<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 15, 1998
REGISTRATION NO. 2-50870
NO. 811-2482
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 39 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 24 [X]
</TABLE>
VAN KAMPEN 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 INVESTMENTS 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:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) 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.
TITLE OF SECURITIES BEING REGISTERED: SHARES OF BENEFICIAL INTEREST, PAR VALUE
$0.01 PER SHARE.
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<PAGE> 2
VAN KAMPEN RESERVE FUND
CROSS REFERENCE SHEET
(as required by Item 501(b) of Registration S-K)
<TABLE>
<CAPTION>
LOCATION IN PROSPECTUS
FORM N-1A ITEM ----------------------
PART A
<S> <C> <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 -----------------------------------
<S> <C> <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 and Distributions; Tax Status of
the Fund
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, so numbered, in Part C of this Registration Statement.
<PAGE> 3
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VAN KAMPEN RESERVE FUND
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Van Kampen 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 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)341-2911.
---------------------
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 15, 1998, 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)341-2911 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 FUNDS LOGO
THIS PROSPECTUS IS DATED SEPTEMBER 15, 1998.
<PAGE> 4
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 4
Annual Fund Operating Expenses and Example.................. 5
Financial Highlights........................................ 6
The Fund.................................................... 7
Investment Objective and Policies........................... 7
Investment Practices........................................ 8
Investment Advisory Services................................ 9
Alternative Sales Arrangements.............................. 10
Purchase of Shares.......................................... 11
Shareholder Services........................................ 14
Redemption of Shares........................................ 17
Distribution and Service Plans.............................. 19
Distributions from the Fund................................. 20
Tax Status.................................................. 20
Fund Performance............................................ 21
Description of Shares of the Fund........................... 22
Additional Information...................................... 22
</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
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PROSPECTUS SUMMARY
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THE FUND. Van Kampen 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. Class B shares and Class C shares of the Fund generally are
made available to shareholders for temporary investment purposes in connection
with exchanges to or from other Van Kampen funds. Unless investors intend to
exchange their Fund shares to or from Class B shares or Class C shares of other
Van Kampen funds, they should purchase the Fund's Class A shares because Class A
shares are not subject to any ongoing distribution fee or related charges. Even
investors who do intend to exchange their Fund shares for Class B shares or
Class C shares of other Van Kampen 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 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."
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 Asset Management Inc. (the "Adviser") is the
Fund's investment adviser.
DISTRIBUTOR. Van Kampen Funds 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.
3
<PAGE> 6
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SHAREHOLDER TRANSACTION EXPENSES
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<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 Year
original purchase price or 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>
4
<PAGE> 7
- --------------------------------------------------------------------------------
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)................................................ 0.14% 0.89%(2) 0.89%(2)
Other Expenses (as a percentage of average daily net
assets)................................................... 0.46% 0.48% 0.47%
Total Fund Operating Expenses (as a percentage of average
daily net assets)......................................... 1.02% 1.79% 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 by NASD Rules.
<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, 1.79% 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 $112 $191*
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 $ 97 $191*
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 CDSC 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."
5
<PAGE> 8
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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 PricewaterhouseCoopers
LLP, independent accountants, whose report thereon was unqualified. The most
recent annual report (which contains financial highlights for the last five
fiscal 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,
---------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<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................... .0467 .0440 .0465 .0434 .0229 .0244 .0415 .0664 .0801 .0815
Less Distributions from Net Investment
Income................................. (.0467) (.0440) (.0465) (.0434) (.0229) (.0244) (.0415) (.0664) (.0801) (.0815)
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............................ 4.78% 4.52% 4.75% 4.43% 2.32% 2.44% 4.20% 6.80% 8.33% 8.49%
Net Assets at End of the Period (in
millions).............................. $634.1 $451.3 $440.3 $319.7 $463.8 $279.3 $329.2 $402.3 $426.1 $474.2
Ratio of Expenses to Average Net
Assets(a).............................. 1.02% 1.02% 1.07% 1.00% 1.03% 1.09% 1.05% .94% .91% .76%
Ratio of Net Investment Income to
Average Net Assets(a).................. 4.60% 4.38% 4.62% 4.28% 2.36% 2.44% 4.19% 6.68% 7.99% 8.19%
</TABLE>
- ---------------
(a) For the years ended May 31, 1994 through 1997, 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>
<CAPTION>
CLASS B SHARES CLASS C SHARES
------------------------------------------- -------------------------------------------
APRIL 18, 1995 APRIL 18, 1995
(COMMENCEMENT (COMMENCEMENT
YEAR ENDED MAY 31, OF DISTRIBUTION) YEAR ENDED MAY 31, OF DISTRIBUTION)
------------------------ TO MAY 31, ------------------------ TO MAY 31,
1998 1997 1996 1995 1998 1997 1996 1995
---- ---- ---- ---------------- ---- ---- ---- ----------------
<S> <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
------ ------ ------ ------ ------ ------ ------ ------
Net Investment Income................. .0391 .0363 .0388 .0047 .0392 .0362 .0387 .0049
Less Distributions from Net Investment
Income............................... (.0391) (.0363) (.0388) (.0047) (.0392) (.0362) (.0387) (.0049)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of the Period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ====== ====== ======
Total Return(d)....................... 3.99% 3.71% 3.95% .47%(b) 3.99% 3.72% 3.94% .49%(b)
Net Assets at End of the Period (in
millions)............................ $123.0 $103.0 $81.5 $4.2 $16.1 $8.4 $9.7 $0.6
Ratio of Expenses to Average Net
Assets(c)............................ 1.79% 1.77% 1.86% 1.76% 1.78% 1.78% 1.87% 1.76%
Ratio of Net Investment Income to
Average Net Assets(c)................ 3.91% 3.70% 3.75% 3.52% 3.91% 3.64% 3.81% 3.52%
</TABLE>
- ---------------
(b) Non-Annualized
(c) For the period ended May 31, 1995 and the years ended May 31, 1996 and 1997,
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%.
(d) Total return is based upon net asset value which does not include payment of
the contingent deferred sales charge.
6
<PAGE> 9
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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 Asset Management Inc. (the "Adviser") provides investment advisory
and administrative services to the Fund. The Adviser or its affiliates also act
as investment adviser to other mutual funds distributed by Van Kampen Funds 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. See "Purchase of
Shares -- General."
OBLIGATIONS OF THE U.S. GOVERNMENT AND ITS AGENCIES. The Fund may invest in
obligations issued or guaranteed as to principal and interest by the U.S.
Government, its agencies and instrumentalities which are supported by any of the
following: (a) the full faith and credit of the U.S. Government, (b) the right
of the issuer to borrow an amount limited to a specific line of credit from the
U.S. Government, (c) discretionary authority of the U.S. Government agency or
instrumentality, or (d) the credit of the instrumentality. Such agencies or
instrumentalities include, but are not limited to, the Federal National Mortgage
Association, the Government National Mortgage Association, Federal Land Banks,
and the Farmer's Home Administration.
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
7
<PAGE> 10
branch of a domestic bank. Because evidences of ownership of obligations of
foreign branches or subsidiaries of foreign banks usually are held outside the
United States, the Fund will be subject to additional risks which include
possible adverse political and economic developments, possible seizure or
nationalization of foreign deposits and possible adopting of governmental
restrictions which might adversely affect the payment of principal and interest
on the foreign obligations or might restrict the payment of principal and
interest to investors located outside the country of the issuer, whether from
currency blockage or otherwise. Income earned or received by the Fund from
sources within foreign countries may be reduced by withholding and other taxes
imposed by such countries.
COMMERCIAL PAPER. The Fund may invest in short-term obligations of companies
which at the time of investment are (a) rated in the two highest categories by
S&P (A-1 and A-2) or by Moody's (Prime-1 and Prime-2), or (b) if not rated,
issued by 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.
YEAR 2000 RISKS. Like other mutual funds, financial and business organizations
and individuals around the world, the Fund could be adversely affected if the
computer systems used by the Fund's Adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Adviser
is taking steps that it believes are reasonably designed to address the Year
2000 Problem with respect to computer systems that it uses and to obtain
reasonable assurances that comparable steps are being taken by the Fund's other
major service providers. At this time, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund. In addition,
the Year 2000 Problem may adversely affect the issuers of securities in which
the Fund may invest which, in turn, may adversely affect the net asset value of
the Fund.
- --------------------------------------------------------------------------------
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
8
<PAGE> 11
transactions, to the extent permitted by law, with brokerage firms affiliated
with the Fund, the Adviser or the Distributor and with brokerage firms
participating in the distribution of shares of the Fund and other Van Kampen
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
Investments Inc. ("Van Kampen"). Van Kampen is a diversified asset management
company with more than two million retail investor accounts, extensive
capabilities for managing institutional portfolios, and more than $65 billion
under management or supervision. Van Kampen's more than 50 open-end and 39
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide. Van Kampen Funds Inc., the
distributor of the Fund and the sponsor of the funds mentioned above, is also a
wholly-owned subsidiary of Van Kampen. Van Kampen is an indirect wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co. The Adviser's principal office is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
Morgan Stanley Dean Witter & 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.
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 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, Van Kampen, or Morgan
Stanley Dean Witter & Co.), and all other business expenses not
9
<PAGE> 12
specifically assumed by the Adviser. Advisory (management) fees and total
operating expense ratios are shown under the caption "Annual Fund Operating
Expenses and Example" herein.
From time to time the Adviser or the Distributor 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.
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. 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 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 schedule applicable to a share acquired through the
exchange privilege is determined by reference to the Participating Fund (defined
below) from which such share was originally purchased.
The conversion of such shares to Class A shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fee and transfer agency costs with respect to such
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the Internal Revenue Code of 1986, 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
generally are made available to shareholders for temporary investment purposes
in connection with exchanges to or from other Van Kampen funds. Investors
purchasing shares of the Fund without regard to the availability of exchanges
should purchase Class A shares because there is no distribution fee or related
expenses and, therefore, Class A shares will have a higher yield than Class B
shares and Class C shares. Even investors who do intend to exchange their shares
for Class B shares or Class C shares of other
10
<PAGE> 13
Van Kampen 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 funds. Since Class A shares are not subject to an
ongoing distribution fee or related expenses, purchasing Class A shares and then
redeeming them to purchase Class B shares or Class C shares of other Van Kampen
funds 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 other Van Kampen funds. The CDSC applicable to
Class B shares or Class C shares is not imposed on exchanges among Participating
Funds for the same class of shares. Instead, Class B shares or Class C shares
acquired in an exchange remain subject to the CDSC schedule of the initial
Participating Fund from which the Class B share or Class C share was purchased.
Similarly the holding period for calculating any CDSC is based upon the date of
purchase of such share from the initial Participating Fund. See also
"Shareholder Services -- Exchange Privilege." 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 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 fee and related expenses of
the 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 by following the wire
transfer instructions described below. Shares of the Fund also may be purchased
by completing the application accompanying this Prospectus and forwarding the
application through an authorized dealer or by mail to the shareholder service
agent, Van Kampen Investor Services Inc. ("Investor Services"), a wholly-owned
subsidiary of the Van Kampen. Shares of the Fund may be purchased on any
business day through Authorized Dealers. When purchasing shares of this Fund,
investors must specify whether the purchase is Class A shares, Class B shares or
Class C shares.
Purchases of shares are priced at the next determined net asset value per
share 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 for each class is determined by adding the total market value of
all portfolio
11
<PAGE> 14
securities owned by the Fund, cash and other assets, including accrued interest
and dividends attributable to such class and then subtracting all liabilities
attributable to such class, including accrued expenses. The resulting amount is
divided by the total number of shares of the class outstanding to arrive at the
net asset value per share 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 and has the same rights 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 related expenses) 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 of shares
has different exchange privileges, (iv) certain classes of shares are subject to
a conversion feature and (v) certain classes of shares have different
shareholder service options available. The 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 related
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 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 the Fund will receive from such sale.
INITIAL INVESTMENT BY BANK WIRE. To open an account by wire an investor should
telephone Van Kampen Investor Services Inc. ("Investor Services") at (800)
421-6714 and provide the account registration, the address, tax identification
number, the amount being wired and the name of the wiring bank. Investor
Services furnishes the investor with an account number. The investor's bank
should wire the specified amount along with the account number and registration
to the Fund's custodian: State Street Bank and Trust Company ("State Street
Bank"), 225 Franklin Street, Boston, Massachusetts 02102, ABA-011000028,
attention Van Kampen Investor Services Inc./Van Kampen Fund Account No.
