<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1999
REGISTRATION NO. 2-50870
NO. 811-2482
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 41 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 26 [X]
VAN KAMPEN RESERVE FUND
(Exact Name of Registrant as Specified in Declaration of Trust)
1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555
(Address of Principal Executive Offices) (Zip Code)
(630) 684-6000
Registrant's Telephone Number, Including Area Code
A. THOMAS SMITH III
Executive Vice President,
General Counsel and Secretary
Van Kampen Investments Inc.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, Illinois 60181-5555
(Name and Address of Agent for Service)
------------------------
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)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) 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
================================================================================
<PAGE> 2
VAN KAMPEN
RESERVE FUND
Van Kampen Reserve Fund is a mutual fund with an investment objective to seek
protection of capital and high current income. The Fund's investment adviser
seeks to achieve the investment objective by investing in a portfolio of U.S.
dollar-denominated money-market securities.
Shares of the Fund have not been approved or disapproved by the Securities and
Exchange Commission (SEC) or any state regulators, and neither the SEC nor any
state regulator has passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
This prospectus is dated SEPTEMBER 28, 1999
[VAN KAMPEN FUNDS LOGO]
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary................................ 3
Fees and Expenses of the Fund...................... 5
Investment Objective, Policies and Risks........... 6
Investment Advisory Services....................... 8
Purchase of Shares................................. 9
Redemption of Shares............................... 13
Distributions from the Fund........................ 15
Shareholder Services............................... 15
Federal Income Taxation............................ 17
Financial Highlights............................... 19
</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 Fund's investment adviser, or the
Fund's distributor. This prospectus does not constitute an offer by the Fund or
by the Fund's 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.
<PAGE> 4
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The Fund is a mutual fund with an investment objective to seek protection of
capital and high current income.
INVESTMENT STRATEGIES
The Fund's investment adviser seeks to achieve the investment objective by
investing in a portfolio of U.S. dollar-denominated money-market securities,
including U.S. government securities, domestic and foreign bank obligations,
commercial paper and repurchase agreements secured by such obligations. The Fund
seeks to maintain a constant net asset value of $1.00 per share by investing in
money-market securities with remaining maturities of 13 months or less and with
a dollar-weighted average maturity of 90 days or less. The Fund's investments
are limited to those securities that meet maturity, quality and diversification
standards with which money market funds must comply. In selecting securities for
investment, the Fund's investment adviser seeks to invest in those securities
that it believes entail reasonable risk considered in relation to the Fund's
investment policies and may sell such securities in order to adjust the average
maturity or credit quality of the Fund's investment portfolio.
INVESTMENT RISKS
An investment in the Fund is subject to investment risks. An investment in the
Fund is not a deposit of any bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. There can be no assurance
that the Fund will achieve its investment objective.
INCOME RISK. The income you receive from the Fund is based primarily on
short-term interest rates, which can vary widely over time. If short-term
interest rates drop, your income from the Fund may drop as well.
CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments
of interest and principal. While credit risk should be low for the Fund because
it invests in high-quality money-market instruments, an investment in the Fund
is not risk free. The Fund is still subject to the risk that the issuers of such
securities may experience financial difficulties and, as a result, fail to pay
on their obligations.
MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline and adversely affect the Fund's net asset value.
The prices of debt securities tend to fall as interest rates rise but market
risk should be low for the Fund because it invests in high-quality, short-term
securities.
MANAGER RISK. As with any managed fund, the Fund's investment adviser may not be
successful in selecting the best-performing securities and the Fund's
performance may lag behind that of similar funds.
INVESTOR PROFILE
In light of its objective and investment strategies, the Fund may be appropriate
for investors who:
- - Seek protection of capital and high current income through investments in
money-market instruments.
3
<PAGE> 5
ANNUAL PERFORMANCE
One way to measure the risks of investing in the Fund is to look at how its
performance varies from year-to-year. The following chart shows the annual
returns of the Fund's Class A Shares over the past ten calendar years prior to
the date of this prospectus. Remember that the past performance of the Fund is
not indicative of its future performance.
