exceed ten (10%) percent of
the AC Fund's net assets. Accordingly, pro forma financial statements are not
included herein.
2
<PAGE> 98
APPENDIX A
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
AUGUST 1, 1995
This Statement of Additional Information is not a Prospectus but contains
information in addition to and more detailed than that set forth in the
Prospectus and should be read in conjunction with the Prospectus. The Statement
of Additional Information and the related Prospectus are both dated August 1,
1995. A Prospectus may be obtained without charge by calling or writing Van
Kampen American Capital Distributors, Inc. at One Parkview Plaza, Oakbrook
Terrace, Illinois 60181 at (800) 421-5666.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION........................................................... 2
INVESTMENT POLICIES........................................................... 3
INVESTMENT RESTRICTIONS....................................................... 3
REPURCHASE AGREEMENTS......................................................... 5
LOANS OF PORTFOLIO SECURITIES................................................. 5
TRUSTEES AND EXECUTIVE OFFICERS............................................... 5
INVESTMENT ADVISORY AGREEMENT................................................. 9
DISTRIBUTOR................................................................... 10
DISTRIBUTION PLANS............................................................ 10
TRANSFER AGENT................................................................ 12
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................................... 12
DETERMINATION OF NET ASSET VALUE.............................................. 12
PURCHASE OF SHARES............................................................ 13
EXCHANGE PRIVILEGE............................................................ 15
REDEMPTION OF SHARES.......................................................... 16
CHECK WRITING PRIVILEGE....................................................... 16
DIVIDENDS AND TAXES........................................................... 16
YIELD INFORMATION............................................................. 17
OTHER INFORMATION............................................................. 18
FINANCIAL STATEMENTS.......................................................... 18
APPENDIX...................................................................... 19
</TABLE>
<PAGE> 99
GENERAL INFORMATION
Van Kampen American Capital Reserve Fund (the "Fund") was originally
incorporated in Maryland on March 28, 1974, and reorganized under the laws of
Delaware July 31, 1995.
Van Kampen American Capital Asset Management, Inc. (the "Adviser"), Van
Kampen American Capital Distributors, Inc. (the "Distributor"), ACCESS Investor
Services, Inc. ("ACCESS") and Advantage Capital Corporation, a retail
broker-dealer affiliate of the Distributor, are wholly owned subsidiaries of Van
Kampen/American Capital, Inc. ("VKAC"), which is a wholly owned subsidiary of
VK/AC Holding, Inc. VK/AC Holding, Inc. is controlled, through the ownership of
a substantial majority of its common stock, by The Clayton & Dubilier Private
Equity Fund IV Limited Partnership ("C&D L.P."), a Connecticut limited
partnership. C&D L.P. is managed by Clayton, Dubilier & Rice, Inc., a New York
based private investment firm. The General Partner of C&D L.P. is Clayton &
Dubilier Associates IV Limited Partnership ("C&D Associates L.P."). The general
partners of C&D Associates L.P. are Joseph L. Rice, III, B. Charles Ames,
William A. Barbe, Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr.,
Hubbard C. Howe and Andrall E. Pearson, each of whom is a principal of Clayton,
Dubilier & Rice, Inc. In addition, certain officers, directors and employees of
VKAC own, in the aggregate, not more than 6% of the common stock of VK/AC
Holding, Inc. and have the right to acquire, upon the exercise of options,
approximately an additional 10% of the common stock of VK/AC Holding, Inc.
VKAC offers one of the industry's broadest lines of
investments -- encompassing mutual funds, closed-end funds and unit investment
trusts -- and is currently the nation's 5th largest broker-sold mutual fund
group according to Strategic Insight, July 1995. VKAC's roots in money
management extend back to 1926. Today, VKAC manages or supervises more than $50
billion in mutual funds, closed-end funds and unit investment trusts -- assets
which have been entrusted to VKAC in more than 2 million investor accounts. VKAC
has one of the largest research teams (outside of the rating agencies) in the
country, with 86 analysts devoted to various specializations.
As of July 14, 1995, no one person was known to own beneficially or hold of
record five percent or more of the outstanding shares of any class of the Fund,
except for those listed below:
<TABLE>
<CAPTION>
NAME AND ADDRESS NATURE OF NUMBER OF
OF HOLDER OWNERSHIP CLASS SHARES HELD PERCENT
- -------------------------------------------- ---------------- ------ ------------ --------
<S> <C> <C> <C> <C>
Donaldson Lufkin Jenrette Securities Corp. of record C 121,347 7.40%
Attn: Mutual Fund Department
P.O. Box 2052
Jersey City, NJ 07303-2052
Van Kampen American Capital of record A 85,603,757 24.68%
Trust Company of record B 1,743,034 17.31%
2800 Post Oak Blvd. of record C 121,413 7.40%
Houston, TX 77056
National Financial Services Corp. of record B 865,147 8.59%
@Southern Nat'l Investment Services, Inc. of record C 84,684 5.16%
200 S. College St. Suite 204
Charlotte, NC 28202-2005
Smith Barney, Inc. of record C 151,079 9.21%
388 Greenwich Street
11th Floor
New York, NY 10013-2375
</TABLE>
2
<PAGE> 100
INVESTMENT POLICIES
The Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Fund uses the amortized cost method of
valuing the Fund's securities pursuant to Rule 2a-7 under the Investment Company
Act of 1940 (the "1940 Act"), certain requirements of which are summarized
below.
In accordance with Rule 2a-7, the Fund is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 13 months or less and invest only in
U.S. dollar denominated securities determined in accordance with procedures
established by the Trustees to present minimal credit risks and which are rated
in one of the two highest rating categories for debt obligations by at least two
nationally recognized statistical rating organizations (or one rating
organization if the instrument was rated by only one such organization) or, if
unrated, are of comparable quality as determined in accordance with procedures
established by the Trustees. The nationally recognized statistical rating
organizations currently rating instruments of the type the Fund may purchase are
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S & P"), Fitch Investors Services, Inc., Duff and Phelps, Inc. and IBCA
Limited and IBCA Inc. See Appendix hereto.
In addition, the Fund will not invest more than five percent of its total
assets in the securities (including the securities collateralizing a repurchase
agreement) of, or subject to puts issued by, a single issuer, except that (i)
the Fund may invest more than five percent of its total assets in a single
issuer for a period of up to three business days in certain limited
circumstances, (ii) the Fund may invest in obligations issued or guaranteed by
the U.S. Government without any such limitation, and (iii) the limitation with
respect to puts does not apply to unconditional puts if no more than ten percent
of the Fund's total assets is invested in securities issued or guaranteed by the
issuer of the unconditional put. Investments in rated securities not rated in
the highest category by at least two rating organizations (or one rating
organization if the instrument was rated by only one such organization), and
unrated securities not determined by the Trustees to be comparable to those
rated in the highest category, will be limited to five percent of the Fund's
total assets, with the investment in any one such issuer being limited to no
more than the greater of one percent of the Fund's total assets or $1,000,000.
As to each security, these percentages are measured at the time the Fund
purchases the security. There can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions which may be less
restrictive than the investment policies stated in the Prospectus and may not be
changed without approval by the holders of a majority of its outstanding shares.
Such majority 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 of the Fund are present or represented by proxy;
or (ii) more than 50% of the Fund's outstanding voting securities. In addition
to the fundamental investment limitations set forth in the Fund's Prospectus,
the Fund may not:
1. Purchase any security which matures more than two years from the date
of purchase. As set forth under "Investment Objective and Policies" in
the Prospectus, the Fund's operating policy is not to purchase any
security having a remaining maturity of more than 13 months;
2. Purchase any security other than (a) obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities; (b) bank
time deposits, certificates of deposit and bankers' acceptances which
are obligations of a domestic bank (or a foreign branch or subsidiary
thereof), or of a foreign bank, rated at the time of investment A-1 and
A-2 by Moody's or Prime-1 and Prime-2 by S & P; (c) instruments secured
by a bank obligation described in item 2(b); (d) commercial paper if
rated A by S & P's or Prime by Moody's, or if not rated, issued by a
company having an outstanding debt issue rated at least A by S & P's or
Moody's (see Appendix for an explanation of these ratings); and (e)
repurchase agreements collateralized by the debt securities described
above;
3. Issue any senior security, although the Fund may borrow as set forth
under item 14 below;
3
<PAGE> 101
4. Purchase or sell real estate; although the Fund may purchase securities
issued by companies, including real estate investment trusts, which
invest in real estate or interest therein;
5. Purchase securities on margin, make short sales of securities or
maintain a short position;
6. Purchase or sell commodities or commodity contracts, or invest in oil,
gas or mineral exploration or development programs;
7. Acquire voting securities of any issuer or any securities of other
investment companies;
8. Make investments for the purpose of exercising control or management;
9. Lend its portfolio securities in excess of 10% of its total assets,
both taken at market value provided that any loans shall be in
accordance with the guidelines established for such loans by the
Trustees of the Fund as described under "Loans of Portfolio
Securities," including the maintenance of collateral from the borrower
equal at all times to the current market value of the securities
loaned;
10. Invest in securities, except repurchase agreements, for which there are
legal or contractual restrictions on resale;
11. Underwrite securities of other issuers except that the Fund may sell an
investment position even though it may be deemed an underwriter as that
term is defined under the Securities Act of 1933;
12. Invest in warrants, or write, purchase or sell puts, calls, straddles,
spreads or combinations thereof;
13. Purchase or retain securities of any issuer if those officers and
directors of the Fund or its investment adviser who own beneficially
more than one-half of one percent of the securities of such issuer,
together own more than five percent of the securities of such issuer;
14. Borrow money, except from banks for temporary or emergency purposes and
then in amounts not exceeding ten percent of the value of the Fund's
total net assets; or mortgage, pledge, or hypothecate any assets except
in connection with any such borrowing and in amounts not exceeding the
lesser of the dollar amount borrowed or five percent of the value of
the Fund's assets at the time of such borrowing (the Fund will not
borrow for leveraging or investment but only to meet redemption
requests which might otherwise require undue dispositions of portfolio
securities);
15. Lend money, except through the purchase or holding of the types of debt
securities in which the Fund may invest;
16. With respect to 75% of its assets, purchase securities if the purchase
would cause the Fund, at that time, to have more than five percent of
the value of its total assets invested in the securities of any one
issuer (except obligations of the U.S. government, its agencies or
instrumentalities and repurchase agreements fully collateralized
thereby);
17. Invest in the securities of any issuer, if immediately thereafter, the
Fund would own more than ten percent of the total value of all
outstanding securities of such issuer;
18. Invest more than five percent of its assets in companies having a
record together with predecessors, of less than three years continuous
operation; and
19. Invest more than 25% of the value of its total assets in securities of
issuers in any particular industry (except obligations of the U.S.
Government and of domestic branches of U.S. banks).
The Fund has committed to one state that so long as its shares are
registered for sale in that state it will apply the restriction contained in No.
17 above to any class of the outstanding securities of any issuer. Consistent
with its investment objectives, the Fund may make additional commitments more
restrictive than its fundamental policies. Should the Fund determine in the
future that a commitment is no longer in the best interests of the Fund and its
shareholders, it will revoke the commitment by withdrawing its shares from sale
in the state to which the commitment was made.
4
<PAGE> 102
REPURCHASE AGREEMENTS
Repurchase agreements are collateralized by the underlying debt securities
and may be considered to be loans under the 1940 Act. The Fund makes payment for
such securities only upon physical delivery or evidence of book entry transfer
to the account of a custodian or bank acting as agent. The seller under a
repurchase agreement is required to maintain the value of the underlying
securities marked-to-market daily at not less than the repurchase price. The
underlying securities must be of a type in which the Fund may invest (normally
securities of the U.S. Government, or its agencies and instrumentalities),
except that the underlying securities may have maturity dates exceeding one
year.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend portfolio securities to brokers, dealers and financial
institutions provided that cash equal to 100% of the market value of the
securities loaned is deposited by the borrower with the Fund and is maintained
each business day. While such securities are on loan, the borrower is required
to pay the Fund any income accruing thereon. Furthermore, the Fund may invest
the cash collateral in portfolio securities thereby increasing the return to the
Fund as well as increasing the market risk to the Fund. The Fund does not
presently intend to lend its portfolio securities in excess of five percent of
its total assets.
Any loans would be made for short-term purposes and would be subject to
termination by the Fund in the normal settlement time, currently five business
days after notice, or by the borrower on one day's notice. Borrowed securities
must be returned when the loan is terminated. Any gain or loss in the market
price of the borrowed securities which occurs during the term of the loan inures
to the Fund and its shareholders, but any gain can be realized only if the
borrower does not default. The Fund may pay reasonable finders', administrative
and custodial fees in connection with a loan.
TRUSTEES AND EXECUTIVE OFFICERS
The Fund's Trustees and executive officers and their principal occupations
for the past five years are listed below.
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
J. Miles Branagan.................. Co-founder, Chairman, Chief Executive Officer and
Strafford Hall President of MDT Corporation, a company which develops,
Suite 200 manufactures, markets and services medical and scientific
1009 Slater Road equipment. A Trustee of each of the Van Kampen American
Harrisville, NC 27560 Capital Funds.
Age: 63
Richard E. Caruso.................. Founder, Chairman and Chief Executive Officer, Integra
Two Radnor Station, Suite 314 Life Sciences Corporation, a firm specializing in life
King of Prussia Road sciences. Trustee of Susquehanna University and First
Radnor, PA 19087 Vice President, The Baum School of Art. Founder and
Age: 62 Director of Uncommon Individual Foundation, a youth
development foundation. Director of International Board
of Business Performance Group, London School of
Economics. Formerly, Director of First Sterling Bank, and
Executive Vice President and a Director of LFC Financial
Corporation, a provider of lease and project financing. A
Trustee of each of the Van Kampen American Capital Funds.
Philip P. Gaughan.................. Prior to February, 1989, Managing Director and Manager of
9615 Torresdale Avenue Municipal Bond Department, W. H. Newbold's Sons & Co. A
Philadelphia, PA 19114 Trustee of each of the Van Kampen American Capital Funds.
Age: 66
</TABLE>
5
<PAGE> 103
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
Roger Hilsman...................... Professor of Government and International Affairs
251-1 Hamburg Cove Emeritus, Columbia University. A Trustee of each of the
Lyme, CT 06371 Van Kampen American Capital Funds.
Age: 75
R. Craig Kennedy................... President and Director, German Marshall Fund of the
1341 E. 50th Street United States. Formerly, advisor to the Dennis Trading
Chicago, IL 60615 Group Inc. Prior to 1992, President and Chief Executive
Age: 43 Officer, Director and member of the Investment Committee
of the Joyce Foundation, a private foundation. A Trustee
of each of the Van Kampen American Capital Funds.
Donald C. Miller................... Prior to 1992, Director of Royal Group, Inc., a company
415 North Adams in insurance related businesses. Formerly Vice Chairman
Hinsdale, IL 60521 and Director of Continental Illinois National Bank and
Age: 75 Trust Company of Chicago and Continental Illinois
Corporation. A Trustee of each of the Van Kampen American
Capital Funds and Chairman of each Van Kampen American
Capital Fund advised by Van Kampen American Capital
Investment Advisory Corp.
Jack E. Nelson..................... President of Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President of Nelson Investment Brokerage
Age: 59 Services Inc., a member of the National Association of
Securities Dealers, Inc. ("NASD") and Securities
Investors Protection Corp. A Trustee of each of the Van
Kampen American Capital Funds.
Don G. Powell*..................... President, Chief Executive Officer and a Director of
2800 Post Oak Blvd. VK/AC Holding, Inc. and Van Kampen American Capital and
Houston, TX 77056 Chairman, Chief Executive Officer and a Director of the
Age: 55 Distributor, and the Adviser. Director and Executive Vice
President of ACCESS, Van Kampen American Capital
Services, Inc. and Van Kampen American Capital Trust
Company. Director, Trustee or Managing General Partner of
each of the Van Kampen American Capital Funds and other
open-end investment companies and closed-end investment
companies advised by the Adviser and its affiliates.
David Rees......................... Contributing Columnist and, prior to 1995, Senior Editor
1601 Country Club Drive of Los Angeles Business Journal. A Director of Source
Glendale, CA 91208 Capital, Inc., an investment company unaffiliated with
Age: 71 Van Kampen American Capital, a Director and the Second
Vice President of International Institute of Los Angeles.
A Trustee of each of the Van Kampen American Capital
Funds.
Jerome L. Robinson................. President of Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director of Pacesetter Software, a
Age: 72 software programming company specializing in white collar
productivity. Director of Panasia Bank. A Trustee of each
of the Van Kampen American Capital Funds.
Lawrence J. Sheehan*............... Of Counsel to and formerly Partner (from 1969 to 1994) of
1999 Avenue of the Stars the law firm of O'Melveny & Myers, legal counsel to the
Suite 700 Fund. Director, FPA Capital Fund, Inc.; FPA New Income
Los Angeles, CA 90067 Fund, Inc.; FPA Perennial Fund, Inc.; Source Capital,
Age: 63 Inc.; and TCW Convertible Security Fund, Inc., investment
companies unaffiliated with Van Kampen American Capital.
A Trustee of each of the Van Kampen American Capital
Funds.
</TABLE>
6
<PAGE> 104
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ---------------------------------------------------------
<S> <C>
Fernando Sisto..................... George M. Bond Chaired Professor and, prior to 1995, Dean
Stevens Institute of Graduate School and Chairman, Department of Mechanical
of Technology Engineering, Stevens Institute of Technology. Director of
Castle Point Station Dynalysis of Princeton, a firm engaged in engineering
Hoboken, NJ 07030 research. A Trustee of each of the Van Kampen American
Age: 70 Capital Funds and Chairman of the Van Kampen American
Capital Funds advised by the Adviser.
Wayne W. Whalen*................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom, legal counsel to certain of the Van Kampen
Chicago, IL 60606 American Capital Funds. A Trustee of each of the Van
Age: 55 Kampen American Capital Funds. He also is a Trustee of
the Van Kampen Merritt Series Trust and closed-end
investment companies advised by an affiliate of the
Adviser.
William S. Woodside................ Vice Chairman of the Board of LSG Sky Chefs, Inc., a
712 Fifth Avenue caterer of airline food. Formerly, Director of Primerica
40th Floor Corporation (currently known as The Traveler's Inc.).
New York, NY 10019 Formerly, Director of James River Corporation, a producer
Age: 73 of paper products. Trustee, and former President of
Whitney Museum of American Art. Formerly, Chairman of
Institute for Educational Leadership, Inc., Board of
Visitors, Graduate School of The City University of New
York, Academy of Political Science. Trustee of Committee
for Economic Development. Director of Public Education
Fund Network, Fund for New York City Public Education.
Trustee of Barnard College. Member of Dean's Council,
Harvard School of Public Health. Member of Mental Health
Task Force, Carter Center. A Trustee of each of the Van
Kampen American Capital Funds.
</TABLE>
- ---------------
* Such Trustees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. Powell is an interested person of the Adviser and the
Fund by reason of his position with the Adviser. Mr. Sheehan and Mr. Whalen
are interested persons of the Adviser and the Fund by reason of their firms
having acted as legal counsel to the Adviser or an affiliate thereof.
The Fund's officers other than Messrs. McDonnell and Nyberg are located at
2800 Post Oak Blvd., Houston, Texas 77056. Messrs. McDonnell and Nyberg are
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS DURING
NAME AND AGE OFFICES WITH FUND PAST 5 YEARS
- ------------------------- -------------------------- -------------------------------------------
<S> <C> <C>
Nori L. Gabert........... Vice President and Vice President, Associate General Counsel
Age: 41 Secretary and Corporate Secretary of the Adviser.
Tanya M. Loden........... Vice President and Vice President and Controller of most of
Age: 35 Controller the investment companies advised by the
Adviser, formerly Tax Manager/Assistant
Controller.
Dennis J. McDonnell...... Vice President President, Chief Operating Officer and a
Age: 53 Director of the Adviser. Director of VK/AC
Holding, Inc. and Van Kampen American
Capital.
Curtis W. Morell......... Vice President and Vice President and Treasurer of most of the
Age: 48 Treasurer investment companies advised by the
Adviser.
</TABLE>
7
<PAGE> 105
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS DURING
NAME AND AGE OFFICES WITH FUND PAST 5 YEARS
- ------------------------- -------------------------- -------------------------------------------
<S> <C> <C>
Ronald A. Nyberg......... Vice President Executive Vice President, General Counsel
Age: 41 and Secretary of Van Kampen American
Capital. Executive Vice President and a
Director of the Distributor. Executive Vice
President of the Adviser. Director of ICI
Mutual Insurance Co., a provider of
insurance to members of the Investment
Company Institute.
Robert C. Peck, Jr....... Vice President Senior Vice President and Director of the
Age: 48 Adviser.
David R. Troth........... Vice President Senior Vice President of the Advisor
Age: 61
J. David Wise............ Vice President and Vice President, Associate General Counsel
Age: 51 Assistant Secretary and Assistant Corporate Secretary of the
Adviser.
Paul R. Wolkenberg....... Vice President Senior Vice President of the Adviser;
Age: 50 President, Chief Operating Officer and
Director of Van Kampen American Capital
Services, Inc. Executive Vice President,
Chief Operating Officer and Director of Van
Kampen American Capital Trust Company.
Executive Vice President and Director of
ACCESS.
</TABLE>
The Trustees and officers of the Fund as a group own less than one percent
of the outstanding shares of the Fund. Only Messrs. Branagan, Caruso, Hilsman,
Powell, Rees, Sheehan, Sisto and Woodside served as Trustees of the Fund during
the last fiscal year. During the fiscal year ended May 31, 1995, the Trustees
who were not affiliated with the Adviser or its parent received as a group
$19,263 in trustees' fees from the Fund in addition to certain out-of-pocket
expenses. Such Trustees also received compensation for serving as directors or
trustees of other investment companies advised by the Adviser. For legal
services rendered during the last fiscal year, the Fund paid legal fees of
$20,066 to the law firm of O'Melveny & Myers, of which Mr. Sheehan is Of
Counsel. The firm also serves as legal counsel to other Van Kampen American
Capital Funds.
Additional information regarding compensation paid by the Fund and the
related mutual funds for which the Trustees serve as trustees is set forth
below. The compensation shown for the Fund is for the most recent fiscal year,
and the total compensation shown for the Fund and other related mutual Funds is
for the calendar year ended December 31, 1994. Mr. Powell is not compensated for
his service as Trustee, because of his affiliation with the Adviser.
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT FROM REGISTRANT
COMPENSATION BENEFITS ACCRUED AND FUND
FROM AS PART OF FUND COMPLEX PAID TO
NAME OF PERSON REGISTRANT EXPENSES DIRECTORS(1)(5)
- ------------------------------------------------- --------------- ---------------- ---------------
<S> <C> <C> <C>
J. Miles Branagan................................ $ 2,355 -0- $64,000
Dr. Richard E. Caruso(3)......................... 2,360(2) -0- 64,000
Dr. Roger Hilsman................................ 2,425 -0- 66,000
David Rees(3).................................... 2,355 -0- 64,000
Lawrence J. Sheehan.............................. 2,465 -0- 67,000
Dr. Fernando Sisto(3)............................ 3,020 -0- 82,000
William S. Woodside(4)........................... 1,145 -0- 18,000
</TABLE>
- ---------------
(1) Represents 29 investment company portfolios in the fund complex.
8
<PAGE> 106
(2) Mr. Caruso deferred his $2,280 of his compensation from the Fund for the
most recent fiscal year.
(3) Messrs. Caruso, Rees and Sisto have deferred compensation in the past. The
cumulative deferred compensation paid by the Fund is as follows: Caruso,
$6,668; Rees, $31,491; Sisto, $5,810.
(4) Prior to October 6, 1994, Mr. Woodside's compensation was paid by the
Adviser. As a result, with respect to the second and fourth columns, $970
and $36,000, respectively, was paid by the Adviser directly.
(5) Includes the following amounts for which the various funds were reimbursed
by the Adviser -- Branagan, $2,000; Caruso, $2,000; Hilsman, $1,000; Rees,
$2,000; Sheehan, $2,000; Sisto, $2,000; Woodside, $1,000. (Mr. Woodside was
paid $36,000 directly by the Advisor as discussed in footnote 4 above.)
Beginning July 21, 1995, the Fund pays each trustee who is not affiliated
with the Adviser, the Distributor or VKAC an annual retainer of $1,010 and a
meeting fee of $29 per Board meeting plus expenses. No additional fees are paid
for committee meetings or to the chairman of the board. In order to alleviate an
additional expense that might be caused by the new compensation arrangement, the
trustees have approved a reduction in the compensation per trustee and have
agreed to an aggregate annual compensation cap with respect to the combined fund
complex of $84,000 per trustee until December 31, 1996, based upon the net
assets and the number of Van Kampen American Capital funds as of July 21, 1995
(except that Mr. Whalen, who is a trustee of 34 closed-end funds advised by an
affiliate of the Adviser, would receive an additional $119,000 for serving as a
trustee of such funds). In addition, the Adviser has agreed to reimburse the
Fund through December 31, 1996 for any increase in the aggregate trustees'
compensation paid by the Fund over their 1994 fiscal year aggregate
compensation.
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of 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 the Fund's
investment objectives. The Adviser also furnishes at no cost to the Fund (except
as noted herein) the services of sufficient executive and clerical personnel for
the Fund as are necessary to prepare registration statements, prospectuses,
shareholder reports, and notices and proxy solicitation materials. In addition,
the Adviser furnishes at no cost to the Fund the services of a President of the
Fund, one or more Vice Presidents as needed, and a Secretary.
Under the Advisory Agreement, the Fund bears the cost of its accounting
services, which includes maintaining its financial books and records and
calculating its daily net asset value. The costs of such accounting services
include the salaries and overhead expenses of a Treasurer or other principal
financial officer and the personnel operating under his direction. Charges are
allocated among the investment companies advised or subadvised by the Adviser.
During the fiscal years ended May 31, 1993, 1994 and 1995, the Adviser received
$1,426,894, $1,494,701 and $1,896,937, respectively in advisory fees from the
Fund. For such periods the Fund paid $90,648, $106,905 and $100,666,
respectively, for accounting services. A portion of these amounts was paid to
the Adviser or its parent in reimbursement of personnel, facilities and
equipment costs attributable to the provision of accounting services to the
Fund. The services provided by the Adviser are at cost. The Fund also pays
transfer agency fees, custodian fees, legal and auditing fees, the costs of
reports to shareholders and all other ordinary expenses not specifically assumed
by the Adviser.
Under the Advisory Agreement, the Fund pays to the Adviser as compensation
for the services rendered, facilities furnished, and expenses paid by it a fee
payable monthly computed on average daily net assets of the Fund at the annual
rate of: 0.50% on the first $150 million net assets; 0.45% on the next $100
million of net assets; 0.40% on the next $100 million of net assets; and 0.35%
on the net assets over $350 million.
The average net asset value for purposes of computing the advisory fee is
determined by taking the average of all of the determinations of net asset value
for each day during a given calendar month. Such fee is payable for each
calendar month as soon as practicable after the end of that month.
9
<PAGE> 107
The fees payable to the adviser by the Fund shall be reduced by any
commissions, tender solicitation and other fees, brokerage or similar payments
received by the Adviser, or any other direct or indirect majority owned
subsidiary of VK/AC Holding, Inc. in connection with the purchase and sale of
portfolio investments of the Fund, less any direct expenses incurred by such
subsidiary of VK/AC Holding, Inc. in connection with obtaining such commissions,
fees, brokerage or similar payments. The Adviser agrees to use its best efforts
to recapture tender solicitation fees and exchange offer fees for the Fund's
benefit and to advise the Trustees of the Fund of any other commissions, fees,
brokerage or similar payments which may be possible for the Adviser or any other
direct or indirect majority owned subsidiary of VK/AC Holding, Inc., to receive
in connection with the Fund's portfolio transactions or other arrangements which
may benefit the Fund.
The Advisory Agreement also provides that, in the event the ordinary
business expenses of the Fund for any fiscal year exceed one percent of the
Fund's average net assets, the compensation due the Adviser will be reduced by
the amount of such excess and that, if a reduction in and refund of the advisory
fee is insufficient, the Adviser will pay the Fund monthly an amount sufficient
to make up the deficiency, subject to readjustment during the year. Ordinary
business expenses do not include (1) interest and taxes; (2) brokerage
commissions; (3) certain litigation and indemnification expenses as described in
the Advisory Agreement and (4) payments made by the Fund pursuant to the
Distribution Plans. The Advisory Agreement also provides that the Adviser shall
not be liable to the Fund for any actions or omissions if it acted in good faith
without negligence or misconduct.
The Advisory Agreement has an initial term of two years and may be
continued from year to year if specifically approved at least annually (a)(i) by
the Fund's Trustees or (ii) by vote of a majority of the Fund's outstanding
voting securities and (b) by the affirmative vote of a majority of the Trustees
who are not parties to the agreement or interested persons of any such party by
votes cast in person at a meeting called for such purpose. The Advisory
Agreement provides that it shall terminate automatically if assigned and that it
may be terminated without penalty by either party on 60 days' written notice.
DISTRIBUTOR
The Distributor, acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Underwriting Agreement"). The Distributor
is owned by the Adviser's parent company. The Distributor's obligation is an
agency or "best efforts" arrangement under which the Distributor is required to
take and pay for only such shares of the Fund as may be sold to the public. The
Underwriting Agreement is renewable from year to year if approved (a) (i) by the
Fund's Trustees or (ii) by a vote of a majority of the Fund's outstanding voting
securities and (b) by the affirmative vote of a majority of Directors who are
not parties to the Underwriting Agreement or interested persons of any party, by
votes cast in person at a meeting called for such purpose. The Underwriting
Agreement provides that it will terminate if assigned, and that it may be
terminated without penalty by either party on 60 days' written notice. The
Distributor bears the cost of printing (but not typesetting) prospectuses used
in connection with this offering and the cost and expense of supplemental sales
literature, promotion and advertising. The Fund pays all expenses attributable
to the registrations of its shares under federal and state laws, including
registration and filing fees, the cost of preparation of the prospectuses,
related legal and auditing expenses, and the cost of printing prospectuses for
current shareholders.
DISTRIBUTION PLANS
The Fund adopted a Class A distribution plan, a Class B distribution plan
and a Class C distribution plan (the "Class A Plan", "Class B Plan" or "Class C
Plan", respectively) to permit the Fund directly or indirectly to pay expenses
associated with servicing shareholders and in the case of the Class B Plan and
Class C Plan the distribution of its shares (the Class A Plan, the Class B Plan
and the Class C Plan are sometimes referred to herein collectively as "Plans"
and individually as a "Plan").
The Trustees have authorized payments by the Fund under the Plan to
reimburse the Distributor for its payments to certain financial institutions
(which may include banks), securities dealers and other industry professionals
(collectively, "Service Organizations") for administration, for servicing Fund
shareholders who
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are also their clients and/or for distribution. Such payments are based on an
annual percentage of the value of Fund shares held in shareholder accounts for
which such Service Organizations are responsible. With respect to the Class A
Plan, the Distributor intends to make payments, in an amount up to 0.15% of the
aggregate average daily net assets attributable to Class A shares, thereunder
only to compensate Service Organizations for personal service and/or the
maintenance of shareholder accounts. With respect to the Class B and C Plans,
authorized payments by the Fund include payments at an annual rate of up to
0.15% of the net assets of the shares of the respective class to reimburse the
Distributor for payments for personal service and/or the maintenance of
shareholder accounts. With respect to the Class B Plan, authorized payments by
the Fund also include payments at an annual rate of up to 0.75% of the net
assets of the Class B shares to reimburse the Distributor for (1) commissions
and transaction fees of up to four percent of the purchase price of Class B
shares purchased by the clients of broker-dealers and other Service
Organizations, (2) out-of-pocket expenses of printing and distributing
prospectuses and annual and semi-annual shareholder reports to other than
existing shareholders, (3) out-of-pocket and overhead expenses for preparing,
printing and distributing advertising material and sales literature, (4)
expenses for promotional incentives to broker-dealers and financial and industry
professionals, (5) advertising and promotion expenses, including conducting and
organizing sales seminars, marketing support salaries and bonuses, and
travel-related expenses, and (6) interest expense thereon computed at the
three-month LIBOR rate plus one and one-half percent compounded quarterly on the
unreimbursed distribution expenses. With respect to the Class C Plan, authorized
payments by the Fund also include payments at an annual rate of up to 0.75% of
the net assets of the Class C shares to reimburse the Distributor for (1)
upfront commissions and transaction fees of up to 0.75% of the purchase price of
Class C shares purchased by the clients of broker-dealers and other Service
Organizations and ongoing commissions and transaction fees paid to
broker-dealers and other Service Organizations in an amount up to 0.75% of the
average daily net assets of the Fund's Class C shares, (2) out-of-pocket
expenses of printing and distributing prospectuses and annual and semi-annual
shareholder reports to other than existing shareholders, (3) out-of-pocket and
overhead expenses for preparing, printing and distributing advertising material
and sales literature, (4) expenses for promotional incentives to broker-dealers
and financial and industry professionals, (5) advertising and promotion
expenses, including seminars, marketing support salaries and bonuses, and
travel-related expenses, and (6) interest expense thereon computed at the
three-month LIBOR rate plus one and one-half percent compounded quarterly on the
unreimbursed distribution expenses. Such reimbursements are subject to the
maximum sales charge limits specified by the NASD for asset-based charges.
Banks are currently prohibited under the Glass-Steagall Act from providing
certain underwriting or distribution services. If banking firms were prohibited
from acting in any capacity or providing any of the described services, the
Distributor would consider what action, if any, would be appropriate. The
Distributor does not believe that termination of a relationship with a bank
would result in any material adverse consequences to the Fund. In addition,
state securities laws on this issue may differ from the interpretations of
federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law.
As required by Rule 12b-1 under the 1940 Act, each Plan and the forms of
servicing agreements and selling group agreements were approved by the Trustees,
including a majority of the Trustees who are not affiliated persons (as defined
in the 1940 Act) of the Fund and who have no direct or indirect financial
interest in the operation of any of the Plans or in any agreements related to
each Plan ("Independent Trustees"). In approving each Plan in accordance with
the requirements of Rule 12b-1, the Trustees determined that there is a
reasonable likelihood that each Plan will benefit the Fund and its shareholders.
Each Plan requires the Distributor to provide the Trustees at least
quarterly with a written report of the amounts expended pursuant to each Plan
and the purposes for which such expenditures were made. Unless sooner terminated
in accordance with its terms, each Plan will continue in effect for a period of
one year and thereafter will continue in effect so long as such continuance is
specifically approved at least annually by the Trustees, including a majority of
Independent Trustees.
Each Plan may be terminated by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting securities of the
Fund. Any change in any of the Plans that would materially increase
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the distribution expenses borne by the Fund requires shareholder approval;
otherwise, it may be amended by a majority of the Trustees, including a majority
of the Independent Trustees, by vote cast in person at a meeting called for the
purpose of voting upon such amendments. So long as each Plan is in effect, the
selection or nomination of the Independent Trustees is committed to the
discretion of the Independent Trustees.
During the fiscal year ended May 31, 1995, the Fund's aggregate expenses
under the Class A Plan were $611,646 or .14%, respectively of the Fund's average
net assets. Such expenses were paid to reimburse the Distributor for payments
made to Service Organizations for servicing Fund shareholders and for
administering the Class A Plan. For the period April 18, 1995 (the commencement
of the offering of Class B shares) through May 31, 1995, the Fund's aggregate
expenses under the Class B Plan were $3,845 or .17% (not annualized) of the
Class B shares' average net assets. Such expenses were paid to reimburse the
Distributor for the following payments: $3,268 for commissions and transaction
fees paid to broker-dealers and other Service Organizations in respect of sales
of Class B shares of the Fund and $577 for fees paid to Service Organizations
for servicing Class B shareholders and administering the Class B Plan. For the
period April 18, 1995 (the commencement of the offering of Class C shares)
through May 31, 1995, the Fund's aggregate expenses under the Class C Plan were
$526 or .17% (not annualized) of the Class C shares' average net assets. Such
expenses were paid to reimburse the Distributor for the following payments: $447
for commissions and transaction fees paid to broker-dealers and other Service
Organizations in respect of sales of Class C shares of the Fund and $79 for fees
paid to Service Organizations for servicing Class B shareholders and
administering the Class C Plan.
TRANSFER AGENT
During the fiscal years ending May 31, 1993, 1994 and 1995, ACCESS,
shareholder service agent and dividend disbursing agent for the Fund, received
fees aggregating $986,681, $898,801 and $1,266,690 respectively, for these
services. These services are provided at cost plus a profit.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities for the
Fund and for the placement of its portfolio business and the negotiation of the
commissions, if any, on such transactions. As most transactions made by the Fund
are principal transactions at net prices, the Fund incurs little or no brokerage
cost. During the past three years the Fund paid no commissions to brokers on the
purchase or sale of portfolio securities. Portfolio securities are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers include the spread between the bid and
asked price. The Adviser places portfolio transactions in a manner deemed fair
and reasonable to the Fund and not according to any formula. The primary
consideration in all portfolio transactions is prompt execution of orders in an
effective manner at a favorable price.
The Adviser places portfolio transactions for other advisory accounts
including other investment companies, and seeks to allocate portfolio
transactions equitably whenever concurrent decisions are made to purchase or
sell securities by the Fund and another advisory account. In some cases, this
procedure could have an adverse effect on the price or the amount of securities
available to the Fund. In making such allocations, the main factors considered
by the Adviser are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held, and
opinions of the persons responsible for recommending the investment.
DETERMINATION OF NET ASSET VALUE
Purchases of shares will be priced at the net asset value next determined
after a purchase order becomes effective which is upon receipt by the Fund of
federal funds. The net asset value per share is determined once daily as of the
close of trading on the New York Stock Exchange (the "Exchange") (currently 4:00
p.m., New York time) each day the Exchange is open. The Exchange is currently
closed on weekends and on the
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following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value is computed by dividing the value of the Fund's securities plus all cash
and other assets (including accrued interest) less all liabilities (including
accrued expenses) by the number of shares outstanding.
The valuation of the Fund's portfolio securities is based upon their
amortized cost, which does not take into account unrealized capital gains or
losses. Amortized cost valuation involves initially valuing an instrument at its
cost and thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price that the Fund would receive if
it sold the instrument.
The Fund's use of the amortized cost method of valuing its portfolio
securities is permitted by a rule adopted by the Securities and Exchange
Commission ("SEC"). Under this rule, the Fund must maintain a dollar-weighted
average portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of thirteen months or less and invest only in securities
determined by the Adviser to be of eligible quality with minimal credit risks.
The Fund's Trustees has established procedures reasonably designed, taking
into account current market conditions and the Fund's investment objective, to
stabilize the net asset value per share for purposes of sales and redemptions at
$1.00. These procedures include review by the Trustees, at such intervals as it
deems appropriate, to determine the extent, if any, to which the net asset value
per share calculated by using available market quotations deviates from $1.00
per share based on amortized cost. In the event such deviation should exceed
four tenths of one percent, the Trustees is required to promptly consider what
action, if any, should be initiated. If the Trustees believes that the extent of
any deviation from a $1.00 amortized cost price per share may result in material
dilution or other unfair results to new or existing shareholders, it will take
such steps as it considers appropriate to eliminate or reduce these consequences
to the extent reasonably practicable. Such steps may include selling portfolio
securities prior to maturity; shortening the average maturity of the portfolio;
withholding or reducing dividends; or utilizing a net asset value per share
determined by using available market quotations.
The assets belonging to the Class A shares, the Class B shares and the
Class C shares will be invested together in a single portfolio. The net asset
value of each class will be determined separately by subtracting the expenses
and liabilities allocated to that class from the assets belonging to that class
pursuant to an order issued by the SEC.
PURCHASE OF SHARES
Shares of the Fund are sold in a continuous offering and may be purchased
on any business day through ACCESS. All orders become effective when the wire or
check payment is converted into federal funds. A check order will normally be
converted into federal funds on the second business day following receipt of
payment by ACCESS. When payment is by wire transfer of federal funds, such order
becomes effective upon receipt provided that prior notice has been given as
described below; other bank wire payments will normally be converted into
federal funds on the day following receipt.
After each initial and subsequent investment, the shareholder receives a
statement of the number of shares owned. Certificates for shares purchased will
not normally be issued but shares will be held on deposit by ACCESS. However,
the shareholder may request a certificate by writing ACCESS for shares at any
time. It is preferred that such request for a certificate be for at least 1,000
shares in order to minimize shareholder service agent costs.
ALTERNATIVE SALES ARRANGEMENTS
The Fund issues three classes of shares: Class A shares are sold at net
asset value without a sales charge; Class B shares and Class C shares are sold
at net asset value and are subject to a contingent deferred sales charge. The
three classes of shares each represent interests in the same portfolio of
investments of the Fund,
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have the same rights and are identical in all respects, except that Class B and
Class C shares bear the expenses of the deferred sales arrangements,
distribution fees, and any expenses (including higher transfer agency costs)
resulting from such sales arrangements, and have exclusive voting rights with
respect to the Rule 12b-1 distribution plan pursuant to which the distribution
fee is paid.
WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE ("CDSC -- CLASS B
AND C")
The CDSC -- Class B and C may be waived on redemptions of Class B and Class
C shares in the circumstances described below:
(a) Redemption Upon Disability or Death
The Fund will waive the CDSC -- Class B and C on redemptions following the
death or disability of a Class B and Class C shareholder. An individual will be
considered disabled for this purpose if he or she meets the definition thereof
in Section 72(m)(7) of the Internal Revenue Code (the "Code"), which in
pertinent part defines a person as disabled if such person "is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or to be
of long-continued and indefinite duration." While the Fund does not specifically
adopt the balance of the Code's definition which pertains to furnishing the
Secretary of Treasury with such proof as he or she may require, the Distributor
will require satisfactory proof of death or disability before it determines to
waive the CDSC -- Class B and C.
In cases of disability or death, the CDSC -- Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC -- Class B and C applies to a total or partial
redemption, but only to redemptions of shares held at the time of the death or
initial determination of disability.
(b) Redemption in Connection with Certain Distributions from Retirement
Plans
The Fund will waive the CDSC -- Class B and C when a total or partial
redemption is made in connection with certain distributions from Retirement
Plans. The charge will be waived upon the tax-free rollover or transfer of
assets to another Retirement Plan invested in one or more of Van Kampen American
Capital Funds; in such event, as described below, the Fund will "tack" the
period for which the original shares were held onto the holding period of the
shares acquired in the transfer or rollover for purposes of determining what, if
any, CDSC -- Class B and C is applicable in the event that such acquired shares
are redeemed following the transfer or rollover. The charge also will be waived
on any redemption which results from the return of an excess contribution
pursuant to Section 408(d)(4) or (5) of the Code, the return of excess deferral
amounts pursuant to Code Section 401(k)(8) or 402(g)(2), or from the death or
disability of the employee (see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In
addition, the charge will be waived on any minimum distribution required to be
distributed in accordance with Code Section 401(a)(9).
The Fund does not intend to waive the CDSC -- Class B and C for any
distributions from IRAs or other Retirement Plans not specifically described
above.
(c) Redemption Pursuant to a Fund's Systematic Withdrawal Plan
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the account up
to the required minimum balance. The Fund will waive the CDSC -- Class B and C
upon such involuntary redemption.
(d) Involuntary Redemptions of Shares in Accounts that Do Not Have the
Required Minimum Balance
A shareholder may elect to participate in a systematic withdrawal plan
("Plan") with respect to the shareholder's investment in the Fund. Under the
Plan, a dollar amount of a participating shareholder's investment in the Fund
will be redeemed systematically by the Fund on a periodic basis, and the
proceeds mailed to the shareholder. The amount to be redeemed and frequency of
the systematic withdrawals will be
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<PAGE> 112
specified by the shareholder upon his or her election to participate in the
Plan. The CDSC -- Class B and C will be waived on redemptions made under the
Plan.
The amount of the shareholder's investment in a Fund at the time the
election to participate in the Plan is made with respect to the Fund is
hereinafter referred to as the "initial account balance." The amount to be
systematically redeemed from such Fund without the imposition of a CDSC -- Class
B and C may not exceed a maximum of 12% annually of the shareholder's initial
account balance. The Fund reserves the right to change the terms and conditions
of the Plan and the ability to offer the Plan.
(e) Involuntary Redemptions of Shares in Accounts that Do Not Have the
Required Minimum Balance
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the account up
to the required minimum balance. Any involuntary redemption may only occur if
the shareholder account is less than the amount specified in the Prospectus due
to shareholder redemptions. The Fund will waive the CDSC -- Class B and Class C
upon such involuntary redemption.
(f) Reinvestment of Redemption Proceeds in Shares of the Same Fund Within
120 Days After Redemption
A shareholder who has redeemed Class C shares of a Fund may reinvest, with
credit for any CDSC -- Class C paid on the redeemed shares, any portion or all
of his or her redemption proceeds (plus that amount necessary to acquire a
fractional share to round off his or her purchase to the nearest full share) in
shares of the Fund, provided that the reinvestment is effected within 120 days
after such redemption and the shareholder has not previously exercised this
reinvestment privilege with respect to Class C shares of the Fund. Shares
acquired in this manner will be deemed to have the original cost and purchase
date of the redeemed shares for purposes of applying the CDSC -- Class C to
subsequent redemptions.
(g) Redemption by Adviser
The Fund may waive the CDSC -- Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
EXCHANGE PRIVILEGE
The following supplements the discussion of "Exchange Privilege" in the
Prospectus:
By use of the exchange privilege, the investor authorizes ACCESS to act on
telephonic, telegraphic or written exchange instructions from any person
representing himself to be the investor or the agent of the investor and
believed by ACCESS to be genuine. VKAC and its subsidiaries, including ACCESS
(collectively, "Van Kampen American Capital"), and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated by
telephone are genuine. Such procedures include requiring certain personal
identification information prior to acting upon telephone instructions, tape
recording telephone communications, and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
neither Van Kampen American Capital nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. Van Kampen
American Capital and the Fund may be liable for any losses due to unauthorized
or fraudulent instructions if reasonable procedures are not followed.
Exchange requests received on a business day prior to the time shares of
the funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares in the fund from which the
shareholder is withdrawing an investment will be redeemed at the net asset value
per share next determined on the date of receipt. Shares of the new fund into
which the shareholder is investing will also normally be purchased at the net
asset value per share, plus any applicable sales charge, next determined on the
date of receipt. Exchange requests received on a business day after the time
shares of the funds involved in the request are priced will be processed on the
next business day in the manner described above.
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A prospectus of any of these mutual funds may be obtained from any
authorized dealer or the Distributor. An investor considering an exchange to one
of such funds should refer to the prospectus for additional information
regarding such fund.
REDEMPTION OF SHARES
Redemptions are not made on days during which the Exchange is closed,
including those holidays listed under "Determination of Net Asset Value." The
right of redemption may be suspended and the payment therefor may be postponed
for more than seven days during any period when (a) the Exchange is closed for
other than customary weekends or holidays; (b) trading on the Exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund to fairly determine the value of its net assets; or (d)
the SEC, by order, so permits.
CHECK WRITING PRIVILEGE
To establish the check writing privilege, a shareholder must complete the
appropriate section of the application and the Authorization for Redemption form
and return both documents to ACCESS before checks will be issued. All signatures
on the authorization card must be guaranteed if any of the signators are persons
not referenced in the account registration or if more than 30 days have elapsed
since ACCESS established the account on its records. Moreover, if the
shareholder is a corporation, partnership, trust, fiduciary, executor or
administrator, the appropriate documents appointing authorized signers
(corporate resolutions, partnerships or trust agreements) must accompany the
authorization card. The documents must be certified in original form, and the
certificates must be dated within 60 days of their receipt by ACCESS.
The privilege does not carry over to accounts established through exchanges
or transfers. It must be requested separately for each fund account.
DIVIDENDS AND TAXES
The Fund's net income is declared as dividends on a daily basis. Dividends
are paid to shareholders of record immediately prior to the determination of net
asset value for that day. Since shares are issued and redeemed at the time net
asset value is determined, dividends commence on the day following the date
shares are issued and are received for the day shares are redeemed. The per
share dividends on Class B and Class C shares will be lower than the per share
dividends on Class A shares as a result of the distribution fees and higher
transfer agency fees applicable to the Class B and Class C shares. All dividends
are automatically invested in additional full and fractional shares of the Fund
at net asset value. Shareholders may elect to receive monthly payment of
dividends in cash by written instruction to ACCESS. Shares purchased by daily
reinvestments are liquidated at the net asset value on the last business day of
the month and the proceeds of such redemption less any applicable CDSC mailed to
the shareholder electing cash payment. A redeeming shareholder receives all
dividends accrued through the date of redemption.
The Fund's net income for dividend purposes is calculated daily and
consists of interest accrued or discount earned, plus or minus any net realized
gains or losses on portfolio securities, less any amortization of premium and
the expenses of the Fund.
Should the Fund incur or anticipate any unusual expense, or loss or
depreciation which would adversely affect its net asset value per share or
income for a particular period, the Trustees would at that time consider whether
to adhere to the present dividend policy described above or to revise it in the
light of the then prevailing circumstances. For example, if the Fund's net asset
value per share was reduced below $1.00, the Board may suspend further dividend
payments until net asset value returned to $1.00. Thus, such expenses or losses
or depreciation may result in an investor receiving no dividends for the period
during which he held his shares and in his receiving upon redemption a price per
share lower than that which he paid.
By meeting certain diversification of assets and other requirements of the
Internal Revenue Code (the "Code"), the Fund intends to continue to qualify as a
regulated investment company and thereby be relieved
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from payment of federal income taxes on that portion of its net investment
income and net realized capital gains which is distributed to shareholders.
Dividends from net investment income and distributions from any net realized
short-term capital gains are taxable to shareholders as ordinary income.
Dividends do not qualify for the dividends received deduction for corporations.
All dividends and any distributions are taxable to the shareholder whether or
not reinvested in shares. Information as to the federal tax status of dividends
and distributions is provided by the Fund to shareholders annually if such
amounts are $10.00 or more.
If for any taxable year the Fund does not qualify for the special tax
treatment afforded regulated investment companies, all of its taxable income,
including any net realized capital gains, would be subject to tax at regular
corporate rates (without any deduction for distributions to shareholders).
The Fund is subject to a four percent excise tax to the extent it does not
distribute to its shareholders during any calendar year at least 98% of its
ordinary taxable (net investment) income for the twelve months ended December
31, plus 98% of its capital gain net income for the twelve months ended October
31 of such year. The Fund intends to distribute sufficient amounts to avoid
liability for the excise tax.
If shares of the Fund are sold or exchanged within 90 days of acquisition,
and shares of the same or a related mutual fund are acquired, to the extent the
sales charge is reduced or waived on the subsequent acquisition, the sales
charge may not be used to determine the basis in the disposed shares for
purposes of determining gain or loss. To the extent the sales charge is not
allowed in determining gain or loss on the initial shares, it is capitalized in
the basis of the subsequent shares.
Dividends and distributions declared payable to shareholders of record
after September 30 of any year and paid before February 1 of the following year
are considered taxable income to shareholders on the record date even though
paid in the next year.
Dividends to shareholders who are non-resident aliens may be subject to a
United States withholding tax at a rate up to 30% under existing provisions of
the Code applicable to foreign individuals and entities unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Non-resident shareholders are urged to consult their own tax advisers concerning
the applicability of the United States withholding tax.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury Regulations promulgated thereunder. The Code and these Treasury
Regulations are subject to change by legislative or administrative action either
prospectively or retroactively.
Dividends and any distributions may also be subject to state and local
taxes.
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to Federal, state or local taxes.
Back-up Withholding. The Fund is required to withhold and remit to the
United States Treasury 31% of (i) reportable taxable dividends and distributions
and (ii) the proceeds of any redemptions of Fund shares with respect to any
shareholder who is not exempt from withholding and who fails to furnish the Fund
with a correct taxpayer identification number, who fails to report fully
dividend or interest income, or who fails to certify to the Fund that he has
provided a correct taxpayer identification number and that he is not subject to
withholding. (An individual's taxpayer identification number is his social
security number.) The 31% back-up withholding tax is not an additional tax and
may be credited against a taxpayer's regular federal income tax liability.
YIELD INFORMATION
The annualized current yield for Class A shares for the seven day period
ending May 31, 1995 was 4.53%. Its compound effective yield for the same period
was 4.63%. For Class B shares the annualized yield and compound effective yield
for the seven day period was 3.61% and 3.68%, respectively. For Class C shares
the annualized yield and compound effective yield for the seven day period was
3.59% and 3.65%, respectively.
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The yield of the Fund is its net income expressed in annualized terms. The
SEC requires by rule that a yield quotation set forth in an advertisement for a
"money market" fund be computed by a standardized method based on a historical
seven calendar day period. The standardized yield is computed by determining the
net change (exclusive of realized gains and losses and unrealized appreciation
and depreciation) in the value of an hypothetical pre-existing account having a
balance of one share at the beginning of the period, dividing the net change in
account value by the value of the account at the beginning of the base period to
obtain the base period return, and multiplying the base period return by
(365/7). The determination of net change in account value reflects the value of
additional shares purchased with dividends from the original share, dividends
declared on both the original share and such additional shares, and all fees
that are charged to all shareholder accounts, in proportion to the length of the
base period and the Fund's average account size. The Fund may also calculate its
annualized yield by compounding the unannualized base period return (calculated
as described above) by adding 1 to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one.
The yield quoted at any time represents the amount being earned on a
current basis for the indicated period and is a function of the types of
instruments in the Fund's portfolio, their quality and length of maturity, and
the Fund's operating expenses. At May 31, 1995, 20% of the Fund's portfolio was
invested in obligations of U.S. Government Agencies', 50% was invested in
commercial paper of which 100% was rated A-1 or Prime-1, 5% was invested in U.S.
Treasury obligations and the remaining 30% was invested in repurchase
agreements. See "Investment Policies -- Commercial Paper," and the Appendix
hereto. The length of maturity for the portfolio is the average dollar weighted
maturity of the portfolio. This means that the portfolio has an average maturity
of a stated number of days for all of its issues. The calculation is weighted by
the relative value of the investment. At May 31, 1995 the average dollar
weighted maturity of the portfolio was 25 days.
The yield fluctuates daily as the income earned on the investments of the
Fund fluctuates. Accordingly, there is no assurance that the yield quoted on any
given occasion will remain in effect for any period of time. It should also be
emphasized that the Fund is an open-end investment company and that there is no
guarantee that the net asset value will remain constant. A shareholder's
investment in the Fund is not insured. Investors comparing results of the Fund
with investment results and yields from other sources such as banks or savings
and loan associations should understand this distinction. The yield quotation
may be of limited use for comparative purposes because it does not reflect
charges imposed at the Account level which, if included, would decrease the
yield.
Other funds of the money market type as well as banks and savings and loan
associations may calculate their yield on a different basis, and the yield
quoted by the Fund could vary upwards or downwards if another method of
calculation or base period were used.
Yield is calculated separately for Class A, Class B and Class C shares.
Because of the differences in distribution fees, the yield for each of the
classes will differ.
OTHER INFORMATION
CUSTODY OF ASSETS -- All securities owned by the Fund and all cash, including
proceeds from the sale of shares of the Fund and of securities in the Fund's
investment portfolio, are held by State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, as Custodian.
SHAREHOLDER REPORTS -- Semiannual statements are furnished to shareholders, and
annually such statements are audited by the independent accountants.
INDEPENDENT ACCOUNTANTS -- Price Waterhouse LLP, 1201 Louisiana, Houston, Texas
77002, the independent accountants for the Fund, performs annual audits of the
Fund's financial statements.
FINANCIAL STATEMENTS
The attached financial statements in the form in which they appear in the
Annual Report to Shareholders including the related report of Independent
Accountants on such financial statements are included in the Statement of
Additional Information.
18
<PAGE> 116
APPENDIX
Description of the highest commercial paper, bond and other short-term and
long-term rating categories assigned by Standard & Poor's Corporation ("S&P"),
Moody's Investors Service ("Moody's"), Fitch Investors Service, Inc. ("Fitch"),
Duff and Phelps, Inc. ("Duff") and IBCA Limited and IBCA Inc. ("IBCA").
COMMERCIAL PAPER AND SHORT-TERM RATINGS
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations and ordinarily well established industries,
high rates of return of funds employed, conservative well established
industries, high rates of return of funds employed, conservative capitalization
structures with moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity. Issues rated Prime-2 (P-2) have a strong
capacity for repayment of short-term promissory obligations. This ordinarily
will be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff,
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors small.
The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. The designation A2 by
IBCA indicates that the obligation is supported by a strong capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic, or financial conditions.
BOND AND LONG-TERM RATINGS
Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess an extremely strong capacity to pay principal and interest. Bonds
rated AA by S&P are judged by S&P to have a very strong capacity to pay
principal and interest and, in the majority of instances, differ only in small
degrees from issues rated AAA.
Bonds which are rated Aaa by Moody's are judged to be of the best quality.
Bonds are rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger. Moody's applies numerical modifiers 1, 2
and 3 in the Aa rating category. The modifier 1 indicates a ranking for the
security in
19
<PAGE> 117
the higher end of this rating category, the modifier 2 indicates a mid-range
ranking, and the modifier 3 indicates a ranking in the lower end of the rating
category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.
Bonds rated Duff-1 are judged by Duff to be of the highest credit quality
with negligible risk factors; only slightly more than U.S. Treasury debt. Bonds
rated Duff-2, 3 and 4 are judged by Duff to be of high credit quality with
strong protection factors. Risk is modest but may vary slightly from time to
time because of economic conditions.
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations rated AA have a
very low expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in business, economic or
financial conditions may increase investment risk albeit not very significantly.
IBCA also assigns a rating to certain international and U.S. banks. An IBCA
bank rating represents IBCA's current assessment of the strength of the bank and
whether such bank would receive support should it experience difficulties. In
its assessment of a bank, IBCA uses a dual rating system comprised of Legal
Rating and Individual Ratings. In addition, IBCA assigns banks Long- and
Short-Term Ratings as used in the corporate ratings discussed above. Legal
Ratings, which range in gradation from 1 through 5, address the question of
whether the bank would receive support by central banks or shareholders if it
experienced difficulties, and such ratings are considered by IBCA to be a prime
factor in its assessment of credit risk. Individual Ratings, which range in
gradations from A through E, represent IBCA's assessment of a bank's economic
merits and address the question of how the bank would be viewed if it were
entirely independent and could not rely on support from state authorities or its
owners.
20
<PAGE> 118
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
May 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER 60.7%
$16,000 Associates Corp. of North America.............. 6.230% 07/12/95 $ 15,886,133
15,000 Chevron Oil Finance Co......................... 5.930% 06/26/95 14,936,083
10,000 Du Pont (E.I.) de Nemours...................... 6.060% 06/27/95 9,955,150
18,000 General Electric Capital Corp.................. 6.190% 07/24/95 17,837,190
19,000 General Electric Co............................ 6.230% 09/05/95 18,689,250
6,300 Lilly (Eli) & Co............................... 6.000% 06/30/95 6,268,815
10,000 MetLife Funding, Inc........................... 5.960% 06/22/95 9,963,761
10,000 MetLife Funding, Inc........................... 6.000% 07/11/95 9,932,350
18,000 Pitney Bowes Credit Corp....................... 6.100% 06/12/95 17,963,880
9,000 Pitney Bowes, Inc.............................. 5.960% 06/14/95 8,979,210
8,000 Prudential Funding Corp........................ 6.230% 07/24/95 7,927,160
9,000 Prudential Funding Corp........................ 6.230% 07/27/95 8,913,503
18,000 Raytheon Co.................................... 5.970% 06/09/95 17,973,180
5,000 State Bank of New South Wales.................. 6.250% 08/29/95 4,923,750
10,000 State Bank of New South Wales.................. 6.260% 09/06/95 9,833,944
17,000 Toronto Dominion Holdings...................... 5.990% 07/10/95 16,887,989
------------
TOTAL COMMERCIAL PAPER (Cost
$196,871,348)............................. 196,871,348
------------
REPURCHASE AGREEMENTS* 37.2%
SBC Capital Markets, Inc., dated 5/31/95,
repurchase
65,000 proceeds $65,011,104.......................... 6.150% 06/01/95 65,000,000
State Street Bank & Trust Co., dated 5/31/95,
55,905 repurchase proceeds $55,914,512............... 6.125% 06/01/95 55,905,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost $120,905,000)....................... 120,905,000
------------
UNITED STATES GOVERNMENT OBLIGATIONS 24.6%
30,000 Federal Home Loan Banks........................ 6.100% 06/01/95 29,994,917
25,000 Federal National Mortgage Association.......... 5.900% 06/02/95 24,991,819
25,000 Federal National Mortgage Association.......... 5.940% 08/09/95 24,715,625
------------
TOTAL UNITED STATES GOVERNMENT OBLIGATIONS
(Cost $79,702,361)........................ 79,702,361
------------
TOTAL INVESTMENTS (Cost $397,478,709) 122.5%...................................... 397,478,709
OTHER ASSETS AND LIABILITIES, NET (22.5%)......................................... (73,020,170)
------------
NET ASSETS 100%................................................................... $324,458,539
============
</TABLE>
*Collateralized by U.S. Government obligations in a pooled cash account
See Notes to Financial Statements
F-1
<PAGE> 119
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at amortized cost.............................................. $397,478,709
Cash........................................................................ 127,602
Receivable for Fund shares sold............................................. 786,579
Other assets................................................................ 43,829
------------
Total Assets............................................................. 398,436,719
------------
LIABILITIES
Payable for Fund shares redeemed............................................ 73,417,480
Due to shareholder service agent............................................ 162,280
Due to Adviser.............................................................. 138,975
Due to Distributor.......................................................... 87,995
Dividends payable........................................................... 62,989
Deferred Directors' compensation............................................ 60,138
Accrued expenses............................................................ 48,323
------------
Total Liabilities........................................................ 73,978,180
------------
NET ASSETS, equivalent to $1.00 per share for Class A, B and C shares....... $324,458,539
============
NET ASSETS WERE COMPRISED OF:
Capital stock at par; 319,694,843 Class A, 4,189,806 Class B and 588,487
Class C shares outstanding................................................. $ 3,244,731
Capital surplus............................................................. 321,161,934
Undistributed net investment income......................................... 51,874
------------
NET ASSETS at May 31, 1995.................................................. $324,458,539
============
</TABLE>
See Notes to Financial Statements
F-2
<PAGE> 120
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended May 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest..................................................................... $22,971,502
-----------
EXPENSES
Management fees.............................................................. 1,896,937
Shareholder service agent's fees and expenses................................ 1,495,213
Accounting services.......................................................... 100,666
Service fees--Class A........................................................ 611,646
Distribution and service fees--Class B....................................... 3,845
Distribution and service fees--Class C....................................... 526
Directors' fees and expenses................................................. 22,739
Audit fees................................................................... 21,525
Legal fees................................................................... 20,066
Reports to shareholders...................................................... 58,845
Registration and filing fees................................................. 111,820
Miscellaneous................................................................ 13,559
-----------
Total expenses............................................................ 4,357,387
-----------
NET INVESTMENT INCOME........................................................ 18,614,115
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................. $18,614,115
===========
</TABLE>
See Notes to Financial Statements
F-3
<PAGE> 121
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended May 31
-----------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period.......................... $ 463,827,313 $ 279,344,078
--------------- ---------------
Operations
Increase from net investment income...................... 18,614,115 7,722,464
--------------- ---------------
Distributions to shareholders from net investment income
Class A............................................... (18,623,009) (7,713,417)
Class B............................................... (15,317) --
Class C............................................... (2,167) --
--------------- ---------------
(18,640,493) (7,713,417)
--------------- ---------------
Capital transactions
Proceeds from shares sold
Class A............................................... 3,148,142,161 2,733,962,738
Class B............................................... 21,754,203 --
Class C............................................... 3,049,049 --
--------------- ---------------
3,172,945,413 2,733,962,738
--------------- ---------------
Proceeds from shares issued for distributions reinvested
Class A............................................... 18,623,009 7,713,418
Class B............................................... 15,317 --
Class C............................................... 2,167 --
--------------- ---------------
18,640,493 7,713,418
--------------- ---------------
Cost of shares redeemed
Class A............................................... (3,310,885,859) (2,557,201,968)
Class B............................................... (17,579,714) --
Class C............................................... (2,462,729) --
--------------- ---------------
(3,330,928,302) (2,557,201,968)
--------------- ---------------
Increase (decrease) in net assets resulting from
capital transactions................................ (139,342,396) 184,474,188
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS........................ (139,368,774) 184,483,235
--------------- ---------------
NET ASSETS, end of period................................ $ 324,458,539 $ 463,827,313
=============== ===============
</TABLE>
See Notes to Financial Statements
F-4
<PAGE> 122
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each of the
periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
Year Ended May 31
--------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from operations
Investment income............................... .0535 .0329 .0353 .052 .0758
Expenses........................................ (.0101) (.0100) (.0109) (.0105) (.0094)
------ ------ ------ ------ ------
Net investment income............................ .0434 .0229 .0244 .0415 .0664
------ ------ ------ ------ ------
Distributions from net investment income......... (.0434) (.0229) (.0244) (.0415) (.0664)
------ ------ ------ ------ ------
Net asset value, end of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
TOTAL RETURN..................................... 4.43% 2.32% 2.44% 4.20% 6.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)............. $319.7 $463.8 $279.3 $329.2 $402.3
Average net assets (millions).................... $434.4 $326.8 $306.7 $377.5 $482.6
Ratios to average net assets
Expenses........................................ 1.00% 1.03% 1.09% 1.05% .94%
Net investment income........................... 4.28% 2.36% 2.44% 4.19% 6.68%
</TABLE>
See Notes to Financial Statements
F-5
<PAGE> 123
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of capital stock outstanding throughout each of the
periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
---------------- ----------------
April 18, April 18,
1995(1) 1995(1)
through through
May 31, 1995 May 31, 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period..................... $ 1.00 $ 1.00
------ ------
Income from investment operations
Investment income....................................... .0073 .0076
Expenses................................................ (.0026) (.0027)
------ ------
Net investment income.................................... .0047 .0049
------ ------
Distributions from net investment income................. (.0047) (.0049)
------ ------
Net asset value, end of period........................... $ 1.00 $ 1.00
====== ======
TOTAL RETURN(2).......................................... .47% .49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)..................... $ 4.2 $ 0.6
Average net assets (millions)............................ $ 2.3 $ 0.3
Ratios to average net assets (annualized)(3.