9900-446-7. The investor should then immediately complete and mail the account
application form accompanying this Prospectus to Investor Services. To receive
same day credit to an account, the investor must call Investor Services, at the
telephone number listed above, by 11:00 a.m. Kansas City time with the intent to
wire funds and State Street Bank must then receive such funds by 4:00 p.m.
Boston time.
INITIAL INVESTMENT BY MAIL. To open an account by mail an investor should send
a check payable to the Fund along with a completed account application form to
Investor Services.
SUBSEQUENT INVESTMENTS BY BANK WIRE. The investor's bank should wire the
specified amount along with the account number and registration to State Street
Bank. To receive same day credit to an account, the investor must call Investor
12
<PAGE> 15
Services at (800) 421-6714 by 11:00 a.m. Kansas City time with the intent to
wire funds and State Street Bank must then receive such funds by 4:00 p.m.
Boston time.
SUBSEQUENT INVESTMENTS BY MAIL. Subsequent investments in the amount of $25 or
more may be sent by mail to Investor Services, indicating the account
registration and account number.
CLASS A SHARES
Class A shares are offered at net asset value per share 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 a unit investment trust must have an agreement with the
Distributor pursuant to which the administrator will (1) submit a single bulk
order and make payment with a single remittance for all investments in the Fund
during each distribution period by all investors who choose to invest in the
Fund through the program and (2) provide Investor Services with appropriate
backup data for each participating investor in a computerized format fully
compatible with Investor Services 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 per share. 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 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 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 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.
13
<PAGE> 16
CLASS C SHARES
Class C shares are offered at net asset value per share. 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 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.
A commission or transaction fee of up to 1.00% of the purchase amount will
generally 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; (iv) in
circumstances under which no commission or transaction fee is paid to authorized
dealers at the time of purchase of such shares; or (v) 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. As used herein, "Participating
Funds" refers to certain open-end investment companies advised by the Adviser or
its affiliates and distributed by the Distributor as determined from time to
time by the Fund's Board of Trustees.
INVESTMENT ACCOUNT. Each shareholder has an investment account under which the
investor's shares of the Fund are held by Investor Services, the Fund's transfer
agent and a wholly-owned subsidiary of Van Kampen. Investor Services performs
bookkeeping, data processing and administrative services relating 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 Investor Services showing any reinvestment of dividends and
capital gains distributions and any other activity in the account since the
preceding statement. Such shareholders also will receive separate confirmations
for each purchase or sale transaction other than reinvestment of dividends and
capital gains distributions and systematic purchases or redemptions. Additions
to an investment account may be made at any time by wire transfer or by
purchasing shares through authorized dealers or by mailing a check directly to
Investor Services.
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 Funds, c/o Van Kampen Investor Services Inc., P.O. Box
418256, Kansas City, MO 64141-9256, requesting an "affidavit of loss" and obtain
a Surety Bond in a form acceptable to Investor Services. On the date the letter
is received, Investor Services will calculate a fee for replacing the lost
certificate equal to
14
<PAGE> 17
no more than 2.00% of the net asset value of the issued shares and bill the
party to whom the replacement 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 per share (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) 341-2911 ((800) 421-2833 for the hearing impaired) or in writing
to Investor Services. 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 Investor Services to charge a shareholder's
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; 401(k) plans; Section 403(b)(7) plans in the case of
employees of public school systems and certain non-profit organizations; or
other pension or profit sharing plans. Documents and forms containing detailed
information regarding these plans are available from the Distributor. Van Kampen
Trust Company serves as custodian under the IRA, 403(b)(7) and Keogh plans.
Details regarding fees, as well as full plan administration for profit sharing,
pension and 401(k) plans, are available from the Distributor.
AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS. Holders of Class A shares can use
ACH to have redemption proceeds deposited electronically into their bank
accounts. Redemptions transferred to a bank account via the ACH plan are
available to be credited to the account on the second business day following
normal payment. In order to utilize this option, the shareholder's bank must be
a member of ACH. In addition, the shareholder must fill out the appropriate
section of the account application. The shareholder must also include a voided
check or deposit slip from the bank account into which redemptions are to be
deposited together with the completed application. Once Investor Services has
received the application and the voided check or deposit slip, such
shareholder's designated bank account, following any redemption, will receive
the proceeds of such redemption. Once enrolled in the ACH plan, a shareholder
may terminate participation at any time by writing Investor Services.
DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application accompanying this
Prospectus or by calling (800) 341-2911 ((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 per share 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 Participating Fund based on the next computed net asset value per
share of each fund after requesting the exchange without any sales charge,
subject to certain limitations. Shares of the Fund may be exchanged for shares
of any Participating Fund only if shares of that Participating Fund are
available for sale; however, during periods of suspension of sales, shares of a
Participating Fund may be available for sale only to existing shareholders of
the Participating Fund. 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 Participating 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 applicable CDSC schedule, conversion period, if any, and holding
period is based upon the initial purchase of such Class B shares or Class C
shares from a Participating Fund. When such Class B or Class C shares are
redeemed and not exchanged for shares of another Participating Fund, such Class
B or Class C shares are subject to the CDSC schedule imposed by the
Participating Fund from which such shares were originally purchased.
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<PAGE> 18
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.
A shareholder wishing to make an exchange may do so by sending a written
request to Investor Services 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 accompanying this
Prospectus. Van Kampen and its subsidiaries, including Investor Services
(collectively, "VK"), 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 VK nor the Fund
will be liable for following telephone instructions which it reasonably believes
to be genuine. VK and the Fund may be liable for any losses due to unauthorized
or fraudulent instructions if reasonable procedures are not followed. If the
exchanging shareholder does not have an account in the fund whose shares are
being acquired, a new account will be established with the same registration,
dividend and capital 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 Participating 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 per share after
receipt of instructions may establish a monthly, quarterly, semi-annual or
annual withdrawal plan. Any investor whose shares in a single account total
$5,000 or more at the next determined net asset value per share after receipt of
instructions may establish a quarterly, semi-annual or annual withdrawal plan.
This plan provides for the orderly use of the entire account, not only the
income but also the capital, if necessary. Each withdrawal constitutes a
redemption of shares on which any capital gain or loss will be recognized. The
planholder may arrange for monthly, quarterly, 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 per share. 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 gain or loss realized by the shareholder upon the
redemption of shares is a taxable event. The Fund reserves the right to amend or
terminate the systematic withdrawal program on 30 days' notice to its
shareholders.
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 Investor Services as agent by completing the Authorization for
Redemption by Check form and the appropriate section of the account application
and returning the form and application to Investor Services. Once the form is
properly completed, signed and returned to Investor Services, 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 Investor Services at the next
determined net
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<PAGE> 19
asset value per share. 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 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.
INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform certain
transactions through the internet. Please refer to our web site at
www.van-kampen.com for further instruction. VK and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated
through the internet are genuine. Such procedures include requiring use of a
personal identification number prior to acting upon internet instructions and
providing written confirmation of instructions communicated through the
internet. If reasonable procedures are employed neither VK nor the Fund will be
liable for following instructions through the internet which it reasonably
believes to be genuine. If an account has multiple owners, Investor Services may
rely on the instructions of any one owner.
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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 Van Kampen Investor Services, 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 Investor Services. 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 120 days must
accompany the redemption request. IRA redemption requests should be sent to the
IRA custodian to be forwarded to Investor Services. Where Van Kampen Trust
Company serves as custodian, special IRA, 403(b)(7), or Keogh distribution forms
must be obtained from and must be forwarded to Van Kampen 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
Investor Services. Payment for shares redeemed is made by check mailed within
seven days after acceptance by Investor Services 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
17
<PAGE> 20
have been recently purchased by check, Investor Services 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.
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
accompanying this Prospectus or call the Fund at (800) 341-2911 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. VK 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 VK nor the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine. VK
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 Investor Services by
telephone, whether because all telephone lines are busy or for any other reason;
in such case, a shareholder would have to use the Fund's regular redemption
procedure described above. Requests received by Investor Services 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, Investor Services may rely on the instructions of any one
owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire transfer. 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 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.
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 and the proceeds are
wired on the date of receipt. Redemption requests received by Investor Services
after such hour are priced subsequently processed and the proceeds are wired on
the next banking day following receipt of such request. Investor Services
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 Investor Services 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.
GENERAL REDEMPTION INFORMATION. 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 will be given and the
shareholder will be given an opportunity to purchase the required value of
additional shares at the next determined net asset value per share without sales
charge. Any involuntary redemption may only occur if the shareholder account is
less than the minimum initial investment due to shareholder redemptions.
REDEMPTION UPON DEATH OR DISABILITY. The Fund will waive the CDSC on
redemptions following the death or disability of a Class B shareholder and Class
C shareholder. An individual will be considered disabled for this purpose if he
or she meets the definition thereof in Section 72(m)(7) of the Code, which in
pertinent part defines a person as disabled if such person "is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or to be
of long-continued and indefinite duration." While the Fund does not specifically
adopt the balance of the Code's definition which pertains to furnishing the
Secretary of Treasury
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<PAGE> 21
with such proof as 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 death or disability, the CDSC on Class B shares and Class C shares
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 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 death or the initial determination of disability.
REINSTATEMENT PRIVILEGE. 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 Trust Company for repayment of principal (and interest) on their
borrowings on such plans.
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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, 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.
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<PAGE> 22
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 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, 1998, there were $2,882,684 and $145,960 of unreimbursed distribution
expenses with respect to Class B shares and Class C shares, respectively,
representing approximately 2.34% and 0.91% 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.
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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 Investor
Services. 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.
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.
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TAX STATUS
- --------------------------------------------------------------------------------
The Fund has elected and qualified, and intends to continue to qualify each
year, to be treated as a regulated investment company under Subchapter M of the
Code. To qualify as a regulated investment company, the Fund must comply with
certain requirements of the Code relating to, among other things, the source of
its income and 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
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<PAGE> 23
(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 ("capital gain dividends"), 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 ordinary income dividends and
capital gain dividends, including the portion (if any) of such capital gain
dividends to which the special 28% tax rate described below is applicable, will
be provided by the Fund to shareholders for each year that such amounts are
$10.00 or more.
The maximum tax rate applicable to capital gains for individuals and other
non-corporate taxpayers generally is (i) the same as the maximum ordinary income
tax rate for capital assets held for one year or less or (ii) 20% for capital
assets held for more than one year. A special 28% tax rate may apply to a
portion of the capital gain dividends paid by the Fund with respect to its
taxable year ended June 30, 1998.
To avoid being subject to a 31% federal backup withholding tax on dividends,
capital gain dividends 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 "Tax Status of the Fund" in the
Statement of Additional Information.
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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, 1998, 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.
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 standard performance information required by the SEC as described
above.
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<PAGE> 24
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 of this Prospectus.
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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 was renamed as Van Kampen American Capital Reserve Fund. The
Fund adopted its current name on July 14, 1998. The authorized capitalization of
the Fund consists of an unlimited number of shares of beneficial interest, par
value $0.01 per share, divided into classes. 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. Except as described herein, there are no conversion,
preemptive or other subscription rights. 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 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 his or her 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.
22
<PAGE> 25
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) 341-2911
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 RESERVE FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN
ASSET MANAGEMENT INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
VAN KAMPEN
INVESTOR SERVICES INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen Reserve Fund
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 West Franklin Street
P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen Reserve Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
200 East Randolph Drive
Chicago, IL 60601
<PAGE> 26
- --------------------------------------------------------------------------------
RESERVE FUND
- --------------------------------------------------------------------------------
P R O S P E C T U S
SEPTEMBER 15, 1998
VAN KAMPEN FUNDS LOGO
RES PRO 9/98
<PAGE> 27
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN RESERVE FUND
Van Kampen 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 Funds Inc. at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181 or (800) 341-2911.
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-13
Distribution and Service Plans.............................. B-14
Transfer Agent.............................................. B-14
Portfolio Transactions and Brokerage........................ B-15
Determination of Net Asset Value............................ B-15
Purchase and Redemption of Shares........................... B-16
Exchange Privilege.......................................... B-17
Check Writing Privilege..................................... B-18
Dividends and Distributions................................. B-18
Tax Status of the Fund...................................... B-19
Yield Information........................................... B-21
Other Information........................................... B-22
Rating Categories........................................... B-22
Report of Independent Accountants........................... B-24
Financial Statements........................................ B-25
Notes to Financial Statements............................... B-33
</TABLE>
This Statement of Additional Information is dated September 15, 1998.
