<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1997
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. 38 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 23 [X]
</TABLE>
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)
ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
(630) 684-6000
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
RONALD A. NYBERG, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
VAN KAMPEN AMERICAN CAPITAL, INC.
ONE PARKVIEW PLAZA
OAKBROOK TERRACE, ILLINOIS 60181
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
COPIES TO:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 407-0700
---------------------
Approximate Date of Proposed Public Offering: As soon as practicable following
effectiveness of this Registration Statement.
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on September 28, 1997 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.
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
INTENDS TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION A FORM 24F-2 FOR ITS
FISCAL YEAR ENDING MAY 31, 1998 ON OR BEFORE AUGUST 29, 1998.
================================================================================
<PAGE> 2
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
LOCATION IN PROSPECTUS
FORM N-1A ITEM ----------------------
PART A
<C> <S> <C>
1. Cover Page................................. Cover Page
2. Synopsis................................... Prospectus Summary; Shareholder Transaction
Expenses; Annual Fund Operating Expenses
and Example
3. Condensed Financial Information............ Financial Highlights; Fund Performance
4. General Description of Registrant.......... The Fund; Investment Objective and
Policies; Investment Practices; Description
of Shares of the Fund
5. Management of the Fund..................... Annual Fund Operating Expenses and Example;
The Fund; Investment Practices;
Investment Advisory Services; Inside Back
Cover
6. Capital Stock and Other Securities......... The Fund; Alternative Sales Arrangements;
Purchase of Shares; Shareholder Services;
Distribution and Service Plans;
Redemption of Shares; Distributions from
the Fund; Tax Status; Description of
Shares of the Fund; Additional
Information; Inside Back Cover
7. Purchase of Securities Being Offered....... Alternative Sales Arrangements; Purchase of
Shares; Shareholder Services;
Distribution and Service Plans
8. Redemption or Repurchase................... Shareholder Services; Redemption of Shares
9. Pending Legal Proceedings.................. Inapplicable
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL INFORMATION
PART B -----------------------------------
<C> <S> <C>
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Table of Contents
12. General Information and History............ General Information
13. Investment Objectives and Policies......... Investment Policies; Investment
Restrictions
14. Management of the Fund..................... General Information; Trustees and Officers;
Investment Advisory Agreement
15. Control Persons and Principal Holders of
Securities............................... General Information; Trustees and Officers
16. Investment Advisory and Other Services..... General Information; Trustees and Officers;
Investment Advisory Agreement;
Distributor; Distribution and Service
Plans; Transfer Agent; Portfolio
Transactions and Brokerage; Other
Information
17. Brokerage Allocation and Other Practices... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities......... Purchase and Redemption of Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Determination of Net Asset Value; Purchase
and Redemption of Shares; Exchange
Privilege; Check Writing Privilege
20. Tax Status................................. Dividends, Distributions and Taxes
21. Underwriters............................... Distributor
22. Calculation of Performance Data............ Yield Information
23. Financial Statements....................... Report of Independent Accountants;
Financial Statements; Notes to Financial
Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item in Part C of the Registration Statement.
<PAGE> 3
- --------------------------------------------------------------------------------
VAN KAMPEN AMERICAN CAPITAL
RESERVE FUND
- --------------------------------------------------------------------------------
Van Kampen American Capital Reserve Fund (the "Fund") is a diversified
mutual fund. The investment objective of the Fund is to seek protection of
capital and high current income. The Fund seeks to achieve its investment
objective by investing 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 One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, and its telephone number is
(800)421-5666.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information, dated September 28, 1997, containing
additional information about the Fund is hereby incorporated in its entirety
into this Prospectus. A copy of the Statement of Additional Information may be
obtained without charge by calling (800)421-5666 or for Telecommunications
Device For the Deaf by calling (800)421-2833. The Statement of Additional
Information has been filed with the Securities and Exchange Commission (the
"SEC") and is available along with other related materials of the Fund at the
SEC's internet web site (http://www.sec.gov).
------------------
VAN KAMPEN AMERICAN CAPITAL SM
------------------
THIS PROSPECTUS IS DATED SEPTEMBER 28, 1997.
<PAGE> 4
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 5
Annual Fund Operating Expenses and Example.................. 6
Financial Highlights........................................ 8
The Fund.................................................... 10
Investment Objective and Policies........................... 10
Investment Practices........................................ 13
Investment Advisory Services................................ 13
Alternative Sales Arrangements.............................. 15
Purchase of Shares.......................................... 17
Shareholder Services........................................ 21
Redemption of Shares........................................ 26
Distribution and Service Plans.............................. 29
Distributions from the Fund................................. 31
Tax Status.................................................. 32
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> 5
- ------------------------------------------------------------------------------
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 for each class of shares and
$25 minimum for each subsequent investment for each class of shares (or less as
described under "Purchase of Shares").
INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek
protection of capital and high current income. There is no assurance the Fund
will achieve its investment objective. See "Investment Objective and Policies."
INVESTMENT POLICY. The Fund seeks to maintain a constant net asset value of
$1.00 per share by investing in a diversified portfolio of U.S. dollar
denominated money market securities. 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 can be no assurance that the Fund will be able to do so.
INVESTMENT RESULTS. The investment results of the Fund are shown in the table
of "Financial Highlights."
ALTERNATIVE SALES ARRANGEMENTS. The Fund offers three classes of shares to the
public, each with its own sales charge structure: Class A shares, Class B shares
and Class C shares. 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
shares 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 shares 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 shares
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."
3
<PAGE> 6
Class A Shares. Class A 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 and Service Plans."
Class B Shares. Class B shares are offered at net asset value per share and are
subject to a maximum contingent deferred sales charge ("CDSC") of 4.00% on
redemptions made within the first year after purchase and declining thereafter
to 0.00% after the fifth year. See "Redemption of Shares." Class B shares are
subject to a combined annual distribution fee and service fee of up to 0.90% of
its average daily net assets attributable to such class of shares. See "Purchase
of Shares -- Class B Shares" and "Distribution and Service Plans." Class B
shares convert automatically to Class A shares eight years after the end of the
calendar month in which the shareholder's order to purchase was accepted. See
"Alternative Sales Arrangements -- Conversion Feature."
Class C Shares. Class C shares are offered at net asset value per share and are
subject to a CDSC of 1.00% on redemptions made within one year of purchase. See
"Redemption of Shares." Class C shares are subject to a combined annual
distribution fee and service fee of up to 0.90% of its average daily net assets
attributable to such class of shares. See "Purchase of Shares -- Class C Shares"
and "Distribution and Service Plans."
INVESTMENT ADVISER. Van Kampen American Capital Asset Management, Inc. (the
"Adviser") is the Fund's investment adviser.
DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the "Distributor")
distributes the Fund's shares.
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."
The foregoing is qualified in its entirety by reference to the more detailed
information appearing elsewhere in this Prospectus.
4
<PAGE> 7
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Maximum sales charge imposed on
purchases (as a percentage of
offering price)............... 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 Year
redemption proceeds).......... None Year 1--4.00% 1--1.00%
Year 2--4.00% After -- None
Year 3--3.00%
Year 4--2.50%
Year 5--1.50%
After--None
Redemption fees (as a percentage
of amount redeemed)........... None None None
Exchange fee.................... None None None
</TABLE>
5
<PAGE> 8
- ------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Management Fees (as a percentage of
average daily net assets)............... 0.42% 0.42% 0.42%
12b-1 Fees (as a percentage of average
daily net assets)(1).................... 0.15% 0.90%(2) 0.90%(2)
Other Expenses (as a percentage of average
daily net assets)....................... 0.45% 0.45% 0.46%
Total Fund Operating Expenses (as a
percentage of average daily net
assets)................................. 1.02% 1.77% 1.78%
</TABLE>
- ------------------------------------------------------------------------------
(1) Class A shares are subject to an annual service fee of up to 0.15% of the
average daily net assets attributable to such class of shares. Class B
shares and Class C shares are each subject to a combined annual distribution
and service fee of up to 0.90% of the average daily net assets attributable
to such class of shares. See "Distribution and Service Plans."
(2) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted as a Fund-level expense by NASD
Rules.
6
<PAGE> 9
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
EXAMPLE: ---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (i) an
operating expense ratio of 1.02% for
Class A shares, 1.77% for Class B shares
and 1.78% for Class C shares, (ii) a
5.00% annual return and (iii) redemption
at the end of each time period:
Class A............................... $10 $32 $ 56 $125
Class B............................... $58 $86 $111 $189*
Class C............................... $28 $56 $ 96 $209
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 $ 56 $125
Class B............................... $18 $56 $ 96 $189*
Class C............................... $18 $56 $ 96 $209
</TABLE>
- ------------------------------------------------------------------------------
*Based on conversion to Class A shares after eight years.
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The "Example" reflects expenses based on the "Annual Fund
Operating Expenses" table as shown above carried out to future years and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5.00% annual
return assumption. The ten year amount with respect to Class B shares of the
Fund reflects the lower aggregate 12b-1 and service fees applicable to such
shares after conversion to Class A shares. Class B shares acquired through the
exchange privilege are subject to the 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 CDSC. THE INFORMATION CONTAINED IN THE ABOVE
TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of such costs and expenses, see "Purchase of Shares," "Investment
Advisory Services," "Redemption of Shares" and "Distribution and Service Plans."
7
<PAGE> 10
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST
OUTSTANDING THROUGHOUT EACH OF THE PERIODS INDICATED)
- --------------------------------------------------------------------------------
The following financial highlights have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified. The most recent
annual report (which contains financial highlights for the last five years) is
included in the Statement of Additional Information and may be obtained by
shareholders without charge by calling the telephone number on the cover of this
Prospectus. This information should be read in conjunction with the financial
statements and notes thereto included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------------------------------
YEAR ENDED MAY 31
---------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period................................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Investment Income................... .0440 .0465 .0434 .0229 .0244 .0415 .0664 .0801 .0815 .0651
Less Distributions from Net Investment
Income................................. (.0440) (.0465) (.0434) (.0229) (.0244) (.0415) (.0664) (.0801) (.0815) (.0651)
Net Asset Value, End of the Period...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return............................ 4.52% 4.75% 4.43% 2.32% 2.44% 4.20% 6.80% 8.33% 8.49% 6.71%
Net Assets at End of the Period (in
millions).............................. $451.3 $440.3 $319.7 $463.8 $279.3 $329.2 $402.3 $426.1 $474.2 $500.7
Ratio of Expenses to Average Net
Assets*................................ 1.02% 1.07% 1.00% 1.03% 1.09% 1.05% .94% .91% .76% .78%
Ratio of Net Investment Income to
Average Net Assets*.................... 4.38% 4.62% 4.28% 2.36% 2.44% 4.19% 6.68% 7.99% 8.19% 6.56%
</TABLE>
- ---------------
* The impact on the Ratios of Expenses and Net Investment Income to Average Net
Assets due to the Adviser's reimbursement of expenses was less than 0.01%.
(Table continued on following page)
8
<PAGE> 11
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
---------------------------------- ----------------------------------
APRIL 18, 1995 APRIL 18, 1995
YEAR ENDED (COMMENCEMENT YEAR ENDED (COMMENCEMENT
MAY 31, OF DISTRIBUTION) MAY 31, OF DISTRIBUTION)
--------------- TO MAY 31, --------------- TO MAY 31,
1997 1996 1995 1997 1996 1995
---- ---- ---------------- ---- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ----- ------ ------ -----
Net Investment Income................................... .0363 .0388 .0047 .0362 .0387 .0049
Less Distributions from Net Investment Income........... (.0363) (.0388) (.0047) (.0362) (.0387) (.0049)
------ ------ ----- ------ ------ -----
Net Asset Value, End of the Period...................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ===== ====== ====== =====
Total Return(a)......................................... 3.71% 3.95% .47%* 3.72% 3.94% .49%*
Net Assets at End of the Period (in millions)........... $103.0 $81.5 $4.2 $8.4 $9.7 $0.6
Ratio of Expenses to Average Net Assets**............... 1.77% 1.86% 1.76% 1.78% 1.87% 1.76%
Ratio of Net Investment Income to Average Net
Assets**............................................... 3.70% 3.75% 3.52% 3.64% 3.81% 3.52%
</TABLE>
- ---------------
* Non-Annualized
** The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to the Adviser's reimbursement of expenses was less than
0.01%.
(a) Total return is based upon net asset value which does not include payment of
the contingent deferred sales charge.
9
<PAGE> 12
- ------------------------------------------------------------------------------
THE FUND
- ------------------------------------------------------------------------------
The Fund is an open-end, diversified management investment company, commonly
known as a mutual fund. A mutual fund provides, for those who have similar
investment goals, a practical and convenient way to invest in a diversified
portfolio of securities by combining their resources in an effort to achieve
such goals.
Van Kampen American Capital Asset Management, Inc. (the "Adviser") provides
investment advisory and administrative services to the Fund. The Adviser 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 the Prospectus.
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- ------------------------------------------------------------------------------
The investment objective of the Fund is to seek protection of capital and high
current income. The Fund seeks to achieve its investment objective by investing
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 and with a dollar-weighted average maturity of
90 days or less as required by rules promulgated by the SEC.
There can be no guarantee that the Fund will achieve its investment objective
or be able at all times to maintain its net asset value per share at $1.00. 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
10
<PAGE> 13
Association, the Government National Mortgage Association, Federal Land Banks,
and the Farmer's Home Administration.
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 Ratings Group ("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.
11
<PAGE> 14
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 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. 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. Repurchase agreements involve certain risks in
the event of a default by the other party. The Fund will 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 aggregates
the cash that certain funds advised or subadvised by the Adviser or certain of
its affiliates would otherwise invest separately into a joint account. The cash
in the joint account is then invested 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 an SEC exemption order
authorizing this practice, which conditions are designed to ensure the fair
administration of the joint account and to protect the amounts in that account.
12
<PAGE> 15
- ------------------------------------------------------------------------------
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, to the extent permitted by law, with brokerage
firms affiliated with the Fund and 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.
INVESTMENT RESTRICTIONS. The Fund has adopted certain fundamental investment
restrictions which, like the investment objective, may not be changed without
approval by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the Investment Company Act of 1940, as amended ("1940
Act")). 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 5% 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 fundamental
investment restrictions are described in the Statement of Additional
Information. Except to the extent governed by the Fund's fundamental investment
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 more
than $60 billion under management or supervision. Van Kampen American Capital's
more than 50 open-end and 37 closed-end funds and more than 2,800 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
13
<PAGE> 16
wholly-owned subsidiary of Van Kampen American Capital. Van Kampen American
Capital is an indirect wholly-owned subsidiary of Morgan Stanley, Dean Witter,
Discover & Co. The Adviser's principal office is located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181.
Morgan Stanley, Dean Witter, Discover & Co. and various of its directly or
indirectly owned subsidiaries, including Morgan Stanley Asset Management Inc.,
an investment adviser ("MSAM" or the "Subadviser"), Morgan Stanley & Co.
Incorporated, a registered broker-dealer and investment adviser, and Morgan
Stanley International are engaged in a wide range of financial services. Their
principal businesses include securities underwriting, distribution and trading;
merger, acquisition, restructuring and other corporate finance advisory
activities; merchant banking; stock brokerage and research services; credit
services; asset management; trading of futures, options, foreign exchange,
commodities and swaps (involving foreign exchange, commodities, indices and
interest rates); real estate advice, financing and investing; and global
custody, securities clearance services and securities lending.
ADVISORY AGREEMENT. The Fund retains the Adviser to manage the investment of
its assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed based on an annual rate applied to average daily net assets of the Fund
as follows:
<TABLE>
<CAPTION>
% PER
AVERAGE DAILY NET ASSETS ANNUM
------------------------ -----------
<S> <C>
First $150 million........................................ 0.50%
Next $100 million......................................... 0.45%
Next $100 million......................................... 0.40%
Over $350 million......................................... 0.35%
</TABLE>
Under the Advisory Agreement, the Fund also reimburses the Adviser for the
cost of the Fund's accounting services, which include maintaining its financial
books and records and calculating its daily net asset value. Operating expenses
paid by the Fund include shareholder service agency fees, service fees,
distribution fees, custodian fees, legal and accounting fees, the costs of
reports and proxies to shareholders, trustees' fees (other than those who are
affiliated persons as defined in the 1940 Act of the Adviser, Distributor or Van
Kampen American Capital), and all other business expenses not specifically
assumed by the Adviser.
From time to time as the Adviser 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.
14
<PAGE> 17
PERSONAL INVESTMENT POLICIES. The Fund and the Adviser have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
Adviser and its employees. The Codes permit directors, trustees, officers and
employees to buy and sell securities for their personal accounts subject to
certain restrictions. Persons with access to certain sensitive information are
subject to preclearance and other procedures designed to prevent conflicts of
interest.
- ------------------------------------------------------------------------------
ALTERNATIVE SALES ARRANGEMENTS
- ------------------------------------------------------------------------------
The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares of the Fund that is most beneficial given the amount of the
purchase and the length of time the investor expects to hold the shares.
CLASS A SHARES. Class A shares are sold at net asset value. 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 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. Class B shares convert automatically to Class A shares eight years after
the end of the calendar month in which the shareholder's order to purchase was
accepted. See "Purchase of Shares -- Class B Shares."
CLASS C SHARES. Class C shares are sold at net asset value and are subject to
a deferred sales charge if redeemed within one year of purchase. Class C shares
are subject to an ongoing service fee at an annual rate of up to 0.15% 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."
CONVERSION FEATURE. Class B shares purchased on or after June 1, 1996, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares eight years after the end of the calendar month in which the
shares were purchased. Class B shares purchased before June 1, 1996, and any
dividend
15
<PAGE> 18
reinvestment plan shares received thereon, automatically convert to Class A
shares six years after the end of the calendar month in which the shares were
purchased. Class C shares purchased before January 1, 1997, and any dividend
reinvestment plan shares received thereon, automatically convert to Class A
shares ten years after the end of the calendar month in which such shares were
purchased. Such conversion will be on the basis of the relative net asset values
per share, without the imposition of any sales load, fee or other charge.
The conversion of such shares to Class A shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fee and transfer agency costs with respect to such
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the 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 may be suspended for an indefinite
period if an opinion is no longer available and such shares might continue to be
subject to the higher aggregate fees applicable to such shares.
FACTORS FOR CONSIDERATION. Class B shares and Class C shares of the Fund are
made available primarily to allow investors to directly purchase Class B shares
and Class C shares and later exchange such shares directly into Class B shares
and Class C shares of the other funds advised by the Adviser or its affiliates
and distributed by the Distributor that offer an 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 shares and Class
C shares. Investors who wish to have the ability to exchange their shares for
Class B shares or Class C shares of other Van Kampen American Capital funds
should consider purchasing Class A shares of the Fund and then redeeming those
shares when they wish to invest in Class B shares or Class C shares of other Van
Kampen American Capital 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 shares or Class C shares of another Van Kampen American Capital
fund is likely to result in a higher return to the investor than purchasing
Class B shares or Class C shares of the Fund and then exchanging them for Class
B shares or Class C shares of another Van Kampen American Capital fund. It is
presently the policy of the Distributor not to accept any order of $500,000 or
more for Class B shares or any order of $1 million or more for Class C shares as
it ordinarily would be more beneficial for such an investor to purchase Class A
shares.
The distribution expenses incurred by the Distributor in connection with the
sale of Class B shares and Class C shares will be reimbursed from the proceeds
of the ongoing distribution fee and any CDSC incurred upon redemption within
five years or one year, respectively, of purchase. Distribution expenses by the
Distributor in
16
<PAGE> 19
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 shares and Class C shares. Sales personnel are
not entitled to receive compensation for selling Class A shares.
GENERAL. Dividends paid by the Fund with respect to Class A shares, Class B
shares and Class C shares will be calculated in the same manner at the same time
on the same day except that the higher distribution fees and transfer agency
costs relating to Class B shares or Class C shares will be borne by the
respective class. See "Distributions from the Fund." Shares of the Fund may be
exchanged, subject to certain limitations, for shares of the same class of
certain other mutual funds advised by the Adviser and its affiliates and
distributed by the Distributor. See "Shareholder Services -- Exchange
Privilege."
- ------------------------------------------------------------------------------
PURCHASE OF SHARES
- ------------------------------------------------------------------------------
GENERAL
The Fund offers three classes of shares to the public on a continuous basis
through the Distributor as principal underwriter, which is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181. Shares also are offered
through members of the National Association of Securities Dealers, Inc. ("NASD")
who are acting as securities dealers ("dealers") and NASD members or eligible
non-NASD members who are acting as brokers or agents for investors ("brokers").
The term "dealers" and "brokers" are sometimes referred to herein as "authorized
dealers."
Initial investments must be at least $500 for each class of shares and
subsequent investments must be at least $25 for each class of shares. Both
minimums may be waived by the Distributor for plans involving periodic
investments. Shares of the Fund may be sold in foreign countries where
permissible. The Fund and the Distributor reserve the right to refuse any order
for the purchase of shares. The Fund also reserves the right to suspend the sale
of the Fund's shares in response to conditions in the securities markets or for
other reasons.
Shares of the Fund may be purchased on any business day through authorized
dealers. Shares also may be purchased by completing the application accompanying
this Prospectus and forwarding the application through the authorized dealer, to
the shareholder service agent, ACCESS Investor Services, Inc. ("ACCESS"), a
wholly-owned subsidiary of the Van Kampen American Capital. When purchasing
shares of this Fund, investors must specify whether the purchase is Class A
shares, Class B shares or Class C shares.
17
<PAGE> 20
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.
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 shares and Class C shares bear the expenses of the
deferred sales arrangement and any expenses (including the higher distribution
fee and transfer agency costs) resulting from such sales arrangement, (ii)
generally, each class has exclusive voting rights with respect to approvals of
the Rule 12b-1 distribution plan pursuant to which its distribution fee or
service fee is paid, (iii) each class has different exchange privileges, (iv)
certain shares are subject to a conversion feature and (v) certain shares have
different shareholder service options available. The net income attributable to
Class B shares and Class C shares and the dividends payable on Class B shares
and Class C shares will be reduced by the amount of the distribution fee and
other expenses associated with such shares. Sales personnel of authorized
dealers distributing the Fund's shares and other persons entitled to receive
compensation for selling such shares may receive differing compensation for
selling Class A shares, Class B shares or Class C shares.
The Distributor may from time to time implement programs under which an
authorized dealer's sales force may be eligible to win nominal awards for
certain sales efforts or under which the Distributor will reallow to any
authorized dealer that sponsors sales contests or recognition programs
conforming to criteria established by the Distributor, or participates in sales
programs sponsored by the Distributor, an amount not exceeding the total
applicable sales charges on sales generated by the authorized dealer at the
public offering price during such programs. Other programs provide, among other
things and subject to certain conditions, for certain favorable distribution
arrangements for shares of the Fund. Also, the Distributor in its discretion may
from time to time, pursuant to objective
18
<PAGE> 21
criteria established by the Distributor, pay fees to, and sponsor business
seminars for, qualifying authorized dealers for certain services or activities
which are primarily intended to result in sales of shares of the Fund. Fees may
include payment for travel expenses, including lodging, incurred in connection
with trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature. In some instances additional compensation or
promotional incentives may be offered to brokers, dealers or financial
intermediaries that have sold or may sell significant amounts of shares during
specified periods of time. The Distributor may provide additional compensation
to Edward D. Jones & Co. or an affiliate thereof based on a combination of its
sales of shares and increases in assets under management. All of the foregoing
payments are made by the Distributor out of its own assets. Such fees paid for
such services and activities with respect to the Fund will not exceed in the
aggregate 1.25% of the average total daily net assets of the Fund on an annual
basis. These programs will not change the price an investor will pay for shares
or the amount that a Fund will receive from such sale.
CLASS A SHARES
Class A shares are offered at net asset value without sales charge.
The Fund permits unitholders of unit investment trusts to reinvest
distributions from such trusts in Class A shares of the Fund 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 systematic withdrawal program. There will be no minimum for
reinvestments from unit investment trusts. The Fund will send account activity
statements to such participants on a quarterly basis only, even if their
investments are made more frequently. 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 CDSC at the rates set
forth in the following table charged as a percentage of the dollar amount
subject thereto. The
19
<PAGE> 22
charge is assessed on an amount equal to the lesser of the then current market
value or the cost of the shares being redeemed. Accordingly, no sales charge is
imposed on increases in net asset value above the initial purchase price. In
addition, no charge is assessed on shares derived from reinvestment of dividends
or capital gains distributions. It is presently the policy of the Distributor
not to accept any order for Class B shares in an amount of $500,000 or more
because it ordinarily will be more advantageous for an investor making such an
investment to purchase Class A shares.
The amount of the CDSC, if any, varies depending on the number of years from
the time of payment for the purchase of Class B shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchases of shares, all payments
during a month are aggregated and deemed to have been made on the last day of
the month.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
- ------------------------------------------------------------------------
<S> <C>
First................................ 4.00%
Second............................... 4.00%
Third................................ 3.00%
Fourth............................... 2.50%
Fifth................................ 1.50%
Sixth and After...................... None
- ------------------------------------------------------------------------
</TABLE>
In determining whether a CDSC is applicable to a redemption, it is assumed
that the redemption is first of any shares in the shareholder's Fund account
that are not subject to a CDSC, second of shares held for over five years or
shares acquired pursuant to reinvestment of dividends or distributions and third
of shares held longest during the five-year period.
A commission or transaction fee of 4.00% of the purchase amount will be paid
to authorized dealers and at the time of purchase. Additionally, the Distributor
may, from time to time, pay additional promotional incentives, in the form of
cash or other compensation, to authorized dealers that sell Class B shares of
the Fund.
CLASS C SHARES
Class C shares are offered at net asset value. Class C shares which are
redeemed within the first year of purchase are subject to a CDSC of 1.00%. The
charge is assessed on an amount equal to the 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. It is presently the policy of the Distributor
not to accept any order in
20
<PAGE> 23
an amount of $1 million or more for Class C shares because it ordinarily will be
more advantageous for an investor making such an investment to purchase Class A
shares.
In determining whether a CDSC is applicable to a redemption, it is assumed
that the redemption is first of any shares in the shareholder's Fund account
that are not subject to a CDSC and second of shares held for more than one year
or shares acquired pursuant to reinvestment of dividends or distributions.
A commission or transaction fee of 1.00% of the purchase amount will be paid
to authorized dealers at the time of purchase. Authorized dealers also will be
paid ongoing commissions and transaction fees of up to 0.75% of the average
daily net assets of the Fund's Class C shares annually commencing in the second
year after purchase. Additionally, the Distributor may, from time to time, pay
additional promotional incentives, in the form of cash or other compensation, to
authorized dealers that sell Class C shares of the Fund.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The CDSC may be waived on redemptions of Class B shares and Class C shares (i)
following the death or disability (as defined in the Code) of a shareholder,
(ii) in connection with required minimum distributions from an IRA or other
retirement plan, (iii) pursuant to the Fund's systematic withdrawal plan but
limited to 12% annually of the initial value of the account or (iv) effected
pursuant to the right of the Fund to liquidate a shareholder's account as
described herein under "Redemption of Shares." The CDSC 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 180 days after
redemption. See the Statement of Additional Information for further discussion
of waiver provisions.
- ------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
The Fund offers a number of shareholder services designed to facilitate the
investment in its shares at little or no extra cost to the investor. The
following is a description of such services.
INVESTMENT ACCOUNT. Each shareholder has an investment account under which the
investor's shares are held by ACCESS, the fund's transfer agent. ACCESS performs
bookkeeping, data processing and administrative services relative to the
maintenance of shareholder accounts. Except as described in this Prospectus,
after each share transaction in an account, the shareholder receives a statement
showing the activity in the account. Each shareholder will 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
21
<PAGE> 24
also will receive separate confirmations for each purchase or sale transaction
other than reinvestment of dividends and capital gains distributions and
systematic purchases or redemptions. Additions to an investment account may be
made at any time by purchasing shares through authorized dealers or by mailing a
check directly to ACCESS.
SHARE CERTIFICATES. Generally, the Fund will not issue share certificates.
However, upon written or telephone request to the Fund, a share certificate will
be issued representing shares (with the exception of fractional shares) of the
Fund. A shareholder will be required to surrender such certificates upon
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen American Capital Funds, c/o ACCESS, P.O. Box 418256,
Kansas City, MO 64141-9256, requesting an "affidavit of loss" and obtain a
Surety Bond in a form acceptable to ACCESS. On the date the letter is received
ACCESS will calculate a fee for replacing the lost certificate equal to no more
than 2.00% of the net asset value of the issued shares, and bill the party to
whom the certificate was mailed.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value (without sales charge) on
the record date. Unless the shareholder instructs otherwise, the reinvestment
plan is automatic. This instruction may be made by telephone by calling (800)
421-5666 ((800) 421-2833 for the hearing impaired) or in writing to ACCESS. The
investor may, on the initial application or prior to any declaration, instruct
that dividends be paid in cash and capital gains distributions be reinvested at
net asset value, or that both dividends and capital gains distributions be paid
in cash.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder may authorize ACCESS to charge a bank account on a regular
basis to invest predetermined amounts in the Fund. Additional information is
available from the Distributor or authorized dealers.
RETIREMENT PLANS. Eligible investors may establish individual retirement
accounts ("IRAs"); SEP, 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
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
22
<PAGE> 25
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) 421-2833 for the hearing
impaired), elect to have all dividends and other distributions paid on a class
of shares of the Fund invested into shares of the same class of any
Participating Fund so long as the investor has a pre-existing account for such
class of shares of the other Fund. Both accounts must be of the same type,
either non-retirement or retirement. If the accounts are retirement accounts,
they must both be for the same class and of the same type of retirement plan
(e.g. IRA, 403(b)(7), 401(k), Keogh) and for the benefit of the same individual.
If a qualified, pre-existing account does not exist, the shareholder must
establish a new account subject to minimum investment and other requirements of
the fund into which distributions would be invested. Distributions are invested
into the selected fund at its net asset value as of the payable date of the
distribution.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any other fund advised by the Adviser or Van Kampen American Capital
Investment Advisory Corp. and distributed by the Distributor ("Participating
Funds") based on the net asset values of each fund on the date of the exchange.
Class A shares of the Fund which have not previously been charged a sales load
(except for shares purchased via the reinvestment option) or that have been
charged a lower sales charge than the sales charge applicable of the fund being
acquired will have any applicable sales charges differential imposed upon an
exchange into a Participating Fund. When Class B shares and Class C shares are
exchanged among Participating Funds, the holding period for purposes of
computing the CDSC is based upon the dates of the initial purchase of such
shares from a Participating Fund (the "original fund"). Upon redemption from the
Participating Funds complex of funds, Class B shares and Class C shares are
subject to the CDSC schedule of the original fund.
Shares of any Participating Fund may be exchanged for shares of any other
Participating Fund only if shares are available for sale; however, during
periods of suspension of sales, shares of a Participating Fund may be available
for sale only to existing shareholders of a fund. Shares of the fund to be
acquired must be registered
23
<PAGE> 26
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. Shareholders seeking an
exchange into a Participating Fund should obtain and read the current prospectus
for such fund. Additional funds may be added from time to time as determined by
the Fund's Board of Trustees as Participating Funds.
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
otherwise designated 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 (if applicable). If the
exchanging shareholder does not have an account in the fund whose shares are
being acquired, a new account will be established with the same registration,
dividend and capital gain options (except dividend diversification) and
authorized dealer of record as the account from which shares are exchanged,
unless otherwise specified by the shareholder. In order to establish a
systematic withdrawal plan for the new account or reinvest dividends from the
new account into another fund, however, an exchanging shareholder must file a
specific written request. The Fund reserves the right to reject any order to
acquire its shares through exchange. In addition, the Fund may modify, restrict
or terminate the exchange privilege at any time on 60 days' notice to its
shareholders of any termination or material amendment.
A prospectus of any of these mutual funds may be obtained from any authorized
dealer or the Distributor. An investor considering an exchange to one of such
funds should refer to the prospectus for additional information regarding such
fund prior to investing.
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the next determined net asset value after receipt of
instructions may establish a monthly, quarterly, semi-annual or annual
withdrawal plan. Any investor whose shares is a single account total $5,000 or
more at the offering price next computed after receipt of instructions may
establish a quarterly, semi-annual or annual withdrawal plan. This plan provides
for the orderly use of the
24
<PAGE> 27
entire account, not only the income but also the capital, if necessary. Each
withdrawal constitutes a redemption of shares on which any capital gain or loss
will be recognized. The planholder may arrange for monthly, quarterly,
semi-annual, or annual checks in any amount, not less than $25. Such a
systematic withdrawal plan also may be maintained by an investor purchasing
shares for a retirement plan established on a form made available by the Fund.
See "Shareholder Services -- Retirement Plans."
Class B shareholders and Class C shareholders may redeem up to 12% annually of
the shareholder's initial account balance without incurring a CDSC. Initial
account balance means the amount of the shareholder's investment at the time the
election to participate in the plan is made.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under the plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends and capital gains distributions, the shareholder's
original investment will be correspondingly reduced and ultimately exhausted.
Withdrawals made concurrently with the purchase of additional shares ordinarily
will be disadvantageous to the shareholder because of the duplication of sales
charges. Any taxable gain or loss will be recognized by the shareholder upon
redemption of shares.
CHECK WRITING PRIVILEGE. A Class A shareholder holding shares of the Fund for
which certificates have not been issued and which are in a non-escrow status 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
Class A shareholder. 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. Check writing redemptions represent the sale of Class A shares. Any
gain or loss realized on the sale of shares is a taxable event. See "Redemption
of Shares."
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
25
<PAGE> 28
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 authorized dealers must be at least $500 unless transmitted
via the FUNDSERV network.