<TABLE>
<CAPTION>
ANNUAL RETURN
-------------
<S> <C>
'1989' 9.01
'1990' 7.53
'1991' 5.33
'1992' 2.91
'1993' 2.16
'1994' 3.38
'1995' 5.00
'1996' 4.46
'1997' 4.68
'1998' 4.85
</TABLE>
The Fund's return for the six-month period ended June 30, 1999 was 2.07%.
The annual return variability of the Fund's Class B Shares and Class C Shares
would be substantially similar to that shown for the Class A Shares because all
of the Fund's shares are invested in the same portfolio of securities; however,
the actual annual returns of the Class B Shares and Class C Shares would be
lower than the annual returns shown for the Fund's Class A Shares because of
differences in the fees and expenses borne by each class of shares.
During the ten-year period shown in the bar chart, the highest quarterly return
was 1.88% (for the quarter ended June 30, 1990) and the lowest quarterly return
was 0.52% (for the quarter ended June 30, 1993).
COMPARATIVE PERFORMANCE
As a basis for evaluating the Fund's performance and risks, the table below
shows the Fund's average annual total returns for the periods ended December 31,
1998 (the most recently completed calendar year prior to the date of this
prospectus). The Fund's performance figures for Class B Shares and Class C
Shares include the maximum contingent deferred sales charges paid by investors.
Remember that the past performance of the Fund is not indicative of its future
performance.
<TABLE>
<CAPTION>
Average Annual
Total Returns Past 10
for the Years or
Periods Ended Past Past Since
December 31, 1998 1 Year 5 Years Inception
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen
Reserve Fund--
Class A Shares 4.85% 4.47% 4.91%()
.......................................................
Van Kampen
Reserve Fund--
Class B Shares 0.06% -- 3.31%(1)
.......................................................
Van Kampen
Reserve Fund--
Class C Shares 3.05% -- 3.92%(1)
.......................................................
</TABLE>
Inception date: (1) 4/18/95.
Investors can obtain the current 7-day yield for each class of shares of the
Fund by calling (800) 341-2911.
4
<PAGE> 6
FEES AND EXPENSES
OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly from your investment)
- --------------------------------------------------------------
</TABLE>
Maximum sales charge
(load) imposed on None None None
purchases
..............................................................
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption None 4.00%(1)(2) 1.00%(1)(3)
proceeds)
..............................................................
Maximum sales charge
(load) imposed on None None None
reinvested dividends
..............................................................
Redemption fees None None None
..............................................................
Exchange fee None None None
..............................................................
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
<TABLE>
- --------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
Management Fees 0.39% 0.39% 0.39%
..............................................................
Distribution and/or 0.14% 0.90%(5) 0.90%(5)
Service (12b-1)
Fees(4)
..............................................................
Other Expenses 0.31% 0.34% 0.34%
..............................................................
Total Annual Fund 0.84% 1.63% 1.63%
Operating Expenses
..............................................................
</TABLE>
(1) 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 "Purchase of Shares."
(2) The maximum deferred sales charge is 4.00% in the first and second year
after purchase, declining thereafter as follows:
Year 1-4.00%
Year 2-4.00%
Year 3-3.00%
Year 4-2.50%
Year 5-1.50%
After-None
See "Purchase of Shares -- Class B Shares."
(3) The maximum deferred sales charge is 1.00% in the first year after purchase
and 0.00% thereafter. See "Purchase of Shares -- Class C Shares."
(4) 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 "Purchase of Shares."
(5) Because Distribution and/or Service (12b-1) Fees are paid out of the Fund's
assets on an ongoing basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales
charges.
Example:
The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year (except for the ten-year
amounts for Class B Shares which reflect the conversion of Class B Shares to
Class A Shares after eight years). Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $ 86 $268 $ 466 $1,037
......................................................................
Class B Shares $566 $814 $1,037 $1,724*
......................................................................
Class C Shares $266 $514 $ 887 $1,933
......................................................................
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $ 86 $268 $466 $1,037
.....................................................................
Class B Shares $166 $514 $887 $1,724*
.....................................................................
Class C Shares $166 $514 $887 $1,933
.....................................................................
</TABLE>
* Based on conversion to Class A Shares after eight years.