B-1
<PAGE> 28
GENERAL INFORMATION
Van Kampen Reserve Fund, formerly known as Van Kampen American Capital
Reserve Fund (the "Fund"), originally was incorporated in Maryland on March 28,
1974. The Fund was reorganized as a business trust under the laws of Delaware
and was renamed Van Kampen American Capital Reserve Fund. The Fund adopted its
current name on July 14, 1998.
Van Kampen Asset Management Inc. (the "Adviser"), Van Kampen Funds Inc.
(the "Distributor"), and Van Kampen Investor Services Inc. ("Investor Services")
are wholly-owned subsidiaries of Van Kampen Investments Inc. ("Van Kampen"),
which is an indirect wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
The principal office of the Fund, the Adviser, the Distributor and Van Kampen is
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
Morgan Stanley Dean Witter & 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 August 13, 1998, 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 Trust Company A 119,684,001 16.72%
2800 Post Oak Blvd. B 67,557,755 41.19%
Houston, TX 77056 C 5,546,545 23.40%
</TABLE>
Van Kampen 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 a single issuer, except that (i) the Fund may invest up to 25% of its total
assets in the first tier securities of a single issuer for a period of up to
three business days in
B-2
<PAGE> 29
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
Fund may invest, with limitations, more than 5% of its total assets in
securities subject to a guarantee issued by a non-controlled person. 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 "Ratings Categories" for an explanation of these ratings);
and (e) repurchase agreements collateralized by the debt securities
described above;
B-3
<PAGE> 30
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> 31
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 Fund and executive
officers of the Fund's investment adviser and their principal occupations for
the last five years and their affiliations, if any, with Van Kampen Investments
Inc. ("Van Kampen"), Van Kampen Investment Advisory Corp. ("Advisory Corp."),
Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Funds Inc.,
the distributor of the Fund's shares (the "Distributor"), Van Kampen Management
Inc., Van Kampen Advisors Corp., Van Kampen Insurance Agency of Illinois Inc.,
Van Kampen Insurance Agency of Texas Inc., Van Kampen System Inc., Van Kampen
Recordkeeping Services Inc., American Capital Contractual Services, Inc., Van
Kampen Trust Company, Van Kampen Exchange Corp. and Van Kampen Investor Services
Inc., the Fund's transfer agent ("Investor Services"). Advisory Corp. and Asset
Management sometimes are referred to herein collectively as the "Advisers". For
purposes hereof, the term "Fund Complex" includes each of the open-end
investment companies advised by the Advisers (excluding the Van Kampen American
Capital Exchange Fund).
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, Individual Asset
Two World Trade Center Management Group, a division of Morgan Stanley Dean
66th Floor Witter & Co. Mr. DeMartini is a Director of InterCapital
New York, NY 10048 Funds, Dean Witter Distributors, Inc. and Dean Witter
Date of Birth: 10/12/52 Trust Company. 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.
Linda Hutton Heagy........................ 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.
</TABLE>
B-5
<PAGE> 32
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
<S> <C>
R. Craig Kennedy.......................... President and Director, German Marshall Fund of the
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.
Don G. Powell*............................ Chairman and a Director of Van Kampen. Chairman and a
2800 Post Oak Blvd. Director of the Advisers and the Distributor. Chairman
Houston, TX 77056 and a Director of Investor Services. Director or officer
Date of Birth: 10/19/39 of certain other subsidiaries of Van Kampen. Chairman of
the Board of Governors and the Executive Committee of the
Investment Company Institute. Prior to July of 1998,
Director and Chairman of VK/AC Holding, Inc. Prior to
November 1996, President, Chief Executive Officer and a
Director of VK/AC Holding, Inc. Trustee/Director of each
of the funds in the Fund Complex and
Trustee/Director/Managing General Partner of other funds
advised by the Advisers or Van Kampen Management Inc.
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, and other open-end and closed-end funds advised
Date of Birth: 08/22/39 by the Advisers or Van Kampen Management Inc.
Trustee/Director of each of the funds in the Fund
Complex, and Trustee/Director/Managing General Partner of
other open-end and closed-end funds advised by the
Advisers or Van Kampen Management Inc.
</TABLE>
- ---------------
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. Whalen is an interested person of the Fund by reason of
his firm currently acting as legal counsel to the Fund. Messrs. DeMartini and
Powell are interested persons of the Fund and the Advisers by reason of their
positions with Morgan Stanley Dean Witter & Co. or its affiliates.
B-6
<PAGE> 33
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>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
Dennis J. McDonnell.................. Executive Vice President and a Director of Van Kampen.
Date of Birth: 05/20/42 President, Chief Operating Officer and a Director of the
President Advisers, Van Kampen Advisors Inc., and Van Kampen
Management Inc. Prior to July of 1998, Director and
Executive Vice President of VK/AC Holding, Inc. Prior to
April of 1998, President and a Director of Van Kampen
Merritt Equity Advisors Corp. Prior to April of 1997, Mr.
McDonnell was a Director of Van Kampen Merritt Equity
Holdings Corp. Prior to September of 1996, Mr. McDonnell was
Chief Executive Officer and Director of MCM Group, Inc.,
McCarthy, Crisanti & Maffei, Inc. and Chairman and Director
of MCM Asia Pacific Company, Limited and MCM (Europe)
Limited. Prior to July of 1996, Mr. McDonnell was President,
Chief Operating Officer and Trustee of VSM Inc. and VCJ Inc.
President of each of the funds in the Fund Complex.
President, Chairman of the Board and Trustee/Managing
General Partner of other investment companies advised by the
Advisers or their affiliates.
Peter W. Hegel....................... Executive Vice President of the Advisers, Van Kampen
Date of Birth: 06/25/56 Management Inc. and Van Kampen Advisors Inc. Prior to July
Vice President of 1996, Mr. Hegel was a Director of VSM Inc. Prior to
September of 1996, he was a Director of McCarthy, Crisanti &
Maffei, Inc. 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..................... Senior Vice President of the Advisers, Vice President and
Date of Birth: 08/04/46 Chief Accounting Officer of each of the funds in the Fund
Vice President and Chief Accounting Complex and certain other investment companies advised by
Officer the Advisers or their affiliates.
</TABLE>
B-7
<PAGE> 34
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
Ronald A. Nyberg..................... Executive Vice President, General Counsel, Secretary and
Date of Birth: 07/29/53 Director of Van Kampen. Mr. Nyberg is Executive Vice
Vice President and Secretary President, General Counsel, Assistant Secretary and a
Director of the Advisers and the Distributor, Van Kampen
Advisors Inc., Van Kampen Management Inc., Van Kampen
Exchange Corp., American Capital Contractual Services, Inc.
and Van Kampen Trust Company. Executive Vice President,
General Counsel and Assistant Secretary of Van Kampen
Investor Services Inc. Director or officer of certain other
subsidiaries of Van Kampen. Director of ICI Mutual Insurance
Co., a provider of insurance to members of the Investment
Company Institute. Prior to July of 1998, Director and
Executive Vice President, General Counsel and Secretary of
VK/AC Holding, Inc. Prior to April of 1998, Executive Vice
President, General Counsel and Director of Van Kampen
Merritt Equity Advisors Corp. Prior to April of 1997, he was
Executive Vice President, General Counsel and a Director of
Van Kampen Merritt Equity Holdings Corp. Prior to September
of 1996, he was General Counsel of McCarthy, Crisanti &
Maffei, Inc. Prior to July of 1996, Mr. Nyberg was Executive
Vice President and General Counsel of VSM Inc. and Executive
Vice President and General Counsel of VCJ Inc. 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.
Paul R. Wolkenberg................... Executive Vice President and Director of Van Kampen.
Date of Birth: 11/10/44 Executive Vice President of the AC Adviser and the
Vice President Distributor. President and a Director of Van Kampen Investor
Services Inc. President and Chief Operating Officer of Van
Kampen Recordkeeping Services, Inc. Prior to July of 1998,
Director and Executive Vice President of VK/AC Holding, Inc.
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................... Senior Vice President of the Advisers, Van Kampen and Van
Date of Birth: 01/11/56 Kampen Management Inc. Senior Vice President and Chief
Vice President and Chief Operating Officer of the Distributor. Vice President and
Financial Officer 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..................... First Vice President of Van Kampen and the Advisers.
Date of Birth: 08/20/55 Treasurer of each of the funds in the Fund Complex and
Treasurer certain other investment companies advised by the Advisers
or their affiliates.
Tanya M. Loden....................... Vice President of Van Kampen and the Advisers. Controller of
Date of Birth: 11/19/59 each of the funds in the Fund Complex and other investment
Controller companies advised by the Advisers or their affiliates.
Nicholas Dalmaso..................... Associate General Counsel and Assistant Secretary of Van
Date of Birth: 03/01/65 Kampen. Vice President, Associate General Counsel and
Assistant Secretary Assistant Secretary of the Advisers, the Distributor, Van
Kampen Advisors Inc. and Van Kampen Management Inc.
Assistant Secretary of each of the funds in the Fund Complex
and other investment companies advised by the Advisers or
their affiliates.
</TABLE>
B-8
<PAGE> 35
<TABLE>
<CAPTION>
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
<S> <C>
Huey P. Falgout, Jr.................. Vice President, Assistant Secretary and Senior Attorney of
Date of Birth: 11/15/63 Van Kampen. Vice President, Assistant Secretary and Senior
Assistant Secretary Attorney of the Advisers, the Distributor, Van Kampen
Investor Services Inc., Van Kampen Management Inc., American
Capital Contractual Services, Inc., Van Kampen Exchange
Corp. and Van Kampen Advisors Inc. Assistant Secretary of
each of the funds in the Fund Complex and other investment
companies advised by the Advisers or their affiliates.
Scott E. Martin...................... Senior Vice President, Deputy General Counsel and Assistant
Date of Birth: 08/20/56 Secretary of Van Kampen. Senior Vice President, Deputy
Assistant Secretary General Counsel and Secretary of the Advisers, the
Distributor, Van Kampen Investor Services Inc., American
Capital Contractual Services, Inc., Van Kampen Management
Inc., Van Kampen Exchange Corp., Van Kampen Advisors Inc.,
Van Kampen Insurance Agency of Illinois Inc., Van Kampen
System Inc. and Van Kampen Recordkeeping Services Inc. Prior
to July of 1998, Senior Vice President, Deputy General
Counsel and Assistant Secretary of VK/AC Holding, Inc. Prior
to April of 1998, Van Kampen Merritt Equity Advisors Corp.
Prior to April of 1997, Senior Vice President, Deputy
General Counsel and Secretary of Van Kampen American Capital
Services, Inc. and Van Kampen Merritt Holdings Corp. Prior
to September of 1996, Mr. Martin was Deputy General Counsel
and Secretary of McCarthy, Crisanti & Maffei, Inc., and
prior to July of 1996, he was Senior Vice President, Deputy
General Counsel and Secretary of VSM Inc. and VCJ Inc.
Assistant Secretary of each of the funds in the Fund Complex
and other investment companies advised by the Advisers or
their affiliates.
Weston B. Wetherell.................. Vice President, Associate General Counsel and Assistant
Date of Birth: 06/15/56 Secretary of Van Kampen, the Advisers, the Distributor, Van
Assistant Secretary Kampen Management Inc. and Van Kampen Advisors Inc. Prior to
September of 1996, Mr. Wetherell was Assistant Secretary of
McCarthy, Crisanti & Maffei, Inc. Assistant Secretary of
each of the funds in the Fund Complex and other investment
companies advised by the Advisers or their affiliates.
Steven M. Hill....................... Vice President of Van Kampen and the Advisers. Assistant
Date of Birth: 10/16/64 Treasurer of each of the funds in the Fund Complex and other
Assistant Treasurer investment companies advised by the Advisers or their
affiliates.
Michael Robert Sullivan.............. Assistant Vice President of the Advisers. Assistant
Date of Birth: 03/30/33 Controller of each of the funds in the Fund Complex and
Assistant Controller other investment companies advised by the Advisers or their
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 64 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
Van Kampen Series Fund, Inc. (the "VK Funds") and the funds advised by Advisory
Corp. organized as series of the Van Kampen Series Fund, Inc. (the "MS Funds").