As described herein under "Purchase of Shares," redemptions of Class B shares
and Class C shares are subject to a CDSC. The CDSC 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. Signatures must conform exactly to the account
registration. 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 national securities exchange, registered securities association or
clearing agency; a savings and loan association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. For example, although the Fund normally does
not issue certificates for shares, it 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
26
<PAGE> 29
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
it confirms the purchase check has cleared, which may take 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 initial investment as
specified in this Prospectus. 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 CDSC 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 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
27
<PAGE> 30
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. 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) 421-5684 (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. 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 CDSC on redemptions
following the disability of a Class B shareholder and Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Code, which in pertinent part
defines a person as disabled if such person "is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of
long-continued and indefinite duration." While the Fund does not specifically
adopt the balance of the Code's definition which pertains to furnishing the
Secretary of Treasury with such proof as
28
<PAGE> 31
he or she may require, the Distributor will require satisfactory proof of
disability before it determines to waive the CDSC on Class B shares and Class C
shares.
In cases of disability, the CDSC on Class B shares 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 CDSC on
Class B shares and Class C shares applies to a total or partial redemption, but
only to redemptions of shares held at the time of the initial determination of
disability.
REINSTATEMENT PRIVILEGE. A Class A shareholder or Class B shareholder who has
redeemed shares of the Fund may reinstate any portion or all of the net proceeds
of such redemption in Class A shares of the Fund. A Class C shareholder who has
redeemed shares of the Fund may reinstate any portion or all of the proceeds of
such redemption in Class C shares of the Fund with credit given for any CDSC
paid upon such redemption. Such reinstatement is made at the net asset value
(without sales charge except as described under "Shareholder
Services -- Exchange Privilege") next determined after the order is received,
which must be within 180 days after the date of the redemption. Reinstatement at
net asset value is also offered to participants in those eligible retirement
plans held or administered by Van Kampen American Capital Trust Company for
repayment of principal (and interest) on their borrowings on such plans.
- ------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS
- ------------------------------------------------------------------------------
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan provide
that the Fund may spend a portion of the Fund's average daily net assets
attributable to each class of shares in connection with distribution of the
respective class of shares and in connection with the provision of ongoing
services to shareholders of each class. The Distribution Plan and the Service
Plan are being implemented through an agreement with the Distributor and
sub-agreements between the Distributor and brokers, dealers or financial
intermediaries (collectively, "Selling Agreements") that may provide for their
customers or clients certain services or assistance.
CLASS A SHARES. The Fund may spend an aggregate amount up to 0.15% per year of
the average daily net assets attributable to the Class A shares of the Fund
pursuant to the Distribution Plan and Service Plan. From such amount, the Fund
may spend up to 0.15% per year of the Fund's average daily net assets
attributable to the Class A shares pursuant to the Service Plan in connection
with the ongoing provision of services to holders of such shares by the
Distributor and by brokers,
29
<PAGE> 32
dealers or financial intermediaries and in connection with the maintenance of
such shareholders' accounts. The Fund pays the Distributor the lesser of the
balance of the 0.15% not paid to such brokers, dealers or financial
intermediaries or the amount of the Distributor's actual distribution related
expense.
CLASS B SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class B shares of the Fund pursuant to the
Distribution Plan. In addition, the Fund may spend up to 0.15% per year of the
Fund's average daily net assets attributable to the Class B shares pursuant to
the Service Plan in connection with the ongoing provision of services to holders
of such shares by the Distributor and by brokers, dealers or financial
intermediaries and in connection with the maintenance of such shareholders'
accounts.
CLASS C SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class C shares of the Fund pursuant to the
Distribution Plan. From such amount, the Fund, or the Distributor as agent for
the Fund, pays brokers, dealers or financial intermediaries in connection with
the distribution of the Class C shares up to 0.75% of the Fund's average daily
net assets attributable to Class C shares maintained in the Fund more than one
year by such broker's, dealer's or financial intermediary's customers. The Fund
pays the Distributor the lesser of the balance of 0.75% not paid to such
brokers, dealers or financial intermediaries or the amount of the Distributor's
actual distribution related expense attributable to the Class C shares. In
addition, the Fund may spend up to 0.15% per year of the Fund's average daily
net assets attributable to the Class C shares pursuant to the Service Plan in
connection with the ongoing provision of services to holders of such shares by
the Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts.
OTHER INFORMATION. Amounts payable to the Distributor with respect to the
Class A Shares under the Distribution Plan in a given year may not fully
reimburse the Distributor for its actual distribution-related expenses during
such year. In such event, with respect to the Class A shares, there is no
carryover of such reimbursement obligations to succeeding years.
The Distributor's actual expenses with respect to Class B shares or Class C
shares for any given year may exceed the amounts payable to the Distributor with
respect to such class of shares under the Distribution Plan, the Service Plan
and payments received pursuant to the CDSC. In such event, with respect to any
such class of shares, any unreimbursed expenses will be carried forward and paid
by the Fund (up to the amount of the actual expenses incurred) in future years
so long as such Distribution Plan is in effect. Except as mandated by applicable
law, the Fund does not impose any limit with respect to the number of years into
the future that such unreimbursed expenses may be carried forward (on a Fund
level basis). Because such expenses are accounted on a Fund level basis, in
periods of extreme
30
<PAGE> 33
net asset value fluctuation such amounts with respect to a particular Class B
share or Class C share may be greater or less than the amount of the initial
commission (including carrying cost) paid by the Distributor with respect to
such share. In such circumstances, a shareholder of a share may be deemed to
incur expenses attributable to other shareholders of such class. As of May 31,
1997, there were $1,612,417 and $127,810 of unreimbursed distribution expenses
with respect to Class B shares and Class C shares, respectively, representing
approximately 1.57% and 1.52% of the Fund's average net assets attributable to
Class B shares and Class C shares, respectively. If the Distribution Plan was
terminated or not continued, the Fund would not be contractually obligated to
pay the Distributor for any expenses not previously reimbursed by the Fund or
recovered through CDSCs.
The Distributor will not use the proceeds from the CDSC applicable to a
particular class of shares to defray distribution-related expenses attributable
to any other class of shares. Various federal and state laws prohibit national
banks and some state-chartered commercial banks from underwriting or dealing in
the Fund's shares. In addition, state securities laws on this issue may differ
from the interpretations of federal law, and banks and financial institutions
may be required to register as dealers pursuant to state law. In the unlikely
event that a court were to find that these laws prevent such banks from
providing such services described above, the Fund would seek alternate providers
and expects that shareholders would not experience any disadvantage.
- ------------------------------------------------------------------------------
DISTRIBUTIONS FROM THE FUND
- ------------------------------------------------------------------------------
The Fund's net income is declared and paid 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.
The per share dividends on Class B shares and Class C shares may be lower than
the per share dividends on Class A shares as a result of the higher distribution
fees and transfer agency costs applicable to such classes of shares.
31
<PAGE> 34
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 each year 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
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. By
qualifying as a regulated investment company, the Fund generally is not subject
to federal income taxes to the extent it distributes at least 90% of its net
investment income (which includes for this purpose net short-term capital gains,
but not net capital gains, which are the excess of net long-term capital gains
over net short-term capital losses) and net capital gains. The Fund intends to
distribute substantially all of its net investment income and net capital gains,
if any, at least annually. Distributions in excess of the Fund's earnings and
profits will first reduce the adjusted tax basis of the shares held by a
shareholder 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). Dividends from net investment income are taxable to shareholders
as ordinary income. Distributions of the Fund's net capital gains, if any, are
taxable to shareholders as long-term capital gains regardless of the length of
time the shares of the Fund have been held by such shareholders. 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 will
be provided by the Fund to shareholders for each year that such amounts are
$10.00 or more.
Under the Taxpayer Relief Act of 1997 (the "1997 Tax Act"), the maximum tax
rates applicable to net capital gains recognized by individuals and other non-
corporate taxpayers are (i) the same as ordinary income rates for capital assets
held for one year or less, (ii) 28% for capital assets held for more than one
year but not more than 18 months and (iii) 20% for capital assets held for more
than 18 months. Under the 1997 Tax Act, the Treasury is authorized to issue
regulations that address the application of the new capital gains rates to sales
and exchanges by regulated investment companies and to sales and exchanges of
interests in regulated investment companies, but no such regulations have been
issued as of the date hereof. It is expected that the new tax rates for capital
gains under the 1997 Tax Act described above will apply to distributions of
capital gains dividends by the Fund as well as to sales and exchanges of shares
in the Fund. Shareholders should
32
<PAGE> 35
consult their own tax advisers as to the application of the new capital gains
rates to their particular circumstances.
To avoid being subject to a 31% federal backup withholding tax on dividends,
distributions and redemption payments, a shareholder must, among other things,
furnish the Fund with a certification of his correct taxpayer identification
number.
The foregoing is a brief summary of some of the federal income tax
considerations affecting the Fund and its shareholders who are U.S. residents or
U.S. corporations. Investors should consult their tax advisers for more detailed
tax advice, including advice regarding state and local tax considerations.
Foreign investors should consult their own tax advisers for further information
as to the tax consequences in the U.S. or their country of residence or
citizenship of an investment in the Fund. See "Dividends, Distributions and
Taxes" in the Statement of Additional Information.
- ------------------------------------------------------------------------------
FUND PERFORMANCE
- ------------------------------------------------------------------------------
From time to time, the Fund may advertise 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 "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, 1997, 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 type and quality of the securities held in a
portfolio, portfolio maturity, operating expenses and market conditions.
Yield is calculated separately for Class A shares, Class B shares and Class C
shares. Because of the differences in distribution fees, the yields for each of
the classes will differ with Class B shares and Class C shares having a lower
yield than Class A shares.
33
<PAGE> 36
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 nationally recognized financial publications. The Fund
will include performance data for each class of shares of the Fund in any
advertisement or information including performance data of the Fund.
The Fund may also utilize performance information in hypothetical
illustrations provided in narrative form. These hypotheticals will be
accompanied by the standard performance information required by the SEC as
described above.
The Fund's Annual Report and Semi-Annual Report contains additional
information. A copy of the Annual Report or Semi-Annual Report may be obtained
without charge by calling or writing the Fund at the telephone number and
address printed on the cover page of this Prospectus.
- ------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF THE FUND
- ------------------------------------------------------------------------------
The Fund originally was incorporated in Maryland on March 28, 1974. The Fund
was reorganized as a business trust under the laws of the state of Delaware on
July 31, 1995, and adopted its current name as of that time. The authorized
capitalization of the Fund consists of an unlimited number of shares of
beneficial interest, par value $0.01 per share. The Fund currently offers three
classes of shares, designated Class A shares, Class B shares and Class C shares.
Other classes may be established from time to time. Shares issued by the Fund
are fully paid, non-assessable and, except as described herein, have no
preemptive or conversion rights.
Each class of shares represents an interest in the same assets of the Fund and
generally are identical in all respects except that each class bears certain
distribution expenses and has exclusive voting rights with respect to its
distribution fee. There are no conversion, preemptive or other subscription
rights, except with respect to the conversion of certain shares into Class A
shares as described herein. In the event of liquidation, each of the shares of
the Fund is entitled to its portion of all of the Fund's net assets after all
debt and expenses of the Fund have been paid. Since Class B shares and Class C
shares pay higher distribution fees and transfer agency costs, the liquidation
proceeds to Class B shareholders and Class C shareholders are likely to be lower
than to other shareholders.
The Fund does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. However, the holders of 10% or more of the
outstanding
34
<PAGE> 37
shares may by written request require a meeting to consider the removal of
Trustees by a vote of two-thirds of the shares then outstanding cast in person
or by proxy at such meeting. The Fund will assist such holders in communicating
with other shareholders of the Fund to the extent required by the 1940 Act. More
detailed information concerning the Fund is set forth in the Statement of
Additional Information.
The Fund's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or liability of the Fund but the assets of the Fund only shall be liable.
- ------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------
This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Fund with
the SEC under the 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 fiscal year end of the Fund is May 31. The Fund sends to its shareholders
at least semi-annually reports showing the Fund's portfolio and other
information. An Annual Report, containing financial statements audited by the
Fund's independent accountants, is sent to shareholders each year. After the end
of each year, shareholders will receive federal tax information regarding
dividends and capital gains distributions.
For Automated Telephone Service which provides 24-hour direct dial access to
fund facts and shareholder account information, dial (800) 847-2424. For
inquiries through Telecommunications Device for the Deaf (TDD) dial (800)
421-2833.
35
<PAGE> 38
EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 341-2911
PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 421-5666
DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS,
OR REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666
FOR SHAREHOLDER AND DEALER
INQUIRIES THROUGH
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
DIAL (800) 421-2833
FOR AUTOMATED
TELEPHONE SERVICES
DIAL (800) 847-2424
VAN KAMPEN AMERICAN CAPITAL
RESERVE FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
ACCESS INVESTOR SERVICES, INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen American Capital Reserve Fund
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 West Franklin Street
P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen American Capital Reserve Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
PRICE WATERHOUSE LLP
1201 Louisiana
Suite 2900
Houston, TX 77002
<PAGE> 39
------------------------------------------------------------------------------
RESERVE FUND
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P R O S P E C T U S
SEPTEMBER 28, 1997
------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------
VAN KAMPEN AMERICAN CAPITAL
------------------------------------------------------------------------
<PAGE> 40
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
Van Kampen American Capital Reserve Fund (the "Fund") is a diversified,
open-end management investment company. This Statement of Additional Information
is not a prospectus. This Statement of Additional Information should be read in
conjunction with the Fund's prospectus (the "Prospectus") dated as of the same
date as this Statement of Additional Information. This Statement of Additional
Information does not include all the information a prospective investor should
consider before purchasing shares of the Fund. Investors should obtain and read
the Prospectus prior to purchasing shares of the Fund. A Prospectus may be
obtained without charge by writing or calling Van Kampen American Capital
Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois 60181 or
(800) 421-5666.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information......................................... B-2
Investment Policies......................................... B-2
Investment Restrictions..................................... B-3
Trustees and Officers....................................... B-5
Legal Counsel............................................... B-12
Investment Advisory Agreement............................... B-12
Distributor................................................. B-14
Distribution and Service Plans.............................. B-14
Transfer Agent.............................................. B-15
Portfolio Transactions and Brokerage........................ B-15
Determination of Net Asset Value............................ B-15
Purchase and Redemption of Shares........................... B-16
Exchange Privilege.......................................... B-18
Check Writing Privilege..................................... B-18
Dividends, Distributions and Taxes.......................... B-19
Yield Information........................................... B-21
Other Information........................................... B-22
Rating Categories........................................... B-22
Report of Independent Accountants........................... B-25
Financial Statements........................................ B-26
Notes to Financial Statements............................... B-34
</TABLE>
This Statement of Additional Information is dated September 28, 1997.
B-1
<PAGE> 41
GENERAL INFORMATION
Van Kampen American Capital Reserve Fund, formerly known as American
Capital Reserve Fund, Inc. (the "Fund"), originally was incorporated in Maryland
on March 28, 1974, and reorganized as a business trust under the laws of
Delaware and adopted its current name on July 31, 1995.
Van Kampen American Capital Asset Management, Inc. (the "Adviser"), Van
Kampen American Capital Distributors, Inc. (the "Distributor"), and ACCESS
Investor Services, Inc. ("ACCESS") are wholly-owned subsidiaries of Van Kampen
American Capital, Inc. ("VKAC"), which is an indirect wholly-owned subsidiary of
Morgan Stanley, Dean Witter, Discover & Co. The principal office of the Fund,
the Adviser, the Distributor and VKAC is located at One Parkview Plaza, Oakbrook
Terrace, Illinois 60181.
Morgan Stanley, Dean Witter, Discover & Co. and various of its directly or
indirectly owned subsidiaries, including Morgan Stanley Asset Management Inc.,
an investment adviser, Morgan Stanley & Co. Incorporated, a registered
broker-dealer and investment adviser, and Morgan Stanley International, are
engaged in a wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; credit services; asset management;
trading of futures, options, foreign exchange, commodities and swaps (involving
foreign exchange, commodities, indices and interest rates); real estate advice,
financing and investing; and global custody, securities clearance services and
securities lending.
As of September 15, 1997, no one person was known to own beneficially or
hold of record 5% or more of the outstanding shares of any class of the Fund,
except for those listed below:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF
OF RECORD HOLDER CLASS OF SHARES SHARES HELD PERCENT OF CLASS
---------------- --------------- ----------- ----------------
<S> <C> <C> <C>
Van Kampen American Capital A 81,808,506 18.00%
Trust Company B 20,030,188 28.17%
2800 Post Oak Blvd. C 2,462,668 21.68%
Houston, TX 77056
</TABLE>
Van Kampen American Capital Trust Company acts as custodian for certain
employee benefit plans and independent retirement accounts.
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, as amended (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 Ratings Group
("S & P"), Fitch Investors Services, Inc., Duff and Phelps, Inc. and IBCA
Limited and IBCA Inc. See Ratings Categories.
In addition, the Fund will not invest more than 5% 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 5% of its total assets in a single issuer for a period of up to
three business
B-2
<PAGE> 42
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 10% 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 5% of
the Fund's total assets, with the investment in any one such issuer being
limited to no more than the greater of 1% 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.
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 5% of its total assets.
Loans would be made for short-term purposes and subject to termination by
the Fund in the normal settlement time, currently three business days after
notice, or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed securities which occurs during the term of the loan inures to the
Fund and its shareholders, but any gain can be realized only if the borrower
does not default. The Fund may pay reasonable finders', administrative and
custodial fees in connection with a loan.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions
which may be less restrictive than the investment policies stated in the
Prospectus and may not be changed without approval by the vote of a majority of
its outstanding voting shares which is defined by the 1940 Act as the lesser of
(i) 67% or more of the voting securities present at a meeting, if the holders of
more than 50% of the outstanding voting securities of the Fund are present or
represented by proxy; or (ii) more than 50% of the 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;
B-3
<PAGE> 43
3. Issue any senior security, although the Fund may borrow as set forth
under item 14 below;
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. The Fund may not invest in securities issued by other investment
companies except as part of a merger, reorganization or other
acquisition and except to the extent permitted by (i) the 1940 Act, as
amended from time to time, (ii) the rules and regulations promulgated
by the SEC under the 1940 Act, as amended from time to time, or (iii)
an exemption or other relief from the provisions of the 1940 Act;
8. Make investments for the purpose of exercising control or management,
except that the Fund may purchase securities of other investment
companies to the extent permitted by (i) the 1940 Act, as amended from
time to time, (ii) the rules and regulations promulgated by the SEC
under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief from the provisions of the 1940 Act;
9. 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, except that the Fund may
purchase securities of other investment companies to the extent
permitted by (i) the 1940 Act, as amended from time to time, (ii) the
rules and regulations promulgated by the SEC under the 1940 Act, as
amended from time to time, or (iii) an exemption or other relief from
the provisions of the 1940 Act;
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 0.50% of the securities of such issuer, together own more
than 5% of the securities of such issuer;
14. Borrow money, except from banks for temporary or emergency purposes and
then in amounts not exceeding 10% 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 5% 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 5% 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 10% of the total value of all outstanding
securities of such issuer, except that the Fund may purchase securities
of other investment companies to the extent permitted by (i) the 1940
Act, as amended
B-4
<PAGE> 44
from time to time, (ii) the rules and regulations promulgated by the
SEC under the 1940 Act, as amended from time to time, or (iii) an
exemption or other relief from the provisions of the 1940 Act;
18. Invest more than 5% 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).
TRUSTEES AND OFFICERS
The tables below list the trustees and officers of the Trust (of which the
Fund is a separate series) and other executive officers of the Fund's investment
adviser and their principal occupations for the last five years and their
affiliations, if any, with VK/AC Holding, Inc. ("VKAC Holding"), Van Kampen
American Capital, Inc. ("Van Kampen American Capital" or "VKAC"), Van Kampen
American Capital Investment Advisory Corp. ("Advisory Corp."), Van Kampen
American Capital Asset Management, Inc. ("Asset Management"), Van Kampen
American Capital Distributors, Inc., the distributor of the Fund's shares (the
"Distributor") and ACCESS Investors Services Inc., the Fund's transfer agent
("ACCESS"). Advisory Corp. and Asset Management sometimes are referred to herein
collectively as the "Advisers". For purposes hereof, the term "Fund Complex"
includes each of the open-end investment companies advised by the Advisers
(excluding the Van Kampen American Capital Exchange Fund and the Common Sense
Trust).
TRUSTEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Co-founder, and prior to August 1996,
1632 Morning Mountain Road Chairman, Chief Executive Officer and President, MDT
Raleigh, NC 27614 Corporation (now known as Getinge/Castle, Inc., a
Date of Birth: 07/14/32 subsidiary of Getinge Industrier AB), a company which
develops, manufactures, markets and services medical and
scientific equipment. Trustee/Director of each of the
funds in the Fund Complex.
Richard M. DeMartini*..................... President and Chief Operating Officer, Dean Witter
Two World Trade Center Capital, a division of Dean Witter Reynolds Inc. Mr.
66th Floor DeMartini is a Director of InterCapital Funds, Dean
New York, NY 10048 Witter Distributors, Inc. and Dean Witter Trust Company.
Date of Birth: 10/12/52 Trustee of the TCW/DW Funds. Director of the National
Healthcare Resources, Inc. Formerly Vice Chairman of the
Board of the National Association of Securities Dealers,
Inc. and Chairman of the Board of the Nasdaq Stock
Market, Inc. Trustee/Director of each of the funds in the
Fund Complex.
</TABLE>
B-5
<PAGE> 45
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
- --------------------- --------------------------
<S> <C>
Linda Hutton Heagy........................ Co-Managing Partner of Heidrick & Stuggles, an executive
Sears Tower search firm. Prior to 1997, Partner, Ray & Berndtson,
233 South Wacker Drive Inc. An executive recruiting and management consulting
Suite 7000 firm. Formerly, Executive Vice President of ABN AMRO,
Chicago, IL 60606 N.A., a Dutch bank holding company. Prior to 1992,
Date of Birth: 06/03/48 Executive Vice President of La Salle National Bank.
Trustee on the University of Chicago Hospitals Board, The
International House Board and the Women's Board of the
University of Chicago. Trustee/Director of each of the
funds in the Fund Complex.
R. Craig Kennedy.......................... President and Director, German Marshall Fund of the
11 DuPont Circle, N.W. United States. Formerly, advisor to the Dennis Trading
Washington, D.C. 20036 Group Inc. Prior to 1992, President and Chief Executive
Date of Birth: 02/29/52 Officer, Director and Member of the Investment Committee
of the Joyce Foundation, a private foundation.
Trustee/Director of each of the funds in the Fund
Complex.
Jack E. Nelson............................ President, Nelson Investment Planning Services, Inc., a
423 Country Club Drive financial planning company and registered investment
Winter Park, FL 32789 adviser. President, Nelson Ivest Brokerage Services Inc.,
Date of Birth: 02/13/36 a member of the National Association of Securities
Dealers, Inc. ("NASD") and Securities Investors
Protection Corp. ("SIPC"). Trustee/Director of each of
the funds in the Fund Complex.
Jerome L. Robinson........................ President, Robinson Technical Products Corporation, a
115 River Road manufacturer and processor of welding alloys, supplies
Edgewater, NJ 07020 and equipment. Director, Pacesetter Software, a software
Date of Birth: 10/10/22 programming company specializing in white collar
productivity. Director, Panasia Bank. Trustee/Director of
each of the funds in the Fund Complex.
Phillip B. Rooney......................... Vice Chairman and Director of The ServiceMaster Company,
One ServiceMaster Way a business and consumer services company. Director of
Downers Grove, IL 60515 Illinois Tool Works, Inc., a manufacturing company; the
Date of Birth: 07/08/44 Urban Shopping Centers Inc., a retail mall management
company; and Stone Container Corp., a paper manufacturing
company. Trustee, University of Notre Dame. Formerly,
President and Chief Executive Officer, Waste Management
Inc., an environmental services company, and prior to
that President and Chief Operating Officer, Waste
Management Inc. Trustee/Director of each of the funds in
the Fund Complex.
Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean of the
155 Hickory Lane Graduate School, Stevens Institute of Technology.
Closter, NJ 07624 Director, Dynalysis of Princeton, a firm engaged in
Date of Birth: 08/02/24 engineering research. Trustee/Director of each of the
funds in the Fund Complex.
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps, Slate, Meagher
333 West Wacker Drive & Flom (Illinois), legal counsel to the funds in the Fund
Chicago, IL 60606 Complex, open-end funds advised by Van Kampen American
Date of Birth: 08/22/39 Capital Management, Inc. and closed-end funds advised by
Advisory Corp. Trustee/Director of each of the funds in
the Fund Complex, open-end funds advised by Van Kampen
American Capital Management, Inc. and closed-end funds
advised by Advisory Corp.
</TABLE>
- ---------------
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. Whalen is an interested person of the Fund by reason of
his firm currently acting as legal counsel to the
B-6
<PAGE> 46
Fund and is an interested person of Asset Management with respect to certain
funds advised by Asset Management by reason of his firm in the past acting as
legal counsel to Asset Management. Mr. DeMartini is an interested person of the
Fund and the Adviser by reason of this position with Dean Witter Capital and
its affiliates.
OFFICERS
Messrs. McDonnell, Hegel, Nyberg, Wood, Sullivan, Dalmaso, Martin,
Wetherell and Hill are located at One Parkview Plaza, Oakbrook Terrace, IL
60181. The Fund's other officers are located at 2800 Post Oak Blvd., Houston, TX
77056.
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Dennis J. McDonnell......... President President and a Director of VKAC.
Date of Birth: 05/20/42 President, Chief Operating Officer and a
Director of the Advisers. Director or
officer of certain other subsidiaries of
VKAC. Prior to November 1996, Executive
Vice President and a Director of VKAC
Holding. President of each of the funds in
the Fund Complex. President, Chairman of
the Board and Trustee of other investment
companies advised by the Advisers or their
affiliates.
Peter W. Hegel.............. Vice President Executive Vice President of the Advisers.
Date of Birth: 06/25/56 Director of Asset Management. Officer of
certain other subsidiaries of VKAC. Vice
President of each of the funds in the Fund
Complex and certain other investment
companies advised by the Advisers or their
affiliates.
Curtis W. Morell............ Vice President and Chief Senior Vice President of the Advisers, Vice
Date of Birth: 08/04/46 Accounting Officer President and Chief Accounting Officer of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Advisers or their affiliates.
Ronald A. Nyberg............ Vice President and Secretary Executive Vice President, General Counsel
Date of Birth: 07/29/53 and Secretary of VKAC. Executive Vice
President, General Counsel, Assistant
Secretary and a Director of the Advisers
and the Distributor. Executive Vice
President, General Counsel and Assistant
Secretary of ACCESS. Director or officer of
certain other subsidiaries of VKAC.
Director of ICI Mutual Insurance Co., a
provider of insurance to members of the
Investment Company Institute. Prior to
November 1996, Executive Vice President,
General Counsel and Secretary of VKAC
Holding. Vice President and Secretary of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Advisers or their affiliates.
</TABLE>
B-7
<PAGE> 47
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Don G. Powell Chairman, President, Chief Executive
2800 Post Oak Blvd. Officer and a Director of VKAC. Chairman,
Houston, TX 77056 Chief Executive Officer and a Director of
Date of Birth: 10/19/39 the Advisers and the Distributor. Chairman
and a Director of ACCESS. Director or
officer of certain other subsidiaries of
VKAC. Chairman of the Board of Governors
and the Executive Committee of the
Investment Company Institute. Prior to
November, 1996, President, Chief Executive
Officer and a Director of VKAC Holding.
President, Chief Executive Officer and a
Trustee/Director of certain investment
companies advised by Asset Management and
prior to July 1996, President, Chief
Executive Officer and a Trustee of the
funds in the Fund Complex and closed-end
investment companies advised by Advisory
Corp.
Alan T. Sachtleben.......... Vice President Executive Vice President of the Advisers.
Date of Birth: 04/20/42 Director of Asset Management. Director or
officer of certain other subsidiaries of
VKAC. Vice President of each of the funds
in the Fund Complex and certain other
investment companies advised by the
Advisers or their affiliates.
Paul R. Wolkenberg.......... Vice President Executive Vice President of the VKAC, the
Date of Birth: 11/10/44 Advisers and the Distributor. President,
Chief Executive Officer and a Director of
ACCESS. Director or officer of certain
other subsidiaries of VKAC. Vice President
of each of the funds in the Fund Complex
and certain other investment companies
advised by the Advisers or their
affiliates.
Edward C. Wood III.......... Vice President and Chief Senior Vice President of the Advisers. Vice
Date of Birth: 01/11/56 Financial Officer President and Chief Financial Officer of
each of the funds in the Fund Complex and
certain other investment companies advised
by the Advisers or their affiliates.
John L. Sullivan............ Treasurer First Vice President of the Advisers.
Date of Birth: 08/20/55 Treasurer of each of the funds in the Fund
Complex and certain other investment
companies advised by the Advisers or their
affiliates.
Tanya M. Loden.............. Controller Vice President of the Advisers. Controller
Date of Birth: 11/19/59 of each of the funds in the Fund Complex
and other investment companies advised by
the Advisers or the affiliates.
</TABLE>
B-8
<PAGE> 48
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS
------------ ----------------- ---------------------
<S> <C> <C>
Nicholas Dalmaso............ Assistant Secretary Vice President and Senior Attorney of VKAC.
Date of Birth: 03/01/65 Assistant Vice President and Assistant
Secretary of the Advisers and the
Distributor. Officer of certain other
subsidiaries of VKAC. Assistant Secretary
of each of the funds in the Fund Complex
and other investment companies advised by
the Advisers or the affiliates.
Huey P. Falgout, Jr......... Assistant Secretary Assistant Vice President and Senior
Date of Birth: 11/15/63 Attorney of VKAC. Assistant Vice President
and Assistant Secretary of the Advisers,
the Distributor and ACCESS. Officer of
certain other subsidiaries of VKAC.
Assistant Secretary of each of the funds in
the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.
Scott E. Martin............. Assistant Secretary Senior Vice President, Deputy General
Date of Birth: 08/20/56 Counsel and Assistant Secretary of VKAC.
Senior Vice President, Deputy General
Counsel and Secretary of the Advisers, the
Distributor and ACCESS. Officer of certain
other subsidiaries of VKAC. Prior to
November 1996, Senior Vice President,
Deputy General Counsel and Assistant
Secretary of VKAC Holding. Assistant
Secretary of each of the funds in the Fund
Complex and other investment companies
advised by the Advisers or the affiliates.
Weston B. Wetherell......... Assistant Secretary Vice President, Associate General Counsel
Date of Birth: 06/15/56 and Assistant Secretary of VKAC, the
Advisers and the Distributor. Officer of
certain other subsidiaries of VKAC.
Assistant Secretary of each of the funds in
the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.
Steven M. Hill.............. Assistant Treasurer Assistant Vice President of the Advisers.
Date of Birth: 10/16/64 Assistant Treasurer of each of the funds in
the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.
M. Robert Sullivan.......... Assistant Controller Assistant Vice President of the Advisers.
Date of Birth: 03/30/33 Assistant Controller of each of the funds
in the Fund Complex and other investment
companies advised by the Advisers or the
affiliates.
</TABLE>
Each trustee/director holds the same position with each of the funds in the
Fund Complex. As of the date of this Statement of Additional Information, there
are 65 operating funds in the Fund Complex. For purposes of the following
compensation and benefits discussion, the Fund Complex is divided into the
following three groups: the funds advised by Asset Management (the "AC Funds"),
the funds advised by Advisory Corp. excluding funds organized as series of the
Morgan Stanley Fund, Inc. (the "VK Funds") and the funds advised by Advisory
Corp. organized as series of the Morgan Stanley Fund, Inc. (the "MS Funds").
Each trustee/director who is not an affiliated person of VKAC, the Advisers, the
Distributor, ACCESS or Morgan Stanley (each a "Non-Affiliated Trustee") is
compensated by an annual retainer and meeting fees for services to the funds in
the Fund Complex. Each fund in the Fund Complex provides a deferred compensation
plan to its Non-Affiliated Trustees that allows trustees/directors to defer
receipt of their compensation and earn a
B-9
<PAGE> 49
return on such deferred amounts. Each AC Fund and VK Fund provides a retirement
plan to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.
The compensation of each Non-Affiliated Trustee from the AC Funds includes
an annual retainer in an amount equal to $35,000 per calendar year, due in four
quarterly installments on the first business day of each calendar quarter. The
AC Funds pay each Non-Affiliated Trustee a per meeting fee in the amount of
$2,000 per regular quarterly meeting attended by the Non-Affiliated Trustee, due
on the date of such meeting, plus reasonable expenses incurred by the
Non-Affiliated Trustee in connection with his or her services as a trustee.
Payment of the annual retainer and the regular meeting fee is allocated among
the AC Funds (i) 50% on the basis of the relative net assets of each AC Fund to
the aggregate net assets of all the AC Funds and (ii) 50% equally to each AC
Fund, in each case as of the last business day of the preceding calendar
quarter. Each AC Fund which is the subject of a special meeting of the trustees
generally pays each Non-Affiliated Trustee a per meeting fee in the amount of
$125 per special meeting attended by the Non-Affiliated Trustee, due on the date
of such meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee
in connection with his or her services as a trustee, provided that no
compensation will be paid in connection with certain telephonic special
meetings.
The compensation of each Non-Affiliated Trustee from the VK Funds includes
an annual retainer in an amount equal to $2,500 per calendar year, due in four
quarterly installments on the first business day of each calendar quarter. Each
Non-Affiliated Trustee receives a per meeting fee from each VK Fund in the
amount of $125 per regular quarterly meeting attended by the Non-Affiliated
Trustee, due on the date of such meeting, plus reasonable expenses incurred by
the Non-Affiliated Trustee in connection with his or her services as a trustee.