Expenses................................................ 1.76% 1.76%
Net investment income................................... 3.52% 3.52%
</TABLE>
(1) Commencement of operations
(2) Total return has not been annualized and does not consider the effect of
sales charges.
(3) Ratios based on the class of shares being in effect for the entire fiscal
year.
See Notes to Financial Statements
F-6
<PAGE> 124
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
American Capital Reserve Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end management
investment company. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements.
A. INVESTMENT VALUATIONS-Investments are valued at amortized cost, which
approximates market value. The cost of investments for federal income tax
purposes is substantially the same as for financial reporting purposes.
B. REPURCHASE AGREEMENTS-A repurchase agreement is a short-term investment in
which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. The Fund may
invest independently in repurchase agreements, or transfer uninvested cash
balances into a pooled cash account along with other investment companies
advised by Van Kampen American Capital Asset Management, Inc. (the "Adviser"),
the daily aggregate of which is invested in repurchase agreements. Repurchase
agreements are collateralized by the underlying debt security. The Fund will
make payment for such securities only upon physical delivery or evidence of book
entry transfer to the account of the custodian bank. The seller is required to
maintain the value of the underlying security at not less than the repurchase
proceeds due the Fund.
C. FEDERAL INCOME TAXES-No provision for federal income taxes is required
because the Fund has elected to be taxed as a "regulated investment company"
under the Internal Revenue Code and intends to maintain this qualification by
annually distributing all of its taxable net investment income and taxable net
realized gains to its shareholders. Additionally, approximately $18,000 of
financial statement losses are deferred for federal income tax purposes to the
1996 fiscal year.
D. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME-Investment transactions
are accounted for on the trade date. Realized gains and losses on investments
are determined on the basis of amortized cost. Interest income is accrued daily.
E. DIVIDENDS-The Fund records daily dividends from net investment income. These
dividends are automatically reinvested in additional shares of the Fund at net
asset value. Shares purchased by daily reinvestments are liquidated at net asset
value on the last business day of the month and the proceeds of such redemptions
paid to the shareholders electing to receive dividends in cash. The Fund
distributes tax basis earnings in accordance with the minimum
F-7
<PAGE> 125
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
distribution requirements of the Internal Revenue Code, which may differ from
generally accepted accounting principles. Such distributions may result in
dividends in excess of financial statement net investment income.
F. DEBT DISCOUNT AND PREMIUM-For financial and tax reporting purposes, all
discounts and premiums are amortized over the life of the security.
NOTE 2--MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Fund. Management fees are
calculated monthly, based on the average daily net assets of the Fund at an
annual rate of .50% of the first $150 million; .45% of the next $100 million;
.40% of the next $100 million; and .35% of the amount in excess of $350 million.
Accounting services include the salaries and overhead expenses of the Fund's
Treasurer and the personnel operating under his direction. Charges are allocated
among investment companies advised by the Adviser. During the period, these
charges included $12,498 as the Fund's share of the employee costs attributable
to the Fund's accounting officers. A portion of the accounting services expense
was paid to the Adviser in reimbursement of personnel, facilities and equipment
costs attributable to the provision of accounting services to the Fund. The
services provided by the Adviser are at cost.
ACCESS Investors Services, Inc., an affiliate of the Adviser, serves as the
Fund's shareholder service agent. These services are provided at cost plus a
profit. During the period, such fees aggregated $1,266,690.
Under the Distribution Plans, each class of shares pays up to .15% per annum
of its average daily net assets to reimburse the Distributor for expenses and
service fees incurred. Class B and Class C shares pay an additional fee of up to
.75% per annum of their average daily net assets to reimburse Van Kampen
American Capital Distributors, Inc. (the "Distributor") for its distribution
expenses. Actual distribution expenses incurred by the Distributor for Class B
and Class C shares may exceed the amounts reimbursed to the Distributor by the
Fund. At the end of the period, the unreimbursed expenses incurred by the
Distributor under the Class B and Class C plans aggregated approximately $9,000
and $3,000, respectively, and may be carried forward and reimbursed through
either the collection of the contingent deferred sales charges from share
redemptions or, subject to the annual renewal of the plans, future Fund
reimbursements of distribution fees.
Legal fees were for services rendered by O'Melveny & Myers, counsel for the
Fund. Lawrence J. Sheehan, of counsel to that firm, is a director of the Fund.
Certain officers and directors of the Fund are officers and directors of the
Adviser, the Distributor and the shareholder service agent.
F-8
<PAGE> 126
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
NOTE 3--DIRECTOR COMPENSATION
Fund directors who are not affiliated with the Adviser are compensated by the
Fund at the annual rate of $1,440 plus a fee of $35 per day for Board and
Committee meetings attended. The Chairman receives additional fees from the Fund
at the annual rate of $540. During the period, such fees aggregated $19,263.
The directors may participate in a voluntary Deferred Compensation Plan (the
"Plan"). 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. Each director covered by the Plan elects to be credited with an
earnings component on amounts deferred equal to the income earned by the Fund on
its short-term investments or equal to the total return of the Fund.
NOTE 4--CAPITAL
The Fund offers three classes of shares at their respective net asset values per
share. Class B and Class C shares are subject to a sales charge imposed at the
time of redemption on a contingent deferred basis. All classes of shares have
the same rights, except that Class B and Class C shares bear the cost of
distribution fees and certain other class specific expenses. Realized and
unrealized gains or losses, investment income and expenses (other than class
specific expenses) are allocated daily to each class of shares based upon the
relative proportion of net assets of each class. Class B and Class C shares
automatically convert to Class A shares six years and ten years after purchase,
respectively, subject to certain conditions. The offering of Class B and Class C
shares commenced April 18, 1995, at which time all previously outstanding shares
became Class A shares.
F-9
<PAGE> 127
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Fund has 1 billion of Class A shares, and 500 million each of Class B
and Class C shares of $.01 par value capital stock authorized. Transactions in
shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended May 31
---------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A................................................. 3,148,142,161 2,733,962,738
Class B................................................. 21,754,203 --
Class C 3,049,049 --
------------- --------------
3,172,945,413 2,733,962,738
============= ==============
Shares issued for distributions reinvested
Class A................................................. 18,623,009 7,713,418
Class B................................................. 15,317 --
Class C................................................. 2,167 --
------------- --------------
18,640,493 7,713,418
============= ==============
Shares redeemed
Class A................................................. (3,310,885,862) (2,557,202,100)
Class B................................................. (17,579,714) --
Class C................................................. (2,462,729) --
------------- --------------
(3,330,928,305) (2,557,202,100)
------------- --------------
Increase (decrease) in shares outstanding.................. (139,342,399) 184,474,056
============= ==============
</TABLE>
F-10
<PAGE> 128
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
AMERICAN CAPITAL RESERVE FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of American Capital Reserve Fund, Inc.
at May 31, 1995, and the results of its operations, the changes in its net
assets and the financial highlights for each of the fiscal periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
June 30, 1995
F-11
<PAGE> 129
APPENDIX B
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN AMERICAN CAPITAL MONEY MARKET FUND
Van Kampen American Capital Money Market Fund, formerly known as Van Kampen
Merritt Money Market Fund (the "Fund"), is a money market mutual fund whose
investment objective is to provide a high level of current income, liquidity and
safety of principal through investment in a diversified portfolio of money
market securities. There can be no assurance that the Fund will achieve its
objective. The Fund is a separate series of Van Kampen American Capital Money
Market Trust, a Delaware business trust (the "Trust"). The Fund is a mutual fund
whose portfolio is advised by Van Kampen American Capital Investment Advisory
Corp. (the "Adviser").
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Prospectus for the Fund dated August 1, 1995 (the
"Prospectus"). This Statement of Additional Information does not include all
information that a prospective investor should consider before purchasing shares
of the Fund, and investors should obtain and read the Prospectus prior to
purchasing shares. A copy of the Prospectus may be obtained without charge by
calling the Fund at (800) 421-5666. This Statement of Additional Information
incorporates by reference the entire Prospectus.
The Prospectus and this Statement of Additional Information omit certain
information contained in the registration statement filed with the Securities
and Exchange Commission (the "Commission"), Washington, D.C. This omitted
information may be obtained from the Commission upon payment of the fee
prescribed or inspected at the Commission's office at no charge.
TABLE OF CONTENTS
<TABLE>
<S> <C>
The Fund and the Trust............................................................ 2
Investment Policies and Restrictions.............................................. 2
Officers and Trustees............................................................. 5
Legal Counsel..................................................................... 11
Investment Advisory and Other Services............................................ 11
Portfolio Transactions............................................................ 13
The Distributor................................................................... 14
Yield Information................................................................. 15
Dividends......................................................................... 16
Unaudited Financial Statements.................................................... 17
Notes to Unaudited Financial Statements........................................... 25
Independent Auditors' Report...................................................... 28
Audited Financial Statements...................................................... 29
Notes to Audited Financial Statements............................................. 35
Appendix.......................................................................... 38
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED AUGUST 1, 1995.
<PAGE> 130
THE FUND AND THE TRUST
The Fund is an open-end diversified management investment company. The Fund is
a series of Van Kampen American Capital Money Market Trust (the "Trust"). At
present, the Fund is the only series of the Trust although other series may be
organized and offered in the future. The Trust and each of its series, including
the Fund, will be treated as separate corporations for Federal income tax
purposes.
The Trust is an unincorporated business trust established under the laws of
the state of Delaware by an Agreement and Declaration of Trust dated as of May
10, 1995, (the "Declaration of Trust"). The Declaration of Trust permits the
Trustees to create one or more separate investment portfolios and issue a series
of shares for each portfolio. The Trustees can further sub-divide each series of
shares into one or more classes of shares for each portfolio. Each share
represents an equal proportionate interest in the assets of the series with each
other share in such series and no interest in any other series. No series is
subject to the liabilities of any other series. The Declaration of Trust
provides that shareholders are not liable for any liabilities of the Trust or
any of its series, requires inclusion of a clause to that effect in every
agreement entered into by the Trust or any of its series and indemnifies
shareholders against any such liability.
Each Class A Share and Class B Share represents an equal proportionate
interest in the assets of the respective class of the series, with each other
share of the respective class, and no interest in any other series. No series is
subject to the liabilities of any other series. The Declaration of Trust
provides that shareholders are not liable for any liabilities of the Trust or
any of its series, requires inclusion of a clause to that effect in every
agreement entered into by the Trust or any of its series and indemnifies
shareholders against any such liability.
Shares of the Trust entitle their holders to one vote per share. However,
separate votes are taken by each series on matters affecting an individual
series or, with respect to a class of shares, on the respective class'
distribution plan. For example, a change in investment policy for a series would
be voted upon by shareholders of only the series involved. Shares do not have
cumulative voting rights, preemptive rights or any conversion or exchange
rights. The Trust does not contemplate holding regular meetings of shareholders
to elect Trustees or otherwise. However, the holders of 10% or more of the
outstanding shares may by written request require a meeting to consider the
removal of Trustees by a vote of a majority of the shares present and voting at
such meeting.
The Trustees may amend the Declaration of Trust if authorized by a vote of the
Trustees and a favorable vote of the holders of more than 50% of the outstanding
shares entitled to vote (or such higher vote as may be required by the
Investment Company Act of 1940 (the "Investment Company Act") or other
applicable law).
Statements contained in this Statement of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information forms as part, each such statement
being qualified in all respects by such reference.
INVESTMENT POLICIES AND RESTRICTIONS
The investment objective of the Fund is to provide high current income,
liquidity and safety of principal through investment in a diversified portfolio
of money market securities. The Fund will invest
2
<PAGE> 131
only in the securities listed below. These securities must be denominated in
U.S. dollars and must either (i) mature or have been called for redemption
within one year of the date purchased or (ii) be subject to repurchase
agreements maturing within one year. There can be no assurance that the Fund
will achieve its objective. The foregoing is a fundamental policy and cannot be
changed without approval of the shareholders of the Fund.
1. U.S. Government Securities. The Fund may invest in obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities.
2. Bank Obligations. The Fund may invest in time deposits of federal and
state banks whose accounts are insured by a government agency; certificates
of deposit, bankers' acceptances and other bank obligations if they are
obligations of a domestic bank (or foreign branch thereof) subject to
regulation by the U.S. Government.
3. Commercial Paper Obligations. The Fund may invest in commercial paper,
including variable amount master demand notes, rated at least A-3 by
Standard & Poor's Ratings Group ("S&P") or Prime-3 by Moody's Investors
Service, Inc. ("MIS") or, if not rated, issued by a corporation in whose
debt obligations the Fund may invest (see 4 below) see Appendix A to this
Statement of Additional Information for a description of the factors
considered by S&P and MIS.
4. Corporate Debt Obligations. The Fund may invest in corporate debt
obligations (for example, bonds and debentures) if they are rated at least
AA by S&P or Aa by MIS see Appendix A to this Statement of Additional
Information for bond ratings.
Fundamental investment restrictions limiting the investments of the Fund provide
that the Money Fund may not:
1. Purchase any securities (other than obligations issued or guaranteed
by the United States Government or by its agencies or instrumentalities)
if, as a result, more than 5% of the Fund's total assets (taken at current
value) would then be invested in securities of a single issuer or if, as a
result, the Fund would hold more than 10% of the outstanding voting
securities of an issuer. (There is no limit on the amount of the Fund's
assets which may be invested in any single issue of U.S. Government
Securities.)
2. Borrow money, except from banks for temporary or emergency purposes
and then not in amounts in excess of 10% of its net assets at the time of
borrowing. It can mortgage or pledge its assets only in connection with
such borrowing and in amounts not in excess of 10% of the value of its net
assets at the time of such borrowing. Interest on borrowing would reduce
the Fund's income. The Fund will not purchase any securities while it has
any outstanding borrowings and will not engage in reverse repurchase
transactions.
3. Buy any securities "on margin" or sell any securities "short."
4. Make investments for the purpose of exercising control or management.
5. Write, purchase or sell puts, calls or combinations thereof, or
purchase or sell interest rate futures contracts or related options.
6. Purchase any security which is restricted as to disposition under
federal securities laws or by contract or which are not readily marketable,
or enter into a repurchase agreement maturing in more than seven days with
respect to any security if, as a result, more than 10% of the Fund's total
assets would be invested in such securities.
3
<PAGE> 132
7. Invest in securities of other investment companies, except as part of
a merger, consolidation or other acquisition.
8. Invest in interests in oil, gas or other mineral exploration or
development programs.
9. Purchase or retain securities of any company if, to the knowledge of
the Fund, its officers and directors and the officers and directors of the
Fund's investment advisor who individually own more than 1/2 of 1% of the
securities of such company together own beneficially more than 5% of such
securities.
10. Make loans, except that the Fund can purchase and hold those publicly
distributed debt securities which it is permitted to buy, lend its
portfolio securities, and enter into repurchase agreements.
11. Act as an underwriter of securities, except to the extent the Fund
may be deemed to be an underwriter in connection with the sale of
securities held in its portfolio.
12. Purchase or sell real estate, commodities or commodity contracts,
except that the Fund may purchase marketable debt securities issued by
companies which invest in interests in real estate.
13. Purchase or retain securities of issuers having a record, together
with predecessors, of less than three years continuous operations if at the
time of purchase more than 5% of the Fund's total assets would be invested
in such securities.
14. Invest more than 25% of its assets in a single industry, except that
such limitation shall not apply to U.S. Government Securities or domestic
bank obligations (excluding foreign branches thereof).
15. Invest in FHA or VA pooled mortgages, or obligations of the Asian
Development Bank, the Inter-American Development Bank or the International
Bank for Reconstruction and Development (World Bank) or in foreign
securities or more than 10% of its assets in bank obligations payable in
Eurodollars; also, the Fund may not purchase or sell forward foreign
currency exchange contracts, invest in bank time deposits maturing in more
than seven days, or invest more than 10% of its assets in bank time
deposits maturing between two business days and seven calendar days.
The Fund may not change any of these investment restrictions without the
approval of the lesser of (i) more than 50% of the Fund's outstanding shares or
(ii) 67% of the Fund's shares present at a meeting at which the holders of more
than 50% of such outstanding shares are present in person or by proxy. As long
as the percentage restrictions described above are satisfied at the time of the
investment or borrowing, the Fund will be considered to have abided by those
restrictions even if, at a later time, a change in values or net assets causes
an increase or decrease in percentage.
From time to time, the Fund may adopt more stringent investment restrictions
in order to satisfy rules and regulations promulgated by the Commission or to be
able to offer its shares to residents in particular states. In order to offer
its shares to residents in particular states, the Fund presently will not invest
in warrants.
4
<PAGE> 133
OFFICERS AND TRUSTEES
The tables below list the trustees and officers of the Trust (of which the
Fund is a separate series) and their principal occupations for the last five
years and their affiliations, if any, with Van Kampen American Capital
Investment Advisory Corp. (the "VK Adviser" or "Adviser"), Van Kampen American
Capital Asset Management, Inc., (the "AC Adviser"), Van Kampen American Capital
Management, Inc., McCarthy, Crisanti & Maffei, Inc., MCM Asia Pacific Company,
Limited, Van Kampen American Capital Distributors, Inc. (the "Distributor"), Van
Kampen American Capital, Inc. ("Van Kampen American Capital") or VK/AC Holding,
Inc. For purposes hereof, the term "Van Kampen American Capital Funds" includes
each of the open-end investment companies advised by the VK Adviser (excluding
the Van Kampen Merritt Series Trust) and each of the open-end investment
companies advised by the AC Adviser.
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ----------------------------------------------------
<S> <C>
J. Miles Branagan.................. Co-founder, Chairman, Chief Executive Officer and
2300 205th Street President of MDT Corporation, a company which
Torrance, CA 90501 develops manufactures, markets and services medical
Age: 63 and scientific equipment. Trustee of each of the Van
Kampen American Capital Funds.
Richard E. Caruso.................. Founder, Chairman and Chief Executive Officer,
Two Randor Station, Suite 314 Integra Life Sciences Corporation, a firm
King of Prussia Road specializing in life sciences. Trustee of
Radnor, PA 19087 Susquehanna University and First Vice President, The
Age: 52 Baum School of Art; Founder and Director of Uncom-
mon Individual Foundation, a youth development
foundation. Director of International Board of
Business Performance Group, London School of
Economics. Formerly, Director of First Sterling
Bank, and Executive Vice President and a Director of
LFC Financial Corporation, a provider of lease and
project financing. Trustee of each of the Van Kampen
American Capital Funds.
Philip P. Gaughan.................. Prior to February, 1989, Managing Director and
9615 Torresdale Avenue Manager of Municipal Bond Department, W. H.
Philadelphia, PA 19114 Newbold's Sons & Co. Trustee of each of the Van
Age: 66 Kampen American Capital Funds.
Roger Hilsman...................... Professor of Government and International Affairs
251-1 Hamburg Cove Emeritus, Columbia University. Trustee of each of
Lyme, CT 06371 the Van Kampen American Capital Funds.
Age: 75
</TABLE>
5
<PAGE> 134
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ----------------------------------------------------
<S> <C>
R. Craig Kennedy................... President and Director, German Marshall Fund of the
1341 E. 50th Street United States. Formerly, advisor to the Dennis
Chicago, IL 60615 Trading Group Inc. Prior to 1992, President and
Age: 43 Chief Executive Officer, Director and member of the
Investment Committee of the Joyce Foundation, a
private foundation. Trustee of each of the Van
Kampen American Capital Funds.
Dennis J. McDonnell*............... President, Chief Operating Officer and a Director of
One Parkview Plaza the VK Adviser, the AC Adviser and Van Kampen
Oakbrook Terrace, IL 60181 American Capital Management, Inc. Director of VK/AC
Age: 53 Holding, Inc, Van Kampen American Capital, and
McCarthy, Crisanti & Maffei, Inc. Chairman and a
Director of MCM Asia Pacific Company, Ltd.
President, Chief Executive Officer and Trustee of
each of the funds advised by the VK Adviser. Prior
to December, 1991, Senior Vice President of Van
Kampen Merritt Inc.
Donald C. Miller................... Prior to 1992, Director of Royal Group, Inc., a
415 North Adams company in insurance related businesses. Formerly
Hinsdale, IL 60521 Vice Chairman and Director of Continental Illinois
Age: 75 National Bank and Trust Company of Chicago and
Continental Illinois Corporation. Trustee of each of
the Van Kampen American Capital Funds and Chairman
of the Board of each of the open-end funds (except
the Van Kampen Merritt Series Trust) advised by the
VK Adviser.
Jack E. Nelson..................... President of Nelson Investment Planning Services,
423 Country Club Drive Inc., a financial planning company and registered
Winter Park, FL 32789 investment adviser. President of Nelson Investment
Age: 59 Brokerage Services Inc., a member of the National
Association of Securities Dealers, Inc. (NASD) and
Securities Investors Protection Corp. (SIPC).
Trustee of each of the Van Kampen American Capital
Funds.
</TABLE>
6
<PAGE> 135
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ----------------------------------------------------
<S> <C>
Don G. Powell*..................... President, Chief Executive Officer and a Director of
2800 Post Oak Blvd. VK/AC Holding, Inc. and Van Kampen American Capital.
Houston, TX 77056 Chairman, Chief Executive Officer and a Director of
Age: 55 the Distributor, the VK Adviser, the AC Adviser and
Van Kampen American Capital Management, Inc.
Director, President and Chief Executive Officer of
Van Kampen American Capital Advisers, Inc. and Van
Kampen American Capital Exchange Corp. Director and
Executive Vice President of Advantage Capital
Corporation, ACCESS Investor Services, Inc., Van
Kampen American Capital Services, Inc. and Van
Kampen American Capital Trust Company. Director of
McCarthy, Crisanti & Maffei, Inc. President and
Director, Trustee or Managing General Partner of
each of the funds advised by the AC Adviser and
Trustee of each of the funds advised by the VK Ad-
viser. He is also Chairman of the Board of the Van
Kampen Merritt Series Trust and closed-end
investment companies advised by the VK Adviser.
David Rees......................... Contributing Columnist and, prior to 1995, Senior
1601 Country Club Drive Editor of Los Angeles Business Journal. A director
Glendale, CA 91208 of Source Capital, Inc., a closed-end investment
Age: 71 company unaffiliated with Van Kampen American
Capital, a director and the second vice president of
International Institute of Los Angeles. Trustee of
each of the Van Kampen American Capital Funds.
Jerome L. Robinson................. President of Robinson Technical Products
115 River Road Corporation, a manufacturer and processor of welding
Edgewater, NJ 07020 alloys, supplies and equipment. Director of
Age: 72 Pacesetter Software, a software programming company
specializing in white collar productivity. Director
of Panasia Bank. Trustee of each of the Van Kampen
American Capital Funds.
Lawrence J. Sheehan*............... Of Counsel to and formerly Partner (from 1969 to
1999 Avenue of the Stars 1994) of the law firm of O'Melveny & Myers, legal
Suite 700 counsel to the funds advised by the AC Adviser.
Los Angeles, CA 90067 Director, FPA Capital Fund, Inc.; FPA New Income
Age: 63 Fund, Inc.; FPA Perennial Fund, Inc.; Source
Capital, Inc.; and TCW Convertible Security Fund,
Inc. Trustee of each of the Van Kampen American
Capital Funds.
Fernando Sisto..................... George M. Bond Chaired Professor and, prior to 1995,
Stevens Institute Dean of Graduate School and Chairman, Department of
of Technology Mechanical Engineering, Stevens Institute of
Castle Point Station Technology. Director of Dynalysis of Princeton, a
Hoboken, NJ 07030 firm engaged in engineering research. Trustee of
Age: 70 each of the Van Kampen American Capital Funds and
Chairman of the Board of each of the open-end funds
advised by the AC Adviser.
</TABLE>
7
<PAGE> 136
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- ----------------------------------- ----------------------------------------------------
<S> <C>
Wayne W. Whalen*................... Partner in the law firm of Skadden, Arps, Slate,
333 West Wacker Drive Meagher & Flom, legal counsel to funds advised by
Chicago, IL 60606 the VK Adviser. Trustee of each of the Van Kampen
Age: 55 American Capital Funds. He also is a Trustee of the
Van Kampen Merritt Series Trust and closed-end
investment companies advised by the VK Adviser.
William S. Woodside................ Vice Chairman of the Board of LSG Sky Chefs, Inc., a
712 Fifth Avenue caterer of airline food. Formerly, Director of
40th Floor Primerica Corporation (currently known as The
New York, NY 10019 Traveler's Inc.). Formerly, Director of James River
Age: 73 Corporation, a producer of paper products. Trustee,
and former President of Whitney Museum of American
Art. Formerly, Chairman of Institute for Educational
Leadership, Inc., Board of Visitors, Graduate School
of The City University of New York, Academy of
Political Science. Trustee of Committee for Economic
Development. Director of Public Education Fund
Network, Fund for New York City Public Education.
Trustee of Barnard College. Member of Dean's
Council, Harvard School of Public Health. Member of
Mental Health Task Force, Carter Center. Trustee of
each of the Van Kampen American Capital Funds.
</TABLE>
OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OTHER PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND IN PAST 5 YEARS
- --------------------- -------------------------- ----------------------------------------
<S> <C> <C>
Peter W. Hegel....... Vice President Executive Vice President and Portfolio
Age: 39 Manager of the Adviser. Executive Vice
President of the AC Adviser. Vice
President of each of the Van Kampen
American Capital Funds and closed- end
funds advised by the VK Adviser.
Ronald A. Nyberg..... Vice President and Executive Vice President, General
Age: 41 Secretary Counsel and Secretary of Van Kampen
American Capital. Executive Vice
President and a Director of the VK
Adviser and the Distributor. Executive
Vice President of the AC Adviser. Vice
President and Secretary of each of the
Van Kampen American Capital Funds and
closed-end funds advised by the VK
Adviser. Director of ICI Mutual
Insurance Co., a provider of insurance
to members of the Investment Company
Institute. Prior to March 1990,
Secretary of Van Kampen Merritt Inc.,
the VK Adviser and McCarthy, Crisanti &
Maffei, Inc.
</TABLE>
8
<PAGE> 137
<TABLE>
<CAPTION>
POSITIONS AND OTHER PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND IN PAST 5 YEARS
- --------------------- -------------------------- ----------------------------------------
<S> <C> <C>
Edward C. Wood III... Vice President, Treasurer Senior Vice President of the VK Adviser.
Age: 39 and Chief Financial Vice President, Treasurer and Chief
Officer Financial Officer of each of the Van
Kampen American Capital Funds and
closed-end funds advised by the VK
Adviser.
Nicholas Dalmaso..... Assistant Secretary Assistant Vice President and Attorney of
Age: 30 Van Kampen American Capital. Assistant
Secretary of each of the Van Kampen
American Capital Funds and closed-end
funds advised by the VK Adviser. Prior
to May 1992, attorney for Cantwell &
Cantwell, a Chicago law firm.
Scott E. Martin...... Assistant Secretary Senior Vice President, Deputy General
Age: 38 Counsel and Assistant Secretary of Van
Kampen American Capital. Senior Vice
President, Deputy General Counsel and
Secretary of the VK Adviser and the
Distributor. Assistant Secretary of each
of the Van Kampen American Capital Funds
and closed-end funds advised by the VK
Adviser.
Weston B. Assistant Secretary Vice President, Associate General
Wetherell.......... Counsel and Assistant Secretary of Van
Age: 39 Kampen American Capital, the VK Adviser
and the Distributor. Assistant Secretary
of McCarthy, Crisanti & Maffei, Inc.
Assistant Secretary of each of the Van
Kampen American Capital Funds and
closed-end funds advised by the VK
Adviser.
John L. Sullivan..... Controller First Vice President of the VK Adviser.
Age: 39 Controller of each of the Van Kampen
American Capital Funds and closed-end
funds advised by the VK Adviser.
Steven M. Hill....... Assistant Treasurer Assistant Vice President of the VK
Age: 30 Adviser. Assistant Treasurer of each of
the Van Kampen American Capital Funds
and closed-end funds advised by the VK
Adviser.
</TABLE>
- ---------------
* Such Trustees are "interested persons" (within the meaning of Section 2(a)(19)
of the 1940 Act). Messrs. Powell and McDonnell are interested persons of the
VK Adviser and the Fund by reason of their positions with the VK Adviser. Mr.
Sheehan is an interested person of the VK Adviser and the Fund by reason of
his firm having acted as legal counsel to the VK Adviser. Mr. Whalen is an
interested person of the Fund by reason of his firm acting as legal counsel
for the Fund.
9
<PAGE> 138
Messrs. Powell and McDonnell own, or have the opportunity to purchase, an
equity interest in VK/ AC Holding, Inc., the parent company of Van Kampen
American Capital, and have entered into employment contracts (for a term of five
years) with Van Kampen American Capital.
The Fund will pay trustees who are not affiliated persons of the VK Adviser,
the Distributor or Van Kampen American Capital an annual retainer of $2,500 per
year and $125 per regular quarterly meeting of the Fund, plus expenses. No
additional fees are proposed at the present time to be paid for special
meetings, committee meetings or to the chairman of the board. The trustees have
approved an aggregate annual compensation cap from the combined fund complex of
$84,000 per trustee (excluding any retirement benefits) until December 31, 1996,
based upon the current net assets and the current number of Van Kampen American
Capital funds (except that Mr. Whalen, who is also a trustee of the closed-end
funds advised by the VK Adviser would receive additional compensation for
serving as a trustee of such funds). In addition, the VK Adviser has agreed to
reimburse the Fund through December 31, 1996, for any increase in the aggregate
trustees' compensation over the aggregate compensation paid by the Fund in its
1994 fiscal year.
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM REGISTRANT
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL AND FUND
COMPENSATION AS PART OF BENEFITS UPON COMPLEX PAID TO
NAME FROM REGISTRANT(2) FUND EXPENSES(3) RETIREMENT(4) TRUSTEE(5)
- -------------------------- -------------------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C>
R. Craig Kennedy.......... $3,783 $0 $2,500 $62,362
Philip G. Gaughan......... 3,783 0 2,500 63,250
Donald C. Miller.......... 3,783 0 2,500 62,178
Jack A. Nelson............ 3,783 0 2,500 62,362
Jerome L. Robinson........ 3,786 0 2,500 58,475
Wayne W. Whalen........... 891 0 2,500 49,875
</TABLE>
- ---------------
(1) Messrs. McDonnell and Powell, trustees of the Registrant, are affiliated
persons of the VK Adviser and are not eligible for compensation or
retirement benefits from the Trust. Messrs. Branagan, Caruso, Hilsman, Rees,
Sheehan, Sisto and Woodside were elected as trustees of the Trust at a
shareholders meeting held July 21, 1995 and thus received no compensation or
retirement benefits from the Registrant during its 1994 fiscal year.
(2) The Registrant is Van Kampen American Capital Money Market Trust (the
"Trust") which currently is comprised of 1 operating series. The amounts
shown in this column are accumulated from the Aggregate Compensation of the
Registrant's year ended December 31, 1994. Beginning in October 1994 each
Trustee, except Messrs. Gaughan and Whalen, began deferring his entire
aggregate compensation. The total combined amount of deferred compensation
(including interest) accrued with respect to each trustee from the Fund
Complex (as defined herein) as of December 31, 1994 is as follows: Mr.
Kennedy $14,737; Mr. Miller $14,553; Mr. Nelson $14,737 and Mr. Robinson
$13,725.
(3) The Registrant's last completed fiscal year for which audited financial
statements are available ended on June 30, 1994. The Retirement Plan
commenced as of August 1, 1994 for the Fund.
10
<PAGE> 139
(4) This is the estimated annual benefits payable per year for the 10-year
period commencing in the year of such Trustee's retirement by a Fund
assuming: the Trustee has 10 or more years of service on the Board of the
Fund and retires at or after attaining the age of 60. Trustees retiring
prior to the age of 60 or with fewer than 10 years of service for the Fund
may receive reduced retirement benefits from such Fund.
(5) As of December 31, 1994, the Fund Complex consisted of 20 mutual funds
advised by the VK Adviser which had the same members on each funds' Board of
Trustees. The amounts shown in this column are accumulated from the
Aggregate Compensation of each of these 20 mutual funds in the Fund Complex
during the calendar year ended December 31, 1994. The VK Adviser also serves
as investment adviser for other investment companies; however, with the
exception of Messrs. Powell, McDonnell and Whalen, such investment companies
do not have the same trustees as the Fund Complex. Combining the Fund
Complex with other investment companies advised by the VK Adviser, Mr.
Whalen received Total Compensation of $161,850.
As of July 17, 1995, the Trustees and officers as a group owned less than 1%
of the Fund's shares.
To the knowledge of the Fund, as of July 17, 1995, no person owned of record
or beneficially 5% or more of the Fund's Class A Shares or Class B Shares.
LEGAL COUNSEL
Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom, Chicago,
Illinois.
INVESTMENT ADVISORY AND OTHER SERVICES
Van Kampen American Capital Investment Advisory Corp. (the "Adviser") is the
Fund's investment adviser. The Adviser was incorporated as a Delaware
corporation in 1982 (and through December 31, 1987 transacted business under the
name of American Portfolio Advisory Service Inc.). The Adviser's principal
office is located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. The
Adviser is a wholly-owned subsidiary of Van Kampen American Capital, Inc., which
in turn is a wholly-owned subsidiary of VK/AC Holding, Inc.
VK/AC Holding, Inc. is controlled, through the ownership of a substantial
majority of its common stock by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is
managed by Clayton, Dubilier & Rice, Inc., a New York based private investment
firm. The General Partner of C&D L.P. is Clayton & Dubilier Associates IV
Limited Partnership ("C&D Associates L.P."). The general partners of C&D
Associates L.P. are Joseph L. Rice, III, B. Charles Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and
Andrall E. Pearson, each of whom is a principal of Clayton, Dubilier & Rice,
Inc. In addition, certain officers, directors and employees of Van Kampen
American Capital, Inc. own, in the aggregate, not more than 7% of the common
stock of VK/AC Holding, Inc. and have the right to acquire upon the exercise of
options, approximately an additional 11% of the common stock of VK/AC Holding,
Inc. Presently, and after giving effect to the exercise of such options, no
officer or trustee owns or would own 5% or more of VK/AC Holding, Inc.
The investment advisory agreement between the Adviser and the Fund provides
that the Adviser will supply investment research and portfolio management,
including the selection of securities for the Fund
11
<PAGE> 140
to purchase, hold or sell and the selection of brokers through whom the Fund's
portfolio transactions are executed. The Adviser also administers the business
affairs of the Fund, furnishes offices, necessary facilities and equipment,
provides administrative services, and permits its officers and employees to
serve without compensation as trustees and officers of the Trust if duly elected
to such positions.
The Adviser's activities are subject to the review and supervision of the
Trustees, to whom the Adviser renders periodic reports of the Fund's investment
activities.
The investment advisory agreement with the Fund will remain in effect from
year to year if specifically approved by the Trustees of the Fund or the
shareholders, as the case may be, and by the disinterested Trustees in
compliance with the requirements of the Investment Company Act. The agreement
may be terminated without penalty upon 60 days written notice by either party
and will automatically terminate in the event of assignment.
The Adviser has undertaken to reimburse the Fund for annual expenses which
exceed the most stringent limit prescribed by any State in which the Fund's
shares are offered for sale. Currently, the most stringent limit in any State
would require such reimbursement to the extent that aggregate operating expenses
of the Fund (excluding interest, taxes and other expenses which may be
excludable under applicable state law) exceed in any fiscal year 2 1/2% of the
average annual net assets of the Fund up to $30 million. 2% of the average
annual net assets of the Fund of the next $70 million, and 1 1/2% of the
remaining average annual net assets of the Fund. In addition to making any
required reimbursements, the Adviser may in its discretion, but is not obligated
to, waive all or any portion of its fee or assume all or any portion of the
expenses of the Fund.
OTHER AGREEMENTS
SUPPORT SERVICES AGREEMENT. Under a support services agreement with the
Distributor and Van Kampen American Capital which terminated concurrent with the
Fund's change in transfer agent, the Fund received support services for
shareholders, including the handling of all written and telephonic
communications, including any other distribution related communications. Payment
by the Fund for such services is made on a cost basis for the employment of the
personnel and the equipment necessary to render the support services. The Fund,
and the other mutual funds distributed by the Distributor and advised by the
Adviser, share such costs proportionately among themselves based upon their
respective net asset values.
ACCOUNTING SERVICES AGREEMENT. The Fund has also entered into an accounting
services agreement pursuant to which the Adviser provides accounting services
supplementary to those provided by the Custodian. Such services are expected to
enable the Fund to more closely monitor and maintain its accounts and records.
The Fund shares together with the other mutual funds distributed by the
Distributor and advised by the Adviser in the cost of employment of persons to
provide such services, with 25% of such costs shared proportionately based on
the number of outstanding classes of securities per fund and with the remaining
75% of such cost being paid by the Fund and such other funds based
proportionally on their respective net assets.
LEGAL SERVICES AGREEMENT. The Fund and each of the other Van Kampen American
Capital funds advised by the VK Adviser and distributed by the Distributor have
entered into Legal Services Agreements pursuant to which Van Kampen American
Capital provides legal services, including without limitation: accurate
maintenance of the funds' minute books and records, preparation and oversight of
the funds' regulatory reports, and other information provided to shareholders,
as well as
12
<PAGE> 141
responding to day-to-day legal issues on behalf of the funds. Payment by the
Fund for such services is made on a cost basis for the employment of personnel
as well as the overhead and the equipment necessary to render such services.
Other funds distributed by the Distributor also receive legal services from Van
Kampen American Capital. Of the total costs for legal services provided to funds
distributed by the Distributor, one half of such costs are allocated equally to
each fund and the remaining one half of such costs are allocated to specific
funds based on specific funds based on monthly time records.
CUSTODIAN AND INDEPENDENT AUDITORS
State Street Bank and Trust Company, 225 Franklin Street, P.O. Box 1713,
Boston, MA 02105-1713, is the custodian of the Fund and has custody of all
securities and cash of the Fund. The custodian, among other things, attends to
the collection of principal and income, and payment for and collection of
proceeds of securities bought and sold by the Fund.
The independent auditors for the Fund are KPMG Peat Marwick LLP, Chicago,
Illinois. The selection of independent auditors will be subject to ratification
by the shareholders of the Fund at any annual meeting of shareholders.
PORTFOLIO TRANSACTIONS
The Adviser is responsible for decisions to buy and sell securities for the
Fund and broker-dealer selection. The primary consideration in effecting a
securities transaction will be execution at the most favorable securities price.
A substantial majority of the Fund's portfolio transactions may be transacted
with primary market makers acting as principal on a net basis, with no brokerage
commissions being paid by the Fund. Such principal transactions may, however,
result in a profit to the market makers. In certain instances the Adviser may
make purchases of underwritten issues at prices which include underwriting fees.
In selecting a broker-dealer to execute each particular transaction, the Adviser
will take the following into consideration: the best securities price available;
the reliability, integrity and financial condition of the broker-dealer; the
size of and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the Fund on a
continuing basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Trustees of the Trust may determine,
the Adviser may cause the Fund to pay a broker-dealer that provides brokerage
and research services an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the Adviser
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to the Fund. The Adviser may
also allocate the orders placed by it on behalf of the Fund to such
broker-dealers who provide research or statistical material, or other services
to the Fund or the Adviser. Such allocation shall be in such amounts and
proportions as the Adviser shall determine, and the Adviser will report on said
allocations regularly to the Trustees, indicating the brokers to whom such
allocations have been made and the basis therefor.
13
<PAGE> 142
While the Adviser will be primarily responsible for the placement of the
Fund's business, the policies and practices in this regard must be consistent
with the foregoing and will at all times be subject to review by the Trustees of
the Trust.
THE DISTRIBUTOR
The Distributor offers one of the industry's broadest lines of
investments -- encompassing mutual funds, closed-end funds and unit investment
trusts -- and is currently the nation's 5th largest broker-sold mutual fund
group according to Strategic Insight. Van Kampen American Capital's roots in
money management extend back to 1926. Today, Van Kampen American Capital manages
or supervises more than $50 billion in mutual funds, closed-end funds and unit
investment trusts -- assets which have been entrusted to Van Kampen American
Capital in more than 2 million investor accounts. Van Kampen American Capital
has one of the largest research teams (outside of the rating agencies) in the
country, with 86 analysts devoted to various specializations.
Shares of the Fund are offered on a continuous basis through the Distributor,
One Parkview Plaza, Oakbrook Terrace, Illinois 60181. The Distributor is a
wholly-owned subsidiary of Van Kampen American Capital, which is a subsidiary of
VK/AC Holding, Inc., a Delaware corporation that is controlled through an
ownership of a substantial majority of its common stock, by The Clayton &
Dubilier Private Equity Fund IV Limited Partnership ("C&D L.P."), a Connecticut
limited partnership. In addition, certain officers, directors and employees of
Van Kampen American Capital and its subsidiaries own, in the aggregate not more
than 7% of the common stock of VK/AC Holding, Inc. and have the right to
acquire, upon the exercise of options, approximately an additional 11% of the
common stock of VK/AC Holding, Inc. C&D L.P. is managed by Clayton, Dubilier &
Rice, Inc. Clayton & Dubilier Associates IV Limited Partnership ("C&D Associates
L.P.") is the general partner of C&D L.P. Pursuant to a distribution agreement,
Van Kampen American Capital will purchase shares of the Fund for resale to the
public, either directly or through securities dealers and brokers, and is
obligated to purchase only those shares for which it has received purchase
orders. A discussion of how to purchase and redeem the Fund's shares and how the
Fund's shares are priced is contained in the Prospectus.
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the Investment
Company Act. The Fund also has adopted a service plan (the "Service Plan") with
respect to each class of its shares. The Distribution Plan and the Service Plan
sometimes are referred to herein as the "Plans." The Plans provide that the Fund
may spend a portion of the Fund's average daily net assets attributable to each
class of its shares in connection with the distribution of the shares and in
connection with the provision of ongoing services to shareholders. The Plans are
being implemented through an agreement (the "Distribution and Service
Agreement") with the Distributor of each class of the Fund's shares,
sub-agreements between the Distributor and members of the NASD who are acting as
securities dealers and NASD members or eligible non-members who are acting as
brokers or agents and similar agreements between the Fund and banks who are
acting as brokers (collectively, "Selling Agreements") that may provide for
their customers or clients certain services or assistance, which may include,
but not be limited to, processing purchase and redemption transactions,
establishing and maintaining shareholder accounts regarding the Fund, and such
other services as may be agreed to from time to time and as may be permitted by
applicable statute, rule or regulation. Brokers, dealers and banks that have
entered into sub-agreements with the Distributor and sell shares of the Fund are
referred to herein as "financial intermediaries."
14
<PAGE> 143
Under the Distribution and Service Agreement and the Selling Agreements,
financial intermediaries that sold shares prior to July 1, 1987, or prior to the
beginning of the calendar quarter in which the Selling Agreement between the
Fund and such financial intermediary was approved by the Money Fund's Board of
Trustees (an "Implementation Date") are not eligible to receive compensation
pursuant to such Distribution and Service Agreement and/or Selling Agreement. To
the extent that there remain outstanding shares of the Fund that were purchased
prior to all Implementation Dates, the percentage of the total average daily net
asset value that may be utilized pursuant to the Distribution and Service
Agreement will be less than the maximum percentage amount permissible under the
Distribution and Service Agreement.
The Distributor must submit quarterly reports to the Board of Trustees of the
Trust, of which the Fund is a series, setting forth separately by class all
amounts paid under the Plans and the purposes for which such expenditures were
made, together with such other information as from time to time is reasonably
requested by the Trustees. The Plans provide that they will continue in full
force and effect from year to year so long as such continuance is specifically
approved by a vote of the Trustees, and also by a vote of the disinterested
Trustees, cast in person at a meeting called for the purpose of voting on the
Plans. Each of the Plans may not be amended to increase materially the amount to
be spent for the services described therein with respect to a class of shares
without approval by a vote of a majority of the outstanding voting shares of
such class and all material amendments to either of the Plans must be approved
by the Trustees and also by the disinterested Trustees. Each of the Plans may be
terminated with respect to a class of shares at any time by a vote of a majority
of the disinterested Trustees or by a vote of a majority of the outstanding
voting shares of such class.
YIELD INFORMATION
There are two methods by which the Fund's yield for a specified period of time
is calculated. Normally a seven day period will be used in determining yields in
published or mailed advertisements.
The first method, which results in an amount referred to as the "current
yield," assumes an account containing exactly one share at the beginning of the
period. (The net asset value of this share will be $1.00 except under
extraordinary circumstances.) The net change in the value of the account during
the period is then determined by subtracting this beginning value from the value
of the account at the end of the period; however, capital changes and unrealized
appreciation or depreciation of the Fund's portfolio are excluded from this
calculation. This net change in the account value is then divided by the value
of the account at the beginning of the period (i.e., normally $1.00 as discussed
above) and the resulting figure (referred to as the "base period return") is
then annualized by multiplying it by 365 and dividing by the seven days of the
period; the result is the "current yield," usually expressed to the nearest one-
hundredth of one percent.
The second method results in an amount referred to as the "compounded
effective yield." This represents an annualization of the current yield with
dividends reinvested daily. This compounded effective yield, calculated again
for a seven day period, would be computed by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by seven and subtracting one from the result.
In addition to using the yields in advertisements or information furnished to
present or prospective stockholders, the Fund also may quote rankings, yields or
returns as published by recognized statistical
15
<PAGE> 144
services or publishers, such as Lipper Analytical Services, Inc., Weisenberger
Investment Companies, Donoghues Money Fund Report, or others.
Yield information may be useful to investors in reviewing the performance of
the Fund. However, a number of factors should be taken into account before using
yield information as a basis for comparison with alternative investments. An
investment in the Fund is not insured and its yields are not guaranteed. They
normally will fluctuate on a daily basis. Accordingly they cannot be compared to
yields on those savings accounts or other investment alternatives which provide
a guaranteed fixed yield for a stated period of time and which may be insured by
a government agency. The yields for any given past period are not an indication
or representation by the Trust of future yields or rates of return on the Fund's
shares. For the fiscal year ended June 30, 1994 the Adviser waived a portion of
its fee, and the Adviser may in its discretion elect to discontinue waiving all
or any portion of its fee. In the event that the Adviser elects to discontinue
waiving its fee, the Fund's yield will be less than it otherwise would have
been. In comparing the yields of one money market fund to another, consideration
should be given to each fund's investment policy, portfolio quality, portfolio
maturity, type of instruments held and operating expenses.
DIVIDENDS
On each day, including a Saturday, Sunday or other holiday, a dividend of all
of the Fund's net income since the last declaration is declared. The Fund's net
income for dividend purposes consists of all interest income accrued on the
Fund's portfolio, less the Fund's expenses.
Under the procedures which the Trust's Board of Trustees have adopted relating
to amortized cost valuation, the calculation of the Fund's daily dividends for
each respective class of shares will change from that indicated above in certain
circumstances. If on any date the deviation between the net asset value for a
class of shares determined on an amortized cost basis and that determined using
market quotations is 0.5% or more, the amount of such deviation will be added to
or subtracted from the daily dividend for such class of shares to the extent
necessary to reduce such deviation to within 0.5%.
16
<PAGE> 145
VAN KAMPEN MERRITT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1994 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) SECURITY DESCRIPTION DATE PURCHASE COST
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AGENCY 9.1%
$ 869 Small Business Administration................... 1/03/95 5.750% $ 868,761
1,000 Federal Farm Credit Bank........................ 1/05/95 5.300 999,411
1,000 Federal Home Loan Mortgage Corp.(b)............. 1/05/95 5.900 999,344
1,000 Federal Home Loan Bank.......................... 1/10/95 5.780 998,555
-----------
TOTAL AGENCY.......................................................... 3,866,071
-----------
BANKERS ACCEPTANCES 13.0%
1,000 Bank of New York................................ 1/06/95 5.480 999,239
1,000 Nationsbank Corp. .............................. 1/06/95 5.880 999,183
1,000 Sanwa Bank...................................... 1/19/95 5.870 997,065
1,500 National Bank of Detroit........................ 1/23/95 5.870 1,500,000
1,000 Northern Trust Co. ............................. 2/17/95 5.980 992,193
-----------
TOTAL BANKERS ACCEPTANCES............................................. 5,487,680
-----------
CERTIFICATES OF DEPOSIT 4.7%
1,000 Dresdner Bank................................... 1/26/95 5.530 999,947
1,000 Societe Generale Bank Yankee.................... 2/03/95 6.150 1,000,000
-----------
TOTAL CERTIFICATES OF DEPOSIT......................................... 1,999,947
-----------
COMMERCIAL PAPER 52.0%
1,000 AT & T Capital Corp. ........................... 1/03/95 5.850 999,645
1,500 J. P. Morgan & Co. Inc. ........................ 1/03/95 6.000 1,499,500
1,500 Exxon Asset Management.......................... 1/04/95 5.600 1,499,300
1,500 Southern California Edison Co. ................. 1/05/95 5.930 1,499,012
1,000 Credit Suisse First Boston Inc. ................ 1/09/95 5.030 998,883
1,500 Rabobank USA Financial Corp. ................... 1/09/95 5.910 1,498,030
1,500 IBM Credit Corp. ............................... 1/10/95 6.000 1,497,750
1,000 State Street Boston Corp. ...................... 1/12/95 5.138 1,000,000
1,500 Ford Motor Credit Co. .......................... 1/17/95 5.950 1,496,033
1,000 Merrill Lynch & Co. Inc. ....................... 1/19/95 5.100 1,000,000
1,000 Commercial Credit Corp. ........................ 1/23/95 5.450 1,000,000
1,000 American General Finance Corp. ................. 1/25/95 5.750 1,000,000
1,500 Associates Corp. ............................... 1/27/95 6.120 1,493,370
1,000 CIT Group Holdings Inc. ........................ 1/27/95 5.750 1,000,000
1,500 American Express Credit Corp. .................. 1/30/95 5.850 1,492,931
1,500 Norwest Financial Inc. ......................... 2/07/95 6.050 1,490,673
1,500 John Deere Capital Corp. ....................... 2/09/95 6.000 1,490,250
-----------
TOTAL COMMERCIAL PAPER................................................ 21,955,377
-----------
</TABLE>
See Notes to Financial Statements.
17
<PAGE> 146
VAN KAMPEN MERRITT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1994 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) SECURITY DESCRIPTION DATE PURCHASE COST
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND OBLIGATIONS 13.0%
$1,500 Virginia St Housing Development Authority....... 1/03/95 6.000% $ 1,500,000
1,400 Catholic Healthcare West (Gtd: Toronto Dominion
Bank)........................................... 1/04/95 7.000 1,400,000
500 Florida Housing Finance Agency (L.O.C. Credit
Suisse)......................................... 1/04/95 6.100 500,000
900 Health Insurance Plan Greater New York (L.O.C.
Morgan Gty)..................................... 1/04/95 6.450 900,000
500 Illinois Student Assistance Commission (L.O.C.
Sumitomo Bank).................................. 1/04/95 6.170 500,000
700 Mississippi Business Finance Corp. ............. 1/04/95 6.400 700,000
-----------
TOTAL VARIABLE RATE DEMAND OBLIGATIONS................................ 5,500,000
-----------
REPURCHASE AGREEMENT 7.2%
UBS Securities, U.S. T-Note, $3,165,000 par, 3.875% coupon, due
10/31/95, dated 12/30/94, to be sold on 01/03/95 at $3,041,942........ 3,040,000
-----------
TOTAL INVESTMENTS (a) 99.0%........................................... 41,849,075
Other Assets in Excess of Liabilities 1.0%............................ 408,518
-----------
NET ASSETS 100.0%..................................................... $42,257,593
==========
</TABLE>
(a) At December 31, 1994, cost is identical for both book and federal income
tax purposes.
(b) This is a Mortgage Backed Security (MBS) which is a pass-through
instrument created by pooling mortgages and selling participations in the
principal and interest payments received from borrowers. This security is
guaranteed by Federal Home Loan Mortgage Corporation (FHLMC), a federally
sponsored agency.
See Notes to Financial Statements.
18
<PAGE> 147
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at Amortized Cost which Approximates Market (Note 1)......... $41,849,075
Cash...................................................................... 180,760
RECEIVABLES:
Fund Shares Sold.......................................................... 544,455
Interest.................................................................. 118,772
Other..................................................................... 4,883
-----------
Total Assets.............................................................. 42,695,945
-----------
LIABILITIES:
PAYABLES:
Fund Shares Repurchased................................................... 346,906
Income Distributions...................................................... 24,412
Investment Advisory Fee (Note 2).......................................... 1,791
Accrued Expenses.......................................................... 55,243
-----------
Total Liabilities......................................................... 438,352
-----------
NET ASSETS................................................................ $42,257,593
===========
NET ASSETS CONSIST OF:
Paid in Surplus:
Class A Shares............................................................ $32,412,705
Class B Shares............................................................ 9,918,443
Accumulated Net Realized Loss on Investments.............................. (73,555)
-----------
NET ASSETS................................................................ $42,257,593
===========
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net Asset Value per share (Based on net assets of $32,339,762 and
32,412,706 shares of beneficial interest issued and outstanding)........ $ 1.00
===========
Class B Shares:
Net Asset Value per share (Based on net assets of $9,917,831 and 9,918,443
shares of beneficial interest issued and outstanding)................... $ 1.00
===========
</TABLE>
See Notes to Financial Statements.
19
<PAGE> 148
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1994 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................... $ 842,639
Amortization of Premium.................................................... (10,988)
-----------
Total Income............................................................... 831,651
-----------
EXPENSES:
Investment Advisory Fee (Note 2)........................................... 83,571
Shareholder Services....................................................... 60,277
Distribution (12b-1) and Service Fees (Allocated to Classes A and B of
$35,230 and $21,742, respectively)(Note 4)............................... 56,972
Printing................................................................... 18,400
Audit...................................................................... 15,088
Custody.................................................................... 14,107
Trustees Fees and Expenses (Note 2)........................................ 11,040
Legal (Note 2)............................................................. 6,440
Other...................................................................... 1,844
-----------
Total Expenses............................................................. 267,739
Less Fees Deferred......................................................... 79,108
-----------
Net Expenses............................................................... 188,631
-----------
NET INVESTMENT INCOME...................................................... $ 643,020
===========
REALIZED GAIN/LOSS ON INVESTMENTS:
Proceeds from Sales........................................................ $ 1,531,038
Cost of Securities Sold.................................................... (1,550,018)
-----------
NET REALIZED LOSS ON INVESTMENTS........................................... $ (18,980)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS................................. $ 624,040
===========
</TABLE>
See Notes to Financial Statements.
20
<PAGE> 149
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1994 and the Year Ended June 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1994 JUNE 30, 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net Investment Income................................... $ 643,020 $ 499,064
Net Realized Loss on Investments........................ (18,980) (26,427)
----------------- -------------
Change in Net Assets from Operations.................... 624,040 472,637
----------------- -------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME:
Class A Shares.......................................... (568,757) (499,064)
Class B Shares.......................................... (74,263) -0-
----------------- -------------
Total Distributions.................................. (643,020) (499,064)
----------------- -------------
Net Change in Net Assets from Investment Activities..... (18,980) (26,427)
----------------- -------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
PROCEEDS FROM SHARES SOLD:
Class A Shares.......................................... 40,881,989 79,908,069
Class B Shares.......................................... 15,887,574 -0-
----------------- -------------
56,769,563 79,908,069
----------------- -------------
NET ASSET VALUE OF SHARES ISSUED THROUGH DIVIDEND
REINVESTMENT:
Class A Shares.......................................... 479,626 445,332
Class B Shares.......................................... 50,549 -0-
----------------- -------------
530,175 445,332
----------------- -------------
COST OF SHARES REPURCHASED:
Class A Shares.......................................... (36,550,200) (74,519,684)
Class B Shares.......................................... (6,019,680) -0-
----------------- -------------
(42,569,880) (74,519,684)
----------------- -------------
Net Change in Net Assets from Capital Transactions........ 14,729,858 5,833,717
----------------- -------------
Total Increase in Net Assets......................... 14,710,878 5,807,290
NET ASSETS:
Beginning of the Period................................. 27,546,715 21,739,425
----------------- -------------
End of the Period....................................... $ 42,257,593 $ 27,546,715
============= ===========
</TABLE>
See Notes to Financial Statements.
21
<PAGE> 150
VAN KAMPEN MERRITT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
DEC. 31, --------------------------------
CLASS A SHARES 1994 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............. $ 1.00 $1.00 $1.00 $1.00 $1.00
---------- ----- ----- ----- -----
Net Investment Income.......................... .019 .025 .023 .041 .065
Less Distributions from Net Investment
Income...................................... .019 .025 .023 .041 .065
---------- ----- ----- ----- -----
Net Asset Value, End of Period................... $ 1.00 $1.00 $1.00 $1.00 $1.00
---------- ----- ----- ----- -----
TOTAL RETURN (Non-Annualized)*................... 1.96% 2.50% 2.31% 4.21% 6.72%
Net Assets at End of Period (In millions)........ $ 32.3 $27.5 $21.7 $24.9 $35.0
Ratio of Expenses to Average Net Assets*......... 1.03% 1.13% 1.16% 1.14% .99%
Ratio of Net Investment Income to Average Net
Assets*........................................ 3.91% 2.44% 2.31% 4.21% 6.57%
</TABLE>
- -------------------------
* If certain expenses had not been assumed by the Adviser, total return would
have been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratio of Expenses to Average Net Assets.......... 1.50% 1.54% 1.31% 1.55% 1.39%
Ratio of Net Investment Income to Average Net
Assets......................................... 3.44% 2.03% 2.16% 3.80% 6.17%
</TABLE>
See Notes to Financial Statements.
22
<PAGE> 151
VAN KAMPEN MERRITT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS -- (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
CLASS A SHARES 1990 1989 1988 1987 1986
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................ $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Net Investment Income............................. .078 .078 .066 .056 .068
Less Distributions from Net Investment Income..... .078 .078 .066 .056 .068
----- ----- ----- ----- -----
Net Asset Value, End of Period...................... $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
TOTAL RETURN (Non-Annualized)*...................... 8.11% 8.07% 6.60% 5.94% 6.96%
Net Assets at End of Period (in millions)........... $45.0 $44.1 $51.5 $17.1 $ 6.3
Ratio of Expenses to Average Net Assets*............ .90% .98% .78% .58% .88%
Ratio of Net Investment Income to Average Net
Assets*........................................... 7.81% 7.79% 6.56% 5.65% 6.78%
</TABLE>
- -------------------------
* If certain expenses had not been assumed by the Adviser, total return would
have been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratio of Expenses to Average Net Assets............. 1.31% 1.31% 1.22% 1.48% 1.85%
Ratio of Net Investment Income to Average Net
Assets............................................ 7.40% 7.46% 6.13% 4.74% 5.81%
</TABLE>
See Notes to Financial Statements.
23
<PAGE> 152
VAN KAMPEN MERRITT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS -- (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the period indicated. (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
JULY 11, 1994
(COMMENCEMENT OF
DISTRIBUTION) TO
DECEMBER 31,
CLASS B SHARES 1994
- ------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period................................... $ 1.00
------
Net Investment Income................................................ .015
Less Distributions from Net Investment Income........................ .015
------
Net Asset Value, End of Period......................................... $ 1.00
==============
TOTAL RETURN (Non-Annualized)*......................................... 1.49%
Net Assets at End of Period (in millions).............................. $ 9.9
Ratio of Expenses to Average Net Assets*............................... 1.80%
Ratio of Net Investment Income to Average Net Assets*.................. 3.41%
</TABLE>
- ---------------
* If certain expenses had not been assumed by the Adviser, total return would
have been lower and the ratios would have been as follows:
<TABLE>
<S> <C>
Ratio of expenses to average net assets................................ 2.28%
Ratio of net investment income to average net assets................... 2.93%
</TABLE>
See Notes to Financial Statements.
24
<PAGE> 153
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 (Unaudited)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Merritt Money Market Fund (the "Fund") is a separate series of Van
Kampen Merritt Money Market Trust (the "Trust"). The Fund is an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended. The distribution of the Fund's second class of
shares, Class B shares, commenced on July 11, 1994.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. Security Valuation
Investments are valued at amortized cost, which approximates market. Under
this valuation method, a portfolio instrument is valued at cost and any discount
or premium is amortized on a straight-line basis to the maturity of the
instrument.
B. Security Transactions
Security transactions are recorded on a trade date basis. Realized gains and
losses are determined on an identified cost basis. Interest income is recorded
on an accrual basis.
C. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is required. The Fund intends to utilize
provisions of the federal income tax laws which allow it to carry a realized
capital loss forward for eight years following the year of the loss and offset
such losses against any future realized capital gains. At June 30, 1994, the
Fund had an accumulated capital loss carryforward for tax purposes of $39,559.
Of this amount, $26,110, $2,038 and $11,411 will expire on June 30, 1998, 1999
and 2000, respectively. Net realized gains or losses differ for financial
statement and tax reporting purposes primarily because of the deferral of post
October 31 losses which are not recognized for tax purposes until the first day
of the following fiscal year.
D. Distribution of Income and Gains
The Fund declares dividends from net investment income daily and automatically
reinvests such dividends daily. Net realized gains, if any, are distributed
annually. Shareholders can elect to receive the cash equivalent of their daily
dividends at each month end.
25
<PAGE> 154
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1994 (Unaudited)
NOTE 2 -- INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen
American Capital Investment Advisory Corp. (the "Adviser") will provide
investment advice and facilities to the Fund for an annual fee payable monthly
as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
--------------------------------------------------- ------------
<S> <C>
First $250 million................................. .500 of 1%
Next $250 million.................................. .475 of 1%
Next $250 million.................................. .425 of 1%
Over $750 million.................................. .275 of 1%
</TABLE>
Certain legal expenses were paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.
For the six months ended December 31, 1994, the Fund recognized expenses of
approximately $9,700 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' ("VKAC") cost of providing accounting, legal and
certain shareholder services to the Fund.
Certain officers and trustees of the Fund are also officers and directors of
VKAC. The Fund does not compensate its officers or trustees who are officers of
VKAC.