Each trustee/director who is not an affiliated person of the Advisers, the
Distributor, Van Kampen or Morgan Stanley Dean Witter & Co. (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
(except the money market series of the MS Funds) provides a deferred
compensation plan to its Non-Affiliated Trustees that allows trustees/directors
to defer receipt of their compensation and earn a return on such deferred
B-9
<PAGE> 36
amounts. Deferring compensation has the economic effect as if the Non-Affiliated
Trustee reinvested his or her compensation into the funds. Each fund in the Fund
Complex (except the money market series of the MS Funds) 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 trustees recently reviewed and adopted a standardized compensation and
benefits program for each fund in the Fund Complex. Effective January 1, 1998,
the compensation of each Non-Affiliated Trustee includes an annual retainer in
an amount equal to $50,000 per calendar year, due in four quarterly installments
on the first business day of each quarter. Payment of the annual retainer is
allocated among the funds in the Fund Complex (except the money market series of
the MS Funds) on the basis of the relative net assets of each fund as of the
last business day of the preceding calendar quarter. Effective January 1, 1998,
the compensation of each Non-Affiliated Trustee includes a per meeting fee from
each fund in the Fund Complex (except the money market series of the MS Funds)
in the amount of $200 per quarterly or special meeting attended by the
Non-Affiliated Trustee, due on the date of the meeting, plus reasonable expenses
incurred by the Non-Affiliated Trustee in connection with his or her services as
a trustee, provided that no compensation will be paid in connection with certain
telephonic special meetings.
For each AC Fund's last fiscal year and the period up to and including
December 31, 1997, 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.
For each VK Fund's last fiscal year and the period up to and including
December 31, 1997, the compensation of each Non-Affiliated Trustee from each VK
Fund 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.
For the period from July 2, 1997 up to and including December 31, 1997, the
compensation of each Non-Affiliated Trustee from the MS Funds was 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.
Under the deferred compensation plan, each Non-Affiliated Trustee generally
can elect to defer receipt of all or a portion of the compensation earned by
such Non-Affiliated Trustee until retirement. Amounts deferred
B-10
<PAGE> 37
are retained by the Fund and earn a rate of return determined by reference to
the return on the common shares of such Fund or other funds in the Fund Complex
as selected by the respective Non-Affiliated Trustee, with the same economic
effect as if such Non-Affiliated Trustee had invested in one or more funds in
the Fund Complex. To the extent permitted by the 1940 Act, the Fund may invest
in securities of those funds selected by the Non-Affiliated Trustees in order to
match the deferred compensation obligation. The deferred compensation plan is
not funded and obligations thereunder represent general unsecured claims against
the general assets of the Fund.
Under the retirement plan, a Non-Affiliated Trustee who is receiving
compensation from such Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500 per year for each of
the ten years following such retirement from such Fund. Non-Affiliated Trustees
retiring prior to the age of 60 or with fewer than 10 years but more than 5
years of service may receive reduced retirement benefits from such Fund. Each
trustee/director has served as a member of the Board of Trustees of the Fund
since he or she was first appointed or elected in the year set forth below. The
retirement plan contains a Fund Complex retirement benefit cap of $60,000 per
year.
Additional information regarding compensation and benefits for trustees is
set forth below for the periods described in the notes accompanying the table.
COMPENSATION TABLE
<TABLE>
<CAPTION>
FUND COMPLEX
----------------------------------------------------------
AGGREGATE AGGREGATE TOTAL
YEAR FIRST PENSION OR ESTIMATED MAXIMUM COMPENSATION
APPOINTED OR AGGREGATE COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS BEFORE DEFERRAL
ELECTED TO THE BEFORE DEFERRAL FROM THE ACCRUED AS PART OF FROM THE FUND UPON FROM FUND
NAME(1) BOARD FUND(2) EXPENSES(3) RETIREMENT(4) COMPLEX(5)
------- -------------- ------------------------ ------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan* 1991 $1,760 $30,328 $60,000 $111,197
Linda Hutton Heagy* 1995 1,560 3,141 60,000 111,197
R. Craig Kennedy* 1995 1,760 2,229 60,000 111,197
Jack E. Nelson* 1995 1,760 15,820 60,000 104,322
Jerome L. Robinson 1995 740 32,020 15,750 107,947
Phillip B. Rooney* 1997 1,760 0 60,000 74,697
Dr. Fernando Sisto* 1991 1,760 60,208 60,000 111,197
Wayne W. Whalen* 1995 1,760 10,788 60,000 111,197
</TABLE>
- ---------------
* Currently a member of the Board of Trustees.
(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. Mr. Robinson retired from the Board of
Trustees on December 31, 1997. Trustees not eligible for compensation are
not included in the compensation table.
(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended May 31, 1998. The
following trustees deferred compensation from the Fund during the fiscal
year ended May 31, 1998: Mr. Branagan, $1,760; Ms. Heagy, $1,560; Mr.
Kennedy, $880; Mr. Nelson, $1,760; Mr. Robinson, $740; Mr. Rooney, $1,760;
Dr. Sisto, $880; and Mr. Whalen, $1,760. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to either the
return on the common shares of the Fund or other funds in the Fund Complex
as selected by the respective Non-Affiliated Trustee, with the same economic
effect as if such Non-Affiliated Trustee had invested in one or more funds
in the Fund Complex. To the extent permitted by the 1940 Act, each Fund may
invest in securities of those funds selected by the Non-Affiliated Trustees
in order to match the deferred compensation obligation. The cumulative
deferred compensation (including interest) accrued with respect to each
trustee, including former trustees, from the Fund as of May 31, 1998 is as
follows: Mr. Branagan, $3,550; Dr. Caruso, $3,449; Mr. Gaughan, $433; Ms.
Heagy, $4,797; Mr. Kennedy, $2,939; Mr. Miller,
B-11
<PAGE> 38
$2,276; Mr. Nelson, $5,780; Mr. Rees, $32,480; Mr. Robinson, $4,100; Mr. Rooney,
$1,888; Dr. Sisto, $9,602; Mr. Vernon, $3,375; and Mr. Whalen, $5,747. The
deferred compensation plan is described above the Compensation Table.
(3) The amounts shown in this column represent the sum of the retirement
benefits expected to be accrued by the operating investment companies in the
Fund Complex for each of the current trustees for the Funds' respective
fiscal years ended in 1997. The retirement plan is described above the
Compensation Table.
(4) For Mr. Robinson, this is the sum of the actual annual benefits payable by
the operating investment companies in the Fund Complex as of the date of his
retirement for each year of the 10-year period since his retirement. For the
remaining trustees, this is the sum of the estimated maximum annual benefits
payable by the operating investment companies in the Fund Complex for each
year of the 10-year period commencing in the year of such trustee's
anticipated retirement. The Retirement Plan is described above the
Compensation Table.
(5) The amounts shown in this column represent the aggregate compensation paid
by all operating investment companies in the Fund Complex as of December 31,
1997 before deferral by the trustees under the deferred compensation plan.
Because the funds in the Fund Complex have different fiscal year ends, the
amounts shown in this column are presented on a calendar year basis. Certain
trustees deferred all or a portion of their aggregate compensation from the
Fund Complex during the calendar year ended December 31, 1997. The deferred
compensation earns a rate of return determined by reference to the return on
the shares of the funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, the Fund may invest in
securities of those investment companies selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
Advisers and their affiliates also serve as investment adviser for other
investment companies; however, with the exception of Mr. Whalen, the
Non-Affiliated Trustees were not trustees of such investment companies.
Combining the Fund Complex with other investment companies advised by the
Advisers and their affiliates, Mr. Whalen received Total Compensation of
$268,447 during the calendar year ended December 31, 1997.
As of August 13, 1998, 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 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 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 Fund's 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.
B-12
<PAGE> 39
Such fee is payable for each calendar month as soon as practicable after the end
of that month. The fee payable to the Adviser is reduced by any commissions,
tender solicitation and other fees, brokerage or similar payments received by
the Adviser, or any other direct or indirect majority-owned subsidiary of Van
Kampen in connection with the purchase and sale of portfolio investments of the
Fund, less any direct expenses incurred by such subsidiary of Van Kampen 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 Van Kampen 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, 1998, 1997 and 1996, the Adviser
received $2,251,176, $2,170,578 and $1,842,244, respectively in advisory fees
from the Fund.
OTHER AGREEMENTS
ACCOUNTING SERVICES AGREEMENT. The Fund has entered into an accounting
services agreement pursuant to which Advisory Corp. provides accounting services
supplementary to those provided by the Custodian. Such services are expected to
enable the Fund to more closely monitor and maintain its accounts and records.
The Fund 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, 1998, 1997 and 1996, the Fund paid expenses of
approximately $131,834, $90,167 and $127,090, respectively, representing the
Advisory Corp.'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
B-13
<PAGE> 40
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.
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 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, 1998, the Fund's aggregate expenses under
Class A Plan were $629,215 or 0.14% of the Class A shares' average net assets.
For the fiscal year ended May 31, 1998, the Fund's aggregate expenses under
the Class B Plan were $612,527 or 0.89% of the Class B shares' average net
assets. Such expenses were paid to reimburse the Distributor for the following
payments: $502,176 for commissions and transaction fees paid to financial
intermediaries in respect of sales of Class B shares of the Fund and $110,351
for fees paid to financial intermediaries for servicing Class B shareholders and
administering the Plans. For the fiscal year ended May 31, 1998, the Fund's
aggregate expenses under the Class C Plan were $93,011 or 0.89% of the Class C
shares' average net assets. Such expenses were paid to reimburse the Distributor
for the following payments: $73,963 for commissions and transaction fees paid to
financial intermediaries in respect of sales of Class C shares of the Fund and
$19,048 for fees paid to financial intermediaries for servicing Class C
shareholders and administering the Plans.
TRANSFER AGENT
During the fiscal years ending May 31, 1998, 1997 and 1996, Van Kampen
Investor Services Inc. shareholder service agent and dividend disbursing agent
for the Fund, received fees aggregating $1,321,365, $1,374,092 and $1,280,376,
respectively, for these services. Beginning in 1998, the transfer agency prices
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive market benchmarks. Prior to 1988, transfer agency services
were provided at cost plus a profit.
B-14
<PAGE> 41
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 may include
a commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers may 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 per share 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 per share 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 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
B-15
<PAGE> 42
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 Investor Services.
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 Investor Services.
However, the shareholder may request a certificate by writing Investor Services
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.
REDEMPTION OF SHARES
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 Death or Disability
The Fund will waive the CDSC -- Class B and C on redemptions following the
death or disability of a Class B shareholder and Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Internal Revenue Code of 1986, as
amended (the "Code"), which in pertinent part defines a person as disabled if
such person "is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or to be of long-continued and indefinite duration."
While the Fund does not specifically adopt the balance of the Code's definition
which pertains to furnishing the Secretary of Treasury with such proof as he or
she may require, the Distributor will require satisfactory proof of death or
disability before it determines to waive the CDSC -- Class B and C.
In cases of death or disability, the CDSC -- Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC -- Class B and C applies to a total or partial
redemption, but only to redemptions of shares held at the time of the death or
initial determination of disability.
(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 Participating Funds
(as
B-16
<PAGE> 43
defined in the Prospectus); 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 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 Investor Services
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 Investor Services to be genuine. Van Kampen and its subsidiaries,
including Investor Services, and the Fund employ procedures considered by them
to be reasonable to confirm
B-17
<PAGE> 44
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, Investor Services nor the Fund will
be liable for following telephone instructions which it reasonably believes to
be genuine. Van Kampen, Investor Services 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 Investor Services 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 Investor Services 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 certifications must be dated within 120 days of their receipt by Investor
Services.
The privilege does not carry over to accounts established through exchanges
or transfers. It must be requested separately for each fund account.
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 Investor
Services. 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
B-18
<PAGE> 45
Board may suspend further dividend payments until net asset value per share
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 has qualified and intends to continue to
qualify each year 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, will be
subject to tax at regular corporate rates (without any deduction for
distributions to shareholders) and all distributions out of earnings and profits
will be taxed to shareholders as ordinary income. To qualify again as a
regulated investment company in a subsequent year, the Fund may be required to
pay an interest charge of 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and profits to its shareholders (less any interest charge).
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 31st, together with 98% of
its capital gain net income for the twelve months ended October 31st of such
year. For purposes of the excise tax, any ordinary income or capital gain net
income retained by, and subject to federal income tax in the hands of, the Fund
will be treated as having been distributed. The Fund intends to distribute
sufficient amounts to avoid liability for the excise tax.