Each Non-Affiliated Trustee receives a per meeting fee from each VK Fund in the
amount of $125 per special meeting attended by the Non-Affiliated Trustee, due
on the date of such meeting, plus reasonable expenses incurred by the
Non-Affiliated Trustee in connection with his or her services as a trustee,
provided that no compensation will be paid in connection with certain telephonic
special meetings.
The compensation of each Non-Affiliated Trustee from the MS Funds is
intended to be based generally on the compensation amounts and methodology used
by such funds prior to their joining the current Fund Complex on July 2, 1997.
Each trustee/director was elected as a director of the MS Funds on July 2, 1997.
Prior to July 2, 1997, the MS Funds were part of another fund complex (the
"Prior Complex") and the former directors of the MS Funds were paid an aggregate
fee allocated among the funds in the Prior Complex that resulted in individual
directors receiving total compensation between approximately $8,000 to $10,000
from the MS Funds during such funds' last fiscal year.
The trustees/directors are currently in the process of reviewing and
seeking to standardize compensation and benefits across the Fund Complex.
The trustees/directors approved an aggregate compensation cap with respect
to funds in the Fund Complex of $84,000 per Non-Affiliated Trustee per year
(excluding any retirement benefits) for the period July 22, 1995 through
December 31, 1996, subject to the net assets and the number of funds in the Fund
Complex as of July 21, 1995 and certain other exceptions. For the calendar year
ended December 31, 1996, certain trustees/directors received aggregate
compensation from the funds in the Fund Complex over $84,000 due to compensation
received but not subject to the cap, including compensation from new funds added
to the Fund Complex after July 22, 1995 and certain special meetings in 1996. In
addition, each of Advisory Corp. or Asset Management, as the case may be, agreed
to reimburse each fund in the Fund Complex through December 31, 1996 for any
increase in the aggregate compensation over the aggregate compensation paid by
such fund in its 1994 fiscal year, provided that if a fund did not exist for the
entire 1994 fiscal year appropriate adjustments will be made.
Each Non-Affiliated Trustee generally can elect to defer receipt of all or
a portion of the compensation earned by such Non-Affiliated Trustee until
retirement. Amounts deferred are retained by the Fund and earn a rate of return
determined by reference to the return on the common shares of such Fund or other
funds in the Fund Complex as selected by the respective Non-Affiliated Trustee,
with the same economic effect as if
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<PAGE> 50
such Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, the Fund may invest in
securities of those funds selected by the Non-Affiliated Trustees in order to
match the deferred compensation obligation. The deferred compensation plan is
not funded and obligations thereunder represent general unsecured claims against
the general assets of the Fund.
Each AC Fund and VK Fund has adopted a retirement plan. Under the
retirement plan, a Non-Affiliated Trustee who is receiving compensation from
such Fund prior to such Non-Affiliated Trustee's retirement, has at least 10
years of service (including years of service prior to adoption of the retirement
plan) and retires at or after attaining the age of 60, is eligible to receive a
retirement benefit equal to $2,500 per year for each of the ten years following
such retirement from such Fund. Non-Affiliated Trustees retiring prior to the
age of 60 or with fewer than 10 years but more than 5 years of service may
receive reduced retirement benefits from such Fund. Each trustee/director has
served as a member of the Board of Trustees of the Fund since he or she was
first appointed or elected in the year set forth below. The retirement plan
contains a Fund Complex retirement benefit cap of $60,000 per year. Asset
Management has reimbursed each AC Fund for the expenses related to the
retirement plan through December 31, 1996.
Additional information regarding compensation and benefits for trustees is
set forth below. As indicated in the notes accompanying the table, the amounts
relate to either the Fund's most recently completed fiscal year or the Fund
Complex' most recently completed calendar year ended December 31, 1996.
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
YEAR FIRST PENSION OR ESTIMATED MAXIMUM BEFORE DEFERRAL
APPOINTED OR AGGREGATE COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS FROM FUND
ELECTED TO THE BEFORE DEFERRAL FROM THE ACCRUED AS PART OF FROM THE FUND UPON COMPLEX PAID
NAME(1) BOARD FUND(2) EXPENSES(3) RETIREMENT(4) TO TRUSTEE(5)
------- -------------- ------------------------ ------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan* 1991 $1,994 $ 691 $2,500 $104,875
Linda Hutton Heagy* 1995 1,994 69 2,500 104,875
Dr. Roger Hilsman 1978 1,004 2,752 2,500 103,750
R. Craig Kennedy* 1995 1,994 45 2,500 104,875
Donald C. Miller 1995 1,004 -0- -0- 104,875
Jack E. Nelson* 1995 1,744 314 2,500 97,875
Jerome L. Robinson* 1995 1,994 -0- -0- 101,625
Phillip B. Rooney* 1997 370 -0- 2,500 -0-
Dr. Fernando Sisto* 1978 1,994 1,519 2,500 104,875
Wayne W. Whalen* 1995 1,994 219 2,500 104,875
William S. Woodside 1986 1,004 4,113 2,500 104,875
</TABLE>
- ---------------
* Currently a member of the Board of Trustees. Mr. Phillip B. Rooney became a
member of the Board of Trustees effective April 14, 1997 and thus does not
have a full fiscal year of information to report.
(1) Persons not designated by an asterisk are not currently members of the Board
of Trustees, but were members of the Board of Trustees during the Fund's
most recently completed fiscal year. Messrs. Hilsman, Miller and Woodside
retired from the Board of Trustees on December 31, 1996. Messrs. DeMartini,
McDonnell and Powell, also trustees of the Fund during all or a portion of
the Fund's last fiscal year, are not included in the compensation table
because they are affiliated persons of the Advisers and are not eligible for
compensation or retirement benefits from the Fund.
(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended May 31, 1997. The
following trustees deferred compensation from the Fund during the fiscal
year ended May 31, 1997: Mr. Branagan, $1,242; Ms. Heagy, $1,340; Mr.
Kennedy, $4,020; Mr. Miller, $4,522; Mr. Nelson, $5,262; Mr. Robinson,
$5,251; Mr. Sisto, $370; and Mr. Whalen, $4,362. Amounts deferred are
retained by the Fund and earn a rate of return determined by reference to
either the return on the common shares of the Fund or other funds in the
Fund Complex as selected by the respective Non-Affiliated Trustee, with the
same economic effect as if such Non-Affiliated Trustee had
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<PAGE> 51
invested in one or more funds in the Fund Complex. To the extent permitted by
the 1940 Act, each Fund may invest in securities of those funds selected by the
Non-Affiliated Trustees in order to match the deferred compensation obligation.
The cumulative deferred compensation (including interest) accrued with
respect to each trustee from the Fund as of May 31, 1997 is as follows: Mr.
Branagan, $1,328; Ms. Heagy, $2,514; Mr. Kennedy, $7,259; Mr. Miller, $6,794;
Mr. Nelson, $8,795; Mr. Robinson, $7,774; Mr. Sisto, $7,259; and Mr. Whalen,
$7,072. The deferred compensation plan is described above the Compensation
Table.
(3) The amounts shown in this column represent the Retirement Benefits accrued
by the Fund during its fiscal year ended May 31, 1997. The retirement plan
is described above the Compensation Table.
(4) For Messrs. Hilsman, Miller and Woodside, this is the actual annual benefits
payable by the Fund in each year of the 10-year period since such trustee's
retirement. For the remaining trustees, this is the estimated maximum annual
benefits payable by the Fund in each year of the 10-year period commencing
in the year of such trustee's retirement from the Fund assuming: the trustee
has 10 or more years of service on the Board of Trustees (including years of
service prior to the adoption of the retirement plan) 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 the Fund. The actual annual benefit may be less if
the trustee is subject to the Fund Complex retirement benefit cap or if the
trustee is not fully vested at the time of retirement.
(5) The amounts shown in this column represent the aggregate compensation paid
by all 51 of the investment companies in the Fund Complex as of December 31,
1996 before deferral by the trustees under the deferred compensation plan.
Because the funds in the Fund Complex have different fiscal year ends, the
amounts shown in this column are presented on a calendar year basis. As
described in the narration preceding the table, the Fund Complex has
increased in size since December 31, 1996. It is likely the aggregate
compensation for the calendar year ending December 31, 1997 will be higher
due to the increase in the size of the Fund Complex. As of the date of this
Statement of Additional Information, the trustee/ directors are in the
process of reviewing and seeking to standardize compensation and benefits
across the Fund Complex. Certain trustees deferred all or a portion of their
aggregate compensation from the Fund Complex during the calendar year ended
December 31, 1996. The deferred compensation earns a rate of return
determined by reference to the return on the shares of the funds in the Fund
Complex as selected by the respective Non-Affiliated Trustee, with the same
economic effect as if such Non-Affiliated Trustee had invested in one or
more funds in the Fund Complex. To the extent permitted by the 1940 Act, the
Fund may invest in securities of those investment companies selected by the
Non-Affiliated Trustees in order to match the deferred compensation
obligation. The trustees' Fund Complex compensation cap covered the period
July 22, 1995 through December 31, 1996. For the calendar year ended
December 31, 1996, certain trustees received compensation over $84,000 in
the aggregate due to compensation received but not subject to the cap,
including compensation from new funds added to the Fund Complex after July
22, 1995 and certain special meetings in 1996. The Advisers and their
affiliates also serve as investment adviser for other investment companies;
however, with the exception of Messrs. McDonnell, Powell and Whalen, the
trustees were not trustees of such investment companies. Combining the Fund
Complex with other investment companies advised by the Advisers and their
affiliates, Mr. Whalen received Total Compensation of $243,375 during the
calendar year ended December 31, 1996.
As of September 15, 1997, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund.
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois).
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
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<PAGE> 52
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. The services
provided by the Adviser are at cost. The Fund also pays transfer agency fees,
distribution fees, service 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 business day during a given calendar month. Such fee is payable for
each calendar month as soon as practicable after the end of that month. The fee
payable to the Adviser is reduced by any commissions, tender solicitation and
other fees, brokerage or similar payments received by the Adviser, or any other
direct or indirect majority-owned subsidiary of VK/AC Holding, Inc. in
connection with the purchase and sale of portfolio investments of the Fund, less
any direct expenses incurred by such subsidiary of VK/AC Holding, Inc. in
connection with obtaining such payments. The Adviser agrees to use its best
efforts to recapture tender solicitation fees and exchange offer fees for the
Fund's benefit and to advise the Trustees of the Fund of any other commissions,
fees, brokerage or similar payments which may be possible for the Adviser or any
direct or indirect majority-owned subsidiary of VK/AC Holding, Inc., to receive
in connection with the Fund's portfolio transactions or other arrangements which
may benefit the Fund.
The Advisory Agreement also provides that, in the event the ordinary
business expenses of the Fund for any fiscal year exceed 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 include the investment advisory fee and other operating costs
paid by the Trust except (1) interest and taxes, (2) brokerage commissions, (3)
certain litigation and indemnification expenses as described in the Advisory
Agreement and (4) payments made by the Fund pursuant to its distribution plans.
The Advisory Agreement 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 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.
During the fiscal years ended May 31, 1997, 1996 and 1995, the Adviser
received $2,170,578, $1,842,244 and $1,896,937, respectively in advisory fees
from the Fund. A portion of these amounts was paid to the Adviser or its parent
in reimbursement of personnel, office space, facilities and equipment costs
attributable to the provision of accounting services to the Fund.
B-13
<PAGE> 53
OTHER AGREEMENTS
ACCOUNTING SERVICES AGREEMENT. The Fund has entered into an accounting
services agreement pursuant to which Advisory Corp. provides accounting services
supplementary to those provided by the Custodian. Such services are expected to
enable the Fund to more closely monitor and maintain its accounts and records.
The Fund shares with the other mutual funds distributed by the Distributor and
advised by the Adviser and its affiliates in the cost of providing such
services, with 25% of such costs shared proportionately based on the respective
number of classes of securities issued per fund and the remaining 75% of such
cost based proportionally on their respective net assets.
For the years ended May 31, 1997, 1996 and 1995, the Fund paid expenses of
approximately $90,167, $127,090 and $100,666, respectively, representing the VK
Adviser's cost of providing accounting services.
DISTRIBUTOR
The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
authorized dealers. The Distributor's obligation is an agency or "best efforts"
arrangement under which the Distributor is required to take and pay for only
such shares of the Fund as may be sold to the public. The Distributor is not
obligated to sell any stated number of shares. The Distributor bears the cost of
printing (but not typesetting) prospectuses used in connection with this
offering and certain other costs including the cost of supplemental sales
literature and advertising. The Distribution and Service Agreement is renewable
from year to year if approved (a) by the Fund's Trustees or by a vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of Trustees who are not parties to the Distribution and
Service Agreement or interested persons of any party, by votes cast in person at
a meeting called for such purpose. The Distribution and Service Agreement
provides that it will terminate if assigned, and that it may be terminated
without penalty by either party on 60 days' written notice. No commissions were
paid by the Fund during the past three fiscal years.
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan sometimes
are referred to herein as the "Plans". The Plans provide that the Fund may spend
a portion of the Fund's average daily net assets attributable to each class of
shares in connection with distribution of the respective class of shares and in
connection with the provision of ongoing services to shareholders of such class,
respectively. The Distribution Plan and the Service Plan are being implemented
through an agreement (the "Distribution and Service Agreement") with the
Distributor of each class of the Fund's shares, sub-agreements between the
Distributor and members of the NASD who are acting as securities dealers and
NASD members or eligible non-members who are acting as brokers or agents and
similar agreements between the Fund and financial intermediaries who are acting
as brokers (collectively, "Selling Agreements") that may provide for their
customers or clients certain services or assistance, which may include, but not
be limited to, processing purchase and redemption transactions, establishing and
maintaining shareholder accounts regarding the Fund, and such other services as
may be agreed to from time to time and as may be permitted by applicable
statute, rule or regulation. Brokers, dealers and financial intermediaries that
have entered into sub-agreements with the Distributor and sell shares of the
Fund are referred to herein as "financial intermediaries."
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to any class of shares without approval by a vote of a majority of the
outstanding voting shares of such class, and all material amendments to either
of the Plans must be approved by the Trustees and also by
B-14
<PAGE> 54
the disinterested Trustees. Each of the Plans may be terminated with respect to
any class of shares at any time by a vote of a majority of the disinterested
Trustees or by a vote of a majority of the outstanding voting shares of such
class.
For the fiscal year ended May 31, 1997, the Fund's aggregate expenses under
the Class B Plan were $713,515 or 0.90% of the Class B shares' average net
assets. Such expenses were paid to reimburse the Distributor for the following
payments: $116,877 for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class B shares of the Fund and $596,638
for fees paid to financial intermediaries for servicing Class B shareholders and
administering the Plans. For the fiscal year ended May 31, 1997, the Fund's
aggregate expenses under the Class C Plan were $83,878 or 0.90% of the Class C
shares' average net assets. Such expenses were paid to reimburse the Distributor
for the following payments: $407 for commissions and transaction fees paid to
financial intermediaries in respect of sales of Class C shares of the Fund and
$83,471 for fees paid to financial intermediaries for servicing Class C
shareholders and administering the Plans.
TRANSFER AGENT
During the fiscal years ending May 31, 1997, 1996 and 1995, ACCESS,
shareholder service agent and dividend disbursing agent for the Fund, received
fees aggregating $1,374,092, $1,280,376 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 as of the close of
trading on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m.,
New York time) on each business day on which the Exchange is open. The net asset
value of Fund shares is computed by dividing the value of all securities plus
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
B-15
<PAGE> 55
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 have 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
they deem 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 4/10 of 1%, the Trustees are required to promptly consider what action,
if any, should be initiated. If the Trustees believe 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, the Trustees
will take such steps as they consider 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.
PURCHASE AND REDEMPTION OF SHARES
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.
Redemptions are not made on days during which the Exchange is closed. The
right of redemption may be suspended and the payment therefor may be postponed
for more than seven days during any period when (a) the Exchange is closed for
other than customary weekends or holidays; (b) trading on the Exchange is
restricted; (c) an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund to fairly determine the value of its net assets; or (d)
the SEC, by order, so permits.
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 shares
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 shareholder and Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Internal Revenue Code of 1986, as
amended
B-16
<PAGE> 56
(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
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 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.
(d) Involuntary Redemptions of Shares in Accounts that Do Not Have the
Required Minimum Balance
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the account up
to the required minimum balance. The Fund will waive the CDSC -- Class B and
Class C upon such involuntary redemption.
(e) Reinvestment of Redemption Proceeds in Shares of the Same Fund Within
180 Days After Redemption
A shareholder who has redeemed Class C shares of a Fund may reinvest, at
net asset value, with credit for any CDSC -- Class C paid on the redeemed
shares, any portion or all of his or her redemption proceeds (plus that amount
necessary to acquire a fractional share to round off his or her purchase to the
nearest full
B-17
<PAGE> 57
share) in Class C shares of the Fund, provided that the reinvestment is effected
within 180 days after such redemption and the shareholder has not previously
exercised this reinvestment privilege with respect to Class C shares of the
Fund. Shares acquired in this manner will be deemed to have the original cost
and purchase date of the redeemed shares for purposes of applying the
CDSC -- Class C to subsequent redemptions.
(f) Redemption by Adviser
The Fund may waive the CDSC -- Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
EXCHANGE PRIVILEGE
The following supplements the discussion of "Exchange Privilege" in the
Prospectus:
By use of the exchange privilege, the investor authorizes ACCESS to act on
telephonic, telegraphic or written exchange instructions from any person
representing himself to be the investor or the agent of the investor and
believed by ACCESS to be genuine. Van Kampen American Capital and its
subsidiaries, including ACCESS, and the Fund employ procedures considered by
them to be reasonable to confirm that instructions communicated by telephone are
genuine. Such procedures include requiring certain personal identification
information prior to acting upon telephone instructions, tape recording
telephone communications, and providing written confirmation of instructions
communicated by telephone. If reasonable procedures are employed, neither Van
Kampen American Capital, ACCESS nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. Van Kampen
American Capital, ACCESS and the Fund may be liable for any losses due to
unauthorized or fraudulent instructions if reasonable procedures are not
followed.
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.
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.
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.
B-18
<PAGE> 58
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund's net income is declared and paid as 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 received for the day shares are
redeemed. The per share dividends on Class B shares and Class C shares will be
lower than the per share dividends on Class A shares as a result of the higher
distribution fees and 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.
TAX STATUS OF THE FUND
The following discussion reflects applicable federal income tax law, as of
the date hereof.
Taxation of the Fund. The Fund intends to continue to qualify each year and
to elect to be treated 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 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. Included among such requirements is the
requirement that the Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stocks, securities or foreign currencies or
other income (including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stocks, securities or currencies.
If the Fund qualifies as a regulated investment company and distributes
each year to its shareholders at least 90% of its net investment income (which
includes for this purpose net short-term capital gains, but not net capital
gains, which are the excess of net long-term capital gains over net short-term
capital losses), it will not be required to pay federal income taxes on any
income distributed to shareholders. The Fund intends to distribute at least the
minimum amount of net investment income necessary to satisfy the 90%
distribution requirement. The Fund will not be subject to federal income tax on
any net capital gains distributed to its shareholders.
If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income, including any net capital gains, would be
subject to tax at regular corporate rates (without any deduction for
distributions to shareholders) and all distributions out of earnings and profits
would be taxed to shareholders as ordinary income.
The Fund is subject to a 4% excise tax to the extent it does not distribute
to its shareholders during any calendar year at least 98% of its ordinary
taxable 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. For
purposes of the excise
B-19
<PAGE> 59
tax, any ordinary income or capital gain net income retained by, and subject to
federal income tax in the hands of, the Fund will be treated as having been
distributed. The Fund intends to distribute sufficient amounts to avoid
liability for the excise tax.
Distributions. Distributions of the Fund's net investment income are
taxable to shareholders as ordinary income to the extent of the Fund's earnings
and profits, whether paid in cash or reinvested in additional shares.
Distributions of the Fund's net capital gains ("capital gains dividends"), if
any, are taxable to shareholders as long-term capital gains regardless of the
length of time shares of the Fund have been held by such shareholders.
Distributions in excess of the Fund's earnings and profits will first reduce the
adjusted tax basis of a holder's shares and, after such adjusted tax basis is
reduced to zero, will constitute capital gains to such holder (assuming such
shares are held as a capital asset). For a summary of the tax rates applicable
to capital gains (including capital gains dividends), see "Capital Gains Rates
Under the 1997 Tax Act" below. Tax-exempt shareholders not subject to federal
income tax on their income generally will not be taxed on distributions from the
Fund.
Shareholders receiving distributions in the form of additional shares
issued by the Fund will be treated for federal income tax purposes as receiving
a distribution in an amount equal to the fair market value of the shares
received, determined as of the distribution date. The basis of such shares will
equal the fair market value on the distribution date. Fund distributions
generally will not qualify for the dividends received deduction for
corporations, except to the extent the Fund receives dividends form domestic
corporations.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31 prior to the date of payment. In
addition, certain other distributions made after the close of the taxable year
of the Fund may be "spilled back" and treated as paid by the Fund (except for
purposes of the 4% excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distribution was actually made.
Dividends to foreign shareholders, including shareholders who are
non-resident aliens, may be subject to a United States withholding tax at a rate
of 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 an applicable treaty. Foreign and non-resident shareholders are
urged to consult their own tax advisers concerning the applicability of the
United States withholding tax.
Dividends and other distributions may also be subject to state and local
taxes.
Sale of Shares. The sale of shares (including transfers in connection with
a redemption or repurchase of shares) will be a taxable transaction for federal
income tax purposes. Selling shareholders will generally recognize gain or loss
in an amount equal to the difference between their adjusted tax basis in the
shares and the amount received. If such shares are held as a capital asset, the
gain or loss will be a capital gain or loss. Any loss recognized upon a taxable
disposition of shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gains dividends received with respect
to such shares. For a summary of the tax rates applicable to capital gains, see
"Capital Gains Rates Under the 1997 Tax Act" below. For purposes of determining
whether shares have been held for six months or less, the holding period is
suspended for any periods during which the shareholder's risk of loss is
diminished as a result of holding one or more other positions in substantially
similar or related property or through certain options or short sales.
If shares of the Fund are sold or exchanged within 90 days of acquisition
and shares of the same or 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 the gain or loss on such shares. To the extent the sales
charge is not allowed in determining the gain or loss on the initial shares, it
is added to the basis of the subsequent shares.
Capital Gains Rates Under the 1997 Tax Act. Under the 1997 Tax Act, the
maximum tax rates applicable to net capital gains recognized by individuals and
other non-corporate taxpayers are (i) the same as ordinary income rates for
capital assets held for one year or less, (ii) 28% for capital assets held for
more than
B-20
<PAGE> 60
one year but not more than 18 months and (iii) 20% for capital assets held for
more than 18 months. Under the 1997 Tax Act, the Treasury is authorized to issue
regulations that address the application of the new capital gains rates to sales
and exchanges by regulated investment companies and to sales and exchanges of
interests in regulated investment companies, but no such regulations have been
issued as of the date hereof. It is expected that the new tax rates for capital
gains under the 1997 Tax Act described above will apply to distributions of
capital gains dividends by regulated investment companies such as the Fund as
well as to sales and exchanges of shares in regulated investment companies such
as the Fund. With respect to capital losses recognized on dispositions of shares
held six months or less where such losses are treated as long-term capital
losses to the extent of prior capital gains dividends received on such shares
(see "Sale of Shares" above), it is unclear how such capital losses offset the
capital gains referred to above. Shareholders should consult their own tax
advisers as to the application of the new capital gains rates to their
particular circumstances.
Backup 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 (a social security number in the
case of an individual) 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 backup withholding. The 31%
back-up withholding tax is not an additional tax and may be credited against a
taxpayer's regular federal income tax liability.
General. The federal income tax discussion set forth above is for general
information only. Shareholders and prospective shareholders should consult their
own tax advisers regarding the specific federal tax consequences of purchasing,
holding and disposing of shares, as well as the effects of state, local and
foreign tax law and any proposed tax law changes.
YIELD INFORMATION
The annualized current yield for Class A shares for the seven day period
ending May 31, 1997 was 4.82%. Its compound effective yield for the same period
was 4.94%. For Class B shares the annualized yield and compound effective yield
for the seven day period was 4.04% and 4.12%, respectively. For Class C shares
the annualized yield and compound effective yield for the seven day period was
4.04% and 4.13%, respectively.
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, 1997, 52% of the Fund's portfolio was
invested in obligations of U.S. Government Agencies', 30% was invested in
commercial paper of which 100% was rated A-1 or Prime-1, and the remaining 18%
was invested in repurchase agreements. See "Investment Policies -- Commercial
Paper," and the Rating Categories herein. 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
B-21
<PAGE> 61
days for all of its issues. The calculation is weighted by the relative value of
the investment. At May 31, 1997 the average dollar weighted maturity of the
portfolio was 29 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 shares, Class B shares and Class
C shares. Because of the differences in distribution fees, the yield for each of
the classes will differ.
From time to time marketing materials may provide a portfolio manager
update, an adviser update and/or discuss general economic conditions and
outlooks. The Fund's marketing materials may also show the Fund's asset class
diversification, top five sectors, ten largest holdings and other Fund asset
structures, such as duration, maturity, coupon, NAV, rating breakdown, AMT
exposure and number of issues in the portfolio. Materials may also mention how
Van Kampen American Capital believes the Fund compares relative to other Van
Kampen American Capital funds. Materials may also discuss the Dalbar Financial
Services study from 1984 to 1994 which studied investor cash flow into and out
of all types of mutual funds. The ten year study found that investors who bought
mutual fund shares and held such shares outperformed investors who bought and
sold. The Dalbar study conclusions were consistent regardless of if shareholders
purchased their funds in direct or sales force distribution channels. The study
showed that investors working with a professional representative have tended
over time to earn higher returns than those who invested directly. The Fund will
also be marketed on the Internet.
OTHER INFORMATION
CUSTODY OF ASSETS -- 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, Suite 2900,
Houston, Texas 77002, the independent accountants for the Fund, performs annual
audits of the Fund's financial statements.
RATING CATEGORIES
Description of the highest commercial paper, bond and other short-term and
long-term rating categories assigned by Standard & Poor's Ratings Group ("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.
B-22
<PAGE> 62
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 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
B-23
<PAGE> 63
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.
B-24
<PAGE> 64
Report of Independent Accountants
To the Shareholders and Board of Trustees of
Van Kampen American Capital Reserve Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Van Kampen American Capital
Reserve Fund (the "Fund") at May 31, 1997, and the results of its operations,
the changes in its net assets and the financial highlights for each of the
periods presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at May 31, 1997 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
July 14, 1997
B-25
<PAGE> 65
Portfolio of Investments
May 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Par Discount Yield
Amount on Date of Amortized
(000) Description Purchase Maturity Cost
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. Agency Obligations 62.6%
$ 10,000 Federal Farm Credit Bank .............. 5.385% 06/03/97 $ 9,995,516
10,000 Federal Farm Credit Bank .............. 5.481 06/03/97 9,995,466
5,000 Federal Farm Credit Bank .............. 5.402 07/29/97 4,956,897
10,000 Federal Home Loan Bank ................ 5.446 06/19/97 9,971,500
10,000 Federal Home Loan Bank ................ 5.451 06/23/97 9,965,500
10,000 Federal Home Loan Bank ................ 5.577 07/03/97 9,949,583
10,000 Federal Home Loan Bank ................ 5.326 07/11/97 9,940,664
10,295 Federal Home Loan Bank ................ 5.377 08/21/97 10,172,123
10,000 Federal Home Loan Bank ................ 5.701 09/23/97 9,822,708
75,000 Federal Home Loan Mortgage Corp. ...... 5.553 06/02/97 74,965,313
20,000 Federal Home Loan Mortgage Corp. ...... 5.576 07/01/97 19,905,278
21,000 Federal Home Loan Mortgage Corp. ...... 5.589 07/02/97 20,897,147
15,000 Federal Home Loan Mortgage Corp. ...... 5.614 08/15/97 14,824,725
12,000 Federal National Mortgage Assn. ....... 5.281 06/10/97 11,982,867
13,000 Federal National Mortgage Assn. ....... 5.310 06/12/97 12,977,597
3,000 Federal National Mortgage Assn. ....... 5.373 06/16/97 2,992,987
10,000 Federal National Mortgage Assn. ....... 5.462 06/24/97 9,963,933
3,000 Federal National Mortgage Assn. ....... 5.373 07/08/97 2,983,438
5,000 Federal National Mortgage Assn. ....... 5.390 07/18/97 4,964,733
7,000 Federal National Mortgage Assn. ....... 5.422 08/07/97 6,929,922
15,000 Federal National Mortgage Assn. ....... 5.629 08/08/97 14,841,300
10,000 Federal National Mortgage Assn. ....... 5.495 08/15/97 9,885,367
10,000 Federal National Mortgage Assn. ....... 5.518 08/18/97 9,880,403
15,000 Federal National Mortgage Assn. ....... 5.618 08/22/97 14,809,446
10,000 Federal National Mortgage Assn. ....... 5.418 08/25/97 9,873,867
7,000 Federal National Mortgage Assn. ....... 5.535 08/26/97 6,907,635
3,000 Federal National Mortgage Assn. ....... 5.479 09/24/97 2,949,057
15,000 Tennessee Valley Authority ............ 5.487 06/26/97 14,941,175
------------
Total U.S. Agency Obligations ................................... 352,246,147
------------
Commercial Paper 36.3%
29,000 Associates Corp. of North America ..... 5.573 06/04/97 28,982,117
24,000 Bank of Nova Scotia ................... 5.423 06/03/97 23,989,300
22,000 Chevron Oil Finance Co. ............... 5.493 06/06/97 21,979,907
</TABLE>
See Notes to Financial Statements
B-26
<PAGE> 66
<TABLE>
<CAPTION>
Portfolio of Investments (Continued)
May 31, 1997
==================================================================================================
Par
Amount Discount Yield
(000) Description on Date of Purchase Maturity Amortized Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Paper (Continued)
$23,000 Ford Motor Credit Co. ....................... 5.654% 07/07/97 $ 22,867,622
22,000 General Electric Capital Corp. .............. 5.524 06/12/97 21,960,400
34,000 General Electric Co. ........................ 5.680 07/21/97 33,730,267
22,000 MetLife Funding Inc. ........................ 5.577 07/16/97 21,844,545
29,000 Toronto Dominion Holdings.................... 5.567 06/09/97 28,959,835
-------------
Total Commercial Paper............................................. 204,313,993
-------------
Repurchase Agreements 21.8%
BankAmerica Securities ($60,350,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 05/30/97,
to be sold on 06/02/97 at $60,377,962)......................................... 60,350,000
Prudential Securities Inc. ($62,000,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 05/30/97,
to be sold on 06/02/97 at $62,028,778)......................................... 62,000,000
-------------
Total Repurchase Agreements........................................ 122,350,000
-------------
Total Investments 120.7% (a)................................................... 678,910,140
-------------
Liabilities in Excess of Other Assets (20.7%).................................. (116,234,809)
-------------
Net Assets 100.0%.............................................................. $ 562,675,331
=============
(a) At May 31, 1997, cost is identical for both book and federal income tax
purposes.