5
<PAGE> 7
INVESTMENT OBJECTIVE,
POLICIES AND RISKS
The Fund's investment objective is to seek protection of capital and high
current income. The Fund's investment objective is a fundamental policy and may
not be changed without the approval of a majority of shareholders of the Fund's
outstanding voting securities, as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"). The Fund seeks to maintain a constant net asset
value of $1.00 per share. There are risks inherent in all investments in
securities; accordingly, there can be no assurance that the Fund's net asset
value will not vary or that the Fund will achieve its investment objective.
The Fund's investment adviser seeks to achieve the investment objective by
investing in a diversified portfolio of U.S. dollar-denominated money-market
securities, including U.S. government securities, domestic and foreign bank
obligations, commercial paper and repurchase agreements secured by such
obligations. The Fund seeks to maintain a constant net asset value of $1.00 per
share by investing in high-quality money-market securities with remaining
maturities of 13 months or less and with a dollar-weighted average maturity of
90 days or less. To be considered high quality, a security generally must be
rated in one of the two highest short-term ratings categories by the ratings
services such as Standard & Poor's ("S&P") or Moody's Investors Service, Inc.
("Moody's").
The Fund's investment adviser seeks to invest in those securities that meet the
maturity, quality and diversification standards established by the Fund's Board
of Trustees following special rules for money market funds established under
federal law. These include requirements for maintaining high credit quality in
the Fund's portfolio, a short average portfolio maturity to reduce the effects
of changes in interest rates on the value of portfolio securities and
diversifying investments among issuers to reduce the effects of a default by any
one issuer on the value of the Fund's shares. Additionally, the Fund's Board of
Trustees has adopted procedures to evaluate potential investments and the Fund's
investment adviser has the responsibility to implement those procedures in
making investments for the Fund's portfolio. In selecting securities for
investment, the Fund's investment adviser focuses on identifying the best
relative values among potential investments based upon an analysis of the yield,
price, interest rate sensitivity and credit quality of such securities. The
Fund's investment adviser seeks to add value and limit risk through careful
security selection and by actively managing the Fund's portfolio. On an ongoing
basis, the Fund's investment adviser analyzes the economic and financial outlook
of the money markets in order to anticipate and respond to changing developments
that may affect the Fund's existing and prospective investments. While the Fund
intends to hold investments until maturity, it may sell portfolio securities
prior to maturity in order to increase the yield or to maintain the average
maturity or credit quality of the Fund's portfolio.
The Fund's dividend and yield are expected to change daily based upon changes in
interest rates and other market conditions. Although the Fund is managed to
maintain a stable $1.00 share price, there is no guarantee that the Fund will be
able to do so.
The following is a brief description of the types of money-market instruments
the Fund may invest in, all of which will be U.S. dollar-denominated
obligations:
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued or
guaranteed as to principal and interest by the U.S. government, its agencies or
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. government which include U.S. Treasury bills
(maturing within one year of issuance) and U.S. Treasury notes and bonds (which
have longer maturities), (b) the right of the issuer to borrow from the U.S.
Treasury, (c) the discretionary authority of the U.S. government agencies or
instrumentalities and (d) the credit of the instrumentality issuing the
securities. If the securities are not backed by the full faith and credit of the
U.S. government, the owners of such securities must look to the agency or
instrumentality issuing the obligation for repayment and will not be able to
assert a claim against the U.S. government in the event of nonpayment.
Governmental agencies or instrumentalities in which the Fund may invest 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 high-quality obligations issued by
domestic and foreign banks or their subsidiaries or overseas branches. Bank
obligations include time deposits, certificates of deposit and bankers'
acceptances, as well as securities secured by such obligations. Certificates of
deposit are instruments representing the obligation of a bank
6
<PAGE> 8
to repay funds deposited with it for a specified period of time. Time deposits
are interest-bearing deposits maintained in a bank for a specified period of
time (not longer than seven days) at a specific rate of interest. Time deposits
held by the Fund generally will not benefit from insurance provided by 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 Fund only invests in "high-quality" bank obligations which are securities
rated in one of the two highest short-term ratings categories by any two
nationally recognized statistical rating organizations ("NRSROs"), such as S&P
(e.g., A-1 or A-2) or Moody's (e.g., P-1 or P-2) (or any one NRSRO if the
instrument was rated by only one such organization). Credit quality at the time
of purchase determines which securities may be acquired. Subsequent downgrades
in ratings may require reassessment of the credit risks presented by such
securities and may even require their sale. NRSROs assign ratings based upon
their opinions as to the quality of the debt securities they undertake to rate,
but they do not base their assessment on the market value risk of such
securities. It should be emphasized that ratings are general and are not
absolute standards of quality. The Fund's current policy is to limit investments
in bank obligations to those rated A-1 or P-1.