The Fund has implemented deferred compensation and retirement plans for its
Trustees. Under the deferred compensation plan, Trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those Trustees who are not officers of VKAC.
At December 31, 1994, VKAC owned 611,383 and 100 shares of Classes A and B,
respectively.
26
<PAGE> 155
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1994 (Unaudited)
NOTE 3 -- CAPITAL TRANSACTIONS
The Fund has outstanding two classes of common shares, Classes A and B. There
are an unlimited number of shares of each class without par value authorized.
At June 30, 1994, paid in surplus for Class A shares aggregated $27,601,290.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS ENDED JUNE 30,
DECEMBER 31, 1994 1994
----------------- -----------
<S> <C> <C>
SALES:
Class A.................................................... 40,881,989 79,908,069
Class B.................................................... 15,887,574 -0-
----------------- -----------
Total Sales................................................ 56,769,563 79,908,069
============= ==========
DIVIDEND REINVESTMENT:
Class A.................................................... 479,626 445,332
Class B.................................................... 50,549 -0-
----------------- -----------
Total Dividend Reinvestment................................ 530,175 445,332
============= ==========
REPURCHASES:
Class A.................................................... (36,550,200) (74,519,684)
Class B.................................................... (6,019,680) -0-
----------------- -----------
Total Repurchases.......................................... (42,569,880) (74,519,684)
============= ==========
</TABLE>
NOTE 4 -- DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 and a Service Plan (the "Service Plan," collectively the "Plans"). The
Plans govern payments for the distribution of the Fund's shares, ongoing
shareholder services and maintenance of shareholder accounts. Annual fees under
the Plans of up to .25% of Class A shares and 1.00% of Class B shares are
accrued daily. Included in these fees for the six months ended December 31,
1994, are payments to VKAC of approximately $16,300.
27
<PAGE> 156
VAN KAMPEN MERRITT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) DESCRIPTION DATE PURCHASE COST
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AGENCY 9.7%
$ 877 Small Business Administration................... 07/01/94 5.250% $ 876,598
800 Student Loan Marketing Association.............. 07/06/94 4.325 800,000
1,000 Federal Home Loan Bank.......................... 08/22/94 4.270 993,832
-----------
TOTAL AGENCY......................................................... 2,670,430
-----------
COMMERCIAL PAPER 25.4%
1,000 American General Finance Corp................... 07/15/94 4.245 1,000,000
1,000 Ford Motor Credit Co............................ 07/15/94 4.245 1,000,000
1,000 John Deere Capital Corp......................... 07/15/94 4.245 1,000,000
1,000 Associates Corp................................. 07/20/94 4.290 1,000,000
1,000 State Street Bank & Trust....................... 07/20/94 4.311 1,000,000
1,000 American Express Credit Corp.................... 08/01/94 4.367 1,000,000
1,000 General Electric Capital Corp................... 08/01/94 4.387 1,000,000
-----------
TOTAL COMMERCIAL PAPER............................................... 7,000,000
-----------
MEDIUM TERM NOTES 14.8%
500 CIT Group Hldgs Inc............................. 07/01/94 4.600 500,027
1,000 Purdue University Indiana Rev................... 07/01/94 4.000 1,000,000
1,000 Kent County, MI Gen Oblig Limited Tax Notes..... 11/01/94 4.547 1,009,598
750 San Diego, CA Taxable Anticipation Notes........ 12/14/94 4.000 750,493
800 Cuyahoga County, OH Taxable Anticipation
Notes........................................... 12/30/94 4.170 800,845
-----------
TOTAL MEDIUM TERM NOTES.............................................. 4,060,963
-----------
VARIABLE RATE DEMAND OBLIGATIONS 15.6%
500 AT & T Capital Corp............................. 07/01/94 4.750 500,000
700 Catholic Healthcare West (Gtd: Toronto Dominion
Bank)........................................... 07/06/94 4.600 700,000
500 Florida Housing Finance Agency (L.O.C. Credit
Suisse)......................................... 07/06/94 4.460 500,000
700 Health Insurance Plan Greater New York (L.O.C.
Morgan Gty)..................................... 07/06/94 4.500 700,000
500 Illinois Student Assistance Commission (L.O.C.
Sumitomo Bank).................................. 07/06/94 4.820 500,000
700 Mississippi Business Finance Corp............... 07/06/94 4.400 700,000
700 Virginia St Housing Development Authority....... 07/06/94 4.500 700,000
-----------
TOTAL VARIABLE RATE DEMAND OBLIGATIONS............................... 4,300,000
-----------
</TABLE>
28
<PAGE> 157
VAN KAMPEN MERRITT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
June 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) DESCRIPTION DATE PURCHASE COST
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT 16.1%
4,440 UBS Securities, U.S. T-Note, $4,190,000 par,
9.500% coupon, due 11/15/95, dated 06/30/94, to
be sold on 07/01/94 at $4,440,518............... 07/01/94 4.200 4,440,000
-----------
TOTAL INVESTMENTS (A) 81.6%.......................................... 22,471,393
OTHER ASSETS IN EXCESS OF LIABILITIES 18.4%.......................... 5,075,322
-----------
NET ASSETS 100.0%.................................................... $27,546,715
===========
</TABLE>
(a) At June 30, 1994, cost is identical for both book and federal income tax
purposes.
See Notes to Financial Statements
29
<PAGE> 158
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1994
<TABLE>
<S> <C>
ASSETS:
Investments, at Amortized Cost which Approximates Market (Note 1)......... $22,471,393
Cash...................................................................... 36,251
RECEIVABLES:
Fund Shares Sold.......................................................... 5,002,968
Interest.................................................................. 119,753
Other..................................................................... 5,070
-----------
Total Assets.............................................................. 27,635,435
-----------
LIABILITIES:
PAYABLES:
Fund Shares Repurchased................................................... 33,514
Income Distributions...................................................... 4,018
Investment Advisory Fee (Note 2).......................................... 3,400
Accrued Expenses.......................................................... 47,788
-----------
Total Liabilities......................................................... 88,720
-----------
NET ASSETS................................................................ $27,546,715
===========
NET ASSETS CONSIST OF:
Paid in Surplus........................................................... $27,601,290
Accumulated Net Realized Loss on Investments.............................. (54,575)
-----------
NET ASSETS (equivalent to $1.00 per share on 27,601,290 shares
outstanding)............................................................ $27,546,715
===========
</TABLE>
See Notes to Financial Statements
30
<PAGE> 159
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................... $ 727,456
Amortization of Discount (Premium) -- Net.................................. 3,996
-----------
Total Income............................................................... 731,452
-----------
EXPENSES:
Investment Advisory Fee (Note 2)........................................... 97,029
Shareholder Services....................................................... 58,932
Distribution (12b-1) and Service Fees (Note 4)............................. 49,893
Printing................................................................... 31,130
Audit...................................................................... 28,430
Trustees Fees and Expenses (Note 2)........................................ 18,855
Custody.................................................................... 17,760
Legal (Note 2)............................................................. 10,950
Other...................................................................... 3,170
-----------
Total Expenses............................................................. 316,149
Less Fees Waived........................................................... 83,761
-----------
Net Expenses............................................................... 232,388
-----------
Net Investment Income...................................................... $ 499,064
===========
REALIZED GAIN/LOSS ON INVESTMENTS:
Proceeds from Sales........................................................ $ 8,035,919
Cost of Securities Sold.................................................... (8,062,346)
-----------
NET REALIZED LOSS ON INVESTMENTS (including $85,500 reimbursement by the
Adviser for realized losses incurred on variable rate instruments)....... $ (26,427)
===========
Net Increase in Net Assets from Operations................................. $ 472,637
===========
</TABLE>
See Notes to Financial Statements
31
<PAGE> 160
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1994 and 1993
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1994 JUNE 30, 1993
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net Investment Income..................................... $ 499,064 $ 541,128
Net Realized Gain/Loss on Investments..................... (26,427) 695
------------- -------------
Change in Net Assets from Operations...................... 472,637 541,823
Distributions from Net Investment Income.................. (499,064) (541,128)
------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES......... (26,427) 695
------------- -------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold................................. 79,908,069 86,871,367
Net Asset Value of Shares Issued Through Dividend
Reinvestment........................................... 445,332 500,012
Cost of Shares Repurchased................................ (74,519,684) (90,537,141)
------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.......... 5,833,717 (3,165,762)
------------- -------------
TOTAL INCREASE/DECREASE IN NET ASSETS....................... 5,807,290 (3,165,067)
NET ASSETS:
Beginning of the Period................................... 21,739,425 24,904,492
------------- -------------
End of the Period......................................... $ 27,546,715 $ 21,739,425
============= =============
</TABLE>
See Notes to Financial Statements
32
<PAGE> 161
VAN KAMPEN MERRITT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following schedule presents selected per share data and related ratios for
one share of the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period......................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Investment Income............ .025 .023 .041 .065 .078 .078 .066 .056 .068 .092
Less Distribution from Net
Investment Income.............. .025 .023 .041 .065 .078 .078 .066 .056 .068 .092
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Return*.................... 2.50% 2.31% 4.21% 6.72% 8.11% 8.07% 6.60% 5.94% 6.96% 9.60%
Net Assets at End of Period (in
millions)...................... $27.5 $21.7 $24.9 $35.0 $45.0 $44.1 $51.5 $17.1 $ 6.3 $ 1.5
Ratio of Expenses to Average Net
Assets*........................ 1.13% 1.16% 1.14% .99% .90% .98% .78% .58% .88% 1.01%
Ratio of Net Investment Income to
Average Net Assets*............ 2.44% 2.31% 4.21% 6.57% 7.81% 7.79% 6.56% 5.65% 6.78% 8.39%
* If certain expenses had not been assumed by the investment adviser, total return would have been lower and the ratios
would have been as follows:
Ratio of Expenses to Average Net
Assets......................... 1.54% 1.31% 1.55% 1.39% 1.31% 1.31% 1.22% 1.48% 1.85% 1.94%
Ratio of Net Investment Income to
Average Net Assets............. 2.03% 2.16% 3.80% 6.17% 7.40% 7.46% 6.13% 4.74% 5.81% 7.46%
</TABLE>
See Notes to Financial Statements
33
<PAGE> 162
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Merritt Money Market Fund (the "Fund") is a separate series of Van
Kampen Merritt Money Market Trust (the "Trust"). The Fund is an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended. The distribution of the Fund's second class of
shares, Class B shares, commenced on July 11, 1994.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. Security Valuation
Investments are valued at amortized cost, which approximates market. Under
this valuation method, a portfolio instrument is valued at cost and any discount
or premium is amortized on a straight-line basis to the maturity of the
instrument.
B. Security Transactions
Security transactions are recorded on a trade date basis. Realized gains and
losses are determined on an identified cost basis. Interest income is recorded
on an accrual basis.
C. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is required. The Fund intends to utilize
provisions of the federal income tax laws which allow it to carry a realized
capital loss forward for eight years following the year of the loss and offset
such losses against any future realized capital gains. At June 30, 1994, the
Fund had an accumulated capital loss carryforward for tax purposes of $39,559.
Of this amount, $26,110, $2,038 and $11,411 will expire on June 30, 1998, 1999
and 2000, respectively. Net realized gains or losses differ for financial
statement and tax reporting purposes primarily because of the deferral of post
October 31 losses which are not recognized for tax purposes until the first day
of the following fiscal year.
D. Distribution of Income and Gains
The Fund declares dividends from net investment income daily and automatically
reinvests such dividends daily. Net realized gains, if any, are distributed
annually. Shareholders can elect to receive the cash equivalent of their daily
dividends at each month end.
34
<PAGE> 163
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 1994
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen
Merritt Investment Advisory Corp. (the "Adviser") will provide investment advice
and facilities to the Fund for an annual fee payable monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
--------------------------------------------------- -----------
<S> <C>
First $250 million................................. .500 of 1%
Next $250 million.................................. .475 of 1%
Next $250 million.................................. .425 of 1%
Over $750 million.................................. .275 of 1%
</TABLE>
Certain legal expenses were paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.
For the year ended June 30, 1994, the Fund recognized expenses of
approximately $20,250 representing Van Kampen Merritt Inc.'s ("Van Kampen
Merritt") or the Adviser's cost of providing accounting, legal and certain
shareholder services to the Fund.
Certain officers and trustees of the Fund are also officers and directors of
the Adviser and Van Kampen Merritt. The Fund does not compensate its officers or
trustees who are officers of the Adviser or Van Kampen Merritt.
At June 30, 1994, Van Kampen Merritt owned 743,833 shares of the Fund.
3. CAPITAL TRANSACTIONS
The Fund is authorized to issue an unlimited number of shares of beneficial
interest without par value. At June 30, 1994, and 1993, paid in surplus
aggregated $27,601,290 and $21,767,573, respectively. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1994 JUNE 30, 1993
------------- -------------
<S> <C> <C>
Beginning Shares............................................... 21,767,573 24,933,335
------------- -------------
Shares Sold.................................................... 79,908,069 86,871,367
Shares Issued Through Dividend Reinvestment.................... 445,332 500,012
Shares Repurchased............................................. (74,519,684) (90,537,141)
------------- -------------
Net Change in Shares Outstanding............................... 5,833,717 (3,165,762)
------------- -------------
Ending Shares.................................................. 27,601,290 21,767,573
============= =============
</TABLE>
35
<PAGE> 164
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 1994
4. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 and a Service Plan (the "Service Plan," collectively the "Plans"). The
Plans govern payments for the distribution of the Fund's shares, ongoing
shareholder services and maintenance of shareholder accounts. Annual fees under
the Plans of up to .25% of the Fund's average net assets are accrued daily.
36
<PAGE> 165
VAN KAMPEN MERRITT MONEY MARKET FUND
INDEPENDENT AUDITOR'S REPORT
The Board of Trustees and Shareholders of
Van Kampen Merritt Money Market Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Merritt Money Market Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1994, and 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 Fund's 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 to 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 June
30, 1994, 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 present fairly, in all material respects, the financial position of Van
Kampen Merritt Money Market Fund as of June 30, 1994, 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.
KPMG Peat Marwick LLP
Chicago, Illinois
August 4, 1994
37
<PAGE> 166
APPENDIX
STANDARD & POORS RATINGS
DEBT RATINGS
A Standard & Poor's corporate or municipal debt rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
The debt rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based in varying degrees, on the following considerations:
1. Likelihood of default -- capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
<TABLE>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
c The letter "c" indicates that the holder's option to tender the security for
purchase may be canceled under certain prestated conditions enumerated in the
tender option documents.
L The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is federally
insured and interest in adequately collateralized. In the case of certificates
of deposit, the letter "L" indicates that the deposit, combined with other
deposits being held in the same right and capacity, will be honored for
principal and accrued per-default interest up to the federal insurance limits
within 30 days
</TABLE>
38
<PAGE> 167
<TABLE>
<S> <C>
after closing of the insured institution or, in the event that the deposit is
assumed by a successor insured institution, upon maturity.
p The letter "p" indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk
of default upon failure of, such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.
* Continuance of the rating is contingent upon S&P's receipt of an executed copy
of the escrow agreement or closing documentation confirming investments and
cash flows.
</TABLE>
COMMERCIAL PAPER RATINGS
Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. These categories are as
follows:
<TABLE>
<S> <C>
A-1 This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
"A-1".
A commercial paper rating is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished
to S&P by the issuer or obtained by S&P from other sources it considers
reliable. S&P does not perform an audit in connection with any rating and may,
on occasion, rely on unaudited financial information. The ratings may be
changed, suspended, or withdrawn as a result of changes in, or unavailability
of , such information, or based on other circumstances.
</TABLE>
39
<PAGE> 168
MOODY'S RATINGS
DEBT RATINGS
<TABLE>
<S> <C>
Aaa Bonds which are rated AAA are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the AAA
securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification of Aa and A. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
</TABLE>
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability of issues to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs the following designations, all judged to
be investment grade, to indicate the relative repayment capacity of rated
issuers:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
- Leading market positions in well established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well established access to a range of financial markets and assured sources
of alternative liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
40
<PAGE> 169
APPENDIX C
AMERICAN CAPITAL RESERVE FUND
PORTFOLIO OF INVESTMENTS
May 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER 60.7%
$16,000 Associates Corp. of North America................... 6.230% 07/12/95 $ 15,886,133
15,000 Chevron Oil Finance Co. ............................ 5.930% 06/26/95 14,936,083
10,000 Du Pont (E.I.) de Nemours........................... 6.060% 06/27/95 9,955,150
18,000 General Electric Capital Corp. ..................... 6.190% 07/24/95 17,837,190
19,000 General Electric Co. ............................... 6.230% 09/05/95 18,689,250
6,300 Lilly (Eli) & Co. .................................. 6.000% 06/30/95 6,268,815
10,000 MetLife Funding, Inc. .............................. 5.960% 06/22/95 9,963,761
10,000 MetLife Funding, Inc. .............................. 6.000% 07/11/95 9,932,350
18,000 Pitney Bowes Credit Corp. .......................... 6.100% 06/12/95 17,963,880
9,000 Pitney Bowes, Inc. ................................. 5.960% 06/14/95 8,979,210
8,000 Prudential Funding Corp. ........................... 6.230% 07/24/95 7,927,160
9,000 Prudential Funding Corp. ........................... 6.230% 07/27/95 8,913,503
18,000 Raytheon Co. ....................................... 5.970% 06/09/95 17,973,180
5,000 State Bank of New South Wales....................... 6.250% 08/29/95 4,923,750
10,000 State Bank of New South Wales....................... 6.260% 09/06/95 9,833,944
17,000 Toronto Dominion Holdings........................... 5.990% 07/10/95 16,887,989
------------
TOTAL COMMERCIAL PAPER (Cost $196,871,348).......... 196,871,348
------------
REPURCHASE AGREEMENTS* 37.2%
65,000 SBC Capital Markets, Inc., dated 5/31/95, repurchase
proceeds $65,011,104................................ 6.150% 06/01/95 65,000,000
55,905 State Street Bank & Trust Co., dated 5/31/95,
repurchase proceeds $55,914,512..................... 6.125% 06/01/95 55,905,000
------------
TOTAL REPURCHASE AGREEMENTS (Cost $120,905,000)..... 120,905,000
------------
UNITED STATES GOVERNMENT OBLIGATIONS 24.6%
30,000 Federal Home Loan Banks............................. 6.100% 06/01/95 29,994,917
25,000 Federal National Mortgage Association............... 5.900% 06/02/95 24,991,819
25,000 Federal National Mortgage Association............... 5.940% 08/09/95 24,715,625
------------
TOTAL UNITED STATES GOVERNMENT OBLIGATIONS
(Cost $79,702,361).................................. 79,702,361
------------
TOTAL INVESTMENTS (Cost $397,478,709) 122.5%....... 397,478,709
Other assets and liabilities, net (22.5%).......... (73,020,170)
------------
NET ASSETS 100%.................................... $324,458,539
============
</TABLE>
* Collateralized by U.S. Government obligations in a pooled cash account
See Notes to Financial Statements.
C-1
<PAGE> 170
AMERICAN CAPITAL RESERVE FUND
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments, at amortized cost................................................. $397,478,709
Cash........................................................................... 127,602
Receivable for Fund shares sold................................................ 786,579
Other assets................................................................... 43,829
------------
Total Assets................................................................... 398,436,719
------------
LIABILITIES
Payable for Fund shares redeemed............................................... 73,417,480
Due to shareholder service agent............................................... 162,280
Due to Adviser................................................................. 138,975
Due to Distributor............................................................. 87,995
Dividends payable.............................................................. 62,989
Deferred Directors' compensation............................................... 60,138
Accrued expenses............................................................... 48,323
------------
Total Liabilities.............................................................. 73,978,180
------------
NET ASSETS, equivalent to $1.00 per share for Class A, B and C shares.......... $324,458,539
============
NET ASSETS WERE COMPRISED OF:
Capital stock at par; 319,694,843 Class A, 4,189,806 Class B and
588,487 Class C shares outstanding............................................. $ 3,244,731
Capital surplus................................................................ 321,161,934
Undistributed net investment income............................................ 51,874
------------
NET ASSETS at May 31, 1995..................................................... $324,458,539
============
</TABLE>
See Notes to Financial Statements.
C-2
<PAGE> 171
AMERICAN CAPITAL RESERVE FUND
STATEMENT OF OPERATIONS
Year Ended May 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest........................................................................ $22,971,502
-----------
EXPENSES
Management fees................................................................. 1,896,937
Shareholder service agent's fees and expenses................................... 1,495,213
Accounting services............................................................. 100,666
Service fees --Class A.......................................................... 611,646
Distribution and service fees -- Class B........................................ 3,845
Distribution and service fees -- Class C........................................ 526
Directors' fees and expenses.................................................... 22,739
Audit fees...................................................................... 21,525
Legal fees...................................................................... 20,066
Reports to shareholders......................................................... 58,845
Registration and filing fees.................................................... 111,820
Miscellaneous................................................................... 13,559
-----------
Total expenses.................................................................. 4,357,387
-----------
Net investment income........................................................... 18,614,115
-----------
Increase in Net Assets Resulting from Operations................................ $18,614,115
===========
</TABLE>
See Notes to Financial Statements.
C-3
<PAGE> 172
AMERICAN CAPITAL RESERVE FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
---------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS, beginning of period.............................. $ 463,827,313 $ 279,344,078
--------------- ---------------
OPERATIONS
Increase from net investment income........................ 18,614,115 7,722,464
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME
Class A.................................................... (18,623,009) (7,713,417)
Class B.................................................... (15,317) --
Class C.................................................... (2,167) --
--------------- ---------------
(18,640,493) (7,713,417)
--------------- ---------------
CAPITAL TRANSACTIONS
Proceeds from shares sold
Class A.................................................... 3,148,142,161 2,733,962,738
Class B.................................................... 21,754,203 --
Class C.................................................... 3,049,049 --
--------------- ---------------
3,172,945,413 2,733,962,738
--------------- ---------------
Proceeds from shares issued for distributions reinvested
Class A.................................................... 18,623,009 7,713,418
Class B.................................................... 15,317 --
Class C.................................................... 2,167 --
--------------- ---------------
18,640,493 7,713,418
--------------- ---------------
Cost of shares redeemed
Class A.................................................... (3,310,885,859) (2,557,201,968)
Class B.................................................... (17,579,714) --
Class C.................................................... (2,462,729) --
--------------- ---------------
(3,330,928,302) (2,557,201,968)
--------------- ---------------
Increase (decrease) in net assets resulting from capital
transactions............................................ (139,342,396) 184,474,188
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS............................ (139,368,774) 184,483,235
--------------- ---------------
NET ASSETS, end of period.................................... $ 324,458,539 $ 463,827,313
=============== ===============
</TABLE>
See Notes to Financial Statements.
C-4
<PAGE> 173
AMERICAN CAPITAL RESERVE FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each of the
periods indicated.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
CLASS A
YEAR ENDED MAY 31,
-----------------------------------------------
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM OPERATIONS
Investment income................................ .0535 .0329 .0353 .052 .0758
Expenses......................................... (.0101) (.0100) (.0109) (.0105) (.0094)
------- ------- ------- ------- -------
Net investment income............................ .0434 .0229 .0244 .0415 .0664
------- ------- ------- ------- -------
DISTRIBUTIONS FROM NET INVESTMENT INCOME......... (.0434) (.0229) (.0244) (.0415) (.0664)
------- ------- ------- ------- -------
Net asset value, end of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURN..................................... 4.43% 2.32% 2.44% 4.20% 6.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)............. $ 319.7 $ 463.8 $ 279.3 $ 329.2 $ 402.3
Average net assets (millions).................... $ 434.4 $ 326.8 $ 306.7 $ 377.5 $ 482.6
Ratios to average net assets
Expenses....................................... 1.00% 1.03% 1.09% 1.05% .94%
Net investment income.......................... 4.28% 2.36% 2.44% 4.19% 6.68%
</TABLE>
See Notes to Financial Statements.
C-5
<PAGE> 174
AMERICAN CAPITAL RESERVE FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of capital stock outstanding throughout each of the
periods indicated.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
CLASS B CLASS C
----------------- -----------------
APRIL 18, 1995(1) APRIL 18, 1995(1)
THROUGH THROUGH
MAY 31, 1995 MAY 31, 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........................... $ 1.00 $ 1.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Investment income.............................................. .0073 .0076
Expenses....................................................... (.0026) (.0027)
------- -------
Net investment income.......................................... .0047 .0049
------- -------
DISTRIBUTIONS FROM NET INVESTMENT INCOME....................... (.0047) (.0049)
------- -------
Net asset value, end of period................................. $ 1.00 $ 1.00
======= =======
TOTAL RETURN(2)................................................ .47% .49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (millions)........................... $ 4.2 $ 0.6
Average net assets (millions).................................. $ 2.3 $ 0.3
Ratios to average net assets (annualized)(3)
Expenses..................................................... 1.76% 1.76%
Net investment income........................................ 3.52% 3.52%
</TABLE>
- ---------------
(1) Commencement of operations.
(2) Total return has not been annualized and does not consider the effect of
sales charges.
(3) Ratios based on the class of shares being in effect for the entire fiscal
year.
See Notes to Financial Statements.
C-6
<PAGE> 175
AMERICAN CAPITAL RESERVE FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
American Capital Reserve Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end management
investment company. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements.
A. Investment Valuations
Investments are valued at amortized cost, which approximates market value.
The cost of investments for federal income tax purposes is substantially the
same as for financial reporting purposes.
B. Repurchase Agreements
A repurchase agreement is a short-term investment in which the Fund
acquires ownership of a debt security and the seller agrees to repurchase the
security at a future time and specified price. The Fund may invest independently
in repurchase agreements, or transfer uninvested cash balances into a pooled
cash account along with other investment companies advised by Van Kampen
American Capital Asset Management, Inc. (the "Adviser"), the daily aggregate of
which is invested in repurchase agreements. Repurchase agreements are
collateralized by the underlying debt security. The Fund will make payment for
such securities only upon physical delivery or evidence of book entry transfer
to the account of the custodian bank. The seller is required to maintain the
value of the underlying security at not less than the repurchase proceeds due
the Fund.
C. Federal Income Taxes
No provision for federal income taxes is required because the Fund has
elected to be taxed as a "regulated investment company" under the Internal
Revenue Code and intends to maintain this qualification by annually distributing
all of its taxable net investment income and taxable net realized gains to its
shareholders. Additionally, approximately $18,000 of financial statement losses
are deferred for federal income tax purposes to the 1996 fiscal year.
D. Investment Transactions and Related Investment Income
Investment transactions are accounted for on the trade date. Realized gains
and losses on investments are determined on the basis of amortized cost.
Interest income is accrued daily.
E. Dividends
The Fund records daily dividends from net investment income. These
dividends are automatically reinvested in additional shares of the Fund at net
asset value. Shares purchased by daily reinvestments are liquidated at net asset
value on the last business day of the month and the proceeds of such redemptions
paid to the shareholders electing to receive dividends in cash. The Fund
distributes tax basis earnings in accordance with the minimum distribution
requirements of the Internal Revenue Code, which may differ from generally
accepted accounting principles. Such distributions may result in dividends in
excess of financial statement net investment income.
C-7
<PAGE> 176
AMERICAN CAPITAL RESERVE FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
F. Debt Discount and Premium
For financial and tax reporting purposes, all discounts and premiums are
amortized over the life of the security.
NOTE 2 -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Adviser serves as investment manager of the Fund. Management fees are
calculated monthly, based on the average daily net assets of the Fund at an
annual rate of .50% of the first $150 million; .45% of the next $100 million;
.40% of the next $100 million; and .35% of the amount in excess of $350 million.
Accounting services include the salaries and overhead expenses of the
Fund's Treasurer and the personnel operating under his direction. Charges are
allocated among investment companies advised by the Adviser. During the period,
these charges included $12,498 as the Fund's share of the employee costs
attributable to the Fund's accounting officers. A portion of the accounting
services expense was paid to the Adviser in reimbursement of personnel,
facilities and equipment costs attributable to the provision of accounting
services to the Fund. The services provided by the Adviser are at cost.
ACCESS Investors Services, Inc., an affiliate of the Adviser, serves as the
Fund's shareholder service agent. These services are provided at cost plus a
profit. During the period, such fees aggregated $1,266,690.
Under the Distribution Plans, each class of shares pays up to .15% per
annum of its average daily net assets to reimburse the Distributor for expenses
and service fees incurred. Class B and Class C shares pay an additional fee of
up to .75% per annum of their average daily net assets to reimburse Van Kampen
American Capital Distributors, Inc. (the "Distributor") for its distribution
expenses. Actual distribution expenses incurred by the Distributor for Class B
and Class C shares may exceed the amounts reimbursed to the Distributor by the
Fund. At the end of the period, the unreimbursed expenses incurred by the
Distributor under the Class B and Class C plans aggregated approximately $9,000
and $3,000, respectively, and may be carried forward and reimbursed through
either the collection of the contingent deferred sales charges from share
redemptions or, subject to the annual renewal of the plans, future Fund
reimbursements of distribution fees.
Legal fees were for services rendered by O'Melveny & Myers, counsel for the
Fund. Lawrence J. Sheehan, of counsel to that firm, is a director of the Fund.
Certain officers and directors of the Fund are officers and directors of
the Adviser, the Distributor and the shareholder service agent.
NOTE 3 -- DIRECTOR COMPENSATION
Fund directors who are not affiliated with the Adviser are compensated by
the Fund at the annual rate of $1,440 plus a fee of $35 per day for Board and
Committee meetings attended. The Chairman receives additional fees from the Fund
at the annual rate of $540. During the period, such fees aggregated $19,263.
C-8
<PAGE> 177
AMERICAN CAPITAL RESERVE FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The directors may participate in a voluntary Deferred Compensation Plan
(the "Plan"). 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. Each director covered by the Plan elects to be credited with an
earnings component on amounts deferred equal to the income earned by the Fund on
its short-term investments or equal to the total return of the Fund.
NOTE 4 -- CAPITAL
The Fund offers three classes of shares at their respective net asset
values per share. Class B and Class C shares are subject to a sales charge
imposed at the time of redemption on a contingent deferred basis. All classes of
shares have the same rights, except that Class B and Class C shares bear the
cost of distribution fees and certain other class specific expenses. Realized
and unrealized gains or losses, investment income and expenses (other than class
specific expenses) are allocated daily to each class of shares based upon the
relative proportion of net assets of each class. Class B and Class C shares
automatically convert to Class A shares six years and ten years after purchase,
respectively, subject to certain conditions. The offering of Class B and Class C
shares commenced April 18, 1995, at which time all previously outstanding shares
became Class A shares.
The Fund has 1 billion of Class A shares, and 500 million each of Class B
and Class C shares of $.01 par value capital stock authorized. Transactions in
shares of capital stock were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEAR ENDED MAY 31,
-------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold
Class A...................................................... 3,148,142,161 2,733,962,738
Class B...................................................... 21,754,203 --
Class C...................................................... 3,049,049 --
------------- -------------
3,172,945,413 2,733,962,738
============= =============
Shares issued for distributions reinvested
Class A...................................................... 18,623,009 7,713,418
Class B...................................................... 15,317 --
Class C...................................................... 2,167 --
------------- -------------
18,640,493 7,713,418
============= =============
Shares redeemed
Class A...................................................... (3,310,885,862) (2,557,202,100)
Class B...................................................... (17,579,714) --
Class C...................................................... (2,462,729) --
------------- -------------
(3,330,928,305) (2,557,202,100)
------------- -------------
Increase (decrease) in shares outstanding.................... (139,342,399) 184,474,056
============= =============
</TABLE>
C-9
<PAGE> 178
AMERICAN CAPITAL RESERVE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
American Capital Reserve Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of American Capital Reserve Fund, Inc.
at May 31, 1995, and the results of its operations, the changes in its net
assets and the financial highlights for each of the fiscal periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
June 30, 1995
C-10
<PAGE> 179
APPENDIX D
VAN KAMPEN MERRITT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) DESCRIPTION DATE PURCHASE COST
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AGENCY 9.7%
$ 877 Small Business Administration........................ 07/01/94 5.250% $ 876,598
800 Student Loan Marketing Association................... 07/06/94 4.325 800,000
1,000 Federal Home Loan Bank............................... 08/22/94 4.270 993,832
-----------
TOTAL AGENCY.............................................................. 2,670,430
-----------
COMMERCIAL PAPER 25.4%
1,000 American General Finance Corp........................ 07/15/94 4.245 1,000,000
1,000 Ford Motor Credit Co................................. 07/15/94 4.245 1,000,000
1,000 John Deere Capital Corp.............................. 07/15/94 4.245 1,000,000
1,000 Associates Corp...................................... 07/20/94 4.290 1,000,000
1,000 State Street Bank & Trust............................ 07/20/94 4.311 1,000,000
1,000 American Express Credit Corp......................... 08/01/94 4.367 1,000,000
1,000 General Electric Capital Corp........................ 08/01/94 4.387 1,000,000
-----------
TOTAL COMMERCIAL PAPER.................................................... 7,000,000
-----------
MEDIUM TERM NOTES 14.8%
500 CIT Group Hldgs Inc.................................. 07/01/94 4.600 500,027
1,000 Purdue University Indiana Rev........................ 07/01/94 4.000 1,000,000
1,000 Kent County, MI Gen Oblig Limited Tax Notes.......... 11/01/94 4.547 1,009,598
750 San Diego, CA Taxable Anticipation Notes............. 12/14/94 4.000 750,493
800 Cuyahoga County, OH Taxable Anticipation Notes....... 12/30/94 4.170 800,845
-----------
TOTAL MEDIUM TERM NOTES................................................... 4,060,963
-----------
VARIABLE RATE DEMAND OBLIGATIONS 15.6%
500 AT & T Capital Corp.................................. 07/01/94 4.750 500,000
700 Catholic Healthcare West (Gtd: Toronto Dominion
Bank)................................................ 07/06/94 4.600 700,000
500 Florida Housing Finance Agency (L.O.C. Credit
Suisse).............................................. 07/06/94 4.460 500,000
700 Health Insurance Plan Greater New York (L.O.C. Morgan
Gty)................................................. 07/06/94 4.500 700,000
500 Illinois Student Assistance Commission (L.O.C.
Sumitomo Bank)....................................... 07/06/94 4.820 500,000
700 Mississippi Business Finance Corp.................... 07/06/94 4.400 700,000
700 Virginia St Housing Development Authority............ 07/06/94 4.500 700,000
-----------
TOTAL VARIABLE RATE DEMAND OBLIGATIONS.................................... 4,300,000
-----------
</TABLE>
D-1
<PAGE> 180
VAN KAMPEN MERRITT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
June 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) DESCRIPTION DATE PURCHASE COST
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT 16.1%
4,440 UBS Securities, U.S. T-Note, $4,190,000 par, 9.500%
coupon, due 11/15/95, dated 06/30/94, to be sold on
07/01/94 at $4,440,518............................... 07/01/94 4.200 4,440,000
-----------
TOTAL INVESTMENTS (A) 81.6%............................................... 22,471,393
OTHER ASSETS IN EXCESS OF LIABILITIES 18.4%............................... 5,075,322
-----------
NET ASSETS 100.0%......................................................... $27,546,715
===========
</TABLE>
(a) At June 30, 1994, cost is identical for both book and federal income tax
purposes.
See Notes to Financial Statements
D-2
<PAGE> 181
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1994
<TABLE>
<S> <C>
ASSETS:
Investments, at Amortized Cost which Approximates Market (Note 1).............. $22,471,393
Cash........................................................................... 36,251
RECEIVABLES:
Fund Shares Sold............................................................... 5,002,968
Interest....................................................................... 119,753
Other.......................................................................... 5,070
-----------
Total Assets................................................................... 27,635,435
-----------
LIABILITIES:
PAYABLES:
Fund Shares Repurchased........................................................ 33,514
Income Distributions........................................................... 4,018
Investment Advisory Fee (Note 2)............................................... 3,400
Accrued Expenses............................................................... 47,788
-----------
Total Liabilities.............................................................. 88,720
-----------
NET ASSETS..................................................................... $27,546,715
===========
NET ASSETS CONSIST OF:
Paid in Surplus................................................................ $27,601,290
Accumulated Net Realized Loss on Investments................................... (54,575)
-----------
NET ASSETS (equivalent to $1.00 per share on 27,601,290 shares outstanding).... $27,546,715
===========
</TABLE>
See Notes to Financial Statements
D-3
<PAGE> 182
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................................ $ 727,456
Amortization of Discount (Premium) -- Net....................................... 3,996
-----------
Total Income.................................................................... 731,452
-----------
EXPENSES:
Investment Advisory Fee (Note 2)................................................ 97,029
Shareholder Services............................................................ 58,932
Distribution (12b-1) and Service Fees (Note 4).................................. 49,893
Printing........................................................................ 31,130
Audit........................................................................... 28,430
Trustees Fees and Expenses (Note 2)............................................. 18,855
Custody......................................................................... 17,760
Legal (Note 2).................................................................. 10,950
Other........................................................................... 3,170
-----------
Total Expenses.................................................................. 316,149
Less Fees Waived................................................................ 83,761
-----------
Net Expenses.................................................................... 232,388
-----------
Net Investment Income........................................................... $ 499,064
===========
REALIZED GAIN/LOSS ON INVESTMENTS:
Proceeds from Sales............................................................. $ 8,035,919
Cost of Securities Sold......................................................... (8,062,346)
-----------
NET REALIZED LOSS ON INVESTMENTS (including $85,500 reimbursement by the Adviser
for realized losses incurred on variable rate instruments).................... $ (26,427)
===========
Net Increase in Net Assets from Operations...................................... $ 472,637
===========
</TABLE>
See Notes to Financial Statements
D-4
<PAGE> 183
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1994 and 1993
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1994 JUNE 30, 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net Investment Income.......................................... $ 499,064 $ 541,128
Net Realized Gain/Loss on Investments.......................... (26,427) 695
------------- -------------
Change in Net Assets from Operations........................... 472,637 541,823
Distributions from Net Investment Income....................... (499,064) (541,128)
------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.............. (26,427) 695
------------- -------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
Proceeds from Shares Sold...................................... 79,908,069 86,871,367
Net Asset Value of Shares Issued Through Dividend
Reinvestment................................................ 445,332 500,012
Cost of Shares Repurchased..................................... (74,519,684) (90,537,141)
------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS............... 5,833,717 (3,165,762)
------------- -------------
TOTAL INCREASE/DECREASE IN NET ASSETS............................ 5,807,290 (3,165,067)
NET ASSETS:
Beginning of the Period........................................ 21,739,425 24,904,492
------------- -------------
End of the Period.............................................. $ 27,546,715 $ 21,739,425
============= =============
</TABLE>
See Notes to Financial Statements
D-5
<PAGE> 184
VAN KAMPEN MERRITT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following schedule presents selected per share data and related ratios for
one share of the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Investment Income.................. .025 .023 .041 .065 .078 .078 .066 .056 .068 .092
Less Distribution from Net Investment
Income............................... .025 .023 .041 .065 .078 .078 .066 .056 .068 .092
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Return*.......................... 2.50% 2.31% 4.21% 6.72% 8.11% 8.07% 6.60% 5.94% 6.96% 9.60%
Net Assets at End of Period (in
millions)............................ $27.5 $21.7 $24.9 $35.0 $45.0 $44.1 $51.5 $17.1 $ 6.3 $ 1.5
Ratio of Expenses to Average Net
Assets*.............................. 1.13% 1.16% 1.14% .99% .90% .98% .78% .58% .88% 1.01%
Ratio of Net Investment Income to
Average Net Assets*.................. 2.44% 2.31% 4.21% 6.57% 7.81% 7.79% 6.56% 5.65% 6.78% 8.39%
* If certain expenses had not been assumed by the investment adviser, total return would have been lower and the ratios would
have been as follows:
Ratio of Expenses to Average Net
Assets............................... 1.54% 1.31% 1.55% 1.39% 1.31% 1.31% 1.22% 1.48% 1.85% 1.94%
Ratio of Net Investment Income to
Average Net Assets................... 2.03% 2.16% 3.80% 6.17% 7.40% 7.46% 6.13% 4.74% 5.81% 7.46%
</TABLE>
See Notes to Financial Statements
D-6
<PAGE> 185
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Merritt Money Market Fund (the "Fund") is a separate series of
Van Kampen Merritt Money Market Trust (the "Trust"). The Fund is an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended. The distribution of the Fund's second class of
shares, Class B shares, commenced on July 11, 1994.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. Security Valuation
Investments are valued at amortized cost, which approximates market. Under
this valuation method, a portfolio instrument is valued at cost and any discount
or premium is amortized on a straight-line basis to the maturity of the
instrument.
B. Security Transactions
Security transactions are recorded on a trade date basis. Realized gains
and losses are determined on an identified cost basis. Interest income is
recorded on an accrual basis.
C. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is required. The Fund intends to utilize
provisions of the federal income tax laws which allow it to carry a realized
capital loss forward for eight years following the year of the loss and offset
such losses against any future realized capital gains. At June 30, 1994, the
Fund had an accumulated capital loss carryforward for tax purposes of $39,559.
Of this amount, $26,110, $2,038 and $11,411 will expire on June 30, 1998, 1999
and 2000, respectively. Net realized gains or losses differ for financial
statement and tax reporting purposes primarily because of the deferral of post
October 31 losses which are not recognized for tax purposes until the first day
of the following fiscal year.
D. Distribution of Income and Gains
The Fund declares dividends from net investment income daily and
automatically reinvests such dividends daily. Net realized gains, if any, are
distributed annually. Shareholders can elect to receive the cash equivalent of
their daily dividends at each month end.
D-7
<PAGE> 186
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 1994
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen
Merritt Investment Advisory Corp. (the "Adviser") will provide investment advice
and facilities to the Fund for an annual fee payable monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
-------------------------------------------------------- -----------
<S> <C>
First $250 million...................................... .500 of 1%
Next $250 million....................................... .475 of 1%
Next $250 million....................................... .425 of 1%
Over $750 million....................................... .275 of 1%
</TABLE>
Certain legal expenses were paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.
For the year ended June 30, 1994, the Fund recognized expenses of
approximately $20,250 representing Van Kampen Merritt Inc.'s ("Van Kampen
Merritt") or the Adviser's cost of providing accounting, legal and certain
shareholder services to the Fund.
Certain officers and trustees of the Fund are also officers and directors
of the Adviser and Van Kampen Merritt. The Fund does not compensate its officers
or trustees who are officers of the Adviser or Van Kampen Merritt.
At June 30, 1994, Van Kampen Merritt owned 743,833 shares of the Fund.
3. CAPITAL TRANSACTIONS
The Fund is authorized to issue an unlimited number of shares of beneficial
interest without par value. At June 30, 1994, and 1993, paid in surplus
aggregated $27,601,290 and $21,767,573, respectively. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1994 JUNE 30, 1993
------------- -------------
<S> <C> <C>
Beginning Shares.................................................... 21,767,573 24,933,335
------------- -------------
Shares Sold......................................................... 79,908,069 86,871,367
Shares Issued Through Dividend Reinvestment......................... 445,332 500,012
Shares Repurchased.................................................. (74,519,684) (90,537,141)
------------- -------------
Net Change in Shares Outstanding.................................... 5,833,717 (3,165,762)
------------- -------------
Ending Shares....................................................... 27,601,290 21,767,573
============= =============
</TABLE>
D-8
<PAGE> 187
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 30, 1994
4. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 and a Service Plan (the "Service Plan," collectively the "Plans"). The
Plans govern payments for the distribution of the Fund's shares, ongoing
shareholder services and maintenance of shareholder accounts. Annual fees under
the Plans of up to .25% of the Fund's average net assets are accrued daily.
D-9
<PAGE> 188
VAN KAMPEN MERRITT MONEY MARKET FUND
INDEPENDENT AUDITOR'S REPORT
The Board of Trustees and Shareholders of
Van Kampen Merritt Money Market Fund:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Merritt Money Market Fund (the "Fund"), including the portfolio of
investments, as of June 30, 1994, and 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 Fund's 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 to 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 June
30, 1994, 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 present fairly, in all material respects, the financial position of Van
Kampen Merritt Money Market Fund as of June 30, 1994, 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.
KPMG Peat Marwick LLP
Chicago, Illinois
August 4, 1994
D-10
<PAGE> 189
APPENDIX E
VAN KAMPEN MERRITT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1994 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) SECURITY DESCRIPTION DATE PURCHASE COST
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AGENCY 9.1%
$ 869 Small Business Administration........................ 1/03/95 5.750% $ 868,761
1,000 Federal Farm Credit Bank............................. 1/05/95 5.300 999,411
1,000 Federal Home Loan Mortgage Corp.(b).................. 1/05/95 5.900 999,344
1,000 Federal Home Loan Bank............................... 1/10/95 5.780 998,555
-----------
TOTAL AGENCY............................................................... 3,866,071
-----------
BANKERS ACCEPTANCES 13.0%
1,000 Bank of New York..................................... 1/06/95 5.480 999,239
1,000 Nationsbank Corp. ................................... 1/06/95 5.880 999,183
1,000 Sanwa Bank........................................... 1/19/95 5.870 997,065
1,500 National Bank of Detroit............................. 1/23/95 5.870 1,500,000
1,000 Northern Trust Co. .................................. 2/17/95 5.980 992,193
-----------
TOTAL BANKERS ACCEPTANCES.................................................. 5,487,680
-----------
CERTIFICATES OF DEPOSIT 4.7%
1,000 Dresdner Bank........................................ 1/26/95 5.530 999,947
1,000 Societe Generale Bank Yankee......................... 2/03/95 6.150 1,000,000
-----------
TOTAL CERTIFICATES OF DEPOSIT.............................................. 1,999,947
-----------
COMMERCIAL PAPER 52.0%
1,000 AT & T Capital Corp. ................................ 1/03/95 5.850 999,645
1,500 J. P. Morgan & Co. Inc. ............................. 1/03/95 6.000 1,499,500
1,500 Exxon Asset Management............................... 1/04/95 5.600 1,499,300
1,500 Southern California Edison Co. ...................... 1/05/95 5.930 1,499,012
1,000 Credit Suisse First Boston Inc. ..................... 1/09/95 5.030 998,883
1,500 Rabobank USA Financial Corp. ........................ 1/09/95 5.910 1,498,030
1,500 IBM Credit Corp. .................................... 1/10/95 6.000 1,497,750
1,000 State Street Boston Corp. ........................... 1/12/95 5.138 1,000,000
1,500 Ford Motor Credit Co. ............................... 1/17/95 5.950 1,496,033
1,000 Merrill Lynch & Co. Inc. ............................ 1/19/95 5.100 1,000,000
1,000 Commercial Credit Corp. ............................. 1/23/95 5.450 1,000,000
1,000 American General Finance Corp. ...................... 1/25/95 5.750 1,000,000
1,500 Associates Corp. .................................... 1/27/95 6.120 1,493,370
1,000 CIT Group Holdings Inc. ............................. 1/27/95 5.750 1,000,000
1,500 American Express Credit Corp. ....................... 1/30/95 5.850 1,492,931
1,500 Norwest Financial Inc. .............................. 2/07/95 6.050 1,490,673
1,500 John Deere Capital Corp. ............................ 2/09/95 6.000 1,490,250
-----------
TOTAL COMMERCIAL PAPER..................................................... 21,955,377
-----------
</TABLE>
See Notes to Financial Statements.
E-1
<PAGE> 190
VAN KAMPEN MERRITT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1994 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) SECURITY DESCRIPTION DATE PURCHASE COST
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND OBLIGATIONS 13.0%
$1,500 Virginia St Housing Development Authority............ 1/03/95 6.000% $ 1,500,000
1,400 Catholic Healthcare West (Gtd: Toronto Dominion
Bank)................................................ 1/04/95 7.000 1,400,000
500 Florida Housing Finance Agency (L.O.C. Credit
Suisse).............................................. 1/04/95 6.100 500,000
900 Health Insurance Plan Greater New York (L.O.C. Morgan
Gty)................................................. 1/04/95 6.450 900,000
500 Illinois Student Assistance Commission (L.O.C.
Sumitomo Bank)....................................... 1/04/95 6.170 500,000
700 Mississippi Business Finance Corp. .................. 1/04/95 6.400 700,000
-----------
TOTAL VARIABLE RATE DEMAND OBLIGATIONS..................................... 5,500,000
-----------
REPURCHASE AGREEMENT 7.2%
UBS Securities, U.S. T-Note, $3,165,000 par, 3.875% coupon, due 10/31/95,
dated 12/30/94, to be sold on 01/03/95 at $3,041,942....................... 3,040,000
-----------
TOTAL INVESTMENTS (a) 99.0%................................................ 41,849,075
Other Assets in Excess of Liabilities 1.0%................................. 408,518
-----------
NET ASSETS 100.0%.......................................................... $42,257,593
===========
</TABLE>
(a) At December 31, 1994, cost is identical for both book and federal
income tax purposes.
(b) This is a Mortgage Backed Security (MBS) which is a pass-through
instrument created by pooling mortgages and selling participations in the
principal and interest payments received from borrowers. This security is
guaranteed by Federal Home Loan Mortgage Corporation (FHLMC), a federally
sponsored agency.
See Notes to Financial Statements.
E-2
<PAGE> 191
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at Amortized Cost which Approximates Market (Note 1).............. $41,849,075
Cash........................................................................... 180,760
RECEIVABLES:
Fund Shares Sold............................................................... 544,455
Interest....................................................................... 116,772
Other.......................................................................... 4,883
-----------
Total Assets................................................................... 42,695,945
-----------
LIABILITIES:
PAYABLES:
Fund Shares Repurchased........................................................ 346,906
Income Distributions........................................................... 24,412
Investment Advisory Fee (Note 2)............................................... 1,791
Accrued Expenses............................................................... 65,243
-----------
Total Liabilities.............................................................. 438,352
-----------
NET ASSETS..................................................................... $42,257,593
===========
NET ASSETS CONSIST OF:
PAID IN SURPLUS:
Class A Shares................................................................. $32,412,705
Class B Shares................................................................. 9,918,443
Accumulated Net Realized Loss on Investments................................... (73,555)
-----------
NET ASSETS..................................................................... $42,257,593
===========
MAXIMUM OFFERING PRICE PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share (Based on Net Assets of $32,339,762 and 32,412,705
Shares of Beneficial Interest Issued and Outstanding)........................ $1.00
CLASS B SHARES: =====
Net Asset Value Per Share (Based on Net Assets of $9,917,831 and 9,918,443
Shares of Beneficial Interest Issued and Outstanding)........................ $1.00
=====
</TABLE>
See Notes to Financial Statements.
E-3
<PAGE> 192
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1994 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................................ $ 842,639
Amortization of Premium......................................................... (10,988)
-----------
Total Income.................................................................... 831,651
-----------
EXPENSES:
Investment Advisory Fee (Note 2)................................................ 83,571
Shareholder Services............................................................ 60,277
Distribution (12b-1) and Service Fees (allocated to Classes A and B of $35,230
and $21,742, respectively) (Note 4)........................................... 56,972
Printing........................................................................ 18,400
Audit........................................................................... 15,088
Custody......................................................................... 14,107
Trustees Fees and Expenses (Note 2)............................................. 11,040
Legal (Note 2).................................................................. 6,440
Other........................................................................... 1,844
-----------
Total Expenses.................................................................. 267,739
Less Fees Deferred.............................................................. 79,108
-----------
Net Expenses.................................................................... 188,631
-----------
Net Investment Income........................................................... $ 643,020
===========
REALIZED GAIN/LOSS ON INVESTMENTS:
Proceeds from Sales............................................................. $ 1,531,038
Cost of Securities Sold......................................................... (1,550,018)
-----------
Net Realized Loss on Investments................................................ $ (18,980)
===========
Net Increase in Net Assets from Operations...................................... $ 624,040
===========
</TABLE>
See Notes to Financial Statements.
E-4
<PAGE> 193
VAN KAMPEN MERRITT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1994 and the Year Ended June 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1994 JUNE 30, 1994
- ----------------------------------------------------------------------------------------------------
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net Investment Income........................................ $ 643,020 $ 499,064
Net Realized Loss on Investments............................. (18,980) (26,427)
------------- -------------
Change in Net Assets from Operations......................... 624,040 472,637
------------- -------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME:
Class A Shares............................................... (568,757) (499,064)
Class B Shares............................................... (74,263) -0-
------------- -------------
Total Distributions....................................... (643,020) (499,064)
------------- -------------
Net Change in Net Assets from Investment Activities.......... (18,980) (26,427)
------------- -------------
FROM CAPITAL TRANSACTIONS (NOTE 3):
PROCEEDS FROM SHARES SOLD:
Class A Shares............................................... 40,881,989 79,908,069
Class B Shares............................................... 15,887,574 -0-
------------- -------------
56,769,563 79,908,069
------------- -------------
NET ASSET VALUE OF SHARES ISSUED THROUGH DIVIDEND REINVESTMENT:
Class A Shares............................................... 479,626 445,332
Class B Shares............................................... 50,549 -0-
------------- -------------
530,175 445,332
------------- -------------
COST OF SHARES REPURCHASED:
Class A Shares............................................... (36,550,200) (74,519,684)
Class B Shares............................................... (6,019,680) -0-
------------- -------------
(42,569,880) (74,519,684)
------------- -------------
Net Change in Net Assets from Capital Transactions............. 14,729,858 5,833,717
------------- -------------
Total Increase in Net Assets.............................. 14,710,878 5,807,290
NET ASSETS:
Beginning of the Period...................................... 27,546,715 21,739,425
------------- -------------
End of the Period............................................ $ 42,257,593 $ 27,546,715
============= =============
</TABLE>
See Notes to Financial Statements.
E-5
<PAGE> 194
VAN KAMPEN MERRITT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
DEC. 31, --------------------------------
CLASS A SHARES 1994 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period.................. $ 1.00 $1.00 $1.00 $1.00 $1.00
------ ----- ----- ----- -----
Net Investment Income............................... .019 .025 .023 .041 .065
Less Distributions from Net Investment Income....... .019 .025 .023 .041 .065
------ ----- ----- ----- -----
Net Asset Value, End of Period........................ $ 1.00 $1.00 $1.00 $1.00 $1.00
------ ----- ----- ----- -----
TOTAL RETURN (Non-Annualized)*........................ 1.96% 2.50% 2.31% 4.21% 6.72%
Net Assets at End of Period (In millions)............. $ 32.3 $27.5 $21.7 24.9 $35.0
Ratio of Expenses to Average Net Assets*.............. 1.03% 1.13% 1.16% 1.14% .99%
Ratio of Net Investment Income to Average Net
Assets*............................................. 3.91% 2.44% 2.31% 4.21% 6.57%
</TABLE>
- -------------------------
* If certain expenses had not been assumed by the Adviser, total return would
have been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratio of Expenses to Average Net Assets............... 1.50% 1.54% 1.31% 1.55% 1.39%
Ratio of Net Investment Income to Average Net
Assets.............................................. 3.44% 2.03% 2.16% 3.80% 6.17%
</TABLE>
See Notes to Financial Statements.
E-6
<PAGE> 195
VAN KAMPEN MERRITT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS -- (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
CLASS A SHARES 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period..................... $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Net Investment Income.................................. .078 .078 .066 .056 .068
Less Distributions from Net Investment Income.......... .078 .078 .066 .056 .068
----- ----- ----- ----- -----
Net Asset Value, End of Period........................... $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
TOTAL RETURN (Non-Annualized)*........................... 8.11% 8.07% 6.60% 5.94% 6.96%
Net Assets at End of Period (in millions)................ $45.0 $44.1 $51.5 $17.1 $ 6.3
Ratio of Expenses to Average Net Assets*................. .90% .98% .78% .58% .88%
Ratio of Net Investment Income to Average Net Assets*.... 7.81% 7.79% 6.56% 5.65% 6.78%
</TABLE>
- -------------------------
* If certain expenses had not been assumed by the Adviser, total return would
have been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratio of Expenses to Average Net Assets.................. 1.31% 1.31% 1.22% 1.48% 1.85%
Ratio of Net Investment Income to Average Net Assets..... 7.40% 7.46% 6.13% 4.74% 5.81%
</TABLE>
See Notes to Financial Statements.
E-7
<PAGE> 196
VAN KAMPEN MERRITT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS -- (CONTINUED)
The following schedule presents financial highlights for one share of the Fund
outstanding throughout the period indicated. (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
JULY 11, 1994
(COMMENCEMENT OF
DISTRIBUTION) TO
DECEMBER 31,
CLASS B SHARES 1994
- -----------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................................ $ 1.00
------
Net Investment Income..................................................... .015
Less Distributions from Net Investment Income............................. .015
------
Net Asset Value, End of Period.............................................. $ 1.00
======
TOTAL RETURN (Non-Annualized)*.............................................. 1.49%
Net Assets at End of Period (in millions)................................... $ 9.9
Ratio of Expenses to Average Net Assets*.................................... 1.80%
Ratio of Net Investment Income to Average Net Assets*....................... 3.41%
</TABLE>
- ---------------
* If certain expenses had not been assumed by the Adviser, total return would
have been lower and the ratios would have been as follows:
<TABLE>
<S> <C>
Ratio of expenses to average net assets..................................... 2.28%
Ratio of net investment income to average net assets........................ 2.93%
</TABLE>
See Notes to Financial Statements.
E-8
<PAGE> 197
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 (Unaudited)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Merritt Money Market Fund (the "Fund") is a separate series of
Van Kampen Merritt Money Market Trust (the "Trust"). The Fund is an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended. The distribution of the Fund's second class of
shares, Class B shares, commenced on July 11, 1994.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A. Security Valuation
Investments are valued at amortized cost, which approximates market. Under
this valuation method, a portfolio instrument is valued at cost and any discount
or premium is amortized on a straight-line basis to the maturity of the
instrument.
B. Security Transactions
Security transactions are recorded on a trade date basis. Realized gains
and losses are determined on an identified cost basis. Interest income is
recorded on an accrual basis.
C. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders. Therefore, no
provision for federal income taxes is required. The Fund intends to utilize
provisions of the federal income tax laws which allow it to carry a realized
capital loss forward for eight years following the year of the loss and offset
such losses against any future realized capital gains. At June 30, 1994, the
Fund had an accumulated capital loss carryforward for tax purposes of $39,559.
Of this amount, $26,110, $2,038 and $11,411 will expire on June 30, 1998, 1999
and 2000, respectively. Net realized gains or losses differ for financial
statement and tax reporting purposes primarily because of the deferral of post
October 31 losses which are not recognized for tax purposes until the first day
of the following fiscal year.
D. Distribution of Income and Gains
The Fund declares dividends from net investment income daily and
automatically reinvests such dividends daily. Net realized gains, if any, are
distributed annually. Shareholders can elect to receive the cash equivalent of
their daily dividends at each month end.
E-9
<PAGE> 198
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1994 (Unaudited)
NOTE 2 -- INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen
American Capital Investment Advisory Corp. (the "Adviser") will provide
investment advice and facilities to the Fund for an annual fee payable monthly
as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
------------------ ------------
<S> <C>
First $250 million...................................... .500 of 1%
Next $250 million....................................... .475 of 1%
Next $250 million....................................... .425 of 1%
Over $750 million....................................... .275 of 1%
</TABLE>
Certain legal expenses were paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Fund, of which a trustee of the Fund is an affiliated person.
For the six months ended December 31, 1994, the Fund recognized expenses of
approximately $9,700 representing Van Kampen American Capital Distributors,
Inc.'s or its affiliates' ("VKAC") cost of providing accounting, legal and
certain shareholder services to the Fund.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund has implemented deferred compensation and retirement plans for its
Trustees. Under the deferred compensation plan, Trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those Trustees who are not officers of VKAC.
At December 31, 1994, VKAC owned 611,383 and 100 shares of Classes A and B,
respectively.
E-10
<PAGE> 199
VAN KAMPEN MERRITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1994 (Unaudited)
NOTE 3 -- CAPITAL TRANSACTIONS
The Fund has outstanding two classes of common shares, Classes A and B.
There are an unlimited number of shares of each class without par value
authorized.
At June 30, 1994, paid in surplus for Class A shares aggregated
$27,601,290. Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1994 JUNE 30, 1994
----------------- -------------
<S> <C> <C>
SALES:
Class A......................................................... 40,881,989 79,908,069
Class B......................................................... 15,887,574 -0-
------------- -----------
Total Sales..................................................... 56,769,563 79,908,069
============= ===========
DIVIDEND REINVESTMENT:
Class A......................................................... 479,626 445,332
Class B......................................................... 50,549 -0-
------------- -----------
Total Dividend Reinvestment..................................... 530,175 445,332
============= ===========
REPURCHASES:
Class A......................................................... (36,550,200) (74,519,684)
Class B......................................................... (6,019,680) -0-
------------- -----------
Total Repurchases............................................... (42,569,880) (74,519,684)
============= ===========
</TABLE>
NOTE 4 -- DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 and a Service Plan (the "Service Plan," collectively the "Plans"). The
Plans govern payments for the distribution of the Fund's shares, ongoing
shareholder services and maintenance of shareholder accounts. Annual fees under
the Plans of up to .25% of Class A shares and 1.00% of Class B shares are
accrued daily. Included in these fees for the six months ended December 31,
1994, are payments to VKAC of approximately $16,300.
E-11
<PAGE> 200
PART C: OTHER INFORMATION
ITEM 15. INDEMNIFICATION
The AC Fund's trustees and officers are covered by an Errors and Omissions
Policy. Section 2 of the current and proposed investment advisory agreement
between the AC Fund and AC Adviser provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
obligations or duties under the investment advisory agreement on the part of AC
Adviser. AC Adviser shall not be liable to the AC Fund or to any shareholder for
any act or omission in the course of or connected in any way with rendering
services or for any losses that may be sustained in the purchase, holding or
sale of any security. The distribution agreement provides that the AC Fund shall
indemnify VKAC Distributors and related thereto for any loss or liability
arising from any alleged misstatement of a material fact (or alleged omission to
state a material fact) contained in, among other things, registration statements
or prospectuses except to the extent the misstated fact or omission was made in
reliance upon information provided by or on behalf of VKAC Distributors.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the AC Fund and AC Adviser and VKAC
Distributors pursuant to the foregoing provisions or otherwise, the AC Fund has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the AC Fund of expenses incurred or paid
by a director, officer, or controlling person of the AC Fund and the principal
underwriter in connection with the successful defense of any action, suit or
proceeding) is asserted against the AC Fund by such director, officer or
controlling person or VKAC Distributors in connection with the shares being
registered, the AC Fund will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
1.1 -- Form of First Amended and Restated Agreement and Declaration of Trust+
1.2 -- Form of Certificate of Designation+
2 -- Form of Amended and Restated Bylaws+
4 -- Form of Agreement and Plan of Reorganization+
5.1 -- Specimen Share Certificate for Class A shares+
5.2 -- Specimen Share Certificate for Class B shares+
5.3 -- Specimen Share Certificate for Class C shares+
6 -- Form of Investment Advisory Agreement+
7.1 -- Form of Underwriting Agreement+
7.2 -- Form of Selling Group Agreement(1)
7.3 -- Form of Selling Agreement for banks and bank affiliated
brokers/dealers(1)
9.1 -- Form of Custodian Agreement(2)
9.2 -- Form of Transfer Agency and Service Agreement+
9.3 -- Data Access Services Agreement(3)
10.1 -- Form of Distribution Plan for Class A shares+
10.2 -- Form of Distribution Plan for Class B shares+
10.3 -- Form of Distribution Plan for Class C shares+
10.4 -- Form of Servicing Agreement+
</TABLE>
C-1
<PAGE> 201
<TABLE>
<S> <C> <C>
10.5 -- Form of Servicing Agreement for banks and bank affiliated
brokers/dealers+
11 -- Form of Opinion of O'Melveny & Myers+
12 -- Form of Opinion of Skadden, Arps, Slate, Meagher & Flom+
14.1 -- Consent of Price Waterhouse LLP+
14.2 -- Consent of KPMG Peat Marwick LLP+
16 -- Power of Attorney+
17.1 -- Copy of 24f-2 Election of Registrant+
17.2 -- Form of proxy card+
17.3 -- Prospectus of Van Kampen American Capital Money Market Fund+
</TABLE>
- ---------------
+ Filed herewith.