See Notes to Financial Statements
</TABLE>
B-27
<PAGE> 67
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
May 31, 1997
======================================================================================
<S> <C>
Assets:
Investments, at Amortized Cost which Approximates Market............. $556,560,140
Repurchase Agreements, at Amortized Cost............................. 122,350,000
Cash................................................................. 349,772
Receivable for Fund Shares Sold...................................... 1,323,985
Other................................................................ 33,989
------------
Total Assets....................................................... 680,617,886
------------
Liabilities:
Payables:
Fund Shares Repurchased............................................ 117,127,578
Distributor and Affiliates......................................... 252,904
Investment Advisory Fee............................................ 195,718
Income Distributions............................................... 101,666
Accrued Expenses..................................................... 152,887
Deferred Compensation and Retirement Plans........................... 111,802
------------
Total Liabilities.................................................. 117,942,555
------------
Net Assets........................................................... $562,675,331
============
Net Assets Consist of:
Capital.............................................................. $562,718,838
Accumulated Undistributed Net Investment Income...................... 26,309
Accumulated Net Realized Loss on Securities.......................... (69,816)
------------
Net Assets........................................................... $562,675,331
============
Maximum Offering Price Per Share:
Class A Shares:
Net Asset Value, Offering Price and Redemption Price per share
(Based on net assets of $451,260,769 and 451,309,332
shares of beneficial interest issued and outstanding)........... $ 1.00
============
Class B Shares:
Net Asset Value and Offering Price per share
(Based on net assets of $103,031,346 and 103,028,995
shares of beneficial interest issued and outstanding)........... $ 1.00
============
Class C Shares:
Net Asset Value and Offering Price per share
(Based on net assets of $8,383,216 and 8,382,947
shares of beneficial interest issued and outstanding)........... $ 1.00
============
See Notes to Financial Statements
</TABLE>
B-28
<PAGE> 68
Statement of Operations
For the Year Ended May 31, 1997
<TABLE>
- -----------------------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest................................................................. $27,897,844
-----------
Expenses:
Investment Advisory Fee.................................................. 2,170,578
Shareholder Services..................................................... 1,701,438
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C
of $616,795, $713,515 and $83,878, respectively)........................ 1,414,188
Legal.................................................................... 48,195
Trustees Fees and Expenses............................................... 24,010
Custody.................................................................. 301
Other.................................................................... 578,052
-----------
Total Expenses......................................................... 5,936,762
Less Expenses Reimbursed............................................... 11,000
-----------
Net Expenses........................................................... 5,925,762
-----------
Net Investment Income.................................................... $21,972,082
===========
Net Realized Loss on Securities.......................................... $ (7,692)
===========
Net Increase in Net Assets from Operations............................... $21,964,390
===========
</TABLE>
See Notes to Financial Statements
B-29
<PAGE> 69
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the Years Ended May 31, 1997 and 1996
=============================================================================================================
Year Ended Year Ended
May 31, 1997 May 31, 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net Investment Income............................................ $ 21,972,082 $ 19,032,684
Net Realized Loss on Securities.................................. (7,692) ---
--------------- ---------------
Change in Net Assets from Operations............................. 21,964,390 19,032,684
--------------- ---------------
Distributions from Net Investment Income:
Class A Shares.............................................. (18,710,328) (17,616,820)
Class B Shares.............................................. (2,925,963) (1,250,566)
Class C Shares.............................................. (339,500) (188,995)
--------------- ---------------
Total Distributions......................................... (21,975,791) (19,056,381)
--------------- ---------------
Net Change in Net Assets
from Investment Activities.................................. (11,401) (23,697)
--------------- ---------------
From Capital Transactions:
Proceeds from Shares Sold:
Class A Shares.............................................. 7,336,713,031 5,916,701,540
Class B Shares.............................................. 648,076,384 402,157,689
Class C Shares.............................................. 141,950,181 99,265,824
--------------- ---------------
8,126,739,596 6,418,125,053
--------------- ---------------
Value Received for Shares Issued in Business Combination:
Class A Shares.............................................. --- 20,714,880
Class B Shares.............................................. --- 5,651,573
Class C Shares.............................................. --- ---
--------------- ---------------
--- 26,366,453
--------------- ---------------
Net Asset Value of Shares Issued Through Dividend Reinvestment:
Class A Shares.............................................. 18,710,328 17,616,820
Class B Shares.............................................. 2,925,963 1,250,566
Class C Shares.............................................. 339,500 188,995
--------------- ---------------
21,975,791 19,056,381
--------------- ---------------
Cost of Shares Repurchased:
Class A Shares.............................................. (7,344,457,086) (5,834,380,999)
Class B Shares.............................................. (629,443,280) (331,779,955)
Class C Shares.............................................. (143,617,542) (90,332,522)
--------------- ---------------
(8,117,517,908) (6,256,493,476)
--------------- ---------------
Net Change in Net Assets from Capital Transactions............... 31,197,479 207,054,411
--------------- ---------------
Total Increase in Net Assets..................................... 31,186,078 207,030,714
Net Assets:
Beginning of the Period.......................................... 531,489,253 324,458,539
--------------- ---------------
End of the Period (Including accumulated undistributed net
investment income of $26,309 and $11,822, respectively)..... $ 562,675,331 $ 531,489,253
=============== ===============
</TABLE>
See Notes to Financial Statements
B-30
<PAGE> 70
Financial Highlights
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Year Ended May 31
-------------------------------------------------
Class A Shares 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Net Investment Income.......................... .0440 .0465 .0434 .0229 .0244
Less Distributions from Net Investment Income.. (.0440) (.0465) (.0434) (.0229) (.0244)
------- ------- ------- ------- -------
Net Asset Value, End of the Period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return................................... 4.52% 4.75% 4.43% 2.32% 2.44%
Net Assets at End of the Period (in millions).. $ 451.3 $ 440.3 $ 319.7 $ 463.8 $ 279.3
Ratio of Expenses to Average Net Assets*....... 1.02% 1.07% 1.00% 1.03% 1.09%
Ratio of Net Investment Income to Average
Net Assets*.................................... 4.38% 4.62% 4.28% 2.36% 2.44%
</TABLE>
* The impact on the Ratios of Expenses and Net Investment Income to Average Net
Assets due to VKAC reimbursement of expenses was less than 0.01%.
See Notes to Financial Statements
B-31
<PAGE> 71
Financial Highlights (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
April 18, 1995
Year Ended May 31, (Commencement of
------------------ Distribution) to
Class B Shares 1997 1996 May 31, 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period ................. $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Net Investment Income .................................... .0363 .0388 .0047
Less Distributions from Net Investment Income ............ (.0363) (.0388) (.0047)
------- ------- -------
Net Asset Value, End of the Period ....................... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total Return (a) ......................................... 3.71% 3.95% .47%*
Net Assets at End of the Period (in millions) ............ $ 103.0 $ 81.5 $ 4.2
Ratio of Expenses to Average Net Assets** ................ 1.77% 1.86% 1.76%
Ratio of Net Investment Income to Average Net Assets** ... 3.70% 3.75% 3.52%
</TABLE>
* Non-Annualized
** The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of expenses was less than 0.01%.
(a) Total return is based upon net asset value which does not include payment
of the contingent deferred sales charge.
See Notes to Financial Statements
B-32
<PAGE> 72
Financial Highlights (Continued)
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
April 18, 1995
Year Ended May 31, (Commencement
---------------------- of Distribution) to
Class C Shares 1997 1996 May 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period....... $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Net Investment Income.......................... .0362 .0387 .0049
Less Distributions from Net
Investment Income......................... (.0362) (.0387) (.0049)
------- ------- -------
Net Asset Value, End of the Period............. $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total Return (a)............................... 3.72% 3.94% .49%*
Net Assets at End of the Period (in millions).. $ 8.4 $ 9.7 $ 0.6
Ratio of Expenses to Average Net Assets**...... 1.78% 1.87% 1.76%
Ratio of Net Investment Income to Average
Net Assets**.............................. 3.64% 3.81% 3.52%
</TABLE>
* Non-Annualized
** The impact on the Ratios of Expenses and Net Investment Income to Average
Net Assets due to VKAC reimbursement of expenses was less than 0.01%.
(a) Total return is based upon net asset value which does not include payment
of the contingent deferred sales charge.
See Notes to Financial Statements
B-33
<PAGE> 73
Notes to Financial Statements
May 31, 1997
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Van Kampen American Capital Reserve Fund ( the "Fund") is organized as a
Delaware business trust. The Fund is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek protection of capital and
high current income through investments in U.S. dollar denominated money market
securities. The Fund commenced investment operations on July 12, 1974. The
distribution of the Fund's Class B and Class C shares commenced on April 18,
1995.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuation-Investments 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.
The Fund invests in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen American Capital Asset Management, Inc. (the
"Adviser") or its affiliates, the daily aggregate of which is invested in
repurchase agreements. Repurchase agreements are fully collateralized by the
underlying debt security. The Fund will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of the
custodian bank. The seller is required to maintain the value of the underlying
security at not less than the repurchase proceeds due the Fund.
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, if any, to its
shareholders. Therefore, no provision for federal income taxes is required.
B-34
<PAGE> 74
Notes to Financial Statements (Continued)
- -------------------------------------------------------------------------------
May 31, 1997
===============================================================================
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 May 31, 1997, the Trust had an accumulated capital loss carryforward
for tax purposes of $62,624 which will expire between May 31, 1998 and May 31,
2005. Of this amount, $2,038 will expire in 1998. Permanent book and tax
differences of $9,915 relating to the expiration of capital loss carryforward
during fiscal 1997 was reclassified from accumulated net realized loss to
capital.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of post October 31 losses which may not be
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.
2. Investment Advisory Fees and Other Transactions with Affiliates
Under the terms of the Fund's Investment Advisory Agreement, Van Kampen
American Capital Asset Management, Inc. ( the "Adviser") will provide
facilities and investment advice to the Fund for an annual fee payable monthly
as follows:
Average Net Assets % Per Annum
- ----------------------------------------------------------
First $150 million............................. .50 of 1%
Next $100 million.............................. .45 of 1%
Next $100 million.............................. .40 of 1%
Over $350 million.............................. .35 of 1%
The Adviser agreed to reimburse the Fund for certain trustees' compensation
in connection with the July, 1995 increase in the number of trustees of the
Fund. This reimbursement was effective through December 31, 1996.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated
person.
For the year ended May 31, 1997, the Fund recognized expenses of
approximately $90,200 representing Van Kampen American Capital Distributors,
Inc.'s, or its affiliates' (collectively "VKAC") cost of providing accounting
services to the Fund. These services are provided by VKAC at cost.
B-35
<PAGE> 75
Notes to Financial Statements (Continued)
May 31, 1997
- --------------------------------------------------------------------------------
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended May
31, 1997, the Fund recognized expenses of approximately $1,374,100,
representing ACCESS' cost of providing transfer agency and shareholder services
plus a profit.
Certain officers and trustees of the Fund are also officers and directors
of VKAC. The Fund does not compensate its officers or trustees who are officers
of VKAC.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. Under the deferred compensation plan,
trustees may elect to defer all or a portion of their compensation to a later
date. Benefits under the retirement plan are payable for a ten-year period and
are based upon each trustee's years of service to the Fund. The maximum annual
benefit under the plan is $2,500.
At May 31, 1997, VKAC owned 4,074 Class A shares of the Fund.
3. Capital Transactions
The Fund has outstanding three classes of shares of beneficial interest,
Classes A, B and C. There are an unlimited number of shares of each class with
a par value of $0.01 per share.
B-36
<PAGE> 76
Notes to Financial Statements (Continued)
May 31, 1997
- --------------------------------------------------------------------------------
Transactions in shares and ending capital were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1997 May 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares Sold:
Class A.................................. 7,336,711,667 5,916,698,879
Class B.................................. 648,076,624 402,157,689
Class C.................................. 141,950,203 99,265,826
------------- -------------
Total Sold.................................... 8,126,738,494 6,418,122,394
============= =============
Shares Issued in Business Combination
Class A.................................. - 20,714,880
Class B.................................. - 5,651,573
Class C.................................. - -
------------- -------------
Total Business Combination.................... - 26,366,453
============= =============
Shares Issued Through Dividend Reinvestment:
Class A.................................. 18,710,328 17,616,820
Class B.................................. 2,926,008 1,250,566
Class C.................................. 339,500 188,995
------------- -------------
Total Dividend Reinvestment................... 21,975,836 19,056,381
============= =============
Shares Repurchased:
Class A.................................. (7,344,457,086) (5,834,380,999)
Class B.................................. (629,443,316) (331,779,955)
Class C.................................. (143,617,542) (90,332,522)
------------- -------------
Total Repurchased............................. (8,117,517,944) (6,256,493,476)
============= =============
Capital:
Class A.................................. $ 451,297,333 $ 440,339,270
Class B.................................. 103,038,760 81,481,218
Class C.................................. 8,382,745 9,710,786
------------- -------------
Total Capital................................. $ 562,718,838 $ 531,531,274
============= =============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed
on most redemptions made within five years of the purchase for Class B and one
year of the purchase for Class C as detailed in the following schedule. The
Class B and C shares bear the expense of their respective deferred sales
arrangements, including higher distribution and service fees and incremental
transfer agency costs.
B-37
<PAGE> 77
Notes to Financial Statements (Continued)
May 31, 1997
================================================================================
Contingent Deferred
Sales Charge
--------------------
Year of Redemption Class B Class C
================================================================================
First................................................... 4.00% 1.00%
Second.................................................. 4.00% None
Third................................................... 3.00% None
Fourth.................................................. 2.50% None
Fifth................................................... 1.50% None
Sixth and Thereafter.................................... None None
For the year ended May 31, 1997, VKAC, as Distributor for the Fund,
received commissions on CDSC redeemed shares of approximately $414,900. Sales
charges do not represent expenses of the Fund.
4. Distribution and Service Plans
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12B-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .15% of average daily net assets of
Class A shares and .90% each of Class B and Class C shares are accrued daily.
Included in these fees for the year ended May 31, 1997, are payments to VKAC of
approximately $684,300.
5. Business Combination
On September 22, 1995, the Fund acquired the net assets of Van Kampen American
Capital Money Market Fund ("VKMM") pursuant to a plan of reorganization
approved by VKMM shareholders on September 21, 1995. The acquisition resulted
in a tax-free exchange of 26,366,453 shares of the Fund for the 26,366,453
shares of VKMM outstanding on September 22, 1995. VKMM's net assets at that
date were $26,366,453; the Fund's net assets were $422,227,929. After the
acquisition, the combined net assets of the Fund were $448,594,382.
B-38
<PAGE> 78
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
<S> <C>
Included in Part A of Registration Statement:
Financial Highlights
Included in Part B of Registration Statement:
Report of Independent Accountants
Financial Statements
Notes to Financial Statements
</TABLE>
(B) EXHIBITS:
<TABLE>
<C> <S>
(1)(a) -- First Amended and Restated Agreement and Declaration of
Trust(8)
(b) -- Certificate of Amendment(8)
(c) -- Amended and Restated Certificate of Designation+
(2) -- Amended and Restated Bylaws(8)
(4)(a) -- Specimen Class A Share Certificate(8)
(b) -- Specimen Class B Share Certificate(8)
(c) -- Specimen Class C Share Certificate(8)
(5) -- Investment Advisory Agreement+
(6)(a) -- Distribution and Service Agreement+
(b) -- Form of Dealer Agreement(8)
(c) -- Form of Broker Agreement(8)
(d) -- Form of Bank Agreement(8)
(8)(a) -- Custodian Contract+
(b) -- Transfer Agency and Service Agreement+
(9)(a) -- Data Access Services Agreement(7)
(b) -- Fund Accounting Agreement+
(10) -- Opinion and Consent of Skadden, Arps, Slate, Meagher &
Flom (Illinois)(8)
(11) -- Consent of Price Waterhouse LLP+
(14)(a) -- Individual Retirement Account Brochure with
Application(4)
(b) -- 403(b)(7) Custodial Account(3)
(c) -- ORP 403(b)(7) Custodial Account(3)
(d) -- Retirement Plans for the Small Business-Forms Package and
Plan Documents(1)
(e) -- Prototype Profit Sharing/Money Purchase Plan and Trust(2)
(f) -- Prototype 401(k) Plan and Trust(2)
(g) -- Salary Reduction Simplified Employee Pension Plan(5)
(h) -- Simplified Employee Pension Plan Brochure with
Application(6)
(15)(a) -- Plan of Distribution pursuant to Rule 12b-1+
(b) -- Form of Shareholder Assistance Agreement+
(c) -- Form of Administrative Services Agreement+
(16) -- Computation of Performance Quotations+
</TABLE>
C-1
<PAGE> 79
<TABLE>
<S> <C>
(17)(a) -- List of certain investment companies in response to Item
29(a)+
(b) -- List of officers and directors of Van Kampen American
Capital Distributors, Inc. in response to Item 29(b)+
(18) -- Amended Multi-Class Plan+
(24) -- Power of Attorney+
(27) -- Financial Data Schedules+
</TABLE>
- -------------------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 44 to Van
Kampen American Capital Emerging Growth Fund's Registration Statement on
Form N-1A, File No. 2-33214, filed December 21, 1990.
(2) Incorporated herein by reference to Post-Effective Amendment No. 61 to Van
Kampen American Capital Growth and Income Fund's Registration Statement on
Form N-1A, File No. 2-21657, filed March 26, 1991.
(3) Incorporated herein by reference to Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed
September 24, 1992.
(4) Incorporated herein by reference to Post-Effective Amendment No. 31 to
Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed
September 24, 1993.
(5) Incorporated herein by reference to Post-Effective Amendment No. 9 to Van
Kampen American Capital World Portfolio Series Trust's Registration
Statement on Form N-1A, File No. 33-37879, filed September 24, 1993.
(6) Incorporated herein by reference to Post-Effective Amendment No. 69 to Van
Kampen American Capital Growth and Income Fund's Registration Statement on
Form N-1A, File No. 2-21657, filed March 24, 1994.
(7) Incorporated herein by reference to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed
May 19, 1994.
(8) Incorporated herein by reference to Post-Effective Amendment No. 37 to
Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed
September 27, 1996.
* Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See the Statement of Additional Information.
C-2
<PAGE> 80
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of September 15, 1997
<TABLE>
<CAPTION>
(2)
NUMBER OF RECORD HOLDERS
(1) ---------------------------
TITLE OF CLASS CLASS A CLASS B CLASS C
-------------- ------- ------- -------
<S> <C> <C> <C>
Shares of Beneficial Interest,
$0.01 par value 42,700 4,804 1,047
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust.
Article 8; Section 8.4 of the Agreement and Declaration of Trust provides
that each officer and trustee of the Registrant shall be indemnified by the
Registrant against all liabilities incurred in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which the officer or trustee may be or may have been involved by reason of
being or having been an officer or trustee, except that such indemnity shall not
protect any such person against a liability to the Registrant or any shareholder
thereof to which such person would otherwise be subject by reason of (i) not
acting in good faith in the reasonable belief that such person's actions were
not in the best interest of the Trust, (ii) willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office, or (iii) for a criminal proceeding not having a reasonable
cause to believe that such conduct was unlawful (collectively "Disabling
Conduct"). Absent a court determination that an officer or trustee seeking
indemnification was not liable on the merits or guilty of Disabling Conduct in
the conduct of his or her office, the decision by the Registrant to indemnify
such person must be based upon the reasonable determination of independent
counsel or non-party independent trustees, after review of the facts, that such
officer or trustee is not guilty of Disabling Conduct in the conduct of his or
her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officers or trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides a security for the
undertaking; (2) the Registrant is insured against losses arising from lawful
advances; or (3) a majority of a quorum of the Registrant's disinterested,
non-party trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that a recipient of
the advance ultimately will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by the trustee, officer, or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
C-3
<PAGE> 81
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Investment Advisory Services" in the Prospectus and "Trustees and
Officers" in the Statement of Additional Information for information regarding
the business of the Adviser. For information as to the business, profession,
vocation and employment of a substantial nature of directors and officers of the
Adviser, reference is made to the Adviser's current Form ADV (File No. 801-1669)
filed under the Investment Advisers Act of 1940, as amended, incorporated herein
by reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The sole principal underwriter is Van Kampen American Capital
Distributors, Inc., which acts as principal underwriter for certain investment
companies and unit investment trusts set forth in Exhibit 17(a) incorporated by
reference herein.
(b) Van Kampen American Capital Distributors, Inc. is an affiliated person
of an affiliated person of Registrant and is the only principal underwriter for
Registrant. The name, principal business address and positions and offices with
Van Kampen American Capital Distributors, Inc. of each of the directors and
officers thereof are set forth in Exhibit 17(b). Except as disclosed under the
heading, "Trustees and Officers" in Part B of this Registration Statement, none
of such persons has any position or office with Registrant.
(c) Not applicable.
ITEM 30. LOCATION OF BOOKS AND RECORDS.
All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
Registrant will be maintained at its offices, located at One Parkview Plaza,
Oakbrook Terrace, Illinois 60181, ACCESS Investor Services, Inc., 7501 Tiffany
Springs Parkway, Kansas City, Missouri 64153, or at the State Street Bank and
Trust Company, 1776 Heritage Drive, North Quincy, MA; (ii) by the Adviser, will
be maintained at its offices, located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181; and (iii) by the Distributor, the principal underwriter, will be
maintained at its offices located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes, if requested to do so by the holders of at
least 10% of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a trustee
or trustees and to assist in communications with other shareholders as required
by Section 16(c) of the Investment Company Act of 1940.
C-4
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VAN KAMPEN AMERICAN CAPITAL
RESERVE FUND, certifies that it meets all of the requirements for effectiveness
of this Amendment to the Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Oakbrook Terrace and State of Illinois, on the
26th day of September, 1997.
VAN KAMPEN AMERICAN CAPITAL
RESERVE FUND
By: /s/ RONALD A. NYBERG
------------------------------------
Ronald A. Nyberg, Vice President and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed on September 26, 1997 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <C>
Principal Executive Officer:
/s/ DENNIS J. MCDONNELL* President
- -----------------------------------------------------
Dennis J. McDonnell
Principal Financial Officer:
/s/ EDWARD C. WOOD III* Vice President and Chief Financial
- ----------------------------------------------------- Officer
Edward C. Wood III
Trustees:
/s/ J. MILES BRANAGAN* Trustee
- -----------------------------------------------------
J. Miles Branagan
/s/ RICHARD M. DEMARTINI* Trustee
- -----------------------------------------------------
Richard M. DeMartini
/s/ LINDA H. HEAGY* Trustee
- -----------------------------------------------------
Linda Hutton Heagy
/s/ R. CRAIG KENNEDY* Trustee
- -----------------------------------------------------
R. Craig Kennedy
/s/ JACK E. NELSON* Trustee
- -----------------------------------------------------
Jack E. Nelson
/s/ JEROME L. ROBINSON* Trustee
- -----------------------------------------------------
Jerome L. Robinson
/s/ PHILLIP B. ROONEY* Trustee
- -----------------------------------------------------
Phillip B. Rooney
/s/ FERNANDO SISTO* Trustee
- -----------------------------------------------------
Fernando Sisto
/s/ WAYNE W. WHALEN* Trustee
- -----------------------------------------------------
Wayne W. Whalen
</TABLE>
- ---------------
* Signed by Ronald A. Nyberg pursuant to a power of attorney.
/s/ RONALD A. NYBERG
- ------------------------------------
Ronald A. Nyberg
Attorney-in-Fact September 26, 1997
<PAGE> 83
SCHEDULE OF EXHIBITS TO POST-EFFECTIVE
AMENDMENT 38 TO FORM N-1A AS SUBMITTED TO THE
SECURITIES AND EXCHANGE COMMISSION
ON SEPTEMBER 26, 1997
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
(1)(c) -- Amended and Restated Certificate of Designation
(5) -- Investment Advisory Agreement
(6)(a) -- Distribution and Service Agreement
(8)(a) -- Custodian Contract
(b) -- Transfer Agency and Service Agreement
(9)(b) -- Fund Accounting Agreement
(11) -- Consent of Price Waterhouse LLP
(15)(a) -- Plan of Distribution pursuant to Rule 12b-1
(b) -- Form of Shareholder Assistance Agreement
(c) -- Form of Administrative Services Agreement
(16) -- Computation of Performance Quotations
(17)(a) -- List of certain investment companies in response to Item
29(a)
(b) -- List of officers and directors of Van Kampen American
Capital Distributors, Inc. in response to Item 29(b)
(18) -- Amended Multi-Class Plan
(24) -- Power of Attorney
(27) -- Financial Data Schedules
</TABLE>
<PAGE> 1
EXHIBIT (1)(c)
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
Amended and Restated 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 Restated Agreement and Declaration of Trust ("Declaration"), and by
the affirmative vote of a Majority of the Trustees does hereby amend and
restate in its entirety the Certificate of Designation of the Van Kampen
American Capital Reserve Fund Series of the Trust dated June 21, 1995 by
redesignating the following classes of Shares of the Trust with the following
rights, preferences and characteristics:
1. Shares. The beneficial interest in the Trust shall be divided into Shares
having a nominal or par value of $0.01 per Share, of which an unlimited number
may be issued, which Shares shall represent interests only in the Trust. The
Trustees shall have the authority from time to time to authorize separate
Series of Shares for the Trust as they deem necessary or desirable.
2. Classes of Shares. The Shares of the Trust shall be initially divided into
three classes--Class A, Class B and Class C. The Trustees shall have the
authority from time to time to authorize additional Classes of Shares of the
Trust.
3. Sales Charges. Each Class A, Class B and Class C Share shall be subject to
such sales charges, if any, as may be established from time to time by the
Trustees in accordance with the Investment Company Act of 1940 (the "1940 Act")
and applicable rules and regulations of the National Association of Securities
Dealers, Inc., all as set forth in the Trust's prospectus.
4. Conversion. Each Class B and certain Class C Shares of the Trust shall be
converted automatically, and without any action or choice on the part
of the Shareholder thereof, into Class A Shares of the Trust at such times and
pursuant to such terms, conditions and restrictions as may be established by
the Trustees and as set forth in the Trust's Prospectus.
5. Allocation of Expenses Among Classes. Expenses related solely to a
particular Class (including, without limitation, distribution expenses
under an administrative or service agreement, plan or other arrangement,
however designated) shall be borne by that Class and shall be appropriately
reflected (in a manner determined by the Trustees) in the net asset value,
dividends, distribution and liquidation rights of the Shares of that Class.
6. Special Meetings. A special meeting of Shareholders of a Class of the Trust
may be called with respect to the Rule 12b-1 distribution plan applicable to
such Class or with respect to any other proper purpose affecting only holders
of shares of such Class at any time by a Majority of the Trustees.
7. Other Rights Governed by Declaration. All other rights, preferences,
qualifications, limitations and restrictions with respect to Shares of any
Series of the Trust, or with respect to any Class of Shares set forth in the
Declaration shall apply to Shares of the Trust unless otherwise
specified in this Certificate of Designation, in which case this Certificate of
Designation shall govern.
8. Amendments, etc. Subject to the provisions and limitations of Section 9.5 of
the Declaration and applicable law, this Certificate of Designation may be
amended by an instrument signed in writing by a Majority of the Trustees (or by
any officer of the Trust pursuant to the vote of a Majority of the Trustees) or
when authorized to do so by the vote in accordance with the Declaration of the
holders of a majority of all the Shares of the Trust outstanding and entitled
to vote or, if such amendment affects the Shares of one or more but not all of
the Classes of the Trust, the holders of a majority of all the Shares of the
affected Classes outstanding and entitled to vote.
9. Incorporation of Defined Terms. All capitalized terms which are not defined
herein shall have the same meaning as ascribed to those terms in the
Declaration.
December 12, 1996
/s/ RONALD A. NYBERG
- ---------------------------
Ronald A. Nyberg, Secretary
1
<PAGE> 1
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT (herein so called) made this May 31, 1997, 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 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.
<PAGE> 2
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.
For a period of one year commencing on the effective date of this Agreement, the
ADVISER and the FUND agree that the retention of (i) the chief executive
officer, president, chief financial officer and secretary of the ADVISER and
(ii) each director, officer and employee of the ADVISER or any of its
Affiliates (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) who serves as an officer of the FUND (each person referred to in
(i) or (ii) hereinafter being referred to as an "Essential Person"), in his or
her current capacities, is in the best interest of the FUND and the FUND's
shareholders. In connection with the ADVISER's acceptance of employment
hereunder, the ADVISER hereby agrees and covenants for itself and on behalf of
its Affiliates that neither the ADVISER nor any of its Affiliates shall make
any material or significant personnel changes or replace or seek to replace any
Essential Person or cause to be replaced any Essential Person, in each case
without first informing the Board of Trustees of the FUND in a timely manner.
In addition, neither the ADVISER nor any Affiliate of the ADVISER shall change
or seek to change or cause to be changed, in any material respect, the duties
and responsibilities of any Essential Person, in each case without first
informing the Board of Trustees of the FUND in a timely manner.
(2) Role of ADVISER
The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the FUND are not impaired.
2
<PAGE> 3
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:
.50% on the first $150 million of the Fund's average daily net assets, .45% on
the next $100 million of the FUND's average daily net assets; .40% on the next
$100 million of the FUND's average daily net assets; and .35% of any excess
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 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.
3
<PAGE> 4
If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.
(4) Books and Records
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the FUND are the
property of the FUND and further agrees to surrender promptly to the FUND any of
such records upon the FUND's request. The ADVISER further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the Act.
(5) Duration of Agreement
This Agreement shall become effective on the date hereof, and shall remain in
full force until May 31, 1999 unless sooner terminated as hereinafter provided.
This Agreement shall continue in force from year to year 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.
All questions concerning the validity, meaning and effect of this Agreement
shall be determined in accordance with the laws (without giving effect to the
conflict-of-law principles thereof) of the State of Delaware applicable to
contracts made and to be performed in that state.
In connection with its employment hereunder, the ADVISER hereby agrees and
covenants not to change its name without the prior consent of the Board of
Trustees of the FUND.
The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.
VAN KAMPEN AMERICAN CAPITAL VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC. RESERVE FUND
By: /s/ DENNIS J. MCDONNELL By: /s/ PETER W. HEGEL
---------------------------- ----------------------------
Name: Dennis J. McDonnell Name: Peter W. Hegel
---------------------------- ----------------------------
Its: President Its: Executive Vice President
---------------------------- ----------------------------
5
<PAGE> 1
EXHIBIT (6)(a)
DISTRIBUTION AND SERVICE AGREEMENT
THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of May 31, 1997 (the
"Agreement") by and between VAN KAMPEN AMERICAN CAPITAL RESERVE FUND (the
"Fund"), and VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC., a Delaware
corporation (the "Distributor").
1. (a) Appointment of Distributor. The Fund appoints the
Distributor as a principal underwriter and exclusive distributor of
each class of its shares of beneficial interest (the "Shares") offered for sale
from time to time pursuant to the then current prospectus of the Fund, subject
to different combinations of front-end sales charges, distribution fees,
service fees and contingent deferred sales charges. Classes of shares, if any,
subject to a front-end sales charge and a distribution and/or service fee are
referred to herein as "FESC Classes" and the Shares of such classes are
referred to herein as "FESC Shares." Classes of shares, if any, subject to a
contingent-deferred sales charge and a distribution and/or a service fee are
referred to herein as "CDSC Classes" and Shares of such classes are referred to
herein as "CDSC Shares." Classes of shares, if any, subject to a front-end
sales charge, a contingent-deferred sales charge and a distribution and/or
service fee are referred to herein as "Combination Classes" and Shares of such
class are referred to herein as "Combination Shares." The Fund reserves the
right to refuse at any time or times to sell Shares hereunder for any reason
deemed adequate by the Board of Trustees of the Fund.
(b) Best Efforts. The Distributor shall use its best efforts to
sell, through its organization and through other dealers and agents, the Shares
which the Distributor has the right to purchase under Section 2 hereof, but the
Distributor does not undertake to sell any specific number of Shares. Without
the prior approval of the Board of Trustees, the Distributor shall not,
directly or indirectly, distribute, sell or market, through its organization or
other brokers, dealers or agents, shares of any investment companies unless the
Board of Trustees of the Fund determines that such companies do not compete, or
potentially compete, with the fund.
(c) Positions in the Shares. The Distributor agrees that it will
not take any long or short positions in the Shares, except for long positions
in those Shares purchased by the Distributor in accordance with any systematic
sales plan described in the then current Prospectus of the Fund and except as
permitted by Section 2 hereof, and that so far as it can control the situation,
it will prevent any of its trustees, officers or shareholders from taking any
long or short positions in the Shares, except for legitimate investment
purposes.
(d) Essential Personnel. The Distributor and the Fund agree that
the retention of (i) the chief executive officer, president, treasurer and
secretary of the Distributor, and (ii) each director, officer and employee of
the Distributor or any of its affiliates (as defined in the Investment Company
Act of 1940, as amended (the "1940 Act")) who serves as an officer of the Fund
(each person referred to in (i) or (ii) hereinafter being referred to as an
"Essential Person"), in his or her current capacities, is in the best interest
of the Fund and the Fund's shareholders. In connection with the Distributor's
acceptance of employment hereunder, the Distributor hereby agrees and covenants
for itself and on behalf of its Affiliates that neither the Distributor nor any
of its Affiliates shall replace or seek to replace any Essential Person or
cause to be replaced any Essential Person, in each case without first
consulting with the Board of Trustees of the Fund in a timely manner. In
addition, neither the Distributor nor any Affiliate of the Distributor shall
change or seek to change or cause to be changed, in any material respect, the
duties and responsibilities of any Essential Person, in each case without first
consulting with the Board of Trustees of the Fund in a timely manner.
2. Sale of Shares to Distributor. The Fund hereby grants to the
Distributor the exclusive right, except as herein otherwise provided, to
purchase Shares directly from the Fund upon the terms herein set forth.
Such exclusive right hereby granted shall not apply to Shares issued or
transferred or sold at net asset value: (a) in connection with the merger or
consolidation of the Fund with any other investment company or the acquisition
by the Fund of all or substantially all of the assets of or the outstanding
Shares of any investment company; (b) in connection with a pro rata
distribution directly to the holders of Shares in the nature of a stock
dividend or stock split or in connection with any other recapitalization
approved by the Board of Trustees; (c) upon the exercise of purchase or
subscription rights granted to the holders of Shares on a pro rata basis; (d)
in connection with the automatic reinvestment of dividends and distributions
from the Fund; or (e) in connection with the issue and sale of Shares to
trustees, officers and employees of the Fund; to directors, officers and
employees of the investment adviser of the Fund or any principal underwriter
(including the Distributor) of the Fund; to retirees of the Distributor that
purchased shares of any mutual fund distributed by the Distributor prior to
retirement; to directors, officers and employees of Van Kampen American
Capital, Inc. (the parent of the Distributor), VK/AC Holding, Inc. (the
parent of The Van Kampen American Capital, Inc.), Morgan Stanley,
Dean Witter, Discover & Co. (the parent company of VK/AC Holding,
Inc.) and to the subsidiaries of Van Kampen American Capital, Inc.; (f) to any
trust, pension, profit-sharing or other benefit plan for any of the aforesaid
persons; and (g) to any group of persons as permitted by Rule 22d-1 under the
1940 Act approved from time to time by the Board of Trustees and set forth in
the then current Prospectus of the Fund.
The Distributor shall have the right to buy from the Fund the Shares needed,
but not more than the Shares needed (except for reasonable allowances for
clerical errors, delays and errors of transmission and cancellation of orders)
to fill unconditional orders for Shares received by the Distributor from
dealers, agents and investors during each period when particular net asset
values and public offering prices are in
1
<PAGE> 2
effect as provided in Section 3 hereof; and the price which the Distributor
shall pay for the Shares so purchased shall be the respective net asset
value used in determining the public offering price on which such orders were
based. The Distributor shall notify the Fund at the end of each such period,
or as soon thereafter on that business day as the orders received in such
period have been compiled, of the number of Shares of each class that the
Distributor elects to purchase hereunder.