The purchase of obligations of foreign banks may subject the Fund to additional
investment risks that are different in some respects from those incurred in
investing in obligations of domestic banks. Foreign banks and foreign branches
or subsidiaries of domestic banks are not necessarily subject to the same or
similar regulatory requirements that apply to domestic banks, such as mandatory
reserve requirements, loan limitations and accounting, audit and financial
record keeping requirements. In addition, less information may be publicly
available about a foreign bank or about a foreign branch of a domestic bank.
Because evidences of ownership of obligations of foreign branches or
subsidiaries of foreign banks usually are held outside the United States, the
Fund will be subject to additional risks which include possible adverse
political and economic developments, possible seizure or nationalization of
foreign deposits and possible adopting of governmental restrictions which might
adversely affect the payment of principal and interest on the foreign
obligations or might restrict the payment of principal and interest to investors
located outside the country of the issuer, whether from currency blockage or
otherwise. Income earned or received by the Fund from sources within foreign
countries may be reduced by withholding and other taxes imposed by such
countries.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually 1 to 270
days) unsecured promissory notes issued by corporations in order to finance
their current operations. The Fund may invest in a commercial paper obligation
that (a) is rated in one of the two highest short-term ratings categories by any
two NRSROs (e.g., A-1 or A-2 by S&P and P-1 or P-2 by Moody's) (or any one NRSRO
if the instrument was rated by only one such organization) or (b) is unrated, if
such security is of comparable quality as determined in accordance with
procedures established by the Fund's Board of Trustees or if such security was a
long-term security at the time of issuance but has a remaining life of 397 days
or less and has received a long-term rating in one of the three highest
long-term ratings categories by any two NRSROs (e.g., A or higher by S&P and
Moody's) (or any one NRSRO if the instrument was rated by only one such
organization). Credit quality at the time of purchase determines which
securities may be acquired. The Fund's current policy is to limit investments in
commercial paper to obligations rated A-1 or P-1.
REPURCHASE AGREEMENTS. A repurchase agreement is a short-term investment in
which the purchaser (e.g., the Fund) acquires ownership of a debt security and
the seller agrees to repurchase the obligation at a future time and at a set
price, thereby determining the yield during the holding period. The Fund may
enter into repurchase agreements with U.S. banks, their subsidiaries or overseas
branches, and with primary dealers of U.S. government securities that report to
the Federal Reserve Bank of New York. The Fund only enters into repurchase
agreements that are (a) rated at the time of investment in one of the two
highest ratings categories by at least two NRSROs (e.g. A-1 or A-2 by S&P and
P-1 or P-2 by Moody's) (or one NRSRO if the instrument was rated by only one
such organization) and (b) collateralized by the underlying securities of the
same type and quality in which the Fund otherwise may invest. The Fund will not
invest in repurchase agreements maturing in more than seven days if any such
investment, together with any other illiquid securities held by the Fund, would
exceed 10% of the Fund's net assets. Repurchase agreements are subject to the
risk of default by the other party.
7
<PAGE> 9
Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.
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 investment 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 Fund's investment 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 assurances that these steps will be sufficient to avoid any adverse
impact to the Fund. In addition, the Year 2000 Problem may adversely affect the
markets and the issuers of securities in which the Fund may invest which, in
turn, may adversely affect the net asset value of the Fund. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing errors may
result in production problems for individual companies or issuers and overall
economic uncertainty. Earnings of individual issuers will be affected by
remediation costs, which may be substantial and may be reported inconsistently
in U.S. and foreign financial statements. Efforts in foreign countries to
remediate the potential Year 2000 Problem may not be as extensive as those in
the U.S. As a result, the operations of foreign markets and issuers may be
disrupted by the Year 2000 Problem. Accordingly, the Fund's investments may be
adversely affected. The statements above are subject to the Year 2000
Information and Readiness Disclosure Act which Act may limit the legal rights
regarding the use of such statements in the case of a dispute.