(1) Incorporated by reference from Registrant's Registration Statement on Form
N-1A, Registration No. 2-50870, Post-Effective Amendment No. 30, filed
September 24, 1992.
(2) Incorporated by reference from American Capital Global Managed Assets Fund,
Inc.'s Registration Statement on Form N-1A, Registration No. 33-74024,
Pre-Effective Amendment No. 2, filed May 6, 1994.
(3) Incorporated by reference from American Capital Utilities Income Fund,
Inc.'s Registration Statement on Form N-1A, Post-Effective Amendment No. 1,
filed May 19, 1994.
C-2
<PAGE> 202
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any public re-offering
of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act, the
re-offering prospectus will contain the information called for by the applicable
registration form for re-offerings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
C-3
<PAGE> 203
SIGNATURES
As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed on behalf of the Registrant in the City
of Chicago and State of Illinois, on the 25th day of July, 1995.
VAN KAMPEN AMERICAN CAPITAL
RESERVE FUND
By /s/ RONALD A. NYBERG
------------------------------------
Ronald A. Nyberg
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- --------------------------------------------
<S> <C>
/s/ DONALD C. MILLER* Trustee
- ---------------------------------------------
Donald C. Miller
/s/ DON G. POWELL* President, Principal Executive Officer
- --------------------------------------------- and Trustee
Don G. Powell
/s/ R. CRAIG KENNEDY Trustee
- ---------------------------------------------
R. Craig Kennedy
/s/ PHILIP P. GAUGHAN* Trustee
- ---------------------------------------------
Philip P. Gaughan
/s/ JACK E. NELSON* Trustee
- ---------------------------------------------
Jack E. Nelson
/s/ JEROME L. ROBINSON* Trustee
- ---------------------------------------------
Jerome L. Robinson
/s/ WAYNE W. WHALEN* Trustee
- ---------------------------------------------
Wayne W. Whalen
/s/ CURTIS W. MORELL* Principal Financial and
- --------------------------------------------- Accounting Officer
Curtis W. Morell
/s/ J. MILES BRANAGAN* Trustee
- ---------------------------------------------
J. Miles Branagan
/s/ RICHARD E. CARUSO* Trustee
- ---------------------------------------------
Richard E. Caruso
/s/ ROGER HILSMAN* Trustee
- ---------------------------------------------
Roger Hilsman
/s/ DAVID REES* Trustee
- ---------------------------------------------
David Rees
</TABLE>
C-4
<PAGE> 204
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ LAWRENCE J. SHEEHAN* Trustee
- ---------------------------------------------
Lawrence J. Sheehan
Chairman and Trustee
- ---------------------------------------------
Fernando Sisto
/s/ WILLIAM S. WOODSIDE Trustee
- ---------------------------------------------
William S. Woodside
</TABLE>
- ---------------
* Signed by Ronald A. Nyberg pursuant to a power of attorney filed herewith.
/s/ RONALD A. NYBERG
- ---------------------------------------------
Ronald A. Nyberg
Attorney-in-fact
C-5
<PAGE> 205
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
AMENDMENT NO. 1 TO FORM N-14
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
<S> <C> <C>
1.1 -- Form of First Amended and Restated Agreement and Declaration of Trust+
1.2 -- Form of Certificate of Designation+
2 -- Form of Amended and Restated Bylaws+
4 -- Form of Agreement and Plan of Reorganization+
5.1 -- Specimen Share Certificate for Class A shares+
5.2 -- Specimen Share Certificate for Class B shares+
5.3 -- Specimen Share Certificate for Class C shares+
6 -- Form of Investment Advisory Agreement+
7.1 -- Form of Underwriting Agreement+
7.2 -- Form of Selling Group Agreement(1)
7.3 -- Form of Selling Agreement for banks and bank affiliated
brokers/dealers(1)
9.1 -- Form of Custodian Agreement(2)
9.2 -- Form of Transfer Agency and Service Agreement+
9.3 -- Data Access Services Agreement(3)
10.1 -- Form of Distribution Plan for Class A shares+
10.2 -- Form of Distribution Plan for Class B shares+
10.3 -- Form of Distribution Plan for Class C shares+
10.4 -- Form of Servicing Agreement+
10.5 -- Form of Servicing Agreement for banks and bank affiliated
brokers/dealers+
11 -- Form of Opinion of O'Melveny & Myers+
12 -- Form of Opinion of Skadden, Arps, Slate, Meagher & Flom+
14.1 -- Consent of Price Waterhouse LLP+
14.2 -- Consent of KPMG Peat Marwick LLP+
16 -- Power of Attorney+
17.1 -- Copy of 24f-2 Election of Registrant+
17.2 -- Form of proxy card+
17.3 -- Prospectus of Van Kampen American Capital Money Market Fund+
</TABLE>
- ---------------
+ Filed herewith.
(1) Incorporated by reference from Registrant's Registration Statement on Form
N-1A, Registration No. 2-50870, Post-Effective Amendment No. 30, filed
September 24, 1992.
(2) Incorporated by reference from American Capital Global Managed Assets Fund,
Inc.'s Registration Statement on Form N-1A, Registration No. 33-74024,
Pre-Effective Amendment No. 2, filed May 6, 1994.
(3) Incorporated by reference from American Capital Utilities Income Fund,
Inc.'s Registration Statement on Form N-1A, Post-Effective Amendment No. 1,
filed May 19, 1994.
<PAGE> 1
EXHIBIT 1.1
FORM OF AMERICAN CAPITAL FUNDS
FIRST AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
FIRST AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF
Dated: June __, 1995
<PAGE> 2
FIRST AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
Index
RECITALS ........................................................... 1
ARTICLE I THE TRUST ................................................. 2
SECTION 1.1 Name ...................................................... 2
SECTION 1.2. Location .................................................. 2
SECTION 1.3. Nature of Trust ........................................... 2
SECTION 1.4. Definitions ............................................... 2
SECTION 1.5. Real Property to be Converted into Personal Property ...... 5
ARTICLE 2 PURPOSE OF THE TRUST ...................................... 5
ARTICLE 3 POWERS OF THE TRUSTEES .................................... 6
SECTION 3.1. Powers in General ......................................... 6
(a) Investments ....................................................... 6
(b) Disposition of Assets ............................................. 7
(c) Ownership Powers .................................................. 7
(d) Form of Holding ................................................... 7
(e) Reorganization, etc. .............................................. 7
(f) Voting Trusts, etc. ............................................... 7
(g) Contracts, etc. ................................................... 7
(h) Guarantees, etc. .................................................. 7
(i) Partnerships, etc. ................................................ 8
(j) Insurance ......................................................... 8
(k) Pensions, etc. .................................................... 8
(I) Power of Collection and Litigation ................................ 8
(m) Issuance and Repurchase of Shares ................................. 8
(n) Offices ........................................................... 8
(o) Expenses .......................................................... 9
(p) Agents, etc. ...................................................... 9
(q) Accounts .......................................................... 9
(r) Valuation ......................................................... 9
(s) Indemnification ................................................... 9
(t) General ........................................................... 9
SECTION 3.2. Borrowings; Financings; Issuance of Securities ............ 9
i
<PAGE> 3
SECTION 3.3. Deposits ................................................... 9
SECTION 3.4. Allocations ................................................ 10
SECTION 3.5. Further Powers; Limitations ................................ 10
ARTICLE 4 TRUSTEES AND OFFICERS ...................................... 10
SECTION 4.1. Number, Designation, Election, Term, etc. .................. 10
(a) Initial Trustee .................................................... 10
(b) Number ............................................................. 10
(c) Election and Term .................................................. 11
(d) Resignation and Retirement ......................................... 11
(e) Removal ............................................................ 11
(f) Vacancies .......................................................... 11
(g) Acceptance of Trusts ............................................... 12
(h) Effect of Death, Resignation, etc. ................................. 12
(i) Conveyance ......................................................... 12
(j) No Accounting ...................................................... 12
SECTION 4.2. Trustees' Meetings; Participation by Telephone, etc. ....... 12
SECTION 4.3. Committees; Delegation ..................................... 13
SECTION 4.4. Officers ................................................... 13
SECTION 4.5. Compensation of Trustees and Officers ...................... 13
SECTION 4.6. Ownership of Shares and Securities of the Trust ............ 13
SECTION 4.7. Right of Trustees and Officers to Own Property or to Engage
in Business; Authority of Trustees to Permit Others to Do
Likewise ................................................... 13
SECTION 4.8. Reliance on Experts ........................................ 14
SECTION 4.9. Surety Bonds ............................................... 14
SECTION 4.10. Apparent Authority of Trustees and Officers ................ 14
SECTION 4.11. Other Relationships Not Prohibited ......................... 14
SECTION 4.12. Payment of Trust Expenses .................................. 15
SECTION 4.13. 0wnership of the Trust Property ............................ 15
ii
<PAGE> 4
SECTION 4.14. By-Laws .................................................... 15
ARTICLE 5 DELEGATION OF MANAGERIAL RESPONSIBILITIES .................. 15
SECTION 5.1. Appointment; Action by Less than All Trustees .............. 15
SECTION 5.2. Certain Contracts .......................................... 16
(a) Advisory ........................................................... 16
(b) Administration ..................................................... 16
(c) Underwriting ....................................................... 16
(d) Custodian .......................................................... 17
(e) Transfer and Dividend Disbursing Agent ............................. 17
(f) Shareholder Servicing .............................................. 17
(g) Accounting ......................................................... 17
Section 5.3. Distribution Arrangements .................................. 17
Section 5.4. Service Arrangements ....................................... 17
ARTICLE 6 SERIES AND SHARES .......................................... 18
SECTION 6.1. Description of Series and Shares ........................... 18
(a) General ............................................................ 18
(b) Establishment, etc. of Series; Authorization of Shares ............. 18
(c) Character of Separate Series and Shares Thereof .................... 18
(d) Consideration for Shares ........................................... 19
(e) Assets Belonging to Series ......................................... 19
(f) Liabilities of Series .............................................. 19
(g) Dividends .......................................................... 19
(h) Liquidation ........................................................ 20
(i) Voting ............................................................. 20
(j) Redemption by Shareholder .......................................... 20
(k) Redemption at the Option of the Trust .............................. 21
(I) Net Asset Value .................................................... 21
(m) Transfer ........................................................... 22
(n) Equality ........................................................... 22
(o) Rights of Fractional Shares ........................................ 22
(p) Conversion Rights .................................................. 22
SECTION 6.2. Ownership of Shares .......................................... 23
SECTION 6.3. Investments in the Trust ..................................... 23
SECTION 6.4. No Pre-emptive Rights ........................................ 23
iii
<PAGE> 5
SECTION 6.5. Status of Shares ........................................... 23
ARTICLE 7 SHAREHOLDERS' VOTING POWERS AND MEETINGS ................... 23
SECTION 7.1. Voting Powers .............................................. 23
SECTION 7.2. Number of Votes and Manner of Voting; Proxies .............. 24
SECTION 7.3. Meetings ................................................... 24
SECTION 7.4. Record Dates ............................................... 25
SECTION 7.5. Quorum and Required Vote ................................... 25
SECTION 7.6. Action by Written Consent .................................. 25
SECTION 7.7. Inspection of Records ...................................... 25
SECTION 7.8. Additional Provisions ...................................... 25
ARTICLE 8 LIMITATION OF LIABILITY; INDEMNIFICATION ................... 26
SECTION 8.1. Trustees, Shareholders, etc. Not Personally Liable; Notice.. 26
SECTION 8.2. Trustees' Good Faith Action; Expert Advice; No Bond
or Surety ................................................. 26
SECTION 8.3. Indemnification of Shareholders ............................ 27
SECTION 8.4. Indemnification of Trustees, Officers, etc. ................ 27
SECTION 8.5. Compromise Payment ......................................... 28
SECTION 8.6. Indemnification Not Exclusive, etc. ........................ 28
SECTION 8.7. Liability of Third Persons Dealing with Trustees ........... 28
ARTICLE 9 DURATION; REORGANIZATION; INCORPORATION; AMENDMENTS ........ 28
SECTION 9.1. Duration of Trust .......................................... 28
SECTION 9.2. Termination of Trust ....................................... 28
SECTION 9.3. Reorganization ............................................. 29
SECTION 9.4. Incorporation ............................................. 29
iv
<PAGE> 6
SECTION 9.5. Amendments; etc. ............................................. 30
SECTION 9.6. Filing of Copies of Declaration and Amendments ............... 30
ARTICLE 10 MISCELLANEOUS ................................................ 30
SECTION 10.1. Notices ...................................................... 30
SECTION 10.2. Governing Law ................................................ 30
SECTION 10.3. Counterparts ................................................ 30
SECTION 10.4. Reliance by Third Parties .................................... 31
SECTION 10.5. References; Headings ......................................... 31
SECTION 10.6. Provisions in Conflict With Law or Regulation ................ 31
SECTION 10.7. Use of the Name "Van Kampen American Capital" ................ 31
Signature ................................................................. 32
Acknowledgments ........................................................... 33
v
<PAGE> 7
FIRST AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF
_____________________ FUND
As amended and restated as of June __, 1995
This CONSENT TO AMENDMENT AND RESTATMENT, made as of this __ day of
June, 1995, by the Trustees whose signatures are set forth below:
W I T N E S S E T H T H A T:
WHEREAS, the AGREEMENT AND DECLARATION OF TRUST of
____________________, a trust organized as a business trust under Delaware law
(the "Trust"), was signed and delivered on May 10, 1995, by Van Kampen American
Capital, Inc. as Settlor (the "Settlor"), and Ronald A. Nyberg as trustee (the
"Initial Trustee"), in the city of Oakbrook Terrace, Illinois; and
WHEREAS, a Certificate of Trust relating to the Trust was thereafter
filed in the offices of the Secretary of State of the State of Delaware; and
WHEREAS, Article IX, Sections 9.5 and 9.6 of the Declaration provide
certain procedures for the amendment and restatement thereof; and
WHEREAS, the Trustees have determined that it is desirable and in the
best interests of the Trust and the Shareholders that the Declaration be
amended and restated as herein provided.
NOW, THEREFORE, the undersigned, being at least a Majority of the
Trustees, do hereby consent, pursuant to Section 9.5 of the Declaration, to the
first amendment and restatement of the Agreement and Declaration of Trust, and
hereby declare, for the benefit of all Persons who shall hereafter become
holders of Shares of the Trust (or of any Series thereof), that the Trustees
will hold the sum delivered to the Initial Trustee upon his execution of the
Declaration, and all other and further cash, securities and other property of
every type and description which they may in any way acquire in their capacity
as such Trustees, together with the income therefrom and the proceeds thereof,
IN TRUST NEVERTHELESS, to manage and dispose of the same for the benefit of the
holders from time to time of the Shares being issued and to be issued hereunder
and in the manner and subject to the provisions hereof, to wit:
1
<PAGE> 8
ARTICLE I
THE TRUST
SECTION 1.1 Name. The name of the Trust shall be
"____________________________________________"
and so far as may be practicable, the Trustees shall conduct the
Trust's activities, execute all documents and sue or be sued under that name,
which name (and the word "Trust" wherever used in this Agreement and
Declaration of Trust, except where the context otherwise requires) shall refer
to the Trustees in their capacity as Trustees, and not individually or
personally, and shall not refer to the officers, agents or employees of the
Trust or of such Trustees, or to the holders of the Shares of the Trust or any
Series. If the Trustees determine that the use of such name is not practicable,
legal or convenient at any time or in any jurisdiction, or if the Trust is
required to discontinue the use of such name pursuant to Section 10.7 hereof,
then subject to that Section, the Trustees may use such other designation, or
they may adopt such other name for the Trust as they deem proper, and the Trust
may hold property and conduct its activities under such designation or name.
SECTION 1.2. Location. The Trust shall maintain a registered office in
the State of Delaware and may have such other offices or places of business as
the Trustees may from time to time determine to be necessary or expedient.
SECTION 1.3. Nature of Trust. The Trust shall be a trust with
transferable shares under the laws of The State of Delaware, of the type
defined in Title 12, Chapter 38, Section 3801 of the Delaware Code as a
business trust. The Trust is not intended to be, shall not be deemed to be, and
shall not be treated as, a general partnership, limited partnership, joint
venture, corporation or joint stock company. The Shareholders shall be
beneficiaries and their relationship to the Trustees shall be solely in that
capacity in accordance with the rights conferred upon them hereunder.
SECTION 1.4. Definitions. As used in this Agreement and Declaration of
Trust, the following terms shall have the meanings set forth below unless the
context thereof otherwise requires:
"Accounting Agent" shall have the meaning designated in Section 5.2(g)
hereof.
"Administrator" shall have the meaning designated in Section 5.2(b)
hereof.
"Affiliated Person" shall have the meaning assigned to it in the 1940
Act.
"By-Laws" shall mean the By-Laws of the Trust, as amended from time to
time.
"Certificate of Designation" shall have the meaning designated in
Section 6.1 hereof.
"Certificate of Termination" shall have the meaning designated in
Section 6.1 hereof.
"Class" or "Classes" shall mean, with respect to the Trust (of any
Series thereof), any unissued Shares of the Trust (or such Series) in respect
of which the Trustees shall from time to time fix and determine any special
provisions relating to sales charges, any rights of redemption and the price,
terms and manner of redemption, special and relative rights as to dividends and
other distributions and on
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liquidation, sinking or purchase fund provisions, conversion rights,
and conditions under which the Shareholders of such Class shall have separate
voting rights or no voting rights.
"Commission" shall have the same meaning as in the 1940 Act.
"Contracting Party" shall have the meaning designated in the preamble
to Section 5.2 hereof.
"Conversion Date" shall mean with respect to Shares of any Class that
are convertible automatically into Shares of any other Class of the Trust (or
Series thereof) the date fixed by the Trustees for such conversion.
"Covered Person" shall have the meaning designated in Section 8.4
hereof.
"Custodian" shall have the meaning designated in Section 5.2(d) hereof.
"Declaration" and "Declaration of Trust" shall mean this Agreement and
Declaration of Trust and all amendments or modifications thereof as from time
to time in effect. This Agreement and Declaration of Trust is the "governing
instrument" of the Trust within the meaning of the laws of the State of
Delaware with respect to Delaware Business Trusts. References in this
Agreement and Declaration of Trust to "hereof", "herein" and "hereunder" shall
be deemed to refer to the Declaration of Trust generally, and shall not be
limited to the particular text, Article or Section in which such words appear.
"Disabling Conduct" shall have the meaning designated in Section 8.4
hereof.
"Distributor" shall have the meaning designated in Section 5.2(c)
hereof.
"Dividend Disbursing Agent" shall have the meaning designated in
Section 5.2(e) hereof.
"General Items" shall have the meaning defined in Section 6.2(a)
hereof.
"Initial Trustee" shall have the meaning defined in the preamble
hereto.
"Investment Advisor" shall have the meaning defined in Section 5.2(a)
hereof.
"Majority of the Trustees" shall mean a majority of the Trustees in
office at the time in question. At any time at which there shall be only one
(1) Trustee in office, such term shall mean such Trustee.
"Majority Shareholder Vote," as used with respect to (a) the election
of any Trustee at a meeting of Shareholders, shall mean the vote for the
election of such Trustee of a plurality of all outstanding Shares of the Trust,
without regard to Series, represented in person or by proxy and entitled to
vote thereon, provided that a quorum (as determined in accordance with the
By-Laws) is present, (b) any other action required or permitted to be taken by
Shareholders, shall mean the vote for such action of the holders of that
majority of all outstanding Shares (or, where a separate vote of Shares of any
particular Series is to be taken, the affirmative vote of that majority of the
outstanding Shares of that Series) of the Trust which consists of: (i) a
majority of all Shares (or of Shares of the particular Series) represented in
person or by proxy and entitled to vote on such action at the meeting of
Shareholders at which such action is to be taken, provided that a quorum (as
determined in accordance with the By-Laws) is present; or (ii) if such action
is to be taken by written consent of Shareholders, a majority of all Shares (or
of Shares of the particular Series) issued and outstanding and entitled to vote
on such action; provided that (iii) as used
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with respect to any action requiring the affirmative vote of "a
majority of the outstanding voting securities," as the quoted phrase is defined
in the 1940 Act, of the Trust or of any Series, "Majority Shareholder Vote"
means the vote for such action at a meeting of Shareholders of the smallest
majority of all outstanding Shares of the Trust (or of Shares of the particular
Series) entitled to vote on such action which satisfies such 1940 Act voting
requirement.
"1940 Act" shall mean the provisions of the Investment Company Act of
1940 and the rules and regulations thereunder, both as amended from time to
time, and any order or orders thereunder which may from time to time be
applicable to the Trust.
"Person" shall mean and include individuals, as well as corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, banks, trust companies, land trusts, business trusts or
other organizations established under the laws of any jurisdiction, whether or
not considered to be legal entities, and governments and agencies and political
subdivisions thereof.
"Principal Underwriter" shall have the meaning designated in Section
5.2(c) hereof.
"Prospectus," as used with respect to the Trust (or the Shares of a
particular Series), shall mean the prospectus relating to the Trust (or such
Series) which constitutes part of the currently effective Registration
Statement of the Trust under the Securities Act of 1933, as such prospectus may
be amended or supplemented from time to time.
"Securities" shall have the same meaning ascribed to that term in the
Securities Act of 1993.
"Series" shall mean one or more of the series of Shares authorized by
the Trustees to represent the beneficial interest in one or more separate
components of the assets of the Trust which are now or hereafter established
and designated under or in accordance with the provisions of Article 6 hereof.
"Settlor" shall have the meaning defined in the preamble hereto.
"Shareholder" shall mean as of any particular time any Person shown of
record at such time on the books of the Trust as a holder of outstanding Shares
of any Series, and shall include a pledgee into whose name any such Shares are
transferred in pledge.
"Shareholder Servicing Agent" shall have the meaning designated in
Section 5.2(f) hereof.
"Shares" shall mean the transferable units into which the beneficial
interest in the Trust and each Series of the Trust (as the context may require)
shall be divided from time to time, and includes fractions of Shares as well as
whole Shares. All references herein to "Shares" which are not accompanied by a
reference to any particular Series or Class shall be deemed to apply to
outstanding Shares without regard to Series or Class.
"Single Class Voting," as used with respect to any matter to be acted
upon at a meeting or by written consent of Shareholders, shall mean a style of
voting in which each holder of one or more Shares shall be entitled to one vote
on the matter in question for each Share standing in his name on the records of
the Trust, irrespective of Series or Class of a Series, and all outstanding
Shares of all Series vote as a single class.
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"Statement of Additional Information," as used with respect to the
Trust (or any Series), shall mean the statement of additional information
relating to the Trust (or such Series) which constitutes part of the currently
effective Registration Statement of the Trust under the Securities Act of 1933,
as such statement of additional information may be amended or supplemented from
time to time.
"Transfer Agent" shall have the meaning defined in Section 5.2(e)
hereof.
"Trust" shall mean the trust named in Section 1.1 hereof.
"Trust Property" shall mean, as of any particular time, any and all
property which shall have been transferred, conveyed or paid to the Trust or
the Trustees, and all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and which at
such time is owned or held by, or for the account of, the Trust or the
Trustees, without regard to the Series to which such property is allocated.
"Trustees" shall mean, collectively, the Initial Trustee, so long as he
shall continue in office, and all other individuals who at the time in question
have been duly elected or appointed as Trustees of the Trust in accordance with
the provisions hereof and who have qualified and are then in office. At any
time at which there shall be only one (I) Trustee in office, such term shall
mean such single Trustee.
SECTION 1.5. Real Property to be Converted into Personal Property.
Notwithstanding any other provision hereof, any real property at any time
forming part of the Trust Property shall be held in trust for sale and
conversion into personal property at such time or times and in such manner and
upon such terms as the Trustees shall approve, but the Trustees shall have
power until the termination of this Trust to postpone such conversion as long
as they in their uncontrolled discretion shall think fit, and for the purpose
of determining the nature of the interest of the Shareholders therein, all such
real property shall at all times be considered as personal property.
ARTICLE 2
PURPOSE OF THE TRUST
The purpose of the Trust shall be to (a) manage, conduct, operate and
carry on the business of an investment company; (b) subscribe for, invest in,
reinvest in, purchase or otherwise acquire, hold, pledge, sell, assign,
transfer, exchange, distribute or otherwise deal in or dispose of any and all
sorts of property, tangible or intangible, including but not limited to
Securities of any type whatsoever, whether equity or nonequity, of any issuer,
evidences of indebtedness of any person and any other rights, interest,
instruments or property of any sort to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investment
of every kind and description, including without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more Persons to exercise any of said rights, powers and privileges in respect
of any of said investments. The Trustees shall not be limited by any law
limiting the investments which may be made by fiduciaries.
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ARTICLE 3
POWERS OF THE TRUSTEES
SECTION 3.1. Powers in General. The Trustees shall have, without other
or further authorization, full, entire, exclusive and absolute power, control
and authority over, and management of, the business of the Trust and over the
Trust Property, to the same extent as if the Trustees were the sole owners of
the business and property of the Trust in their own right, and with such powers
of delegation as may be permitted by this Declaration, subject only to such
limitations as may be expressly imposed by this Declaration of Trust or by
applicable law. The enumeration of any specific power or authority herein shall
not be construed as limiting the aforesaid power or authority or any specific
power or authority. Without limiting the foregoing; they may select, and from
time to time change, the fiscal year of the Trust; they may adopt and use a
seal for the Trust, provided that unless otherwise required by the Trustees, it
shall not be necessary to place the seal upon, and its absence shall not impair
the validity of, any document, instrument or other paper executed and delivered
by or on behalf of the Trust; they may from time to time in accordance with the
provisions of Section 6.1 hereof establish one or more Series to which they may
allocate such of the Trust Property, subject to such liabilities, as they shall
deem appropriate, each such Series to be operated by the Trustees as a separate
and distinct investment medium and with separately defined investment
objectives and policies and distinct investment purposes, all as established by
the Trustees, or from time to time changed by them; they may as they consider
appropriate elect and remove officers and appoint and terminate agents and
consultants and hire and terminate employees, any one or more of the foregoing
of whom may be a Trustee; they may appoint from their own number, and
terminate, any one or more committees consisting of one or more Trustees,
including without implied limitation an Executive Committee, which may, when
the Trustees are not in session and subject to the 1940 Act, exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
in accordance with Section 5.2 they may employ one or more Investment Advisers,
Administrators and Custodians and may authorize any such service provider to
employ one or more other or service providers and to deposit all or any part of
such assets in a system or systems for the central handling of Securities,
retain Transfer, Dividend Disbursing, Accounting or Shareholder Servicing
Agents or any of the foregoing, provide for the distribution of Shares by the
Trust through one or more Distributors, Principal Underwriters or otherwise,
set record dates or times for the determination of Shareholders entitled to
participate in, benefit from or act with respect to various matters; and in
general they may delegate to any officer of the Trust, to any Committee of the
Trustees and to any employee, Investment Adviser, Administrator, Distributor,
Custodian, Transfer Agent, Dividend Disbursing Agent, or any other agent or
consultant of the Trust, such authority, powers, functions and duties as they
consider desirable or appropriate for the conduct of the business and affairs
of the Trust, including without implied limitation the power and authority to
act in the name of the Trust and of the Trustees, to sign documents and to act
as attorney-in-fact for the Trustees. Without limiting the foregoing and to the
extent not inconsistent with the 1940 Act or other applicable law, the Trustees
shall have power and authority:
(a) Investments. To subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange, distribute
or otherwise deal in or dispose of any and all sorts of property, tangible or
intangible, including but not limited to Securities of any type whatsoever,
whether equity or nonequity, of any issuer, evidences of indebtedness of any
person and any other rights, interest, instruments or property of any sort, to
exercise any and all rights, powers and privileges of ownership or
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interest in respect of any and all such investments of every kind and
description, including without limitation the right to consent and otherwise
act with respect thereto, with power to designate one or more Persons to
exercise any of said rights, powers and privileges in respect of any of said
investments, in every case without being limited by any law limiting the
investments which may be made by fiduciaries;
(b) Disposition of Assets. Upon such terms and conditions as they deem
best, to lend, sell, exchange, mortgage, pledge, hypothecate, grant security
interests in, encumber, negotiate, convey, transfer or otherwise dispose of,
and to trade in, any and all of the Trust Property, free and clear of all
trusts, for cash or on terms, with or without advertisement, and on such terms
as to payment, security or otherwise, all as they shall deem necessary or
expedient;
(c) Ownership Powers. To vote or give assent, or exercise any and all
other rights, powers and privileges of ownership with respect to, and to
perform any and all duties and obligations as owners of, any Securities or
other property forming part of the Trust Property, the same as any individual
might do; to exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of Securities, and to receive powers of
attorney from, and to execute and deliver proxies or powers of attorney to,
such Person or Persons as the Trustees shall deem proper, receiving from or
granting to such Person or Persons such power and discretion with relation to
Securities or other property of the Trust, all as the Trustees shall deem
proper;
(d) Form of Holding. To hold any Security or other property in a form
not indicating any trust, whether in bearer, unregistered or other negotiable
form, or in the name of the Trustees or of the Trust, or of the Series to which
such Securities or property belong, or in the name of a Custodian, subcustodian
or other nominee or nominees, or otherwise, upon such terms, in such manner or
with such powers, as the Trustees may determine, and with or without indicating
any trust or the interest of the Trustees therein;
(e) Reorganizations etc. To consent to or participate in any plan for
the reorganization, consolidation or merger of any corporation or issuer, any
Security of which is or was held in the Trust or any Series; to consent to any
contract, lease, mortgage, purchase or sale of property by such corporation or
issuer, and to pay calls or subscriptions with respect to any Security forming
part of the Trust Property;
(f) Voting Trusts, etc. To join with other holders of any Securities in
acting through a committee, depository, voting trustee or otherwise, and in
that connection to deposit any Security with, or transfer any Security to, any
such committee, depository or trustee, and to delegate to them such power and
authority with relation to any Security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to
pay, such portion of the expenses and compensation of such committee,
depository or trustee as the Trustees shall deem proper;
(g) Contracts. etc. To enter into, make and perform all such
obligations, contracts, agreements and undertakings of every kind and
description, with any Person or Persons, as the Trustees shall in their
discretion deem expedient in the conduct of the business of the Trust, for such
terms as they shall see fit, whether or not extending beyond the term of office
of the Trustees, or beyond the possible expiration of the Trust; to amend,
extend, release or cancel any such obligations, contracts, agreements or
understandings; and to execute, acknowledge, deliver and record all written
instruments which they may deem necessary or expedient in the exercise of their
powers;
(h) Guarantees. etc. To endorse or guarantee the payment of any notes
or other obligations of any Person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof;
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and to mortgage and pledge the Trust Property or any part thereof to secure any
of or all such obligations;
(i) Partnerships, etc. To enter into joint ventures, general or limited
partnerships and any other combinations or association;
(j) Insurance. To purchase and pay for entirely out of Trust Property
such insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants, Investment Advisers, managers,
Administrators, Distributors, Principal Underwriters, or other independent
contractors, or any thereof (or any Person connected therewith), of the Trust,
individually, against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such Person
in any such capacity, whether or not the Trust would have the power to
indemnify such Person against such liability;
(k) Pensions, etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit sharing, share bonus, share purchase, savings, thrift, deferred
compensation and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity contracts as
a means of providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust;
(I) Power of Collection and Litigation. To collect, sue for and receive
all sums of money coming due to the Trust, to employ counsel, and to commence,
engage in, prosecute, intervene in, join, defend, compound, compromise, adjust
or abandon, in the name of the Trust, any and all actions, suits, proceedings,
disputes, claims, controversies, demands or other litigation or legal
proceedings relating to the Trust, the business of the Trust, the Trust
Property, or the Trustees, officers, employees, agents and other independent
contractors of the Trust, in their capacity as such, at law or in equity, or
before any other bodies or tribunals, and to compromise, arbitrate or otherwise
adjust any dispute to which the Trust may be a party, whether or not any suit
is commenced or any claim shall have been made or asserted. Except to the
extent required for a Delaware Business Trust, the Shareholders shall have no
power to vote as to whether or not a court action, legal proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or the Shareholders.
(m) Issuance and Repurchase of Shares. To authorize, issue, sell,
repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in Shares of any Series, and, subject to Article 6
hereof, to apply to any such repurchase, redemption, retirement, cancellation
or acquisition of Shares of any Series, any of the assets belonging to the
Series to which such Shares relate, whether constituting capital or surplus or
otherwise, to the full extent now or hereafter permitted by applicable law;
provided that any Shares belonging to the Trust shall not be voted, directly or
indirectly;
(n) Offices. To have one or more offices, and to carry on all or any of
the operations and business of the Trust, in any of the States, Districts or
Territories of the United States, and in any and all foreign countries, subject
to the laws of such State, District, Territory or country;
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(o) Expenses. To incur and pay any and all such expenses and charges as
they may deem advisable (including without limitation appropriate fees to
themselves as Trustees), and to pay all such sums of money for which they may
be held liable by way of damages, penalty, fine or otherwise;
(p) Agents, etc. To retain and employ any and all such servants,
agents, employees, attorneys, brokers, Investment Advisers, accountants,
architects, engineers, builders, escrow agents, depositories, consultants,
ancillary trustees, custodians, agents for collection, insurers, banks and
officers, as they think best for the business of the Trust or any Series, to
supervise and direct the acts of any of the same, and to fix and pay their
compensation and define their duties;
(q) Accounts. To determine, and from time to time change, the method or
form in which the accounts of the Trust or any Series shall be kept;
(r) Valuation. Subject to the requirements of the 1940 Act, to
determine from time to time the value of all or any part of the Trust Property
and of any services, Securities, property or other consideration to be
furnished to or acquired by the Trust, and from time to time to revalue all or
any part of the Trust Property in accordance with such appraisals or other
information as is, in the Trustees' sole judgment, necessary and satisfactory;
(s) Indemnification. In addition to the mandatory indemnification
provided for in Article 8 hereof and to the extent permitted by law, to
indemnify or enter into agreements with respect to indemnification with any
Person with whom this Trust has dealings, including, without limitation, any
independent contractor, to such extent as the Trustees shall determine; and
(t) General. Subject to the fundamental policies in effect from time to
time with respect to the Trust, to do all such other acts and things and to
conduct, operate, carry on and engage in such other lawful businesses or
business activities as they shall in their sole and absolute discretion
consider to be incidental to the business of the Trust or any Series as an
investment company, and to exercise all powers which they shall in their
discretion consider necessary, useful or appropriate to carry on the business
of the Trust or any Series, to promote any of the purposes for which the Trust
is formed, whether or not such things are specifically mentioned herein, in
order to protect or promote the interests of the Trust or any Series, or
otherwise to carry out the provisions of this Declaration.
SECTION 3.2. Borrowings; Financings: Issuance of Securities. The
Trustees have power, subject to the fundamental policies in effect from time to
time with respect to the Trust, to borrow or in any other manner raise such sum
or sums of money, and to incur such other indebtedness for goods or services,
or for or in connection with the purchase or other acquisition of property, as
they shall deem advisable for the purposes of the Trust, in any manner and on
any terms, and to evidence the same by negotiable or nonnegotiable Securities
which may mature at any time or times, even beyond the possible date of
termination of the Trust; to issue Securities of any type for such cash,
property, services or other considerations, and at such time or times and upon
such terms, as they may deem advisable; and to reacquire any such Securities.
Any such Securities of the Trust may, at the discretion of the Trustees, be
made convertible into Shares of any Series, or may evidence the right to
purchase, subscribe for or otherwise acquire Shares of any Series, at such
times and on such terms as the Trustees may prescribe.
SECTION 3.3. Deposits. Subject to the requirements of the 1940 Act, the
Trustees shall have power to deposit any moneys or Securities included in the
Trust Property with any one or more banks, trust companies or other banking
institutions, whether or not such deposits will draw interest. Such deposits
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are to be subject to withdrawal in such manner as the Trustees may
determine, and the Trustees shall have no responsibility for any loss which may
occur by reason of the failure of the bank, trust company or other banking
institution with which any such moneys or Securities have been deposited,
except as provided in Section 8.2 hereof.
SECTION 3.4. Allocations. The Trustees shall have power to determine
whether moneys or other assets received by the Trust shall be charged or
credited to income or capital, or allocated between income and capital,
including the power to amortize or fail to amortize any part or all of any
premium or discount, to treat any part or all of the profit resulting from the
maturity or sale of any asset, whether purchased at a premium or at a discount,
as income or capital, or to apportion the same between income and capital, to
apportion the sale price of any asset between income and capital, and to
determine in what manner any expenses or disbursements are to be borne as
between income and capital, whether or not in the absence of the power and
authority conferred by this Section 3.4 such assets would be regarded as income
or as capital or such expense or disbursement would be charged to income or to
capital; to treat any dividend or other distribution on any investment as
income or capital, or to apportion the same between income and capital; to
provide or fail to provide reserves, including reserves for depreciation,
amortization or obsolescence in respect of any Trust Property in such amounts
and by such methods as they shall determine; to allocate less than all of the
consideration paid for Shares of any Series to surplus with respect to the
Series to which such Shares relate and to allocate the balance thereof to
paid-in capital of that Series, and to reallocate such amounts from time to
time; all as the Trustees may reasonably deem proper.
SECTION 3.5. Further Powers: Limitations. The Trustees shall have power
to do all such other matters and things, and to execute all such instruments,
as they deem necessary, proper or desirable in order to carry out, promote or
advance the interests of the Trust, although such matters or things are not
herein specifically mentioned. Any determination as to what is in the interests
of the Trust made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Declaration of Trust, the presumption shall
be in favor of a grant of power to the Trustees. The Trustees shall not be
required to obtain any court order to deal with the Trust Property. The
Trustees may limit their right to exercise any of their powers through express
restrictive provisions in the instruments evidencing or providing the terms for
any Securities of the Trust or in other contractual instruments adopted on
behalf of the Trust.
ARTICLE 4
TRUSTEES AND OFFICERS
SECTION 4.1. Number. Designation, Election. Term, etc.
(a) Initial Trustee. Upon his execution of this Agreement and
Declaration of Trust dated May 10, 1995 or a counterpart hereof or some other
writing in which he accepted such Trusteeship and agreed to the provisions
hereof, the individual whose signature is affixed thereto as Initial Trustee
became the Initial Trustee thereof.
(b) Number. The Trustees serving as such, whether named above or
hereafter becoming Trustees, may increase (to not more than fourteen (14)) or
decrease the number of Trustees to a number other than the number theretofore
determined by a written instrument signed by a Majority
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(or a supermajority if required by the By-Laws) of the Trustees). No
decrease in the number of Trustees shall have the effect of removing any
Trustee from office prior to the expiration of his term, but the number of
Trustees may be decreased in conjunction with the removal of a Trustee pursuant
to subsection (e) of this Section 4.1.
(c) Election and Term. The Trustees shall be elected by the
Shareholders of the Trust at the first meeting of Shareholders immediately
prior to the initial issuance of shares of the Trust in a public offering and
the term of office of any Trustees in office before such election shall
terminate at the time of such election. Subject to Section 16(a) of the 1940
Act and to the preceding sentence of this subsection (c) and to any
requirements specified in the By-Laws, the Trustees shall have the power to set
and alter the terms of office of the Trustees, and at any time to lengthen or
shorten their own terms or make their terms of unlimited duration, to elect
their own successors and, pursuant to subsection (f) of this Section 4.1, to
appoint Trustees to fill vacancies; provided that Trustees shall be elected by
a Majority Shareholder Vote at any such time or times as the Trustees shall
determine that such action is required under Section 16(a) of the 1940 Act or,
if not so required, that such action is advisable; and further provided that,
after the initial election of Trustees by the Shareholders, the term of office
of any incumbent Trustee shall continue until the termination of this Trust or
his earlier death, resignation, retirement, bankruptcy, adjudicated
incompetency or other incapacity or removal, or if not so terminated, until the
election of such Trustee's successor in office has become effective in
accordance with this subsection (c).
(d) Resignation and Retirement. Any Trustee may resign his trust or
retire as a Trustee, by a written instrument signed by him and delivered to the
other Trustees or to any officer of the Trust, and such resignation or
retirement shall take effect upon such delivery or upon such later date as is
specified in such instrument.
(e) Removal. Any Trustee may be removed: (i) with cause at any time by
written instrument, signed by at least two thirds (2/3) of the number of
Trustees prior to such removal, specifying the date upon which such removal
shall become effective; or (ii) by vote of Shareholders holding a majority of
the Shares of the Trust then outstanding, cast in person or by proxy at any
meeting called for the purpose; or (iii) by a written declaration signed by
Shareholders holding not less than a majority of the Shares of the Trust then
outstanding. Notwithstanding any other provisions set forth in this Declaration
of Trust, this Section 4.1(e) may not be amended (either directly or indirectly
through a reorganization) without the approval of (i) 80% of the Trustees then
in office or (ii) by vote of Shareholders holding a majority of the Shares of
the Trust then outstanding.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from any
reason, including an increase in the number of Trustees, may (but need not
unless required by the 1940 Act) be filled by a Majority (or a supermajority if
required by the By-Laws) of the Trustees, subject to the provisions of Section
16(a) of the 1940 Act, through the appointment in writing of such other
individual as such remaining Trustees in their discretion shall determine;
provided that if there shall be no Trustees in office, such vacancy or
vacancies shall be filled by Majority Shareholders Vote. Any such appointment
or election shall be effective upon such individual's written acceptance of his
appointment as a Trustee and his agreement to be bound by the provisions of
this Declaration of Trust, except that any such appointment in anticipation of
a vacancy to occur by reason of retirement, resignation or increase in the
number of Trustees to be effective at a later date shall become effective only
at or after the effective date of said retirement, resignation or increase in
the number of Trustees.
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(g) Acceptance of Trusts. Whenever any conditions to the appointment or
election of any individual as a Trustee hereunder who was not, immediately
prior to such appointment or election, acting as a Trustee shall have been
satisfied, such individual shall become a Trustee and the Trust estate shall
vest in the new Trustee, together with the continuing Trustees, without any
further act or conveyance. Such new Trustee shall accept such appointment or
election in writing and agree in such writing to be bound by the provisions
hereof, but the execution of such writing shall not be requisite to the
effectiveness of the appointment or election of a new Trustee.
(h) Effect of Death. Resignation, etc. No vacancy, whether resulting
from the death, resignation, retirement, bankruptcy, adjudicated incompetency,
incapacity, or removal of any Trustee, an increase in the number of Trustees or
otherwise, shall operate to annul or terminate the Trust hereunder or to revoke
or terminate any existing agency or contract created or entered into pursuant
to the terms of this Declaration of Trust. Until such vacancy is filled as
provided in this Section 4.1, the Trustees in office (if any), regardless of
their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration. Upon
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require in
order to effect the purpose of this Paragraph.
(i) Convevance. In the event of the resignation or removal of a
Trustee or his otherwise ceasing to be a Trustee, such former Trustee or his
legal representative shall, upon request of the continuing Trustees, execute
and deliver such documents as may be required for the purpose of consummating
or evidencing the conveyance to the Trust or the remaining Trustees of any
Trust Property held in such former Trustee's name, but the execution and
delivery of such documents shall not be requisite to the vesting of title to
the Trust Property in the remaining Trustees, as provided in subsection (g) of
this Section 4.1 and in Section 4.13 hereof.
(j) No Accounting. Except to the extent required by the 1940 Act or
under circumstances which would justify his removal for cause, no Person
ceasing to be a Trustee (nor the estate of any such Person) shall be required
to make an accounting to the Shareholders or remaining Trustees upon such
cessation.
SECTION 4.2. Trustees' Meetings: Participation by Telephone. etc.
Annual and special meetings may be held from time to time, in each case, upon
the call of such officers as may be thereunto authorized by the By-Laws or vote
of the Trustees, or by any three (3) Trustees, or pursuant to a vote of the
Trustees adopted at a duly constituted meeting of the Trustees, and upon such
notice as shall be provided in the By-Laws. Any such meeting may be held within
or without the state of Delaware. The Trustees may act with or without a
meeting, and a written consent to any matter, signed by all of the Trustees,
shall be equivalent to action duly taken at a meeting of the Trustees, duly
called and held. Except as otherwise provided by the 1940 Act or other
applicable law, or by this Declaration of Trust or the By-Laws, any action to
be taken by the Trustees may be taken by a majority of the Trustees present at
a meeting of Trustees (a quorum, consisting of at least a Majority of the
Trustees, being present), within or without Delaware. If authorized by the
By-Laws, all or any one or more Trustees may participate in a meeting of the
Trustees or any Committee thereof by means of conference telephone or similar
means of communication by means of which all Persons participating in the
meeting can hear each other, and participation in a meeting pursuant to such
means of communication shall constitute presence in person at such meeting. The
minutes of any meeting thus held shall be prepared in the same manner as a
meeting at which all participants were present in person.
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SECTION 4.3. Committees; Delegation. The Trustees shall have power,
consistent with their ultimate responsibility to supervise the affairs of the
Trust, to delegate from time to time to one or more other Committees, or to any
single Trustee, the doing of such things and the execution of such deeds or
other instruments, either in the name of the Trust or the names of the Trustees
or as their attorney or attorneys in fact, or otherwise as the Trustees may
from time to time deem expedient, and any agreement, deed, mortgage, lease or
other instrument or writing executed by the Trustee or Trustees or other Person
to whom such delegation was made shall be valid and binding upon the Trustees
and upon the Trust.
SECTION 4.4. Officers. The Trustees shall annually elect such officers
or agents, who shall have such powers, duties and responsibilities as the
Trustees may deem to be advisable, and as they shall specify by resolution or
in the By-Laws. Except as may be provided in the By-Laws, any officer elected
by the Trustees may be removed at any time with or without cause. Any two (2)
or more offices may be held by the same individual.
SECTION 4.5. Compensation of Trustees and Officers. The Trustees shall
fix the compensation of all officers and Trustees. Without limiting the
generality of any of the provisions hereof, the Trustees shall be entitled to
receive reasonable compensation for their general services as such, and to fix
the amount of such compensation, and to pay themselves or any one or more of
themselves such compensation for special services, including legal, accounting,
or other professional services, as they in good faith may deem reasonable. No
Trustee or officer resigning (except where a right to receive compensation for
a definite future period shall be expressly provided in a written agreement
with the Trust, duly approved by the Trustees) and no Trustee or officer
removed shall have any right to any compensation as such Trustee or officer for
any period following his resignation or removal, or any right to damages on
account of his removal, whether his compensation be by the month, or the year
or otherwise.
SECTION 4.6. Ownership of Shares and Securities of the Trust. Any
Trustee, and any officer, employee or agent of the Trust, and any organization
in which any such Person is interested, may acquire, own, hold and dispose of
Shares of any Series and other Securities of the Trust for his or its
individual account, and may exercise all rights of a holder of such Shares or
Securities to the same extent and in the same manner as if such Person were not
such a Trustee, officer, employee or agent of the Trust; subject, in the case
of Trustees and officers, to the same limitations as directors or officers (as
the case may be) of a Delaware business corporation; and the Trust may issue
and sell or cause to be issued and sold and may purchase any such Shares or
other Securities from any such Person or any such organization, subject only to
the general limitations, restrictions or other provisions applicable to the
sale or purchase of Shares of such Series or other Securities of the Trust
generally.
SECTION 4.7. Right of Trustees and Officers to Own Property or to
Engage in Business; Authority of Trustees to Permit Others to Do Likewise. The
Trustees, in their capacity as Trustees, and (unless otherwise specifically
directed by vote of the Trustees) the officers of the Trust in their capacity
as such, shall not be required to devote their entire time to the business and
affairs of the Trust. Except as otherwise specifically provided by vote of the
Trustees, or by agreement in any particular case, any Trustee or officer of the
Trust may acquire, own, hold and dispose of, for his own individual account,
any property, and acquire, own, hold, carry on and dispose of, for his own
individual account, any business entity or business activity, whether similar
or dissimilar to any property or business entity or business activity invested
in or carried on by the Trust, and without first offering the same as an
investment opportunity to the Trust, and may exercise all rights in respect
thereof as if he were not a Trustee or officer of the Trust. The Trustees shall
also have power, generally or in specific cases, to permit
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employees or agents of the Trust to have the same rights (or lesser
rights) to acquire, hold, own and dispose of property and businesses, to carry
on businesses, and to accept investment opportunities without offering them to
the Trust, as the Trustees have by virtue of this Section 4.7.
SECTION 4.8. Reliance on Experts. The Trustees and officers may consult
with counsel, engineers, brokers, appraisers, auctioneers, accountants,
investment bankers, securities analysts or other Persons (any of which may be a
firm in which one or more of the Trustees or officers is or are members or
otherwise interested) whose profession gives authority to a statement made by
them on the subject in question, and who are reasonably deemed by the Trustees
or officers in question to be competent, and the advice or opinion of such
Persons shall be full and complete personal protection to all of the Trustees
and officers in respect of any action taken or suffered by them in good faith
and in reliance on or in accordance with such advice or opinion. In discharging
their duties, Trustees and officers, when acting in good faith, may rely upon
financial statements of the Trust represented to them to be correct by any
officer of the Trust having charge of its books of account, or stated in a
written report by an independent certified public accountant fairly to present
the financial position of the Trust. The Trustees and officers may rely, and
shall be personally protected in acting, upon any instrument or other document
believed by them to be genuine.
SECTION 4.9. Surety Bonds. No Trustee, officer, employee or agent of
the Trust shall, as such, be obligated to give any bond or surety or other
security for the performance of any of his duties, unless required by
applicable law or regulation, or unless the Trustees shall otherwise determine
in any particular case.
SECTION 4.10. Apparent Authority of Trustees and Officers. No
purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by such
officer, or to make inquiry concerning or be liable for the application of
money or property paid, loaned or delivered to or on the order of the Trustees
or of such officer.
SECTION 4.11. Other Relationships Not Prohibited. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any Contracting Party (as defined in Section 5.2 hereof), or of or
for any parent or affiliate of any Contracting Party, or that the
Contracting Party or any parent or affiliate thereof is a Shareholder
or has an interest in the Trust or any Series, or that
(ii) any Contracting Party may have a contract providing for
the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited partnerships
or other organizations, or have other business or interests,
shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the Trust
and/or the Trustees or disqualify any Shareholder, Trustee or officer of the
Trust from voting upon or executing the same or create any liability or
accountability to the Trust or to the holders of Shares of any Series; provided
that, in the case of any relationship or interest referred to in the preceding
clause (i) on the part of any Trustee or officer of the Trust, either (x) the
material facts as to such relationship or interest have been disclosed to or
are known by the Trustees not having any such relationship or interest and the
contract involved is approved in good faith by a majority
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of such Trustees not having any such relationship or interest (even
though such unrelated or disinterested Trustees are less than a quorum of all
of the Trustees), (y) the material facts as to such relationship or interest
and as to the contract have been disclosed to or are known by the Shareholders
entitled to vote thereon and the contract involved is specifically approved in
good faith by vote of the Shareholders, or (z) the specific contract involved
is fair to the Trust as of the time it is authorized, approved or ratified by
the Trustees or by the Shareholders.
SECTION 4.12. Payment of Trust Expenses. The Trustees are authorized to
pay or to cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, and according to any
allocation to a particular Series and Class made by them pursuant to Section
6.1(f) hereof, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the business and affairs of the Trust or in
connection with the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the services of the
Trust's officers, employees, Investment Adviser, Administrator, Distributor,
Principal Underwriter, auditor, counsel, Custodian, Transfer Agent, Dividend
Disbursing Agent, Accounting Agent, Shareholder Servicing Agent, and such other
agents, consultants, and independent contractors and such other expenses and
charges as the Trustees may deem necessary or proper to incur.
SECTION 4.13. Ownership of the Trust Property. Legal title to all the
Trust Property shall be vested in the Trustees as joint tenants, except that
the Trustees shall have power to cause legal title to any Trust Property to be
held by or in the name of one or more of the Trustees, or in the name of the
Trust, or of any particular Series, or in the name of any other Person as
nominee, on such terms as the Trustees may determine; provided that the
interest of the Trust and of the respective Series therein is appropriately
protected. The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each Person who may hereafter become a Trustee.
Upon the termination of the term of office of a Trustee as provided in Section
4.1(c), (d) or (e) hereof, such Trustee shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to Section 4.1(i) hereof.
SECTION 4.14. By-Laws. The Trustees may adopt and from time to time
amend or repeal By-Laws for the conduct of the business of the Trust.
ARTICLE 5
DELEGATION OF MANAGERIAL RESPONSIBILITIES
SECTION 5.1. Appointment; Action by Less than All Trustees. The
Trustees shall be responsible for the general operating policy of the Trust and
for the general supervision of the business of the Trust conducted by officers,
agents, employees or advisers of the Trust or by independent contractors, but
the Trustees shall not be required personally to conduct all the business of
the Trust and, consistent with their ultimate responsibility as stated herein,
the Trustees may appoint, employ or contract with one or more officers,
employees and agents to conduct, manage and/or supervise the operations of the
Trust, and may grant or delegate such authority to such officers, employees
and/or agents as the Trustees may, in their sole discretion, deem to be
necessary or desirable, without regard to whether such authority is normally
granted or delegated by trustees. With respect to those matters of the
operation and business of
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the Trust which they shall elect to conduct themselves, except as
otherwise provided by this Declaration or the By-Laws, if any, the Trustees may
authorize any single Trustee or defined group of Trustees, or any committee
consisting of a number of Trustees less than the whole number of Trustees then
in office without specification of the particular Trustees required to be
included therein, to act for and to bind the Trust, to the same extent as the
whole number of Trustees could do, either with respect to one or more
particular matters or classes of matters, or generally.
SECTION 5.2. Certain Contracts. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time in their discretion and
without limiting the generality of their powers and authority otherwise set
forth herein, enter into one or more contracts with any one or more
corporations, trusts, associations, partnerships, limited partnerships or other
types of organizations, or individuals ("Contracting Party"), to provide for
the performance and assumption of some or all of the following services, duties
and responsibilities to, for or on behalf of the Trust and/or any Series,
and/or the Trustees, and to provide for the performance and assumption of such
other services, duties and responsibilities in addition to those set forth
below, as the Trustees may deem appropriate:
(a) Advisory. An investment advisory or management agreement whereby
the agent shall undertake to furnish the Trust (or any Series thereof) such
management, investment advisory or supervisory, statistical and research
facilities and services, and such other facilities and services, if any, as the
Trustees shall from time to time consider desirable, all upon such terms and
conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the 1940 Act
or any applicable provisions of the By-Laws (any such agent being herein
referred to as an "Investment Adviser"). To the extent required by the 1940
Act, any such advisory or management agreement and any amendment thereto shall
be subject to approval by a Majority Shareholder Vote at a meeting of the
Shareholders of the Trust (or applicable Series). Notwithstanding any
provisions of this Declaration, the Trustees may authorize the Investment
Adviser (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales, loans or exchanges of
securities of the Trust on behalf of the Trustees or may authorize any officer
or employee of the Trust or any Trustee to effect such purchases, sales, loans
or exchanges pursuant to recommendations of the Investment Adviser (and all
without further action by the Trustees). Any such purchases, sales, loans and
exchanges shall be deemed to have been authorized by all of the Trustees. The
Trustees may, in their sole discretion, call a meeting of Shareholders in order
to submit to a vote of Shareholders of the Trust (or applicable Series) at such
meeting the approval of continuance of any such investment advisory or
management agreement.
(b) Administration. An agreement whereby the agent, subject to the
general supervision of the Trustees and in conformity with any policies of the
Trustees with respect to the operations of the Trust and each Series thereof,
will supervise all or any part of the operations of the Trust (or any Series
thereof), and will provide all or any part of the administrative and clerical
personnel, office space and office equipment and services appropriate for the
efficient administration and operations of the Trust (or any Series thereof)
(any such agent being herein referred to as an "Administrator").
(c) Underwriting. An agreement providing for the sale of Shares of the
Trust (or any Series thereof) to net the Trust not less than the net asset
value per Share (as described in Section 6.1(l) hereof) and pursuant to which
the Trust may appoint the other party to such agreement as its principal
underwriter or sales agent for the distribution of such Shares. The agreement
shall contain such terms and
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conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the 1940 Act
and any applicable provisions of the By-Laws (any such agent being herein
referred to as a "Distributor" or a "Principal Underwriter," as the case may
be).
(d) Custodian. The appointment of an agent meeting the requirements for
a custodian for the assets of Investment Companies contained in the 1940 Act
as custodian of the Securities and cash of the Trust (or any Series thereof)
and of the accounting records in connection therewith (any such agent being
herein referred to as a "Custodian").
(e) Transfer and Dividend Disbursing Agent. An agreement with an agent
to maintain records of the ownership of outstanding Shares, the issuance and
redemption and the transfer thereof (any such agent being herein referred to
as a "Transfer Agent"), and to disburse any dividends declared by the
Trustees and in accordance with the policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest any such dividends
(any such agent being herein referred to as a "Dividend Disbursing Agent").
(f) Shareholder Servicing. An agreement with an agent to provide
service with respect to the relationship of the Trust and its Shareholders,
records with respect to Shareholders and their Shares, and similar matters
(any such agent being herein referred to as a "Shareholder Servicing Agent").
(g) Accounting. An agreement with an agent to handle all or any part of
the accounting responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise (any such agent being herein referred
to as an "Accounting Agent").
In addition, the Trustees may from time to time cause the Trust (or any
Series thereof) to enter into agreements with respect to such other services
and upon such other terms and conditions as they may deem necessary,
appropriate or desirable. The same Person may be the Contracting Party for
some or all of the services, duties and responsibilities to, for and of the
Trust and/or the Trustees, and the contracts with respect thereto may contain
such terms interpretive of or in addition to the delineation of the services,
duties and responsibilities provided for, including provisions that are not
inconsistent with the 1940 Act relating to the standard of duty of and the
rights to indemnification of the Contracting Party and others, as the Trustees
may determine. Nothing herein shall preclude, prevent or limit the Trust or a
Contracting Party from entering into subcontractual arrangements relative to
any of the matters referred to in subsections (a) through (g) of this Section
5.2.
Section 5.3. Distribution Arrangements. Subject to compliance with the
1940 Act, the Trustees may adopt and amend or repeal from time to time and
implement one or more plans of distribution pursuant to Rule 12b-1 of the 1940
Act which plan(s) will provide for the payment of specified marketing,
distribution and shareholder relations expenses of the Trust and any or all
Series and their agents and the agents of such agents.
Section 5.4. Service Arrangements. Subject to compliance with the
1940 Act, the Trustees may adopt and amend or repeal from time to time and
implement one or more service plans which plans will provide for the payment of
ongoing services to holders of the shares of such Trust (or any Series thereof)
and in connection with the maintenance of such shareholders' accounts.
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ARTICLE 6
SERIES AND SHARES
SECTION 6.1. Description of Series and Shares.
(a) General. The beneficial interest in the Trust shall be divided into
Shares (either full or fractional) with $.01 par value per Share, of which an
unlimited number may be issued. The Trustees shall have the authority from time
to time to establish and designate one or more separate, distinct and
independent Series of Shares (each of which Series shall represent interests
only in the asset attributed by the Trustees to such Series), and to authorize
separate Classes of Shares of the Trust (or any such Series), as they deem
necessary or desirable. All Shares shall be of one class, provided that the
Trustees shall have the power to classify or reclassify any unissued Shares of
any Series into any number of additional Classes of such Series.
(b) Establishment. etc. of Series; Authorization of Shares. The
establishment and designation of any Series and the authorization of the Shares
thereof shall be effective upon the execution by a Majority of the Trustees (or
by an officer of the Trust pursuant to the vote of a Majority of the Trustees)
of an instrument setting forth such establishment and designation and the
relative rights and preferences of the Shares of such Series and the manner in
which the same may be amended (a "Certificate of Designation"), and may provide
that the number of Shares of such Series which may be issued is unlimited, or
may limit the number issuable. At any time that there are no Shares outstanding
of any particular Series previously established and designated, the Trustees
may by an instrument executed by a Majority of the Trustees (or by an officer
of the Trust pursuant to the vote of a Majority of the Trustees) terminate such
Series and the establishment and designation thereof and the authorization of
its Shares (a "Certificate of Termination"). Each Certificate of Designation,
Certificate of Termination and any instrument amending a Certificate of
Designation shall have the status of an amendment to this Declaration of Trust.
(c) Character of Separate Series and Shares Thereof. Each Series
established hereunder shall represent beneficial interests in a separate
component of the assets of the Trust. Holders of Shares of a Series shall be
considered Shareholders of such Series, but such Shareholders shall also be
considered Shareholders of the Trust for purposes of receiving reports and
notices and, except as otherwise provided herein or in the Certificate of
Designation of a particular Series, or as required by the 1940 Act or other
applicable law, the right to vote, all without distinction by Series. The
Trustees shall have exclusive power without the requirement of Shareholder
approval to establish and designate such separate and distinct Series, and to
fix and determine the relative rights and preferences as between the shares of
the respective Series, and as between the Classes of the Trust (or any Series
thereof), as to rights of redemption and the price, terms and manner of
redemption, special and relative rights as to dividends and other distributions
and on liquidation, sinking or purchase fund provisions, conversion rights, and
conditions under which the Shareholders of the several Series or the several
Classes of any Series of Shares shall have separate voting rights or no voting
rights. Except as otherwise provided as to a particular Series herein, or in
the Certificate of Designation therefor, the Trustees shall have all the rights
and powers, and be subject to all the duties and obligations, with respect to
each such Series and the assets and affairs thereof as they have under this
Declaration with respect to the Trust and the Trust Property in general.
Separate and distinct records shall be maintained for each Series of Shares and
the assets and liabilities attributable thereto.
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(d) Consideration for Shares. The Trustees may issue Shares of the
Trust (or any Series thereof) for such consideration (which may include
property subject to, or acquired in connection with the assumption of,
liabilities) and on such terms as they may determine (or for no consideration
if pursuant to a Share dividend or split-up), all without action or approval of
the Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and nonassessable (but may be subject to mandatory
contribution back to the Trust (or applicable Series) as provided in Section
6.1(l) hereof. The Trustees may classify or reclassify any unissued Shares, or
any Shares of the Trust (or any Series thereof) previously issued and
reacquired by the Trust, into Shares of the Trust or one or more other Series
that may be established and designated from time to time.
(e) Assets Belonging to Series. Any portion of the Trust Property
allocated to a particular Series, and all consideration received by the Trust
for the issue or sale of Shares of such Series, together with all assets in
which such consideration is invested or reinvested, all interest, dividends,
income, earnings, profits and gains therefrom, and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series and shall irrevocably belong to
that Series for all purposes, and shall be so recorded upon the books of
account of the Trust, and the Shareholders of such Series shall not have, and
shall be conclusively deemed to have waived, any claims to the assets of any
Series of which they are not Shareholders. Such consideration, assets,
interest, dividends, income, earnings, profits, gains and proceeds, together
with any General Items allocated to that Series as provided in the following
sentence, are herein referred to collectively as assets "belonging to" that
Series. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Series (collectively, "General Items"), the
Trustees shall allocate such General Items to and among any one or more of the
Series established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable; and any
General Items so allocated to a particular Series shall belong to and be part
of the assets belonging to that Series. Each such allocation by the Trustees
shall be conclusive and binding upon the Shareholders of all Series for all
purposes.
(f) Liabilities of Series. The assets belonging to each particular
Series shall be charged with the liabilities in respect of that Series and all
expenses, costs, charges and reserves attributable to that Series, and any
general liabilities, expenses, costs, charges or reserves of the Trust which
are not readily identifiable as pertaining to any particular Series shall be
allocated and charged by the Trustees to and among any one or more of the
Series established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable. The
indebtedness, expenses, costs, charges and reserves allocated and so charged to
a particular Series are herein referred to as "liabilities of" that Series.
Each allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all Series
for all purposes. Any creditor of any Series may look only to the assets
belonging to that Series to satisfy such creditor's debt.