3. (a) Public Offering Price. The public offering price per Share
shall be determined in accordance with the then current Prospectus of
the Fund. In no event shall the public offering price exceed the net asset
value per Share, plus, with respect to the FESC Shares, a front-end sales
charge not in excess of the applicable maximum sales charge permitted under the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.,
as in effect from time to time. The net asset value per share for each class
of Shares, respectively, shall be determined in the manner provided in the
Declaration of Trust and By-Laws of the Trust as then amended, the Certificate
of Designation with respect to the Fund, as amended, and in accordance with the
then current Prospectus of the Fund consistent with the terms and conditions of
the Fund's Multiple Class Plan adopted by the Board of Trustees in accordance
with Section 18 of the 1940 Act and Rule 18f-3 thereunder. The Fund will
cause immediate notice to be given to the Distributor of each change in net
asset value as soon as it is determined.
(b) Discounts to Dealers. Discounts to dealers purchasing FESC
shares from the Distributor for resale and to brokers and other eligible agents
making sales of FESC Shares to investors and compensation payable from the
Distributor to dealers, brokers and other eligible agents making sales of CDSC
Shares and Combination Shares shall be set forth in the selling agreements
between the Distributor and such dealers or agents, respectively, as from time
to time amended, and, if such discounts and compensation are described in the
then current Prospectus for the Fund, shall be as so set forth. In connection
with the Distributor's employment hereunder, the Distributor hereby agrees to
distribute the Shares through brokers, dealers and other agents of Dean Witter
Distributors, Inc. on a "proprietary basis" substantially identical to the
distribution of shares of proprietary open-end investment companies distributed
by Dean Witter Distributors, Inc.
4. Compliance with NASD Rules, SEC Orders, etc. In selling Fund
Shares, the Distributor will in all respects duly comply with all state and
federal laws relating to the sale of such securities and with all applicable
rules and regulations of all regulatory bodies, including without limitation
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc., and all applicable rules and regulations of the Securities and Exchange
Commission under the 1940 Act, and will indemnify and save the Fund harmless
from any damage or expense on account of any unlawful act by the Distributor or
its agents or employees. The Distributor is not, however, to be responsible
for the acts of other dealers or agents, except to the extent that they shall
be acting for the Distributor or under its direction or authority. None of the
Distributor, any dealer, any agent or any other person is authorized by the
Fund to give any information or to make any representations, other than those
contained in the Registration Statement or Prospectus heretofore or hereafter
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "1933 Act") (as any such Registration Statement and
Prospectus may have been or may be amended from time to time), covering the
Shares, and in any supplemental information to any such Prospectus approved by
the Fund in connection with the offer or sale of Shares. None of the
Distributor, any dealer, any broker or any other person is authorized to act as
agent for the Fund in connection with the offering or sale of Shares to the
public or otherwise. All such sales shall be made by the Distributor as
principal for its own account.
In selling Shares to investors, the Distributor will adopt and comply
with certain standards, as set forth in Exhibit III attached hereto as to when
each respective class of Shares may appropriately be sold to particular
investors. The Distributor will require every broker, dealer and other
eligible agent participating in the offering of the Shares to agree to adopt
and comply with such standards as a condition precedent to their participation
in the offering.
2
<PAGE> 3
5. Expenses.
(a) The Fund will pay or cause to be paid:
(i) all expenses in connection with the registration of
Shares under the federal securities laws, and the Fund
will exercise its best efforts to obtain said
registration and qualification;
(ii) all expenses in connection with the printing of any
notices of shareholders' meetings, proxy and proxy
statements and enclosures therewith, as well as any
other notice or communication sent to shareholders
in connection with any meeting of the shareholders or
otherwise, any annual, semiannual or other reports or
communications sent to the shareholders, and the
expenses of sending prospectuses relating to the Shares
to existing shareholders;
(iii) all expenses of any federal or state original-issue tax
or transfer tax payable upon the issuance, transfer or
delivery of Shares from the Fund to the Distributor;
and
(iv) the cost of preparing and issuing any Share
certificates which may be issued to represent Shares.
(b) The Distributor will pay the costs and expenses of
qualifying and maintaining qualification of the Shares for sale under
the securities laws of the various states. The Distributor will also permit
its officers and employees to serve without compensation as trustees and
officers of the Fund if duly elected to such positions.
(c) The Fund shall reimburse the Distributor for out-of-pocket
costs and expenses actually incurred by it in connection with distribution of
each class of Shares respectively in accordance with and subject to the
terms of a plan (the "12b-1 Plan") adopted by the Fund pursuant to Rule 12b-1
under the 1940 Act as such 12b-1 Plan may be in effect from time to time;
provided, however, that no payments shall be due or paid to the Distributor
hereunder with respect to a class of Shares unless and until this Agreement
shall have been approved for each such class by a majority of the Board of
Trustees of the Fund and by a majority of the "Disinterested Trustees" (as such
term is defined in such 12b-1 Plan) by vote cast in person at a meeting called
for the purpose of voting on this Agreement. A copy of such 12b-1 Plan as in
effect on the date of this Agreement is attached as Exhibit I hereto. The Fund
reserves the right to terminate such 12b-1 Plan with respect to a class of
Shares at any time, as specified in the Plan. The persons authorized to direct
the payment of funds pursuant to this Agreement and the 12b-1 Plan shall
provide to the Fund's Board of Trustees, and the Trustees shall review, at
least quarterly, a written report with respect to each of the classes of Shares
of the amounts so paid and the purposes for which such expenditures were made
for each such class of Shares, comparing the amounts paid by such class of
Shares with amounts paid by classes of shares issued by investment companies
not governed by the Board of Trustees and distributed by the Distributor or by
direct or indirect Affiliates of the Distributor and such other information as
the Board of Trustees may from time to time request.
(d) The Fund shall compensate the Distributor for providing
services to, and the maintenance of, shareholder accounts in the Fund
(including prepaying service fees to eligible brokers, dealers and financial
intermediaries and expenses incurred in connection therewith) and the
Distributor may pay as agent for and on behalf of the Fund a service fee with
respect to each class of Shares to brokers, dealers and financial
intermediaries for the provision of shareholder services and the maintenance of
shareholder accounts in the Fund in the amount with respect to each class of
Shares set forth from time to time in the Fund's prospectus. The Fund shall
compensate the Distributor for such expenses in accordance with the terms of a
service plan (the "Service Plan"), as such Service Plan may be in effect from
time to time; provided, however, that no service fee payments shall be due or
paid to the Distributor hereunder with respect to a class of Shares unless and
until this Agreement shall have been approved for each such class by a majority
of the Board of Trustees of the Fund and by a majority of the Disinterested
Trustees by vote cast in person at a meeting called for the purpose of voting
on this Agreement. A copy of such Service Plan as in effect on the date of
this Agreement is attached as Exhibit II hereto. The Fund reserves the right
to terminate such Service Plan with respect to a class of Shares at any time,
as specified in the Plan. The persons authorized to direct the payment of
funds pursuant to this Agreement and the Service Plan shall provide to the
Fund's Board of Trustees, and the Trustees shall
3
<PAGE> 4
review, at least quarterly, a written report with respect to each class
of Shares setting forth the amounts paid as service fees for each such class
of Shares, comparing the amounts paid as service fees by such class of Shares
with amounts paid by classes of shares issued by investment companies not
governed by the Board of Trustees and distributed by the Distributor or by
direct or indirect Affiliates of the Distributor and such other information as
the Board of Trustees may from time to time request.
6. Redemption of Shares. In connection with the Fund's redemption of
its Shares, the Fund hereby authorizes the Distributor to repurchase, upon the
terms and conditions hereinafter set forth, as the Fund's agent and for the
Fund's account, such Shares as may be offered for sale to the Fund from time to
time by holders of such Shares or their agents.
(a) Subject to and in conformity with all applicable federal
and state legislation, any applicable rules of the National Association of
Securities Dealers, Inc., and any applicable rules and regulations of the
Securities and Exchange Commission under the 1940 Act, the Distributor may
accept offers of holders of Shares to resell such Shares to the Fund on such
terms and conditions and at such prices as described and provided for in the
then current Prospectus of the Fund.
(b) The Distributor agrees to notify the Fund at such times as
the Fund may specify of the number of each class of Shares, respectively,
repurchased for the Fund's account and the time or times of such repurchases,
and the Fund shall notify the Distributor of the prices and, in the case of a
class of CDSC Shares or Combination Shares, of the deferred sales charge as
described below, if any, applicable to repurchases of Shares of such class.
(c) The Fund shall have the right to suspend or revoke the
foregoing authorization at any time; unless otherwise stated, any such
suspension or revocation shall be effective forthwith upon receipt of notice
thereof by telegraph or by written instrument from any of the Fund's officers.
In the event that the Distributor's authorization is, by the terms of such
notice, suspended for more than twenty-four hours or until further notice, the
authorization given by this Section 6 shall not be revived except by vote of
the Board of Trustees of the Fund.
(d) The Distributor agrees that all repurchases of Shares made
by the Distributor shall be made only as agent for the Fund's account and
pursuant to the terms and conditions herein set forth.
(e) The Fund agrees to authorize and direct its Custodian to
pay, for the Fund's account, the repurchase price (together with any applicable
contingent deferred sales charge) of any Shares so repurchased for the Fund
against the authorized transfer of book shares from an open account and against
delivery of any other documentation required by the Board of Trustees of the
Fund or, in the case of certificated Shares, against delivery of the
certificates representing such Shares in proper form for transfer to the Fund.
(f) The Distributor shall receive no commissions or other
compensation in respect of any repurchases of FESC Shares for the Fund under
the foregoing authorization and appointment as agent. With respect to any
repurchase of CDSC Shares or Combination Shares, the Distributor shall receive
the deferred sales charge, if any, applicable to the respective class of Shares
that have been held for less than a specified period of time with respect to
such class as set forth from time to time in the Fund's Prospectus. The
Distributor shall receive no other commission or other compensation in respect
of any repurchases of CDSC Shares or Combination Shares for the Fund under the
foregoing authorization and appointment as agent.
(g) If any FESC Shares sold to the Distributor under the terms
of this Agreement are redeemed or repurchased by the Fund or by the Distributor
as agent or are tendered for redemption within seven business days after the
date of the Distributor's confirmation of the original purchase by the
Distributor, the Distributor shall forfeit the amount above the net asset value
received by it in respect of such Shares, provided that the portion, if any, of
such amount re-allowed by the Distributor to dealers or agents shall be
repayable to the Fund only to the extent recovered by the Distributor from the
dealer or agent concerned. The Distributor shall include in agreements with
such dealers and agents a corresponding provision for the forfeiture by them of
their concession with respect to FESC Shares
4
<PAGE> 5
purchased by them or their principals and redeemed or repurchased by the Fund
or by the Distributor as agent within seven business days after the date of the
Distributor's confirmation of such initial purchases.
7. Indemnification. The Fund agrees to indemnify and hold harmless
the Distributor and each of its trustees and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damage or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damage,
or expense and reasonable counsel fees incurred in connection therewith),
arising by reason of any person acquiring any Shares, based upon the ground
that the registration statement, Prospectus, shareholder reports or other
information filed or made public by the Fund (as from time to time amended)
included an untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading under the 1933 Act or any other statute or the common law. However,
the Fund does not agree to indemnify the Distributor or hold it harmless to the
extent that the statement or omission was made in reliance upon, and in
conformity with, information furnished to the Fund by or on behalf of the
Distributor. In no case (i) is the indemnity of the Fund in favor of the
Distributor or any person indemnified to be deemed to protect the Distributor
or any person against any liability to the Fund or its securityholders to which
the Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Fund to be liable under its indemnity agreement
contained in this Section with respect to any claim made against the
Distributor or any person indemnified unless the Distributor or any such person
shall have notified the Fund in writing of the claim within a reasonable time
after the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor or any such
person (or after the Distributor or the person shall have received notice of
service on any designated agent). However, failure to notify the Fund of any
claim shall not relieve the Fund from any liability which it may have to the
Distributor or any person against whom such action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. The Fund shall
be entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense, of any suit brought to enforce any claims, but
if the Fund elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor or person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume
the defense of any suit and retain counsel, the Distributor, officers or
trustees or controlling person or persons, defendant or defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them.
If the Fund does not elect to assume the defense of any suit, it will reimburse
the Distributor, officers or trustees or controlling person or persons,
defendant or defendants in the suit for the reasonable fees and expenses of any
counsel retained by them. The Fund agrees to notify the Distributor promptly
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any of the
Shares.
The Distributor also covenants and agrees that it will indemnify and
hold harmless the Fund and each of its trustees and officers and each person,
if any, who controls the Fund within the meaning of Section 15 of the 1933 Act
against any loss, liability, damage, claim or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, damage, claim
or expense and reasonable counsel fees incurred in connection therewith)
arising by reason of any person acquiring any Shares, based upon the 1933 Act
or any other statute or common law, alleging any wrongful act of the
Distributor or any of its employees or alleging that the registration
statement, Prospectus, shareholder reports or other information filed or made
public by the Fund (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, insofar as the
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund by or on behalf of the Distributor. In no
case (i) is the indemnity of the Distributor in favor of the Fund or any person
indemnified to be deemed to protect the Fund or any such person against any
liability to which the Fund or such person would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligation and duties
under this Amended Agreement, or (ii) is the Distributor to be liable under its
5
<PAGE> 6
indemnity agreement contained in this paragraph with respect to any claim made
against the Fund or any person indemnified unless the Fund or person, as the
case may be, shall have notified the Distributor in writing of the claim within
a reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the Fund or
person (or after the Fund or such person shall have received notice of service
on any designated agent). However, failure to notify the Distributor of any
claim shall not relieve the Distributor from any liability which it may have to
the Fund or any person against whom the action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. In the case of
any notice to the Distributor, it shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense, of any
suit brought to enforce the claim, but if the Distributor elects to assume the
defense, the defense shall be conducted by counsel chosen by it and
satisfactory to the Fund, to its officers and trustees and to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Distributor elects to assume the defense of any suit and retain counsel, the
Fund or controlling persons, defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them. If the Distributor does
not elect to assume the defense of any suit, it will reimburse the Fund,
officers and trustees or controlling person or persons, defendant or defendants
in the suit, for the reasonable fees and expenses of any counsel retained by
them. The Distributor agrees to notify the Fund promptly of the commencement
of any litigation or proceedings against it in connection with the issue and
sale of any of the Shares.
8. Continuation, Amendment or Termination of This Agreement. This
Agreement shall become effective on the Effective Date and thereafter shall
continue in full force and effect year to year with respect to each class of
Shares so long as such continuance is approved at least annually (i) by the
Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the respective class of Shares of the Fund, and (ii) by
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons in any such party (the "Independent Trustee") cast in person
at a meeting called for the purpose of voting on such approval, provided,
however, that (a) this Agreement may at any time be terminated with respect to
either class of Shares of the Fund without the payment of any penalty either by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the outstanding voting securities of the respective class of Shares of the
Fund, on written notice to the Distributor; (b) this Agreement shall
immediately terminate in the event of its assignment; and (c) this Agreement
may be terminated by the Distributor on ninety (90) days' written notice to the
Fund. Upon termination of this Agreement with respect to either class of
Shares of the Fund, the obligations of the parties hereunder shall cease and
terminate with respect to such class of Shares as of the date of such
termination, except for any obligation to respond for a breach of this
Agreement committed prior to such termination.
This Agreement may be amended with respect to either class of Shares at
any time by mutual consent of the parties, provided that such consent on the
part of the Fund shall have been approved (i) by the Board of Trustees of the
Fund, or by a vote of the majority of the outstanding voting securities of the
respective class of Shares of the Fund, and (ii) by vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such amendment.
For the purpose of this section, the terms "vote of a majority of the
outstanding voting securities", "interested persons" and "assignment" shall
have the meanings defined in the 1940 Act, as amended.
9. Limited Liability of Shareholder. Notwithstanding anything to the
contrary contained in this Agreement, you acknowledge and agree that, as
provided by Section 8.1 of the Agreement and Declaration of Trust of the Trust,
this Agreement is executed by the Trustees of the Trust and/or Officers of the
Fund by them not individually but as such Trustees and/or Officers, and the
obligations of the Fund hereunder are not binding upon any of the Trustees,
Officers or Shareholders individually, but bind only the trust estate.
10. Notice. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postpaid, to the other party at any
office of such party or at such other address as such party shall have
designated in writing.
11. Name. In connection with its employment hereunder, the Distributor
hereby agrees and covenants not to change its name without the prior consent of
the Board of Trustees.
6
<PAGE> 7
12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY, THE
LAW OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF
LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
By: /s/ Dennis J. McDonnell
--------------------------------
Name: Dennis J. McDonnell
Title: President
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By: /s/ Ronald A. Nyberg
--------------------------------
Name: Ronald A. Nyberg
Title: Executive Vice President
7
<PAGE> 1
EXHIBIT 8(a)
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES LISTED ON APPENDIX A
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment of Custodian and Property to be Held By
It . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States . . . . . . 2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . . 2
2.3 Registration of Securities . . . . . . . . . . . . . . . . 4
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Availability of Federal Funds . . . . . . . . . . . . . . 5
2.6 Collection of Income . . . . . . . . . . . . . . . . . . . 5
2.7 Payment of Fund Moneys . . . . . . . . . . . . . . . . . . 6
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . . . . . 7
2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . 7
2.10 Deposit of Fund Assets in Securities System . . . . . . . 8
2.11 Fund Assets Held in the Custodian's Direct
Paper System . . . . . . . . . . . . . . . . . . . . . . . 9
2.12 Segregated Account . . . . . . . . . . . . . . . . . . . . 10
2.13 Ownership Certificates for Tax Purposes . . . . . . . . . 10
2.14 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.15 Communications Relating to Fund Securities . . . . . . . . 11
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States . . . . . . . . . . . . 11
3.1 Appointment of Foreign Sub-Custodians . . . . . . . . . . 11
3.2 Assets to be Held . . . . . . . . . . . . . . . . . . . . 11
3.3 Foreign Securities Systems . . . . . . . . . . . . . . . . 12
3.4 Agreements with Foreign Banking Institutions . . . . . . . 12
3.5 Access of Independent Accountants of the Fund . . . . . . 12
3.6 Reports by Custodian . . . . . . . . . . . . . . . . . . . 12
3.7 Transactions in Foreign Custody Account . . . . . . . . . 13
3.8 Liability of Foreign Sub-Custodians . . . . . . . . . . . 13
3.9 Liability of Custodian . . . . . . . . . . . . . . . . . . 13
3.10 Reimbursement for Advances . . . . . . . . . . . . . . . . 14
3.11 Monitoring Responsibilities . . . . . . . . . . . . . . . 14
3.12 Branches of U.S. Banks . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.13 Tax Law . . . . . . . . . . . . . . . . . . . . . . . . . 15
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund . . . . . . . . . . . . . . . . . . . . . . 15
5. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . 16
6. Actions Permitted Without Express Authority . . . . . . . . . . . 16
7. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . 17
8. Duties of Custodian With Respect to the Books
of Account and Calculation of Net Asset Value
and Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10. Opinion of Fund's Independent Accountants . . . . . . . . . . . . 18
11. Reports to Fund by Independent Public Accountants . . . . . . . . 18
12. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . 18
13. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . 18
14. Effective Period, Termination and Amendment . . . . . . . . . . . 19
15. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . 20
16. Interpretive and Additional Provisions . . . . . . . . . . . . . . 21
17. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . . . 21
18. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . 22
19. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 22
20. Shareholder Communications . . . . . . . . . . . . . . . . . . . . 22
21. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 4
CUSTODIAN CONTRACT
This Contract between each fund or series of a fund listed on
Appendix A which evidences its agreement to be bound hereby by executing a copy
of this Contract (each such fund is individually hereafter referred to as
the "Fund"), and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WITNESSETH THAT, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets
of the Fund, including securities which the Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to
be held outside the United States ("foreign securities") pursuant to the
provisions of the Fund's governing documents. The Fund agrees to deliver to
the Custodian all securities and cash of the Fund, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Fund from time to time, and the cash consideration
received by it for such new or treasury shares of capital stock, beneficial
interest or partnership interest, as applicable, of the Fund, ("Shares") as
may be issued or sold from time to time. The Custodian shall not be
responsible for any property of a Fund held or received by the Fund and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Fund(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund, and
provided that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian. The
Custodian may employ as sub-custodian for the Fund's foreign securities the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
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<PAGE> 5
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property to be held by it in
the United States including all domestic securities owned by such Fund
other than (a) securities which are maintained pursuant to Section 2.10
in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury
(and certain federal agencies collectively referred to herein as
"Securities System") and (b) commercial paper of an issuer for
which State Street Bank and Trust Company acts as issuing and paying
agent ("Direct Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian (the "Direct Paper System")
pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Fund held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund, which may be
continuing instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee
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<PAGE> 6
name of any agent appointed pursuant to Section 2.9 or into
the name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
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<PAGE> 7
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account
deposits in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund ("Prospectus"), in
satisfaction of requests by holders of Shares for repurchase
or redemption;
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund, a
certified copy of a resolution of the Board of Trustees,
specifying the securities of the Fund to be delivered, setting
forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such
securities shall be made; and
16) Upon termination of the Contract.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of
the Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee
name of any agent appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to
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<PAGE> 8
Article 1. All securities accepted by the Custodian on behalf of the
Fund under the terms of this Contract shall be in "street name" or
other good delivery form. If, however, the Fund directs the Custodian
to maintain securities in "street name", the Custodian shall utilize
its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Fund ,
subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940. Funds held by the Custodian for a
Fund may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies
as it may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940 and that
each such bank or trust company and the funds to be deposited with each
such bank or trust company shall on behalf of each applicable Fund be
approved by vote of a majority of the Board of Trustees of the Fund.
Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions from the Fund, make federal funds available to such Fund
as of specified times agreed upon from time to time by the Fund and
the Custodian in the amount of checks received in payment for Shares
of such Fund which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder
to which each Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when
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<PAGE> 9
due on securities held hereunder. Income due each Fund on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund
in arranging for the timely delivery to the Custodian of the income to
which the Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper Instructions from the
Fund, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out moneys of a Fund in the
following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Fund but only (a) against the delivery of such securities
or evidence of title to such options, futures contracts or
options on futures contracts to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this purpose)
registered in the name of the Fund or in the name of a nominee
of the Custodian referred to in Section 2.3 hereof or in proper
form for transfer; (b) in the case of a purchase effected
through a U.S. Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the case of
a purchase involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.11; (d) in the case
of repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the Custodian along
with written evidence of the agreement by the Custodian to
repurchase such securities from the Fund or (e) for transfer to
a time deposit account of the Fund in any bank, whether
domestic or foreign; such transfer may be effected prior to
receipt of a confirmation from a broker and/or the applicable
bank pursuant to Proper Instructions from the Fund as defined
in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
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<PAGE> 10
3) For the redemption or repurchase of Shares issued by the Fund
as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Fund
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund, a certified copy
of a resolution of the Board of Trustees, specifying the amount
of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment
is to be made; and
8) Upon termination of this Contract.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
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<PAGE> 11
2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Fund in a clearing agency
registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "U.S. Securities System" in accordance with
applicable Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Fund in a U.S.
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the U.S.
Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the
U.S. Securities System that such securities have been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon (i)
receipt of advice from the U.S. Securities System that payment
for such securities has been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Fund.
Copies of all advices from the U.S. Securities System of
transfers of securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by the Custodian
and be provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each transfer
to or from the account of the Fund in the form of a written
advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
U.S. Securities System for the account of the Fund.
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities
System;
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<PAGE> 12
5) The Custodian shall have received from the Fund the initial or
annual certificate, as the case may be, required by Article 14
hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the Fund has
not been made whole for any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by a Fund in
the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund ;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held
as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
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<PAGE> 13
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transaction in the U.S. Securities System for the account of
the Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund establish and maintain a segregated account
or accounts for and on behalf of each such Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund , the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by
the Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or
any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund , a certified copy of a
resolution of the Board of Trustees setting forth the purpose or
purposes of such segregated account and declaring such purposes
to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Fund held by it
and in connection with transfers of securities.
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<PAGE> 14
2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Fund Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls
and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased
or sold by the Fund) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Fund desires
to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Fund shall notify the Custodian at
least three business days prior to the date on which the Custodian is
to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 5 of this
Contract, together with a certified resolution of the Fund's Board of
Trustees, the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to:
(a) "foreign securities", as defined in
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<PAGE> 15
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
1940, and (b) cash and cash equivalents in such amounts as the
Custodian or the Fund may determine to be reasonably necessary to
effect the Fund's foreign securities transactions. The Custodian
shall identify on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Funds shall be
maintained in a clearing agency which acts as a securities depository
or in a book-entry system for the central handling of securities
located outside of the United States (each a "Foreign Securities
System") only through arrangements implemented by the foreign banking
institutions serving as sub-custodians pursuant to the terms hereof
(Foreign Securities Systems and U.S. Securities Systems are
collectively referred to herein as the "Securities Systems"). Where
possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold cash, securities and other
non-cash property for all of its customers, including the Fund, with a
foreign sub-custodian in a single account that is identified as
belonging to the Custodian for the benefit of its customers, provided
however, that (1) the records of the Custodian with respect to cash,
securities and other non-cash property of the Fund which are
maintained in such account shall identify by book-entry the cash,
securities and other non-cash property belonging to the Fund and (ii)
the Custodian shall require that cash, securities and other non-cash
property so held by the foreign sub-custodian be held separately from
any assets of the Custodian, the foreign sub-custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that: (a) the assets of
each Fund will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership for the assets of
each Fund will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to each
applicable Fund; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted
under applicable law the independent public accountants for the Fund,
will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Fund(s) held by the foreign
sub-custodian will be subject only to the instructions of the
Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Fund(s) securities and other assets
and advices or notifications of any transfers of securities to or
from each custodial account maintained by a foreign banking
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<PAGE> 16
institution for the Custodian on behalf of each applicable Fund
indicating, as to securities acquired for a Fund, the identity of the
entity having physical possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians. (b) Notwithstanding any provision of this
Contract to the contrary, settlement and payment for securities
received for the account of each applicable Fund and delivery of
securities maintained for the account of each applicable Fund may be
effected in accordance with the customary established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or
to a dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer. In addition, and
whether or not such practice is a customary established trading
practice in the relevany jurisdictions, the Custodian will, upon
Proper Instructions from the Fund, deliver cash to securities brokers
in foreign jurisdictions who will effect securities trades for the
Fund and cause the securities purchased to be delivered to the
applicable foreign sub-custodian at some later date. (c) Securities
maintained in the custody of a foreign sub-custodian may be maintained
in the name of such entity's nominee to the same extent as set forth
in Section 2.3 of this Contract, and the Fund agrees to hold any such
nominee harmless from any liability as a holder of record of such
securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable
care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and each Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or
claim.
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 3.13 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where
the sub-custodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this
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<PAGE> 17
paragraph 3.10, in delegating custody duties to State Street London
Ltd., the Custodian shall not be relieved of any responsibility to the
Fund for any loss due to such delegation, except such loss as may
result from (a) political risk (including, but not limited to,
exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a Fund
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the applicable Fund shall
be security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash
and to dispose of such Fund's assets to the extent necessary to obtain
reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the
Custodian will promptly inform the Fund in the event that the
Custodian learns of a material adverse change in the financial
condition of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-custodian not the
subject of an exemptive order from the Securities and Exchange
Commission is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the equivalent
thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Fund's assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of
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<PAGE> 18
said Act. The appointment of any such branch as a sub-custodian shall
be governed by paragraph 1 of this Contract. (b) Cash held for each
Fund in the United Kingdom shall be maintained in an interest bearing
account established for the Fund with the Custodian's London branch,
which account shall be subject to the direction of the Custodian,
State Street London Ltd. or both.
3.14 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of
America or any state or political subdivision thereof. It shall be
the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist
the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such
information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
The Custodian shall receive from the distributor for the Shares or
from the Transfer Agent of the Fund and deposit into the account of the
appropriate Fund such payments as are received for Shares of that Fund issued
or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Fund and the Transfer Agent of
any receipt by it of payments for Shares of such Fund.
From such funds as may be available for the purpose but subject to the
limitations of the applicable Fund's governing documents and any applicable
votes of the Board of Trustees of the Fund pursuant thereto, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In connection
with the redemption or repurchase of Shares of a Fund, the Custodian is
authorized upon receipt of instructions from the Transfer Agent to wire funds
to or through a commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares of the Fund, the
Custodian shall honor checks drawn on the Custodian by a holder of Shares,
which checks have been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such procedures and controls as
are mutually agreed upon from time to time between the Fund and the Custodian.
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<PAGE> 19
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by the Board of
Trustees of the Fund accompanied by a detailed description of procedures
approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and the Custodian are satisfied
that such procedures afford adequate safeguards for the Funds' assets. For
purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three-party agreement which requires
a segregated asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from
the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund ;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Board of
Trustees of the Fund.
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<PAGE> 20
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of the
Board of Trustees of the Fund as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any determination or
of any action by the Board of Trustees pursuant to the governing documents of
the Fund as described in such vote, and such vote may be considered as in full
force and effect until receipt by the Custodian of written notice to the
contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to keep
the books of account of each Fund and/or compute the net asset value per share
of the outstanding shares of each Fund or, if the Custodian and the Fund
execute the applicable Price Source Authorization (the "Authorization"), the
Custodian shall keep such books of account and/or compute such net asset value
per share pursuant to the terms of the Authorization and the attachments
thereto. If so directed, the Custodian shall also calculate daily the net
income of the Fund as described in the Fund's currently effective Prospectus
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value
per share and the daily income of each Fund shall be made at the time or times
described from time to time in the Fund's currently effective Prospectus
related to such Fund.
9. Records
The Custodian shall with respect to each Fund create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Fund and held by the Custodian and shall, when requested to
17
<PAGE> 21
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or
other annual reports to the Securities and Exchange Commission and with respect
to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in
18
<PAGE> 22
good faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by: (i) events or circumstances
beyond the reasonable control of the Custodian or any sub-custodian or
Securities System or any agent or nominee of any of the foregoing, including,
without limitation, nationalization or expropriation, imposition of currency
controls or restrictions, the interruption, suspension or restriction of trading
on or the closure of any securities market, power or other mechanical or
technological failures or interruptions, computer viruses or communications
disruptions, acts of war or terrorism, riots, revolutions, work stoppages,
natural disasters or other similar events or acts; (ii) errors by the Fund or
its investment adviser in their instructions to the Custodian provided such
instructions have been in accordance with this Contract; (iii) the insolvency of
or acts or omissions by a Securities System; (iv) any delay or failure of any
broker, agent or intermediary, central bank or other commercially prevalent
payment or clearing system to deliver to the Custodian's sub-custodian or agent
securities purchased or in the remittance or payment made in connection with
securities sold; (v) any delay or failure of any company, corporation, or other
body in charge of registering or transferring securities in the name of the
Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or any
consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or
any other country, or political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
sub-custodians generally in this Contract.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned
to the Fund being liable for the payment of money or incurring liability of
some other form, the Fund, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the applicable Fund
shall be security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash and to
dispose of such Fund's assets to the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30)
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<PAGE> 23
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to a Fund act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of the Fund has approved the initial use of a
particular Securities System by such Fund and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of the
Fund has reviewed any subsequent change regarding the use by such Fund of such
Securities System, as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not with respect to
a Fund act under Section 2.11 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board has
approved the initial use of the Direct Paper System by such Fund and the receipt
of an annual certificate of the Secretary or an Assistant Secretary that the
Board of the Fund has reviewed the use by such Fund of the Direct Paper System;
provided further, however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state regulations, or any
provision of the Fund's governing documents, and further provided, that the Fund
on behalf of one or more of the Funds may at any time by action of its Board (i)
substitute another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this Contract in
the event of the appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for a Fund shall be appointed by the Board
of Trustees of such Fund, the Custodian shall, upon termination, deliver to
such successor custodian at the office of the Custodian, duly endorsed and in
the form for transfer, all securities, Funds and other properties of each
applicable Fund then held by it hereunder and shall transfer to an account of
the successor custodian all of the securities of each Fund held in a Securities
System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Trustees of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Trustees shall have been delivered
to the Custodian on or before the date when such
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<PAGE> 24
termination shall become effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, doing business in Boston, Massachusetts, of its
own selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of each
applicable Fund and all instruments held by the Custodian relative thereto and
all other property held by it under this Contract on behalf of each applicable
Fund and to transfer to an account of such successor custodian all of the
securities of each such Fund held in any Securities System. Thereafter, such
bank or trust company shall be the successor of the Custodian under this
Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the governing documents of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
17. Additional Funds
In the event that Van Kampen American Capital Distributors , Inc.
establishes any funds in addition to the Funds listed on Appendix A with
respect to which it desires to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such fund shall become a
Fund hereunder, subject to the delivery by the new Fund of resolutions
authorizing the appointment of the Custodian and such other supporting or
related documentation as the Custodian may request. All references herein to
the "Fund" are to each of the Funds listed on Appendix A individually, as if
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<PAGE> 25
this Contract were between each such individual Fund and the Custodian. With
respect to any Fund which issues shares in separate classes or series, each
class or series of such Fund shall be treated as a separate Fund hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Funds and the Custodian relating to the custody of
the Fund's assets.