INVESTMENT ADVISORY SERVICES
THE ADVISER
Van Kampen Asset Management Inc. is the Fund's investment adviser (the "Adviser"
or "Asset Management"). The Adviser is a wholly owned subsidiary of Van Kampen
Investments Inc. ("Van Kampen Investments"). Van Kampen Investments is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $75 billion under management or supervision. Van Kampen Investments' 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 (the "Distributor") and the
sponsor of the funds mentioned above, is also a wholly owned subsidiary of Van
Kampen Investments. Van Kampen Investments is an indirect wholly owned
subsidiary of Morgan Stanley Dean Witter & Co. The Adviser's principal office is
located at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555.
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 upon an annual rate applied to the average daily net assets of
the Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets % Per Annum
- ------------------------------------------------------
<S> <C> <C> <C>
First $150 million 0.50 of 1.00%
......................................................
Next $100 million 0.45 of 1.00%
......................................................
Next $100 million 0.40 of 1.00%
......................................................
Over $350 million or
thereafter 0.35 of 1.00%
......................................................
</TABLE>
Applying this fee schedule, the effective advisory fee rate was 0.39% of the
Fund's average daily net assets for the Fund's fiscal year ended May 31, 1999.
Under the Advisory Agreement, the Adviser furnishes offices, necessary
facilities and equipment and provides administrative services to the Fund. The
Fund 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. The Fund also pays all charges and expenses of its
day-to-day operations, including the compensation of trustees of the Trust
(other than those who are affiliated persons of the Adviser, Distributor or Van
Kampen Investments), the charges and expenses of legal counsel and independent
accountants, distribution fees, service fees, custodian fees, the costs of
providing reports to
8
<PAGE> 10
shareholders, and all other ordinary business expenses not specifically assumed
by the Adviser.
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 or by reducing
other expenses of the Fund in accordance with such limitations as the Adviser or
Distributor may establish.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Investment
Advisory Corp. ("Advisory Corp.").
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 of Ethics 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 pre-clearance and other procedures designed to
prevent conflicts of interest.
PURCHASE OF SHARES
GENERAL
The Fund offers three classes of shares designated as Class A Shares, Class B
Shares and Class C Shares. By offering three classes of shares, the Fund permits
each investor to choose the class of shares that is most beneficial given the
amount to be invested and the length of time the investor expects to hold the
shares.
Initial investments must be at least $1,000 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.
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 A Shares are sold
without a sales charge, while Class B Shares and Class C Shares bear sales
charge expenses at the time of redemption and any expenses (including higher
distribution fees and transfer agency costs) resulting from such deferred sales
charge arrangement, (ii) generally, each class of shares has exclusive voting
rights with respect to approvals of the Rule 12b-1 distribution plan (described
below) 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 offering price of the Fund's shares is based upon the Fund's net asset value
per share. The net asset values per share of the Class A Shares, Class B Shares
and Class C Shares are generally expected to be substantially the same. In
certain circumstances, however, the per share net asset values of the classes of
shares may differ from one another, reflecting the daily expense accruals of the
higher distribution fees and transfer agency costs applicable to the Class B
Shares and Class C Shares and the differential in the dividends that may be paid
on each class of shares.
The net asset value per share for each class of shares of the Fund 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
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Trustees reserves the right to calculate the net
asset value per share and adjust the offering price more frequently than once
daily if deemed desirable. Net asset values per share for each class is
determined by dividing the value of the Fund's portfolio securities, cash and
other assets (including accrued interest) attributable to such class, less all
liabilities (including accrued expenses) attributable to such class, by the
total number of shares of the class outstanding. The securities held by the Fund
are valued on the basis of amortized cost, which does not take into account
unrealized capital gains or losses. Amortized cost valuation involves initially
valuing a security at its cost and thereafter, applying 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
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 security.