(g) Dividends. Dividends and distributions on Shares of a particular
Series may be paid with such frequency as the Trustees may determine, which may
be daily or otherwise pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may determine, to the
Shareholders of that Series, from such of the income, accrued or realized, and
capital gains,
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realized or unrealized, and out of the assets belonging to that Series,
as the Trustees may determine, after providing for actual and accrued
liabilities of that Series. All dividends and distributions on Shares of a
particular Series shall be distributed pro rata to the Shareholders of that
Series in proportion to the number of such Shares held by such holders at the
date and time of record established for the payment of such dividends or
distributions, except that the dividends and distributions of investment income
and capital gains with respect to each Class of Shares of a particular Series
shall be in such amount as may be declared from time to time by the Trustees,
and such dividends and distributions may vary as between such Classes to
reflect differing allocations of the expenses of the Series between the
Shareholders of such several Classes and any resultant differences between the
net asset value of such several Classes to such extent and for such purposes as
the Trustees may deem appropriate and further except that, in connection with
any dividend or distribution program or procedure, the Trustees may determine
that no dividend or distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not been received by the time
or times established by the Trustees under such program or procedure, or that
dividends or distributions shall be payable on Shares which have been tendered
by the holder thereof for redemption or repurchase, but the redemption or
repurchase proceeds of which have not yet been paid to such Shareholder. Such
dividends and distributions may be made in cash, property or Shares of any
Class of that Series or a combination thereof as determined by the Trustees, or
pursuant to any program that the Trustees may have in effect at the time for
the election by each Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or distribution paid in
Shares will be paid at the net asset value thereof as determined in accordance
with subsection (l) of this Section 6.1.
(h) Liquidation. In the event of the liquidation or dissolution of the
Trust (or any particular Series), the Shareholders of the Trust (or that
Series) shall be entitled to receive, when and as declared by the Trustees, the
excess of the assets belonging to the Trust (or that Series) over the
liabilities of such Series. The assets so distributable to the Shareholders of
the Trust (or that Series) shall be distributed among such Shareholders in
proportion to the number of Shares of the Trust (or that Series) held by them
and recorded on the books of the Trust. The liquidation of the Trust (or any
particular Series) may be authorized by vote of a Majority of the Trustees,
subject to the affirmative vote of "a majority of the outstanding voting
securities" of that Series, as the quoted phrase is defined in the 1940 Act,
determined in accordance with clause (iii) of the definition of "Majority
Shareholder Vote" in Section 1.4 hereof.
(i) Voting. The Shareholders shall have the voting rights set forth in
or determined under Article 7 hereof.
(j) Redemption by Shareholder. Each holder of Shares of the Trust (or a
particular Series thereof) shall have the right at such times as may be
permitted by the Trust, but no less frequently than required by the 1940 Act,
to require the Trust (or such Series) to redeem all or any part of his Shares of
the Trust (or such Series) at a redemption price equal to the net asset value
per Share of the Trust (or Series) next determined in accordance with
subsection (l) of this Section 6.1 after the Shares are properly tendered for
redemption; provided, that the Trustees may from time to time, in their
discretion, determine and impose a fee for such redemption and that the
proceeds of the redemption of Shares (including a fractional Share) of any
Class of the Trust (or any Series thereof) shall be reduced by the amount of
any applicable contingent deferred sales charge or other sales charge, if any,
payable on such redemption to the distributor of Shares of such Class pursuant
to the terms of
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the initial issuance of the Shares of such Class (to the extent
consistent with the 1940 Act or regulations or exemptions thereunder) and the
Trust shall promptly pay to such distributor the amount of such deferred sales
charge. Payment of the redemption price shall be in cash; provided, however,
that if the Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or undesirable, the
Trust may make payment wholly or partly in Securities or other assets belonging
to such Series at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust may
postpone payment of the redemption price and may suspend the right of the
holders of Shares of the Trust (or any Series thereof) to require the Trust to
redeem Shares of the Trust (or such Series) during any period or at any time
when and to the extent permissible under the 1940 Act.
(k) Redemption at the Option of the Trust. The Trustees shall have the
power to redeem Shares of the Trust (or any Series thereof) at a redemption
price determined in accordance with Section 6.1(j), if at any time (i) the
total investment in such account does not have a value of at least such minimum
amount as may be specified in the Prospectus for the Trust (or such Series)
from time to time (ii) the number of Shares held in such account is equal to or
in excess of a specified percentage of Shares of the Trust or any Series as set
forth from time to time in the applicable Prospectus. In the event the Trustees
determine to exercise their power to redeem Shares provided in this Section
6.1(k), the Shareholder shall be notified that the value of his account is less
than the applicable minimum amount and shall be allowed 30 days to make an
appropriate investment before redemption is processed.
(I) Net Asset Value. The net asset value per Share of the Trust (or any
Series or Class) at any time shall be the quotient obtained by dividing the
value of the net assets of the Trust (or such Series or Class) at such time
(being the current value of the assets belonging to the Trust (or such Series
or Class), less its then existing liabilities) by the total number of Shares of
the Trust (or such Series or Class) then outstanding, all determined in
accordance with the methods and procedures, including without limitation those
with respect to rounding, established by the Trustees from time to time in
accordance with the requirements of the 1940 Act. The net asset value of the
several Classes of the Trust (or a particular Series) shall be separately
computed, and may vary from one another. The Trustees shall establish
procedures for the allocation of investment income or capital gains and
expenses and liabilities of a particular Series between the several Classes of
the Trust (or such Series). The Trustees may determine to maintain the net
asset value per Share of the Trust or any Series or Class at a designated
constant dollar amount and in connection therewith may adopt procedures not
inconsistent with the 1940 Act for the continuing declaration of income
attributable to the Trust or such Series or Class as dividends payable in
additional Shares of the Trust or such Series or Class at the designated
constant dollar amount and for the handling of any losses attributable to the
Trust or such Series or Class. Such procedures may provide that in the event of
any loss each Shareholder shall be deemed to have contributed to the shares of
beneficial interest account of the Trust or such Series or Class his pro rata
portion of the total number of Shares required to be canceled in order to
permit the net asset value per Share of the Trust or such Series or Class to be
maintained, after reflecting such loss, at the designated constant dollar
amount. Each Shareholder of the Trust shall be deemed to have expressly agreed,
by his investment in the Trust (or any Series thereof) with respect to which
the Trustees shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such loss.
(m) Transfer. All Shares of the Trust and each Series shall be
transferable, but transfers of Shares of the Trust or a particular Series will
be recorded on the Share transfer records of the Trust
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applicable to the Trust or such Series only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of the
Trust or such Series and at such other times as may be permitted by the
Trustees.
(n) Equality. All Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series (subject to
the liabilities of that Series), and each Share of any particular Series shall
be equal to each other Share thereof; but the provisions of this sentence shall
not restrict any distinctions between the several Classes of a Series
permissible under this Section 6.1 or under Section 7. 1 hereof nor any
distinctions permissible under subsection (g) of this Section 6.1 that may
exist with respect to dividends and distributions on Shares of the same Series.
The Trustees may from time to time divide or combine the Shares of any class of
particular Series into a greater or lesser number of Shares of that class of a
Series without thereby changing the proportionate beneficial interest in the
assets belonging to that Series or in any way affecting the rights of the
holders of Shares of any other Series.
(o) Rights of Fractional Shares. Any fractional Share of the Trust (or
any Series thereof) shall carry proportionately all the rights and obligations
of a whole Share of the Trust (or such Series), including rights and
obligations with respect to voting, receipt of dividends and distributions,
redemption of Shares, and liquidation of the Trust or of the Series to which
they pertain.
(p) Conversion Rights. (i) Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that holders
of Shares of any Series shall have the right to convert said Shares into Shares
of one or more other Series, that holders of any Class of the Trust or a Series
of Shares shall have the right to convert said Shares of such Class into Shares
of one or more other Classes of the Trust or such Series, and that Shares of
any Class of the Trust or a Series shall be automatically converted into Shares
of another Class of the Trust or such Series, in each case in accordance with
such requirements and procedures as the Trustees may establish.
(ii) The number of Shares of into which a convertible Share shall
convert shall equal the number (including for this purpose fractions of a
Share) obtained by dividing the net asset value per Share for purposes of sales
and redemptions of the converting Share on the Conversion Date by the net asset
value per Share for purposes of sales and redemptions of the Class of Shares
into which it is converting on the Conversion Date.
(iii) On the Conversion Date, the Share converting into another
share will cease to accrue dividends and will no longer be deemed
outstanding and the rights of the holders thereof (except the right to receive
the number of target Shares into which the converting Shares have been
converted and declared but unpaid dividends to the Conversion Date) will cease.
Certificates representing Shares resulting from the conversion need not be
issued until certificates representing Shares converted, if issued, have been
received by the Trust or its agent duly endorsed for transfer.
(vi) The Trust will appropriately reflect the conversion of Shares
of one Class of the Trust (or a Series thereof) into Shares of another
Class of the Trust (or such Series) on the first periodic statements of account
sent to Shareholders of record affected which provide account information with
respect to a reporting period which includes the date such conversion occurred.
SECTION 6.2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a Transfer Agent or similar agent for
the Trust, which books shall be maintained
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separately for the Shares of each Series that has been authorized.
Certificates evidencing the ownership of Shares need not be issued except as
the Trustees may otherwise determine from time to time, and the Trustees shall
have power to call outstanding Share certificates and to replace them with book
entries. The Trustees may make such rules as they consider appropriate for the
issuance of Share certificates, the use of facsimile signatures, the transfer
of Shares and similar matters. The record books of the Trust as kept by the
Trust or any Transfer Agent or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders and as to the number of Shares of the
Trust and, if designated, each Series thereof held from time to time by each
such Shareholder.
The holders of Shares of the Trust and, if designated, each Series
thereof shall upon demand disclose to the Trustees in writing such information
with respect to their direct and indirect ownership of Shares of the Trust or,
if designated, such Series as the Trustees deem necessary to comply with the
provisions of the Internal Revenue Code, or to comply with the requirements of
any other authority.
SECTION 6.3. Investments in the Trust. The Trustees may accept
investments in any Series of the Trust from such Persons and on such terms and
for such consideration, not inconsistent with the provisions of the 1940 Act,
as they from time to time authorize. The Trustees may authorize any
Distributor, Principal Underwriter, Custodian, Transfer Agent or other Person
to accept orders for the purchase of Shares that conform to such authorized
terms and to reject any purchase orders for Shares, whether or not conforming
to such authorized terms.
SECTION 6.4. No Preemptive Rights. No Shareholder, by virtue of holding
Shares of the Trust or, if designated, any Series thereof, shall have any
preemptive or other right to subscribe to any additional Shares of the Trust or
such Series, or to any shares of any other Series, or any other Securities
issued by the Trust.
SECTION 6.5. Status of Shares. Every Shareholder, by virtue of having
become a Shareholder, shall be held to have expressly assented and agreed to
the terms hereof and to have become a party hereto. Shares shall be deemed to
be personal property, giving only the rights provided herein. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust Property or right to call for a partition or division of the
same or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the Trust or any Series, nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Declaration of Trust.
ARTICLE 7
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.1. Voting Powers. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Sections 4.1(c)
and (e) hereof, (ii) with respect to the approval or termination in accordance
with the 1940 Act of any contract with a Contracting Party as provided in
Section 5.2 hereof as to which Shareholder approval is required by the 1940
Act, (iii) with respect to any termination or reorganization of the Trust or
any Series to the extent and as provided in Sections 9.2, 9.3 and 9.4 hereof,
(iv) with respect to any amendment of this Declaration of Trust to the extent
and as provided in Section 9.5 hereof, (v) to the same extent as the
stockholders of a Delaware business
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corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or any Series, or the Shareholders of any of them
(provided. however, that a Shareholder of a particular Series shall not in any
event be entitled to maintain a derivative or class action on behalf of any
other Series or the Shareholders thereof), and (vi) with respect to such
additional matters relating to the Trust as may be required by the 1940 Act,
this Declaration of Trust, the By-Laws or any registration of the Trust with
the Commission (or any successor agency) or any State, or as the Trustees may
consider necessary or desirable. If and to the extent that the Trustees shall
determine that such action is required by law or by this Declaration, they
shall cause each matter required or permitted to be voted upon at a meeting or
by written consent of Shareholders to be submitted to a separate vote of the
outstanding Shares of each Series entitled to vote thereon; provided, that (i)
when expressly required by the 1940 Act or by other law, actions of
Shareholders shall be taken by Single Class Voting of all outstanding Shares
whose holders are entitled to vote thereon; and (ii) when the Trustees
determine that any matter to be submitted to a vote of Shareholders affects
only the rights or interests of Shareholders of one or more but not all Series
or of one or more but not all Classes of the Trust or a single Series
(including without limitation any distribution plan pursuant to Rule 12b-1 of
the 1940 Act applicable to such Class), then only the Shareholders of the
Series or Classes so affected shall be entitled to vote thereon. Any matter
required to be submitted to shareholders and affecting one or more Series shall
require separate approval by the required vote of Shareholders of the Trust or
each affected Series; provided, however, that to the extent required by the
1940 Act, there shall be no separate Series votes on the election or removal of
Trustees, the selection of auditors for the Trust and its Series or approval of
any agreement or contract entered into by the Trust or any Series. Shareholders
of a particular Series shall not be entitled to vote on any matter that affects
only one or more other Series.
SECTION 7.2. Number of Votes and Manner of Voting: Proxies. On each
matter submitted to a vote of the Shareholders, each holder of Shares of the
Trust or, if applicable, any Series shall be entitled to a number of votes
equal to the number of Shares of the Trust or such Series standing in his name
on the books of the Trust. There shall be no cumulative voting in the election
or removal of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two (2) or more Persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them.
A proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
SECTION 7.3. Meetings. Meetings of Shareholders may be called by the
Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of the Shareholders as herein provided, or upon
any other matter deemed by the Trustees to be necessary or desirable. Written
notice of any meeting of Shareholders shall be given or caused to be given by
the Trustees by mailing such notice at least seven (7) days before such
meeting, postage prepaid, stating the time, place and purpose of the meeting,
to each Shareholder at the Shareholder's address as it appears on the records
of the Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the Trust
when requested to do so in writing by Shareholders holding not less than ten
percent (10%) of the Shares then outstanding. If the Trustees shall fail to
call or give notice of any meeting of Shareholders for a period of thirty (30)
days after written application by Shareholders holding at least ten percent
(10%) of the Shares then outstanding requesting that a
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meeting be called for any other purpose requiring action by the
Shareholders as provided herein or in the By-Laws, then Shareholders holding at
least ten percent (10%) of the Shares then outstanding may call and give notice
of such meeting, and thereupon the meeting shall be held in the manner provided
for herein in case of call thereof by the Trustees. Any meetings may be held
within or without The State of Delaware. Shareholders may only act with
respect to matters set forth in the notice to Shareholders.
SECTION 7.4. Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding thirty (30) days (except at
or in connection with the termination of the Trust), as the Trustees may
determine; or without closing the transfer books the Trustees may fix a date
and time not more than ninety (90) days prior to the date of any meeting of
Shareholders or other action as the date and time of record for the
determination of Shareholders entitled to vote at such meeting or any
adjournment thereof or to be treated as Shareholders of record for purposes of
such other action, and any Shareholder who was a Shareholder at the date and
time so fixed shall be entitled to vote at such meeting or any adjournment
thereof or to be treated as a Shareholder of record for purposes of such other
action, even though he has since that date and time disposed of his Shares, and
no Shareholder becoming such after that date and time shall be so entitled to
vote at such meeting or any adjournment thereof or to be treated as a
Shareholder of record for purposes of such other action.
SECTION 7.5. Quorum and Required Vote. A majority of the Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, but any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held within a reasonable
time after the date set for the original meeting without the necessity of
further notice. A Majority Shareholder Vote at a meeting of which a quorum is
present shall decide any question, except when a different vote is required or
permitted by any provision of the 1940 Act or other applicable law or by this
Declaration of Trust or the By-Laws, or when the Trustees shall in their
discretion require a larger vote or the vote of a majority or larger fraction
of the Shares of one or more particular Series.
SECTION 7.6. Action By Written Consent. Subject to the provisions of
the 1940 Act and other applicable law, any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders entitled to vote on the
matter (or such larger proportion thereof or of the Shares of any particular
Series as shall be required by the 1940 Act or by any express provision of this
Declaration of Trust or the By-Laws or as shall be permitted by the Trustees)
consent to the action in writing and if the writings in which such consent is
given are filed with the records of the meetings of Shareholders, to the same
extent and for the same period as proxies given in connection with a
Shareholders' meeting. Such consent shall be treated for all purposes as a vote
taken at a meeting of Shareholders.
SECTION 7.7. Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of a Delaware business corporation under the Delaware business
corporation law.
SECTION 7.8. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
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ARTICLE 8
LIMITATION OF LIABILITY: INDEMNIFICATION
SECTION 8.1. Trustees. Shareholders. etc. Not Personally Liable;
Notice. The Trustees, officers, employees and agents of the Trust, in incurring
any debts, liabilities or obligations, or in limiting or omitting any other
actions for or in connection with the Trust, are or shall be deemed to be
acting as Trustees, officers, employees or agents of the Trust and not in their
own capacities. No Shareholder shall be subject to any personal liability
whatsoever in tort, contract or otherwise to any other Person or Persons in
connection with the assets or the affairs of the Trust or of any Series, and
subject to Section 8.4 hereof, no Trustee, officer, employee or agent of the
Trust shall be subject to any personal liability whatsoever in tort, contract,
or otherwise, to any other Person or Persons in connection with the assets or
affairs of the Trust or of any Series, save only that arising from his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office or the discharge of his functions.
The Trust (or if the matter relates only to a particular Series, that Series)
shall be solely liable for any and all debts, claims, demands, judgments,
decrees, liabilities or obligations of any and every kind, against or with
respect to the Trust or such Series in tort, contract or otherwise in
connection with the assets or the affairs of the Trust or such Series, and all
Persons dealing with the Trust or any Series shall be deemed to have agreed
that resort shall be had solely to the Trust Property of the Trust or the
Series Assets of such Series, as the case may be, for the payment or
performance thereof.
The Trustees shall use their best efforts to ensure that every note,
bond, contract, instrument, certificate or undertaking made or issued by the
Trustees or by any officers or officer shall give notice that a Certificate of
Trust in respect of the Trust is on file with the Secretary of the state of
Delaware and shall recite to the effect that the same was executed or made by
or on behalf of the Trust or by them as Trustees or Trustee or as officers or
officer, and not individually, and that the obligations of such instrument are
not binding upon any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, or the particular Series in
question, as the case may be, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually, or to subject the Series Assets of any Series to the
obligations of any other Series.
SECTION 8.2. Trustees' Good Faith Action; Expert Advice: No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. Subject to Section 8.4 hereof, a
Trustee shall be liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law. Subject to the foregoing, (i) the Trustees
shall not be responsible or liable in any event for any neglect or wrongdoing
of any officer, agent, employee, consultant, Investment Adviser, Administrator,
Distributor or Principal Underwriter, Custodian or Transfer Agent, Dividend
Disbursing Agent, Shareholder Servicing Agent or Accounting Agent of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee; (ii) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written
reports made to the Trustees by any officer appointed by them, any independent
public accountant, and (with respect to the subject matter of the contract
involved) any officer, partner or
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responsible employee of a Contracting Party appointed by the Trustees
pursuant to Section 5.2 hereof. The Trustees as such shall not be required to
give any bond or surety or any other security for the performance of their
duties.
SECTION 8.3. Indemnification of Shareholders. If any Shareholder (or
former Shareholder) of the Trust shall be charged or held to be personally
liable for any obligation or liability of the Trust solely by reason of being
or having been a Shareholder and not because of such Shareholder's acts or
omissions or for some other reason, the Trust (upon proper and timely request
by the Shareholder) may assume the defense against such charge and satisfy any
judgment thereon or may reimburse the Shareholders for expenses, and the
Shareholder or former Shareholder (or the heirs, executors, administrators or
other legal representatives thereof, or in the case of a corporation or other
entity, its corporate or other general successor) shall be entitled (but solely
out of the assets of the Series of which such Shareholder or former Shareholder
is or was the holder of Shares) to be held harmless from and indemnified
against all loss and expense arising from such liability.
SECTION 8.4. Indemnification of Trustees. Officers, etc. Subject to the
limitations, if applicable, hereinafter set forth in this Section 8.4, the
Trust shall indemnify (from the assets of one or more Series to which the
conduct in question relates) each of its Trustees, officers, employees and
agents (including Persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise (hereinafter, together with
such Person's heirs, executors, administrators or personal representative,
referred to as a "Covered Person")) against all liabilities, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable accountants' and counsel
fees, incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or otherwise or with which
such Covered Person may be or may have been threatened, while in office or
thereafter, by reason of being or having been such a Trustee or officer,
director or trustee, except with respect to any matter as to which it has been
determined that such Covered Person (i) did not act in good faith in the
reasonable belief that such Covered Person's action was in or not opposed to
the best interests of the Trust; (ii) had acted with willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office (iii) for a criminal proceeding, had
reasonable cause to believe that his conduct was unlawful (the conduct
described in (i), (ii) and (iii) being referred to hereafter as "Disabling
Conduct"). A determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the merits by a court or
other body before whom the proceeding was brought that the Covered Person to be
indemnified was not liable by reason of Disabling Conduct, (ii) dismissal of a
court action or an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum
of Trustees who are neither "interested persons" of the Trust as defined in
Section 2(a)(19) of the 1940 Act nor parties to the proceeding (the
"Disinterested Trustees"), or (b) an independent legal counsel in a written
opinion. Expenses, including accountants' and counsel fees so incurred by any
such Covered Person (but excluding amounts paid in satisfaction of judgments,
in compromise or as fines or penalties), may be paid from time to time by one
or more Series to which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided that the Covered
Person shall have undertaken to repay the amounts so paid to such Series if it
is ultimately determined that indemnification of such expenses is not
authorized under this Article 8 and (i) the Covered Person shall
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have provided security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the Disinterested Trustees, or an independent legal
counsel in a written opinion, shall have determined, based on a review of
readily available facts (as opposed to a full trial type inquiry), that there
is reason to believe that the Covered Person ultimately will be found entitled
to indemnification.
SECTION 8.5. Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 8.4
hereof, pursuant to a consent decree or otherwise, no such indemnification
either for said payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of a quorum of the
Disinterested Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Trustees pursuant to clause (i) or by independent
legal counsel pursuant to clause (ii) shall not prevent the recovery from any
Covered Person of any amount paid to such Covered Person in accordance with
either of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's action was in
or not opposed to the best interests of the Trust or to have been liable to the
Trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
Covered Person's office.
SECTION 8.6. Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article 8 shall not be exclusive of or affect
any other rights to which any such Covered Person or shareholder may be
entitled. As used in this Article 8, a "disinterested" Person is one against
whom none of the actions, suits or other proceedings in question, and no other
action, suit or other proceeding on the same or similar grounds is then or has
been pending or threatened. Nothing contained in this Article 8 shall affect
any rights to indemnification to which personnel of the Trust, other than
Trustees and officers, and other Persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such Person.
SECTION 8.7. Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry concerning
the validity of any transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred to the Trust or
upon its order.
ARTICLE 9
DURATION: REORGANIZATION: INCORPORATION; AMENDMENTS
SECTION 9.1. Duration of Trust. Unless terminated as provided herein,
the Trust shall have perpetual existence.
SECTION 9.2. Termination of Trust. The Trust may be terminated at any
time by a Majority of the Trustees, subject to the favorable vote of the
holders of not less than a majority of the Shares outstanding and entitled to
vote of each Series of the Trust, or by an instrument or instruments in writing
without a meeting, consented to by the holders of not less than a majority of
such Shares, or by such greater or different vote of Shareholders of any Series
as may be established by the Certificate of Designation by which such Series
was authorized. Upon termination, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued or anticipated
as may be
28
<PAGE> 35
determined by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, Securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with
the provisions of Section 6.1(h) hereof. After termination of the Trust or any
Series and distribution to the Shareholders as herein provided, a majority of
the Trustees shall execute and lodge among the records of the Trust an
instrument in writing setting forth the fact of such termination. Upon
termination of the Trust, the Trustees shall thereupon be discharged from all
further liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease. Upon termination of any Series, the
Trustees shall thereupon be discharged from all further liabilities and duties
with respect to such Series, and the rights and interests of all Shareholders
of such Series shall thereupon cease.
SECTION 9.3. Reorganization. The Trustees may sell, convey and transfer
all or substantially all of the assets of the Trust, or the assets belonging to
any one or more Series, to another trust, partnership, association, corporation
or other entity organized under the laws of any state of the United States, or
may transfer such assets to another Series of the Trust, in exchange for cash,
Shares or other Securities (including, in the case of a transfer to another
Series of the Trust, Shares of such other Series), or to the extent permitted
by law then in effect may merge or consolidate the Trust or any Series with any
other Trust or any corporation, partnership, or association organized under the
laws of any state of the United States, all upon such terms and conditions and
for such consideration when and as authorized by vote or written consent of a
Majority of the Trustees and approved by the affirmative vote of the holders of
not less than a majority of the Shares outstanding and entitled to vote of each
Series whose assets are affected by such transaction, or by an instrument or
instruments in writing without a meeting, consented to by the holders of not
less than a majority of such Shares, and/or by such other vote of any Series as
may be established by the Certificate of Designation with respect to such
Series. Following such transfer, the Trustees shall distribute the cash, Shares
or other Securities or other consideration received in such transaction (giving
due effect to the assets belonging to and indebtedness of, and any other
differences among, the various Series of which the assets have so been
transferred) among the Shareholders of the Series of which the assets have been
so transferred; and if all of the assets of the Trust have been so transferred,
the Trust shall be terminated. Nothing in this Section 9.3 shall be construed
as requiring approval of Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or
other organizations, and to sell, convey or transfer less than substantially
all of the Trust Property or the assets belonging to any Series to such
organizations or entities.
SECTION 9.4. Incorporation. Upon approval by Majority Shareholder
Vote, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, association or organization, in
exchange for the shares or securities thereof, or otherwise, and to lend money
to, subscribe for the shares of securities of, and enter into any contracts
with any such corporation, trust, partnership, association or organization in
which the Trust holds or is about to acquire shares or any other interests. The
Trustees may also cause a merger or consolidation between the Trust or any
successor thereto and any such corporation, trust, partnership, association or
other organization if and to the extent permitted by law, as provided under the
law then in effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporation, trusts,
29
<PAGE> 36
partnerships, associations or other organizations and selling, conveying or
transferring a portion of the Trust Property to such organizations or entities.
SECTION 9.5. Amendments; etc. All rights granted to the Shareholders
under this Declaration of Trust are granted subject to the reservation of the
right to amend this Declaration of Trust as herein provided, except that no
amendment shall repeal the limitations on personal liability of any Shareholder
or Trustee or the prohibition of assessment upon the Shareholders (otherwise
than as permitted under Section 6.1(l)) without the express consent of each
Shareholder or Trustee involved. Subject to the foregoing, the provisions of
this Declaration of Trust (whether or not related to the rights of
Shareholders) may be amended at any time, so long as such amendment does not
adversely affect the rights of any Shareholder with respect to which such
amendment is or purports to be applicable and so long as such amendment is not
in contravention of applicable law, including the 1940 Act, by an instrument in
writing signed by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees). Any amendment to this
Declaration of Trust that adversely affects the rights of all Shareholders may
be adopted at any time by an instrument in writing signed by a Majority of the
Trustees (or by an officer of the Trust pursuant to a vote of a Majority of the
Trustees) when authorized to do so by the vote in accordance with Section 7.I
hereof of Shareholders holding a majority of all the Shares outstanding and
entitled to vote, without regard to Series, or if said amendment adversely
affects the rights of the Shareholders of less than all of the Series, by the
vote of the holders of a majority of all the Shares entitled to vote of each
Series so affected. Notwithstanding any other provisions set forth in this
Declaration of Trust, a provision in this Declaration of Trust requiring
shareholder approval of any action may be amended only with like shareholder
approval.
SECTION 9.6. Filing of Copies of Declaration and Amendments. The
original or a copy of this Declaration and of each amendment hereto (including
each Certificate of Designation and Certificate of Termination) shall be kept
at the office of the Trust where it may be inspected by any Shareholder. A
restated Declaration, integrating into a single instrument all of the
provisions of this Declaration which are then in effect and operative, may be
executed from time to time by a Majority of the Trustees and shall, upon
execution, be conclusive evidence of all amendments contained therein and may
thereafter be referred to in lieu of the original Declaration and the various
amendments thereto. A Certificate of Trust shall be filed in the office of the
Secretary of State of the State of Delaware.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Notices. Any and all notices to which any Shareholder
hereunder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage prepaid, addressed to any Shareholder of
record at his last known address as recorded on the applicable register of the
Trust.
SECTION 10.2. Governing Law. This Declaration of Trust is, with
reference to the laws thereof, and the rights of all parties and the
construction and effect of every provision hereof shall be, subject to and
construed according to the laws of said The State of Delaware.
SECTION 10.3. Counterparts. This Declaration of Trust and any amendment
thereto may be simultaneously executed in several counterparts, each of which
so executed shall be deemed to be an
30
<PAGE> 37
original, and such counterparts, together, shall constitute but one and
the same instrument, which shall be sufficiently evidenced by any such original
counterpart.
SECTION 10.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust is a Trustee hereunder,
certifying to: (a) the number or identity of Trustees or Shareholders, (b) the
due authorization of the execution of any instrument or writing, (c) the form
of any vote passed at a meeting of Trustees or Shareholders, (d) the fact that
the number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration of Trust, (e)
the form of any By-Law adopted, or the identity of any officers elected, by the
Trustees, (f) the existence or nonexistence of any fact or facts which in any
manner relate to the affairs of the Trust, or (g) the name of the Trust or the
establishment of a Series shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees, or any of them, and
the successors of such Person.
SECTION 10.5. References; Headings. The masculine gender shall include
the feminine and neuter genders. Headings are placed herein for convenience of
reference only and shall not be taken as a part of this Declaration or control
or affect the meaning, construction or effect hereof.
SECTION 10.6. Provisions in Conflict With Law or Regulation. (a)
The provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986 or with other applicable laws and regulations,
the conflicting provision shall be deemed never to have constituted a part of
this Declaration; provided, however, that such determination shall not affect
any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
SECTION 10.7. Use of the Name "Van Kampen American Capital". Van Kampen
American Capital, Inc. ("Van Kampen American Capital") has consented to the use
by the Trust and by each Series and each Series thereof to the identifying
words "Van Kampen" or "Van Kampen Merritt" or any combination thereof in the
name of the Trust and of each Series and Series thereof. Such consent is
conditioned upon the Trust's employment of Van Kampen American Capital, its
successors or a subsidiary or affiliate thereof as investment adviser to the
Trust and to each Series and each Series thereof. As between Van Kampen
American Capital and the Trust, Van Kampen American Capital shall control the
use of such name insofar as such name contains the identifying words "Van
Kampen" or "Van Kampen Merritt". Van Kampen American Capital may from time to
time use the identifying words "American Capital," "Van Kampen" or "Van Kampen
Merritt" in other connections and for other purposes, including without
limitation in the names of other investment companies, corporations or
businesses that it may manage, advise, sponsor or own or in which it may have a
financial interest. Van Kampen American Capital may require the Trust or any
Series or Series thereof to cease using the identifying words "Van Kampen" or
"Van Kampen Merritt" in the name of the Trust or any Series or any Series
thereof if the Trust or any Series or Series thereof ceases to employ Van
Kampen American Capital, its successors or a subsidiary or affiliate thereof as
investment adviser.
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<PAGE> 38
IN WITNESS WHEREOF, the undersigned, being at least a majority of the
Trustees of the Trust, have set their hands and seal, for themselves and their
assigns, unto this First Amended and Restated Agreement and Declaration of
Trust of Van Kampen American Capital ___________, as of the day and year first
above written.
___________________________________ ___________________________________
J. Miles Branagan Richard E. Caruso
___________________________________ ___________________________________
Roger Hilsman Don G. Powell
___________________________________ ___________________________________
David Rees Lawrence J. Sheehan
___________________________________ ___________________________________
Fernando Sisto William S. Woodside
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<PAGE> 39
A C K N O W L E D G M E N T
STATE OF )
) ss
COUNTY OF )
______________________
(Date)
Then personally appeared the above named [ ] and acknowledged the
foregoing instrument to be his free act and deed.
Before me,
_______________________________
(Notary Public)
My commission expires:___________
33
<PAGE> 1
EXHIBIT 1.2
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
Certificate of Designation
of
Van Kampen American Capital Reserve Fund
The undersigned, being the Secretary of Van Kampen American Capital Reserve
Fund, a Delaware business trust (the "Trust"), pursuant to the authority
conferred upon the Trustees of the Trust by Section 6.1 of the Trust's First
Amended and Related Agreement and Declaration of Trust ("Declaration"), and by
the affirmative vote of a Majority of the Trustees does hereby establish and
designate the following classes of Shares of the Trust with following the
rights, preferences and characteristics:
1. Classes of Shares. The Shares of the Trust shall be initially divided into
three classes--Class A, Class B and Class C. The Trustees shall have the
authority from time to time to authorize additional Classes of Shares of the
Trust.
2. Sales Charges. Each Class A, Class B and Class C Share shall be subject to
such sales charges, if any, as may be established from time to time by the
Trustees in accordance with the Investment Company Act of 1940 (the "1940 Act")
and applicable rules and regulations of the National Association of Securities
Dealers, Inc., all as set forth in the Trust's prospectus.
3. Conversion. Each Class B and Class C Share of the Trust shall be converted
automatically, and without any action or choice on the part of the Shareholder
thereof, into Class A Shares of the Trust at such times and pursuant to such
terms, conditions and restrictions as may be established by the Trustees and as
set forth in the Trust's Prospectus.
4. Allocation of Expenses Among Classes. Expenses related solely to a particular
Class (including, without limitation, distribution expenses under an
administrative or service agreement, plan or other arrangement, however
designated) shall be borne by that Class and shall be appropriately reflected
(in a manner determined by the Trustees) in the net asset value, dividends,
distribution and liquidation rights of the Shares of that Class.
5. Special Meetings. A special meeting of Shareholders of a Class of the Trust
may be called with respect to the Rule 12b-1 distribution plan applicable to
such Class or with respect to any other proper purpose affecting only holders of
shares of such Class at any time by a Majority of the Trustees.
6. Other Rights Governed by Declaration. All other rights, preferences,
qualifications, limitations and restrictions with respect to Shares of any
Series of the Trust, or with respect to any Class of Shares set forth in the
Declaration shall apply to
1
<PAGE> 2
Shares of the Trust unless otherwise specified in this Certificate of
Designation, in which case this Certificate of Designation shall govern.
7. Amendments, etc. Subject to the provisions and limitations of Section 9.5 of
the Declaration and applicable law, this Certificate of Designation may be
amended by an instrument signed in writing by a Majority of the Trustees (or by
and officer of the Trust pursuant to the vote of a Majority of the Trustees) or
when authorized to do so by the vote in accordance with the Declaration of the
holders of a majority of all the Shares of the Trust outstanding and entitled to
vote or, if such amendment affects the Shares of one or more but not all of the
Classes of the Trust, the holders of a majority of all the Shares of the
affected Classes outstanding and entitled to vote.
8. Incorporation of Defined Terms. All capitalized terms which are not defined
herein shall have the same meaning as ascribed to those terms in the
Declaration.
June _____, 1995
____________________________
Nori L. Gabert,
Secretary
2
<PAGE> 1
EXHIBIT 2
FORM OF VAN KAMPEN AMERICAN CAPITAL FUNDS DELAWARE TRUST
AMENDED AND RESTATED BYLAWS
VAN KAMPEN AMERICAN CAPITAL
[TRUST]
AMENDED AND RESTATED BYLAWS
<PAGE> 2
[TRUST]
Bylaws
Index
<TABLE>
<S> <C> <C>
ARTICLE 1 SHAREHOLDERS AND SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Presiding Officer; Secretary . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3. Authority of Chairman of Meeting to Interpret Declaration and Bylaws . . 1
Section 1.4. Voting; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.5. Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6 Records at Shareholder Meetings . . . . . . . . . . . . . . . . . . . . 2
Section 1.7. Shareholders Action in Writing . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 TRUSTEES AND TRUSTEES' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1. Number of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.2. Regular Meetings of Trustees . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.3. Special Meetings of Trustees . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.4. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.5. Quorum; Presiding Trustee . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.6. Participation by Telephone . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.7. Location of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.8. Actions by Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.9. Rulings of Presiding Trustee . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.10. Trustees' Action in Writing . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.11. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.12. Tenure of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 3 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1. Officers of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2. Time and Terms of Election . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.3. Resignation and Removal . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.4. Fidelity Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.5. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.6. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.7. Treasurer and Assistant Treasurers . . . . . . . . . . . . . . . . . . . 5
Section 3.8. Controller and Assistant Controllers . . . . . . . . . . . . . . . . . . 6
Section 3.9. Secretary and Assistant Secretaries . . . . . . . . . . . . . . . . . . 6
Section 3.10. Substitutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.11. Execution of Deeds, etc. . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.12. Power to Vote Securities . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4 COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.1. Power of Trustees to Designate Committees . . . . . . . . . . . . . . . 7
Section 4.2. Rules for Conduct of Committee Affairs . . . . . . . . . . . . . . . . 7
Section 4.3. Trustees May Alter, Abolish, etc., Committees . . . . . . . . . . . . . 7
Section 4.4. Minutes; Review by Trustees . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 5 SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 6 SHARES .......................................... . . . . . . . . . . . . . . . . . 7
Section 6.1. Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6.2. Uncertificated Shares . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.3. Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.4. Lost, Stolen, etc., Certificates . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 7 STOCK TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7.1. Transfer Agents, Registrars, etc. . . . . . . . . . . . . . . . . . . . 8
Section 7.2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7.3. Registered Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 8 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8.1. Bylaws Subject to Amendment . . . . . . . . . . . . . . . . . . . . . 9
Section 8.2. Notice of Proposal to Amend Bylaws Required . . . . . . . . . . . . . . 9
</TABLE>
<PAGE> 5
[TRUST]
BYLAWS
These are the Bylaws of [TRUST], a trust with transferable shares
established under the laws of The State of Delaware (the "Trust"), pursuant to
an Agreement and Declaration of Trust of the Trust (the "Declaration") made the
10th day of May, 1995, and a Certificate of Trust filed in the office of the
Secretary of State pursuant to Section 3810 of The Delaware Business Trust Act,
Title 12, Chapter 38 of the Delaware Code. These Bylaws have been adopted by
the Trustees pursuant to the authority granted by Section 4.14 of the
Declaration.
All words and terms capitalized in these Bylaws, unless
otherwise defined herein, shall have the same meanings as they have in the
Declaration.
ARTICLE 1
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
SECTION 1.1. Meetings. A meeting of the Shareholders of the Trust
shall be held whenever called by the Chairman, the President or a majority of
the Trustees and whenever election of a Trustee or Trustees by Shareholders is
required by the provisions of the 1940 Act. Meetings of Shareholders shall
also be called by the Trustees when requested in writing by Shareholders
holding at least ten percent (10%) of the Shares then outstanding for the
purpose of voting upon removal of any Trustee, or if the Trustees shall fail to
call or give notice of any such meeting of Shareholders for a period of thirty
(30) days after such application, then Shareholders holding at least ten
percent (10%) of the Shares then outstanding may call and give notice of such
meeting. Notice of Shareholders' meetings shall be given as provided in the
Declaration.
SECTION 1.2. Presiding Officer; Secretary. The President shall
preside at each Shareholders' meeting as chairman of the meeting, or in the
absence of the President, the Trustees present at the meeting shall elect one
of their number as chairman of the meeting. Unless otherwise provided for by
the Trustees, the Secretary of the Trust shall be the secretary of all meetings
of Shareholders and shall record the minutes thereof.
SECTION 1.3. Authority of Chairman of Meeting to Interpret
Declaration and Bylaws. At any Shareholders' meeting the chairman of the
meeting shall be empowered to determine the construction or interpretation
of the Declaration or these Bylaws, or any part thereof or hereof, and their
ruling shall be final.
SECTION 1.4. Voting; Quorum. At each meeting of Shareholders, except
as otherwise provided by the Declaration, every holder of record of Shares
entitled to vote shall be entitled to a number of votes equal to the number of
Shares standing in his name on the Share register of the Trust on the record
date of the meeting. Shareholders may vote by proxy and the form of any such
proxy may be prescribed from time to time by the Trustees. A quorum shall
exist if the holders of a majority of the outstanding Shares of the Trust
entitled to vote are present in person or by proxy, but any lesser
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<PAGE> 6
number shall be sufficient for adjournments. At all meetings of the
Shareholders, votes shall be taken by ballot for all matters which may be
binding upon the Trustees pursuant to Section 7.1 of the Declaration. On other
matters, votes of Shareholders need not be taken by ballot unless otherwise
provided for by the Declaration or by vote of the Trustees, or as required by
the 1940 Act, but the chairman of the meeting may in his discretion authorize
any matter to be voted upon by ballot.
SECTION 1.5. Inspectors. At any meeting of Shareholders, the chairman
of the meeting may appoint one or more Inspectors of Election or Balloting to
supervise the voting at such meeting or any adjournment thereof. If Inspectors
are not so appointed, the chairman of the meeting may, and on the request of
any Shareholder present or represented and entitled to vote shall, appoint one
or more Inspectors for such purpose. Each Inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of Inspector of Election or Balloting, as the case may be, at such
meeting with strict impartiality and according to the best of his
ability. If appointed, Inspectors shall take charge of the polls and, when the
vote is completed, shall make a certificate of the result of the vote taken and
of such other facts as may be required by law.
SECTION 1.6. Records at Shareholder Meetings. At each meeting of the
Shareholders there shall be open for inspection the minutes of the last
previous Meeting of Shareholders of the Trust and a list of the Shareholders of
the Trust, certified to be true and correct by the Secretary or other proper
agent of the Trust, as of the record date of the meeting or the date of closing
of transfer books, as the case may be. Such list of Shareholders shall contain
the name of each Shareholder. Shareholders shall have such other rights and
procedures of inspection of the books and records of the Trust as are granted
to shareholders of a Delaware corporation.
SECTION 1.7. Shareholders' Action in Writing. Nothing in this Article
1 shall limit the power of the Shareholders to take any action by means of
written instruments without a meeting, as permitted by Section 7.6 of the
Declaration.
ARTICLE 2
TRUSTEES AND TRUSTEES' MEETINGS
SECTION 2.1. Number of Trustees. The number of Trustees shall be
eight (8) until such time as additional trustees are elected by the
Shareholders pursuant to Section 4.1(e) hereof and the meeting of shareholders
called for July 21, 1995 of the Trust's predecessor. Thereafter, the number of
Trustees shall be fourteen (14), provided that such number shall be
automatically reduced upon the death, resignation or retirement of any Trustee
until the number of Trustees is eight (8). The number of Trustees shall
thereafter be such number, authorized by the Declaration, as from time to time
shall be fixed by a vote of the Trustees in accordance with Section 2.8 hereof.
SECTION 2.2. Regular Meetings of Trustees. Regular meetings of the
Trustees may be held without call or notice at such places and at such times as
the Trustees may from time to time determine; provided, that notice of such
determination, and of the time and place of the first regular meeting
thereafter, shall be given to each absent Trustee in accordance with Section
2.4 hereof.
SECTION 2.3. Special Meetings of Trustees. Special meetings of the
Trustees may be held at any time and at any place when called by the President
or the Treasurer or by three (3) or more
2
<PAGE> 7
Trustees, or if there shall be less than three (3) Trustees, by any Trustee;
provided, that notice of the time and place thereof is given to each Trustee
in accordance with Section 2.4 hereof by the Secretary or an Assistant
Secretary or by the officer or the Trustees calling the meeting.
SECTION 2.4. Notice of Meetings. Notice of any regular or special
meeting of the Trustees shall be sufficient if given in writing to each
Trustee, and if sent by mail at least five (5) days, by a nationally recognized
overnight delivery service at least two (2) days or by facsimile at least
twenty-four (24) hours, before the meeting, addressed to his usual or last
known business or residence address, or if delivered to him in person at least
twenty-four (24) hours before the meeting. Notice of a special meeting need
not be given to any Trustee who was present at an earlier meeting, not more
than thirty-one (31) days prior to the subsequent meeting, at which the
subsequent meeting was called. Unless statute, these bylaws or a resolution of
the Trustees might otherwise dictate, notice need not state the business to be
transacted at or the purpose of any meeting of the Board of Trustees. Notice
of a meeting may be waived by any Trustee by written waiver of notice, executed
by him or her before or after the meeting, and such waiver shall be filed with
the records of the meeting. Attendance by a Trustee at a meeting shall
constitute a waiver of notice, except where a Trustee attends a meeting for the
purpose of protesting prior thereto or at its commencement the lack of notice.
No notice need be given of action proposed to be taken by unanimous written
consent.
SECTION 2.5. Quorum: Presiding Trustee. At any meeting of the
Trustees, a Majority of the Trustees shall constitute a quorum. Any meeting may
be adjourned from time to time by a majority of the votes cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice. Unless the Trustees shall otherwise elect,
generally or in a particular case, the Chairman shall be the presiding Trustee
at each meeting of the Trustees or in the absence of the Chairman, the
President shall preside over the meeting. In the absence of both the Chairman
and the President, the Trustees present at the meeting shall elect one of their
number as presiding Trustee of the meeting.
SECTION 2.6. Participation by Telephone. One or more of the Trustees
may participate in a meeting thereof or of any Committee of the Trustees by
means of a conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
SECTION 2.7. Location of Meetings. Trustees' meetings may be held at
any place, within or without the State of Delaware.
SECTION 2.8. Actions by Trustees. Unless statute, the declaration
or these bylaws requires a greater proportion, action of a majority of the
Trustees present at a meeting at which a quorum is present is action of the
Board of Trustees. Notwithstanding the preceding sentence, a vote of not less
than two-thirds (2/3) of the Trustees then in office shall be required to
(directly or indirectly through a reorganization or an amendment to the
Declaration) (i) amend Section 2.1, 2.12 or 2.13 of these By-Laws, (ii)
nominate or elect a new Trustee, (iii) adopt a retirement plan other than a
deferred compensation plan or (iv) amend this supermajority provision of the
By-Laws. Voting at Trustees' meetings may be conducted orally, by show of
hands, or, if requested by any Trustee, by written ballot. The results of
all voting shall be recorded by the Secretary in the minute book.
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SECTION 2.9. Rulings of Presiding Trustee. All other rules of conduct
adopted and used at any Trustees' meeting shall be determined by the presiding
Trustee of such meeting, whose ruling on all procedural matters shall be
final.
SECTION 2.10. Trustees' Action in Writing. Nothing in this Article 2
shall limit the power of the Trustees to take action by means of a written
instrument without a meeting, as provided in Section 4.2 of the Declaration.
SECTION 2.11. Resignations. Any Trustee may resign at any time by
written instrument signed by him and delivered to the Chairman, the President
or the Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time.
SECTION 2.12. Tenure of Trustees. Notwithstanding any other
provision herein to the contrary, through June 30, 1996, the term of office of
each Trustee shall end at the time such Trustee reaches the age of seventy-six
and one-half years (76 1/2) or seventy-four and one-half years (74 1/2) for
each person who had not been elected before January 1, 1986 as a trustee or
director of any open end investment company managed by Van Kampen American
Capital Asset Management, Inc. (formerly American Capital Asset Management,
Inc. and, prior thereto, American General Capital Management, Inc.) and on and
after July 1, 1996, the term of office of each Trustee shall end at the time
such Trustee reaches the age of seventy-six and one-half years (76 1/2) or
seventy-two and one-half years (72 1/2) for each person who had not been
elected before January 1, 1986 as a trustee or director of any open end
investment company managed by Van Kampen American Capital Asset Management,
Inc.; provided that the term of office of each Trustee shall end on December
31st of the year in which such Trustee reaches the age of seventy-five years
(75) for each person first elected on or after July 1, 1995 and prior to
December 1, 1995 as a Trustee who was over the age of seventy-two and one half
(72 1/2) and under the age of seventy-five (75) at the time of such election;
and further provided that the term of office of each Trustee first elected on
or after July 1, 1995 and prior to December 1, 1995 who is seventy-five years
(75) of age at the time of such election shall expire as of the date such
Trustees reaches the age of seventy-six years (76).
SECTION 2.13. Chairman of the Board. The Trustees shall from time to
time elect one of the Trustees to serve as Chairman of the Board of Trustees,
provided that the chairman shall be a Trustee who is not an "interested person"
of the Trust or the Trust's investment adviser, within the meaning of the 1940
Act.
ARTICLE 3
OFFICERS
SECTION 3.1. Officers of the Trust. The officers of the Trust shall
consist of a President, a Treasurer and a Secretary, and may include a
Controller and one or more Vice Presidents, Assistant Treasurers and Assistant
Secretaries, and such other officers as the Trustees may designate. Any person
may hold more than one office.
SECTION 3.2. Time and Terms of Election. The President, the Treasurer
and the Secretary shall be elected by the Trustees at their first meeting and
thereafter at the annual meeting of the Trustees, as provided in Section 4.2 of
the Declaration. Such officers shall hold office until the next
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annual meeting of the Trustees and until their successors shall have been duly
elected and qualified, and may be removed at any meeting by the affirmative
vote of a Majority of the Trustees. All other officers of the Trust may be
elected or appointed at any meeting of the Trustees. Such officers shall hold
office for any term, or indefinitely, as determined by the Trustees, and shall
be subject to removal, with or without cause, at any time by the Trustees.
SECTION 3.3. Resignation and Removal. Any officer may resign at any
time by giving written notice to the Trustees. Such resignation shall take
effect at the time specified therein, and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make
it effective. If the office of any officer or agent becomes vacant by reason
of death, resignation, retirement, disqualification, removal from office or
otherwise, the Trustees may choose a successor, who shall hold office for the
unexpired term in respect of which such vacancy occurred. Except to the extent
expressly provided in a written agreement with the Trust, no officer resigning
or removed shall have any right to any compensation for any period following
such resignation or removal, or any right to damage on account of such removal.
SECTION 3.4. Fidelity Bond. The Trustees may, in their discretion,
direct any officer appointed by them to furnish at the expense of the Trust a
fidelity bond approved by the Trustees, in such amount as the Trustees may
prescribe.
SECTION 3.5. President. The President shall be the chief executive
officer of the Trust and, subject to the supervision of the Trustees, shall
have general charge and supervision of the business, property and affairs of
the Trust and such other powers and duties as the Trustees may prescribe.
SECTION 3.6. Vice Presidents. In the absence or disability of the
President, the Vice President or, if there shall be more than one, the Vice
Presidents in the order of their seniority or as otherwise designated by the
Trustees, shall exercise all of the powers and duties of the President. The
Vice Presidents shall have the power to execute bonds, notes, mortgages and
other contracts, agreements and instruments in the name of the Trust, and shall
do and perform such other duties as the Trustees or the President shall direct.
SECTION 3.7. Treasurer and Assistant Treasurers. The Treasurer shall
be the chief financial officer of the Trust, and shall have the custody of the
Trust's funds and Securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and shall deposit
all moneys, and other valuable effects in the name and to the credit of the
Trust, in such depositories as may be designated by the Trustees, taking
proper vouchers for such disbursements, shall have such other duties and
powers as may be prescribed from time to time by the Trustees, and shall
render to the Trustees, whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the Trust. If no
Controller is elected, the Treasurer shall also have the duties and powers
of the Controller, as provided in these Bylaws. Any Assistant Treasurer shall
have such duties and powers as shall be prescribed from time to time by the
Trustees or the Treasurer, and shall be responsible to and shall report to the
Treasurer. In the absence or disability of the Treasurer, the Controller shall
have the powers and duties of the Treasurer. If no Controller is elected, the
Assistant Treasurer or, if there shall be more than one, the Assistant
Treasurers in the order of their seniority or as otherwise designated by the
Trustees or the Chairman, shall have the powers and duties of the Treasurer.
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SECTION 3.8. Controller and Assistant Controllers. If a Controller
is elected, the Controller shall be the chief accounting officer of the Trust
and shall be in charge of its books of account and accounting records and of
its accounting procedures, and shall have such duties and powers as are
commonly incident to the office of a controller, and such other duties and
powers as may be prescribed from time to time by the Trustees. The Controller
shall be responsible to and shall report to the Trustees, but in the
ordinary conduct of the Trust's business, shall be under the supervision of
the Treasurer. Any Assistant Controller shall have such duties and powers as
shall be prescribed from time to time by the Trustees or the Controller, and
shall be responsible to and shall report to the Controller. In the absence or
disability of the Controller, the Assistant Controller or, if there shall be
more than one, the Assistant Controllers in the order of their seniority or as
otherwise designated by the Trustees, shall have the powers and duties of the
Controller.
SECTION 3.9. Secretary and Assistant Secretaries. The
Secretary shall, if and to the extent requested by the Trustees, attend all
meetings of the Trustees, any Committee of the Trustees and/or the Shareholders
and record all votes and the minutes of proceedings in a book to be kept for
that purpose, shall give or cause to be given notice of all meetings of the
Trustees, any Committee of the Trustees, and of the Shareholders and shall
perform such other duties as may be prescribed by the Trustees. The Secretary,
or in his absence any Assistant Secretary, shall affix the Trust's seal to any
instrument requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary. The Secretary shall be
the custodian of the Share records and all other books, records and papers of
the Trust (other than financial) and shall see that all books, reports,
statements, certificates and other documents and records required by law are
properly kept and filed. In the absence or disability of the Secretary, the
Assistant Secretary or, if there shall be more than one, the Assistant
Secretaries in the order of their seniority or as otherwise designated by the
Trustees, shall have the powers and duties of the Secretary.
SECTION 3.10. Substitutions. In case of the absence or disability
of any officer of the Trust, or for any other reason that the Trustees may deem
sufficient, the Trustees may delegate, for the time being, the powers or
duties, or any of them, of such officer to any other officer, or to any
Trustee.
SECTION 3.11. Execution of Deeds, etc. Except as the Trustees may
generally or in particular cases otherwise authorize or direct, all deeds,
leases, transfers, contracts, proposals, bonds, notes, checks, drafts and other
obligations made, accepted or endorsed by the Trust shall be signed or endorsed
on behalf of the Trust by its properly authorized officers or agents as
provided in the Declaration.
SECTION 3.12. Power to Vote Securities. Unless otherwise ordered by
the Trustees, the Treasurer shall have full power and authority on behalf of
the Trust to give proxies for, and/or to attend and to act and to vote at, any
meeting of stockholders of any corporation in which the Trust may hold stock,
and at any such meeting the Treasurer or his proxy shall possess and may
exercise any and all rights and powers incident to the ownership of such stock
which, as the owner thereof, the Trust might have possessed and exercised if
present. The Trustees, by resolution from time to time, or, in the absence
thereof, the Treasurer, may confer like powers upon any other person or persons
as attorneys and proxies of the Trust.
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ARTICLE 4
COMMITTEES
SECTION 4.1. Power of Trustees to Designate Committees. The Trustees,
by vote of a Majority of the Trustees, may elect from their number an Executive
Committee and any other Committees and may delegate thereto some or all of
their powers except those which by law, by the Declaration or by these
Bylaws may not be delegated; provided, that an Executive Committee shall not
be empowered to elect the President, the Treasurer or the Secretary, to amend
the Bylaws, to exercise the powers of the Trustees under this Section 4.1 or
under Section 4.3 hereof, or to perform any act for which the action of a
Majority of the Trustees is required by law, by the Declaration or by these
Bylaws. The members of any such Committee shall serve at the pleasure of the
Trustees.
SECTION 4.2. Rules for Conduct of Committee Affairs. Except as
otherwise provided by the Trustees, each Committee elected or appointed
pursuant to this Article 4 may adopt such standing rules and regulations for
the conduct of its affairs as it may deem desirable, subject to review and
approval of such rules and regulations by the Trustees at the next succeeding
meeting of the Trustees, but in the absence of any such action or any contrary
provisions by the Trustees, the business of each Committee shall be conducted,
so far as practicable, in the same manner as provided herein and in the
Declaration for the Trustees.
SECTION 4.3. Trustees May Alter, Abolish, etc., Committees Trustees
may at any time alter or abolish any Committee, change membership of any
Committee, or revoke, rescind, waive or modify action of any Committee or the
authority of any Committee with respect to any matter or class of matters;
provided, that no such action shall impair the rights of any third parties.
SECTION 4.4. Minutes: Review by Trustees. Any Committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees.
ARTICLE 5
SEAL
The seal of the Trust, if any, may be affixed to any instrument, and
the seal and its attestation may be lithographed, engraved or otherwise printed
on any document with the same force and effect as if had been imprinted and
affixed manually in the same manner and with the same force and effect as if
done by a Delaware corporation. Unless otherwise required by the Trustees,
the seal shall not be necessary to be placed on, and its absence shall not
impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.
ARTICLE 6
SHARES
SECTION 6.1. Issuance of Shares. The Trustees may issue an unlimited
number of Classes of Shares of any or all Series either in certificated or
uncertificated form, they may issue certificates to the
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holders of a Class of Shares of a Series which was originally issued in
uncertificated form, and if they have issued Shares of any Series in
certificated form, they may at any time discontinue the issuance of Share
certificates for such Series and may, by written notice to such Shareholders of
such Series require the surrender of their Share certificates to the Trust for
cancellation, which surrender and cancellation shall not affect the ownership
of Shares for such Series.
SECTION 6.2. Uncertificated Shares. For any Class of Shares for which
the Trustees issue Shares without certificates, the Trust or the Transfer Agent
may either issue receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such Shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of such Shares as if they
had received certificates therefor and shall be held to have expressly assented
and agreed to the terms hereof and of the Declaration.
SECTION 6.3. Share Certificates. For any Class of Shares for which
the Trustees shall issue Share certificates, each Shareholder of such Class
shall be entitled to a certificate stating the number of Shares owned by him in
such form as shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by the President or a Vice President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Trust. Such signatures may be facsimiles if the certificate
is countersigned by a Transfer Agent, or by a Registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed
or whose facsimile signature has been placed on such certificate shall cease to
be such officer before such certificate is issued, it may be issued by the
Trust with the same effect as if he were such officer at the time of its issue.
SECTION 6.4. Lost, Stolen, etc., Certificates. If any
certificate for certificated Shares shall be lost, stolen, destroyed or
mutilated, the Trustees may authorize the issuance of a new certificate of the
same tenor and for the same number of Shares in lieu thereof. The Trustees
shall require the surrender of any mutilated certificate in respect of which a
new certificate is issued, and may, in their discretion, before the issuance of
a new certificate, require the owner of a lost, stolen or destroyed
certificate, or the owner's legal representative, to make an affidavit or
affirmation setting forth such facts as to the loss, theft or destruction as
they deem necessary, and to give the Trust a bond in such reasonable sum as the
Trustees direct, in order to indemnify the Trust.
ARTICLE 7
TRANSFER OF SHARES
SECTION 7.1. Transfer Agents, Registrars, etc. As approved in Section
5.2(e) of the Declaration, the Trustees shall have the authority to employ and
compensate such transfer agents and registrars with respect to the Shares of
the Trust as the Trustees shall deem necessary or desirable. In addition, the
Trustees shall have the power to employ and compensate such dividend dispersing
agents, warrant agents and agents for reinvestment of dividends as they shall
deem necessary or desirable. Any of such agents shall have such power and
authority as is delegated to any of them by the Trustees.
SECTION 7.2 Transfer of Shares. The Shares of the Trust shall be
transferable on the books of the Trust only upon delivery to the Trustees or a
transfer agent of the Trust of proper documentation as provided in Section
6.1(m) of the Declaration. The Trust, or its transfer agents, shall be
authorized to
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refuse any transfer unless and until presentation of such evidence as may be
reasonably required to show that the requested transfer is proper.
SECTION 7.3 Registered Shareholders. The Trust may deem and treat
the holder of record of any Shares the absolute owner thereof for all purposes
and shall not be required to take any notice of any right or claim of right of
any other person.
ARTICLE 8
AMENDMENTS
SECTION 8.1. Bylaws Subject to Amendment. These Bylaws may be
altered, amended or repealed, in whole or in part, at any time by vote of the
holders of a majority of the Shares issued, outstanding and entitled to vote.
The Trustees, by vote of a Majority of the Trustees (unless a greater vote is
required by Section 2.8 hereof), may alter, amend or repeal these Bylaws, in
whole or in part, including Bylaws adopted by the Shareholders, except with
respect to any provision hereof which by law, the Declaration or these Bylaws
requires action by the Shareholders. Bylaws adopted by the Trustees may be
altered, amended or repealed by the Shareholders.
SECTION 8.2. Notice of Proposal to Amend Bylaws Required. No proposal
to amend or repeal these Bylaws or to adopt new Bylaws shall be acted upon at a
meeting unless either (i) such proposal is stated in the notice or in the
waiver of notice, as the case may be, of the meeting of the Trustees or
Shareholders at which such action is taken, or (ii) all of the Trustees or
Shareholders, as the case may be, are present at such meeting and all agree to
consider such proposal without protesting the lack of notice.
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EXHIBIT 4
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as of
July 31, 1995, by and between the Van Kampen American Capital Reserve
Fund, a Delaware business trust formed under the laws of the State of Delaware
(the "AC Fund") and the Van Kampen American Capital Money Market Trust, a
Delaware business trust created under the laws of the State of Delaware (the
"VKM Trust") on behalf of its series, the Van Kampen American Capital Money
Market Fund (the "VKM Fund").
W I T N E S S E T H:
WHEREAS, on December 20, 1994, (the "AC Acquisition Date") The Van Kampen
Merritt Companies, Inc. ("TVKMC") acquired all of the issued and outstanding
shares of American Capital Management & Research, Inc. ("American Capital") and
subsequently changed the combined entity's name to Van Kampen American Capital,
Inc.;
WHEREAS, American Capital and TVKMC, through their affiliated companies,
sponsor and manage a number of registered investment companies; and
WHEREAS, Van Kampen American Capital Distributors, Inc., successor by merger
between Van Kampen Merritt Inc. and American Capital Marketing, Inc., acts as
the sponsor and principal underwriter for both the AC Fund and the VKM Fund;
WHEREAS, the VKM Trust was organized as a Massachusetts business trust, and
subsequently reorganized as a Delaware business trust, pursuant to an Agreement
and Declaration of Trust (the "Declaration of Trust") dated May 10, 1995,
pursuant to which it is authorized to issue an unlimited number of shares of
beneficial interest with par value of $0.01 per share, which at present have
been divided into different series, each series constituting a separate and
distinct series of the VKM Trust, including the VKM Fund;
WHEREAS, Van Kampen American Capital Investment Advisory Corp. (formerly, Van
Kampen Merritt Investment Advisory Corp.) ("Advisory Corp.") provides
investment advisory and administrative services to the VKM Fund;
WHEREAS, the AC Fund was organized as a Maryland corporation on March 28,
1974, and subsequently reorganized as a Delaware business trust, pursuant to an
Agreement and Declaration of Trust subsequently amended and restated as of June
20, 1995 and is authorized to issue an unlimited number of shares of
beneficial interest with par value of $0.01 per share;
WHEREAS, Van Kampen American Capital Asset Management, Inc. (formerly,
American Capital Asset Management, Inc.) ("VKAC Asset Management") provides
investment advisory and administrative services to the AC Fund;
WHEREAS, the Board of Trustees of each of the VKM Trust and the AC Fund have
determined that entering into this Agreement for the AC Fund to acquire the
assets and liabilities of the VKM Fund is in the best interests of the
shareholders of each respective fund; and
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WHEREAS, the parties intend that this transaction qualify as a reorganization
within the meaning as described in Section 368(a) of the Internal Revenue Code
of 1986, as amended, (the "Code");
NOW, THEREFORE, in consideration of the mutual promises contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. PLAN OF TRANSACTION.
A. TRANSFER OF ASSETS. Upon satisfaction of the conditions precedent set
forth in Sections 7 and 8 hereof, the VKM Trust will convey, transfer and
deliver to the AC Fund at the closing, provided for in Section 2 hereof, all of
the existing assets of the VKM Fund (including accrued interest to the Closing
Date) consisting of nondefaulted, liquid, U.S. dollar denominated money market
securities, due bills, cash and other marketable securities acceptable to the
AC Fund as more fully set forth on Schedule 1 hereto, and as amended from time
to time prior to the Closing Date (as defined below), free and clear of all
liens, encumbrances and claims whatsoever (the assets so transferred
collectively being referred to as the "Assets").