20. Reproduction of Documents
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties
hereto all/each agree that any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding, whether or
not the original is in existence and whether or not such reproduction was made
by a party in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
21. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires banks which
hold securities for the account of customers to respond to requests by issuers
of securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether the Fund authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose stock the Fund owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either
"yes" or "no" below, the Custodian is required by the rule to treat the Fund as
consenting to disclosure of this information for all securities owned by the
Fund or any funds or accounts established by the Fund. For the Fund's
protection, the Rule prohibits the requesting company from using the Fund's name
and address for any purpose other than corporate communications. Please
indicate below whether the Fund consent or object by checking one of the
alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions of each Fund listed on
Exhibit A.
NO [X] The Custodian is not authorized to release the Fund's
name, address, and share positions of each Fund listed
on Exhibit A.
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22. Limitation of Liability.
The execution of this Contract has been authorized by each Fund's
Board of Trustees. This Contract is executed on behalf of each Fund or the
trustees of such Fund as trustees and not individually and the obligations of
the Fund under this Contract are not binding upon any of the Fund's trustees,
officers or shareholders individually but are binding only upon the assets and
property of the Fund.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the 1st day of August, 1997.
ATTEST EACH OF THE FUNDS LISTED ON APPENDIX A
/s/ Nicholas Dalmaso By: /s/ Ronald A. Nyberg
- ------------------------ -----------------------------------
Ronald A. Nyberg, Vice President
and Secretary
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Francine Hayes By: [ILLEGIBLE]
- ------------------------ -----------------------------------
Executive Vice President
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APPENDIX A
FUND NAMES
VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND
VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND
VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND
VAN KAMPEN AMERICAN CAPITAL ENTERPRISE FUND
VAN KAMPEN AMERICAN CAPITAL EQUITY INCOME FUND
VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND
VAN KAMPEN AMERICAN CAPITAL GOVERNMENT TARGET FUND
VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND
VAN KAMPEN AMERICAN CAPITAL HARBOR FUND
VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Asset Allocation Portfolio
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Global Equity Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Morgan Stanley Real Estate Securities Portfolio
VAN KAMPEN AMERICAN CAPITAL LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN AMERICAN CAPITAL PACE FUND
VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
VAN KAMPEN AMERICAN CAPITAL SMALL CAPITALIZATION FUND
VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST
Van Kampen American Capital High Yield Municipal Fund
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN AMERICAN CAPITAL UTILITIES INCOME FUND
VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST
Van Kampen American Capital U.S. Government Fund
VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal
Income Fund
Van Kampen American Capital Florida Insured Tax Free
Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
VAN KAMPEN AMERICAN CAPITAL TRUST
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST
Van Kampen American Capital Utility Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Prospector Fund
Van Kampen American Capital Aggressive Growth Fund
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
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<PAGE> 28
THE EXPLORER INSTITUTIONAL TRUST
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
VAN KAMPEN AMERICAN CAPITAL NAVIGATOR FUNDS
Emerging Markets Equity Portfolio
Emerging Markets Fixed Income Portfolio
U.S. Quality Funds
VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND
VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST II
VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNICIPAL TRUST
VAN KAMPEN AMERICAN CAPITAL FLORIDA QUALITY MUNICIPAL TRUST
VAN KAMPEN AMERICAN CAPITAL NEW YORK QUALITY MUNICIPAL TRUST
VAN KAMPEN AMERICAN CAPITAL OHIO QUALITY MUNICIPAL TRUST
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA QUALITY MUNICIPAL TRUST
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE MUNICIPALS
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW JERSEY MUNICIPALS
VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW YORK MUNICIPALS
VAN KAMPEN AMERICAN CAPITAL TRUST FOR PENNSYLVANIA MUNICIPALS
VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST
VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST
VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL CALIFORNIA VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL NEW JERSEY VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL NEW YORK VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST II
VAN KAMPEN AMERICAN CAPITAL FLORIDA MUNICIPAL OPPORTUNITY TRUST
VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST II
VAN KAMPEN AMERICAN CAPITAL SELECT SECTOR MUNICIPAL TRUST
VAN KAMPEN AMERICAN CAPITAL BOND FUND
VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES FUND
VAN KAMPEN AMERICAN CAPITAL INCOME TRUST
25
<PAGE> 1
EXHIBIT (8)(b)
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 31st day of May, 1997 by and between each of the
VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS set forth on Schedule "A" hereto,
which are organized under the laws of the state and as the entities set forth
in Schedule "A" hereto (collectively, the "Funds"), and ACCESS INVESTOR
SERVICES, INC., a Delaware corporation ("ACCESS").
R E C I T A L:
-------------
WHEREAS, each of the Funds desires to appoint ACCESS as its transfer
agent, dividend disbursing agent and shareholder service agent and ACCESS
desires to accept such appointments;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1. Terms of Appointment; Duties of ACCESS.
---------------------------------------
1.01 Subject to the terms and conditions set forth in this Agreement, each
of the Funds hereby employs and appoints ACCESS as its transfer agent, dividend
disbursing agent and shareholder service agent.
1.02 ACCESS hereby accepts such employment and appointments and agrees
that on and after the effective date of this Agreement it will act as the
transfer agent, dividend disbursing agent and shareholder service agent for
each of the Funds on the terms and conditions set forth herein.
1.03 ACCESS agrees that its duties and obligations hereunder will be
performed in a competent, efficient and workmanlike manner with due diligence
in accordance with reasonable industry practice, and that the necessary
facilities, equipment and personnel for such performance will be provided.
1.04 For a period of one year commencing on the effective date of this
Agreement, ACCESS and each of the Funds agree that the retention of (i) the
chief executive officer, president, chief financial officer, chief operating
officer and secretary of ACCESS and (ii) each director, officer and employee of
ACCESS or any of its Affiliates (as defined in the Investment Company Act of
1940, as amended (the "1940 Act")) who serves as an officer of the Funds (each
person referred to in (i) or (ii) hereinafter being referred to as an
"Essential Person"), in his or her current capacities, is in the best interest
<PAGE> 2
of the Funds and the Funds' shareholders. In connection with ACCESS's
acceptance of employment hereunder, ACCESS hereby agrees and covenants for
itself and on behalf of its Affiliates that neither ACCESS nor any of its
Affiliates shall make any material or significant personnel changes or replace
or seek to replace any Essential Person or cause to be replaced any Essential
Person, in each case without first informing the Board of Trustees of the Funds
in a timely manner. In addition, neither ACCESS nor any Affiliate of ACCESS
shall change or seek to change or cause to be changed, in any material
respect, the duties and responsibilities of any Essential Person, in each case
without first informing the Board of Trustees of the Funds in a timely
manner.
1.05 In order to assure compliance with section 1.03 and to implement a
cooperative effort to improve and maintain the quality of transfer agency,
dividend disbursing and shareholder services received by each of the Funds and
their shareholders, ACCESS agrees to provide and maintain quantitative
performance objectives, including maximum target turn-around times and maximum
target error rates, for the various services provided hereunder. ACCESS also
agrees to provide a reporting system designed to provide the Board of Trustees
of each of the Funds (the "Board") on a quarterly basis with quantitative data
comparing actual performance for the period with the performance objectives.
The foregoing procedures are designed to provide a basis for continuing
monitoring by the Board of the quality of services rendered hereunder.
Article 2. Fees and Expenses.
------------------
2.01 For the services to be performed by ACCESS pursuant to this
Agreement, each of the Funds agrees to pay ACCESS the fees provided in the fee
schedules agreed upon from time to time by each of the Funds and ACCESS.
2.02 In addition to the amounts paid under section 2.01 above, each of the
Funds agrees to reimburse ACCESS promptly for such Fund's reasonable
out-of-pocket expenses or advances paid on its behalf by ACCESS in connection
with its performance under this Agreement for postage, freight, envelopes,
checks, drafts, continuous forms, reports and statements, telephone, telegraph,
costs of outside mailing firms, necessary outside record storage costs, media
for storage of records (e.g., microfilm, microfiche and computer tapes) and
printing costs incurred due to special requirements of such Fund. In addition,
any other special out-of-pocket expenses paid by ACCESS at the specific request
of any of the Funds will be promptly reimbursed by the requesting Fund.
Postage for mailings of dividends, proxies, Fund reports and other mailings
Page 2
<PAGE> 3
to all shareholder accounts shall be advanced to ACCESS by the concerned Fund
three business days prior to the mailing date of such materials.
Article 3. Representations and Warranties of Access.
-----------------------------------------
ACCESS represents and warrants to each of the Funds that:
3.01 It is a corporation duly organized and existing and in good standing
under the laws of the State of Delaware.
3.02 It is duly qualified to carry on its business in each jurisdiction in
which the nature of its business requires it to be so qualified.
3.03 It is empowered under applicable laws and regulations and by its
charter and bylaws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
3.05 It has and will continue to have during the term of this Agreement
access to the necessary facilities, equipment and personnel to perform its
duties and obligations hereunder.
3.06 It will maintain a system regarding "as of" transactions as follows:
(a) Each "as of" transaction effected at a price other than that in
effect on the day of processing for which an estimate has not been given
to any of the affected Funds and which is necessitated by ACCESS' error,
or delay for which ACCESS is responsible or which could have been avoided
through the exercise of reasonable care, will be identified, and the net
effect of such transactions determined, on a daily basis for each such
Fund.
(b) The cumulative net effect of the transactions included in
paragraph (a) above will be determined each day throughout each month.
If, on any day during the month, the cumulative net effect upon any Fund
is negative and exceeds an amount equivalent to 1/2 of 1 cent per share
of such Fund, ACCESS shall promptly make a payment to such Fund (in cash
or through use of a credit as described in paragraph (c) below) in such
amount as necessary to reduce the negative cumulative net effect to less
than 1/2 of 1 cent per share of such Fund. If on the last business day
of the month the cumulative net effect (adjusted by the amount of any
payments or credits used pursuant to the preceding sentence) upon any
Fund is negative, such Fund shall be entitled to a reduction in the
monthly transfer agency fee next payable by an equivalent amount, except
as provided in paragraph (c) below. If on the last
Page 3
<PAGE> 4
business day of the month the cumulative net effect (similarly adjusted)
upon any Fund is positive, ACCESS shall be entitled to recover certain
past payments, credits used and reductions in fees, and to a credit
against all future payments and fee reductions made under this paragraph
to such Fund, as described in paragraph (c) below.
(c) At the end of each month, any positive cumulative net effect
upon any Fund shall be deemed to be a credit to ACCESS which shall first
be applied to recover any payments, credits used and fee reductions made
by ACCESS to such Fund under paragraph (b) above during the calendar year
by increasing the amount of the monthly transfer agency fee next payable
in an amount equal to prior payments, credits used and fee reductions
made during such year, but not exceeding the sum of that month's credit
and credits arising in prior months during such year to the extent such
prior credits have not previously been utilized as contemplated by this
paragraph (c). Any portion of a credit to ACCESS not so used shall
remain as a credit to be used as payment against the amount of any future
negative cumulative net effects which would otherwise require a payment,
use of a credit or fee reduction to such Fund pursuant to paragraph (b)
above.
Article 4. Representations and Warranties of the Funds.
--------------------------------------------
Each of the Funds hereby represents and warrants on behalf of itself
only and not on behalf of any other Funds which are a party to this Agreement
that:
4.01 It is duly organized and existing and in good standing under the laws
of the commonwealth or state set forth in Schedule "A" hereto.
4.02 It is empowered under applicable laws and regulations and by its
Declaration of Trust and by-laws to enter into and perform this Agreement.
4.03 All requisite proceedings have been taken by its Board to authorize
it to enter into and perform this Agreement.
4.04 It is an open-end, management investment company registered under the
Investment Company Act of 1940, as amended.
Page 4
<PAGE> 5
4.05 A registration statement under the Securities Act of 1933, as
amended, is currently effective and will remain effective, and appropriate
state securities laws filings have been made and will continue to be made, with
respect to all of its shares being offered for sale.
Article 5. Indemnification.
---------------
5.01 ACCESS shall not be responsible for and each of the Funds shall
indemnify and hold ACCESS harmless from and against any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liabilities (collectively, "Losses") arising out of or attributable to:
(a) All actions of ACCESS required to be taken by ACCESS for the
benefit of such Fund pursuant to this Agreement, provided that ACCESS has
acted in good faith with due diligence and without negligence or willful
misconduct.
(b) The reasonable reliance by ACCESS on, or reasonable use by
ACCESS of, information, records and documents which have been prepared or
maintained by or on behalf of such Fund or have been furnished to ACCESS
by or on behalf of such Fund.
(c) The reasonable reliance by ACCESS on, or the carrying out by
ACCESS of, any instructions or requests of such Fund.
(d) The offer or sale of such Fund's shares in violation of any
requirement under the federal securities laws or regulations or the
securities laws or regulations of any state or in violation of any stop
order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such shares in such state unless
such violation results from any failure by ACCESS to comply with written
instructions of such Fund that no offers or sales of such Fund's shares
be made in general or to the residents of a particular state.
(e) Such Fund's refusal or failure to comply with the terms of this
Agreement, or such Fund's lack of good faith, negligence or willful
misconduct or the breach of any representation or warranty of such Fund
hereunder. Notwithstanding the foregoing, no Fund shall be required to
indemnify or hold ACCESS harmless from and against any Losses arising out
of or attributable to any action or failure to take action, or any
information, records or
Page 5
<PAGE> 6
documents prepared or maintained, on behalf of
the Fund by the Fund's investment adviser or distributor, or any person
providing fund accounting or legal services to the Fund that is also an
officer or employee of Van Kampen American Capital, Inc. or its
subsidiaries unless such person or entity is otherwise entitled to
indemnification from the Fund.
5.02 ACCESS shall indemnify and hold harmless each of the Funds from and
against any and all Losses arising out of or attributable to ACCESS' refusal or
failure to comply with the terms of this Agreement, or ACCESS' lack of good
faith, or its negligence or willful misconduct, or the breach of any
representation or warranty of ACCESS hereunder.
5.03 At any time ACCESS may apply to any authorized officer of any of the
Funds for instructions, and may consult with any of the Funds' legal counsel,
at the expense of such concerned Fund, with respect to any matter arising in
connection with the services to be performed by ACCESS under this Agreement,
and ACCESS shall not be liable and shall be indemnified by such concerned Fund
for any action taken or omitted by it in good faith in reasonable reliance upon
such instructions or upon the opinion of such counsel. ACCESS shall be
protected and indemnified in acting upon any paper or document reasonably
believed by ACCESS to be genuine and to have been signed by the proper person
or persons and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the concerned Fund.
ACCESS shall also be protected and indemnified in recognizing stock
certificates which ACCESS reasonably believes to bear the proper manual or
facsimile signatures of the officers of the concerned Fund, and the proper
countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.04 In the event that any party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage, or other causes reasonably beyond its control,
such party shall not be liable to the other for any damages resulting from such
failure to perform or otherwise from such causes.
5.05 In no event and under no circumstances shall any party to this
Agreement be liable to another party for consequential damages under any
provision of this Agreement or for any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which one party may be
required to indemnify another, the party seeking indemnification shall promptly
notify the other party of such assertion, and shall keep the other party
advised with respect to all developments concerning such claim.
Page 6
<PAGE> 7
The party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The party
seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent.
Article 6. Covenants of Each of the Funds and ACCESS.
------------------------------------------
6.01 Each of the Funds shall promptly furnish to ACCESS the following:
(a) Certified copies of the resolution of its Board authorizing the
appointment of ACCESS and the execution and delivery of this Agreement.
(b) Certified copies of its Declaration of Trust or Articles of
Incorporation and by-laws and all amendments thereto.
6.02 ACCESS hereby agrees to maintain facilities and procedures
reasonably acceptable to each of the Funds for safekeeping of share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
6.03 ACCESS shall keep records relating to the services to be
performed hereunder in the form and manner as it may deem advisable; provided,
however, that all accounts, books and other records of each of the Funds
(hereinafter referred to as "Fund Records") prepared or maintained by ACCESS
hereunder shall be maintained and kept current in compliance with Section 31 of
the Investment Company Act of 1940 and the Rules thereunder (such Section and
Rules being hereinafter referred to as the "1940 Act Requirements"). To the
extent required by the 1940 Act Requirements, ACCESS agrees that all Fund
Records prepared or maintained by ACCESS hereunder are the property of the
concerned Fund and shall be preserved and made available in accordance with the
1940 Act Requirements, and shall be surrendered promptly to the concerned Fund
on its request. ACCESS agrees at such reasonable times as may be requested by
the Board and at least quarterly to provide (i) written confirmation to the
Board that all Fund Records are maintained and kept current in accordance with
the 1940 Act Requirements, and (ii) such other reports regarding its
performance hereunder as may be reasonably requested by the Board.
Page 7
<PAGE> 8
6.04 ACCESS and each of the Funds agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law.
6.05 In case of any requests or demands for the inspection of any of
the Fund Records, ACCESS will endeavor to notify each of the concerned
Funds and to secure instructions from an authorized officer of each of the
concerned Funds as to such inspection. ACCESS reserves the right, however, to
exhibit such Fund Records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit such Fund records to such
person.
Article 7. Term and Termination Of Agreement.
----------------------------------
7.01 The initial term of this Agreement shall expire May 31, 1999,
and thereafter this Agreement shall automatically be renewed for
successive one year periods to begin on June 1 of each year unless any party
provides notice to the other party at least 120 days in advance of that date
that this Agreement is not to be renewed.
7.02 Notwithstanding the foregoing, any party may terminate this
Agreement for good and reasonable cause at any time by giving written
notice to the other party at least 60 days prior to the date on which such
termination is to be effective or such shorter period as may be required by
law.
7.03 Any unpaid fees or reimbursable expenses payable to ACCESS at
the termination date of this Agreement shall be due on that termination date.
ACCESS agrees to use its best efforts to cooperate with the Funds and the
successor transfer, dividend disbursement, or shareholder servicing agent
or agents in accomplishing an orderly transition.
Article 8. Miscellaneous.
--------------
8.01 Except as provided in section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by any party
without the written consent of ACCESS or the concerned Fund, as the case may
be; provided, however, that no consent shall be required for any merger of any
of the Funds with, or any sale of all or substantially all the assets of
any of the Funds to, another investment company.
8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
Page 8
<PAGE> 9
8.03 ACCESS may, without further consent on the part of any of the
Funds, subcontract with DST, Inc., a Missouri corporation, or any other
qualified servicer, for the performance of data processing activities;
provided, however, that ACCESS shall be as fully responsible to each of
the Funds for the acts and omissions of DST, Inc. or other qualified
servicer as it is for its own acts and omissions.
8.04 Without the prior approval of the Boards of Trustees of the
Funds, ACCESS shall not, directly or indirectly, provide services,
including services such as transfer agent, dividend disbursing agent or
shareholder service agent, to any investment companies.
8.05 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes
any prior agreement with respect thereto, whether oral or written, and
this Agreement may not be modified except by written instrument executed
by the affected parties.
8.06 The execution of this Agreement has been authorized by the
Funds' Trustees. This Plan is executed on behalf of the Funds or the
Trustees of the Funds as Trustees and not individually and the
obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the Funds individually but are binding only
upon the assets and property of the Funds. A Certificate of Trust in
respect of each of the Funds is on file with the appropriate state
agency.
8.07 For each of those Funds which have one or more portfolios as
set forth in Schedule "A" hereto, all obligations of those Funds under
this Agreement shall apply only on a portfolio-by-portfolio basis and the
assets of one portfolio shall not be liable for the obligations of any
other.
8.08 In the event of a change in the business or regulatory
environment affecting all or any portion of this Agreement, the parties
hereto agree to renegotiate such affected portions in good faith.
8.09 All questions concerning the validity, meaning and effect of
this Agreement shall be determined in accordance with the laws (without
giving effect to the conflict-of-law principles thereof) of the State of
Delaware applicable to contracts made and to be performed in that state.
8.10 (a) Any dispute, controversy, or claim arising out of or
relating to this Agreement, or the breach, termination or validity
thereof, shall be finally settled by arbitration in accordance with
the Expedited Procedures
Page 9
<PAGE> 10
of the commercial arbitration Rules of the American Arbitration
Association (the "AAA") then in effect (the "Rules"). The
arbitration shall be held in Chicago, Illinois.
(b) There shall be one arbitrator who shall be selected jointly by
the parties. If the parties are unable to agree on an arbitrator
within 15 days after a demand for arbitration is made by a party,
the arbitrator shall be appointed by the AAA in accordance with the
Rules. The hearing shall be held within 90 days of the appointment
of the arbitrator. Notwithstanding the Expedited Procedures
of the Rules, the arbitrator, at his discretion, may schedule
additional days of hearings.
(c) Either party may, without inconsistency with this Agreement,
seek from a court any interim or provisional relief in aid of
arbitration, pending the establishment of the arbitral tribunal.
The parties hereby submit to the exclusive jurisdiction of the
federal and state courts located in the northern district of the
state of Illinois for any such relief in aid of arbitration, or for
any relief relating to arbitration, except for the enforcement of an
arbitral award which may be enforced in any court having
jurisdiction.
(d) Any arbitration proceedings or award rendered hereunder and the
validity, effect and interpretation of Section 8.10 shall be
governed by the Federal Arbitration Act (9 U.S.C. Sections 1 et
--
seq.) The award shall be final and binding upon the parties.
---
Judgment upon any award may be entered in any court having
jurisdiction.
(e) This Agreement and the rights and obligations of the Parties
shall remain in full force and effect pending the award in any
arbitration proceeding hereunder.
Page 10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf and through their duly authorized
officers, as of the date first above written.
EACH OF THE VAN KAMPEN AMERICAN CAPITAL
OPEN END FUNDS LISTED ON SCHEDULE
"A" HERETO
BY: /s/ Ronald A. Nyberg
----------------------------------
Vice President
ATTEST:
/s/ Nicholas Dalmaso
- ----------------------------------
Assistant Secretary
ACCESS INVESTOR SERVICES, INC.
BY: /s/ Paul R. Wolkenberg
---------------------------------
President and Chief Executive Officer
ATTEST:
/s/ Huey P. Falgout
- ---------------------------------
Assistant Secretary
Page 11
<PAGE> 12
SCHEDULE "A"
------------
VAN KAMPEN AMERICAN CAPITAL OPEN-END FUNDS
<TABLE>
<CAPTION>
Organization Type
Fund Name State of [Business Trust
(including Portfolios) Organization "T"]
=====================================================================================================
<S> <C> <C>
Van Kampen American Capital Aggressive Growth Fund DE T
Van Kampen American Capital California Insured Tax Free Fund DE T
Van Kampen American Capital Comstock Fund DE T
Van Kampen American Capital Corporate Bond Fund DE T
Van Kampen American Capital Emerging Growth Fund DE T
Van Kampen American Capital Enterprise Fund DE T
Van Kampen American Capital Equity Income Fund DE T
Van Kampen American Capital Florida Insured Tax Free Income Fund DE T
Van Kampen American Capital Foreign Securities Fund DE T
Van Kampen American Capital Global Managed Assets Fund DE T
Van Kampen American Capital Government Securities Fund DE T
Van Kampen American Capital Government Target Fund DE T
Van Kampen American Capital Great American Companies Fund DE T
Van Kampen American Capital Growth Fund DE T
Van Kampen American Capital Growth and Income Fund DE T
Van Kampen American Capital Harbor Fund DE T
Van Kampen American Capital High Income Corporate Bond Fund DE T
Van Kampen American Capital High Yield Fund DE T
Van Kampen American Capital Insured Tax Free Income Fund DE T
Van Kampen American Capital Intermediate Term Municipal Income Fund DE T
</TABLE>
Page 12
<PAGE> 13
<TABLE>
<CAPTION>
Organization Type
Fund Name State of [Business Trust
(including Portfolios) Organization "T"]
=====================================================================================================
<S> <C> <C>
Van Kampen American Capital Life Investment Trust DE T
Asset Allocation Portfolio
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Global Equity Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Morgan Stanley Real Estate Securities Portfolio
Van Kampen American Capital Limited Maturity Government Fund DE T
Van Kampen American Capital Municipal Income Fund DE T
Van Kampen American Capital New Jersey Tax Free Income Fund DE T
Van Kampen American Capital New York Tax Free Income Fund DE T
Van Kampen American Capital Pace Fund DE T
Van Kampen American Capital Pennsylvania Tax Free Income Fund PA T
Van Kampen American Capital Prospector Fund DE T
Van Kampen American Capital Real Estate Securities Fund DE T
Van Kampen American Capital Reserve Fund DE T
Van Kampen American Capital Short-Term Global Income Fund DE T
Van Kampen American Capital Small Capitalization Fund DE T
Van Kampen American Capital Strategic Income Fund DE T
Van Kampen American Capital Tax-Exempt Trust DE T
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital Tax Free High Income Fund DE T
Van Kampen American Capital Tax Free Money Fund DE T
Van Kampen American Capital U.S. Government Fund DE T
Van Kampen American Capital U.S. Government Trust for Income DE T
Van Kampen American Capital Utility Fund DE T
Van Kampen American Capital Value Fund DE T
</TABLE>
PAGE 13
<PAGE> 14
<TABLE>
<CAPTION>
Organization Type
Fund Name State of [Business Trust
(including Portfolios) Organization "T"]
=====================================================================================================
<S> <C> <C>
Van Kampen American Capital World Portfolio Series Trust DE T
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities
Fund
</TABLE>
PAGE 14
<PAGE> 1
Exhibit 9(b)
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, dated May 31, 1997, by and between the parties
set forth in Schedule A hereto (designated collectively hereafter as the
"Funds") and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware
corporation ("Advisory Corp.").
W I T N E S S E T H:
WHEREAS, each of the Funds is registered as a management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, Advisory Corp. has the capability of providing certain
accounting services to the Funds; and
WHEREAS, each desires to utilize Advisory Corp. in the
provision of such accounting services; and
WHEREAS, Advisory Corp. intends to maintain its staff in order
to accommodate the provision of all such services.
NOW THEREFORE, in consideration of the premises and the mutual
covenants spelled out herein, it is agreed between the parties hereto as
follows:
1. Appointment of Advisory Corp. As agent, Advisory Corp. shall provide
-----------------------------
each of the Funds the accounting services ("Accounting Services") as set
forth in Paragraph 2 of this Agreement. Advisory Corp. accepts such
appointment and agrees to furnish the Accounting Services in return for the
compensation provided in Paragraph 3 of this Agreement.
2. Accounting Services to be Provided. Advisory Corp. will provide
----------------------------------
to each respective Fund accounting related services in connection with the
maintenance of the financial records of such Fund, including without
limitation: (i) maintenance of the general ledger and other financial books
and records; (ii) processing of portfolio transactions; (iii) coordination
of the valuation of portfolio securities; (iv) calculation of the Fund's
net asset value; (v) coordination of financial and regulatory reporting;
(vi) preparation of financial reports for each Fund's Board of Trustees;
(vii) coordination of tax and financial compliance issues; (viii) the
establishment and maintenance of accounting policies; (ix) recommendations
with respect to dividend policies; (x) preparation of each Fund's financial
reports and other accounting and tax related notice information to
shareholders; and (xi) the assimilation and interpretation of accounting
data for meaningful management review. Advisory Corp. shall provide
accurate maintenance of each Fund's financial books and records as required
by the applicable securities statutes and regulations, and shall hire
persons (collectively the "Accounting Service Group") as needed to provide
such Accounting Services.
<PAGE> 2
3. Expenses and Reimbursements. Advisory Corp. shall be reimbursed by the
Funds for all costs and services incurred in connection with the provision
of the aforementioned Accounting Services ("Accounting Service Expenses"),
including but not limited to all salary and related benefits paid to the
personnel of the Accounting Service Group, overhead and expenses related to
office space and related equipment and out-of-pocket expenses.
The Accounting Services Expenses will be paid by Advisory Corp.
and reimbursed by the Funds. Advisory Corp. will tender to each Fund a monthly
invoice as of the last business day of each month which shall certify the total
support service expenses expended. Except as provided herein, Advisory Corp.
will receive no other compensation in connection with Accounting Services
rendered in accordance with this Agreement.
4. Payment for Accounting Service Expenses Among the Funds. As to one
quarter (25%) of the Accounting Service Expenses incurred under the
Agreement, the expense shall be allocated between all Funds based on the
number of classes of shares of beneficial interest that each respective
Fund has issued. As to the remaining three quarters (75%) of the Accounting
Service Expenses incurred under the Agreement, the expense shall be
allocated between all Funds based on their relative net assets. For
purposes of determining the percentage of expenses to be allocated to any
Fund, the liquidation preference of any preferred shares issued by any such
Fund shall not be considered a liability of such Fund for the purposes of
calculating relative net assets of such Fund.
5. Maintenance of Records. All records maintained by Advisory Corp. in
connection with the performance of its duties under this Agreement will
remain the property of each respective Fund and will be preserved by
Advisory Corp. for the periods prescribed in Section 31 of the 1940 Act and
the rules thereunder or such other applicable rules that may be adopted
from time to time under the act. In the event of termination of the
Agreement, such records will be promptly delivered to the respective Funds.
Such records may be inspected by the respective Funds at reasonable times.
6. Liability of Advisory Corp. Advisory Corp. shall not be liable to any
Fund for any action taken or thing done by it or its agents or contractors
on behalf of the fund in carrying out the terms and provisions of the
Agreement if done in good faith and without gross negligence or misconduct
on the part of Advisory Corp., its agents or contractors.
7. Indemnification By Funds. Each Fund will indemnify and hold Advisory
Corp. harmless from all lost, cost, damage and expense, including reasonable
expenses for legal counsel, incurred by Advisory Corp. resulting from: (a) any
claim, demand, action or suit in connection with Advisory Corp.'s acceptance of
this Agreement; (b) any action or omission by Advisory Corp. in the performance
of its duties hereunder; (c) Advisory Corp.'s acting upon instructions believed
by it to have been executed by a duly authorized officer of the Fund; or (d)
Advisory Corp.'s acting upon information provided by the Fund in form and under
policies agreed to by Advisory Corp. and the Fund. Advisory Corp. shall not be
entitled to such indemnification in respect of actions or omissions
constituting gross negligence or willful misconduct of Advisory Corp. or its
agents or contractors. Prior to confessing any claim against it which may be
subject to this indemnification, Advisory Corp. shall give the Fund reasonable
opportunity to defend against said claim in its own name or in the name of
Advisory Corp.
8. Indemnification By Advisory Corp. Advisory Corp. will indemnify and
hold harmless each Fund from all loss, cost, damage and expense, including
reasonable expenses for legal counsel, incurred by the Fund resulting from any
claim, demand, action or suit arising out of Advisory Corp.'s failure to comply
with the terms of this Agreement or which arises out of the gross negligence or
willful misconduct of Advisory Corp. or its agents or contractors; provided
that such negligence or misconduct is not attributable to the Funds, their
agents or contractors. Prior to confessing any claim against it which may be
subject to this indemnification, the Fund shall give Advisory Corp. reasonable
opportunity to defend against said claim in its own name or in the name of such
Fund.
2
<PAGE> 3
9. Further Assurances. Each party agrees to perform such further acts and
-------------------
execute such further documents as are necessary to effectuate the purposes
hereof.
10. Dual Interests. It is understood that some person or persons may be
---------------
directors, trustees, officers or shareholders of both the Funds and Advisory
Corp. (including Advisory Corp.'s affiliates), and that the existence of any
such dual interest shall not affect the validity hereof or of any transactions
hereunder except as otherwise provided by a specific provision of applicable
law.
11. Execution, Amendment and Termination. The term of this Agreement shall
-------------------------------------
begin as of the date first above written, and unless sooner terminated as
herein provided, this Agreement shall remain in effect through May, 1998, and
thereafter from year to year, if such continuation is specifically approved at
least annually by the Board of Trustees of each Fund, including a majority of
the independent Trustees of each Fund. This Agreement may be modified or
amended from time to time by mutual agreement between the parties hereto and
may be terminated after May, 1998, by at least sixty (60) days' written notice
given by one party to the others. Upon termination hereof, each Fund shall pay
to Advisory Corp. such compensation as may be due as of the date of such
termination and shall likewise reimburse Advisory Corp. for its costs, expenses
and disbursements payable under this Agreement to such date. This Agreement
may be amended in the future to include as additional parties to the Agreement
other investment companies for with Advisory Corp., any subsidiary or affiliate
serves as investment advisor or distributor if such amendment is approved by
the President of each Fund.
12. Assignment. Any interest of Advisory Corp. under this Agreement shall
-----------
not be assigned or transferred, either voluntarily or involuntarily, by
operation of law or otherwise, without the prior written consent of the Funds.
This Agreement shall automatically and immediately terminate in the event of
its assignment without the prior written consent of the Funds.
13. Notice. Any notice under this Agreement shall be in writing, addressed
-------
and delivered or sent by registered or certified mail, postage prepaid, to the
other party at such address as such other party may designate for the receipt
of such notices. Until further notice to the other parties, it is agreed that
for this purpose the address of each Fund is One Parkview Plaza, Oakbrook
Terrace, Illinois 60181, Attention: President and that of Advisory Corp. for
this purpose is One Parkview Plaza, Oakbrook Terrace, Illinois 60181,
Attention: President.
14. Personal Liability. As provided for in the Agreement and Declaration of
------------------
Trust of the various Funds, under which the Funds are organized as
unincorporated trusts, the shareholders, trustees, officers, employees and
other agents of the Fund shall not personally be found by or liable for the
matters set forth hereto, nor shall resort be had to their private property for
the satisfaction of any obligation or claim hereunder.
15. Interpretative Provisions. In connection with the operation of this
--------------------------
Agreement, Advisory Corp. and the Funds may agree from time to time on such
provisions interpretative of or in addition to the provisions of this Agreement
as may in their joint opinion be consistent with the general tenor of this
Agreement.
16. State Law. This Agreement shall be construed and enforced in accordance
----------
with and governed by the laws of the State of Illinois.