Income from investments in foreign obligations received by the Fund may be
subject to income, withholding and other taxes imposed by foreign countries. Tax
conventions between the certain countries and the United States may reduce or
eliminate such taxes. Investors will not be entitled to claim United States
foreign tax credits with respect to such taxes.
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 gain dividends"), if
any, are taxable to shareholders as long-term capital gains regardless of the
length of time shares of the Fund have been held by such shareholders.
Distributions in excess of the Fund's earnings and profits will first reduce the
adjusted tax basis of a holder's shares and, after such adjusted tax basis is
reduced to zero, will constitute capital gains to such holder (assuming such
shares are held as a capital asset). For a summary of the tax rates applicable
to capital gains (including capital gain dividends), see "Capital Gains Rates"
below. Tax-exempt shareholders not subject to federal income tax on their income
generally will not be taxed on distributions from the Fund.
B-19
<PAGE> 46
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.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31st prior to the date of payment.
In addition, certain other distributions made after the close of 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 gain dividends received with respect
to such shares. For a summary of the tax rates applicable to capital gains, see
"Capital Gains Rates" 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. The maximum tax rate applicable to capital gains for
individuals and other non-corporate taxpayers generally is (i) the same as the
maximum ordinary income tax rate for capital assets held for one year or less or
(ii) 20% for capital assets held for more than one year. A special 28% tax rate
may apply to a portion of the capital gain dividends paid by the Fund with
respect to its taxable year ended June 30, 1998.
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
B-20
<PAGE> 47
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, 1998 was 4.72%. Its compound effective yield for the same period
was 4.83%. For Class B shares the annualized yield and compound effective yield
for the seven day period was 3.92% and 4.00%, respectively. For Class C shares
the annualized yield and compound effective yield for the seven day period was
3.93% and 4.01%, 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, 1998, 10.2% of the Fund's portfolio
was invested in obligations of U.S. Government Agencies', 67.1% was invested in
commercial paper of which 100% was rated A-1 or Prime-1, 1.7% was invested in
Certificates of Deposit, and the remaining 21.0% 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 days for all of its issues. The
calculation is weighted by the relative value of the investment. At May 31, 1998
the average dollar weighted maturity of the portfolio was 26 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 believes the Fund compares relative to other Van Kampen
B-21
<PAGE> 48
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 West
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 -- PricewaterhouseCoopers LLP, 200 East Randolph,
Chicago, Illinois 60601, 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.
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.
B-22
<PAGE> 49
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 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-23
<PAGE> 50
================================================================================
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, 1998, 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,
1998 by correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Chicago, Illinois
June 26, 1998
B-24
<PAGE> 51
================================================================================
PORTFOLIO OF INVESTMENTS
================================================================================
May 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Discount Yield
Amount on Date
(000)) Description of Purchase Maturity Amortized Cost
- ------ ----------- ----------- -------- --------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS 8.0%
$ 10,252 Federal Home Loan Bank Consolidated
Discount Note ................................... 5.412% 07/13/98 $ 10,187,344
12,080 Federal Home Loan Mortgage Discount Note ........ 5.469 06/09/98 12,059,846
10,000 Federal National Mortgage Association
Discount Note ................................... 5.426 07/10/98 9,941,334
10,000 Federal National Mortgage Association
Discount Note ................................... 5.394 07/29/98 9,913,958
20,000 Federal National Mortgage Association
Medium Term Note ................................ 5.625 04/28/99 19,990,904
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS ........................................ 62,093.386
-----------
CERTIFICATE OF DEPOSIT 1.3%
10,000 Societe Generale ................................ 5.550 07/10/98 10,000,000
-----------
COMMERCIAL PAPER 52.7%
19,000 Abbott Labs Corp. ............................... 5.493 06/02/98 18,994,226
25,000 American Express Co. ............................ 5.520 06/08/98 24,969,611
25,000 American General Finance Corp. .................. 5.578 07/06/98 24,862,000
20,000 Associates Corp. of North America ............... 5.545 07/09/98 19,881,050
20,000 Chevron USA, Inc. ............................... 5.511 06/12/98 19,963,466
25,000 CIT Group Holdings, Inc. ........................ 5.508 06/22/98 24,916,431
25,000 Coca Cola Co. ................................... 5.499 07/08/98 24,855,915
25,000 Commercial Credit Corp. ......................... 5.530 06/19/98 24,927,826
30,000 Ford Motor Credit Corp. ......................... 5.547 07/13/98 29,803,991
25,000 General Electric Capital Corp. .................. 5.565 06/05/98 24,980,868
20,000 IBM Credit Corp. ................................ 5.538 06/22/98 19,932,655
25,000 John Deere Capital Corp., Class B ............... 5.551 07/27/98 24,782,291
25,000 LaSalle National Bank ........................... 5.530 07/16/98 25,000,000
20,000 Merrill Lynch & Co., Inc. ....................... 5.588 08/21/98 19,748,988
15,000 New York St Power Auth Rev & Genl Purp Ser D. ... 5.881 02/15/99 15,000,000
20,000 Norwest Financial Inc. .......................... 5.530 06/01/98 19,996,944
20,000 Prudential Funding Corp. ........................ 5.552 07/20/98 19,847,221
25,000 Toronto Dominion Holdings ....................... 5.753 06/01/96 24,996,118
-----------
TOTAL COMMERCIAL PAPER .......................................................... 407,459,601
-----------
</TABLE>
See Notes to Financial Statements
B-25
<PAGE> 52
================================================================================
PORTFOLIO OF INVESTMENTS (CONTINUED)
================================================================================
May 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Amortized Cost
- ----------- --------------
<S> <C>
REPURCHASE AGREEMENTS 16.5%
BankAmerica Securities ($66,289,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 05/29/98,
to be sold on 06/01/98 at $66,319,769) .................................... $ 66,289,000
Swiss Bank Corp. ($61,206,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated
05/29/98 to be sold on 06/01/98 at $61,234,308) ........................... 61,206,000
------------
TOTAL REPURCHASE AGREEMENTS ........................................ 127,495,000
------------
TOTAL INVESTMENTS 78.5%(a) ................................................ 607,047,987
OTHER ASSETS IN EXCESS OF LIABILITIES 21.5% ............................... 165,133,019
------------
NET ASSETS 100.0% ......................................................... $773,181,006
============
</TABLE>
(a) At May 31, 1998, cost is identical for both book and federal income tax
purposes.
See Notes to Financial Statements
B-26
<PAGE> 53
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
================================================================================
May 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments, at Amortized Cost which Approximates Market, including
repurchase agreements of $127,495,000 ........................................ $607,047,987
Cash ........................................................................... 1,113
Receivables:
Fund Shares Sold ............................................................. 170,184,339
Interest ..................................................................... 443,455
Other .......................................................................... 89,404
------------
Total Assets ................................................................. 777,766,298
------------
LIABILITIES:
Payables:
Fund Shares Repurchased ...................................................... 3,175,829
Distributor and Affiliates ................................................... 509,070
Investment Advisory Fee ...................................................... 239,418
Income Distributions ......................................................... 152,637
Accrued Expenses ............................................................... 338,791
Trustees' Deferred Compensation and Retirement Plans ........................... 169,547
------------
Total Liabilities ............................................................ 4,585,292
------------
NET ASSETS ..................................................................... $773,181,006
============
NET ASSETS CONSIST OF:
Capital......................................................................... $773,222,491
Accumulated Undistributed Net Investment Income ................................ 52,205
Accumulated Net Realized Loss .................................................. (93,690)
------------
NET ASSETS ..................................................................... $773,181,006
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net Asset Value, Offering Price and Redemption Price per share
(Based on net assets of $634,076,293 and 634,125,237
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 $123,018,178 and 123,015,509
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 $16,086,535 and 16,086,219
shares of beneficial interest issued and outstanding) ...................... $ 1.00
============
</TABLE>
See Notes to Financial Statements
B-27
<PAGE> 54
================================================================================
STATEMENT OF OPERATIONS
================================================================================
For the Year Ended May 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest ....................................................................... $ 30,125,078
------------
EXPENSES:
Investment Advisory Fee ........................................................ 2,251,176
Shareholder Services ........................................................... 1,885,679
Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C
of $632,729, $669,085 and $92,673, respectively) .............................. 1,394,487
Legal .......................................................................... 38,650
Custody ........................................................................ 25,102
Trustees' Fees and Expenses .................................................... 21,579
Other .......................................................................... 504,827
------------
Total Expenses ................................................................ 6,121,500
------------
NET INVESTMENT INCOME .......................................................... $ 24,003,578
============
NET REALIZED LOSS .............................................................. $ (25,912)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS .................................... $ 23,977,666
============
</TABLE>
See Notes to Financial Statements
B-28
<PAGE> 55
================================================================================
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
For the Years Ended May 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1998 May 31, 1997
---------------- ---------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income ...................................... $ 24,003,578 $ 21,972,082
Net Realized Loss .......................................... (25,912) (7,692)
---------------- ---------------
Change in Net Assets from Operations ....................... 23,977,666 21,964,390
---------------- ---------------
Distributions from Net Investment Income:
Class A Shares ........................................... (20,677,191) (18,710,328)
Class B Shares ........................................... (2,897,824) (2,925,963)
Class C Shares ........................................... (402,667) (339,500)
---------------- ---------------
Total Distributions .................................... (23,977,682) (21,975,791)
---------------- ---------------
NET CHANGE IN NET ASSETS
FROM INVESTMENT ACTIVITIES ............................... (16) (11,401)
---------------- ---------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold .................................. 11,140,736,165 8,126,739,596
Net Asset Value of Shares Issued Through
Dividend Reinvestment .................................... 23,977,682 21,975,791
Cost of Shares Repurchased ................................. (10,954,208,156) (8,117,517,908)
---------------- ---------------
NET CHANGE IN NET ASSETS
FROM CAPITAL TRANSACTIONS ................................ 210,505,691 31,197,479
---------------- ---------------
Total Increase in Net Assets ............................... 210,505,675 31,186,078
NET ASSETS:
Beginning of the Period .................................... 562,675,331 531,489,253
---------------- ---------------
End of the Period (including accumulated undistributed net
investment income of $52,205 and $26,309, respectively)... $ 773,181,006 $ 562,675,331
================ ===============
</TABLE>
See Notes to Financial Statements
B-29
<PAGE> 56
================================================================================
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 1998 1997 1996 1995 1994
- -------------- -------- -------- -------- --------- ---------
<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 ....................... .0467 .0440 .0465 .0434 .0229
Less Distributions from Net
Investment Income ......................... (.0467) (.0440) (.0465) (.0434) (.0229)
-------- -------- -------- --------- ---------
Net Asset Value, End of the Period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========= =========
Total Return ................................ 4.78% 4.52% 4.75% 4.43% 2.32%
Net Assets at End of the Period
(in millions) ............................. $ 634.1 $ 451.3 $ 440.3 $ 319.7 $ 463.8
Ratio of Expenses to Average Net Assets*..... 1.02% 1.02% 1.07% 1.00% 1.03%
Ratio of Net Investment Income
to Average Net Assets* .................... 4.60% 4.38% 4.62% 4.28% 2.36%
</TABLE>
* For the years ended May 31, 1994 through 1997, 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-30
<PAGE> 57
================================================================================
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 1998 1997 1996 May 31, 1995
- -------------- ------- -------- --------- --------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- -------- --------- --------
Net Investment Income .................. .0391 .0363 .0388 .0047
Less Distributions from Net
Investment Income .................... (.0391) (.0363) (.0388) (.0047)
------- -------- --------- --------
Net Asset Value, End of the Period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======== ========= ========
Total Return (a) ....................... 3.99% 3.71% 3.95% .47%*
Net Assets at End of the
Period (in millions) ................. $ 123.0 $ 103.0 $ 81.5 $ 4.2
Ratio of Expenses to Average
Net Assets** ......................... 1.79% 1.77% 1.86% 1.76%
Ratio of Net Investment Income
to Average Net Assets** .............. 3.91% 3.70% 3.75% 3.52%
</TABLE>
* Non-Annualized
** For the period ended May 31, 1995 and the years ended May 31, 1996 and
1997, 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-31
<PAGE> 58
================================================================================
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 1998 1997 1996 May 31, 1995
- -------------- ------- -------- --------- -------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- -------- --------- --------
Net Investment Income .................. .0392 .0362 .0387 .0049
Less Distributions from Net
Investment Income .................... (.0392) (.0362) (.0387) (.0049)
------- -------- --------- --------
Net Asset Value, End of the Period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======== ========= ========
Total Return(a) ........................ 3.99% 3.72% 3.94% .49%*
Net Assets at End of the
Period (in millions) ................. $ 16.1 $ 8.4 $ 9.7 $ 0.6
Ratio of Expenses to Average
Net Assets** ......................... 1.78% 1.78% 1.87% 1.76%
Ratio of Net Investment Income
to Average Net Assets** .............. 3.91% 3.64% 3.81% 3.52%
</TABLE>
* Non-Annualized
** For the period ended May 31, 1995 and the years ended May 31, 1996 and
1997, 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> 59
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
May 31, 1998
- --------------------------------------------------------------------------------
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 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 may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen 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-33
<PAGE> 60
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
May 31, 1998
- --------------------------------------------------------------------------------
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, 1998, the Fund had an accumulated capital loss carryforward
for tax purposes of $66,693 which will expire between May 31, 2001 and May 31,
2006. Permanent book and tax differences of $2,038 relating to the expiration of
capital loss carryforward during fiscal year 1998 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 daily from net
investment income 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, the Adviser will
provide facilities and investment advice to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
------------------ -----------
<S> <C>
First $150 million .............................. .50 of 1%
Next $100 million ............................... .45 of 1%
Next $100 million ............................... .40 of 1%
Over $350 million ............................... .35 of 1%
</TABLE>
For the year ended May 31, 1998, the Fund recognized expenses of
approximately $38,700 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the year ended May 31, 1998, the Fund recognized expenses of
approximately $131,800 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.