B. CONSIDERATION. In consideration thereof, the AC Fund agrees that on the
Closing Date the AC Fund will (i) deliver to the VKM Trust, in exchange for
such Assets, full and fractional Class A and Class B shares of the AC Fund
having a net asset value per share calculated as provided in Section 3A hereof,
in an amount equal to the aggregate dollar value of the Assets determined
pursuant to Section 3A of this Agreement net of any liabilities of the VKM Fund
described in Secion 3E hereof (the "Liabilities") (collectively, the "AC Fund
Shares") and (ii) assume all of the VKM Fund's Liabilities. All AC Fund Shares
delivered to the VKM Trust in exchange for such Assets shall be delivered at
net asset value without sales load, commission or other transactional fee being
imposed.
2. CLOSING OF THE TRANSACTION.
CLOSING DATE. The closing shall occur within fifteen (15) business days
after the later of receipt of all necessary regulatory approvals and the final
adjournment of the meeting of shareholders of the VKM Fund at which this
Agreement will be considered and approved or such later date as soon as
practicable thereafter, as the parties may mutually agree (the "Closing Date").
On the Closing Date, the AC Fund shall deliver to the VKM Trust the AC Fund
Shares in the amount determined pursuant to Section 1B hereof and the VKM Trust
thereafter shall, in order to effect the distribution of such shares to the VKM
Fund stockholders, instruct the AC Fund to register the pro rata interest in
the AC Fund Shares (in full and fractional shares) of each of the holders of
record of shares of the VKM Fund in accordance with their holdings of either
Class A or Class B shares and shall provide as part of such instruction a
complete and updated list of such holders (including addresses and taxpayer
identification numbers), and the AC Fund agrees promptly to comply with said
instruction. The AC Fund shall have no obligation to inquire as to the
validity, propriety or correctness of such instruction, but shall assume that
such instruction is valid, proper and correct.
3. PROCEDURE FOR REORGANIZATION.
A. VALUATION. The value of the Assets and Liabilities of the VKM Fund to be
transferred and assumed, respectively, by the AC Fund shall be computed as of
the Closing Date, in the manner set forth in the most recent Prospectus and
Statement of Additional Information of the AC Fund (collectively, the "AC Fund
Prospectus"), copies of which have been delivered to the VKM Trust.
B. DELIVERY OF FUND ASSETS. The Assets shall be delivered to State Street
Bank and Trust Company, 225 Franklin Street, Post Office Box 1713, Boston,
Massachusetts 02105-1713, as custodian for the AC Fund (the "Custodian") for
the benefit of the AC Fund, duly endorsed in proper form for transfer in such
condition as to constitute a good delivery thereof, free and clear of all
liens, encumbrances and claims whatsoever, in accordance with the custom of
brokers, and shall be accompanied by all necessary state stock transfer stamps,
the cost of which shall be borne by the VKM Fund.
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C. FAILURE TO DELIVER SECURITIES. If the VKM Trust is unable to make
delivery pursuant to Section 3B hereof to the Custodian of any of the VKM
Fund's securities for the reason that any of such securities purchased by the
AC Fund have not yet been delivered to it by the VKM Fund's broker or brokers,
then, in lieu of such delivery, the VKM Trust shall deliver to the Custodian,
with respect to said securities, executed copies of an agreement of assignment
and due bills executed on behalf of said broker or brokers, together with such
other documents as may be required by the AC Fund or Custodian, including
brokers' confirmation slips.
D. SHAREHOLDER ACCOUNTS. The AC Fund, in order to assist the VKM Trust in
the distribution of the AC Fund Shares to the VKM Fund shareholders after
delivery of the AC Fund Shares to the VKM Trust, will establish pursuant to the
request of the VKM Trust an open account with the AC Fund for each shareholder
of the VKM Fund and, upon request by the VKM Trust, shall transfer to such
account the exact number of full and fractional shares of the AC Fund then held
by the VKM Trust specified in the instruction provided pursuant to Section 2
hereof. The AC Fund is not required to issue certificates representing AC Fund
Shares unless requested to do so by a shareholder. Upon liquidation or
dissolution of the VKM Fund, certificates representing shares of beneficial
interest of the VKM Fund shall become null and void.
E. LIABILITIES. The Liabilities shall include all of VKM Fund's
liabilities, debts, obligations, and duties of whatever kind or nature, whether
absolute, accrued, contingent, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable at the Closing Date,
and whether or not specifically referred to in this Agreement.
F. EXPENSES. Whether or not the transactions contemplated herein are
consummated VKAC Asset Management agrees to pay (i) for the reasonable outside
expenses for the transactions contemplated herein; including, but not by way of
limitation, the preparation of the AC Fund's Registration Statement on Form
N-14 (the "Registration Statement") and the solicitation of VKM Fund
shareholder proxies; (ii) VKM Trust's counsel's reasonable attorney's fees,
which fees shall be payable pursuant to receipt of an itemized statement, and
(iii) the cost of rendering the tax opinion, more fully referenced in Section
7F below.
G. DISSOLUTION. As soon as practicable after the Closing Date but in no
event later than one year after the Closing Date, the VKM Trust shall
voluntarily dissolve and completely liquidate the VKM Fund, by taking, in
accordance with the Delaware Business Trust Law and Federal securities laws,
all steps as shall be necessary and proper to effect a complete liquidation and
dissolution of the VKM Fund. Immediately after the Closing Date, the stock
transfer books relating to the VKM Fund shall be closed and no transfer of
shares shall thereafter be made on such books.
4. VKM TRUST'S REPRESENTATIONS AND WARRANTIES.
The VKM Trust, on behalf of the VKM Fund, hereby represents and warrants to
the AC Fund which representations and warranties are true and correct on the
date hereof, and agrees with the AC Fund that:
A. ORGANIZATION. The VKM Trust, a Delaware Business Trust duly formed and
in good standing under the laws of the State of Delaware and is duly authorized
to transact business in the State of Delaware. The VKM Fund is a separate
series of the VKM Trust duly designated in accordance with the applicable
provisions of the Declaration of Trust. The VKM Trust and the VKM Fund are
qualified to do business in all jurisdictions in which they are required to be
so qualified, except jurisdictions in which the failure to so qualify would not
have a material adverse effect on either the VKM Trust or VKM Fund. The VKM
Trust has all material federal, state and local authorizations necessary to own
on behalf of the VKM Fund all of the properties and assets allocated to the VKM
Fund and to carry on its business and the business of the VKM Fund as now being
conducted, except authorizations which the failure to so obtain would not have
a material adverse effect on the VKM Trust or the VKM Fund.
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B. REGISTRATION. The VKM Trust is registered under the Investment Company
Act of 1940, as amended (the "1940 Act") as an open-end, diversified
management company and such registration has not been revoked or rescinded.
The VKM Fund is duly designated as a series of the VKM Trust pursuant to the
terms of the Declaration of Trust. VKM Trust is in compliance in all material
respects with the 1940 Act and the rules and regulations thereunder with
respect to its activities and those undertaken on behalf of the VKM Fund.
All of the outstanding shares of beneficial interest of the VKM Fund have been
duly authorized and are validly issued, fully paid and non-assessable and not
subject to pre-emptive or dissenters' rights.
C. AUDITED FINANCIAL STATEMENTS. The statement of assets and liabilities
and the portfolio of investments and the related statements of operations and
changes in net assets of the VKM Fund audited as of and for the year ended June
30, 1994, and, as soon as reasonably available, same for the year ended June 30,
1995, true and complete copies of which have been heretofore furnished to the
AC Fund, fairly represent the financial condition and the results of operations
of the VKM Fund as of and for their respective dates and periods in conformity
with generally accepted accounting principles applied on a consistent basis
during the periods involved.
D. FINANCIAL STATEMENTS. The VKM Trust shall furnish to the AC Fund (i) an
unaudited statement of assets and liabilities and the portfolio of investments
and the related statements of operations and changes in net assets of the VKM
Fund for the period ended June 30, 1995; and (ii) within five (5) business days
after the Closing Date an unaudited statement of assets and liabilities and the
portfolio of investments and the related statements of operations and changes
in net assets as of and for the interim period ending on the Closing Date; such
financial statements will represent fairly the financial position and portfolio
of investments and the results of the VKM Fund's operations as of, and for the
period ending on, the dates of such statements in conformity with generally
accepted accounting principles applied on a consistent basis during the periods
involved and the results of its operations and changes in financial position
for the periods then ended; and such financial statements shall be certified by
the Treasurer of the VKM Trust as complying with the requirements hereof.
E. CONTINGENT LIABILITIES. There are, and as of the Closing Date will be, no
contingent Liabilities of the VKM Fund not disclosed in the financial
statements delivered pursuant to Sections 4C and 4D which would materially
affect the VKM Fund's financial condition, and there are no legal,
administrative, or other proceedings pending or, to its knowledge, threatened
against the VKM Trust or the VKM Fund which would, if adversely determined,
materially affect the VKM Fund's financial condition. All Liabilities were
incurred by the VKM Fund in the ordinary course of its business.
F. MATERIAL AGREEMENTS. The VKM Trust is in compliance as to the VKM Fund
with all material agreements, rules, laws, statutes, regulations and
administrative orders affecting the VKM Fund's operations or its assets; and
except as referred to in the VKM Fund's Prospectus and Statement of Additional
Information, there are no material agreements outstanding relating to the VKM
Fund to which the VKM Trust is a party.
G. STATEMENT OF EARNINGS. As promptly as practicable, but in any case no
later than 30 calendar days after the Closing Date, KPMG Peat Marwick L.L.P.,
auditors for the VKM Trust, shall furnish the AC Fund with a statement of the
earnings and profits of the VKM Fund within the meaning of the Code as of the
Closing Date.
H. RESTRICTED SECURITIES. None of the securities comprising the assets of
the VKM Fund at the date hereof are, or on the Closing Date or any subsequent
delivery date will be, "restricted securities" under the Securities Act of
1933, (the "Securities Act") or the rules and regulations of the Securities and
Exchange Commission (the "SEC") thereunder, or will be securities for which
market quotations are not readily available for purposes of Section 2(a)(41)
under the 1940 Act.
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I. TAX RETURNS. At the date hereof and on the Closing Date, all Federal
and other material tax returns and reports of the VKM Fund required by law to
have been filed by such dates shall have been filed, and all Federal and other
taxes shown thereon shall have been paid so far as due, or provision shall have
been made for the payment thereof, and to the best of VKM Trust's knowledge no
such return is currently under audit and no assessment has been asserted with
respect to any such return.
J. CORPORATE AUTHORITY. The VKM Trust has the necessary power under its
Declaration of Trust to enter into this Agreement and to consummate the
transactions contemplated herein. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein
have been duly authorized by the VKM Trust's Board of Trustees, and except for
obtaining approval of the holders of the shares of beneficial interest of the
VKM Fund, no other corporate acts or proceedings by the VKM Trust or the VKM
Fund are necessary to authorize this Agreement and the transactions
contemplated herein. This Agreement has been duly executed and delivered by
VKM Trust and constitutes a legal, valid and binding obligation of VKM Trust
enforceable in accordance with its terms subject to bankruptcy laws and other
equitable remedies.
K. NO VIOLATION; CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement by the VKM Trust does not and will not (i)
result in a material violation of any provision of the Declaration of Trust of
the VKM Trust or the Designation of Series of the VKM Fund, or any amendment
thereto, (ii) result in a material violation of any statute, law, judgment,
writ, decree, order, regulation or rule of any court or governmental authority
applicable to VKM Trust, (iii) result in a material violation or breach of, or
constitute a default under any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument or obligation to which the VKM Trust
is subject, or (iv) result in the creation or imposition or any lien, charge or
encumbrance upon any property or assets of the VKM Trust. Except as set forth
in Schedule 2 to this Agreement, (i) no consent, approval, authorization, order
or filing with or notice to any court or governmental authority or agency is
required for the consummation by the VKM Trust of the transactions contemplated
by this Agreement and (ii) no consent of or notice to any third party or entity
is required for the consummation by the VKM Trust of the transactions
contemplated by this Agreement.
L. ABSENCE OF CHANGES. From the date of this Agreement through the Closing
Date, there shall not have been:
(1) any change in the business, results of operations, assets, or financial
condition or the manner of conducting the business of the VKM Fund, other than
changes in the ordinary course of its business, or any pending or threatened
litigation, which has had or may have a material adverse effect on such
business, results of operations, assets or financial condition;
(2) issued any option to purchase or other right to acquire shares of the
VKM Fund granted by the VKM Trust to any person other than subscriptions to
purchase shares at net asset value in accordance with terms in the Prospectus
for the VKM Fund;
(3) any entering into, amendment or termination of any contract or
agreement with respect to the VKM Fund by the VKM Trust, except as otherwise
contemplated by this Agreement;
(4) any indebtedness incurred, other than in the ordinary course of
business, by the VKM Fund for borrowed money or any commitment to borrow money
entered into by the VKM Fund or the VKM Trust on behalf of the VKM Fund;
(5) any amendment of the Declaration of Trust of the VKM Trust or of the
Designation of Series of the VKM Fund; or
(6) any grant or imposition of any lien, claim, charge or encumbrance
(other than encumbrances arising in the ordinary course of business with
respect to covered options) upon any asset of the VKM Fund other than a lien
for taxes not yet due and payable.
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M. TITLE. On the Closing Date, the VKM Fund will have good and marketable
title to the Assets, free and clear of all liens, mortgages, pledges,
encumbrances, charges, claims and equities whatsoever, other than a lien for
taxes not yet due and payable and full right, power and authority to sell,
assign, transfer and deliver such Assets; upon delivery of such Assets, the AC
Fund will receive good and marketable title to such Assets, free and clear of
all liens, mortgages, pledges, encumbrances, charges, claims and equities other
than a lien for taxes not yet due and payable.
N. PROXY STATEMENT. The VKM Trust's Proxy Statement, at the time of delivery
by the VKM Trust to its shareholders in connection with a special meeting of
shareholders to approve this transaction, and the VKM Trust's Prospectus and
Statement of Additional Information with respect to the VKM Fund on the forms
incorporated by reference into such Proxy Statement and as of their respective
dates (collectively, the "VKM Trust's Proxy Statement/Prospectus"), and at the
time the Registration Statement becomes effective, the Registration Statement
insofar as it relates to the VKM Trust and the VKM Fund and each of them at all
times subsequent thereto and including the Closing Date, as amended or as
supplemented if it shall have been amended or supplemented, conform and will
conform, in all material respects, to the applicable requirements of the
applicable Federal and state securities laws and the rules and regulations of
the SEC thereunder, and do not and will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representations or
warranties in this Section 4N apply to statements or omissions made in reliance
upon and in conformity with written information concerning the AC Fund or their
affiliates furnished to VKM Trust by the AC Fund.
O. BROKERS. There are no brokers or finders fees payable by VKM Trust or
VKM Fund in connection with the transactions provided for herein.
P. TAX QUALIFICATION. The VKM Fund has qualified as a regulated investment
company within the meaning of Section 851 of the Code for each of its taxable
years; and has satisfied the distribution requirements imposed by Section 852
of the Code for each of its taxable years.
Q. FAIR MARKET VALUE The fair market value on a going concern basis of the
Assets will equal or exceed the Liabilities to be assumed by the AC Fund and
those to which the Assets are subject.
R. VKM TRUST'S LIABILITIES. Except as otherwise provided for herein, the
VKM Trust shall use reasonable efforts, consistent with its ordinary operating
procedures, to repay in full any indebtedness for borrowed money for the
account of the VKM Fund and have discharged or reserved against all of the VKM
Fund's known debts, liabilities and obligations including expenses, costs and
charges whether absolute or contingent, accrued or unaccrued.
5. THE AC FUND'S REPRESENTATIONS AND WARRANTIES.
The AC Fund, hereby represents and warrants to the VKM Trust, which
representations and warranties are true and correct on the date hereof and
agrees with the VKM Trust that:
A. ORGANIZATION. The AC Fund is a Delaware Business Trust duly formed and
in good standing under the laws of the State of Delaware and is duly authorized
to transact business in the State of Delaware. The AC Fund is qualified to do
business as a foreign corporation in all jurisdictions in which it is required
to be so qualified, except jurisdictions in which the failure to so qualify
would not have a material adverse effect on the AC Fund. The AC Fund has all
material federal, state and local authorization necessary to own all of its
properties and assets and to carry on its business and the business thereof as
now being conducted, except authorizations which the failure to so obtain would
not have a material adverse effect on the AC Fund.
B. REGISTRATION. The AC Fund is registered under the 1940 Act as an
open-end, non-diversified management company and; such registration has not
been revoked or rescinded. The AC Fund is in compliance in all material
respects with the 1940 Act and the rules and regulations thereunder. All of
the outstanding shares of the AC Fund have been duly authorized and are validly
issued, fully paid and non-assessable and not subject to pre-emptive dissenters'
rights.
C. AUDITED FINANCIAL STATEMENTS. The statement of assets and liabilities
and the portfolio of investments and the related statements of operations and
changes in net assets of the AC Fund audited
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as of and for the year ended May 31, 1995, true and complete copies of which
have been heretofore furnished to the VKM Trust fairly represent the financial
condition and the results of operations of the AC Fund as of and for their
respective dates and periods in conformity with generally accepted accounting
principles applied on a consistent basis during the periods involved.
D. FINANCIAL STATEMENTS. The AC Fund shall furnish to the VKM Trust (i) an
unaudited statement of assets and liabilities and the portfolio of investments
and the related statements of operations and changes in net assets of the AC
Fund for the period ended June 30, 1995, and (ii) within five (5) business
days after the Closing Date, an unaudited statement of assets and liabilities
and the portfolio of investments and the related statements of operations and
changes in net assets as of and for the interim period ending on the Closing
Date; such financial statements will represent fairly the financial position
and portfolio of investments of the AC Fund and the results of its operations
as of, and for the period ending on, the dates of such statements in conformity
with generally accepted accounting principles applied on a consistent basis
during the period involved and fairly present the financial position of the AC
Fund as at the dates thereof and the results of its operations and changes in
financial position for the periods then ended; and such financial statements
shall be certified by the Treasurer of the AC Fund as complying with the
requirements hereof.
E. CONTINGENT LIABILITIES. There are no contingent liabilities of the AC
Fund not disclosed in the financial statements delivered pursuant to Sections
5C and 5D which would materially affect the AC Fund's financial condition, and
there are no legal, administrative, or other proceedings pending or, to its
knowledge, threatened against the AC Fund which would, if adversely determined,
materially affect the AC Fund's financial condition.
F. MATERIAL AGREEMENTS. The AC Fund is in compliance with all material
agreements, rules, laws, statutes, regulations and administrative orders
affecting its operations or its assets; and except as referred to in the AC
Funds Prospectus there are no material agreements outstanding to which the AC
Fund is a party.
G. TAX RETURNS. At the date hereof and on the Closing Date, all Federal and
other material tax returns and reports of the AC Fund required by laws to have
been filed by such dates shall have been filed, and all Federal and other taxes
shall have been paid so far as due, or provision shall have been made for the
payment thereof, and to the best of the AC Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to any
such return.
H. CORPORATE AUTHORITY. The AC Fund has the necessary power to enter into
this Agreement and to consummate the transactions contemplated herein. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein have been duly authorized by the AC Fund's
Board of Trustees, no other corporate acts or proceedings by the AC Fund are
necessary to authorize this Agreement and the transactions contemplated herein.
This Agreement has been duly executed and delivered by the AC Fund and
constitutes a valid and binding obligation of the AC Fund enforceable in
accordance with its terms subject to bankruptcy laws and other equitable
remedies.
I. NO VIOLATION; CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement by the AC Fund does not and will not (i) result
in a material violation of any provision of the Declaration of Trust of the AC
Fund, or any amendment thereto, (ii) result in a material violation of any
statute, law, judgment, writ, decree, order, regulation or rule of any court or
governmental authority applicable to the AC Fund or (iii) result in a violation
or breach of, or constitute a default under, or result in the creation or
imposition or any lien, charge or encumbrance upon any property or assets of
the AC Fund pursuant to any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument or obligation to which the AC Fund
is subject. Except as set forth in Schedule 3 to this Agreement, (i) no
consent, approval, authorization, order of or filing with notice to any court or
governmental authority or agency is required for the consummation by the AC
Fund of the transactions contemplated by this Agreement and (ii) no consent of
or notice to any third party or entity is required for the consummation by the
AC Fund of the transactions contemplated by this Agreement.
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<PAGE> 8
J. ABSENCE OF PROCEEDINGS. There are no legal, administrative or other
proceedings pending or, to its knowledge, threatened against the AC Fund which
would materially affect its financial condition.
K. SHARES OF THE AC FUND: REGISTRATION. The AC Fund Shares to be issued
pursuant to Section 1 hereof will be duly registered under the Securities Act
and all applicable state securities laws.
L. SHARES OF THE AC FUND: AUTHORIZATION. The shares of the AC Fund to be
issued pursuant to Section 1 hereof have been duly authorized and, when issued
in accordance with this Agreement, will be validly issued and fully paid and
non-assessable by the AC Fund and conform in all material respects to the
description thereof contained in the AC Fund's Prospectus furnished to the VKM
Trust.
M. ABSENCE OF CHANGES. From the date hereof through the Closing Date, there
shall not have been any change in the business, results of operations, assets
or financial condition or the manner of conducting the business of the AC Fund,
other than changes in the ordinary course of its business, which has had a
material adverse effect on such business, results of operations, assets or
financial condition.
N. REGISTRATION STATEMENT. The Registration Statement and the Prospectus
contained therein filed on Form N-14, the ("Registration Statement"), as of the
effective date of the Registration Statement, and at all times subsequent
thereto up to and including the Closing Date, as amended or as supplemented if
they shall have been amended or supplemented, will conform, in all material
respects, to the applicable requirements of the applicable Federal securities
laws and the rules and regulations of the SEC thereunder, and will not include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representations or warranties in this Section apply to statements or
omissions made in reliance upon and in conformity with written information
concerning the VKM Trust or the VKM Fund furnished to the AC Fund by the VKM
Trust.
O. TAX QUALIFICATION. The AC Fund has qualified as a regulated investment
company within the meaning of Section 851 of the Code for each of its taxable
years; and has satisfied the distribution requirements imposed by Section 852
of the Code for each of its taxable years. For purposes of this Section, any
reference to the AC Fund shall include its predecessors, a Maryland corporation
organized on March 28, 1974 and subsequently reorganized by merger with and
into the Fund.
6. COVENANTS.
During the period from the date of this Agreement and continuing until the
Closing Date the VKM Trust and AC Fund each agrees that (except as expressly
contemplated or permitted by this Agreement):
A. OTHER ACTIONS. The VKM Fund shall operate only in the ordinary course of
business consistent with prior practice. No party shall take any action that
would, or reasonably would be expected to, result in any of its representations
and warranties set forth in this Agreement being or becoming untrue in any
material respect.
B. GOVERNMENT FILINGS; CONSENTS. The VKM Trust and the AC Fund shall file
all reports required to be filed by the VKM Trust and the AC Fund with the SEC
between the date of this Agreement and the Closing Date and shall deliver to the
other party copies of all such reports promptly after the same are filed.
Except where prohibited by applicable statutes and regulations, each party
shall promptly provide the other (or its counsel) with copies of all other
filings made by such party with any state, local or federal government agency
or entity in connection with this Agreement or the transactions contemplated
hereby. Each of the VKM Trust and the AC Fund shall use all reasonable
efforts to obtain all consents, approvals, and authorizations required in
connection with the consummation of the transactions contemplated by this
Agreement and to make all necessary filings with the Secretary of State of the
State of Delaware.
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C. PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY
STATEMENT/PROSPECTUS. In connection with the Registration Statement and the
VKM Fund's Proxy Statement/Prospectus, each party hereto will cooperate with
the other and furnish to the other the information relating to the VKM Trust,
VKM Fund or the AC Fund, as the case may be, required by the Securities Act or
the Exchange Act and the rules and regulations thereunder, as the case may be,
to be set forth in the Registration Statement or the Proxy
Statement/Prospectus, as the case may be. The VKM Trust shall promptly prepare
and file with the SEC the Proxy Statement/Prospectus and the AC Fund shall
promptly prepare and file with the SEC the Registration Statement, in which the
Proxy Statement/Prospectus will be included as a prospectus. In connection
with the Registration Statement, insofar as it relates to the VKM Trust and its
affiliated persons, the AC Fund shall only include such information as is
approved by the VKM Trust for use in the Registration Statement. The AC Fund
shall not amend or supplement any such information regarding the VKM Trust and
such affiliates without the prior written consent of the VKM Trust which
consent shall not be unreasonably withheld. The AC Fund shall promptly notify
and provide the VKM Trust with copies of all amendments or supplements filed
with respect to the Registration Statement. The AC Fund shall use all
reasonable efforts to have the Registration Statement declared effective under
the Securities Act as promptly as practicable after such filing. The AC Fund
shall also take any action (other than qualifying to do business in any
jurisdiction in which it is now not so qualified) required to be taken under
any applicable state securities laws in connection with the issuance of the AC
Fund's shares in the transactions contemplated by this Agreement, and the AC
Fund shall furnish all information concerning the VKM Fund and the holders of
the AC Fund's shares of beneficial interest as may be reasonably requested in
connection with any such action.
D. ACCESS TO INFORMATION. During the period prior to the Closing Date, the
VKM Trust shall make available to the AC Fund a copy of each report, schedule,
registration statement and other document (the "Documents") filed or received
by it during such period pursuant to the requirements of Federal or state
securities laws or Federal or state banking laws (other than Documents which
such party is not permitted to disclose under applicable law or which are not
relevant to the VKM Fund). During the period prior to the Closing Date, the AC
Fund shall make available to the VKM Fund each Document pertaining to the
transactions contemplated hereby filed or received by it during such period
pursuant to Federal or state securities laws or Federal or state banking laws
(other than Documents which such party is not permitted to disclose under
applicable law).
E. SHAREHOLDERS MEETING. The VKM Trust shall call a meeting of the VKM Fund
shareholders to be held as promptly as practicable for the purpose of voting
upon the approval of this Agreement and the transactions contemplated herein,
and shall furnish a copy of the Proxy Statement/Prospectus and form of proxy to
each shareholder of the VKM Fund as of the record date for such meeting of
shareholders. The VKM Trust's Board of Trustees shall recommend to the VKM Fund
shareholders approval of this Agreement and the transactions contemplated
herein, subject to fiduciary obligations under applicable law.
F. COORDINATION OF PORTFOLIOS. The VKM Trust and AC Fund, covenant and
agree to coordinate the respective portfolios of the VKM Fund and AC Fund from
the date of the Agreement up to and including the Closing Date in order that at
Closing, when the Assets are added to the AC Fund's portfolio, the resulting
portfolio will meet the AC Fund's investment objective, policies and
restrictions, as set forth in the AC Fund Prospectus, a copy of which has been
delivered to VKM Trust.
G. DISTRIBUTION OF THE SHARES. At Closing the VKM Trust covenants that it
shall cause to be distributed the AC Fund Shares in the proper pro rata amount
for the benefit of the VKM Fund's shareholders and such that neither the VKM
Trust nor the VKM Fund shall continue to hold amounts of said shares so as to
cause a violation of Section 12(d)(1) of the 1940 Act. VKM Trust covenants
further that, pursuant to Section 3G, it shall liquidate and dissolve the VKM
Fund as promptly as practicable after the Closing Date. The VKM Trust
covenants to use all reasonable efforts to cooperate with the AC Fund and the
AC Fund's transfer agent in the distribution of said shares.
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<PAGE> 10
H. BROKERS OR FINDERS. Except as disclosed in writing to the other party
prior to the date hereof, each of the VKM Trust and the AC Fund represents that
no agent, broker, investment banker, financial advisor or other firm or person
is or will be entitled to any broker's or finder's fee or any other commission
or similar fee in connection with any of the transactions contemplated by this
Agreement, and each party shall hold the other harmless from and against any
all claims, liabilities or obligations with respect to any such fees,
commissions or expenses asserted by any person to be due or payable in
connection with any of the transactions contemplated by this Agreement on the
basis of any act or statement alleged to have been made by such first party or
its affiliate.
I. ADDITIONAL AGREEMENTS. In case at any time after the Closing Date any
further action is necessary or desirable in order to carry out the purposes of
this Agreement, the proper officers and trustees of each party to
this Agreement shall take all such necessary action.
J. PUBLIC ANNOUNCEMENTS. For a period of time from the date of this
Agreement to the Closing Date, the VKM Trust and the AC Fund will consult with
each other before issuing any press releases or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
herein and shall not issue any press release or make any public statement prior
to such consultation, except as may be required by law or the rules of any
national securities exchange on which such party's securities are traded.
K. TAX STATUS OF REORGANIZATION. The intention of the parties is that the
transaction will qualify as a reorganization within the meaning of Section
368(a) of the Code. Neither the VKM Trust, the VKM Fund nor the AC Fund shall
take any action, or cause any action to be taken (including, without
limitation, the filing of any tax return) that is inconsistent with such
treatment or results in the failure of the transaction to qualify as a
reorganization within meaning of Section 368(a) of the Code. At or prior to
the Closing Date, the VKM Trust, the VKM Fund and the AC Fund will take such
action, or cause such action to be taken, as is reasonably necessary to enable
Skadden, Arps, Slate, Meagher & Flom, counsel to the VKM Trust and the VKM
Fund, to render the tax opinion required herein.
L. DECLARATION OF DIVIDEND. At or immediately prior to the Closing Date, the
VKM Fund shall declare and pay to its stockholders a dividend or other
distribution in an amount large enough so that it will have distributed in an
substantially all (and in any event not less than 98%) of its investment
company taxable income (computed without regard to any deduction for dividends
paid) and realized net capital gain, if any, for the current taxable year
through the Closing Date.
7. CONDITIONS TO OBLIGATIONS OF THE VKM TRUST
The obligations of the VKM Trust hereunder with respect to the consummation
of the Reorganization are subject to the satisfaction, or written waiver by the
VKM Trust, of the following conditions:
A. SHAREHOLDER APPROVAL. This Agreement and the transactions contemplated
herein shall have been approved by the affirmative vote of the holders of a
majority of the shares of beneficial interest of the VKM Fund present in person
or by proxy at a meeting of said shareholders in which a quorum is constituted.
B. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Each of the representations
and warranties of the AC Fund contained herein shall be true in all material
respects as of the Closing Date, and as of the Closing Date there shall have
been no material adverse change in the financial condition, results of
operations, business properties or assets of the AC Fund since May 31, 1995, and
the VKM Trust shall have received a certificate of the President or Vice
President of the AC Fund satisfactory in form and
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substance to the VKM Trust so stating. The AC Fund shall have performed and
complied in all material respects with all agreements, obligations and
covenants required by this Agreement to be so performed or complied with by it
on or prior to the Closing Date.
C. REGISTRATION STATEMENT EFFECTIVE. The Registration Statement shall have
become effective and no stop orders under the Securities Act pertaining thereto
shall have been issued.
D. REGULATORY APPROVAL. All necessary approvals, registrations, and
exemptions under federal and state securities laws shall have been obtained.
E. NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the transactions contemplated by
this Agreement shall be in effect, nor shall any proceeding by any state, local
or federal government agency or entity asking any of the foregoing be pending.
There shall not have been any action taken, or any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the transactions
contemplated by this Agreement, which makes the consummation of the
transactions contemplated by this Agreement illegal or which has a material
adverse affect on the business operations of the AC Fund.
F. TAX OPINION. The VKM Trust and the VKM Fund shall have obtained an
opinion from Skadden, Arps, Slate, Meagher & Flom, counsel for the VKM Trust
and the VKM Fund, dated as of the Closing Date, addressed to the VKM Trust and
the VKM Fund, that the consummation of the transactions set forth in this
Agreement comply with the requirements of a reorganization as described in
Section 368(a) of the Code substantially in the form attached as Annex A.
G. OPINION OF COUNSEL. The VKM Trust shall have received the opinion of
O'Melveny & Myers, counsel for AC Fund, dated as of the Closing Date, addressed
to the VKM Trust and VKM Fund, substantially in the form and to the effect
that: (i) the AC Fund is duly formed and existing as a trust under the laws of
the State of Delaware; (ii) the AC Fund is registered as an open-end,
diversified management company under the 1940 Act; (iii) this Agreement and
the reorganization provided for herein and the execution of this Agreement have
been duly authorized by all necessary trust action of the AC Fund and this
Agreement has been duly executed and delivered by the AC Fund and (assuming the
Agreement is a valid and binding obligation of the other parties thereto) is a
valid and binding obligation of the AC Fund; (iv) neither the execution or
delivery by the AC Fund of this Agreement nor the consummation by the AC Fund
of the transactions contemplated thereby contravene the AC Fund's Declaration
of Trust or, to their knowledge, violate any provision of any statute, or any
published regulation or any judgment or order disclosed to them by the AC Fund
as being applicable to the AC Fund; (v) to their knowledge based solely on the
certificate of an appropriate officer of the AC Fund attached there is no
pending, or threatened litigation involving the AC Fund except as disclosed
therein (vi) the AC Fund's Shares being issued pursuant to this Agreement have
been duly authorized and upon issuance thereof in accordance with this
Agreement will be validly issued, fully paid and non-assessable; (vii) except
as to financial statements and schedules and other financial and statistical
data included or incorporated by reference therein and subject to usual and
customary qualifications with respect to Rule 10b-5 type opinions as of the
effective date of the Registration Statement filed pursuant to the Agreement,
the portions thereof pertaining to the AC Fund comply as to form in all
material respects with their requirements of the Securities Act, the Securities
Exchange Act and the 1940 Act and the rules and regulations of the Commission
thereunder and no facts have come to counsel's attention which cause them to
believe that as of the effectiveness of the portions of the Registration
Statement applicable to the AC Fund, the Registration Statement contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; and (viii) to their knowledge and subject to the qualifications set
forth below, the execution and delivery by the AC Fund of the Agreement and the
consummation of the transactions therein contemplated do not require, under
11
<PAGE> 12
the laws of the State of Delaware, or the Federal laws of the United
States, the consent, approval, authorization, registration, qualification or
order of, or filing with, any court or governmental agency or body (except such
as have been obtained under the Securities Act, the 1940 Act or the rules and
regulations thereunder.) Counsel need express no opinion, however, as to any
such consent, approval, authorization, registration, qualification, order or
filing (a) which may be required as a result of the involvement of other
parties to the Agreement in the transactions contemplated by the Agreement
because of their legal or regulatory status or because of any other facts
specifically pertaining to them; (b) the absence of which does not deprive the
VKM Trust or VKM Fund of any material benefit under such agreements; or (c)
which can be readily obtained without significant delay or expense to the VKM
Trust or VKM Fund, without loss to the VKM Trust or VKM Fund of any material
benefit under the Agreement and without any material adverse effect on them
during the period such consent, approval authorization, registration,
qualification or order was obtained. The foregoing opinion relates only to
consents, approvals, authorizations, registrations, qualifications, orders or
fillings under (a) laws which are specifically referred to in the opinion, (b)
laws of the State of Delaware and the Federal laws of the United States of
America which, in our experience, are normally applicable to transactions of
the type provided for in the Agreement and (c) court orders and judgments
disclosed to them by the AC Fund in connection with the opinion. Counsel's
opinion as to the validity and binding nature of this Agreement may be limited
to the present law of the State of Delaware. Counsel's other opinions may
be limited to the present Federal law of the United States and the present
general corporation and trust laws of the State of Delaware.
H. OFFICER CERTIFICATES. The VKM Trust shall have received a certificate of
an authorized officer of the AC Fund, dated as of the Closing Date, certifying
that the representations and warranties set forth in Section 5 are true and
correct on the Closing Date, together with certified copies of the resolutions
adopted by the Board of Directors shall be furnished to the VKM Trust.
8. CONDITIONS TO OBLIGATIONS OF THE AC FUND
The obligations of the AC Fund hereunder with respect to the consummation of
the Reorganization are subject to the satisfaction, or written waiver by the AC
Fund of the following conditions:
A. SHAREHOLDER APPROVAL. This Agreement and the transactions contemplated
herein shall have been approved by the affirmative vote of the holders of a
majority of the shares of beneficial interest of the VKM Fund present in person
or by proxy at a meeting of said shareholders in which a quorum is constituted.
B. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Each of the representations
and warranties of the VKM Trust contained herein shall be true in all material
respects as of the Closing Date, and as of the Closing Date there shall have
been no material adverse change in the financial condition, results of
operations, business, properties or assets of the VKM Fund since June 30, 1994
and the AC Fund shall have received a certificate of the President or Vice
President of the VKM Trust satisfactory in form and substance to the AC Fund
so stating. The VKM Trust and the VKM Fund shall have performed and complied
in all material respects with all agreements, obligations and covenants
required by this Agreement to be so performed or complied with by them on or
prior to the Closing Date.
C. REGISTRATION STATEMENT EFFECTIVE. The Registration Statement shall have
become effective and no stop orders under the Securities Act pertaining thereto
shall have been issued.
D. REGULATORY APPROVAL. All necessary approvals, registrations, and
exemptions under federal and state securities laws shall have been obtained.
E. NO INJUNCTIONS OR RESTRAINTS: ILLEGALITY. No injunction preventing the
consummation of the transactions contemplated by this Agreement shall be in
effect, nor shall any proceeding by any state, local or federal government
agency or entity seeking any of the foregoing be pending. There shall not be
12
<PAGE> 13
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the transactions contemplated by this
Agreement, which makes the consummation of the transactions contemplated by
this Agreement illegal.
F. TAX OPINION. The AC Fund shall have obtained an opinion from Skadden,
Arps, Slate, Meagher & Flom, counsel for the VKM Trust and the VKM Fund, dated
as of the Closing Date, addressed to the AC Fund, that the consummation of the
transactions set forth in this Agreement comply with the requirements of
a reorganization as described in Section 368(a) of the Code substantially in
the form attached as Annex A.
G. OPINION OF COUNSEL. The AC Fund shall have received the opinion of
Skadden, Arps, Slate, Meagher & Flom, counsel for the VKM Trust, dated as of
the Closing Date, addressed to the AC Fund substantially in the form of and to
the effect that: (i) the VKM Trust is duly formed and in good standing as a
business trust under the laws of the State of Delaware; (ii) the Board of
Trustees of the VKM Trust has duly designated the VKM Fund as a series of the
VKM Trust pursuant to the terms of the Declaration of Trust of the VKM Trust;
(iii) the VKM Fund is registered as an open-end, diversified management company
under the 1940 Act; (iv) this Agreement and the reorganization provided for
herein and the execution of this Agreement have been duly authorized and
approved by all requisite action of VKM Trust and this Agreement has been duly
executed and delivered by the VKM Trust and (assuming the Agreement is a valid
and binding obligation of the other parties thereto) is a valid and binding
obligation of the VKM Trust; (v) neither the execution or delivery by the VKM
Trust of this Agreement nor the consummation by the VKM Trust or VKM Fund of
the transactions contemplated thereby contravene the VKM Trust's Declaration of
Trust, or, to the best of their knowledge, violate any provision of any statute
or any published regulation or any judgment or order disclosed to them by the
VKM Trust as being applicable to the VKM Trust or the VKM Fund; (vi) to the
best of their knowledge based solely on the certificate of an appropriate
officer of the VKM Trust attached hereto, there is no pending or threatened
litigation which would have the effect of prohibiting any material business
practice or the acquisition of any material property or the conduct of any
material business of the VKM Fund or might have a material adverse effect on
the value of any assets of the VKM Fund; (vii) except as to financial
statements and schedules and other financial and statistical data included or
incorporated by reference therein and subject to usual and customary
qualifications with respect to Rule 10b-5 type opinions, as of the effective
date of the Registration Statement filed pursuant to the Agreement, the
portions thereof pertaining to VKM Trust and the VKM Fund comply as to form in
all material respects with the requirements of the Securities Act, the
Securities Exchange Act and the 1940 Act and the rules and regulations of the
Commission thereunder and no facts have come to counsel's attention which would
cause them to believe that as of the effectiveness of the portions of the
Registration Statement applicable to VKM Trust and VKM Fund, the Registration
Statement contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; and (viii) to the best of their knowledge
and information and subject to the qualifications set forth below, the
execution and delivery by the VKM Trust of the Agreement and the consummation
of the transactions therein contemplated do not require, under the laws of the
States of Delaware or Illinois or the federal laws of the United States, the
consent, approval, authorization, registration, qualification or order of, or
filing with, any court or governmental agency or body (except such as have been
obtained). Counsel need express no opinion, however, as to any such consent,
approval, authorization, registration, qualification, order or filing (a) which
may be required as a result of the involvement of other parties to the
Agreement in the transactions contemplated by the Agreement because of their
legal or regulatory status or because of any other facts specifically
pertaining to them; (b) the absence of which does not deprive the AC Fund of
any material benefit under the Agreement; or (c) which can be readily obtained
without significant delay or expense to the AC Fund, without loss to the AC
Fund of any material benefit under the Agreement and without any material
adverse effect on the AC Fund during the period such consent, approval,
authorization, registration, qualification or order was obtained. The
foregoing opinion relates only to consents, approvals, authorizations,
registrations, qualifications, orders or filings under (a) laws which are
specifically referred to in this opinion, (b) laws of the States of Delaware
and Illinois and the Federal laws of the United States of America which, in
counsel's experience, are normally applicable to transactions of the type
provided for in the Agreement and (c) court orders and judgments disclosed to
13
<PAGE> 14
them by the VKM Trust in connection with this opinion. In addition, although
counsel need not specifically considered the possible applicability to the VKM
Trust of any other laws, orders or judgments, nothing has come to their
attention in connection with their representation of the VKM Trust and the VKM
Fund in this transaction that has caused them to conclude that any other
consent, approval, authorization, registration, qualification, order or filing
is required.
H. THE ASSETS. The Assets, as set forth in Schedule 1, as amended, shall
consist solely of nondefaulted, liquid U.S. dollar denominated money market
securities, cash and other marketable securities which are in conformity with
the AC Fund's investment objective, policy and restrictions as set forth in the
AC Fund's prospectus and statement of additional information, copies of which
have been delivered to the VKM Trust.
I. SHAREHOLDER LIST. The VKM Trust shall have delivered to the AC Fund an
updated list of all shareholders of the VKM Fund, as reported by VKM Trust's
transfer agent, as of one (1) business day prior to the Closing Date with each
shareholder's respective holdings in the VKM Fund, taxpayer identification
numbers, Form W-9 and last known address.
J. OFFICER CERTIFICATES. The AC Fund shall have received a certificate of
an authorized officer of VKM Trust, dated as of the Closing Date, certifying
that the representations and warranties set forth in Section 4 are true and
correct on the Closing Date, together with certified copies of the resolutions
adopted by the Board of Trustees and shareholders shall be furnished to the VKM
Trust.
9. AMENDMENT, WAIVER AND TERMINATION.
(A) The parties hereto may, by agreement in writing authorized by their
respective Boards of Trustees, amend this Agreement at any time before or after
approval thereof by the shareholders of the VKM Fund; provided, however, that
after receipt of VKM Fund shareholder approval, no amendment shall be made by
the parties hereto which substantially changes the terms of Sections 1, 2 and 3
hereof without obtaining VKM Fund's shareholder approval thereof or that affect
any applications for exemptive relief from the SEC or any orders with respect
thereto without obtaining the approval fo the staff of the SEC.
(B) At any time prior to the Closing Date, either of the parties may by
written instrument signed by it (i) waive any inaccuracies in the
representations and warranties made to it contained herein and (ii) waive
compliance with any of the covenants or conditions made for its benefit
contained herein. No delay on the part of either party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or
privilege, or any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
(C) This Agreement may be terminated, and the transactions contemplated
herein may be abandoned at any time prior to the Closing Date:
(i) by the mutual consents of the Board of Trustees of the VKM Trust and
the AC Fund;
(ii) by the VKM Trust, if the AC Fund breaches in any material respect
any of its representations, warranties, covenants or agreements contained in
this Agreement;
(iii) by the AC Fund, if the VKM Trust breaches in any material respect
any of its representations, warranties, covenants or agreements contained in
this Agreement;
14
<PAGE> 15
(iv) by either the VKM Trust or the AC Fund, if the Closing has not
occurred on or prior to September 30, 1995 (provided that the rights to
terminate this Agreement pursuant to this subsection (C) (iv) shall not be
available to any party whose failure to fulfill any of its obligations under
this Agreement has been the cause of or resulted in the failure of the Closing
to occur on or before such date);
(v) by the AC Fund in the event that: (a) all the conditions
precedent to the VKM Trust's obligation to close, as set forth in Section 7 of
this Agreement, have been fully satisfied (or can be fully satisfied at the
Closing); (b) the AC Fund gives the VKM Trust written assurance of its intent
to close irrespective of the satisfaction or non-satisfaction of all conditions
precedent to the AC Fund's obligation to close, as set forth in Section 8 of
this Agreement; and (c) the VKM Trust then fails or refuses to close within the
earlier of five (5) business days or September 30, 1995; or
(vi) by the VKM Trust in the event that: (a) all the conditions precedent
to the AC Fund's obligation to close, as set forth in Section 8 of this
Agreement, have been fully satisfied (or can be fully satisfied at the
Closing); (b) the VKM Trust gives the AC Fund written assurance of its intent
to close irrespective of the satisfaction or non-satisfaction of all the
conditions precedent to the VKM Trust's obligation to close, as set forth in
Section 7 of this Agreement; and (c) the AC Fund then fails or refuses to close
within the earlier of five (5) business days or September 30, 1995.
10. REMEDIES
In the event of termination of this Agreement by either or both of the VKM
Trust and AC Fund pursuant to Section 9(C), written notice thereof shall
forthwith be given by the terminating party to the other party hereto, and this
Agreement shall therefore terminate and become void and have no effect, and the
transactions contemplated herein and thereby shall be abandoned, without
further action by the parties hereto.
11. SURVIVAL OF WARRANTIES AND INDEMNIFICATION.
(A) SURVIVAL. The representations and warranties included or provided for
herein, or in the Schedules or other instruments delivered or to be delivered
pursuant hereto, shall survive the Closing Date for a three year period except
that any representation or warranty with respect to taxes shall survive for the
expiration of the statutory period of limitations for assessments of tax
deficiencies as the same may be extended from time to time by the taxpayer.
The covenants and agreements included or provided for herein shall survive and
be continuing obligations in accordance with their terms. The period for which
a representation, warranty, covenant or agreement survives shall be referred to
hereinafter as the "Survival Period." Notwithstanding anything set forth in
the immediately preceding sentence, the VKM Trust's and the AC Fund's right to
seek indemnity pursuant to this Agreement shall survive for a period of ninety
(90) days beyond the expiration of the Survival Period of the representation,
warranty, covenant or agreement upon which indemnity is sought. In no event
shall the VKM Trust or the AC Fund be obligated to indemnify the other if
indemnity is not sought within ninety (90) days of the expiration of the
applicable Survival Period.
15
<PAGE> 16
(i) all debts, liabilities and obligations of the VKM Trust of any nature,
whether accrued, absolute, contingent or otherwise, including liabilities or
obligations relating to the Assets (whether or not disclosed to the AC Fund and
whether or not known by the VKM Trust); and
(ii) taxes of any kind in respect of the VKM Fund whether imposed on the VKM
Fund or on any shareholder of the VKM Fund.
(B) INDEMNIFICATION. Each party (an "Indemnitor") shall indemnify and hold
the other and its officers, directors, agents and persons controlled by or
controlling any of them (each an "Indemnified Party") harmless from and against
any and all losses, damages, liabilities, claims, demands, judgments,
settlements, deficiencies, taxes, assessments, charges, costs and expenses of
any nature whatsoever (including reasonable attorneys' fees) including amounts
paid in satisfaction of judgments, in compromise or as fines and penalties, and
counsel fees reasonably incurred by such Indemnified Party in connection with
the defense or disposition of any claim, action, suit or other proceeding,
whether civil or criminal, before any court or administrative or investigative
body in which such Indemnified Party may be or may have been involved as a
party or otherwise or with which such Indemnified Party may be or may have been
threatened, (collectively, the "Losses") arising out of or related to any
claim of a breach of any representation, warranty or covenant made herein by
the Indemnitor; provided, however, that no Indemnified Party shall be
indemnified hereunder against any Losses arising directly from such Indemnified
Party's (i) willful misfeasance, (ii) bad faith, (iii) gross negligence or (iv)
reckless disregard of the duties involved in the conduct of such Indemnified
Party's position.
(C) INDEMNIFICATION PROCEDURE. The Indemnified Party shall use its best
efforts to minimize any liabilities, damages, deficiencies, claims, judgments,
assessments, costs and expenses in respect of which indemnity may be sought
hereunder. The Indemnified Party shall given written notice to Indemnitor
within the earlier of ten (10) days of receipt of written notice to Indemnitor
or thirty (30) days from discovery by Indemnified Party of any matters which
may give rise to a claim for indemnification or reimbursement under this
Agreement. The failure to give such notice shall not affect the right of
Indemnified Party to indemnity hereunder unless such failure has materially and
adversely affected the rights of the Indemnitor; provided that in any event
such notice shall have been given prior to the expiration of the Survival
Period. At any time after ten (10) days from the giving of such notice,
Indemnified Party may, at its option, resist, settle or otherwise compromise,
or pay such claim unless it shall have received notice from Indemnitor that
Indemnitor intends, at Indemnitor's sole cost and expense, to assume the
defense of any such matter, in which case Indemnified Party shall have the
right, at no cost or expense to Indemnitor, to participate in such defense. If
Indemnitor does not assume the defense of such matter, and in any event until
Indemnitor states in writing that it will assume the defense, Indemnitor shall
pay all costs of Indemnified Party arising out of the defense until the defense
is assumed; provided, however, that Indemnified Party shall consult with
Indemnitor and obtain Indemnitor's consent to any payment or settlement of any
such claim. Indemnitor shall keep Indemnified Party fully apprised at all
times as to the status of the defense. If Indemnitor does not assume the
defense, Indemnified Party shall keep Indemnitor apprised at all times as to
the status of the defense. Following indemnification as provided for
hereunder, Indemnitor shall be subrogated to all rights of Indemnified Party
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made.
12. SURVIVAL
The provisions set forth in Sections 10, 11 and 16 hereof shall survive the
termination of this Agreement for any cause whatsoever.
13. NOTICES.
All notices hereunder shall be sufficiently given for all purposes hereunder
if in writing and delivered personally or sent by registered mail or certified
mail, postage prepaid. Notice to the VKM Trust shall be addressed to the VKM
Trust c/o Van Kampen American Capital Investment Advisory Corp., One Parkview
Plaza, Oakbrook Terrace, Illinois 60181, Attention: General Counsel or at such
other address and to the attention of such other person as the VKM Trust may
designate by written notice to the AC Fund. Notice to AC Fund shall be
addressed to the AC Fund c/o Van Kampen American Capital Asset Management,
Inc., 2800 Post Oak Boulevard, Houston, Texas 77056, Attention: General
Counsel, with a copy to George M. Bartlett, O'Melveny & Myers, 400 South Hope
Street, Los Angeles,
16
<PAGE> 17
California 900710-2899, or at such other address as AC Fund may designate by
written notice to the VKM Trust. Any notice shall be deemed to have been
served or given as of the date such notice is delivered personally or mailed.
14. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their successors and assigns. This Agreement shall not be assigned
by any party without the prior written consent of the other parties.
15. BOOKS AND RECORDS.
The VKM Trust and the AC Fund agree that copies of the books and records of
the VKM Fund relating to the Assets including, but not limited to all files,
records, written materials; e.g., closing transcripts, surveillance files and
credit reports shall be delivered by the VKM Trust to the AC Fund at the
Closing Date. In addition to, and without limiting the foregoing, the VKM Trust
and the AC Fund agree to take such action as may be necessary in order that the
AC Fund shall have reasonable access to such other books and records as may be
reasonably requested, all for three years after the Closing Date for the three
tax years ending December 31, 1992, December 31, 1993 and December 31, 1994
namely, general ledger, journal entries, voucher registers; distribution
journal; payroll register; monthly balance owing report; income tax returns;
tax depreciation schedules; and investment tax credit basis schedules.
16. GENERAL.
This Agreement supersedes all prior agreements between the parties (written
or oral), is intended as a complete and exclusive statement of the terms of the
Agreement between the parties and may not be amended, modified or changed or
terminated orally. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been executed by the VKM Trust and
the AC Fund and delivered to each of the parties hereto. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. This Agreement is for the
sole benefit of the parties thereto, and nothing in this Agreement, expressed
or implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to principles of conflicts or choice of law.
17
<PAGE> 18
17. LIMITATION OF LIABILITY.
Copies of the Declarations of Trust of the VKM Trust and AC Fund are on file
with the Secretary of State of the State of Delaware, and notice, is hereby
given and the parties hereto acknowledge and agree that this instrument is
executed on behalf of the Trustees of the VKM Trust and AC Fund, respectively,
as Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or shareholders of the VKM Trust or
the AC Fund individually but binding only upon the assets and property of this
VKM Trust or AC Fund, as the case may be.
IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to be
executed and delivered by their duly authorized officers as of the day and year
first written above.
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND,
a Delaware business trust
By:_____________________________________
Title:__________________________________
Attest: _________________________
Title: _________________________
VAN KAMPEN AMERICAN CAPITAL MONEY MARKET
TRUST, a Delaware business trust
By:_____________________________________
Title:__________________________________
Attest: _________________________
Title: _________________________
18
<PAGE> 19
SCHEDULE 1 [LIST OF MARKETABLE SECURITIES] [AS AMENDED AT CLOSING]
<PAGE> 20
SCHEDULE 2 [VKM TRUST CONSENTS]
<PAGE> 21
SCHEDULE 3 [AC FUND CONSENTS]
<PAGE> 22
ANNEX A [TAX FREE OPINION: SKADDEN, ARPS, SLATE, MEAGHER & FLOM]
<PAGE> 1
EXHIBIT 5.1
NUMBER SHARES
__________ __________
VAN KAMPEN AMERICAN CAPITAL ________ FUND
CLASS A
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP 024904 30 2
_________________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen American Capital ________ Fund, transferable on
the books of the Fund by the holder thereof in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
is not valid unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN AMERICAN CAPITAL
________ FUND
DELAWARE SEAL]
NORI L. GABERT DON G. POWELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN AMERICAN CAPITAL ________ FUND
NUMBER CLASS A SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 5.2
NUMBER SHARES
__________ __________
VAN KAMPEN AMERICAN CAPITAL ________ FUND
CLASS B
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP 024904 30 2
_________________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen American Capital ________ Fund, transferable on
the books of the Fund by the holder thereof in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
is not valid unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN AMERICAN CAPITAL
________ FUND
DELAWARE SEAL]
NORI L. GABERT DON G. POWELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN AMERICAN CAPITAL ________ FUND
NUMBER CLASS B SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
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<PAGE> 2
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REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
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For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
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*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
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________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 5.3
NUMBER SHARES
__________ __________
VAN KAMPEN AMERICAN CAPITAL ________ FUND
CLASS C
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP 024904 30 2
_________________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen American Capital ________ Fund, transferable on
the books of the Fund by the holder thereof in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
is not valid unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN AMERICAN CAPITAL
________ FUND
DELAWARE SEAL]
NORI L. GABERT DON G. POWELL
SECRETARY PRESIDENT
KC 002717
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COUNTERSIGNED by ACCESS INVESTOR SERVICES, INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
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PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN AMERICAN CAPITAL ________ FUND
NUMBER CLASS C SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
ACCESS
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
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<PAGE> 2
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REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
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For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 6
INVESTMENT ADVISORY AGREEMENT
AGREEMENT (herein so called) made this _____ day of ______________, 1995, by and
between VAN KAMPEN AMERICAN CAPITAL RESERVE FUND, a Delaware business trust
(hereinafter referred to as the "FUND"), and VAN KAMPEN AMERICAN CAPITAL ASSET
MANAGEMENT, INC., a Delaware corporation (hereinafter referred to as the
"ADVISER").
The FUND and the ADVISER agree as follows:
(1.) Services Rendered and Expenses Paid by ADVISER
The ADVISER, subject to the control, direction and supervision of the FUND's
Trustees and in conformity with applicable laws, the FUND's Agreement and
Declaration of Trust ("Declaration of Trust"), By-laws, registration statements,
prospectus and stated investment objectives, policies and restrictions, shall:
a. manage the investment and reinvestment of the FUND's assets including, by way
of illustration, the evaluation of pertinent economic, statistical, financial
and other data, determination of the industries and companies to be represented
in the FUND's portfolio, and formulation and implementation of investment
programs;
b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the FUND's account with brokers or dealers selected by
the ADVISER;
c. conduct and manage the day-to-day operations of the FUND including, by way of
illustration, the preparation of registration statements, prospectuses, reports,
proxy solicitation materials and amendments thereto, the furnishing of routine
legal services except for services provided by outside counsel to the FUND
selected by the Trustees, and the supervision of the FUND's Treasurer and the
personnel working under his direction; and
d. furnish to the FUND office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each FUND trustee and FUND officer who is an
affiliated person of the ADVISER, except the compensation of the FUND's
Treasurer and related expenses as provided below.
In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the FUND the most favorable price and
execution available and shall maintain records adequate to demonstrate
compliance with this requirement. Subject to prior authorization by the FUND's
Trustees of appropriate policies and procedures, the ADVISER may, to the extent
authorized by law, cause the FUND to pay a broker or dealer that provides
brokerage and research services to the ADVISER an amount of commission for
effecting a portfolio investment transaction in
<PAGE> 2
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction. In the event of such authorization and to the
extent authorized by law, the ADVISER shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of such action.
Except as otherwise agreed, or as otherwise provided herein, the FUND shall pay,
or arrange for others to pay, all its expenses other than those expressly stated
to be payable by the ADVISER hereunder, which expenses payable by the FUND shall
include (i) interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase and sale of portfolio investments; (iii)
compensation of its trustees and officers other than those who are affiliated
persons of the ADVISER; (iv) compensation of its Treasurer, compensation of
personnel working under the Treasurer's direction, and expenses of office space,
facilities, and equipment used by the Treasurer and such personnel in the
performance of their normal duties for the FUND which consist of maintenance of
the accounts, books and other documents which constitute the record forming the
basis for the FUND's financial statements, preparation of such financial
statements and other FUND documents and reports of a financial nature required
by federal and state laws, and participation in the production of the FUND's
registration statement, prospectuses, proxy solicitation materials and reports
to shareholders; (v) fees of outside counsel to and of independent accountants
of the FUND selected by the Trustees; (vi) custodian, registrar and shareholder
service agent fees and expenses; (vii) expenses related to the repurchase or
redemption of its shares including expenses related to a program of periodic
repurchases or redemptions; (viii) expenses related to the issuance of its
shares against payment therefor by or on behalf of the subscribers thereto; (ix)
fees and related expenses of registering and qualifying the FUND and its shares
for distribution under state and federal securities laws; (x) expenses of
printing and mailing of registration statements, prospectuses, reports, notices
and proxy solicitation materials of the FUND; (xi) all other expenses incidental
to holding meetings of the FUND's shareholders including proxy solicitations
therefor; (xii) expenses for servicing shareholder accounts; (xiii) insurance
premiums for fidelity coverage and errors and omissions insurance; (xiv) dues
for the FUND's membership in trade associations approved by the Trustees; and
(xv) such nonrecurring expenses as may arise, including those associated with
actions, suits or proceedings to which the FUND is a party and the legal
obligation which the FUND may have to indemnify its officers and trustees with
respect thereto. To the extent that any of the foregoing expenses are allocated
between the FUND and any other party, such allocations shall be pursuant to
methods approved by the Trustees.
(2.) Role of ADVISER
The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services
2
<PAGE> 3
rendered to the FUND are not impaired.
Except as otherwise required by the Investment Company Act of 1940 (the "1940
Act"), any of the shareholders, trustees, officers and employees of the FUND may
be a shareholder, trustee, director, officer or employee of, or be otherwise
interested in, the ADVISER, and in any person controlled by or under common
control with the ADVISER, and the ADVISER, and any person controlled by or under
common control with the ADVISER, may have an interest in the FUND.
Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence or reckless disregard of obligations or duties hereunder on the part
of the ADVISER, the ADVISER shall not be subject to liability to the FUND, or to
any shareholder of the FUND, for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
(3.) Compensation Payable to ADVISER
The FUND shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, a monthly fee computed at
the following annual rate(s):
.50% on the first $150 million of the Fund's average daily net assets, .45% on
the next $100 million, .40% on the next $100 million and .35% over $350 million
Average daily net assets shall be determined by taking the average of the net
assets for each business day during a given calendar month calculated in the
manner provided in the FUND's Declaration of Trust. Such fee shall be payable
for each calendar month as soon as practicable after the end of that month.
The fees payable to the ADVISER by the FUND pursuant to this Section 3 shall be
reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the ADVISER, or any other direct or indirect
majority owned subsidiary of VK/AC Holding, Inc., in connection with the
purchase and sale of portfolio investments of the FUND, less any direct expenses
incurred by such person, in connection with obtaining such commissions, fees,
brokerage or similar payments. The ADVISER shall use its best efforts to
recapture all available tender offer solicitation fees and exchange offer fees
in connection with the FUND's portfolio transactions and shall advise the
Trustees of any other commissions, fees, brokerage or similar payments which may
be possible for the ADVISER or any other direct or indirect majority owned
subsidiary of VK/AC Holding, Inc. to receive in connection with the FUND's
portfolio transactions or other arrangements which may benefit the FUND.
In the event that the ordinary business expenses of the FUND for any fiscal year
should exceed 1% of average daily net assets, the compensation due the ADVISER
for such fiscal year shall be reduced
3
<PAGE> 4
by the amount of such excess. The ADVISER's compensation shall be so reduced by
a reduction or a refund thereof, at the time such compensation is payable after
the end of each calendar month during such fiscal year of the FUND, and if such
amount should exceed such monthly compensation, the ADVISER shall pay the FUND
an amount sufficient to make up the deficiency, subject to readjustment during
the FUND's fiscal year. For purposes of this paragraph, all ordinary business
expenses of the FUND shall include the investment advisory fee and other
operating expenses paid by the FUND except (i) for interest and taxes; (ii)
brokerage commissions; (iii) as a result of litigation in connection with a suit
involving a claim for recovery by the FUND; (iv) as a result of litigation
involving a defense against a liability asserted against the FUND, provided
that, if the ADVISER made the decision or took the actions which resulted in
such claim, it acted in good faith without negligence or misconduct; (v) any
indemnification paid by the FUND to its officers and trustees and the ADVISER in
accordance with applicable state and federal laws as a result of such
litigation; and (vi) amounts paid to Van Kampen American Capital Distributors,
Inc., the distributor of the FUND's shares, in connection with a distribution
plan adopted by the FUND's Trustees pursuant to Rule 12b-1 under the Investment
Company Act of 1940.
If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.
(4.) Books and Records
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the FUND are the
property of the FUND and further agrees to surrender promptly to the FUND any of
such records upon the FUND's request. The ADVISER further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the Act.
(5.) Duration of Agreement
This Agreement shall have an initial term of 2 years from the date hereof, and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved at least annually by the vote of a majority of the
FUND's Trustees who are not parties to this Agreement or interested persons of
any such parties, cast in person at a meeting called for the purpose of voting
on such approval, and by a vote of a majority of the FUND's Trustees or a
majority of the FUND's outstanding voting securities.
This Agreement shall terminate automatically in the event of its assignment. The
Agreement may be terminated at any time by the FUND's Trustees, by vote of a
majority of the FUND's outstanding voting securities, or by the ADVISER, on 60
days' written notice, or upon such shorter notice as may be mutually agreed
upon. Such termination shall be without payment of any penalty.
4
<PAGE> 5
(6.) Miscellaneous Provisions
For the purposes of this Agreement, the terms "affiliated person," "assignment,"
"interested person," and "majority of the outstanding voting securities" shall
have their respective meanings defined in the 1940 Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
to either the ADVISER or the FUND by the Securities and Exchange Commission (the
"Commission"), or such interpretive positions as may be taken by the Commission
or its staff, under the 1940 Act, and the term "brokerage and research services"
shall have the meaning given in the Securities Exchange Act of 1934 and the
Rules and Regulations thereunder.