17. Captions. The captions in this Agreement are included for convenience
---------
of reference only and in no way define or limit any of the provisions hereof
or otherwise affect their construction or effect.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this amended and
restated Agreement to be executed as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE A
By: /s/ Ronald A. Nyberg
---------------------------------------
Ronald A. Nyberg, Vice President
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
By: /s/ Dennis J. McDonnell
---------------------------------------
Dennis J. McDonnell, President
4
<PAGE> 5
SCHEDULE A
I. Funds advised by Van Kampen American Capital Investment
Advisory Corp. ("Investment Advisory Corp.") (Collectively, the "Former
Van Kampen Funds"):
CLOSED END FUNDS
- ----------------
Van Kampen American Capital Municipal Income Trust
Van Kampen American Capital California Municipal Trust
Van Kampen American Capital High Income Trust
Van Kampen American Capital High Income Trust II
Van Kampen American Capital Investment Grade Municipal Trust
Van Kampen American Capital Municipal Trust
Van Kampen American Capital California Quality Municipal Trust
Van Kampen American Capital Florida Quality Municipal Trust
Van Kampen American Capital New York Quality Municipal Trust
Van Kampen American Capital Ohio Quality Municipal Trust
Van Kampen American Capital Pennsylvania Quality Municipal Trust
Van Kampen American Capital Trust For Insured Municipals
Van Kampen American Capital Trust For Investment Grade Municipals
Van Kampen American Capital Trust For Investment Grade California Municipals
Van Kampen American Capital Trust For Investment Grade Florida Municipals
Van Kampen American Capital Trust For Investment Grade New Jersey Municipals
Van Kampen American Capital Trust For Investment Grade New York Municipals
Van Kampen American Capital Trust For Investment Grade Pennsylvania Municipals
Van Kampen American Capital Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust
Van Kampen American Capital Advantage Pennsylvania Municipal Income Trust
Van Kampen American Capital Strategic Sector Municipal Trust
Van Kampen American Capital Value Municipal Income Trust
Van Kampen American Capital California Value Municipal Income Trust
Van Kampen American Capital Massachusetts Value Municipal Income Trust
Van Kampen American Capital New Jersey Value Municipal Income Trust
Van Kampen American Capital New York Value Municipal Income Trust
Van Kampen American Capital Ohio Value Municipal Income Trust
Van Kampen American Capital Pennsylvania Value Municipal Income Trust
Van Kampen American Capital Municipal Opportunity Trust II
Van Kampen American Capital Florida Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust II
Van Kampen American Capital Select Sector Municipal Trust
INSTITUTIONAL FUNDS
- -------------------
II. Funds Advised by Van Kampen American Capital Management, Inc.
("Management, Inc.") (Collectively, the "Former Van Kampen Funds"):
The Explorer Institutional Trust
on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
5
<PAGE> 6
OPEN END FUNDS
- --------------
III. Funds Advised by Van Kampen American Capital Asset Management, Inc.
("Asset Management, Inc.") (Collectively, the "Former American Capital Funds"):
Van Kampen American Capital Comstock Fund ("Comstock Fund")
Van Kampen American Capital Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen American Capital Emerging Growth Fund ("Emerging Growth Fund")
Van Kampen American Capital Enterprise Fund ("Enterprise Fund")
Van Kampen American Capital Equity Income Fund ("Equity Income Fund")
Van Kampen American Capital Global Managed Assets Fund ("Global Managed Assets
Funds")
Van Kampen American Capital Government Securities Fund ("Government Securities
Fund")
Van Kampen American Capital Government Target Fund ("Government Target Fund")
Van Kampen American Capital Growth and Income Fund ("Growth and Income Fund")
Van Kampen American Capital Harbor Fund ("Harbor Fund")
Van Kampen American Capital High Income Corporate Bond Fund ("High Income
Corporate Bond Fund")
Van Kampen American Capital Life Investment Trust ("Life Investment Trust" or
"LIT") on behalf of its Series
Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Real Estate Securities Portfolio ("LIT Real Estate Securities Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")
Global Equity Portfolio ("LIT Global Equity Portfolio")
Van Kampen American Capital Limited Maturity Government Fund ("Limited
Maturity Government Fund")
Van Kampen American Capital Pace Fund ("Pace Fund")
Van Kampen American Capital Real Estate Securities Fund ("Real Estate
Securities Fund")
Van Kampen American Capital Reserve Fund ("Reserve Fund")
Van Kampen American Capital Small Capitalization Fund ("Small Capitalization
Fund")
Van Kampen American Capital Tax-Exempt Trust ("Tax-Exempt Trust") on behalf of
its Series
Van Kampen American Capital High Yield Municipal Fund ("High Yield
Municipal Fund")
Van Kampen American Capital U.S. Government Trust for Income ("U.S.
Government Trust for Income")
6
<PAGE> 7
IV. Funds advised by Van Kampen American Capital Investment
Advisory Corp. ("Investment Advisory Corp.") (Collectively, the "Former
Van Kampen Funds"):
Van Kampen American Capital U.S. Government Trust ("U.S. Government Trust")
on behalf of its series
Van Kampen American Capital U.S. Government Fund ("U.S. Government Fund")
Van Kampen American Capital Tax Free Trust ("Tax Free Trust") on behalf of its
series
Van Kampen American Capital Insured Tax Free Income Fund ("Insured Tax Free
Income Fund")
Van Kampen American Capital Tax Free High Income Fund ("Tax Free High Income
Fund")
Van Kampen American Capital California Insured Tax Free Fund ("California
Insured Tax Free Fund")
Van Kampen American Capital Municipal Income Fund ("Municipal Income Fund")
Van Kampen American Capital Intermediate Term Municipal Income Fund
(Intermediate Term Municipal Income Fund")
Van Kampen American Capital Florida Insured Tax Free Income Fund ("Florida
Insured Tax Free Income Fund")
Van Kampen American Capital New Jersey Tax Free Income Fund ("New Jersey
Tax Free Income Fund")
Van Kampen American Capital New York Tax Free Income Fund ("New York
Tax Free Income Fund")
Van Kampen American Capital California Tax Free Income Fund ("California Tax
Free Income Fund")
Van Kampen American Capital Michigan Tax Free Income Fund ("Michigan Tax
Free Income Fund")
Van Kampen American Capital Missouri Tax Free Income Fund ("Missouri Tax
Free Income Fund")
Van Kampen American Capital Ohio Tax Free Income Fund ("Ohio Tax Free
Income Fund")
Van Kampen American Capital Trust ("VKAC Trust")
Van Kampen American Capital High Yield Fund ("High Yield Fund")
Van Kampen American Capital Short-Term Global Income Fund ("Short-Term
Global Income Fund")
Van Kampen American Capital Strategic Income Fund ("Strategic Income Fund")
Van Kampen American Capital Equity Trust ("Equity Trust")
on behalf of its series
Van Kampen American Capital Utility Fund ("Utility Fund")
Van Kampen American Capital Growth Fund ("Growth Fund")
Van Kampen American Capital Value Fund ("Value Fund")
Van Kampen American Capital Great American Companies Fund ("Great American
Companies Fund")
Van Kampen American Capital Prospector Fund ("Prospector Fund")
Van Kampen American Capital Aggressive Growth Fund ("Aggressive Growth Fund")
Van Kampen American Capital Foreign Securities Fund ("Foreign Securities Fund")
Van Kampen American Capital Pennsylvania Tax Free Income Fund ("Pennsylvania
Tax Free Income Fund")
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund")
7
<PAGE> 1
EXHIBIT (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 38, Amendment No. 23, to
the Registration Statement on Form N-1A (the "Registration Statement") of our
report dated July 14, 1997, relating to the financial statements and
financial highlights of Van Kampen American Capital Reserve Fund, which
appears in such Statement of Additional Information, and to the incorporation
by reference of our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights" and "Independent Accountants" in such
Prospectus and to the reference to us under the heading "Independent
Accountants" in such Statement of Additional Information.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Houston, Texas
September 26, 1997
<PAGE> 1
EXHIBIT (15)(a)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
The plan set forth below (the "Distribution Plan") is the written plan
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), for the VAN KAMPEN AMERICAN CAPITAL
RESERVE FUND (the "Fund"). This Distribution Plan describes the material terms
and conditions under which assets of the Fund may be used in connection with
financing distribution related activities with respect to each of its classes
of shares of beneficial interest (the "Shares"), each of which is offered and
sold subject to a different combination of front-end sales charges,
distribution fees, service fees and contingent deferred sales charges.(1)
Classes of shares, if any, subject to a front-end sales charge and a
distribution and/or service fee are referred to herein as "Front-End Classes"
and the Shares of such classes are referred to herein as "Front-End Shares."
Classes of shares, if any, subject to a contingent-deferred sales charge and a
distribution and/or a service fee are referred to herein as "CDSC Classes" and
Shares of such classes are referred to herein as "CDSC Shares." Classes of
shares, if any, subject to a front-end sales charge, a contingent-deferred
sales charge and a distribution and/or service fee are referred to herein as
"Combination Classes" and Shares of such class are referred to herein as
"Combination Shares."
The Fund has adopted a service plan (the "Service Plan") pursuant to
which the Fund is authorized to expend on an annual basis a portion of its
average net assets attributable to any or each class of Shares in connection
with the provision by the principal underwriter (within the meaning of the 1940
Act) of the Shares and by brokers, dealers and other financial intermediaries
(collectively, "Financial Intermediaries") of personal services to holders of
Shares and/or the maintenance of shareholder accounts. The Fund also has
entered into a distribution and services agreement (the "Distribution and
Services Agreement") with Van Kampen American Capital Inc. (the "Distributor"),
pursuant to which the Distributor acts as the principal underwriter with
respect to each class of Shares and provides services to the Fund and acts as
agent on behalf of the Fund in connection with the implementation of the
Service Plan. The Distributor may enter into selling agreements (the "Selling
Agreements") with Financial Intermediaries in order to implement the
Distribution and Services Agreement, the Service Plan and this Distribution
Plan.
1. The Fund hereby is authorized to pay the Distributor a distribution
fee with respect to each class of its Shares to compensate the Distributor for
activities which are primarily intended to result in the sale of such Shares
("distribution related activities") performed by the Distributor with respect
to the respective class of Shares of the Fund. Such distribution related
activities include without limitation: (a) printing and distributing copies of
any prospectuses and annual and interim reports of the Fund (after the Fund has
prepared and set in type such materials) that are used by such Distributor in
connection with the offering of Shares; (b) preparing, printing or otherwise
manufacturing and distributing any other literature or materials of any nature
used by such Distributor in connection with promoting, distributing or offering
the Shares; (c) advertising, promoting and selling Shares to broker-dealers,
banks and the public; (d) distribution related overhead and the provision of
information programs and shareholder services intended to enhance the
attractiveness of investing in the Fund; (e) incurring initial outlay expenses
in connection with compensating Financial Intermediaries for (i) selling CDSC
Shares and Combination Shares and (ii) providing personal services to
shareholders and the maintenance of
____________________
(1) The Fund is authorized to offer multiple classes of shares pursuant to a
Rule 18f-3 Plan adopted under the 1940 Act.
1
<PAGE> 2
shareholder accounts of all classes of Shares, including paying interest on and
incurring other carrying costs on funds borrowed to pay such initial outlays;
and (f) acting as agent for the Fund in connection with implementing this
Distribution Plan pursuant to the Selling Agreements.
2. The amount of the distribution fee hereby authorized with respect to
each class of Shares of the Fund shall be as follows:
3. With respect to Class A Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.25% of the Fund's average daily net
assets attributable to Class A Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to Class A Shares. The
Fund may pay a distribution fee as determined from time to time by its Board of
Trustees in an annual amount not to exceed the lesser of (i) (A) 0.25% of the
Fund's average daily net asset value during such year attributable to Class A
Shares sold on or after the date on which this Distribution Plan was first
implemented with respect to Class A Shares minus (B) the amount of the service
fee with respect to the Class A Shares actually expended during such year by
the Fund pursuant to the Service Plan and (ii) the actual amount of
distribution related expenses incurred by the Distributor with respect to Class
A Shares.
4. With respect to Class B Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 1.00% of the Fund's average daily net
assets attributable to Class B Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class B Shares. The
Fund may pay a distribution fee with respect to the Class B Shares as
determined from time to time by its Board of Trustees in an annual amount not
to exceed the lesser of (A) 0.75% of the Fund's average daily net asset value
during such year attributable to Class B Shares sold on or after the date on
which this Distribution Plan is first implemented with respect to the Class B
Shares and (B) the actual amount of distribution related expenses incurred by
the Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class B Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class B Shares.
5. With respect to Class C Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 1.00% of the Fund's average daily net
assets attributable to Class C Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class C Shares. The
Fund may pay a distribution fee with respect to the Class C Shares as
determined from time to time by its Board of Trustees in an annual amount not
to exceed the lesser of (A) 0.75% of the Fund's average daily net asset value
during such year attributable to Class C Shares sold on or after the date on
which this Distribution Plan is first implemented with respect to the Class C
Shares and (B) the actual amount of distribution related expenses incurred by
the Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class C Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class C Shares.
6. Payments pursuant to this Distribution Plan shall not be made more
often than monthly upon receipt by the Fund of a separate written expense
report with respect to each class of Shares setting forth the expenses
qualifying for such reimbursement allocated to each class of Shares and the
purposes thereof.
7. In the event that amounts payable hereunder with respect to shares of
a Front-End Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of such class, there
is no carryforward of reimbursement obligations to succeeding years. In the
event the amounts payable hereunder with respect to shares of a CDSC Class or a
Combination Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of the respective
class, such unreimbursed distribution expenses will be carried forward and paid
by the Fund hereunder in future years so long as this Distribution Plan remains
in effect, subject to applicable laws
2
<PAGE> 3
and regulations. Reimbursements for distribution related expenses payable
hereunder with respect to a particular class of Shares may not be used to
subsidize the sale of Shares of any other class of Shares.
8. The Fund shall not compensate the Distributor, and neither the Fund
nor the Distributor shall compensate any Financial Intermediary, for any
distribution related expenses incurred with respect to a class of Shares prior
to the later of (a) the implementation of this Distribution Plan with respect
to such class of Shares or (b) the date that such Financial Intermediary enters
into a Selling Agreement with the Distributor.
9. The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to
such Financial Intermediaries for activities and services of the type referred
to in Paragraph 1 hereof. Prior to the implementation of a Selling Agreement,
such agreement shall be approved by a majority of the Board of Trustees of the
Trust and a majority of the Disinterested Trustees (within the meaning of the
1940 Act) by a vote cast in person at a meeting called for the purpose of
voting on such Selling Agreements. The Distributor may reallocate all or a
portion of its distribution fee to such Financial Intermediaries as
compensation for the above-mentioned activities and services. Such
reallocation shall be in an amount as set forth from time to time in the Fund's
prospectus. Such Selling Agreements shall provide that the Financial
Intermediaries shall provide the Distributor with such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Paragraphs 3 and 8 hereof.
10. Subject to the provisions of this Distribution Agreement, the Fund is
hereby authorized to pay a distribution fee to any person that is not an
"affiliated person" or "interested person" of the Fund or its "investment
adviser" or "principal underwriter" (as such terms are defined in the 1940 Act)
who provides any of the foregoing services for the Fund. Such fee shall be
paid only pursuant to written agreements between the Fund and such other person
the terms of which permit payments to such person only in accordance with the
provisions of this Distribution Agreement and which have the approval of a
majority of the Disinterested Trustees by vote cast separately with respect to
each class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.
11. The Fund and the Distributor shall prepare separate written reports
for each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with
respect to each class of Shares pursuant to this Distribution Plan, the Service
Plan and the agreements contemplated hereby, the purposes for which such
payments were made and such other information as the Board of Trustees or the
Disinterested Trustees may reasonably request from time to time, and the Board
of Trustees shall review such reports and other information.
12. This Distribution Plan shall become effective upon its approval by (a)
a majority of the Board of Trustees and a majority of the Disinterested
Trustees by vote cast separately with respect to each class of Shares cast in
person at a meeting called for the purpose of voting on this Distribution Plan,
and (b) with respect to each class of Shares, a "majority of the outstanding
voting securities" (as such phrase is defined in the 1940 Act) of such class of
Shares voting separately as a class.
13. This Distribution Plan and any agreement contemplated hereby shall
continue in effect beyond the first anniversary of its adoption by the Board of
Trustees of the Fund only so long as (a) its continuation is approved at least
annually in the manner set forth in clause (a) of paragraph 9 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.
14. This Distribution Plan may be terminated with respect to a class of
Shares without penalty at any time by a majority of the Disinterested Trustees
or by a "majority of the outstanding voting securities" of the respective
class of Shares of the Fund.
15. This Distribution Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with the approval of
a "majority of the outstanding voting securities" of the respective class of
Shares of the Fund and may not be amended in any other material
3
<PAGE> 4
respect except with the approval of a majority of the Disinterested Trustees.
Amendments required to conform this Distribution Plan to changes in the Rule or
to other changes in the 1940 Act or the rules and regulations thereunder shall
not be deemed to be material amendments.
16. To the extent any service fees paid by the Fund pursuant to the
Service Plan are deemed to be payments for the financing of any activity
primarily intended to result in the sale of Shares issued by the Fund within
the meaning of the Rule, the terms and provisions of such plan and any payments
made pursuant to such plan hereby are authorized pursuant to this Distribution
Plan in the amounts and for the purposes authorized in the Service Plan without
any further action by the Board of Trustees or the shareholders of the Fund.
To the extent the terms and provisions of the Service Plan conflict with the
terms and provisions of this Distribution Plan, the terms and provisions of the
Service Plan shall prevail with respect to amounts payable pursuant thereto.
This paragraph 16 is adopted solely due to the uncertainty that may exist with
respect to whether payments to be made by the Fund pursuant to the Service Plan
constitute payments primarily intended to result in the sale of Shares issued
by the Fund within the meaning of the Rule.
17. The Trustees of the Trust have adopted this Distribution Plan as
trustees under the Declaration of Trust of the Trust and the policies of the
Trust adopted hereby are not binding upon any of the Trustees or shareholders
of the Trust individually, but bind only the trust estate.
4
<PAGE> 1
EXHIBIT (15)(b)
FORM OF
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
SHAREHOLDER ASSISTANCE AGREEMENT
This Agreement is entered into as of the _____day of _____, 199__, by and
between Van Kampen American Capital Distributors, Inc. (the "Company") and the
undersigned (the "Broker-Dealer").
WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and
WHEREAS, the Broker-Dealer is registered as a broker-dealer with the
National Association of Securities Dealers, Inc.; and
WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") and a service plan (the "Service Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), relating to such Fund, the Distribution Plans being described in
the Fund's Prospectus and Statement of Additional Information; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution assistance agreements such as this Agreement with
broker-dealers selected by the Company, and the Broker-Dealer has been so
selected; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such broker-dealer on or after the effective date
of this Agreement, as determined pursuant to Section 4 hereof, and held at the
close of each day in accounts of clients or customers of a particular
broker-dealer, such amount being referred to herein as the "Holding Level"; for
purposes of calculating the Holding Level, shares of such Fund which are
redeemed or otherwise disposed of from any account existing prior to such
effective date shall be deemed to have been shares sold prior to such effective
date to the extent of the number of shares held in such account immediately
after the close of business on the day prior to such effective date; and
WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;
NOW, THEREFORE, the Company and the Broker-Dealer agree as follows:
1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Broker-Dealer shall be entitled distribution fee and
service fee to payments, if any, to be paid by the Company at the annual
percentage rate of the Holding Level set forth from time to time in the then
current Prospectus of the Fund on a quarterly basis (prorated for any portion
of such period during which this Agreement is in effect for less than the full
amount of such period); it is understood and agreed that the Company may make
final and binding determinations as to whether such continuing compliance and
as to whether or not any Fund shares are to be considered in determining the
Holding Level of any particular broker-dealer and what Fund shares, if any, are
to be attributed to such purpose to a particular broker-dealer, to a different
broker-dealer or to no broker-dealer. Payments shall be made to the
Broker-Dealer named above and portions of the payments may be, in the
discretion of the Broker-Dealer,
1
<PAGE> 2
paid over to individual registered representatives of said Broker-Dealer to
whom there have been assigned accounts of clients or customers of the
Broker-Dealer with respect to which the respective Holding Level was determined.
2. The distribution fee payments with respect to a class of the Fund's
shares to be made in accordance with Section 1 hereof, if any, shall be paid to
the Broker-Dealer as compensation for selling shares of the respective class.
3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Broker-Dealer shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Broker-dealer may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the fund, assisting
in selected dividend payment options, account designations and addresses and
maintaining the investment of such customer or client in the Fund.
4. The Company shall have the right at any time and from time to time
without notice to the Broker-Dealer to amend its Prospectus with respect to the
amount of the service free and the amount of the distribution fee to be paid
pursuant hereto. Such amendments shall be effective as of the date of the
amended Prospectus.
5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be), and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act), of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Broker-dealer, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
VAN KAMPEN AMERICAN CAPITAL
- -------------------------- DISTRIBUTORS, INC.
Broker-dealer Firm Name
- -------------------------- By:
Firm Address -------------------------
Senior Vice President
By:
-----------------------
Title:
--------------------
2
<PAGE> 1
EXHIBIT (15)(c)
FORM OF
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is entered into as of the ____ day of ____, 19__, by and
between Van Kampen American Capital Distributors, Inc. (the "Company") and the
undersigned (the "Intermediary").
WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and
WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"), and a Service Plan (the
"Service Plan") relating to such Fund, the Distribution Plans being described
in the Fund's Prospectus and Statement of Additional Information; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution services agreements such as this Agreement with
certain financial intermediaries selected by the Company, and the Intermediary
has been so selected; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such financial intermediary on or after the
effective date of this Agreement, as determined pursuant to Section 4 hereof,
and held at the close of each day in accounts of clients or customers of
particular intermediary, such amount being referred to herein as the "Holding
Level"; for purposes of calculating the Holding Level, shares of such Fund
which are redeemed or otherwise disposed of from any account existing prior to
such effective date shall be deemed to have been shares sold prior to such
effective date to the extent of the number of shares held in such account
immediately after the close of business on the day prior to such effective
date; and
WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;
NOW, THEREFORE, the Company and the Intermediary agree as follows:
1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Intermediary shall be entitled to distribution fee and
service fee payments, if any, to be paid by the Company with respect to each
class of the Fund's shares at the annual percentage rate of the Holding Level
set forth from time to time in the then current Prospect of the Fund on a
quarterly basis (prorated for any portion of such period during which this
Agreement is in effect for less than the full amount of such period); it is
understood and agreed that the Company may make final and binding
determinations as to whether such continuing compliance and as to whether or
not any Fund shares are to be considered in determining the Holding Level of
any particular financial intermediary and what Fund shares, if any, are to be
attributed to such purpose to a particular financial intermediary, to a
different financial intermediary or to no financial intermediary.
1
<PAGE> 2
2. The distribution fee payments with respect to a class of the Fund's
shares to be made in accordance with Section 1 hereof, if any, shall be paid to
the Broker-Dealer as compensation for selling shares of the respective class.
3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Intermediary shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Intermediary may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the Fund,
assisting in selected dividend payment options, account designations and
addresses and maintaining the investment of such customer or client in the
Fund.
4. The Company shall have the right at any time and from time to time
without notice to the Broker-Dealer to amend its Prospectus with respect to the
amount of the service free and the amount of the distribution fee to be paid
pursuant hereto. Such amendments shall be effective as of the date of the
amended Prospectus.
5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be) and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act) of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Intermediary, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
By:
- ------------------------ ----------------------
Intermediary Senior Vice President
- ------------------------
Address
By:
---------------------
Title
2
<PAGE> 1
EXHIBIT (16)
CALCULATION OF YIELD
The Fund calculates its annualized current yield quotations based on the
seven days ended on the date of the most recent balance sheet included in the
registration statement, computed by determining the net change, exclusive of
capital charges, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then multiplying the base period by (365/7).