The Fund has adopted a distribution plan (the "Distribution Plan") with respect
to each class of its
9
<PAGE> 11
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.
Under the Distribution Plan and the Service Plan, the Fund pays distribution
fees in connection with the sale and distribution of its shares and service fees
in connection with the provision of ongoing services to shareholders of each
class.
The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution fees and other expenses of the Fund associated with such class of
shares. To assist investors in comparing classes of shares, the tables under the
heading "Fees and Expenses of the Fund" provide a summary of sales charges and
expenses and an example of the sales charges and expenses of the Fund applicable
to each class of shares.
The shares are offered to the public on a continuous basis through the
Distributor as principal underwriter, which is located at 1 Parkview Plaza, PO
Box 5555, Oakbrook Terrace, Illinois 60181-5555. Shares also are offered through
members of the 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"). "Dealers" and "brokers" are sometimes referred to herein
as "authorized dealers."
Shares may be purchased on any business day by following the wire transfer
instructions described below or by completing the application accompanying this
prospectus and forwarding the application, directly or through an authorized
dealer, to the Fund's shareholder service agent, Van Kampen Investor Services
Inc. ("Investor Services"), a wholly owned subsidiary of Van Kampen Investments.
When purchasing shares of the Fund, investors must specify whether the purchase
is for Class A Shares, Class B Shares or Class C Shares. Sales personnel of
authorized dealers distributing the Fund's shares are entitled to receive
compensation for selling Class B Shares and Class C Shares and may receive
differing compensation for selling Class B Shares or Class C Shares. Sales
personnel of authorized dealers are not entitled to receive compensation for
selling Class A Shares.
The offering price for shares is based upon the next calculation of net asset
value per share after an order becomes effective, which is upon receipt by
Investor Services of federal funds. Payment by check generally will be converted
into federal funds on the second business day following receipt of payment for
the order by Investor Services.
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 sold in foreign countries where permissible.
Investor accounts will automatically be credited with additional shares of the
Fund after any Fund distributions, such as dividends and capital gain dividends,
unless the investor instructs the Fund otherwise. Investors wishing to receive
cash instead of additional shares should contact the Fund at (800) 341-2911 or
by writing to the Fund, c/o Van Kampen Investors Services Inc., PO Box 218256,
Kansas City, MO 64121-8256.
INITIAL INVESTMENT BY BANK WIRE. To open an account by wire an investor should
telephone 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.
10
<PAGE> 12
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
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 of the Fund are sold at net asset value without a sales charge
and no sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.
Under the Distribution Plan and Service Plan, the Fund may spend a total of
0.15% per year of the average daily net assets with respect to the Class A
Shares of the Fund. From such amount, under the Service Plan the Fund may spend
up to 0.15% per year of the Fund's average daily net assets with respect to the
Class A Shares, for the ongoing provision of services to Class A shareholders by
the Distributor and by brokers, dealers or financial intermediaries and for the
maintenance of such shareholders' accounts.
UNIT INVESTMENT TRUST REINVESTMENT PROGRAM. The Fund permits unitholders of
unit investment trusts to reinvest distributions from such trusts in Class A
Shares of the Fund at net asset value per share and with no minimum initial or
subsequent investment requirement if the administrator of an investor's unit
investment trust program meets certain uniform criteria relating to cost savings
by the Fund and the Distributor. The administrator of such a unit investment
trust must have an agreement with the Distributor pursuant to which the
administrator will (1) submit a single bulk order and make payment with a single
remittance for all investments in the Fund during each distribution period by
all investors who choose to invest in the Fund through the program and (2)
provide Investor Services with appropriate backup data for each investor
participating in the program in a computerized format fully compatible with
Investor Services' processing system. As further requirements for obtaining
these special benefits, 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. The Fund reserves the right to modify or terminate this program at
any time.
CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
deferred sales charge if redeemed within five years of purchase as shown in the
table as follows:
CLASS B SHARES
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
as a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
- ------------------------------------------------
<S> <C> <C> <C>
First 4.00%
................................................
Second 4.00%
................................................
Third 3.00%
................................................