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, 1998, the Fund recognized
B-34
<PAGE> 61
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
May 31, 1998
- --------------------------------------------------------------------------------
expenses of approximately $1,321,400. Beginning in 1998, the transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors
of 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 per trustee under the plan is $2,500.
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.
At May 31,1998, capital aggregated $634,111,567, $123,024,950 and
$16,085,974 for Classes A, B and C, respectively. For the year ended May 31,
1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
--------------- -----------------
<S> <C> <C>
Sales:
Class A ........................... 10,148,446,425 $ 10,148,446,425
Class B ........................... 844,805,255 844,805,255
Class C .......................... 147,484,485 147,484,485
--------------- -----------------
Total Sales ....................... 11,140,736,165 $ 11,140,736,165
=============== =================
Dividend Reinvestment:
Class A ........................... 20,677,191 $ 20,677,191
Class B ........................... 2,897,824 2,897,824
Class C ........................... 402,667 402,667
--------------- -----------------
Total Dividend Reinvestment ....... 23,977,682 23,977,682
=============== =================
Repurchases:
Class A ........................... (9,986,307,711) $ (9,986,307,711)
Class B ........................... (827,716,565) (827,716,565)
Class C ........................... (140,183,880) (140,183,880)
--------------- -----------------
Total Repurchases ................. (10,954,208,156) $ (10,954,208,156)
=============== =================
</TABLE>
B-35
<PAGE> 62
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
May 31, 1998
- --------------------------------------------------------------------------------
At May 31, 1997, capital aggregated $451,297,333, $103,038,760 and $8,382,745
for Classes A, B and C, respectively. For the year ended May 31, 1997,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
-------------- ----------------
<S> <C> <C>
Sales:
Class A ......................... 7,336,711,667 $ 7,336,713,031
Class B ......................... 648,076,624 648,076,384
Class C ......................... 141,950,203 141,950,181
-------------- ----------------
Total Sales ....................... 8,126,738,494 $ 8,126,739,596
============== ================
Dividend Reinvestment:
Class A ......................... 18,710,328 $ 18,710,328
Class B ......................... 2,926,008 2,925,963
Class C ......................... 339,500 339,500
-------------- ----------------
Total Dividend Reinvestment ....... 21,975,836 $ 21,975,791
============== ================
Repurchases:
Class A ......................... (7,344,457,086) $ (7,344,457,086)
Class B ......................... (629,443,316) (629,443,280)
Class C ......................... (143,617,542) (143,617,542)
-------------- ----------------
Total Repurchases ................. (8,117,517,944) $ (8,117,517,908)
============== ================
</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. Class B shares will automatically convert to Class A
shares after the eighth year following purchase.
B-36
<PAGE> 63
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
May 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
---------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------ ------- -------
<S> <C> <C>
First .................................. 4.00% 1.00%
Second ................................. 4.00% None
Third .................................. 3.00% None
Fourth ................................. 2.50% None
Fifth .................................. 1.50% None
Sixth and Thereafter ................... None None
</TABLE>
For the year ended May 31, 1998, VKAC, as Distributor for the Fund,
received commissions on CDSC redeemed shares of approximately $497,700. 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, 1998, are payments retained by
VKAC of approximately $630,100.
B-37
<PAGE> 64
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>
<S> <C>
(1)(a) -- First Amended and Restated Agreement and Declaration of
Trust(8)
(b) -- Second Certificate of Amendment+
(c) -- Second Amended and Restated Certificate of Designation+
(2) -- Amended and Restated Bylaws(8)
(4)(a) -- Specimen Class A Share Certificate+
(b) -- Specimen Class B Share Certificate+
(c) -- Specimen Class C Share Certificate+
(5) -- Investment Advisory Agreement(9)
(6)(a) -- Distribution and Service Agreement(9)
(b) -- Form of Dealer Agreement(8)
(c) -- Form of Broker Agreement(8)
(d) -- Form of Bank Agreement(8)
(8)(a) -- Custodian Contract(9)
(b) -- Transfer Agency and Service Agreement(9)
(9)(a) -- Data Access Services Agreement(7)
(b) -- Fund Accounting Agreement(9)
(10) -- Opinion and Consent of Skadden, Arps, Slate, Meagher &
Flom (Illinois)(8)
(11) -- Consent of PricewaterhouseCoopers 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(9)
(b) -- Form of Shareholder Assistance Agreement(9)
(c) -- Form of Administrative Services Agreement(9)
(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 Funds Inc.
in response to Item 29(b)+
(18) -- Amended Multi-Class Plan(9)
(24) -- Power of Attorney+
(27) -- Financial Data Schedules+
</TABLE>
C-1
<PAGE> 65
- -------------------------
(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.
(9) Incorporated herein by reference to Post-Effective Amendment No. 38 to the
Registrant's Registration Statement on Form N1-A, File No. 2-50870, filed
September 26, 1997.
* Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Such persons, if any, are listed in the Statement of Additional
Information.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of August 13, 1998
<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 43,519 6,885 1,299
</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
C-2
<PAGE> 66
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.
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 Funds 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 Funds 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 Funds 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, Van Kampen Investor Services Inc., 7501
Tiffany Springs Parkway, Kansas City, Missouri 64153, or at the State Street
Bank and Trust Company, 1776 Heritage Drive, North Quincy, MA; (ii) by the
Adviser, will be maintained at its offices, located at One Parkview
C-3
<PAGE> 67
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> 68
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VAN KAMPEN 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 14th
day of September, 1998.
VAN KAMPEN 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 14, 1998 by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <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/ DON G. POWELL* Trustee
- -----------------------------------------------------
Don G. Powell
/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 14, 1998
<PAGE> 69
SCHEDULE OF EXHIBITS TO POST-EFFECTIVE
AMENDMENT 39 TO FORM N-1A AS SUBMITTED TO THE
SECURITIES AND EXCHANGE COMMISSION
ON SEPTEMBER 15, 1998
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
(1)(b) Second Certificate of Amendment
(1)(c) Second Amended and Restated Certificate of Designation
(4)(a) Specimen Class A Share Certificate
(4)(b) Specimen Class B Share Certificate
(4)(c) Specimen Class C Share Certificate
(11) Consent of PricewaterhouseCoopers LLP
(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 Fund Inc. in
response to Item 29(b)
(24) Power of Attorney
(27) Financial Data Schedules
</TABLE>
<PAGE> 1
Exhibit (1)(b)
SECOND CERTIFICATE OF AMENDMENT DATED JULY 14, 1998
TO
FIRST AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST DATED JUNE 21, 1995
WHEREAS, the Trustees of Van Kampen American Capital Reserve Fund, a
Delaware business trust (the "Trust") have approved the amendment of the Trust's
First Amended and Restated Agreement and Declaration of Trust dated June 21,
1995 ("Declaration of Trust") in accordance with Section 9.5 thereof;
WHEREAS, the Trustees have authorized the proper officers of the Trust,
including the officer whose name appears below, to effect such amendment;
NOW, THEREFORE, the Declaration of Trust is amended as follows:
1. The first sentence of Section 1.1 is amended and restated in its
entirety to read as follows:
1.1 NAME. The name of the Trust shall be
"VAN KAMPEN RESERVE FUND"
and so far as may be practicable, the Trustees shall conduct the
Trust's activities, execute all documents and sue or be sued under
that name, which name (and the word ''Trust'' wherever used in this
Agreement and Declaration of Trust, except where the context otherwise
requires) shall refer to the Trustees in their capacity as Trustees,
and not individually or personally, and shall not refer to the
officers, agents or employees of the Trust or of such Trustees, or to
the holders of the Shares of the Trust or any Series. If the Trustees
determine that the use of such name is not practicable, legal or
convenient at any time or in any jurisdiction, or if the Trust is
required to discontinue the use of such name pursuant to Section 10.7
hereof, then subject to that Section, the Trustees may use such other
designation, or they may adopt such other name for the Trust as they
deem proper, and the Trust may hold property and conduct its
activities under such designation or name.
EXECUTED, to be effective as of July 14, 1998
/s/ Ronald A. Nyberg
------------------------------------
Ronald A. Nyberg, Secretary
<PAGE> 1
Exhibit (1) (c)
VAN KAMPEN RESERVE FUND
Second Amended and Restated Certificate of Designation
of
Van Kampen Reserve Fund
The undersigned, being the Secretary of Van Kampen 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
Amended and Restated Certificate of Designation of the Van Kampen American
Capital Reserve Fund Series of the Trust dated December 12,1996 by redesignating
such Series as the Van Kampen Reserve Fund Series 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 Share 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.
<PAGE> 2
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.
July 14, 1998
/s/ Ronald A. Nyberg
-----------------------------
Ronald A. Nyberg, Secretary
<PAGE> 1
EXHIBIT (4)(a)
NUMBER SHARES
__________ __________
VAN KAMPEN RESERVE FUND
CLASS A
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP 92113Q103
_________________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen Reserve Fund, transferable on the books of the
Fund by the holder thereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate is not valid
unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN
RESERVE FUND
DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by VAN KAMPEN INVESTOR SERVICES INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN RESERVE FUND
NUMBER CLASS A SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
Van Kampen Investor Services Inc.
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said shares on the books of the within-named Trust with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT (4)(b)
NUMBER SHARES
__________ __________
VAN KAMPEN RESERVE FUND
CLASS B
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP 92113Q202
_________________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen Reserve Fund, transferable on the books of the
Fund by the holder thereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate is not valid
unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN
RESERVE FUND
DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by VAN KAMPEN INVESTOR SERVICES INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN RESERVE FUND
NUMBER CLASS B SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
Van Kampen Investor Services Inc.
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said shares on the books of the within-named Trust with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT (4)(c)
NUMBER SHARES
__________ __________
VAN KAMPEN RESERVE FUND
CLASS C
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP 92113Q301
_________________
fully paid and nonassessable shares of beneficial interest of the par value of
$0.01 per share of Van Kampen Reserve Fund, transferable on the books of the
Fund by the holder thereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate is not valid
unless countersigned by the Transfer Agent.
WITNESS THE FACSIMILE SEAL OF THE FUND AND THE FACSIMILE SIGNATURES OF
ITS DULY AUTHORIZED OFFICERS.
Dated
[VAN KAMPEN
RESERVE FUND
DELAWARE SEAL]
RONALD A. NYBERG DENNIS J. MCDONNELL
SECRETARY PRESIDENT
KC 002717
- --------------------------------------------------------------------------------
COUNTERSIGNED by VAN KAMPEN INVESTOR SERVICES INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By
----------------------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN RESERVE FUND
NUMBER CLASS C SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
Van Kampen Investor Services Inc.
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY ONE OF THE FOLLOWING:
A BANK OR TRUST COMPANY; A BROKER/DEALER; A CREDIT UNION; A NATIONAL SECURITIES
EXCHANGE, REGISTERED SECURITIES ASSOCIATION OR CLEARING AGENCY; A SAVINGS AND
LOAN ASSOCIATION; OR A FEDERAL SAVINGS BANK.