The Fund calculates its effective yield based on the seven days ended on
the date of the most recent balance sheet included in the registration
statement, computed by determining the net change, exclusive of capital charges,
in the value of a hypothetical pre-existing account having a balance of one
share at the beginning of the period, according to the following formula:
Effective Yield = [(Base Period Return + 1) 365/7]-1
<PAGE> 1
EXHIBIT 17(a)
INVESTMENT COMPANIES FOR WHICH
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
SEPTEMBER 15, 1997
Van Kampen American Capital U.S. Government Trust
Van Kampen American Capital U.S. Government Fund
Van Kampen American Capital Tax Free Trust
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital Trust
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund
Van Kampen American Capital Strategic Income Fund
Van Kampen American Capital Equity Trust
Van Kampen American Capital Utility Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Prospector Fund
Van Kampen American Capital Aggressive Growth Fund
Van Kampen American Capital Foreign Securities Fund
Van Kampen American Capital Pennsylvania Tax Free Income Fund
Van Kampen American Capital Tax Free Money Fund
Van Kampen American Capital Prime Rate Income Trust
Van Kampen American Capital Comstock Fund
Van Kampen American Capital Corporate Bond Fund
Van Kampen American Capital Emerging Growth Fund
Van Kampen American Capital Enterprise Fund
Van Kampen American Capital Equity Income Fund
Van Kampen American Capital Limited Maturity Government Fund
Van Kampen American Capital Global Managed Assets Fund
Van Kampen American Capital Government Securities Fund
Van Kampen American Capital Government Target Fund
Van Kampen American Capital Growth and Income Fund
Van Kampen American Capital Harbor Fund
Van Kampen American Capital High Income Corporate Bond Fund
Van Kampen American Capital Life Investment Trust
Van Kampen American Capital Asset Allocation Portfolio
Van Kampen American Capital Domestic Income Portfolio
Van Kampen American Capital Emerging Growth Portfolio
Van Kampen American Capital Enterprise Portfolio
Van Kampen American Capital Global Equity Portfolio
Van Kampen American Capital Government Portfolio
Van Kampen American Capital Growth and Income Portfolio
Van Kampen American Capital Money Market Portfolio
Van Kampen American Capital Strategic Stock Portfolio
Morgan Stanley Real Estate Securities Portfolio
<PAGE> 2
Van Kampen American Capital Pace Fund
Van Kampen American Capital Real Estate Securities Fund
Van Kampen American Capital Reserve Fund
Van Kampen American Capital Tax -Exempt Trust
Van Kampen American Capital High Yield Municipal Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital World Portfolio Series Trust
Van Kampen American Capital Global Equity Fund
Van Kampen American Capital Global Government Securities Fund
Morgan Stanley Aggressive Equity Fund
Morgan Stanley American Value Fund
Morgan Stanley Asian Growth Fund
Morgan Stanley Emerging Markets Fund
Morgan Stanley Global Equity Allocation Fund
Morgan Stanley Global Fixed Income Fund
Morgan Stanley Government Obligations Money Market Fund
Morgan Stanley High Yield Fund
Morgan Stanley International Magnum Fund
Morgan Stanley Latin American Fund
Morgan Stanley Money Market Fund
Morgan Stanley Stable Value Fund (SVFRX)
Morgan Stanley Stable Value Fund II (SVFIX)
Morgan Stanley U.S. Real Estate Fund
Morgan Stanley Value Fund
Morgan Stanley Worldwide High Income Fund
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Emerging Markets Municipal Income Trust................................................................. Series 1
Insured Municipals Income Trust......................................................................... Series 1 through 378
Insured Municipals Income Trust (Discount).............................................................. Series 5 through 13
Insured Municipals Income Trust (Short Intermediate Term)............................................... Series 1 through 104
Insured Municipals Income Trust (Intermediate Term)..................................................... Series 5 through 88
Insured Municipals Income Trust (Limited Term).......................................................... Series 9 through 85
Insured Municipals Income Trust (Premium Bond Series)................................................... Series 1 through 3
Insured Municipals Income Trust (Intermediate Laddered Maturity)........................................ Series 1 and 2
Insured Tax Free Bond Trust............................................................................. Series 1 through 6
Insured Tax Free Bond Trust (Limited Term).............................................................. Series 1
Investors' Quality Tax-Exempt Trust..................................................................... Series 1 through 93
Investors' Quality Tax-Exempt Trust-Intermediate........................................................ Series 1
Investors' Corporate Income Trust....................................................................... Series 1 through 12
Investors' Governmental Securities Income Trust......................................................... Series 1 through 7
Van Kampen Merritt International Bond Income Trust...................................................... Series 1 through 21
Alabama Investors' Quality Tax-Exempt Trust............................................................. Series 1
Alabama Insured Municipals Income Trust................................................................. Series 1 through 9
Arizona Investors' Quality Tax-Exempt Trust............................................................. Series 1 through 16
Arizona Insured Municipals Income Trust................................................................. Series 1 through 17
Arkansas Insured Municipals Income Trust................................................................ Series 1 through 2
Arkansas Investors' Quality Tax-Exempt Trust............................................................ Series 1
California Insured Municipals Income Trust.............................................................. Series 1 through 158
California Insured Municipals Income Trust (Premium Bond Series)........................................ Series 1
California Insured Municipals Income Trust (1st Intermediate Series).................................... Series 1 through 3
California Investors' Quality Tax-Exempt Trust.......................................................... Series 1 through 21
California Insured Municipals Income Trust (Intermediate Laddered)...................................... Series 1 through 22
Colorado Insured Municipals Income Trust................................................................ Series 1 through 81
Colorado Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 18
Connecticut Insured Municipals Income Trust ............................................................ Series 1 through 31
Connecticut Investors' Quality Tax-Exempt Trust......................................................... Series 1
Delaware Investor's Quality Tax-Exempt Trust............................................................ Series 1 and 2
Florida Insured Municipal Income Trust - Intermediate................................................... Series 1 and 2
Florida Insured Municipals Income Trust................................................................. Series 1 through 107
Florida Investors' Quality Tax-Exempt Trust............................................................. Series 1 and 2
Florida Insured Municipals Income Trust (Intermediate Laddered)......................................... Series 1 through 13
Georgia Insured Municipals Income Trust................................................................. Series 1 through 80
Georgia Investors' Quality Tax-Exempt Trust............................................................. Series 1 through 16
Hawaii Investors' Quality Tax-Exempt Trust.............................................................. Series 1
Indiana Insured Municipals Income Trust................................................................. Series 1
Investors' Quality Municipals Trust (AMT)............................................................... Series 1 through 9
Kansas Investors'Quality Tax-Exempt Trust .............................................................. Series 1 through 11
Kentucky Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 58
Louisiana Insured Municipals Income Trust............................................................... Series 1 through 17
Maine Investor's Quality Tax-Exempt Trust............................................................... Series 1
Maryland Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 79
Massachusetts Insured Municipals Income Trust........................................................... Series 1 through 34
Massachusetts Insured Municipals Income Trust (Premium Bond Series)..................................... Series 1
Michigan Financial Institutions Trust................................................................... Series 1
Michigan Insured Municipals Income Trust................................................................ Series 1 through 140
Michigan Insured Municipals Income Trust (Premium Bond Series).......................................... Series 1
Michigan Insured Municipals Income Trust (1st Intermediate Series)...................................... Series 1 through 3
Michigan Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 30
Michigan Select Trust................................................................................... Series 1
Minnesota Insured Municipals Income Trust............................................................... Series 1 through 59
Minnesota Investors' Quality Tax-Exempt Trust........................................................... Series 1 through 21
Mississippi Insured Municipals Income Trust............................................................. Series 1
Missouri Insured Municipals Income Trust................................................................ Series 1 through 98
Missouri Insured Municipals Income Trust (Premium Bond Series).......................................... Series 1
Missouri Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 15
Missouri Insured Municipals Income Trust
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
(Intermediate Laddered Maturity)....................................................................... Series 1
Nebraska Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 9
New Mexico Insured Municipals Income Trust.............................................................. Series 1 through 18
New Jersey Insured Municipals Income Trust.............................................................. Series 1 through 114
New Jersey Investors' Quality Tax-Exempt Trust.......................................................... Series 1 through 22
New Jersey Insured Municipals Income Trust
(Intermediate Laddered Maturity)....................................................................... Series 1 and 4
New York Insured Municipals Income Trust-Intermediate................................................... Series 1 through 6
New York Insured Municipals Income Trust (Limited Term)................................................. Series 1
New York Insured Municipals Income Trust................................................................ Series 1 through 136
New York Insured Tax-Free Bond Trust.................................................................... Series 1
New York Insured Municipals Income Trust
(Intermediate Laddered Maturity)....................................................................... Series 1 through 17
New York Investors' Quality Tax-Exempt Trust............................................................ Series 1
North Carolina Investors' Quality Tax-Exempt Trust...................................................... Series 1 through 88
Ohio Insured Municipals Income Trust.................................................................... Series 1 through 104
Ohio Insured Municipals Income Trust (Premium Bond Series).............................................. Series 1 and 2
Ohio Insured Municipals Income Trust (Intermediate Term)................................................ Series 1
Ohio Insured Municipals Income Trust
(Intermediate Laddered Maturity)....................................................................... Series 3 through 6
Ohio Investors' Quality Tax-Exempt Trust................................................................ Series 1 through 16
Oklahoma Insured Municipal Income Trust................................................................. Series 1 through 17
Oregon Investors' Quality Tax-Exempt Trust.............................................................. Series 1 through 53
Pennsylvania Insured Municipals Income Trust - Intermediate............................................. Series 1 through 6
Pennsylvania Insured Municipals Income Trust............................................................ Series 1 through 223
Pennsylvania Insured Municipals Income Trust (Premium Bond Series)...................................... Series 1
Pennsylvania Investors' Quality Tax-Exempt Trust........................................................ Series 1 through 14
South Carolina Investors' Quality Tax-Exempt Trust...................................................... Series 1 through 84
Stepstone Growth Equity and Treasury Securities Trust................................................... Series 1
Tennessee Insured Municipals Income Trust............................................................... Series 1-3 and 5-37
Texas Insured Municipals Income Trust................................................................... Series 1 through 40
Texas Insured Municipal Income Trust (Intermediate Ladder).............................................. Series 1
Virginia Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 73
Van Kampen American Capital Equity Opportunity Trust.................................................... Series 1 through 41
Van Kampen American Capital Utility Income Trust........................................................ Series 1 through 8
Van Kampen American Capital Insured Income Trust........................................................ Series 1 through 61
Van Kampen American Capital Insured Income Trust (Intermediate Term).................................... Series 1 through 60
Van Kampen Merritt Select Equity Trust.................................................................. Series 1
Van Kampen Merritt Select Equity and Treasury Trust..................................................... Series 1
Washington Insured Municipals Income Trust.............................................................. Series 1
West Virginia Insured Municipals Income Trust........................................................... Series 1 through 7
Principal Financial Institutions Trust.................................................................. Series 1
Internet Trust.......................................................................................... Series 1 through 3
Michigan Real Estate Income and Growth Trust............................................................ Series 1
Strategic Ten Trust, United States...................................................................... Series 1 through 10
Strategic Ten Trust, United Kingdom..................................................................... Series 1 through 10
Strategic Ten Trust, Hong Kong ......................................................................... Series 1 through 10
Strategic Five Trust, United States..................................................................... Series 1 through 4
Global Fifteen Trust.................................................................................... Series 1 through 2
Global Thirty Trust..................................................................................... Series 1 through 3
Great International Firms Trust......................................................................... Series 1
Undervalued Growth Opportunities Trust.................................................................. Series 1
Emerging Growth and Treasury............................................................................ Series 1
Global Blue Chip Trust.................................................................................. Series 1
Renaissance Trust....................................................................................... Series 1
Blue Chip Opportunity and Treasury Trust................................................................ Series 1 through 4
Wheat First Strategic Opportunity Unit Trust............................................................ Series 1
Baby Boomer Opportunity Trust........................................................................... Series 1
</TABLE>
<PAGE> 1
EXHIBIT 17 (b)
Officers
Van Kampen American Capital Distributors, Inc.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ---- ------ --------
<S> <C> <C>
Don G. Powell Chairman Houston, TX
Philip N. Duff Chief Executive Officer Oakbrook Terrace, IL
William R. Molinari President & Chief Operating Oakbrook Terrace, IL
Officer
Ronald A. Nyberg Executive Vice President, General Oakbrook Terrace, IL
Counsel & Assistant Secretary
William R. Rybak Executive Vice President & Chief Oakbrook Terrace, IL
Financial Officer
Paul R. Wolkenberg Executive Vice President Houston, TX
Robert A. Broman Sr. Vice President Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
Keith K. Furlong Sr. Vice President Oakbrook Terrace, IL
Douglas B. Gehrman Sr. Vice President Houston, TX
Richard D. Humphrey Sr. Vice President Houston, TX
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Mark T. McGannon Sr. Vice President Oakbrook Terrace, IL
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL
Michael L. Stallard Sr. Vice President Oakbrook Terrace, IL
Robert S. West Sr. Vice President Oakbrook Terrace, IL
John H. Zimmermann, III Sr. Vice President Oakbrook Terrace, IL
Dominic C. Martellaro 1st Vice President Danville, CA
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
James J. Ryan 1st Vice President Oakbrook Terrace, IL
George J. Vogel 1st Vice President Oakbrook Terrace, IL
Patrick J. Woelfel 1st Vice President Oakbrook Terrace, IL
Laurence J. Althoff Vice President & Controller Oakbrook Terrace, IL
James K. Ambrosio Vice President Massapequa, NY
Brian P. Arcara Vice President Buffalo, NY
Sheldon Barker Vice President Moon, PA
Patricia A. Bettlach Vice President Chesterfield, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
Christopher M. Bisaillon Vice President Oakbrook Terrace, IL
James J. Boyne Vice President, Associate General Oakbrook Terrace, IL
Counsel & Assistant Secretary
Michael P. Boos Vice President Oakbrook Terrace, IL
Robert C. Brooks Vice President Oakbrook Terrace, IL
Brooksley Burke Vice President Marina Del Ray, CA
William F Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Christine Cleary Byrum Vice President Tampa, FL
Glenn M. Cackovic Vice President Laguna Niguel, CA
Joseph N. Caggiano Vice President New York, NY
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
Daniel R. Chambers Vice President Austin, TX
Richard J. Charlino Vice President Houston, TX
Deanna Margaret Chiaro Vice President Oakbrook Terrace, IL
Scott A. Chriske Vice President Plano, TX
German Clavijo Vice President Atlanta, GA
Eleanor M. Cloud Vice President Oakbrook Terrace, IL
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Suzanne Cummings Vice President Oakbrook Terrace, IL
Nicholas Dalmaso Vice President & Asst. Secretary Oakbrook Terrace, IL
Ken DiFrancesca Vice President Oakbrook Terrace, IL
Daniel R. DeJong Vice President Oakbrook Terrace, IL
Tracey M. DeLusant Vice President New York, NY
Mark B. Doremus Vice President Houston, TX
Michael E. Eccleston Vice President Oakbrook Terrace, IL
Jonathan Eckard Vice President Tampa, FL
Charles Edward Fisher Vice President Naperville, IL
William J. Fow Vice President Redding, CT
Nicholas J. Foxhoven Vice President Englewood, CO
Charles Friday Vice President Gibsonia, PA
Erich P. Gerth Vice President Piedmont, CA
Richard G. Golod Vice President Annapolis, MD
Timothy D. Griffith Vice President Kirkland, WA
Kyle D. Haas Vice President Oakbrook Terrace, IL
Daniel Hamilton Vice President Austin, TX
John A. Hanhauser Vice President Philadelphia, PA
John G. Hansen Vice President Oakbrook Terrace, IL
Eric J. Hargens Vice President Orlando, FL
Calvin B. Hays Vice President Richmond, VA
Joseph Hays Vice President Cherry Hill, NJ
Gregory Heffington Vice President Ft. Collins, CO
Susan J. Hill Vice President Oakbrook Terrace, IL
Thomas R. Hindelang Vice President Gilbert, AZ
David S. Hogaboom Vice President Oakbrook Terrace, IL
Bryn M. Hoggard Vice President Houston, TX
Robert S. Hunt Vice President Phoenix, MD
Lowell Jackson Vice President Norcross, GA
Kevin G. Jajuga Vice President Baltimore, MD
Jeffrey S. Kinney Vice President Overland Park, KS
Dana R. Klein Vice President Oakbrook Terrace, IL
Ann Marie Klingenhagen Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Director Oakbrook Terrace, IL
of Compliance
Richard D. Kozlowski Vice President Atlanta, GA
Patricia D. Lathrop Vice President Tampa, FL
Brian Laux Vice President Staten Island, NY
S. William Lehew III Vice President Charlotte, NC
Tony E. Leal Vice President Daphne, AL
Eric Levinson Vice President San Francisco, CA
Jonathan Linstra Vice President Oakbrook Terrace, IL
Walter Lynn Vice President Flower Mound, TX
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Carl Mayfield Vice President Lakewood, CO
Brooks D. McCartney Vice President Puyallup, WA
Anne Therese McGrath Vice President Los Gatos, CA
John Mills Vice President Kenner, LA
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Ted Morrow Vice President Dallas, TX
Robert Muller, Jr. Vice President Cypress, TX
Peter Nicholas Vice President Beverly, MA
Michael D. Ossmen Vice President Oakbrook Terrace, IL
Todd W. Page Vice President Oakbrook Terrace, IL
Christopher Petrungaro Vice President Oakbrook Terrace, IL
Anthony Piazza Vice President Old Bridge, NJ
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Fairlawn, OH
Daniel D. Reams Vice President Royal Oak, MI
Walter E. Rein Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Oakbrook Terrace, IL
Suzette N. Rothberg Vice President Plymouth, MN
Jeffrey Rourke Vice President Oakbrook Terrace, IL
Thomas Rowley Vice President St. Louis, MO
Heather R. Sabo Vice President Richmond, VA
Stephanie Scarlata Vice President Bedford Corners, NY
Andrew J. Scherer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Jeffrey C. Shirk Vice President Swampscott, MA
Traci T. Sorensen Vice President Oakbrook Terrace, IL
Kimberly M. Spangler Vice President Fairfax, VA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
Gary R. Steele Vice President Philadelphia, PA
Richard Stefanec Vice President Los Angeles, CA
James D. Stevens Vice President North Andover, MA
James M. Stilwell Vice President San Diego, CA
William C. Strafford Vice President Granger, IN
David A. Tabone Vice President Scottsdale, AZ
James C. Taylor Vice President Naperville, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Todd Volkman Vice President Austin, TX
Daniel B. Waldron Vice President Oakbrook Terrace, IL
Christopher Walsh Vice President Oakbrook Terrace, IL
Jeff Warland Vice President Oakbrook Terrace, IL
Robert A. Watson Vice President Oakbrook Terrace, IL
Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary
Harold Whitworth, III Vice President Oakbrook Terrace, IL
Kirk Wiggins Vice President Arlington, TX
David M. Wynn Vice President Phoenix, AZ
James R. Yount Vice President Mercer Island, WA
Patrick M. Zacchea Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Huey P. Falgout, Jr. Asst. Vice President & Asst. Secretary Houston, TX
Walter C. Gray Asst. Vice President Houston, TX
Laurie L. Jones Asst. Vice President Houston, TX
Michael B. Kollins Asst. Vice President Oakbrook Terrace, IL
Ivan R. Lowe Asst. Vice President Houston, TX
Linda S. MacAyaal Asst. Vice President Oakbrook Terrace, IL
Stuart R. Moehlman Asst. Vice President Houston, TX
Steven R. Norvid Asst. Vice President Oakbrook Terrace, IL
Gregory S. Parker Asst. Vice President Houston, TX
David B. Partain Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Michael Quinn Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Thomas J. Sauerborn Asst. Vice President New York, NY
Bruce Saxon Asst. Vice President Oakbrook Terrace, IL
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Natalie Wilson Asst. Vice President New York, NY
Barbara A. Withers Asst. Vice President Oakbrook Terrace, IL
Gina M. Costello Asst. Secretary Oakbrook Terrace, IL
Cathy Napoli Asst. Secretary Oakbrook Terrace, IL
Elizabeth M. Brown Officer Houston, TX
John Browning Officer Oakbrook Terrace. IL
Leticia George Officer Houston, TX
Sarah Kessler Officer Oakbrook Terrace, IL
William D. McLaughlin Officer Houston, TX
Becky Newman Officer Houston, TX
Rosemary Pretty Officer Houston, TX
Colette Saucedo Officer Houston, TX
Frederick Shepherd Officer Houston, TX
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX
</TABLE>
<PAGE> 5
DIRECTORS
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ------------------- ------------------------ ---------------------------------
<S> <C> <C>
Don G. Powell Chairman & CEO 2800 Post Oak
Blvd.Houston, TX 77056
William R. Molinari President & COO One Parkview Plaza
Oakbrook Terrace, IL 60181
Ronald A. Nyberg Executive Vice President One Parkview Plaza
& General Counsel Oakbrook Terrace, IL 60181
William R. Rybak Executive Vice President One Parkview Plaza
& CFO Oakbrook Terrace, IL 60181
</TABLE>
<PAGE> 1
EXHIBIT 18
AMENDED
MULTI-CLASS PLAN
FOR
VAN KAMPEN AMERICAN CAPITAL FAMILY OF FUNDS
This Plan is adopted pursuant to Rule 18f-3 under the Act to provide
for the issuance and distribution of multiple classes of shares by each of the
Funds in accordance with the terms, procedures and conditions set forth below.
A majority of the Trustees of the Funds, including a majority of the Trustees
who are not interested persons of the Funds within the meaning of the Act,
found this Multi-Class Plan, including the expense allocations, to be in the
best interest of each Fund and each Class of Shares of each Fund. The Fund
adopted this Plan on January 26, 1996 and amended the Plan as of January 1,
1997.
A. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
1. The Act - Investment Company Act of 1940, as amended.
2. CDSC - contingent deferred sales charge.
3. CDSC Period - the period of years following acquisition during
which Shares are assessed a CDSC upon redemption.
4. Class - a class of Shares of a Fund.
5. Class A Shares - shall have the meaning ascribed in Section B. 1.
6. Class B Shares - shall have the meaning ascribed in Section B. 1.
7. Class C Shares - shall have the meaning ascribed in Section B. 1.
8. Distribution Expenses - expenses incurred in activities which are
primarily intended to result in the distribution and sale of
Shares as defined in a Plan of Distribution and/or board
resolutions.
9. Distribution Fee - a fee paid by a Fund to the Distributor in
reimbursement of Distribution Expenses.
10. Distributor - Van Kampen American Capital Distributors, Inc.
11. Fund - an investment company listed on Exhibit A hereto and each
series thereof.
12. Money Market Fund - Van Kampen American Capital Reserve Fund or
Van Kampen American Capital Tax Free Money Fund.
<PAGE> 2
13. Plan of Distribution - Any plan adopted under Rule 12b-1 under the
Act with respect to payment of a Distribution Fee.
14. Service Fee - a fee paid to financial intermediaries for the
ongoing provision of personal services to Fund shareholders and/or
the maintenance of shareholder accounts.
15. Share - a share of beneficial interest in a Fund.
16. Trustees - the trustees of a Fund.
B. Classes. Each Fund may offer three Classes as follows:
1. Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to
time by the Trustees and set forth in the Funds' prospectus,
which may be reduced or eliminated for Money Market Funds,
larger purchases, under a combined purchase privilege, under a
right of accumulation, under a letter of intent or for certain
categories of purchasers as permitted by Rule 22(d) of the Act
and as set forth in the Fund's prospectus. Class A Shares that
are not subject to a front-end sales charge as a result of the
foregoing, may be subject to a CDSC for the CDSC Period set forth
in Section D.1. The offering price of Shares subject to a
front-end sales charge shall be computed in accordance with Rule
22c-1 and Section 22(d) of the Act and the rules and regulations
thereunder. Class A Shares shall be subject to ongoing Service
Fees approved from time to time by the Trustees and set forth in
the Funds' prospectus. Although shares of Van Kampen American
Capital Tax Free Money Market Fund are not designated as "Class A"
they are substantially similar to Class A Shares as defined herein
and shall be treated as Class A shares for the purposes of this
Plan.
2. Class B Shares. Class B Shares shall be (1) offered at net asset
value, (2) subject to a CDSC for the CDSC Period set forth in
Section D. 1, (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Trustees and
set forth in the Funds' prospectus and (4) converted to Class A
Shares three to ten years after the calendar month in which the
shareholder's order to purchase was accepted, which number of
years shall be as approved from time to time by the Trustees and
set forth in the respective Fund's prospectus.
3. Class C Shares. Class C Shares shall be (1) offered at net
asset value, (2) subject to a CDSC for the CDSC Period set forth
in Section D. 1. , (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Trustees and
set forth in the Funds' prospectus and (4) prior to January 1,
1997, converted to Class A Shares eight to fifteen years after
the calendar month in which the shareholder's order to purchase
was accepted, which number of years shall be as approved from
time to time by the Trustees and set forth in the respective
Fund's prospectus.
<PAGE> 3
C. Rights and Privileges of Classes. Each Class of each Fund will
represent an interest in the same portfolio of investments of that
Fund and will have identical voting, dividend, liquidation and other
rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions except as
described otherwise herein.
D. CDSC. A CDSC may be imposed upon redemption of Class A Shares, Class
B Shares and Class C Shares that do not incur a front end sales charge
subject to the following conditions:
1. CDSC Period. The CDSC Period for Class A Shares and Class C Shares
shall be one year. The CDSC Period for Class B Shares shall be at
least three but not more than ten years as recommended by the
Distributor and approved by the Trustees.
2. CDSC Rate. The CDSC rate shall be recommended by the Distributor
and approved by the Trustees. If a CDSC is imposed for a period
greater than one year the CDSC rate must decline during the CDSC
Period such that (a) the CDSC rate is less in the last year of the
CDSC Period than in the first and (b) in each succeeding year the
CDSC rate shall be less than or equal to the CDSC rate in the
preceding year.
3. Disclosure and Changes. The CDSC rates and CDSC Period shall be
disclosed in a Fund's prospectus and may be decreased at the
discretion of the Distributor but may not be increased unless
approved as set forth in Section L.
4. Method of Calculation. The CDSC shall be assessed on an amount
equal to the lesser of the then current market value or the cost of
the Shares being redeemed. No sales charge shall be imposed on
increases in the net asset value of the Shares being redeemed above
the initial purchase price. No CDSC shall be assessed on Shares
derived from reinvestment of dividends or capital gains
distributions. The order in which Class B Shares and Class C
Shares are to be redeemed when not all of such Shares would be
subject to a CDSC shall be as determined by the Distributor in
accordance with the provisions of Rule 6c-10 under the Act.
5. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares under circumstances
previously approved by the Trustees and disclosed in the Fund's
prospectus or statement of additional information and as allowed
under Rule 6c-10 under the Act.
6. Calculation of offering price. The offering price of Shares subject
to a CDSC shall be computed in accordance with Rule 22c-1 and
Section 22(d) of the Act and the rules and regulations thereunder.
7. Retention by Distributor. The CDSC paid with respect to Shares of
a Fund may be retained by the Distributor to reimburse the
Distributor for commissions paid by it in
<PAGE> 4
connection with the sale of Shares subject to a CDSC and
Distribution Expenses to the extent of such commissions and
Distribution Expenses eligible for reimbursement and approved by
the Trustees.
E. Service and Distribution Fees. Class A Shares shall be subject to a
Service Fee and Class B and Class C Shares shall be subject to a
Service Fee and a Distribution Fee. The Service Fee applicable to any
class shall not exceed 0.25% per annum of the average daily net assets
of the Class and the Distribution Fee shall not exceed 0.75% per annum
of the average daily net assets of the Class. All other terms and
conditions with respect to Service Fees and Distribution Fees shall be
governed by the plans adopted by the Fund with respect to such fees
and Rule 12b-1 of the Act.
F. Conversion. Shares purchased through the reinvestment of dividends
and distributions paid on Shares subject to conversion shall be
treated as if held in a separate sub-account. Each time any Shares
in a Shareholder's account (other than Shares held in the sub-
account) convert to Class A Shares, a proportionate number of Shares
held in the sub-account shall also convert to Class A Shares. All
conversions shall be effected on the basis of the relative net asset
values of the two Classes without the imposition of any sales load or
other charge. So long as any Class of Shares converts into Class A
Shares, the Distributor shall waive or reimburse each Fund, or take
such other actions with the approval of the Trustees as may be
reasonably necessary, to ensure the expenses, including payments
authorized under a Plan of Distribution, applicable to the Class A
Shares are not higher than the expenses, including payments authorized
under the Plan of Distribution, applicable to the class of shares
converting into Class A Shares.
G. Allocation of Expenses, Income and Gains Among Classes.
1. Expenses applicable to a particular class. Each Class of each
Fund shall pay any Service Fee, Distribution Fee and CDSC
applicable to that Class. Other expenses applicable to a
particular Class such as incremental transfer agency fees, but not
including advisory or custodial fees or other expenses related to
the management of the Fund's assets, shall be allocated between
Classes in different amounts if they are actually incurred in
different amounts by the Classes or the Classes receive services
of a different kind or to a different degree than other Classes.
2. Distribution Expenses. Distribution Expenses actually
attributable to the sale of all Classes shall be allocated to each
Class based upon the ratio which sales of each Class bears to the
sales of all Shares of the Fund. For this purpose, Shares issued
upon reinvestment of dividends or distributions, upon conversion
from Class B Shares or Class C Shares to Class A Shares or upon
stock splits will not be considered sales.
3. Income, capital gains and losses, and other expenses applicable to
all Classes. Income, realized and unrealized capital gains and
losses, and expenses such as advisory fees applicable to all
Classes shall be allocated to each Class on the basis of the net
asset value of that Class in relation to the net asset value of
the Fund.
<PAGE> 5
4. Determination of nature of expenses. The Trustees shall determine
in their sole discretion whether any expense other than those
listed herein is properly treated as attributed to a particular
Class or all Classes.
H. Exchange Privilege. Exchanges of Shares shall be permitted between
Funds as follows.
1. General. Shares of one Fund may be exchanged for Shares of the
same Class of another Fund at net asset value and without sales
charge, provided that
a. The Distributor may specify that certain Funds may not be
exchanged within a designated period, which shall not exceed
90 days, after acquisition without prior Distributor approval.
b. Class A Shares of a Money Market Fund that were not acquired
in exchange for Class B or Class C Shares of a Fund may be
exchanged for Class A Shares of another Fund only upon payment
of the excess, if any, of the sales charge rate applicable to
the Shares being acquired over the sales charge rate
previously paid.
c. Shares of a Money Market Fund acquired through an exchange of
Class B Shares or Class C Shares may be exchanged only for the
same Class of another Fund as the Class they were acquired in
exchange for or any Class into which those shares were
converted.
2. Target Fund. Shares of Van Kampen American Capital Government
Target Fund may be exchanged for Class A Shares of a Fund.
3. CDSC Computation. The acquired Shares will remain subject to the
CDSC rate schedule and CDSC Period for the original Fund upon the
redemption of the Shares from the Van Kampen American Capital
complex of funds. For purposes of computing the CDSC payable on a
disposition of the new Shares, the holding period for the
original Shares shall be added to the holding period of the new
Shares.
I. Voting Rights of Classes.
1. Shareholders of each Class shall have exclusive voting rights on
any matter submitted to them that relates solely to the Plan of
Distribution related to that Class, provided that
d. If any amendment is proposed to the plan under which Service
Fees are paid with respect to Class A Shares of a Fund that
would increase materially the amount to be borne by Class A
Shares under that plan, then no Class B Shares or Class C
Shares shall convert into Class A Shares of that Fund until
the holders of Class B Shares and Class C Shares of that Fund
have also approved the proposed amendment.
<PAGE> 6
e. If the holders of either the Class B Shares and/or Class C
Shares referred to in subparagraph a. do not approve the
proposed amendment, the Trustees of the Fund and the
Distributor shall take such action as is necessary to ensure
that the Class voting against the amendment shall convert into
another Class identical in all material respects to Class A
Shares of the Fund as constituted prior to the amendment.
2. Shareholders shall have separate voting rights on any matter
submitted to shareholders in which the interest of one Class
differs from the interests of any other Class.
J. Dividends. Dividends paid by a Fund with respect to each Class, to
the extent any dividends are paid, will be calculated in the same
manner at the same time on the same day and will be in substantially
the same amount, except any Distribution Fees,Service Fees or
incremental expenses relating to a particular Class will be borne
exclusively by that Class.
K. Reports to Trustees. The Distributor shall provide to the Trustees of
each Fund quarterly and annual statements concerning distribution and
Shareholder servicing expenditures complying with paragraph (b)(3)(ii)
of Rule 12b-1 of the Act, as it may be amended from time to time. The
Distributors also shall provide the Trustees such information as the
Trustees may from time to time deem to be reasonably necessary to
evaluate this Plan.
L. Amendment. Any material amendment to this Plan shall be approved by
the affirmative vote of a majority of the Trustees of a Fund,
including the affirmative vote of the trustees of the Fund
who are not interested persons of the Fund, except that any amendment
that increases the CDSC rate schedule or CDSC Period must also be
approved by the affirmative vote of a majority of the Shares of the
affected Class. The Distributor shall provide the Trustees such
information as may be reasonably necessary to evaluate any amendment
to this Plan.
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, being officers and trustees of each of the Van Kampen
American Capital Open End Trusts (with the exception of Don G. Powell), as
indicated on Schedule 1 attached hereto and incorporated by reference, each a
Delaware business trust, except for the Van Kampen American Capital
Pennsylvania Tax Free Income Fund, being a Pennsylvania business trust
(individually, a "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, any and all amendments to the Registration Statement filed by
each Trust with the Securities and Exchange Commission pursuant to the
provisions of the Securities Act of 1933 and the Investment Company Act of
1940.
This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together shall constitute
one instrument.
Dated: July 24, 1997
Signature Title
--------- -----
/s/ J. Miles Branagan Trustee
- ---------------------------
J. Miles Branagan
/s/ Richard M. DeMartini Trustee
- ---------------------------
Richard M. DeMartini
/s/ Linda Hutton Heagy Trustee
- ---------------------------
Linda Hutton Heagy
/s/ R. Craig Kennedy Trustee
- ---------------------------
R. Craig Kennedy
/s/ Jack E. Nelson Trustee
- ---------------------------
Jack E. Nelson
/s/ Don G. Powell Trustee (For Former Van
- --------------------------- Kampen Funds only)
Don G. Powell
/s/ Jerome L. Robinson Trustee
- ---------------------------
Jerome L. Robinson
/s/ Phillip B. Rooney Trustee
- ---------------------------
Phillip B. Rooney
/s/ Fernando Sisto, Sc.D. Trustee
- ---------------------------
Fernando Sisto, Sc.D.
/s/ Wayne W. Whalen Trustee and Chairman
- ---------------------------
Wayne W. Whalen
/s/ Edward C. Wood III Vice President and
- --------------------------- Chief Financial Officer
Edward C. Wood III
/s/ Dennis J. McDonnell President
- ---------------------------
Dennis J. McDonnell
<PAGE> 2
SCHEDULE 1
I. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
Van Kampen American Capital U.S. Government Trust ("U.S. Government Trust")
on behalf of its series
Van Kampen American Capital U.S. Government Fund ("U.S. Government Fund")
Van Kampen American Capital Tax Free Trust ("Tax Free Trust")
on behalf of its series
Van Kampen American Capital Insured Tax Free Income Fund ("Insured Tax Free
Income Fund")
Van Kampen American Capital Tax Free High Income Fund ("Tax Free High Income
Fund")
Van Kampen American Capital California Insured Tax Free Fund ("California
Insured Tax Free Fund")
Van Kampen American Capital Municipal Income Fund ("Municipal Income Fund")
Van Kampen American Capital Intermediate Term Municipal Income Fund
("Intermediate Term Municipal Income Fund") (f/k/a Limited Term Municipal
Income Fund)
Van Kampen American Capital Florida Insured Tax Free Income Fund ("Florida
Insured Tax Free Income Fund")
Van Kampen American Capital New Jersey Tax Free Income Fund ("New Jersey Tax
Free Income Fund")
Van Kampen American Capital New York Tax Free Income Fund ("New York Tax Free
Income Fund")
Van Kampen American Capital California Tax Free Income Fund ("California Tax
Free Income Fund")
Van Kampen American Capital Michigan Tax Free Income Fund ("Michigan Tax Free
Income Fund")
Van Kampen American Capital Missouri Tax Free Income Fund ("Missouri Tax Free
Income Fund")
Van Kampen American Capital Ohio Tax Free Income Fund ("Ohio Tax Free Income
Fund")
Van Kampen American Capital Trust ("VKAC Trust")
on behalf of its series
Van Kampen American Capital High Yield Fund ("VKAC High Yield Fund")
Van Kampen American Capital Short-Term Global Income Fund ("Short-Term Global
Income Fund")
Van Kampen American Capital Strategic Income Fund ("Strategic Income Fund")
Van Kampen American Capital Equity Trust ("Equity Trust")
on behalf of its series
Van Kampen American Capital Utility Fund ("Utility Fund")
Van Kampen American Capital Value Fund ("Value Fund")
Van Kampen American Capital Great American Companies Fund ("Great American
Companies Fund")
Van Kampen American Capital Growth Fund ("Growth Fund")
Van Kampen American Capital Prospector Fund ("Prospector Fund")
Van Kampen American Capital Pennsylvania Tax Free Income Fund
("Pennsylvania Tax Free Income Fund")
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund")
<PAGE> 3
II. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
("ASSET MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN CAPITAL FUNDS"):
Van Kampen American Capital Comstock Fund ("Comstock Fund")
Van Kampen American Capital Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen American Capital Emerging Growth Fund ("Emerging Growth Fund")
Van Kampen American Capital Enterprise Fund ("Enterprise Fund")
Van Kampen American Capital Equity Income Fund ("Equity Income Fund")
Van Kampen American Capital Limited Maturity Government Fund ("Limited
Maturity Government Fund")
Van Kampen American Capital Global Managed Assets Fund ("Global Managed Assets
Fund")
Van Kampen American Capital Government Securities Fund ("Government Securities
Fund")
Van Kampen American Capital Government Target Fund ("Government Target Fund")
Van Kampen American Capital Growth and Income Fund ("Growth and Income Fund")
Van Kampen American Capital Harbor Fund ("Harbor Fund")
Van Kampen American Capital High Income Corporate Bond Fund ("High Income
Corporate Bond Fund")
Van Kampen American Capital Life Investment Trust ("Life Investment Trust" or
"LIT") on behalf of its Series
Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Global Equity Portfolio ("LIT Global Equity Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Morgan Stanley Real Estate Securities Portfolio ("LIT Morgan Stanley Real
Estate Securities Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")
Strategic Stock Portfolio ("LIT Strategic Stock Portfolio")
Van Kampen American Capital Pace Fund ("Pace Fund")
Van Kampen American Capital Real Estate Securities Fund ("Real Estate
Securities Fund")
Van Kampen American Capital Reserve Fund ("Reserve Fund")
Van Kampen American Capital Small Capitalization Fund ("Small Capitalization
Fund")
Van Kampen American Capital Tax-Exempt Trust ("Tax-Exempt Trust")
on behalf of its Series
Van Kampen American Capital High Yield Municipal Fund ("High Yield
Municipal Fund")
Van Kampen American Capital U.S. Government Trust for Income ("U.S.
Government Trust for Income")
Van Kampen American Capital World Portfolio Series Trust ("World Portfolio
Series Trust") on behalf of its Series
Van Kampen American Capital Global Equity Fund ("Global Equity Fund")
Van Kampen American Capital Global Government Securities Fund ("Global
Government Securities Fund")
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> RESERVE FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 678910140<F1>
<INVESTMENTS-AT-VALUE> 678910140<F1>
<RECEIVABLES> 1323985<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 383761<F1>
<TOTAL-ASSETS> 680617886<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 117942555<F1>
<TOTAL-LIABILITIES> 117942555<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 451297333
<SHARES-COMMON-STOCK> 451309332
<SHARES-COMMON-PRIOR> 440344423
<ACCUMULATED-NII-CURRENT> 26309<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (69816)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 451260769
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 27897844<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5925762)<F1>
<NET-INVESTMENT-INCOME> 21972082<F1>
<REALIZED-GAINS-CURRENT> (7692)<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 21964390<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (18710328)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7336711667
<NUMBER-OF-SHARES-REDEEMED> (7344457086)
<SHARES-REINVESTED> 18710328
<NET-CHANGE-IN-ASSETS> 10946807
<ACCUMULATED-NII-PRIOR> 11822<F1>
<ACCUMULATED-GAINS-PRIOR> (53843)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2170578<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 5936762<F1>
<AVERAGE-NET-ASSETS> 426573846
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.044
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.044)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> RESERVE FUND CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 678910140<F1>
<INVESTMENTS-AT-VALUE> 678910140<F1>
<RECEIVABLES> 1323985<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 383761<F1>
<TOTAL-ASSETS> 680617886<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 117942555<F1>
<TOTAL-LIABILITIES> 117942555<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103038760
<SHARES-COMMON-STOCK> 103028995
<SHARES-COMMON-PRIOR> 81469679
<ACCUMULATED-NII-CURRENT> 26309<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (69816)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 103031346
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 27897844<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5925762)<F1>
<NET-INVESTMENT-INCOME> 21972082<F1>
<REALIZED-GAINS-CURRENT> (7692)<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 21964390<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (2925963)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 648076624
<NUMBER-OF-SHARES-REDEEMED> (629443316)
<SHARES-REINVESTED> 2926008
<NET-CHANGE-IN-ASSETS> 21566312
<ACCUMULATED-NII-PRIOR> 11822<F1>
<ACCUMULATED-GAINS-PRIOR> (53843)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2170578<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 5936762<F1>
<AVERAGE-NET-ASSETS> 79265861
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.036
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.036)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.77
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> RESERVE FUND CLASS C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 678910140<F1>
<INVESTMENTS-AT-VALUE> 678910140<F1>
<RECEIVABLES> 1323985<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 383761<F1>
<TOTAL-ASSETS> 680617886<F1>
<PAYABLE-FOR-SECURITIES> 0<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 117942555<F1>
<TOTAL-LIABILITIES> 117942555<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8382745
<SHARES-COMMON-STOCK> 8382947
<SHARES-COMMON-PRIOR> 9710786
<ACCUMULATED-NII-CURRENT> 26309<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (69816)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 0<F1>
<NET-ASSETS> 8383216
<DIVIDEND-INCOME> 0<F1>
<INTEREST-INCOME> 27897844<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5925762)<F1>
<NET-INVESTMENT-INCOME> 21972082<F1>
<REALIZED-GAINS-CURRENT> (7692)<F1>
<APPREC-INCREASE-CURRENT> 0<F1>
<NET-CHANGE-FROM-OPS> 21964390<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (339500)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 141950203
<NUMBER-OF-SHARES-REDEEMED> (143617542)
<SHARES-REINVESTED> 339500
<NET-CHANGE-IN-ASSETS> (1327041)
<ACCUMULATED-NII-PRIOR> 11822<F1>
<ACCUMULATED-GAINS-PRIOR> (53843)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2170578<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 5936762<F1>
<AVERAGE-NET-ASSETS> 9333024
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.036
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.036)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis.
</FN>
</TABLE>