Fourth 2.50%
................................................
Fifth 1.50%
................................................
Sixth and After None
................................................
</TABLE>
The contingent deferred sales 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 sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. 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 contingent deferred sales charge, if any, varies depending on
the number of years from the time of payment for the purchase of Class B Shares
11
<PAGE> 13
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 purchase of shares, all
payments during a month are totaled and deemed to have been made on the last day
of the month.
In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed that the redemption is first of any shares in the
shareholder's Fund account that are not subject to a contingent deferred sales
charge and then of shares held the longest in the shareholder's account.
Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
average daily net assets with respect to the Class B Shares of the Fund. In
addition, under the Service Plan, the Fund may spend up to 0.15% per year of the
Fund's average daily net assets with respect to the Class B Shares for the
ongoing provision of services to Class B shareholders by the Distributor and by
brokers, dealers or financial intermediaries and for the maintenance of such
shareholders' accounts.
CLASS C SHARES
Class C Shares of the Fund are sold at net asset value and are subject to a
deferred sales charge of 1.00% of the dollar amount subject to charge if
redeemed within one year of purchase.
The contingent deferred sales 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 sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1,000,000 or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.
In determining whether a contingent deferred sales charge is applicable to a
redemption, it is assumed that the redemption is first of any shares in the
shareholder's Fund account that are not subject to a contingent deferred sales
charge and then of shares held the longest in the shareholder's account.
Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
average daily net assets with respect to the Class C Shares of the Fund. In
addition, under the Service Plan, the Fund may spend up to 0.15% per year of the
Fund's average daily net assets with respect to the Class C Shares for the
ongoing provision of services to Class C shareholders by the Distributor and by
brokers, dealers or financial intermediaries and for the maintenance of such
shareholders' accounts.
CONVERSION FEATURE
Class B Shares purchased on or after June 1, 1996, and any dividend reinvestment
plan Class B Shares received on such shares, 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 Class B Shares received on such shares, 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 Class C Shares received on such shares, 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 of the Fund acquired
through the exchange privilege from another Van Kampen fund participating in the
exchange program is determined by reference to the Van Kampen fund 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 federal income tax law and (ii) the
conversion of shares does not constitute a taxable event under federal income
tax law. The conversion may be suspended if such an opinion is no longer
available and such shares might continue to be subject to the higher aggregate
fees applicable to such shares for an indefinite period.
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 participating in the exchange program. Investors
12
<PAGE> 14
purchasing shares of the Fund without regard to the availability of exchanges
should purchase Class A Shares because there is no sales charge or related
expenses on Class A Shares 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 Van Kampen
funds should consider purchasing Class A Shares 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 subject to lower distribution and service fees
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 and then exchanging them for Class B Shares or Class C Shares of
other Van Kampen funds. The contingent deferred sales charges applicable to
Class B Shares and Class C Shares is not imposed on exchanges among Van Kampen
funds participating in the exchange program for the same class of shares.
Instead, Class B Shares or Class C Shares acquired in an exchange remain subject
to the contingent deferred sales charges schedule of the initial fund from which
the Class B Shares or Class C Shares were purchased. Similarly the holding
period for calculating any contingent deferred sales charge is based upon the
date of purchase of such shares from the initial fund.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge is waived on redemptions of Class B Shares
and Class C Shares (i) within one year following the death or disability (as
disability is defined by federal income tax law) of a shareholder, (ii) for
required minimum distributions from an individual retirement account ("IRA") or
certain other retirement plan distributions, (iii) for withdrawals under the
Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, (iv) if no commission or transaction fee is paid to
authorized dealers at the time of purchase of such shares and (v) if made by
involuntary liquidation by the Fund of a shareholder's account as described
under the heading "Redemption of Shares." Subject to certain limitations, a
shareholder who has redeemed Class C Shares of the Fund may reinvest in Class C
Shares at net asset value with credit for any contingent deferred sales charge
if the reinvestment is made within 180 days after the redemption. For a more
complete description of contingent deferred sales charge waivers, please refer
to the Fund's Statement of Additional Information or contact your authorized
dealer.