- --------------------------------------------------------------------------------
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said shares on the books of the within-named Trust with full
power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
- --------------------------------------------------------------------------------
*The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN. ACT - ________ Custodian _________
in common (Cust) (Minor)
under Uniform Gifts to
TEN ENT - as tenants by Minors Act
the entireties
____________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list
- --------------------------------------------------------------------------------
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT (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. 39, Amendment No. 24, to
the Registration Statement on Form N-1A (the "Registration Statement") of our
report dated June 26, 1998, relating to the financial statements and financial
highlights of Van Kampen 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/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
September 9, 1998
<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 FUNDS INC.
ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR
AUGUST 27, 1998
Van Kampen U.S. Government Trust
Van Kampen U.S. Government Fund
Van Kampen Tax Free Trust
Van Kampen Insured Tax Free Income Fund
Van Kampen Tax Free High Income Fund
Van Kampen California Insured Tax Free Fund
Van Kampen Municipal Income Fund
Van Kampen Intermediate Term Municipal Income Fund
Van Kampen Florida Insured Tax Free Income Fund
Van Kampen New York Tax Free Income Fund
Van Kampen Trust
Van Kampen High Yield Fund
Van Kampen Short-Term Global Income Fund
Van Kampen Strategic Income Fund
Van Kampen Equity Trust
Van Kampen Utility Fund
Van Kampen American Capital Value Fund
Van Kampen Great American Companies Fund
Van Kampen Growth Fund
Van Kampen Prospector Fund
Van Kampen Aggressive Growth Fund
Van Kampen Foreign Securities Fund
Van Kampen Pennsylvania Tax Free Income Fund
Van Kampen Tax Free Money Fund
Van Kampen Prime Rate Income Trust
Van Kampen Senior Floating Rate Fund
Van Kampen Comstock Fund
Van Kampen Corporate Bond Fund
Van Kampen Emerging Growth Fund
Van Kampen Enterprise Fund
Van Kampen Equity Income Fund
Van Kampen Limited Maturity Government Fund
Van Kampen Global Managed Assets Fund
Van Kampen Government Securities Fund
Van Kampen Growth and Income Fund
Van Kampen Harbor Fund
Van Kampen High Income Corporate Bond Fund
Van Kampen Life Investment Trust
Asset Allocation Portfolio
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Global Equity Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Strategic Stock Portfolio
Morgan Stanley Real Estate Securities Portfolio
Comstock Portfolio
<PAGE> 2
Van Kampen Small Capitalization Fund
Van Kampen Pace Fund
Van Kampen Real Estate Securities Fund
Van Kampen Reserve Fund
Van Kampen Tax -Exempt Trust
Van Kampen High Yield Municipal Fund
Van Kampen American Capital U.S. Government Trust for Income
Van Kampen American Capital World Portfolio Series Trust
Van Kampen Global Government Securities Fund
Van Kampen Series Fund, Inc.
Van Kampen Aggressive Equity Fund
Van Kampen American Value Fund
Van Kampen Asian Growth Fund
Van Kampen Emerging Markets Fund
Van Kampen Emerging Markets Debt Fund
Van Kampen Equity Growth Fund
Van Kampen Global Equity Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Fixed Income Fund
Van Kampen Global Franchise Fund
Morgan Stanley Government Obligations Money Market Fund
Van Kampen Growth and Income Fund II
Van Kampen High Yield & Total Return Fund
Van Kampen International Magnum Fund
Van Kampen Japanese Equity Fund
Van Kampen Latin American Fund
Van Kampen MidCap Growth Fund
Morgan Stanley Money Market Fund
Morgan Stanley Tax-Free Money Market Fund
Van Kampen U.S. Real Estate Fund
Van Kampen Value Fund
Van Kampen Worldwide High Income Fund
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Insured Municipals Income Trust..........................................................................Series 401
Arizona Insured Municipals Income Trust................................................................. Series 18
California Insured Municipals Income Trust.............................................................. Series 174
Colorado Insured Municipals Income Trust................................................................ Series 87
Connecticut Insured Municipals Income Trust ............................................................ Series 37
Florida Insured Municipals Income Trust................................................................. Series 120
Georgia Insured Municipals Income Trust................................................................. Series 86
Kentucky Investors' Quality Tax-Exempt Trust............................................................ Series 60
Maryland Investors' Quality Tax-Exempt Trust............................................................ Series 86
Massachusetts Insured Municipals Income Trust........................................................... Series 35
Michigan Insured Municipals Income Trust................................................................ Series 151
Minnesota Insured Municipals Income Trust............................................................... Series 62
Missouri Insured Municipals Income Trust................................................................ Series 107
New Jersey Insured Municipals Income Trust.............................................................. Series 123
New York Insured Municipals Income Trust................................................................ Series 146
North Carolina Investors' Quality Tax-Exempt Trust...................................................... Series 95
Ohio Insured Municipals Income Trust.................................................................... Series 110
Pennsylvania Insured Municipals Income Trust............................................................ Series 237
South Carolina Investors' Quality Tax-Exempt Trust...................................................... Series 86
Tennessee Insured Municipals Income Trust............................................................... Series 41
Virginia Investors' Quality Tax-Exempt Trust............................................................ Series 81
Van Kampen American Capital Insured Income Trust........................................................ Series 71
Internet Trust.......................................................................................... Series 11
Strategic Ten Trust, United States Portfolio............................................................ August 1998 Series
Strategic Ten Trust, United States Portfolio............................................................ August 1998
Traditional Series
Strategic Five Trust, United States Portfoliio.......................................................... August 1998 Series
Strategic Five Trust, United States Portfolio........................................................... August 1998
Traditional Series
EAFE Strategic 20 Trust................................................................................. August 1998 Series
EURO Strategic 20 Trust................................................................................. August 1998 Series
Strategic Picks Opportunity Trust....................................................................... August 1998 Series
Strategic Fifteen Trust Global Portfolio................................................................ July 1998 Series
Strategic Thirty Trust Global Portfolio................................................................. July 1998 Series
Great International Firms Trust......................................................................... Series 5
Blue Chip Opportunity and Treasury Trust................................................................ Series 6
Blue Chip Opportunity Trust............................................................................. Sereis 4
Baby Boomer Opportunity Trust........................................................................... Series 4
Global Energy Trust..................................................................................... Series 6
Brand Name Equity Trust................................................................................. Series 6
Edward Jones Select Growth Trust........................................................................ July 1998 Series
Banking Trust........................................................................................... Series 3
Morgan Stanley High-Technology 35 Index Trust........................................................... Series 3
Health Care Trust....................................................................................... Series 3
Telecommunications Trust................................................................................ Series 3
Utility Trust........................................................................................... Series 3
Financial Services Trust................................................................................ Series 1
Natcity Investments, Inc. Great American Equities Trust................................................. Series 1
First Albany Banking Growth Trust....................................................................... Series 1
Gruntal Global Transport Trust.......................................................................... Series 1
</TABLE>
<PAGE> 1
EXHIBIT 17 (b)
Officers
Van Kampen Funds Inc.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ---- ------ --------
<S> <C> <C>
Don G. Powell Chairman Houston, TX
Richard F. Powers, III Chief Executive Officer Oakbrook Terrace, IL
John H. Zimmerman President Oakbrook Terrace, IL
Douglas B. Gehrman Executive Vice President Houston, TX
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
Laurence J. Althoff Sr. Vice President & Controller Oakbrook Terrace, IL
John. E. Doyle Sr. Vice President Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
Richard G. Gold Sr. Vice President Annapolis, MD
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
Walter E. Rein Sr. Vice President Oakbrook Terrace, IL
Colette M. Saucedo Sr. Vice President Houston, TX
Frederick Shepherd Sr. Vice President Houston, TX
Steven P. Sorenson Sr. Vice President Oakbrook Terrace, IL
Michael L. Stallard Sr. Vice President Oakbrook Terrace, IL
Robert S. West Sr. Vice President Oakbrook Terrace, IL
Edward C. Wood Sr. Vice President and Oakbrook Terrace, IL
Chief Operating Officer
Glenn M. Cackovic 1st Vice President Laguna Nigel, CA
Eric J. Hargens 1st Vice President Orlando, FL
David B. Hogaboom 1st Vice President Oakbrook Terrace, IL
Dominic C. Martellaro 1st Vice President Danville, CA
Carl Mayfield 1st Vice President Oakbrook Terrace, IL
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
Robert J. Abreu Vice President New York, NY
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
Michael P. Boos Vice President Oakbrook Terrace, IL
James J. Boyne Vice President, Associate General Oakbrook Terrace, IL
Counsel & Assistant Secretary
Robert C. Brooks Vice President Oakbrook Terrace, IL
William F Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Christine Cleary Byrum Vice President Tampa, FL
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, Associate Oakbrook Terrace, IL
General Counsel & Asst. Secretary
Tracey M. DeLusant Vice President New York, NY
Michael E. Eccleston Vice President Oakbrook Terrace, IL
Jonathan Eckard Vice President Tampa, FL
Huey P. Falgout, Jr. Vice President, Assistant Houston, TX
Secretary and Senior Attorney
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
Timothy D. Griffith Vice President Kirkland, WA
Kyle D. Haas Vice President Oakbrook Terrace, IL
Daniel Hamilton Vice President Austin, TX
John G. Hansen Vice President Oakbrook Terrace, IL
Joseph Hays Vice President Cherry Hill, NJ
Daniel M. Hazard Vice President Huntington Beach, CA
Gregory Heffington Vice President Ft. Collins, CO
Susan J. Hill Vice President and Senior Attorney Oakbrook Terrace, IL
Thomas R. Hindelang Vice President Gilbert, AZ
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
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Director Oakbrook Terrace, IL
of Compliance
Richard D. Kozlowski Vice President Atlanta, GA
Bradford N. Langs Vice President Oakbrook Terrace, IL
Patricia D. Lathrop Vice President Tampa, FL
Brian Laux Vice President Staten Island, NY
Tony E. Leal Vice President Daphne, AL
S. William Lehew III Vice President Charlotte, NC
Eric Levinson Vice President San Francisco, CA
Jonathan Linstra Vice President Oakbrook Terrace, IL
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Walter Lynn Vice President Flower Mound, TX
Kevin S. Marsh Vice President Bellevue, WA
Linda S. MacAyeal Vice President and Senior Attorney Oakbrook Terrace, IL
Brooks D. McCartney Vice President Puyallup, WA
Anne Therese McGrath Vice President Los Gatos, CA
Maura A. McGrath Vice President New York, NY
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
Gregory S. Parker Vice President Houston, TX
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
Michael W. Rohr Vice President Oakbrook Terrace, IL
Jeffrey L. Rose Vice President Houston, TX
Suzette N. Rothberg Vice President Plymouth, MN
Jeffrey Rourke Vice President Oakbrook Terrace, IL
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
Gwen L. Shaneyfelt Vice President Oakbrook Terrace, IL
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
William C. Strafford Vice President Granger, IN
Mark A. Syswerda Vice President Oakbrook Terrace, IL
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
Jeff Warland 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
Thomas M. Wilson Vice President Oakbrook Terrace, IL
Barbara A. Withers Vice President Oakbrook Terrace, IL
David M. Wynn Vice President Phoenix, AZ
James R. Yount Vice President Mercer Island, WA
Patrick M. Zacchea Vice President Oakbrook Terrace, IL
Scott F. Becker Asst. Vice President Oakbrook Terrace, IL
Brian E. Binder Asst. Vice President Oakbrook Terrace, IL
Joan E. Blackwood Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Gregory T. Brunk Asst. Vice President Oakbrook Terrace, IL
Gina Costello Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Sarah K. Gieser Asst. Vice President Oakbrook Terrace, IL
Walter C. Gray Asst. Vice President Houston, TX
Valri G. Hamilton Asst. Vice President Houston, TX
Laurie L. Jones Asst. Vice President Houston, TX
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Robin R. Jordan Asst. Vice President Oakbrook Terrace, IL
Ivan R. Lowe Asst. Vice President Houston, TX
Pamela D. Meyer Asst. Vice President Phoenix, AZ
Stuart R. Moehlman Asst. Vice President Houston, TX
Cathy Napoli Asst. Vice President Oakbrook Terrace, IL
Steven R. Norvid Asst. Vice President Oakbrook Terrace, IL
Vincent M. Pellegrini Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Regina Rosen Asst. Vice President Oakbrook Terrace, IL
Pamela S. Salley Asst. Vice President Houston, TX
Vanessa M. Sanchez Asst. Vice President Oakbrook Terrace, IL
Thomas J. Sauerborn Asst. Vice President New York, NY
Bruce Saxon Asst. Vice President Oakbrook Terrace, IL
David T. Saylor Asst. Vice President Oakbrook Terrace, IL
Christina L. Schmieder Asst. Vice President Oakbrook Terrace, IL
Lauren B. Sinai Asst. Vice President Oakbrook Terrace, IL
Kristen L. Transier Asst. Vice President Houston, TX
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Sharon M. C. Wells Asst. Vice President Oakbrook Terrace, IL
Elizabeth M. Brown Officer Houston, TX
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Rebecca Newman Officer Houston, TX
Theresa M. Renn Officer Oakbrook Terrace, IL
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX
</TABLE>
<PAGE> 5
DIRECTORS
VAN KAMPEN FUNDS INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
- ------------------- ------------------------ ----------------------------
<S> <C> <C>
Don G. Powell Chairman 2800 Post Oak Blvd.