The execution of this Agreement has been authorized by the FUND's Trustees and
by the sole shareholder. This Agreement is executed on behalf of the Fund or the
Trustees of the FUND as Trustees and not individually and that the obligations
of this Agreement are not binding upon any of the Trustees, officers or
shareholders of the FUND individually but are binding only upon the assets and
property of the FUND. A Certificate of Trust in respect of the Fund is on file
with the Secretary of State of Delaware.
The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
By:________________________________________
Name:______________________________________
Its:_______________________________________
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By:________________________________________
Name:______________________________________
Its:_______________________________________
5
<PAGE> 1
EXHIBIT 7.1
UNDERWRITING AGREEMENT
between
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
and
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
THIS AGREEMENT made this ____ day of _______, 199__, by and between VAN KAMPEN
AMERICAN CAPITAL RESERVE FUND, a Delaware business trust, hereinafter referred
to as the "Fund" and VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC., a Delaware
corporation, hereinafter referred to as the "Underwriter".
WHEREAS, the Fund proposes to issue its shares in three classes: Class A, Class
B and Class C, all as described in the Fund's current prospectus at the time of
sale;
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt whereof is hereby acknowledged, the parties
hereto agree as follows:
FIRST: The Fund hereby appoints the Underwriter as its exclusive agent for the
sale of shares of the Fund to the public through investment dealers in the
United States and throughout the world.
SECOND: The Fund shall not sell any of its shares except through the Underwriter
and under the terms and conditions set forth in paragraph FOURTH below.
Notwithstanding the provisions of the foregoing sentence, however,
(A) the Fund may issue its shares to any other investment company or personal
holding company, or to the shareholders thereof, in exchange for all or a
majority of the shares or assets of any such company;
(B) the Fund may issue its shares at net asset value to any shareholder of the
Fund purchasing such shares with dividends or other cash distributions received
from the Fund pursuant to an offer made to all shareholders;
(C) The Fund may issue its shares at net asset value to its Trustees; and
(D) the Fund may issue its Class A shares at their net asset value directly to
registered unit investment trusts which are the issuers of periodic payment plan
certificates, the proceeds of which are invested in such redeemable securities.
The Fund may also sell its shares directly to the public.
<PAGE> 2
THIRD: The Underwriter hereby accepts appointment as exclusive agent for the
sale of all classes of shares of the Fund and agrees that it will use its best
efforts to sell such shares; provided, however, that:
(A) The Underwriter may, and when requested by the Fund shall, suspend its
efforts to effectuate sales for any or all classes of shares of the Fund or
limit such sales efforts to existing shareholders of the Fund at any time when,
in the opinion of the Underwriter, after consultation with the investment
adviser to the Fund, or in the opinion of the Fund, sales efforts should be
limited or suspended because of market or other economic considerations
(including a determination by the Fund's investment adviser that it would be in
the best interests of existing shareholders of the Fund to suspend sales of
shares of the Fund or limit such sales to existing shareholders of the Fund) or
abnormal circumstances of any kind; and
(B) Upon the limiting or suspension of sales efforts by the Underwriter pursuant
to clause (A) above, the Fund may in its discretion suspend the sale of shares
through the Underwriter or limit such sales to existing shareholders of the
Fund; and
(C) the Fund may withdraw the offering of its shares (i) at any time with the
consent of the Underwriter, or (ii) without such consent when so required by the
provisions of any statute or of any order, rule or regulation of any
governmental body having jurisdiction. It is mutually understood and agreed that
the Underwriter does not undertake to sell any specific amount of shares of the
Fund. The Fund shall have the right to specify minimum amounts for initial and
subsequent orders for the purchase of shares.
FOURTH: The offering price of Class A shares of the Fund (the "offering price")
shall be the net asset value per share. Net asset value per share shall be
determined in the manner provided in the then current prospectus of the Fund.
The offering price of Class B and Class C shares of the Fund shall be the net
asset value per share without an initial sales charge. However, the Fund agrees
that the Underwriter shall impose certain contingent deferred sales charges in
connection with the redemption of Class B and Class C shares of the Fund, not to
exceed a specified percentage of the original purchase price of the shares as
from time to time set forth in the prospectus of the Fund. The Underwriter may
retain (or receive from the Fund, as the case may be) all of such contingent
deferred sales charges. Net asset value per share shall be determined in the
manner provided in the then current prospectus of the Fund. The Underwriter may
designate eliminations of contingent deferred sales charges to particular
classes of investors or transactions in accordance with Rule 22d-1 provided such
eliminations are approved by the Fund and described
2
<PAGE> 3
in the prospectus. The Underwriter proposes to pay to investment dealers through
whom Class B and Class C shares of the Fund are sold a dealer commission of a
specified percentage of the purchase price of Class B and Class C shares
purchased through them and as from time to time set forth in the prospectus of
the Fund.
The Underwriter shall act as agent of the Fund in connection with the sale and
repurchase of shares of the Fund. Except with respect to such sales and
repurchases, the Underwriter shall act as principal in all matters relating to
the promotion of the sale of shares of the Fund and shall enter into all of its
own engagements, agreements and contracts as principal on its own account. The
Underwriter shall enter into selling group agreements with investment dealers
selected by the Underwriter, authorizing such investment dealers to offer and
sell shares of the Fund to the public upon the terms and conditions set forth
therein, which shall not be inconsistent with the provisions of this Agreement.
Each selling group agreement shall provide that the investment dealer shall act
as a principal, and not as an agent of the Fund.
FIFTH: The Underwriter shall bear
(A) the expenses of printing from the final proof and distributing registration
statements and prospectuses relating to public offerings made by the Underwriter
pursuant to this Agreement and annual and semi-annual shareowner reports used as
sales literature (not, however, including typesetting costs), as well as all
printing and distribution costs of any other sales literature used by the
Underwriter or furnished by the Underwriter to dealers in connection with such
public offerings except as otherwise agreed by the Trustees;
(B) expenses of advertising in connection with such public offerings except as
otherwise agreed by the Trustees; and
(C) all legal expenses in connection with the foregoing.
SIXTH: The Underwriter will accept orders for shares of the Fund only to the
extent of purchase orders actually received and not in excess of such orders,
and it will not avail itself of any opportunity of making a profit by expediting
or withholding orders.
SEVENTH:
(A) The Fund and the Underwriter shall each comply with all applicable
provisions of the Act, the Securities Act of 1933 (the "Securities Act") and of
all other federal and state laws, rules and regulations governing the issuance
and sale of shares of the Fund.
(B) The Fund agrees to indemnify the Underwriter against any and all claims,
demands, liabilities and expenses which the Underwriter
3
<PAGE> 4
may incur under the Securities Act, or common law or otherwise, arising out of
or based upon any alleged untrue statement of a material fact contained in any
registration statement or prospectus of the Fund, or any omission to state a
material fact therein, the omission of which makes any statement contained
therein misleading, unless such statement or omission was made in reliance upon,
and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Underwriter.
(C) The Underwriter agrees to indemnify the Fund against any and all claims,
demands, liabilities and expenses which the Fund may incur arising out of or
based upon any act or deed of the Underwriter or its sales representatives which
has not been authorized by the Fund in its prospectus or in this Agreement. The
Underwriter agrees to indemnify the Fund against any and all claims, demands,
liabilities and expenses which the Fund may incur under the Securities Act, or
common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in any registration statement or
prospectus of the Fund, or any omission to state a material fact therein if such
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund in connection therewith by or on behalf of the
Underwriter.
(D) The Underwriter agrees to indemnify the Fund against any and all claims,
demands, liabilities and expenses which the Fund may incur under the Securities
Act, or common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in any prospectus of the Fund prepared
for use under Rule 482 of the Securities Act, or any omission to state a
material fact therein.
EIGHTH: Nothing herein contained shall require the Fund to take any action
contrary to any provision of its charter or to any applicable statute or
regulation.
NINTH: This Agreement shall become effective on the date hereof, shall have an
initial term of one year from the date hereof, and shall continue in force and
effect from year to year thereafter, provided, that such continuance is
specifically approved at least annually (a)(i) by the Trustees of the Fund, or
(ii) by vote of a majority of the Fund's outstanding voting securities (as
defined in Section 2(a)(42) of the Act); and (b) by vote of a majority of the
Fund's Trustees who are not parties to this Agreement or interested persons (as
defined in Section 2(a)(19) of the Act) of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval.
TENTH:
(A) This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Trustees of the Fund or by
4
<PAGE> 5
vote of a majority of the outstanding voting securities of the Fund, or by the
Underwriter, on sixty days written notice to the other party.
(B) This Agreement shall automatically terminate in the event of its assignment
(as defined in Section 2(a)(4) of the Act).
ELEVENTH: Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed, postage paid, to the other party at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the address of the Fund shall be 2800 Post
Oak Boulevard, Houston, Texas 77056 and the address of the Underwriter shall be
One Parkview Plaza, Oakbrook Terrace, Illinois 60181. TWELFTH: This Agreement is
executed on behalf of the Fund or the Trustees of the FUND as Trustees and not
individually and that the obligations of this Agreement are not binding upon any
of the Trustees, officers or shareholders of the FUND individually but are
binding only upon the assets and property of the FUND. A Certificate of Trust in
respect of the Fund is on file with the Secretary of the State of Delaware.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
duplicate on the day and year first above written.
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
By:_____________________________________
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
By:_____________________________________
Vice President
5
<PAGE> 1
EXHIBIT 9.2
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the ___ day of _______, 1995 by and between each
of the VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS set forth on Schedule "A"
hereto, which are organized under the laws of the state and as the entities set
forth in Schedule "A" hereto, having their principal office and place of
business at Houston, Texas (collectively, the "Funds"), and ACCESS INVESTOR
SERVICES, INC., a Delaware corporation, having its principal office at Houston,
Texas, and its principal place of business at Kansas City, Missouri ("ACCESS").
R E C I T A L:
WHEREAS, each of the Funds desires to appoint ACCESS as its transfer
agent, dividend disbursing agent and shareholder service agent and ACCESS
desires to accept such appointments;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1. TERMS OF APPOINTMENT; DUTIES OF ACCESS.
1.01 Subject to the terms and conditions set forth in this
Agreement, each of the Funds hereby employs and appoints ACCESS as its transfer
agent, dividend disbursing agent and shareholder service agent.
1.02 ACCESS hereby accepts such employment and appointments and
agrees that on and after the effective date of this Agreement it will act as
the transfer agent, dividend disbursing agent and shareholder service agent for
each of the Funds on the terms and conditions set forth herein.
1.03 ACCESS agrees that its duties and obligations hereunder will
be performed in a competent, efficient and workmanlike manner with due
diligence in accordance with reasonable industry practice, and that the
necessary facilities, equipment and personnel for such performance will be
provided.
1.04 In order to assure compliance with section 1.03 and to
implement a cooperative effort to improve the quality of transfer agency and
shareholder services received by each of the Funds and its shareholders,
1
<PAGE> 2
ACCESS agrees to provide and maintain quantitative performance objectives,
including maximum target turn-around times and maximum target error rates, for
the various services provided hereunder. ACCESS also agrees to provide a
reporting system designed to provide the Board of Trustees or Board of
Directors of each of the Funds (the "Board") on a quarterly basis with
quantitative data comparing actual performance for the period with the
performance objectives. The foregoing procedures are designed to provide a
basis for continuing monitoring by the Board of the quality of services
rendered hereunder.
ARTICLE 2. FEES AND EXPENSES.
2.01 For the services to be performed by ACCESS pursuant to this
Agreement, each of the Funds agrees to pay ACCESS the fees provided in the fee
schedules agreed upon from time to time by each of the Funds and ACCESS.
2.02 In addition to the amounts paid under section 2.01 above, each
of the Funds agrees to reimburse ACCESS promptly for such Fund's reasonable
out-of-pocket expenses or advances paid on its behalf by ACCESS in connection
with its performance under this Agreement for postage, freight, envelopes,
checks, drafts, continuous forms, reports and statements, telephone, telegraph,
costs of outside mailing firms, necessary outside record storage costs, media
for storage of records (e.g., microfilm, microfiche and computer tapes) and
printing costs incurred due to special requirements of such Fund. In addition,
any other special out-of-pocket expenses paid by ACCESS at the specific request
of any of the Funds will be promptly reimbursed by the requesting Fund.
Postage for mailings of dividends, proxies, Fund reports and other mailings to
all shareholder accounts shall be advanced to ACCESS by the concerned Fund
three business days prior to the mailing date of such materials.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF ACCESS.
ACCESS represents and warrants to each of the Funds that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware.
3.02 It is duly qualified to carry on its business in the states of
Texas and Missouri.
3.03 It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement.
2
<PAGE> 3
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have during the term of this
Agreement access to the necessary facilities, equipment and personnel to
perform its duties and obligations hereunder.
3.06 It will maintain a system regarding "as of" transactions as
follows:
(a) Each "as of" transaction effected at a price other
than that in effect on the day of processing for which an estimate has
not been given to any of the affected Funds and which is necessitated
by ACCESS' error, or delay for which ACCESS is responsible or which
could have been avoided through the exercise of reasonable care, will
be identified, and the net effect of such transactions determined, on
a daily basis for each such Fund.
(b) The cumulative net effect of the transactions
included in paragraph (a) above will be determined each day throughout
each month. If, on any day during the month, the cumulative net
effect upon any Fund is negative and exceeds an amount equivalent to
1/2 of 1 cent per share of such Fund, ACCESS shall promptly make a
payment to such Fund (in cash or through use of a credit as described
in paragraph (c) below) in such amount as necessary to reduce the
negative cumulative net effect to less than 1/2 of 1 cent per share of
such Fund. If on the last business day of the month the cumulative
net effect (adjusted by the amount of any payments pursuant to the
preceding sentence) upon any Fund is negative, such Fund shall be
entitled to a reduction in the monthly transfer agency fee next
payable by an equivalent amount, except as provided in paragraph (c)
below. If on the last business day of the month the cumulative net
effect (similarly adjusted) upon any Fund is positive, ACCESS shall be
entitled to recover certain past payments and reductions in fees, and
to a credit against all future payments and fee reductions made under
this paragraph to such Fund, as described in paragraph (c) below.
(c) At the end of each month, any positive cumulative net
effect upon any Fund shall be deemed to be a credit to ACCESS which
shall first be applied to recover any payments and fee reductions made
by ACCESS to such Fund under paragraph (b) above during the calendar
year by increasing the amount of the monthly transfer agency fee next
payable in an amount equal to prior payments and fee
3
<PAGE> 4
reductions made during such year, but not exceeding the sum of that
month's credit and credits arising in prior months during such year to
the extent such prior credits have not previously been utilized as
contemplated by this paragraph (c). Any portion of a credit to ACCESS
not so used shall remain as a credit to be used as payment against the
amount of any future negative cumulative net effects that would
otherwise require a payment or fee reduction to such Fund pursuant to
paragraph (b) above.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE FUNDS.
Each of the Funds hereby represents and warrants on behalf of
itself only and not any other Funds that are a party to this Agreement that:
4.01 It is duly organized and existing and in good standing under
the laws of the commonwealth or state set forth in Schedule "A" hereto.
4.02 It is empowered under applicable laws and regulations and by
its Declaration of Trust or Articles of Incorporation and by-laws to enter into
and perform this Agreement.
4.03 All requisite proceedings have been taken by its Board to
authorize it to enter into and perform this Agreement.
4.04 It is an open-end, diversified, management investment company
registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended, is currently effective and will remain effective, and appropriate
state securities laws filings have been made and will continue to be made, with
respect to all of its shares being offered for sale.
ARTICLE 5. INDEMNIFICATION.
5.01 ACCESS shall not be responsible for and each of the Funds
shall indemnify and hold ACCESS harmless from and against any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liabilities arising out of or attributable to:
4
<PAGE> 5
(a) All actions of ACCESS required to be taken by ACCESS
for the benefit of such Fund pursuant to this Agreement, provided
ACCESS has acted in good faith with due diligence and without
negligence or willful misconduct.
(b) The reasonable reliance by ACCESS on, or reasonable
use by ACCESS of, information, records and documents which have been
prepared or maintained by or on behalf of such Fund or have been
furnished to ACCESS by or on behalf of such Fund.
(c) The reasonable reliance by ACCESS on, or the carrying
out by ACCESS of, any instructions or requests of such Fund.
(d) The offer or sale of such Fund's shares in violation
of any requirement under the federal securities laws or regulations or
the securities laws or regulations of any state or in violation of any
stop order or other determination or ruling by any federal agency or
any state with respect to the offer or sale of such shares in such
state unless such violation results from any failure by ACCESS to
comply with written instructions of such Fund that no offers or sales
of such Fund's shares be made in general or to the residents of a
particular state.
(e) Such Fund's refusal or failure to comply with the
terms of this Agreement, or such Fund's lack of good faith, negligence
or willful misconduct or the breach of any representation or warranty
of such Fund hereunder.
5.02 ACCESS shall indemnify and hold each of the Funds harmless
from and against any and all losses, damages, costs, charges, reasonable
counsel fees, payments, expenses and liability arising out of or attributable
to ACCESS' refusal or failure to comply with the terms of this Agreement, or
ACCESS' lack of good faith, negligence or willful misconduct, or the breach of
any representation or warranty of ACCESS hereunder.
5.03 At any time ACCESS may apply to any authorized officer of any
of the Funds for instructions, and may consult with any of the Funds' legal
counsel, at the expense of such concerned Fund, with respect to any matter
arising in connection with the services to be performed by ACCESS under this
Agreement, and ACCESS shall not be liable and shall be indemnified by such
concerned Fund for any action taken or omitted by it in good faith in
reasonable reliance upon such instructions or upon the opinion of such counsel.
ACCESS shall be protected and
5
<PAGE> 6
indemnified in acting upon any paper or document reasonably believed by ACCESS
to be genuine and to have been signed by the proper person or persons and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the concerned Fund. ACCESS shall also
be protected and indemnified in recognizing stock certificates which ACCESS
reasonably believes to bear the proper manual or facsimile signatures of the
officers of the concerned Fund, and the proper countersignature of any former
transfer agent or registrar, or of a co-transfer agent or co-registrar.
5.04 In the event any party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage, or other causes reasonably beyond its control,
such party shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such causes.
5.05 In no event and under no circumstances shall any party to this
Agreement be liable to another party for consequential damages under any
provision of this Agreement or for any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which one party may be
required to indemnify another, the party seeking indemnification shall promptly
notify the other party of such assertion, and shall keep the other party
advised with respect to all developments concerning such claim. The party who
may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in
any case in which the other party may be required to indemnify it except with
the other party's prior written consent.
ARTICLE 6. COVENANTS OF EACH OF THE FUNDS AND ACCESS.
6.01 Each of the Funds shall promptly furnish to ACCESS the
following:
(a) Certified copies of the resolution of its Board
authorizing the appointment of ACCESS and the execution and delivery
of this Agreement.
(b) Certified copies of its Declaration of Trust or
Articles of Incorporation and by-laws and all amendments thereto.
6
<PAGE> 7
6.02 ACCESS hereby agrees to maintain facilities and procedures
reasonably acceptable to each of the Funds for safekeeping of share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 ACCESS shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable; provided,
however, that all accounts, books and other records of each of the Funds
(hereinafter referred to as "Fund Records") prepared or maintained by ACCESS
hereunder shall be maintained and kept current in compliance with Section 31 of
the Investment Company Act of 1940 and the Rules thereunder (such Section and
Rules being hereinafter referred to as the "1940 Act Requirements"). To the
extent required by the 1940 Act Requirements, ACCESS agrees that all Fund
Records prepared or maintained by ACCESS hereunder are the property of the
concerned Fund and shall be preserved and made available in accordance with the
1940 Act Requirements, and shall be surrendered promptly to the concerned Fund
on its request. ACCESS agrees at such reasonable times as may be requested by
the Board and at least quarterly to provide (i) written confirmation to the
Board that all Fund Records are maintained and kept current in accordance with
the 1940 Act Requirements, and (ii) such other reports regarding its
performance hereunder as may be reasonably requested by the Board.
6.04 ACCESS and each of the Funds agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.05 In case of any requests or demands for the inspection of any
of the Fund Records, ACCESS will endeavor to notify each of the concerned Funds
and to secure instructions from an authorized officer of each of the concerned
Funds as to such inspection. ACCESS reserves the right, however, to exhibit
such Fund Records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit such Fund Records to such person.
ARTICLE 7. TERM AND TERMINATION OF AGREEMENT.
7.01 This Agreement shall remain in effect from the date hereof
through June 30, 1995; provided, however, that this Agreement may be terminated
by any party with respect to that party for good and reasonable
7
<PAGE> 8
cause at any time by giving written notice to the other party at least 120 days
prior to the date on which such termination is to be effective. Any unpaid
fees or reimbursable expenses payable to ACCESS shall be due on any such
termination date. ACCESS agrees to use its best efforts to cooperate with each
of the Funds and the successor transfer agent or agents in accomplishing an
orderly transition.
7.02 Subject to the prior approval of the Board, this Agreement
shall be renewed and extended for periods of not more than one year each,
unless and until this Agreement is terminated in accordance with section 7.01
above.
ARTICLE 8. MISCELLANEOUS.
8.01 Except as provided in section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by any party
without the written consent of ACCESS or the concerned Fund, as the case may
be; provided, however, that no consent shall be required for any merger of any
of the Funds with, or any sale of all or substantially all the assets of any of
the Funds to, another investment company.
8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
8.03 ACCESS may, without further consent on the part of any of the
Funds, subcontract with DST, Inc., a Missouri corporation, or any other
qualified servicer, for the performance of data processing activities;
provided, however, that ACCESS shall be as fully responsible to each of the
Funds for the acts and omissions of DST, Inc., or other qualified servicer as
it is for its own acts and omissions.
8.04 ACCESS may, without further consent on the part of any of the
Funds, provide services to its affiliated companies. Such services may be
provided at cost.
8.05 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes any
prior agreement with respect thereto, whether oral or written, and this
Agreement may not be modified except by written instrument executed by the
affected parties.
8.06 The execution of this Agreement has been authorized by the
Funds' Trustees. This Plan is executed on
behalf of the Funds or the Trustees of the Funds as Trustees and not
individually and that the obligations of this Agreement are not binding upon
any of
8
<PAGE> 9
the Trustees, officers or shareholders of the Funds individually but are
binding only upon the assets and property of the Funds. A Certificate of Trust
in respect of each of the Funds is on file with the Secretary of the State of
Delaware.
8.07 For each of those Funds that have one or more portfolios as
set forth in Schedule "A" hereto, all obligations of those Funds under this
Agreement shall apply only on a portfolio-by-portfolio basis and the assets of
one portfolio shall not be liable for the obligations of any other.
8.08 In the event of a change in the business or regulatory
environment affecting all or any portion of this Agreement, the parties hereto
agree to renegotiate such affected portions in good faith.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf and through their duly
authorized officers, as of the date first above written.
EACH OF THE VAN KAMPEN AMERICAN
CAPITAL OPEN END FUNDS LISTED ON
SCHEDULE "A" HERETO
BY:____________________________________
Vice President
ATTEST:
____________________________
Secretary
ACCESS INVESTOR SERVICES, INC.
BY:____________________________________
President
ATTEST:
____________________________
Secretary
10
<PAGE> 11
SCHEDULE "A"
VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS
<TABLE>
<CAPTION>
Type
[Corporation "C"/
Fund Name State of Business Trust "T"/
(including Portfolios) Organization Partnership "P"]
===============================================================================================================
<S> <C> <C>
[TO BE PROVIDED]
</TABLE>
11
<PAGE> 12
PRICING SCHEDULE
PRICE PER ACCOUNT PLUS OUT-OF-POCKET
______________, 1995
[TO BE PROVIDED]
12
<PAGE> 1
EXHIBIT 10.1
CLASS A
DISTRIBUTION PLAN
OF
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
Section 1. Van Kampen American Capital Reserve Fund (the "Fund") may act as a
distributor of securities of which it is the issuer, pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "Act"), according to the terms of
this Distribution Plan (the "Plan").
Section 2. The Fund may incur as a distributor of securities of which it is the
issuer, expenses of up to fifteen one-hundredths of one percent (.15%) per annum
of the Fund's average daily net assets.
Section 3. Amounts set forth in Section 2 may be expended when and if authorized
in advance by the Fund's Trustees. Such amounts may be used to finance any
activity which is primarily intended to result in the sale of the Fund's shares
or the retention of shares by investors, including but not limited to, expenses
of organizing and conducting sales seminars, printing of prospectuses and
reports for other than existing shareholders, preparation and distribution of
advertising material and sales literature, supplemental payments to dealers
under a dealer incentive program to be established by Van Kampen American
Capital Distributors, Inc. ("VKAC") as the Fund's Distributor, in accordance
with Section 4, and the costs of administering such a program. All amounts
expended pursuant to the Plan shall be paid to VKAC. VKAC shall be required to
use such amounts exclusively to finance those activities set forth in Sections 3
and 4 of the Plan.
Section 4. (a) Amounts expended by the Fund under the Plan shall be used
primarily for the implementation by VKAC of a dealer incentive program and to
pay the costs of administering the calculation of payment under such program.
(b) Pursuant to this program, VKAC may enter into agreements ("Servicing
Agreements") with such broker/dealers ("Dealers") as may be selected from time
to time by VKAC for the provision of distribution assistance in connection with
the sale of shares of the Fund ("Shares") to the Dealers' clients and customers
("Customers") and for the provision of administrative support services to
Customers who may from time to time directly or beneficially own Shares. The
distribution assistance and administrative support services to be rendered by
Dealers under the Servicing Agreements may include, but shall not be limited to,
the following: distributing sales literature; answering routine Customer
inquiries concerning the Fund; assisting Customers in changing dividend options,
account designations and addresses, and
<PAGE> 2
in enrolling into the pre-authorized check plan, systematic withdrawal plan or
any of several tax sheltered retirement plans offered in connection with the
purchase of Shares; assisting in the establishment and maintenance of Customer
accounts and records and in the processing of purchase and redemption
transactions; investing dividends and capital gains distributions automatically
in Shares and providing such other information and services as the Fund or the
Customer may reasonably request.
Section 5. This Plan shall not take effect until it has been approved, by a vote
of at least a majority (as defined in the Act) of the outstanding voting
securities of the Fund.
Section 6. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of the majority of both (a) the Trustees
of the Fund and (b) those Trustees of the Fund who are not "interested persons"
of the Fund (as defined in the Act) and have no direct or indirect financial
interest in the operation of this Plan or any agreements related to it (the
"Disinterested Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan or such agreements.
Section 7. Unless sooner terminated pursuant to Section 9, this Plan shall
continue in effect for a period of one year from the date it takes effect and
thereafter shall continue in effect so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 6.
Section 8. VKAC shall provide to the Fund's Trustees and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
Section 9. This Plan may be terminated, without payment of any penalty, at any
time by vote of a majority of the Disinterested Trustees, or by vote of a
majority of the Fund's outstanding voting securities.
Section 10. Any agreement related to this Plan shall be in writing, and shall
provide:
(a) That such agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Disinterested Trustees, or by a vote of
the Fund's outstanding voting securities, on not more than sixty days' written
notice to any other party to the agreement; and
(b) That such agreement shall terminate automatically in the event of its
assignment.
Section 11. This Plan may not be amended to increase materially the amount of
distribution expenses provided for in Section 2
<PAGE> 3
hereof unless such amendment is approved in the manner provided in Section 5
hereof, and no material amendment to the Plan shall be made unless approved in
the manner provided for in Section 6 hereof.
Section 12. The execution of this Plan has been authorized by the Fund's
Trustees and by the sole shareholder of the Class A shares of the Fund. This
Plan is executed on behalf of the Fund or the Trustees of the Fund as Trustees
and not individually and that the obligations of this Plan are not binding upon
any of the Trustees, officers or shareholders of the Fund individually but are
binding only upon the assets and property of the Fund. A Certificate of Trust in
respect of the Fund is on file with the Secretary of the State of Delaware.
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
By: __________________________
Name: Nori L. Gabert
Its: Vice President
Plan effective as of: _____________________, 1995
3
<PAGE> 1
EXHIBIT 10.2
CLASS B
DISTRIBUTION PLAN
OF
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
WHEREAS, Van Kampen American Capital Reserve Fund (the "Fund"), engages in
business as an open-end management investment company and is registered as such
under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Fund proposes to commence an offering of Class B shares at net
asset value without initial sales charge but with a contingent deferred sales
charge ("CDSC");
WHEREAS, the Fund proposes to engage in activities which are primarily intended
to result in the distribution and sale of its Class B shares, to make payments
in connection with the distribution of its Class B shares and to engage Van
Kampen American Capital Distributors, Inc. ("VKAC") to act as principal
underwriter (as defined in the Act) of its Class B shares, and desires to adopt
a Class B Shares Distribution Plan pursuant to Rule 12b-1 under the Act;
WHEREAS, VKAC proposes to compensate broker-dealers or other persons for
providing distribution assistance in the offering of Class B shares and to
compensate financial and other industry professionals that provide services to
facilitate transactions in Class B shares for their clients (such
broker-dealers, other persons, financial institutions and other industry
professionals being collectively referred to as "Service Organizations");
WHEREAS, such compensation includes commissions to dealers and transaction fees
to other Service Organizations (such commissions and transaction fees being
collectively referred to as "Transactional Compensation"), plus supplemental
payments to Service Organizations ("Service Fees") pursuant to Servicing
Agreements proposed to be offered by VKAC to such Service Organizations;
WHEREAS, VKAC may provide additional promotional incentives to certain or all
Service Organizations and proposes to incur substantial additional expenses in
rendering distribution services for Class B shares, including but not limited
to, printing prospectuses and reports for other than existing shareholders,
preparation and distribution of advertising material and sales literature,
expenses of organizing and conducting sales seminars, and other operating
expenses;
WHEREAS, the Trustees of the Fund have determined that there is a reasonable
likelihood that adoption of this Class B Distribution
<PAGE> 2
Plan will benefit the Fund and its Class B shareholders;
NOW, THEREFORE, the Fund hereby adopts this Class B Distribution Plan (the
"Plan") in accordance with Rule 12b-1 under the Act and containing the following
terms and conditions:
1. Subject to the supervision of the Trustees of the Fund, VKAC will provide the
Fund with such distribution services and facilities as the Fund may from time to
time consider necessary to enhance the sale of its Class B shares.
2. In consideration of the Transactional Compensation and Service Fees paid and
the other distribution services for Class B shares rendered by VKAC, the Fund
shall pay VKAC out of the assets attributable to the Class B shares an annual
distribution fee and service fee ("Distribution Fee and Service Fee") calculated
daily and payable weekly. The combined Distribution Fee and Service Fee shall
equal on an annual basis up to 0.90% of the average daily net assets of the
Funds' Class B shares. Only distribution expenditures of a type and amount
authorized in advance by the Fund's Trustees and properly attributable to the
sale of Class B shares will be used to justify any fee paid pursuant to this
Plan.
3. This Plan shall not take effect until it has been approved by a vote of at
least a majority (as defined in the Act) of the outstanding Class B shares of
the Fund.
4. This Plan shall not take effect until it has been approved, together with any
related agreements, by votes of the majority of both (a) the Trustees of the
Fund and (b) those Trustees of the Fund who are not "interested persons" of the
Fund (as defined in the Act) and have no direct or indirect financial interest
in the operation of this Plan or any agreements related to it (the
"Disinterested Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan or such agreements.
5. So long as the Plan remains in effect, the selection and nomination of
persons to serve as trustees of the Fund who are not "interested persons" of the
Fund shall be committed to the discretion of the Trustees then in office who are
not "interested persons" of the Fund.
6. Unless sooner terminated pursuant to Section 8, this Plan shall continue in
effect for a period of one year from the date it takes effect (which shall be
the date of the commencement of the public offering of Class B shares, provided
that the conditions of Sections 3 and 4 above have been met).
7. VKAC shall provide to the Fund's Trustees and the Trustees shall review, at
least quarterly, a written report of the expenses incurred hereunder and the
purposes for which such expenditures were made.
2
<PAGE> 3
8. The Plan may be terminated, without payment of any penalty, at any time by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the outstanding voting securities of the Fund.
9. Any agreement related to this Plan shall be in writing, and shall provide:
(a) That such agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Disinterested Trustees or by a vote of the
outstanding voting securities of the Fund, on not more than sixty days' written
notice to any other party to this agreement; and
(b) That such agreement shall terminate automatically in the event of its
assignment.
10. This Plan may not be amended to increase materially the amount of
distribution expenses provided for in Section 2 hereof unless such amendment is
approved in the manner provided in Section 3 hereof, and no material amendment
to the Plan shall be made unless approved in the manner provided for in Section
4 hereof.
11. The Fund will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 7 above, for a period of not less
than six years (the first two years in an easily accessible place) from the date
of the Plan, agreement or report.
12. The execution of this Plan has been authorized by the Fund's Trustees and by
the sole shareholder of the Class B shares of the Fund. This Plan is executed on
behalf of the Fund or the Trustees of the Fund as Trustees and not individually
and that the obligations of this Plan are not binding upon any of the Trustees,
officers or shareholders of the Fund individually but are binding only upon the
assets and property of the Fund. A Certificate of Trust in respect of the Fund
is on file with the Secretary of the State of Delaware.
Van Kampen American Capital Reserve Fund
By: _____________________________
Name: Nori L. Gabert
Its: Vice President
Plan effective as of:_________________________
3
<PAGE> 1
EXHIBIT 10.3
CLASS C
DISTRIBUTION PLAN
OF
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
WHEREAS, Van Kampen American Capital Reserve Fund (the "Fund"), engages in
business as an open-end management investment company and is registered as such
under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Fund proposes to commence an offering of Class C shares at net
asset value without initial sales charge but with a contingent deferred sales
charge ("CDSC");
WHEREAS, the Fund proposes to engage in activities which are primarily intended
to result in the distribution and sale of its Class C shares, to make payments
in connection with the distribution of its Class C shares and to engage Van
Kampen American Capital Distributors, Inc. ("VKAC") to act as principal
underwriter (as defined in the Act) of its Class C shares, and desires to adopt
a Class C Shares Distribution Plan pursuant to Rule 12b-1 under the Act;
WHEREAS, VKAC proposes to compensate broker-dealers or other persons for
providing distribution assistance in the offering of Class C shares and to
compensate financial and other industry professionals that provide services to
facilitate transactions in Class C shares for their clients (such
broker-dealers, other persons, financial institutions and other industry
professionals being collectively referred to as "Service Organizations");
WHEREAS, such compensation includes commissions to dealers and transaction fees
to other Service Organizations (such commissions and transaction fees being
collectively referred to as "Transactional Compensation"), plus supplemental
payments to Service Organizations ("Service Fees") pursuant to Servicing
Agreements proposed to be offered by VKAC to such Service Organizations;
WHEREAS, VKAC may provide additional promotional incentives to certain or all
Service Organizations and proposes to incur substantial additional expenses in
rendering distribution services for Class C shares, including but not limited
to, printing prospectuses and reports for other than existing shareholders,
preparation and distribution of advertising material and sales literature,
expenses of organizing and conducting sales seminars, and other operating
expenses;
WHEREAS, the Trustees of the Fund have determined that there is a reasonable
likelihood that adoption of this Class C Distribution
<PAGE> 2
Plan will benefit the Fund and its Class C shareholders;
NOW, THEREFORE, the Fund hereby adopts this Class C Distribution Plan (the
"Plan") in accordance with Rule 12b-1 under the Act and containing the following
terms and conditions:
1. Subject to the supervision of the Trustees of the Fund, VKAC will provide the
Fund with such distribution services and facilities as the Fund may from time to
time consider necessary to enhance the sale of its Class C shares.
2. In consideration of the Transactional Compensation and Service Fees paid and
the other distribution services for Class C shares rendered by VKAC, the Fund
shall pay VKAC out of the assets attributable to the Class C shares an annual
distribution fee and service fee ("Distribution Fee and Service Fee") calculated
daily and payable weekly. The combined Distribution Fee and Service Fee shall
equal on an annual basis up to 0.90% of the average daily net assets of the
Funds' Class C shares. Only distribution expenditures of a type and amount
authorized in advance by the Fund's Trustees and properly attributable to the
sale of Class C shares will be used to justify any fee paid pursuant to this
Plan.
3. This Plan shall not take effect until it has been approved by a vote of at
least a majority (as defined in the Act) of the outstanding Class C shares of
the Fund.
4. This Plan shall not take effect until it has been approved, together with any
related agreements, by votes of the majority of both (a) the Trustees of the
Fund and (b) those Trustees of the Fund who are not "interested persons" of the
Fund (as defined in the Act) and have no direct or indirect financial interest
in the operation of this Plan or any agreements related to it (the
"Disinterested Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan or such agreements.
5. So long as the Plan remains in effect, the selection and nomination of
persons to serve as trustees of the Fund who are not "interested persons" of the
Fund shall be committed to the discretion of the Trustees then in office who are
not "interested persons" of the Fund.
6. Unless sooner terminated pursuant to Section 8, this Plan shall continue in
effect for a period of one year from the date it takes effect (which shall be
the date of the commencement of the public offering of Class C shares, provided
that the conditions of Sections 3 and 4 above have been met).
7. VKAC shall provide to the Fund's Trustees and the Trustees shall review, at
least quarterly, a written report of the expenses incurred hereunder and the
purposes for which such expenditures were made.
2
<PAGE> 3
8. The Plan may be terminated, without payment of any penalty, at any time by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the outstanding voting securities of the Fund.
9. Any agreement related to this Plan shall be in writing, and shall provide:
(a) That such agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Disinterested Trustees or by a vote of the
outstanding voting securities of the Fund, on not more than sixty days' written
notice to any other party to this agreement; and
(b) That such agreement shall terminate automatically in the event of its
assignment.
10. This Plan may not be amended to increase materially the amount of
distribution expenses provided for in Section 2 hereof unless such amendment is
approved in the manner provided in Section 3 hereof, and no material amendment
to the Plan shall be made unless approved in the manner provided for in Section
4 hereof.
11. The Fund will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 7 above, for a period of not less
than six years (the first two years in an easily accessible place) from the date
of the Plan, agreement or report.
12. The execution of this Plan has been authorized by the Fund's Trustees and by
the sole shareholder of the Class C shares of the Fund. This Plan is executed on
behalf of the Fund or the Trustees of the Fund as Trustees and not individually
and that the obligations of this Plan are not binding upon any of the Trustees,
officers or shareholders of the Fund individually but are binding only upon the
assets and property of the Fund. A Certificate of Trust in respect of the Fund
is on file with the Secretary of the State of Delaware.
Van Kampen American Capital Reserve Fund
By: ___________________________
Name: Nori L. Gabert
Its: Vice President
Plan effective as of:________________________
3
<PAGE> 1
EXHIBIT 10.4
SERVICING AGREEMENT RELATING TO SHARES OF
CERTAIN AMERICAN CAPITAL MUTUAL FUNDS
- --------------------------------------------------------------------------------
Dear Sir:
This Service Agreement (the "Agreement") between Van Kampen American Capital
Distributors, Inc. ("VKAC") and the undersigned authorized dealer defines the
services to be provided by the authorized dealer for which it may receive
payment pursuant to Distribution Plans (hereinafter severally referred to as the
"Plan") adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Act") by certain mutual funds for which VKAC serves as distributor (the
"Funds"). Each such fund has acted severally and not jointly in adopting the
Plan and the agreement and hereinafter is referred to severally as the "Fund".
The Plan and the Agreement have been approved by a majority of the Trustees of
the Fund including a majority of the Trustees who are not interested persons of
the Fund and who have no direct or indirect financial interest in the operation
of the Plan or any related agreements (the "non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on the Plan. Such approval
included a determination that in the exercise of their reasonable business
judgement and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders. The Plan
has also been approved by a vote of a majority of the Fund's outstanding voting
securities, as defined in the Act.
- --------------------------------------------------------------------------------
1 To the extent you provide distribution assistance and administrative support
services to Customers who may from time to time, directly or beneficially own
shares, including but not limited to, distributing prospectuses and sales
literature, answering routine Customer inquiries regarding the Fund, assisting
Customers in changing divided options, account designations and addresses, and
in enrolling into the pre-authorized check plan, systematic withdrawal plan or
any of several tax sheltered retirement plans offered in connection with the
purchase of shares in the case of those Funds offering such Plans, assisting in
the establishment and maintenance of customer accounts and records and in the
processing of purchase and redemption transactions, investing dividends and
capital gains distributions automatically in shares and providing such other
services as the Fund or the Customer may reasonably request, we shall pay you
quarterly a fee as indicated in each Fund's then current prospectus based on the
net asset value of Fund shares owned shareholders whose shares are owned of
record by your firm as nominee for your Customers or which are owned by those
Customers of your firm whose records, as maintained by the Fund or its Agents,
designate your firm as the Customer's dealer of record. No such quarterly fee
will be paid to you with respect to shares purchased by you and redeemed or
repurchased by the Fund or by us as Agent within seven (7) business days after
the date of our confirmation of such purchase. No such fee shall be payable with
respect to shares purchased at net asset value without a sales charge by
investors of the classes described in the Fund's Prospectus pursuant to Rule
22d-1 under the Act, other than classes of net asset value categories pursuant
to Rule 22d-1 as may from time to time be approved by the Fund.
- --------------------------------------------------------------------------------
<PAGE> 2
2 By accepting such fee you agree to assign a representative to each account, to
require such representative to contact the Customer regularly and to pay at
least a portion of such fee to such representative. Additionally, you understand
that VKAC will monitor service levels which you provide to your Customers
pursuant to this agreement and that consistently low levels of service will
result in non-payment of the fee.
- --------------------------------------------------------------------------------
3 In accordance with your agreement to provide distribution assistance, you
agree to use your best efforts to support the asset value of the Fund to the
extent consistent with the suitability requirements of your Customer. You
understand that VKAC will monitor levels of redemption and that redemption
levels consistently above those dictated by market conditions will result in
non-payment of the fee.
- --------------------------------------------------------------------------------
4 This Agreement does not require any authorized dealer to hold Fund shares in
street name or to provide shareholder accounting and record keeping services for
any Customers who are beneficial owners of Fund shares.
- --------------------------------------------------------------------------------
5 You shall furnish us and the Fund with such information as shall reasonably be
requested by either the Trustees of the Fund or by us with respect to the fees
paid to you pursuant to this Agreement.
- --------------------------------------------------------------------------------
6 We shall furnish to the Trustees of the Fund, for their review on a quarterly
basis, a written report of the amounts expended under the Plan by us and the
purposes for which such expenditures were made.
- --------------------------------------------------------------------------------
7 Neither you nor any of your employees or agents are authorized to make any
representation concerning shares of the Fund except those contained in the then
current Prospectus for the Fund, and you shall have no authority to act as Agent
for the Fund or for VKAC.
- --------------------------------------------------------------------------------
8 We may enter into other similar Servicing Agreements with any other person
without your consent.
- --------------------------------------------------------------------------------
9 This Agreement may be terminated with respect to any Fund at any time without
payment of any penalty by the vote of a majority of the non-interested Trustees
or by a vote of a majority of the Fund's outstanding shares, on sixty (60) days
written notice. It will be terminated by any act which terminates either the
Fund's Underwriting Agreement with us or the Selling Group Agreement between
your firm and us and shall terminate automatically in the event of its
<PAGE> 3
assignment as that term is defined in the Act.
- --------------------------------------------------------------------------------
10 The provisions of the Underwriting Agreement between the Fund and us, insofar
as they relate to the Plan, are incorporated herein by reference. This Agreement
shall become effective upon execution and delivery hereof and shall continue in
full force and effect so long as the continuance of the Plan and this related
Agreement are approved at least annually by a vote of the Fund's Trustees,
including a majority of the non-interested Trustees, cast in person at a meeting
called for the purpose of voting thereon. All communications to us should be
sent to the foregoing address. Any notice to you shall be duly given if mailed
or telegraphed to you at the address specified by you below.
- --------------------------------------------------------------------------------
11 As described in the prospectus of each Fund which is organized as a trust,
the Agreement and Declaration of Trust ("Declaration") establishing such Trust,
provides that the name of the Trust refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no Trustee,
shareholder or officer of said Trust shall be held to any personal liability,
nor shall resort be had to their private property for satisfaction of any
obligation or claim or otherwise in connection with the affairs of said Trust,
but only the assets and property of the Trust, or of the particular series of
the Trust in question, as the case may be, shall be liable. In the case of each
Fund comprised of series, all obligations of such Fund under this Agreement
shall apply only on a series by series basis and the assets of one series shall
not be liable for the obligations of any other series.
- --------------------------------------------------------------------------------
12 This Agreement shall be construed in accordance with the laws of the State of
Texas.
Van Kampen American Capital Distributors, Inc.
Dated_______________19____ By:_____________________________
Accepted:
_____________________________
Please sign both copies and return to:
Van Kampen American Capital Distributors, Inc. _____________________________
P.O. Box 1411
Houston, TX 77251-1411
By:_____________________________
Title:__________________________
<PAGE> 1
EXHIBIT 10.5
SERVICING AGREEMENT RELATING TO SHARES OF
CERTAIN AMERICAN CAPITAL MUTUAL FUNDS FOR
BANKS AND BANK AFFILIATED BROKER / DEALERS
- --------------------------------------------------------------------------------
Dear Sir:
This Servicing Agreement (the "Agreement") between Van Kampen American Capital
Distributors, Inc. ("VKAC") and the undersigned authorized bank or bank
affiliated dealer defines the services to be provided by the authorized bank or
bank affiliated dealer for which it may receive payment pursuant to Distribution
Plans (hereinafter severally referred to as the "Plan") adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "Act") by certain mutual
funds for which VKAC serves as distributor (the "Funds"). Each such fund has
acted severally and not jointly in adopting the Plan and the Agreement and
hereinafter is referred to severally as the "Fund". The Plan and the Agreement
have been approved by a majority of the Trustees of the Fund including a
majority of Trustees who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or any
related agreements (the "non-interested Trustees"), cast in person at a meeting
called for the purpose of voting on the Plan. Such approval included a
determination that in the exercise of their reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders. The Plan has also been approved by a
vote of a majority of the Fund's outstanding voting securities, as defined in
the Act.
- --------------------------------------------------------------------------------
1 To the extent you provide administrative support services to your agency
clients who may from time to time, directly or beneficially own shares,
including but not limited to, distributing prospectuses, performing
sub-accounting, answering routine shareholder inquiries regarding the Fund,
assisting shareholders in changing dividend options, account designations and
addresses, and in enrolling into the pre-authorized check plan, systematic
withdrawal plan or any of several tax sheltered retirement plans offered in
connection with the purchase of shares in the case of those Funds offering such
Plans, assisting in the establishment and maintenance of customer accounts and
records and in the processing of purchase and redemption transaction, investing
dividends and capital gains distributions automatically in shares and providing
such other services as the Fund or your client may reasonably request, to the
extent you are permitted by applicable statute, rule or regulation to provide
such services, we shall pay you quarterly a fee as indicated in each Fund's then
current prospectus based on the net asset value of Fund shares owned by
shareholders whose shares are owned of record by your bank or bank affiliated
dealer as nominee for your clients or which are owned by your agency clients
whose records, as maintained by the Fund or its Agent, designate your bank or
bank affiliated dealer as the shareholder's dealer of record. No such quarterly
fee will be paid to you with respect to shares purchased by your agency client
and redeemed or repurchased by the Fund or by us as Agent within seven (7)
<PAGE> 2
business days after the date of our confirmation of such purchase. No such fee
shall be payable with respect to shares purchased at net asset value without a
sales charge by investors of the classes described in the Fund's Prospectus
pursuant to Rule 22d-1 under the Act, other than classes of net asset value
categories pursuant to Rule 22d-1 as may from time to time be approved by the
Board.
- --------------------------------------------------------------------------------
2 By accepting such fee you agree to contact your client regularly.
Additionally, you understand that VKAC will monitor service levels which you
provide to your Customers pursuant to this agreement and that consistently low
levels of service will result in non-payment of the fee.
- --------------------------------------------------------------------------------
3 This Agreement does not require any authorized bank or bank affiliated dealer
to hold Fund shares in street name or to provide shareholder accounting and
record keeping services for any clients who are beneficial owners of Fund
shares.
- --------------------------------------------------------------------------------
4 You shall furnish us and the Fund with such information as shall reasonably be
requested by either the Trustees of the Fund or by us with respect to the fees
paid to you pursuant to this Agreement.
- --------------------------------------------------------------------------------
5 We shall furnish to the Trustees of the Fund, for their review on a quarterly
basis, a written report of the amounts expended under the Plan by us and the
purposes for which such expenditures were made.
- --------------------------------------------------------------------------------
6 Neither you nor any of your employees or agents are authorized to make any
representation concerning shares of the Fund except those contained in the then
current prospectus for the Fund, and you shall have no authority to act as agent
for the Fund or for VKAC.
- --------------------------------------------------------------------------------
7 We may enter into other similar Servicing Agreements with any other person
without your consent.
- --------------------------------------------------------------------------------
8 This Agreement may be terminated with respect to any Fund at any time without
payment of any penalty by the vote of a majority of the non-interested Trustees
or by a vote of a majority of the Fund's outstanding shares on sixty (60) days
written notice. It will be terminated by any act
<PAGE> 3
which terminates either the Fund's Underwriting Agreement with us or the Selling
Group Agreement between you and us and shall terminate automatically in the
event of its assignment as that term is defined in the Act.
- --------------------------------------------------------------------------------
9 The provisions of the Underwriting Agreement between the Fund and us, insofar
as they relate to the Plan, are incorporated herein by reference. This Agreement
shall become effective upon execution and delivery hereof and shall continue in
full force and effect so long as the continuance of the Plan and this related
Agreement are approved at least annually by a vote of the Fund's Trustees,
including a majority of the non-interested Trustees, cast in person at a meeting
called for the purpose of voting thereon. All communications to us should be
sent to the foregoing address. Any notice to you shall be duly given if mailed
or telegraphed to you at the address specified by you below.
- --------------------------------------------------------------------------------
10 As described in the prospectus of each Fund which is organized as a trust,
the Agreement and Declaration of Trust ("Declaration") establishing such Trust,
provides that the name of the Trust refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no Trustee,
shareholder or officer of said Trust shall be held to any personal liability,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of said Trust,
but only the assets and property of the Trust, or of the particular series of
the Trust in question, as the case may be, shall be liable. In the case of each
Fund comprised of series, all obligations of such Fund under this Agreement
shall apply only on a series by series basis and the assets of one series shall
not be liable for the obligations of any other series.
- --------------------------------------------------------------------------------
11 This Agreement shall be construed in accordance with the laws of the State of
Texas.
Van Kampen American Capital Distributors, Inc.
Dated _____________19___ By:____________________________________________
Accepted:
____________________________________________
Bank or Dealer's Name
____________________________________________
Address
By:____________________________________________
Title:_________________________________________
<PAGE> 1
EXHIBIT 11
[O'MELVENY & MEYERS LETTERHEAD]
July 31, 1995
WRITER'S DIRECT DIAL NUMBER OUR FILE NUMBER
(213) 669-6690 019,628-001
LA1-674729,V1
Van Kampen American Capital Reserve
Fund, a Delaware business trust
2800 Post Oak Boulevard
Houston, Texas 77056
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form N-14
(the "Registration Statement") filed by your predecessor, American Capital
Reserve Fund, Inc., a Maryland corporation, on May 26, 1995 with the Securities
and Exchange Commission ("SEC") and the form of Amendment No. 1 to the
Registration Statement to be filed by you with the SEC in connection with the
proposed acquisition by you of the assets of Van Kampen American Capital Money
Market Fund (the "Disappearing Fund"), a series of Van Kampen American Capital
Money Market Trust, a Delaware business trust. Pursuant to the acquisition,
the assets and liabilities of the Disappearing Fund will be transferred to you
in exchange for your shares of beneficial interest, $0.01 par value (the
"Shares"), which will be distributed to the shareholders of the Disappearing
Fund. We are familiar with the proceedings taken and proposed to be taken by
you in connection with the authorization, issuance and sale of the Shares.
Based upon our examination and upon our knowledge of your business trust
activities, it is our opinion that the Shares will, when issued and sold in th
manner described in Amendment No. 1 to the Registration Statement, be validly
issued, fully paid and nonassessable.
<PAGE> 2
Page 2 - Van Kampen American Capital Reserve Fund -
July 31, 1995
In rendering this opinion, we have relied in part as to matters of
Delaware law upon the opinion of Skadden, Arps, Slate, Meagher & Flom of even
date herewith, a copy of which has been delivered to you. We consent to the
filing of this opinion as an exhibit to Amendment No. 1 to the Registration
Statement.
Respectfully submitted,
O'MELVENY & MYERS
<PAGE> 1
EXHIBIT 12
[Letterhead of Skadden, Arps, Slate, Meagher & Flom]
September _____, 1995
Van Kampen American Capital
Money Market Fund
One Parkview Plaza
Oak Brook Terrace, Illinois 60181
Van Kampen American Capital Reserve Fund
2800 Post Oak Boulevard
Houston, Texas 77056
Ladies and Gentlemen:
You have requested our opinion as to certain Federal income tax
consequences of the acquisition by the Van Kampen American Capital Reserve
Fund (the "AC Fund"), a Delaware business trust, of all of the assets of
the Van Kampen American Capital Money Market Fund (the "VK Fund"), a series of
Van Kampen American Capital Money Market Trust, a Delaware business trust (the
"VKAC Trust"), solely in exchange for full and fractional Class A and Class B
voting shares of beneficial interest of the AC Fund and the assumption by the
AC Fund of the liabilities of the VK Fund and the subsequent liquidation of the
VK Fund (the "Acquisition"), pursuant to the Agreement and Plan of
Reorganization dated as of [September ___, 1995], by and between the AC Fund and
VKAC Trust on behalf of the VK Fund (the "Agreement"). Specifically, you have
requested our opinion as to whether for Federal income tax purposes the
Acquisition will qualify as a reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
In connection with rendering our opinion, we have examined and are
familiar with originals or copies, certified or otherwise identified to our
satisfaction, of the Agreement, the Registration Statement of the AC Fund on
Form N-14, as filed with the Securities and Exchange Commission
on _______, 1995 (the "Registration Statement") and such other records and
documents as we have deemed necessary or appropriate as a basis for the
opinions set forth below. We have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all records and
documents
<PAGE> 2
Van Kampen American Capital
Money Market Fund
Van Kampen American Capital Reserve Fund, Inc.
September ____, 1995
Page 2
submitted to us as originals, the conformity to original records and documents
of all records and documents submitted to us as certified, conformed or
photostatic copies and the authenticity of the originals of such copies. As to
any facts material to this opinion that we did not independently establish or
verify, we have relied upon statements and representations of officers and
other representatives of the AC Fund, the VKAC Trust and VK Fund. In rendering
this opinion, we have assumed that the transactions will be consummated in
accordance with the descriptions thereof set forth in such records and
documents and that such records and documents accurately reflect the material
facts of the transactions. Our opinion is limited to legal rather than factual
matters.
In rendering our opinion, we have relied upon the Code, Treasury
Regulations, legislative history, judicial authorities, published positions of
the Internal Revenue Service and such other authorities as we have considered
relevant, all in effect as of the date hereof and all of which are subject to
change or differing interpretation (possibly on a retroactive basis).
On the basis of and subject to the foregoing, we are of the opinion
that:
(1) The acquisition by the AC Fund of all of the assets of the VK Fund
in exchange solely for Class A and Class B Shares of the AC Fund and the
assumption by the AC Fund of the liabilities of the VK Fund and the subsequent
liquidation of the VK Fund will qualify as a reorganization within the meaning
of Section 368(a)(1) of the Code.
(2) No gain or loss will be recognized by the VK Fund or the AC Fund
upon the transfer to the AC Fund of the assets of the VK Fund in exchange
solely for the Class A and Class B Shares of the AC Fund and the assumption by
the AC Fund of the liabilities of the VK Fund, or on the distribution of such
Class A and Class B Shares of the AC Fund by the VK Fund to its shareholders.
(3) The AC Fund's basis in the VK Fund assets received in the
Acquisition will, in each instance, equal the basis of such assets in the hands
of the VK Fund immediately prior to the transfer, and the AC Fund's
2
<PAGE> 3
Van Kampen American Capital
Money Market Fund
Van Kampen American Capital Reserve Fund, Inc.
September ___, 1995
Page 3
holding period of such assets will, in each instance, include the period during
which the assets were held by the VK Fund.
(4) No gain or loss will be recognized by any shareholder of the VK
Fund upon the exchange of their shares of the VK Fund solely for the Class A
and Class B Shares, respectively, of the AC Fund.
(5) The aggregate tax basis of the Class A and Class B Shares of the AC
Fund received by the shareholders of the VK Fund will be the same as the
aggregate tax basis of the shares of the VK Fund surrendered in exchange
therefor.
(6) The holding period of the Class A and Class B Shares of the AC Fund
received by a shareholder of the VK Fund will include the holding period of
the shares of the VK Fund surrendered in exchange therefor if such surrendered
shares are held as capital assets by such shareholder on the date of the
exchange.
We express no opinion as to any Federal tax consequences other than as
set forth in this letter or as to any tax consequences under state, local or
foreign law. We hereby consent to the filing of this opinion letter as an
exhibit to the Registration Statement. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations
promulgated thereunder.
Very truly yours,
3
<PAGE> 1
EXHIBIT 14.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of the registration statement on Form N-14 (the "Registration
Statement") of our report dated July 5, 1994, relating to the financial
statements and financial highlights of the American Capital Reserve Fund, Inc.,
the predecessor of the registrant under the Registration Statement, which
appears in such Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Houston, Texas
July 26, 1995
<PAGE> 1
EXHIBIT 14.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Van Kampen Merritt Money Market Fund:
We consent to the use of our report included herein.
KPMG Peat Marwick LLP
Chicago, Illinois
July 26, 1995
<PAGE> 1
EXHIBIT 16
POWER OF ATTORNEY
The undersigned, being officers and trustees of Van Kampen American Capital
Reserve Fund, a Delaware business trust (the "Trust"), do hereby, in the
capacities shown below, individually appoint Dennis J. McDonnell and Ronald A.
Nyberg, each of Oakbrook Terrace, Illinois, and each of them, as the agents and
attorneys-in-fact with full power of substitution and resubstitution, for each
of the undersigned, to execute and deliver, for and on behalf of the
undersigned, the amendment to the Registration Statement on Form N-14
("Registration Statement") to be filed with the Securities and Exchange
Commission on or about August 4, 1995, pursuant to the provisions of the
Securities Act of 1933, and any and all amendments to the Registration Statement
which may be filed by the Trust with the Securities and Exchange Commission.
This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together shall constitute one
instrument.
Dated: July 25, 1995
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ J. MILES BRANAGAN Trustee
-----------------------------------
J. Miles Branagan
/s/ RICHARD E. CARUSO Trustee
-----------------------------------
Richard E. Caruso
/s/ PHILIP P. GAUGHAN Trustee
-----------------------------------
Philip P. Gaughan
/s/ ROGER HILSMAN Trustee
-----------------------------------
Roger Hilsman
/s/ R. CRAIG KENNEDY Trustee
-----------------------------------
R. Craig Kennedy
/s/ DONALD C. MILLER Trustee
-----------------------------------
Donald C. Miller
/s/ CURTIS W. MORELL Principal Financial and Accounting Officer
-----------------------------------
Curtis W. Morell
/s/ JACK E. NELSON Trustee
-----------------------------------
Jack E. Nelson
/s/ DON G. POWELL President, Principal Executive Officer and
----------------------------------- Trustee
Don G. Powell
/s/ DAVID REES Trustee
-----------------------------------
David Rees
/s/ JEROME L. ROBINSON Trustee
-----------------------------------
Jerome L. Robinson
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<S> <C>
/s/ LAWRENCE J. SHEEHAN Trustee
- ---------------------------------------------
Lawrence J. Sheehan
Chairman and Trustee
- ---------------------------------------------
Fernando Sisto
/s/ WAYNE W. WHALEN Trustee
- ---------------------------------------------
Wayne W. Whalen
/s/ WILLIAM S. WOODSIDE Trustee
- ---------------------------------------------
William S. Woodside
</TABLE>
<PAGE> 1
EXHIBIT 17.1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 1995
REGISTRATION NO. 2-50870
NO. 811-2482
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 36 /X/
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 21 /X/
</TABLE>
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
2800 POST OAK BLVD., HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (713) 993-0500
RONALD A. NYBERG, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
VAN KAMPEN AMERICAN CAPITAL ASSET, INC.
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, IL 60181
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
COPY TO:
GEORGE M. BARTLETT, ESQ.
O'MELVENY & MEYERS
400 SOUTH HOPE STREET
LOS ANGELES, CA 90071
Approximate Date of Proposed Public Offering: As soon as practicable following
effectiveness of this Registration Statement.
---------------------
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/X/ on July 31, 1995 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Exhibit Index required by Rule 483(a) under the Securities Act of 1933
is located at page of the manually signed copy of this Registration
Statement.
DECLARATION PURSUANT TO RULE 24F-2.
REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES UNDER THE SECURITIES
ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940 AND,
PURSUANT TO PARAGRAPH (B)(2). REGISTRANT INTENDS TO FILE A RULE 24F-2 NOTICE FOR
ITS LAST FISCAL YEAR ON OR BEFORE JULY 31, 1995.
PURSUANT TO A TRANSACTION SCHEDULED TO BE EFFECTIVE JULY 31, 1995, AMERICAN
CAPITAL RESERVE FUND, INC., A MARYLAND CORPORATION, WILL BE COMBINED WITH VAN
KAMPEN AMERICAN CAPITAL RESERVE FUND, A DELAWARE BUSINESS TRUST. UPON
EFFECTIVENESS OF THE COMBINATION AND PURSUANT TO RULE 414 UNDER THE SECURITIES
ACT OF 1933, VAN KAMPEN AMERICAN CAPITAL RESERVE FUND ("SUCCESSOR REGISTRANT"),
ADOPTS AND SUCCEEDS TO THE REGISTRATION STATEMENT OF AMERICAN CAPITAL RESERVE
FUND, INC. AMERICAN CAPITAL RESERVE FUND, INC. HAS IN THE PAST REGISTERED AN
INDEFINITE NUMBER OF SHARES OF COMMON STOCK UNDER THE SECURITIES ACT OF 1933
PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940. UPON THE
EFFECTIVE DATE OF THE COMBINATION, SUCCESSOR REGISTRANT HEREBY ADOPTS AND
SUCCEEDS TO ANY PRIOR RULE 24F-2 NOTICES OF AMERICAN CAPITAL RESERVE FUND, INC.
SUCCESSOR REGISTRANT PROPOSES TO FILE ANY NOTICE REQUIRED BY RULE 24F-2.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 17.2
PROXY
VAN KAMPEN AMERICAN CAPITAL MONEY MARKET FUND
SPECIAL MEETING OF SHAREHOLDERS
August 3, 1995
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE VAN KAMPEN AMERICAN CAPITAL MONEY
MARKET FUND, A SERIES OF THE VAN KAMPEN AMERICAN CAPITAL MONEY MARKET TRUST.
The undersigned holder of shares of beneficial interest, $.01 par value (the
"Shares"), of the Van Kampen American Capital Money Market Fund ("VK Fund"), a
series of Van Kampen American Capital Money Market Trust, a Delaware business
trust, hereby appoint Ronald A. Nyberg, Don G. Powell, Dennis J. McDonnell and
Nori L. Gabert, and each of them, with full power of substitution and
revocation, as proxies to represent the undersigned at the Special Meeting of
Shareholders to be held at the Hyatt Regency Oak Brook, 1909 Spring Road, Oak
Brook, Illinois, 60521, on Friday, September 15, 1995 at 2:00 p.m., and any and
all adjournments thereof (the "Special Meeting"), and thereat to vote all Shares
of beneficial interest which the undersigned would be entitled to vote, with all
powers the undersigned would possess if personally present, in accordance with
the following instructions:
<TABLE>
<S> <C> <C> <C> <C> <C>
1. FOR AGAINST ABSTAIN
------ ------ ------ The proposal to approve the Reorganization pursuant to
which the VK Fund would transfer substantially all of its
------ ------ ------ assets and liabilities to the Van Kampen American Capital
Reserve Fund (the "AC Fund") in exchange for shares of
the AC Fund, which shares would be distributed to each
shareholder of the VK Fund and the VK Fund would be
dissolved, as more fully described in the Proxy
Statement/ Prospectus.