Houston, TX 77056
Richard F. Powers, III Chief Executive Officer One Parkview Plaza
Oakbrook Terrace, IL 60181
John H. Zimmerman President One Parkview Plaza
Oakbrook Terrace, IL 60181
Ronald A. Nyberg Executive Vice President, One Parkview Plaza
General Counsel Oakbrook Terrace, IL 60181
& Assistant Secretary
William R. Rybak Executive Vice President One Parkview Plaza
& Chief Financial Officer Oakbrook Terrace, IL 60181
</TABLE>
<PAGE> 1
EXHIBIT (24)
POWER OF ATTORNEY
The undersigned, being officers and trustees of each of the Van Kampen
American Capital Open End Trusts (individually, a "Trust") as indicated on
Schedule 1 attached hereto and incorporated by reference, each a Delaware
business trust except for the Van Kampen American Capital Pennsylvania Tax Free
Income Fund being a Pennsylvania business trust, and being officers and
directors of the Morgan Stanley Fund, Inc. (the "Corporation"), a Maryland
corporation, 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 or the Corporation with the
Securities and Exchange Commission pursuant to the provisions of the Securities
Act of 1933 and the Investment Company Act of 1940.
This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together shall constitute one
instrument.
Dated: April 24, 1998
<TABLE>
<CAPTION>
<S> <C>
Signature Title
--------- -----
/s/ Dennis J. McDonnell President and Trustee/Director
- ---------------------------
Dennis J. McDonnell
/s/ Edward C. Wood III Vice/President and Chief Financial Officer
- ---------------------------
Edward C. Wood III
/s/ J. Miles Branagan Trustee/Director
- ---------------------------
J. Miles Branagan
/s/ Richard M. DeMartini Trustee/Director
- ---------------------------
Richard M. DeMartini
/s/ Linda Hutton Heagy Trustee/Director
- ---------------------------
Linda Hutton Heagy
/s/ R. Craig Kennedy Trustee/Director
- ---------------------------
R. Craig Kennedy
/s/ Jack E. Nelson Trustee/Director
- ---------------------------
Jack E. Nelson
/s/ Don G. Powell Trustee/Director
- ---------------------------
Don G. Powell
/s/ Phillip B. Rooney Trustee/Director
- ---------------------------
Phillip B. Rooney
/s/ Fernando Sisto, Sc.D. Trustee/Director
- ---------------------------
Fernando Sisto, Sc. D.
/s/ Wayne W. Whalen Trustee/Director and Chairman
- ---------------------------
Wayne W. Whalen
</TABLE>
<PAGE> 2
SCHEDULE 1
VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST
VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST
VAN KAMPEN AMERICAN CAPITAL TRUST
VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST
VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
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 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 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 U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST
VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 11
[NAME] RESERVE FUND A
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAY-31-1998
[PERIOD-START] JUN-01-1997
[PERIOD-END] MAY-31-1998
[INVESTMENTS-AT-COST] 607,047,987<F1>
[INVESTMENTS-AT-VALUE] 607,047,987<F1>
[RECEIVABLES] 170,627,794<F1>
[ASSETS-OTHER] 28,136<F1>
[OTHER-ITEMS-ASSETS] 62,381<F1>
[TOTAL-ASSETS] 777,666,298<F1>
[PAYABLE-FOR-SECURITIES] 0<F1>
[SENIOR-LONG-TERM-DEBT] 0<F1>
[OTHER-ITEMS-LIABILITIES] 4,585,292<F1>
[TOTAL-LIABILITIES] 4,585,292<F1>
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 634,111,567
[SHARES-COMMON-STOCK] 634,125,237
[SHARES-COMMON-PRIOR] 451,309,332
[ACCUMULATED-NII-CURRENT] 52,205<F1>
[OVERDISTRIBUTION-NII] 0<F1>
[ACCUMULATED-NET-GAINS] (93,690)<F1>
[OVERDISTRIBUTION-GAINS] 0<F1>
[ACCUM-APPREC-OR-DEPREC] 0<F1>
[NET-ASSETS] 634,076,293
[DIVIDEND-INCOME] 0<F1>
[INTEREST-INCOME] 30,125,078<F1>
[OTHER-INCOME] 0<F1>
[EXPENSES-NET] (6,121,500)<F1>
[NET-INVESTMENT-INCOME] 24,003,578<F1>
[REALIZED-GAINS-CURRENT] (25,912)<F1>
[APPREC-INCREASE-CURRENT] 0<F1>
[NET-CHANGE-FROM-OPS] 23,977,666<F1>
[EQUALIZATION] 0<F1>
[DISTRIBUTIONS-OF-INCOME] (20,677,191)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 10,148,446,425
[NUMBER-OF-SHARES-REDEEMED] (9,986,307,711)
[SHARES-REINVESTED] 20,677,191
[NET-CHANGE-IN-ASSETS] 242,685,435
[ACCUMULATED-NII-PRIOR] 26,309<F1>
[ACCUMULATED-GAINS-PRIOR] (69,816)<F1>
[OVERDISTRIB-NII-PRIOR] 0<F1>
[OVERDIST-NET-GAINS-PRIOR] 0<F1>
[GROSS-ADVISORY-FEES] 2,251,176<F1>
[INTEREST-EXPENSE] 0<F1>
[GROSS-EXPENSE] 6,121,500<F1>
[AVERAGE-NET-ASSETS] 449,408,642
[PER-SHARE-NAV-BEGIN] 1.000
[PER-SHARE-NII] .047
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] (0.047)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[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>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 12
[NAME] RESERVE FUND B
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAY-31-1998
[PERIOD-START] JUN-01-1997
[PERIOD-END] MAY-31-1998
[INVESTMENTS-AT-COST] 607,047,987<F1>
[INVESTMENTS-AT-VALUE] 607,047,987<F1>
[RECEIVABLES] 170,627,794<F1>
[ASSETS-OTHER] 28,136<F1>
[OTHER-ITEMS-ASSETS] 62,381<F1>
[TOTAL-ASSETS] 777,766,298<F1>
[PAYABLE-FOR-SECURITIES] 0<F1>
[SENIOR-LONG-TERM-DEBT] 0<F1>
[OTHER-ITEMS-LIABILITIES] 4,585,292<F1>
[TOTAL-LIABILITIES] 4,585,292<F1>
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 123,024,950
[SHARES-COMMON-STOCK] 123,015,509
[SHARES-COMMON-PRIOR] 103,028,995
[ACCUMULATED-NII-CURRENT] 52,205<F1>
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (93,690)<F1>
[OVERDISTRIBUTION-GAINS] 0<F1>
[ACCUM-APPREC-OR-DEPREC] 0<F1>
[NET-ASSETS] 123,018,178
[DIVIDEND-INCOME] 0<F1>
[INTEREST-INCOME] 30,125,078<F1>
[OTHER-INCOME] 0<F1>
[EXPENSES-NET] (6,121,500)<F1>
[NET-INVESTMENT-INCOME] 24,003,578<F1>
[REALIZED-GAINS-CURRENT] (25,912)<F1>
[APPREC-INCREASE-CURRENT] 0<F1>
[NET-CHANGE-FROM-OPS] 23,977,666<F1>
[EQUALIZATION] 0<F1>
[DISTRIBUTIONS-OF-INCOME] (2,897,824)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 844,805,255
[NUMBER-OF-SHARES-REDEEMED] (827,716,565)
[SHARES-REINVESTED] 2,897,824
[NET-CHANGE-IN-ASSETS] 47,922,402
[ACCUMULATED-NII-PRIOR] 26,309<F1>
[ACCUMULATED-GAINS-PRIOR] (69,816)<F1>
[OVERDISTRIB-NII-PRIOR] 0<F1>
[OVERDIST-NET-GAINS-PRIOR] 0<F1>
[GROSS-ADVISORY-FEES] 2,251,176<F1>
[INTEREST-EXPENSE] 0<F1>
[GROSS-EXPENSE] 6,121,500
[AVERAGE-NET-ASSETS] 75,080,760
[PER-SHARE-NAV-BEGIN] 1.000
[PER-SHARE-NII] 0.039
[PER-SHARE-GAIN-APPREC] 0.000
[PER-SHARE-DIVIDEND] (0.039)
[PER-SHARE-DISTRIBUTIONS] 0.000
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 1.000
[EXPENSE-RATIO] 1.79
[AVG-DEBT-OUTSTANDING] 0<F1>
[AVG-DEBT-PER-SHARE] 0<F1>
<FN>
<F1>This item relatesto the fund on a composite basis and not on a class basis.
</FN>
</TABLE>
<PAGE> 1
[ARTICLE] 6
[SERIES]
[NUMBER] 13
[NAME] RESERVE FUND C
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAY-31-1998
[PERIOD-START] JUN-01-1998
[PERIOD-END] MAY-31-1998
[INVESTMENTS-AT-COST] 607,047,987<F1>
[INVESTMENTS-AT-VALUE] 607,047,987<F1>
[RECEIVABLES] 170,627,794<F1>
[ASSETS-OTHER] 28,136<F1>
[OTHER-ITEMS-ASSETS] 62,381<F1>
[TOTAL-ASSETS] 777,766,298<F1>
[PAYABLE-FOR-SECURITIES] 0<F1>
[SENIOR-LONG-TERM-DEBT] 0<F1>
[OTHER-ITEMS-LIABILITIES] 4,585,292<F1><F10>
[TOTAL-LIABILITIES] 4,585,292<F1>
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 16,085,974
[SHARES-COMMON-STOCK] 16,086,219
[SHARES-COMMON-PRIOR] 8,382,947
[ACCUMULATED-NII-CURRENT] 52,205<F1>
[OVERDISTRIBUTION-NII] 0<F1>
[ACCUMULATED-NET-GAINS] (93,690)<F1>
[OVERDISTRIBUTION-GAINS] 0<F1>
[ACCUM-APPREC-OR-DEPREC] 0<F1>
[NET-ASSETS] 16,086,535<F1>
[DIVIDEND-INCOME] 0<F1>
[INTEREST-INCOME] 30,125,078<F1>
[OTHER-INCOME] 0<F1>
[EXPENSES-NET] (6,121,500)<F1>
[NET-INVESTMENT-INCOME] 24,003,578<F1>
[REALIZED-GAINS-CURRENT] (25,912)<F1>
[APPREC-INCREASE-CURRENT] 0<F1>
[NET-CHANGE-FROM-OPS] 23,977,666<F1>
[EQUALIZATION] 0<F1>
[DISTRIBUTIONS-OF-INCOME] (402,667)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 147,484,485
[NUMBER-OF-SHARES-REDEEMED] (140,183,880)
[SHARES-REINVESTED] 402,667
[NET-CHANGE-IN-ASSETS] 4,977,996
[ACCUMULATED-NII-PRIOR] 26,309<F1>
[ACCUMULATED-GAINS-PRIOR] (69,816)<F1>
[OVERDISTRIB-NII-PRIOR] 0<F1>
[OVERDIST-NET-GAINS-PRIOR] 0<F1>
[GROSS-ADVISORY-FEES] 2,251,176<F1>
[INTEREST-EXPENSE] 0<F1>
[GROSS-EXPENSE] 6,121,500<F1>
[AVERAGE-NET-ASSETS] 10,394,519<F1>
[PER-SHARE-NAV-BEGIN] 1.000
[PER-SHARE-NII] 0.039
[PER-SHARE-GAIN-APPREC] 0.000
[PER-SHARE-DIVIDEND] (0.039)
[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.
<F10>
</FN>
</TABLE>