2. To act upon any and all other business which may come
before the Special Meeting or any adjournment thereof.
</TABLE>
If more than one of the proxies, or their substitutes, are present at the
Special Meeting or any adjournment thereof, they jointly (or, if only one
is present and voting then that one) shall have authority and may exercise
all powers granted hereby. This Proxy, when properly executed, will be
voted in accordance with the instructions marked hereon by the undersigned.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSALS DESCRIBED ABOVE AND IN THE DISCRETION OF THE PROXIES UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Account No. No. of Shares Class of Shares Proxy No.
The undersigned hereby acknowledges receipt of the accompanying Notice of
Special Meeting and Proxy Statement for the Special Meeting to be held on
September 15, 1995.
Dated
------------------------ , 1995
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Signature(s)
Please sign exactly as your name or names appear on this Proxy. When signing as
attorney, trustee, executor, administrator, custodian, guardian or corporate
officer, please give full title. If shares are held jointly, each holder should
sign.
<PAGE> 1
EXHIBIT 17.3
- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
MONEY MARKET FUND
- --------------------------------------------------------------------------------
Van Kampen American Capital Money Market Fund, formerly known as Van Kampen
Merritt Money Market Fund (the "Money Fund"), is a money market mutual fund
whose investment objective is to provide high current income consistent with the
preservation of capital and liquidity through investments in a broad range of
money market instruments that will mature within 12 months of the date of
purchase.
The Money Fund is a separate series of the Van Kampen American Capital Money
Market Trust, a Delaware business trust (the "Trust"). The portfolio of the
Money Fund is managed by Van Kampen American Capital Investment Advisory Corp.
(the "Adviser").
An investment in the Money Fund is neither insured nor guaranteed by the U.S.
government. There can be no assurance that the Money Fund will be able to
maintain a stable net asset value of $1.00 per share.
The Money Fund offers two classes of shares designated Class A Shares and
Class B Shares. Class A Shares are available at their net asset value per share
without a sales charge. Class B Shares are offered at net asset value, but are
subject to a contingent deferred sales charge, and therefore are subject to
expenses higher than expenses normally applicable to shares of money market
funds that are not subject to a contingent deferred sales charge. Class B Shares
may be acquired only by exchange of Class B Shares of other funds in the Van
Kampen American Capital family of funds and are offered for temporary investment
purposes between investments in such other funds.
The Money Fund's shareholders are considering a proposal to reorganize the
Money Fund into the Van Kampen American Capital Reserve Fund. See "The Fund."
This Prospectus concisely sets forth the information about the Money Fund and
the Trust that a prospective investor should know before investing in the Money
Fund. Please read and retain this Prospectus for future reference. The address
of the Money Fund is One Parkview Plaza, Oakbrook Terrace, Illinois 60181, and
its telephone number is (800) 421-5666.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
SHARES OF THE MONEY FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE MONEY FUND INVOLVE
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information, dated August 1, 1995 containing
additional information about the Money Fund and the Trust, has been filed with
the Securities and Exchange Commission and is hereby incorporated by reference
in its entirety into this Prospectus. A copy of the Money Fund's Statement of
Additional Information may be obtained without charge by calling (800) 421-5666
or for Telecommunication Device for the Deaf at (800) 772-8889.
------------------
VAN KAMPEN AMERICAN CAPITAL SM
------------------
THIS PROSPECTUS IS DATED AUGUST 1, 1995.
<PAGE> 2
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder Transaction Expenses.......................................................... 3
Annual Fund Operating Expenses and Example................................................ 3
Financial Highlights...................................................................... 5
The Fund.................................................................................. 6
Investment Objective and Policies......................................................... 7
Investment Practices...................................................................... 7
Investment Advisory Services.............................................................. 8
Purchase of Shares........................................................................ 9
Distributions from the Fund............................................................... 14
Shareholder Services...................................................................... 15
Redemption of Shares...................................................................... 15
The Distribution and Service Plans........................................................ 20
Tax Status................................................................................ 21
Description of Shares of the Fund......................................................... 22
Additional Information.................................................................... 23
</TABLE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER, OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
2
<PAGE> 3
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------- ---------------
<S> <C> <C>
Maximum sales charge imposed on purchases (as a percentage of
the offering price)......................................... None None
Maximum sales charge imposed on reinvested dividends (as a
percentage of the offering price)........................... None None(1)
Deferred sales charge (as a percentage of the lesser of the
original purchase price or redemption proceeds)............. None Year
1--3.00%(2)
Year 2--2.00%
Year 3--1.00%
After--None
Redemption fees (as a percentage of amount redeemed).......... None None
Exchange fees................................................. None None
</TABLE>
- ---------------
(1) Class B Shares received as reinvested dividends are subject to a 12b-1 fee,
a portion of which may indirectly pay for the initial sales commission
incurred on behalf of the investor. See "The Distribution and Service
Plans."
(2) Class B Shares acquired through use of the exchange privilege are subject to
the higher of the Money Fund's contingent deferred sales charge schedule or
the highest contingent deferred sales charge schedule previously applicable
to the investor's Class B Shares.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
---------- -------------
<S> <C> <C>
Management Fees(1) (as a percentage of average daily net assets
net of waiver)................................................. 0.01% 0.01%
12b-1 Fees(2) (as a percentage of average daily net assets)...... 0.25% 1.00%
Other Expenses (as a percentage of average daily net assets)..... 0.82% 0.88%
Total Expenses (as a percentage of average daily net assets net
of waiver)..................................................... 1.08% 1.89%
</TABLE>
- ---------------
(1) The Adviser waived its "Management Fees" of the Money Fund for the Money
Fund's six-month period ended December 31, 1994. Absent the Adviser's waiver
of its fee of the Money Fund, "Management Fees" would have been 0.50% for
each class of shares and "Total Expenses" would have been 1.57% for Class A
Shares and 2.38% for Class B Shares, respectively.
(2) Such fees include a service fee of up to 0.25% paid by the Money Fund to
investors' broker-dealers as compensation for ongoing services rendered to
investors.
3
<PAGE> 4
EXAMPLE:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (i) an operating expense ratio of 1.08% for Class
A Shares and 1.89% for Class B Shares, (ii) 5% annual
return and (iii) redemption at the end of each time period:
Class A Shares............................................. $11 $34 $ 60 $ 132
Class B Shares............................................. $49 $69 $ 102 $ 190*
An investor would pay the following expenses on the same
$1,000 investment assuming no redemption at the end of each
period:
Class A Shares............................................. $11 $34 $ 60 $ 132
Class B Shares............................................. $19 $59 $ 102 $ 190*
</TABLE>
- ---------------
* Based on conversion to Class A Shares after six years.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Money Fund will bear
directly or indirectly. The "Example" reflects expenses based on the "Annual
Fund Operating Expenses" table as shown above carried out to future years. It is
expected that as Money Fund assets increase, the fees waived or expenses
reimbursed by the Adviser will decrease. Accordingly, it is unlikely that future
expenses as projected will remain consistent with those determined based on the
table of the "Annual Fund Operating Expenses." Class B Shares acquired through
the exchange privilege are subject to the higher of the Money Fund's contingent
deferred sales charge or the highest contingent deferred sales charge schedule
previously applicable to the investor's Class B Shares. Accordingly, future
expenses as projected could be higher than those determined in the above table
if the investor's Class B Shares were exchanged from a fund with a higher
contingent deferred sales charge. THE INFORMATION CONTAINED IN THE ABOVE TABLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. For more complete
description of such costs and expenses, see "Investment Advisory Services" and
"The Distribution and Service Plans."
4
<PAGE> 5
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (for one share outstanding throughout the period)
- --------------------------------------------------------------------------------
The following schedule presents financial highlights for one Class A Share and
one Class B Share of the Money Fund or its predecessor fund outstanding
throughout the periods indicated. The information for the nine years ended June
30, 1994 has been audited by KPMG Peat Marwick LLP, independent certified public
accountants unless otherwise indicated. The information for the year ended June
30, 1985, was audited by other independent certified public accountants whose
report thereon was unqualified. This information should be read in conjunction
with the financial statements and related notes thereto included in the
Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A SHARES(2)
-------------------------------------------------------------
SIX MONTHS YEAR ENDED JUNE 30,
ENDED -------------------------------------------------------------
DECEMBER 31, 1994 1993 1992 1991 1990 1989 1988 1987
1994 ----- ----- ----- ----- ----- ----- ----- -----
------------
UNAUDITED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................. $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Investment Income.............................. .019 .025 .023 .041 .065 .078 .078 .066 .056
----- ----- ----- ----- ----- ----- ----- ----- -----
Total from Investment Operations..................... .019 .025 .023 .041 .065 .078 .078 .066 .056
----- ----- ----- ----- ----- ----- ----- ----- -----
Less Distributions from Net Investment Income........ .019 .025 .023 .041 .065 .078 .078 .066 .056
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period....................... $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
========== ===== ===== ===== ===== ===== ===== ===== =====
Total Return(1) (annualized)......................... 1.96% 2.50% 2.31% 4.21% 6.72% 8.11% 8.07% 6.60% 5.94%
Net Assets at End of Period
(in millions)...................................... $ 32.3 $27.5 $21.7 $24.9 $35.0 $45.0 $44.1 $51.5 $17.1
Ratio of Expenses to Average Net Assets(1)
(annualized)....................................... 1.03% 1.13% 1.16% 1.14% .99% .90% .98% .78% .58%
Ratio of Net Investment Income to Average
Net Assets(1) (annualized)......................... 3.91% 2.44% 2.31% 4.21% 6.57% 7.81% 7.79% 6.56% 5.65%
- ---------------
(1) If certain expenses had not been assumed by the
investment adviser, total return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets
(annualized)....................................... 1.50% 1.54% 1.31% 1.55% 1.39% 1.31% 1.31% 1.22% 1.48%
Ratio of Net Investment Income to Average
Net Assets (annualized)............................ 3.44% 2.03% 2.16% 3.80% 6.17% 7.40% 7.46% 6.13% 4.74%
<CAPTION>
CLASS B
SHARES
JULY 11, 1994
(COMMENCEMENT
1986 1985 OF
----- ----- DISTRIBUTION)
TO DECEMBER
-------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................. $1.00 $1.00 $1.00
----- ----- -----
Net Investment Income.............................. .068 .092 .015
----- ----- -----
Total from Investment Operations..................... .068 .092 .015
----- ----- -----
Less Distributions from Net Investment Income........ .068 .092 .015
----- ----- -----
Net Asset Value, End of Period....................... $1.00 $1.00 $1.00
===== ===== =============
Total Return(1) (annualized)......................... 6.96% 9.60% 1.49%
Net Assets at End of Period
(in millions)...................................... $ 6.3 $ 1.5 $ 9.9
Ratio of Expenses to Average Net Assets(1)
(annualized)....................................... .88% 1.01% 1.80%
Ratio of Net Investment Income to Average
Net Assets(1) (annualized)......................... 6.78% 8.39% 3.41%
- ---------------
(1) If certain expenses had not been assumed by the
investment adviser, total return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to Average Net Assets
(annualized)....................................... 1.85% 1.94% 2.28%
Ratio of Net Investment Income to Average
Net Assets (annualized)............................ 5.81% 7.46% 2.93%
</TABLE>
(2) Shares of the Money Fund outstanding prior to July 11, 1994 have been
redesignated Class A Shares.
See Financial Statements and Notes Thereto.
---------------
The "current yield" of the Money Fund for the seven days ended June 30, 1994
was 3.26% and its "compounded effective yield" for that period was 3.31%. The
method of calculating these yields is described in the Statement of Additional
Information.
5
<PAGE> 6
- --------------------------------------------------------------------------------
THE FUND
- --------------------------------------------------------------------------------
Van Kampen American Capital Money Market Fund (the "Money Fund") is a
diversified, open-end management investment company, commonly known as a "mutual
fund," and is organized as a series of the Van Kampen American Capital Money
Market Trust, a Delaware business trust (the "Trust"). Mutual funds sell their
shares to investors and invest the proceeds in a portfolio of securities. A
mutual fund allows investors to pool their money with that of other investors in
order to obtain professional investment management. Mutual funds generally make
it possible for investors to obtain greater diversification of their investments
and to simplify their recordkeeping.
Van Kampen American Capital Investment Advisory Corp. (the "Adviser") provides
investment advisory and administrative services to the Money Fund. The Adviser
and its affiliates also manage other mutual funds distributed by Van Kampen
American Capital Distributors Inc. (the "Distributor"). To obtain prospectuses
and other information on any of these other funds, please call the telephone
number on the cover page of this Prospectus.
Prior to the date of this Prospectus, the Money Fund was known as Van Kampen
Merritt Money Market Fund. Prior to June 1986, the Money Fund was known as
Independent CashFlow Trust, Money Market Series. Independent CashFlow Trust
became the successor to American Monetary Reserve Fund Inc. in September 1984.
The Adviser has been the Money Fund's investment adviser since January 31,
1986. Independent CashFlow Advisors, Ltd. was the investment adviser for the
period from December 7, 1984 to January 31, 1986. Anglo-American Investors
Service Inc. was the investment adviser for the period from April 22, 1983 to
December 7, 1984.
On May 11, 1995, the Board of Trustees of the Trust approved an Agreement and
Plan of Reorganization between the Money Fund and the Van Kampen American
Capital Reserve Fund (the "AC Fund"), a fund advised by Van Kampen American
Capital Asset Management, Inc., providing for the transfer of assets and
liabilities of the Money Fund to the AC Fund in exchange for shares of
beneficial interest of the AC Fund at its net asset value per share (the
"Reorganization").
Van Kampen American Capital Asset Management, Inc. and the Adviser are wholly
owned subsidiaries of Van Kampen American Capital, Inc. which is a wholly owned
subsidiary of VK/AC Holding, Inc.
The Reorganization is subject to approval by the holders of a majority of the
outstanding shares of the Money Fund. Further details of the proposed
Reorganization will be contained in the proxy statement/prospectus expected to
be mailed to shareholders in August, 1995.
The Money Fund's investment objective is to provide high current income
consistent with the preservation of capital and liquidity through investments in
a broad range of money market instruments that will mature within 12 months of
the date of purchase. The Money Fund had net assets of $34.7 million on March
31, 1995. The AC Fund had net assets of $362.0 as of March 31, 1995. Its
investment objective is to seek protection of capital and high current income
through investments in U.S. dollar denominated money market securities. Both the
Money Fund and the AC Fund invest principally in a diversified portfolio of
United States agency and government obligations, commercial paper and repurchase
agreements.
The Money Fund will continue its normal operations prior to the
Reorganization.
6
<PAGE> 7
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Money Fund's investment objective is to provide investors with high
current income consistent with the preservation of capital and liquidity through
investments in a broad range of money market instruments that will mature within
12 months of the date of purchase. There can be no assurance that the Money Fund
will attain its investment objective.
The Money Fund seeks to achieve its investment objective by investing only in
the following securities and instruments: (a) obligations of or guaranteed by
the U.S. government, its agencies or instrumentalities ("U.S. Government
Securities"), (b) obligations of banks subject to U.S. government regulation as
well as such other bank obligations as are insured by a U.S. government agency
("Bank Obligations"), (c) commercial paper (including variable amount master
demand notes) rated, at the time of investment, at least A-2 by Standard &
Poor's Ratings Group ("S&P") or Prime-2 by Moody's Investors Service, Inc.
("Moody's"), or, if not so rated, issued by a corporation which has outstanding
debt obligations rated, at the time of investment, at least AA by S&P or Aa by
Moody's and (d) debt obligations (other than commercial paper) of corporate
issuers which obligations are rated, at the time of investment, at least AA by
S&P or Aa by Moody's. All of the Money Fund's investments are subject to the
limitation that they mature within one year of the date of their purchase or are
subject to repurchase agreements maturing within one year.
U.S. Government Securities in which the Money Fund may invest include Treasury
Bills, Notes and Bonds issued by the U.S. government and backed by the full
faith and credit of the U.S., as well as securities issued or guaranteed as to
principal and interest by agencies and instrumentalities of the U.S. government.
Bank Obligations include certificates of deposit and banker's acceptances of
domestic banks (or Euro-dollar obligations of foreign branches of such domestic
banks) subject to U.S. government regulation and time deposits of federal and
state banks whose accounts are insured by a government agency as well as such
accounts themselves. An investment in the Money Fund, however, is neither
insured nor guaranteed by the U.S. government.
- --------------------------------------------------------------------------------
INVESTMENT PRACTICES
- --------------------------------------------------------------------------------
The Money Fund may enter into repurchase agreements with banks and
broker-dealers, under which the Money Fund purchases securities and agrees to
resell the securities at an agreed upon time and at an agreed upon price. Under
the Investment Company Act of 1940, as amended (the "1940 Act"), repurchase
agreements may be considered collateralized loans by the Money Fund, and the
difference between the amount the Money Fund pays for the securities and the
amount it receives upon resale is accrued as interest and reflected in the Money
Fund's net income. When the Money Fund enters into repurchase agreements, it
relies on the seller to repurchase the securities. Failure to do so may result
in a loss for the Money Fund if the market value of the securities is less than
the repurchase price. At the time the Money Fund enters into a repurchase
agreement, the value of the underlying security including accrued interest will
be equal to or exceed the value of the repurchase agreement and, for repurchase
agreements that mature in more than one day, the seller will agree that the
value of the underlying security including accrued interest will continue to be
at least equal to the value of the repurchase agreement. In determining whether
to enter into a repurchase agreement with a bank or broker-dealer, the Money
Fund will take into account the creditworthiness of such party. In the event of
default by
7
<PAGE> 8
such party, the Money Fund may not have a right to the underlying security and
there may be possible delays and expenses in liquidating the security purchased,
resulting in a decline in its value and loss of interest. The Money Fund will
use repurchase agreements as a means of making short-term investments, and may
invest in repurchase agreements of duration of seven days or less without
limitation. The Money Fund's ability to invest in repurchase agreements that
mature in more than seven days is subject to an investment restriction that
limits the Money Fund's investment in "illiquid" securities, including such
repurchase agreements, to 10% of the Money Fund's net assets.
The Money Fund may lend its portfolio securities to brokers, dealers, banks or
other recognized institutional borrowers of securities, provided that the
borrower at all times maintains cash or equivalent collateral or secures a
letter of credit in favor of the Money Fund in an amount equal to at least 100%
of the market value of the securities loaned. During the time portfolio
securities are on loan, the borrower will pay the Money Fund an amount
equivalent to any dividend or interest paid on such securities and the Money
Fund may invest the cash collateral and earn additional income, or it may
receive an agreed-upon amount of interest income from the borrower who has
delivered equivalent collateral or secured a letter of credit. Loans are subject
to termination at the option of the Money Fund or the borrower. The Money Fund
may pay reasonable administration and custodial fees in connection with a loan.
As with any extensions of credit, there are risks of delay in recovery and in
some cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Adviser to be creditworthy and when the
income which can be earned from such loans justifies the attendant risks. The
Money Fund will not loan securities having an aggregate value of more than 20%
of the market value of its assets.
Although the securities in which the Money Fund invests are of high quality
and the transactions which it enters into entail low risk, there is still the
possibility of loss of principal. Corporate issuers may default on their
obligations. Repurchase agreements may be deemed to be collateralized loans and
the Money Fund could experience delay and expenses in liquidating such
collateral in the event of the failure of the repurchasing party to honor its
agreement to repurchase. Agencies or instrumentalities of the U.S. government
could also default on their securities which may not be guaranteed by or be
backed by the full faith and credit of the U.S.
The Money Fund may borrow up to 10% of its net assets in order to pay for
redemptions when liquidation of portfolio securities is considered
disadvantageous or inconvenient and may pledge up to 10% of its net assets to
secure such borrowings. The Money Fund has not used this power to date and does
not expect to in the future.
The Money Fund is subject to certain investment restrictions which constitute
fundamental policies. Fundamental policies cannot be changed without the
approval of the holders of a majority of the Money Fund's outstanding voting
securities, as defined in the 1940 Act. See "Investment Policy and Restrictions"
in the Statement of Additional Information.
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
THE ADVISER. Van Kampen American Capital Investment Advisory Corp. (the
"Adviser") is the investment adviser for the Money Fund. The Adviser is a
wholly-owned subsidiary of Van Kampen American Capital, Inc. ("Van Kampen
American Capital"). Van Kampen American Capital is a diversified asset
management company with more than two million retail investor accounts,
extensive
8
<PAGE> 9
capabilities for managing institutional portfolios, and over $50 billion under
management or supervision. Van Kampen American Capital's more than 40 open-end
and 38 closed-end funds and more than 2,700 unit investment trusts are
professionally distributed by leading financial advisers nationwide.
Van Kampen American Capital is a wholly-owned subsidiary of VK/AC Holding,
Inc. VK/AC Holding, Inc. is controlled, through the ownership of a substantial
majority of its common stock, by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership ("C&D L.P."), a Connecticut limited partnership. C&D L.P. is
managed by Clayton, Dubilier & Rice, Inc., a New York based private investment
firm. The General Partner of C&D L.P. is Clayton & Dubilier Associates IV
Limited Partnership ("C&D Associates L.P."). The general partners of C&D
Associates L.P. are Joseph L. Rice, III, B. Charles Ames, William A. Barbe,
Alberto Cribiore, Donald J. Gogel, Leon J. Hendrix, Jr., Hubbard C. Howe and
Andrall E. Pearson, each of whom is a principal of Clayton, Dubilier & Rice,
Inc. In addition, certain officers, directors and employees of Van Kampen
American Capital own, in the aggregate, not more than 7% of the common stock of
VK/AC Holding, Inc. and have the right to acquire, upon the exercise of options,
approximately an additional 11% of the common stock of VK/AC Holding, Inc.
Presently, and after giving effect to the exercise of such options, no officer
or trustee of the Money Fund owns or would own 5% or more of the common stock of
VK/AC Holding, Inc.
ADVISORY AGREEMENT. The business and affairs of the Money Fund will be
managed under the direction of the Trustees of the Trust. Subject to the
Trustees' authority, the Adviser and the Trust's officers will supervise and
implement the Money Fund's investment activities and will be responsible for
overall management of the Money Fund's business affairs. The Money Fund will pay
the Adviser a fee (accrued daily and paid monthly) equal to a percentage of the
average daily net assets of the Money Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
-----------
<S> <C>
First $250 million.............. 0.500 of 1%
Next $250 million............... 0.475 of 1%
Next $250 million............... 0.425 of 1%
Over $750 million............... 0.275 of 1%
</TABLE>
Under its investment advisory agreement with the Adviser, the Money Fund has
agreed to assume and pay the charges and expenses of the Money Fund's operation,
including the compensation of the Trustees of the Trust (other than those who
are affiliated persons, as defined in the 1940 Act, of the Adviser, the
Distributor or Van Kampen American Capital), the charges and expenses of
independent accountants, legal counsel, any transfer or dividend disbursing
agent and the custodian (including fees for safekeeping of securities), costs of
calculating net asset value, costs of acquiring and disposing of portfolio
securities, interest (if any) on obligations incurred by the Money Fund, costs
of share certificates, membership dues in the Investment Company Institute or
any similar organization, reports and notices to shareholders, costs of
registering shares of the Money Fund under the federal securities laws,
miscellaneous expenses and all taxes and fees to federal, state or other
governmental agencies, excluding state securities registration expenses.
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
The Money Fund currently offers two classes of shares, designated Class A
Shares and Class B Shares, through Van Kampen American Capital Distributors,
Inc., (the "Distributor"), as principal underwriter, which is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181. Shares also are offered
through members of the National Association of Securities Dealers, Inc. ("NASD")
who are
9
<PAGE> 10
acting as securities dealers ("dealers") and through NASD members acting as
brokers for investors ("brokers") or eligible non-NASD members who are acting as
agents for investors ("financial intermediaries"). The Money Fund reserves the
right to suspend or terminate the continuous offering at any time and without
prior notice.
Class A Shares of the Money Fund are available through the Distributor at
their net asset value per share without a sales charge. Class B Shares may be
acquired only by exchange of Class B Shares of other funds distributed by the
Distributor. Class B Shares are acquired at net asset value, but are subject to
a contingent deferred sales charge.
The Money Fund has adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act and a service plan which permit the Money Fund through Van Kampen
American Capital to compensate brokers, dealers and financial intermediaries out
of the assets of the Money Fund for their sales of Class A Shares and Class B
Shares of the Money Fund and for shareholder services, respectively.
The minimum initial investment with respect to each class of shares is $500.
The minimum subsequent investment with respect to each class of shares is $25,
except as discussed under "Unit Trust Reinvestment Programs" hereunder and under
the heading "Investments by Tax-Sheltered Retirement Plans." Share certificates
will not be issued.
ALTERNATIVE SALES ARRANGEMENTS
Each class of shares represents an interest in the same portfolio of
investments of the Money Fund and has the same rights, except each class of
shares (i) bears those distribution fees, service fees and administrative
expenses applicable to the respective class of shares as a result of its sales
arrangements, (ii) has exclusive voting rights with respect to those provisions
of the Money Fund's Rule 12b-1 distribution plan which relate only to such class
and (iii) has a different exchange privilege. Only the Class B Shares are
subject to a conversion feature (discussed below). Generally, Class B Shares
will have a higher expense ratio and pay lower dividends than Class A Shares and
are offered for temporary investment purposes between investments in other funds
distributed by the Distributor. The per share net asset values of the different
classes of shares are expected to remain at $1.00 per share, except in unusual
circumstances. The net asset value per share of each class of shares will be
determined as described in this Prospectus under "Purchase of Shares -- Net
Asset Value."
The administrative expenses that may be allocated to a specific class of
shares may consist of (i) transfer agency expenses attributable to a specific
class of shares, which expenses typically will be higher with respect to Class B
Shares; (ii) printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and proxy statements to
current shareholders of a specific class; (iii) Securities and Exchange
Commission (the "SEC") registration fees incurred by a class of shares; (iv) the
expense of administrative personnel and services as required to support the
shareholders of a specific class; (v) Trustees' fees or expense incurred as a
result of issues relating to one class of shares; (vi) accounting expenses
relating solely to one class of shares; and (vii) any other incremental expenses
subsequently identified that should be properly allocated to one or more classes
of shares that shall be approved by the SEC pursuant to an amended exemptive
order. All such expenses incurred by a class will be borne on a pro rata basis
by the outstanding shares of such class. All allocations of administrative
expenses to a particular class of shares will be limited to the extent necessary
to preserve the Money Fund's qualification as a regulated investment company
under
10
<PAGE> 11
the Code. Sales personnel or brokers, dealers and financial intermediaries
distributing the Money Fund's shares may receive different compensation for
selling different classes of shares.
CLASS A SHARES
The public offering price of Class A Shares is equal to the net asset value
per Class A Share, without the imposition of a sales charge. The Money Fund
anticipates that the net asset value per Class A Share normally will remain
fixed at $1.00 per share, except in extraordinary circumstances.
CLASS B SHARES
Class B Shares may be acquired only by exchange of Class B Shares of other
funds distributed by the Distributor. Class B Shares are acquired at net asset
value, but are subject to a contingent deferred sales charge. The Money Fund
anticipates that the net asset value per Class B Share normally will remain
fixed at $1.00 per share, except in extraordinary circumstances. Class B Shares
are offered for temporary investment purposes between investments in other funds
distributed by the Distributor.
Class B Shares are redeemed at net asset value. By acquiring Class B Shares of
the Money Fund through use of the exchange privilege, an investor agrees that
the Money Fund, or the Distributor on behalf of the Money Fund, may deduct a
contingent deferred sales charge from the proceeds of such redemption, as set
forth from time to time in this Prospectus.
Class B Shares of the Money Fund acquired through use of the exchange
privilege will be subject to the higher of the Money Fund's contingent deferred
sales charge schedule or the highest contingent deferred sales charge previously
applicable to the investor's Class B Shares exchanged into the Money Fund. The
contingent deferred sales charge schedule of the Money Fund is as follows:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
- ------------------- -------------------
<S> <C>
First..................................................... 3.00%
Second.................................................... 2.00%
Third..................................................... 1.00%
Fourth and after.......................................... 0.00%
</TABLE>
The contingent deferred sales charge will be assessed on an amount equal to
the lesser of the then current market value or the original purchase price of
the Class B Shares being redeemed. Accordingly, although the Money Fund
anticipates that the net asset value of the Class B Shares will remain at $1.00
per share, no sales charge will be imposed on increases in net asset value, if
any, above the initial purchase price. In addition, no contingent deferred sales
charge will be assessed on Class B Shares derived from reinvestment of dividends
or capital gains distributions. Solely for purposes of determining the number of
years from the time of any payment for the purchases of Class B Shares
distributed by the Distributor, all payments during a month will be aggregated
and deemed to have been made on the last day of the month.
11
<PAGE> 12
In determining whether a contingent deferred sales charge is applicable to a
redemption of Class B Shares, it will be assumed that the redemption is made
first of any Class B Shares acquired pursuant to reinvestment of dividends or
distributions, second of Class B Shares that have been held for a sufficient
period of time such that the contingent deferred sales charge no longer is
applicable to such shares, third of Class A Shares in the shareholder's Money
Fund account, if any, and fourth of Class B Shares held longest during the
period of time that a contingent deferred sales charge is applicable to such
Class B Shares.
Conversion Feature. A Class B Share of the Money Fund automatically converts
to a Class A Share of the Money Fund seven years after the end of the month in
which a shareholder's order to purchase such Class B Share in one of the funds
in the Van Kampen American Capital Family of Funds is accepted, and thereafter
will no longer be subject to the higher aggregate distribution and service fees
applicable to Class B Shares. The purpose of the conversion feature is to
relieve the holders of Class B Shares that have been outstanding for a period of
time sufficient for the Distributor to have been compensated for distribution
expenses related to the Class B Shares from most of the burden of such
distribution-related expenses. The Money Fund does not expect to issue any stock
certificates upon conversion.
For purposes of conversion of Class A Shares, Class B Shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
Shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's account (other
than those in the sub-account) convert to Class A Shares, an equal pro rata
portion of the Class B Shares in the sub-account also will convert to Class A
Shares. The holding period applicable to a Class B Share acquired through the
use of the exchange privilege (discussed below) shall be the holding period
applicable to a Class B Share of such fund acquired other than through use of
the exchange privilege. For purposes of calculating the holding period
applicable to a Class B Share of the Money Fund prior to conversion, a Class B
Share of the Money Fund issued in connection with an exercise of the exchange
privilege, or a series of exchanges, shall be deemed to have been issued on the
date on which the investor's order to purchase the exchanged Class B Share was
accepted or, in the case of a series of exchanges, when the investor's order to
purchase the original Class B Share was accepted.
The conversion of Class B Shares to Class A Shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution services fee and transfer agency costs
with respect to Class B Shares does not result in the Money Fund's dividends or
distributions constituting "preferential dividends" under the Code and (ii) that
the conversion of Class B Shares does not constitute a taxable event under
federal income tax law. The conversion of Class B Shares to Class A Shares may
be suspended if such an opinion is no longer available. In that event, no
further conversions of Class B Shares would occur, and Class B Shares might
continue to be subject to the higher aggregate distribution and service fees for
an indefinite period.
Waiver of Contingent Deferred Sales Charge. The contingent deferred sales
charge is waived on redemptions of Class B Shares (i) following the death or
disability (as defined in the Code) of a shareholder, (ii) in connection with
certain distributions from an IRA or other retirement plan, (iii) pursuant to
the Money Fund's systematic withdrawal plan but limited to 12% annually of the
initial value of the account, and (iv) effected pursuant to the right of the
Money Fund to liquidate a shareholder's account as described herein under
"Redemption of Shares." See "Shareholder Services" and "Redemption of Shares"
for further discussion of the waiver provisions.
12
<PAGE> 13
GENERAL
Investments in Class A Shares may be made as follows:
1. By Mail. For initial investments send a check payable to "Van Kampen
American Capital Money Market Fund" along with a completed account application
to the transfer agent of the Money Fund, ACCESS Investor Services, Inc., P.O.
Box 418256, Kansas City, Missouri 64141-9256 ("ACCESS"). Subsequent investments
by mail may be made directly to the Money Fund in which such initial investment
was made accompanied by either the detachable form which is part of the account
statement or by a letter indicating the dollar amount of the investment, the
account number, and registration. Investments made by check will begin receiving
dividends on the next business day after the Money Fund receives good funds. For
checks drawn on foreign banks, monies must be collected before shares will be
purchased.
2. By Wire. The Money Fund will also accept investments by wire. An investor
must first telephone the Money Fund at (800) 421-5666 and provide the account
registration, address, tax identification number, and the amount being wired.
Investors will then be assigned an account number and should instruct their bank
or broker to wire federal funds to State Street Bank and Trust Company, Custody,
ABA-011000028, Re: Van Kampen American Capital Money Market Fund for further
credit to Account Name , Account Number . Investors
will be responsible for the charges, if any, that the bank, broker, dealer or
financial intermediary may require to handle the wire transfer. A completed
account application must then be forwarded to the Money Fund. Subsequent
investments by wire may be made by instructing a bank or broker to wire the
specified amount in accordance with the above instructions. Please call to
advise the Money Fund before wiring monies.
Investments made by federal funds wire (up to $1 million, without approval by
the Money Fund) received prior to 12:00 p.m. Eastern time will be invested at
the next determined net asset value and begin receiving dividends on that day.
Investments made by federal funds wire received after 12:00 p.m. Eastern time
will be invested at the next determined net asset value and begin receiving
dividends on the next business day.
3. Through Financial Services Representatives. Brokers, dealers or financial
intermediaries may purchase, on behalf of investors, shares of the Money Fund
using either the By Mail or By Wire procedures outlined above. The Money Fund
does not charge for this transaction.
4. Unit Trust Reinvestment Programs. The Money Fund will permit unitholders
of unit investment trusts to reinvest distributions from such trusts in Class A
Shares of the Money Fund and other eligible mutual funds distributed by the
Distributor with no minimum or subsequent investment requirement. In order to
qualify for this privilege, the administrator of an investor's unit investment
trust must have an agreement with the Distributor pursuant to which the
administrator will (1) submit a single bulk order and make payment with a single
remittance for all investments in the Money Fund during each distribution period
by all investors who choose to invest in the Money Fund through the program and
(2) provide the Money Fund's transfer agent with appropriate backup data for
each participating investor in a computerized format fully compatible with the
transfer agent's processing system. In addition, the Money Fund also requires
that all dividends and other distributions by the Money Fund be reinvested in
additional shares without any systematic withdrawal program. There will be no
minimum for reinvestments from unit investment trusts. The Money Fund will send
account activity statements to
13
<PAGE> 14
investors on a quarterly basis only, even if an investor's investment period is
more frequent. Persons desiring more information with respect to this program,
including the applicable terms and conditions thereof, should contact their
securities broker, dealer, financial intermediary or the Distributor. The Money
Fund reserves the right to modify or terminate this program at any time.
The Money Fund and the Distributor reserve the right to reject any order for
the purchase of shares. In addition, the offering of shares may be suspended and
resumed at any time thereafter. Shares will not be offered in certificate form.
Account statements are prepared and mailed to you monthly, quarterly in the
case of an Individual Account. Account statements are not mailed to shareholders
as a result of individual redemptions by check.
NET ASSET VALUE
The net asset value per share of the Money Fund will be determined separately
for each class of shares. The net asset value per share of a class of shares of
the Money Fund is determined by calculating the total value of the Money Fund's
assets attributable to such class of shares, deducting the total liabilities
attributable to such class of shares and dividing the result by the number of
shares of such class outstanding. The net asset value per share for each class
of shares normally will remain fixed at $1.00 per share except in extraordinary
circumstances. The net asset value for the Money Fund is computed twice daily as
of 12:00 p.m. and 4:00 p.m. Eastern time, Monday through Friday, except on
customary business holidays, or except on any day on which no purchase or
redemption orders are received, or there is not a sufficient degree of trading
in the Money Fund's portfolio securities such that the Money Fund's net asset
value per share might be materially affected. The Money Fund reserves the right
to calculate the net asset value more or less frequently than daily if deemed
desirable.
The Money Fund values its portfolio on the basis of amortized cost, which
means that securities are valued at their acquisition cost to reflect a constant
amortization rate to maturity of any premium or discount, rather than at current
market value. Calculations are made to compare the amortized cost valuation of
the portfolio with current market values. Money market valuations are obtained
by using market quotations provided by market makers, estimates of market
values, or values obtained from published yield data of money market
instruments. If a deviation of 1/2 of 1.00% or more were to occur between the
net asset value calculated by reference to market values and the Money Fund's
$1.00 per share net asset value, or if there were any other deviation which the
Trustees believe would result in a material dilution to investors or purchasers,
the Trustees would promptly consider what action, if any, should be initiated.
Other assets are valued at fair value as determined in good faith by the
Trustees of the Trust, of which the Money Fund is a series. The method of
calculating yields is described in the Statement of Additional Information.
There can be no assurance that the Money Fund will be able to maintain a net
asset value of $1.00 per share.
- --------------------------------------------------------------------------------
DISTRIBUTIONS FROM THE FUND
- --------------------------------------------------------------------------------
The Money Fund's present policy, which may be changed at any time by the Board
of Trustees, is to declare and pay dividends from net investment income on a
daily basis to each respective class of shares. Investments will begin earning
dividends on the day federal funds are received by the Money Fund prior to 12:00
p.m. Eastern time. Any investments for which federal funds are received after
12:00 p.m. will
14
<PAGE> 15
begin receiving dividends on the next business day. Dividends are automatically
reinvested in additional shares of the Money Fund and credited to the investors'
accounts daily.
If investors request, they may redeem dividends paid on their shares on a
monthly basis. Investors may make such a request by checking the appropriate box
on the account application.
Distributions with respect to each class of shares will be calculated in the
same manner on the same day and will be in the same amount, except that the
different distribution and service fees and any incremental administrative
expenses relating to each class of shares will be borne exclusively by the
respective class and may cause the distributions relating to the different
classes of shares to differ. Generally, distributions with respect to a class of
shares subject to a higher distribution fee will be lower than distributions
with respect to a class of shares subject to a lower distribution fee.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
ACCESS Investor Services, Inc., P.O. Box 418256, Kansas City, Missouri
64141-9256, transfer agent for the Money Fund and a wholly-owned subsidiary of
Van Kampen American Capital, performs bookkeeping, data processing and
administrative services related to the maintenance of shareholder accounts. When
an initial investment is made in the Money Fund, an account will be opened for
each investor on the Money Fund's books and investors will receive a
confirmation of the opening of the account. Investors will receive monthly
statements giving details of all activity in their account during the month and
will also receive a statement whenever an investment or withdrawal is made in or
from their account (except for reinvestment of distributions, systematic
withdrawals and investments through special programs). Information for federal
income tax purposes will be provided at the end of the year.
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
Investors may redeem shares by phone, by writing a check, by mail or, if they
qualify, by establishing a Systematic Withdrawal Plan. The Money Fund does not
charge for redemptions. Shares purchased by check may not be redeemed until the
check has cleared, which may take 15 days or more. In addition, a completed
account application must have been received by the transfer agent for the Money
Fund before any redemption request can be honored.
TELEPHONE REDEMPTIONS. Shareholders may sell shares by calling the Money Fund
at (800) 421-5666 before 4:00 p.m. Central Time to request a redemption by the
Money Fund. For inquiries through Telecommunications Device for the Deaf (TDD),
dial (800) 772-8889. There is a $500 minimum per request if the redemption
proceeds are to be mailed to the shareholder. If the redemption proceeds are to
be wired to a bank, there is a minimum of $1,000 per request. Prior to redeeming
shares by telephone the appropriate section of the account application or an
Expedited Telephone Redemption and Exchange Request Form (the "Authorization")
must be completed by the shareholder and be on file with ACCESS. The
signature(s) on the Authorization must be guaranteed by a member firm of a
principal stock exchange, a commercial bank or trust company which is a member
of the Federal Deposit Insurance Corporation, a credit union or a savings
association unless the Authorization is completed at the time an account is
originally established. The guarantee must state the words "Signature
Guaranteed" along with the name of the granting institution. Shareholders should
verify with the institution that it is an eligible guarantor prior to signing. A
guarantee from a notary public is not acceptable. A redemption requested by
telephone will be processed at the net asset value next
15
<PAGE> 16
determined after the request is received. Any applicable CDSC with respect to
Class B Shares redeemed will be deducted from the redemption proceeds prior to
transmittal of such proceeds to the shareholder. The proceeds would then be made
payable to the registered shareowner(s) and mailed to the address registered on
the account or wired to a bank, as requested on the Authorization. These
privileges are available for all accounts other than retirement accounts. This
service is not available with respect to shares purchased by check until 15 days
after purchase.
By establishing the telephone redemption service, a shareholder authorizes the
Money Fund or ACCESS to act upon the instructions of any person by telephone to
redeem shares for any account for which such service has been authorized to the
address of record of such account or such other address as is listed in the
Authorization. The Money Fund, Van Kampen American Capital and ACCESS employ
procedures reasonably believed to confirm that instructions communicated by
telephone are genuine. Such procedures include requiring a person attempting to
redeem shares by telephone to provide, on a recorded line, the name on the
account, a social security number or tax identification number and such
additional information as may be included in the Authorization. An investor
agrees that no such person will be liable for any loss, liability, cost or
expense arising out of any request, including any fraudulent or unauthorized
request. However, if the Money Fund Van Kampen American Capital or ACCESS fails
to employ such reasonable procedures, such person may be liable for any losses
due to unauthorized or fraudulent telephone transactions. This service may be
amended or terminated at any time by the Money Fund or ACCESS. If an investor is
unable to reach the Money Fund by telephone, he or she may redeem shares
pursuant to the procedures set forth below under the caption "Written Redemption
Request." During periods of extreme economic or market changes, it may be
difficult for investors to reach the Money Fund by telephone and to effect
telephone redemptions.
BY CHECK. By completing the appropriate section of the account application,
investors in Class A Shares of the Money Fund may effect redemptions by writing
checks drawn on their share account with the Money Fund payable in any amount
not less than $100. Presently there is no charge for this service.
When a check is presented for payment, the Money Fund will redeem a sufficient
number of full and fractional Class A Shares from the investors's account to
cover the amount of the check. If a check is presented against an account in
which there are insufficient funds, if shares to be redeemed were purchased by
check and have been on the books of the Money Fund for less than 15 days, if a
check is presented with an improper signature or if the amount of the check is
less than $100, the check will be returned and there will be a $5 service charge
deducted from the account. A service charge of $10 will be deducted from the
account for each stop payment order requested by an investor. The Money Fund
reserves the right to terminate or modify this service at any time with respect
to a particular investor or all investors in general.
WRITTEN REDEMPTION REQUEST. Shareholders may sell shares without charge (other
than, with respect to the Class B Shares, any applicable contingent deferred
sales charge) at any time by mailing a written redemption request in proper form
to ACCESS. This request should be sent to ACCESS Investor Services, Inc., Van
Kampen American Capital Funds, P.O. Box 418256, Kansas City, MO 64141-9256. The
request should indicate the number of shares to be redeemed of a particular fund
and the class designation of such shares and identify the account number and be
signed exactly as the shares are registered. If the amount being redeemed is in
excess of $50,000 or if the redemption proceeds will be sent to an address other
than the address of record, the signature(s) must be guaranteed by a member firm
of a principal stock exchange, a commercial bank or trust company which is a
member of the Federal Deposit Insurance Corporation, a credit union or a savings
association. The guarantee must state
16
<PAGE> 17
the words "Signature Guaranteed" along with the name of the granting
institution. Shareholders should verify with the institution that it is an
eligible guarantor prior to signing. A guarantee from a notary public is not
acceptable. Shareholders will receive the net asset value per share next
computed after ACCESS receives the redemption request in proper form. Any
applicable contingent deferred sales charge with respect to Class B Shares
redeemed will be deducted from the redemption proceeds prior to transmittal of
such proceeds to the shareholder.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account is valued at
$10,000 or more, a requested dollar amount may be paid from such account to any
person monthly, quarterly, semiannually or annually. The minimum amount that may
be withdrawn each period is $25. Depending upon the size of the payments
requested and the fluctuations in the net asset value of the shares redeemed,
redemptions for the purpose of making such payments may reduce or even exhaust
the amounts in such account.
Holders of Class B Shares who establish a withdrawal plan may redeem up to 12%
annually of the shareholder's initial account balance without incurring a
contingent deferred sales charge. Initial account balance means the amount of
the shareholder's investment in the Fund at the time the election to participate
in the plan is made.
Under the plan, sufficient shares of the Money Fund are redeemed to provide
the amount of the periodic withdrawal payment. Distributions on shares held
under the plan are reinvested in additional shares at the next determined net
asset value. If periodic withdrawals continuously exceed reinvested
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted. Withdrawals made concurrently with purchases
of additional shares ordinarily will be disadvantageous to the shareholder
because of the duplication of sales charges. The Fund reserves the right to
amend or terminate the systematic withdrawal program on thirty days' notice to
its shareholders.
It will ordinarily be disadvantageous to purchase shares (except through
reinvestment of distributions) while participating in a systematic withdrawal
program because a shareholder will be paying a sales charge, or will become
subject to a contingent deferred sales charge, in order to purchase shares at
the same time that shares are being redeemed upon which a sales charge may
already have been paid. Therefore, the Money Fund will not knowingly permit a
shareholder to make additional investments in shares of less than $5,000 if at
the same time such shareholder is making systematic withdrawals at a rate
greater than the distribution being paid on such shareholder's shares. The Money
Fund reserves the right to amend or terminate the systematic withdrawal program
on thirty days notice, and a shareholder may withdraw from the program at any
time.
EXCHANGE PRIVILEGE. Shares of the Money Fund may be exchanged with shares of
any other eligible mutual fund distributed by the Distributor, subject to
certain limitations herein or in such other fund's prospectus. Before effecting
an exchange, shareholders in the Money Fund should obtain and read a current
prospectus of the fund into which the exchange is to be made. SHAREHOLDERS MAY
ONLY EXCHANGE INTO SUCH OTHER FUNDS AS ARE LEGALLY AVAILABLE FOR SALE IN THEIR
STATE.
In general, shares of the Money Fund must have been registered in the
shareholder's name for at least 15 days prior to an exchange. Shares of the
Money Fund registered in a shareholder's name for less than 15 days may only be
exchanged upon receipt of prior approval of the Adviser; however, under normal
circumstances, it is the policy of the Adviser not to approve such requests.
Upon 60 days after the date of this prospectus, the Money Fund will increase the
number of days shares must be registered in a shareholder's name prior to an
exchange to 30 days.
17
<PAGE> 18
Exchanges of Class A Shares of the Money Fund that have not previously been
charged a sales charge (except for shares purchased via the reinvestment option)
or have previously been subject to a sales charge lower than the sales charge
applicable to the other fund will have the sales charge differential imposed
upon the exchange into such fund.
No sales charge is imposed upon the exchange of Class B Shares. Upon
redemption of Class B Shares from the Van Kampen American Capital family of
funds, Class B Shares which have been exchanged are subject to the contingent
deferred sales charge imposed by the initial Van Kampen American Capital fund
purchased by the investor prior to any exchanges. The holding period
requirements for the contingent deferred sales charge, and the conversion
privilege for Class B Shares of the Money Fund, are determined by the date of
purchase into the initial Van Kampen American Capital fund purchased by the
investor prior to any exchanges.
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes. If the shares exchanged have been held for less than 91
days, the sales charge paid on such shares is not included in the tax basis of
the exchanged shares, but is carried over and included in the tax basis of the
shares acquired.
A shareholder wishing to make an exchange may do so by sending a written
request to ACCESS or by contacting the telephone transaction line at (800)
421-5684 ((800) 772-8889 for the hearing impaired). A shareholder automatically
has telephone exchange privileges unless otherwise designated in the application
form accompanied by this Prospectus. The exchange will take place at the
relative net asset values of the shares next determined after receipt of such
request with adjustment for any additional sales charge. Any shares exchanged
begin earning dividends on the next business day after the exchange is affected.
Van Kampen American Capital and its subsidiaries, including ACCESS
(collectively, "VKAC"), and the Money Fund employ procedures considered by them
to be reasonable to confirm that instructions communicated by telephone are
genuine. Such procedures include requiring certain personal identification
information prior to acting upon telephone instructions, tape recording
telephone communications, and providing written confirmation of instructions
communicated by telephone. If reasonable procedures are employed, a shareholder
agrees that neither VKAC nor the Money Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. VKAC and the
Money Fund may be liable for any losses due to unauthorized or fraudulent
instructions if reasonable procedures are not followed. If the exchanging
shareholder does not have an account in the fund whose shares are being
acquired, a new account will be established with the same registration, dividend
and capital gains options (except dividend diversification options) and broker,
dealer or financial intermediary of record as the account from which shares are
exchanged, unless otherwise specified by the shareholder. In order to establish
a systematic plan for the new account or dividend diversification options for
the new account, an exchanging shareholder must file a specific written request.
The Money Fund reserves the right to reject any order to acquire its shares
through exchange. In addition the Fund may restrict or terminate the exchange
privilege at any time on 60 days notice to its shareholders of any termination
or material amendment.
AUTOMATED MULTIPLE ACCOUNT SHAREHOLDER SERVICES
1. Automated Clearing House ("ACH") Deposits. Holders of Class A Shares can
use ACH to have redemption proceeds deposited electronically into their bank
accounts. Redemptions transferred to a bank account via the ACH plan are
available to be credited to the account on the second business day following
normal payment. In order to utilize this option, the shareholder's bank must be
a member of
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Automated Clearing House. In addition, the shareholder must fill out the
appropriate section of the application attached to this Prospectus. The
shareholder must also include a voided check or deposit slip from the bank
account into which redemptions are to be deposited together with the completed
application. Once ACCESS has received the application and the voided check or
deposit slip, such shareholder's designated bank account, following any
redemption, will be credited with the proceeds of such redemption. Once enrolled
in the ACH plan, a shareholder may terminate participation at any time by
writing the ACCESS.
2. Automated Dividend Programs. The Money Fund will, upon the election of a
shareholder, automatically invest distributions from a shareholder's account
directly into a shareholder's bank account.
3. Dividend Diversification. Monthly distributions and any net long-term
capital gain distributions to a shareholder's account may be invested in the
same class of shares of any other mutual fund distributed by Van Kampen American
Capital at the then current net asset value, WITHOUT A SALES CHARGE, upon
election by a shareholder. This election may be made on the account application
bound in this prospectus, by written notice to ACCESS or by calling the Money
Fund directly at (800) 421-5666. For inquiries through Telecommunications Device
for the Deaf (TDD), dial (800) 772-8889. In order to qualify for this privilege,
a shareholder must have established an account in the other mutual fund prior to
electing this privilege. This privilege may be modified or terminated by the
Money Fund at any time.
4. Easy Account Savings Enhancement Plan. Once a shareholder has opened a
Class A Share account with the required minimum investment, the automatic
investment option may be utilized to make regular electronic monthly investments
into such shareholder's Class A Share account. In order to utilize this option,
a shareholder must fill out and sign the appropriate section of the application
attached to this Prospectus or the application available from ACCESS, the Money
Fund, such shareholder's broker or dealer or Van Kampen American Capital. Once
the Transfer Agent has received this application, such shareholder's checking
account at his or her designated local bank will be debited each month in the
amount authorized by such shareholder to purchase Class A Shares of the Money
Fund.
By electing to utilize any of the foregoing services, a shareholder authorizes
ACCESS or its agent to act upon the instructions indicated in the appropriate
section of the application in performing such services by either withdrawing
funds for deposit in the Money Fund or depositing distributions and redemptions
in the bank account indicated by the voided check or deposit slip accompanying
the shareholder's election and/or by depositing the shareholder's distributions
in the Van Kampen American Capital fund account indicated. A shareholder also
agrees that neither the Money Fund, Van Kampen American Capital or ACCESS will
be liable for any loss, liability, cost or expense arising out of any request,
including any fraudulent request. This service may be amended or terminated at
any time by the Money Fund or ACCESS.
GENERAL. Whether shares are redeemed by the Money Fund or sold through a
securities dealer, a check for the proceeds (net of any required tax withholding
and, with respect to Class B Shares, any applicable contingent deferred sales
charge) ordinarily will be mailed to shareholders or their dealer, as the case
may be, within three business days after a redemption request or repurchase
order received in proper form as set forth above. Wire transfers from the Money
Fund of redemption proceeds, in the manner described above, ordinarily will be
transmitted to the shareholder within one business day. If any shares are
redeemed or repurchased shortly after purchase, the Money Fund will not mail the
proceeds until checks received for the purchase of shares have cleared, which
may take 10 days or more. The proceeds, of course, may be more or less than the
cost of the shares.
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The right of redemption or resale to the Money Fund may be suspended or the
date of payment postponed during any period when the New York Stock Exchange is
closed (other than customary weekend and holiday closings), when an emergency
exists as defined by rules and regulations of the SEC, or during any period when
the SEC has by order permitted such suspension or postponement.
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THE DISTRIBUTION AND SERVICE PLANS
- --------------------------------------------------------------------------------
The Money Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the Investment
Company Act. The Money Fund also has adopted a service plan (the "Service Plan")
with respect to each class of its shares. The Distribution Plan and the Service
Plan provide that the Money Fund may spend a portion of its average daily net
assets attributable to each class of shares in connection with distribution of
the respective class of shares and in connection with the provision of ongoing
services to shareholders of each class. The Distribution Plan and the Service
Plan are being implemented through an agreement with Van Kampen American
Capital, distributor of each class of the Money Fund's shares, sub-agreements
between Van Kampen American Capital and members of the NASD acting as securities
dealers ("dealers"), NASD members or eligible non-members acting as brokers
("brokers") or agents and similar agreements between the Money Fund and
financial intermediaries acting as brokers ("financial intermediaries")
(collectively, "Selling Agreements") that may provide for their customers or
clients certain services or assistance.
CLASS A SHARES. The Money Fund may spend an aggregate amount up to 0.25% per
year of the average daily net assets attributable to the Class A Shares of the
Money Fund pursuant to the Distribution Plan and Service Plan. From such amount,
the Money Fund may spend up to the full 0.25% per year of its average daily net
assets attributable to the Class A Shares pursuant to the Service Plan in
connection with the ongoing provision of services to holders of such shares by
Van Kampen American Capital and by brokers, dealers or financial intermediaries
and in connection with the maintenance of such shareholders' accounts. The Money
Fund pays Van Kampen American Capital the lesser of the balance, if any, of the
0.25% not paid to such brokers, dealers or financial intermediaries or the
amount of Van Kampen American Capital's actual distribution related expense.
CLASS B SHARES. The Money Fund may spend up to 0.75% per year of the average
daily net assets attributable to the Class B Shares of the Money Fund pursuant
to the Distribution Plan. In addition, the Money Fund may spend up to 0.25% per
year of its average daily net assets attributable to the Class B Shares pursuant
to the Service Plan in connection with the ongoing provision of services to
holders of such shares by Van Kampen American Capital and by brokers, dealers or
financial intermediaries and in connection with the maintenance of such
shareholders' accounts.
OTHER INFORMATION. Amounts payable to Van Kampen American Capital with respect
to the Class A Shares under the Distribution Plan in a given year may not fully
reimburse Van Kampen American Capital for its actual distribution-related
expenses during such year. In such event, with respect to the Class A Shares,
there is no carryover of such reimbursement obligations to succeeding years.
Van Kampen American Capital's actual expenses with respect to Class B Shares
for any given year may exceed the amounts payable to Van Kampen American Capital
with respect to such Class B Shares under the Distribution Plan, the Service
Plan and payments received pursuant to the contingent deferred sales charge. In
such event, any unreimbursed expenses will be carried forward and paid by the
Money
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<PAGE> 21
Fund (up to the amount of the actual expenses incurred) in future years so long
as such Distribution Plan is in effect. Except as mandated by applicable law,
the Money Fund does not impose any limit with respect to the number of years
into the future that such unreimbursed expenses may be carried forward (on a
fund level basis). Because such expenses are accounted on a fund level basis, in
periods of extreme net asset value fluctuation such amounts with respect to a
particular Class B Share may be greater or less than the amount of the initial
commission (including carrying cost) paid by Van Kampen American Capital with
respect to such Class B Share. In such circumstances, a shareholder of such
Class B Share may be deemed to incur expenses attributable to other shareholders
of such class. The Money Fund will disclose in its prospectus from time to time
the then current amount of any such unreimbursed expenses with respect to each
class of Class B Shares expressed as a dollar amount and as a percent of the
Money Fund's total net assets. If the Distribution Plan was terminated or not
continued, the Money Fund would not be contractually obligated to pay Van Kampen
American Capital for any expenses not previously reimbursed by the Money Fund or
recovered through contingent deferred sales charges.
Various federal and state laws prohibit national banks and some
state-chartered commercial banks from underwriting or dealing in the Money
Fund's shares. In addition, state securities laws on this issue may differ from
the interpretations of federal law, and banks and financial institutions may be
required to register as dealers pursuant to state law. In the unlikely event
that a court were to find that these laws prevent such banks from providing such
services described above, the Money Fund would seek alternate providers and
expects that shareholders would not experience any disadvantage.
- --------------------------------------------------------------------------------
TAX STATUS
- --------------------------------------------------------------------------------
The Money Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify as a regulated investment company, the Money
Fund must comply with certain requirements of the Code relating to, among other
things, the source of its income and the diversification of its assets. If the
Money Fund so qualifies and if it distributes at least 90% of its net investment
income (which includes net short-term capital gains, but not net capital gains,
which is the excess of net long-term capital gains over net short-term capital
losses) in each year, the Money Fund will not be required to pay federal income
taxes on any income distributed to shareholders. The Money Fund intends to
distribute at least the minimum amount of net investment income necessary to
satisfy the 90% distribution requirement. The Money Fund will not be subject to
federal income tax on any net capital gains distributed to its shareholders.
Distributions of the Money Fund's net investment income are taxable to
shareholders as ordinary income whether received in shares or in cash.
Shareholders who receive distributions in the form of additional shares will
have a basis for federal income tax purposes in each such share equal to the
value thereof on the reinvestment date. Distributions in excess of the Money
Fund's earnings and profits will first reduce the adjusted tax basis of the
shares held by the shareholders and, after such adjusted tax basis is reduced to
zero, will constitute capital gains to such shareholder (assuming such shares
are held as a capital asset). The Money Fund will inform shareholders of the
source and tax status of such distributions promptly after the close of each
taxable year. Distributions by the Money Fund generally will not be eligible for
the dividends received deduction for corporations.
In order to avoid a 4% excise tax the Money Fund will be required to
distribute by December 31 of each year at least 98% of its net investment income
for such year and at least 98% of its capital gain net
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<PAGE> 22
income (computed on the basis of the one-year period ending on October 31 of
such year), plus any amounts that were not distributed in previous taxable
years. For purposes of the excise tax, any net investment income or capital gain
net income retained by, and subject to federal income tax in the hands of, the
Money Fund will be treated as having been distributed.
Redemption or resale of shares of the Money Fund will be a taxable transaction
for federal income tax purposes. Redeeming shareholders will recognize gain or
loss in an amount equal to the difference between their basis in such redeemed
shares of the Money Fund and the amount received. Assuming that such shares are
held as capital assets, the gain or loss will be a capital gain or loss and will
generally be long- term if such shareholders have held their shares for more
than one year.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such months and paid in January of the following
year will be treated as having been distributed by the Money Fund (and received
by the shareholders) on the December 31 of the year in which the dividends were
declared. In addition, certain other distributions made after the close of a
taxable year of the Money Fund may be "spilled back" and treated as paid by the
Money Fund (except for purposes of the 4% excise tax) during such taxable year.
In such case, shareholders will be treated as having received such dividends in
the taxable year in which the distribution is actually made.
The Money Fund is required, in certain circumstances, to withhold 31% of
dividends and certain other payments, including redemptions, paid to
shareholders who do not furnish to the Money Fund their correct taxpayer
identification number (in the case of individuals, their social security number)
or who are otherwise subject to backup withholding. Foreign shareholders,
including shareholders who are nonresident aliens, may be subject to U.S.
withholding tax on certain distributions (whether received in cash or in shares)
at a rate of 30% or such lower rate as prescribed by any applicable treaty.
The federal income tax discussion set forth above is for general information
only. Prospective investors should consult their own advisors regarding the
specific federal income tax consequences of holding and disposing of shares, as
well as the effects of state, local and foreign tax laws and any proposed tax
law changes.
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DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
The Money Fund is a series of the Van Kampen American Capital Money Market
Trust, a Delaware business trust organized as of May 10, 1995 (the "Trust"). The
Money Fund originally organized as the American Monetary Reserve Fund, Inc., a
Maryland corporation, incorporated in July 1982 and subsequently reorganized as
the Independent CashFlow Trust, Money Market Series, which was then renamed as
Van Kampen Merritt Money Market Trust. Van Kampen Merritt Money Market Fund, a
separate series of Van Kampen Merritt Money Market Trust was again reorganized
as a series of the Trust as of July 31, 1995. The only series currently
designated is the Money Fund although the Trustees of the Trust are also
empowered to designate additional series. The authorized capitalization of the
Money Fund consists of an unlimited number of shares of beneficial interest, par
value $0.01, divided into two classes, designated Class A Shares and Class B
Shares. Each class of shares represents an interest in the assets of the Money
Fund and are identical in all respects except that each class bears certain
distribution expenses, has exclusive voting rights with respect to its
distribution fee and has different exchange privileges. See "The Distribution
and Service Plans." The Declaration of Trust provides that shareholders are not
liable for any liabilities of the Trust or any series, requires inclusion of
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<PAGE> 23
a clause to that effect in every agreement entered into by the Trust or any of
its series and indemnifies shareholders against any such liability.
Shares of the Trust entitle their holders to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. The Trust does not contemplate holding regular meetings of shareholders
to elect Trustees or otherwise. However, the holders of 10% or more of the
outstanding shares may by written request require a meeting to consider the
removal of Trustees by a vote of a majority of the shares present and voting at
such meeting. The Trust will assist such holders in communicating with other
shareholders of the Money Fund to the extent required by the Investment Company
Act. More detailed information concerning the Trust is set forth in the
Statement of Additional Information.
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ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
This prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Money Fund
with the SEC under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC, or may be
examined, without charge, at the office of the SEC in Washington, D.C.
The Money Fund's fiscal year ends on June 30. The Money Fund sends to its
shareholders at least semi-annually reports showing the Money Fund's portfolio
and other information. An annual report, containing financial statements audited
by independent auditors, is sent to shareholders each year. After the end of
each year, shareholders will receive federal income tax information regarding
dividends and capital gains distributions.
Shareholder inquiries should be directed to the Van Kampen American Capital
Money Market Fund, One Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attn:
Correspondence.
For Automated Telephone Service which provides 24-hour direct dial access to
Fund facts and Shareholder account information, dial (800) 421-5666. For
inquiries through Telecommunications Device for the Deaf (TDD) dial (800)
772-8889.
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VAN KAMPEN AMERICAN CAPITAL
MONEY MARKET FUND
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
----------------------
Investment Adviser
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Distributor
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Transfer Agent
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256
EXISTING SHAREHOLDERS--FOR Kansas City, MO 64141-9256
INFORMATION ON YOUR EXISTING Attn: Van Kampen American Capital
ACCOUNT PLEASE CALL THE FUND'S Funds
TOLL-FREE NUMBER--(800) 421-5666.
Custodian
STATE STREET BANK AND TRUST
PROSPECTIVE INVESTORS--CALL COMPANY 225 Franklin Street, P.O. Box 1713
YOUR BROKER OR (800) 421-5666. Boston, MA 02105-1713
Attn: Van Kampen American Capital
Funds
DEALERS--FOR DEALER INFORMA-
TION, SELLING AGREEMENTS, WIRE
ORDERS, OR REDEMPTIONS CALL
THE DISTRIBUTOR'S TOLL-FREE Legal Counsel
NUMBER--(800) 421-5666. SKADDEN, ARPS, SLATE, MEAGHER &
FLOM
333 West Wacker Drive
FOR SHAREHOLDER AND DEALER Chicago, IL 60606
INQUIRIES THROUGH
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
DIAL (800) 772-8889. Independent Auditors
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
FOR AUTOMATED TELEPHONE Chicago, IL 60601
SERVICES DIAL (800) 421-5666.
<PAGE> 25
MONEY MARKET FUND
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PROSPECTUS
AUGUST 1, 1995
------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