REDEMPTION OF
SHARES
Generally shareholders may redeem for cash some or all of their shares without
charge by the Fund (other than applicable sales charge) at any time. As
described under the heading "Purchase of Shares," redemptions of Class B Shares
and Class C Shares may be subject to a contingent deferred sales charge.
Redemptions completed through an authorized dealer or a custodian of a
retirement plan account may involve additional fees charged by the dealer or
custodian.
Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the request and any other necessary documents in
proper form as described below. Such payment may be postponed or the right of
redemption suspended as provided by the rules of the SEC. Such payment may,
under certain circumstances, be paid wholly or in part by a distribution-in-kind
of portfolio securities. If the shares to be redeemed have been recently
purchased by check, Investor Services may delay the payment of redemption
proceeds until it confirms the purchase check has cleared, which may take up to
15 days. A taxable gain or loss will be recognized by the shareholder upon
redemption of shares.
WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor Services
Inc., PO Box 218256, Kansas City, MO 64121-8256. The request for redemption
should indicate the number of shares to be redeemed, the class designation of
such shares and the shareholder's account number. The redemption request 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, or 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-
13
<PAGE> 15
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 to be in proper form. In some
cases, however, additional documents may be necessary. In the case of
shareholders holding certificates, the certificates for the shares being
redeemed properly endorsed for transfer 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. Contact the IRA custodian
for further information.
In the case of written redemption requests sent directly to Investor Services,
the redemption price is the net asset value per share next determined after the
request in proper form is received by Investor Services.
AUTHORIZED DEALER REDEMPTION REQUESTS. Shareholders may place redemption
requests through an authorized dealer. Orders sent through authorized dealers
must be at least $500 (unless transmitted by your authorized dealer via the
FUNDSERV network). The redemption price for such shares is the net asset value
per share next calculated after an order in proper form is received by an
authorized dealer provided such order is transmitted to the Distributor prior to
the Distributor's close of business on such day. It is the responsibility of
authorized dealers to transmit redemption requests received by them to the
Distributor so they will be received prior to such time. Redemptions completed
through an authorized dealer may involve additional fees charged by the dealer.
TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
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. Van Kampen Investments, Investor Services and the Fund employ
procedures considered by them to be reasonable to confirm that instructions
communicated by telephone are genuine. Such procedures include requiring certain
personal identification information prior to acting upon telephone instructions,
tape recording telephone communications and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
neither Van Kampen Investments, Investor Services nor the Fund will be liable
for following telephone instructions which it reasonably believes to be genuine.
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
other redemption procedure previously described. Requests received by Investor
Services prior to 4:00 p.m., New York time, will be processed at the next
determined net asset value per share. These privileges are available for all
accounts other than retirement accounts or accounts with 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. 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 payable by wire transfer are expected to be wired on the next
business day following the date of redemption. The Fund reserves the right at
any time to terminate, limit or otherwise modify this redemption privilege.
Expedited telephone redemption requests.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 telephone redemption requests
received prior to 10:00 a.m. Kansas City time are processed and the proceeds are
wired on the date of receipt. Redemption requests
14
<PAGE> 16
received by Investor Services after such hour are 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.
OTHER REDEMPTION INFORMATION. The Fund may redeem shares of any shareholder
account that has a 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 provided to
the shareholder and such shareholder will be given an opportunity to purchase
the required value of additional shares at the next determined net asset value
without sales charge. Any involuntary redemption may only occur if the
shareholder account is less than the minimum initial investment due to
shareholder redemptions.
DISTRIBUTIONS FROM THE FUND
Shareholders may receive distributions from the Fund of dividends and capital
gain dividends.
DIVIDENDS. Interest earned from investments is the Fund's main source of income.
The Fund's 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. The Fund's present policy, which may be changed at any time by the
Board of Trustees, is to declare and distribute all, or substantially all of
this income, less expenses, daily as dividends to shareholders. All dividends
are automatically applied to purchase additional full and fractional shares of
the Fund at the next determined net asset value. Shareholders may elect to
receive monthly payment of dividends in cash by written instruction to Investor
Services. 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. A redeeming
shareholder receives all dividends accrued through the date of redemption.
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 fees and
expenses applicable to such classes of shares.
CAPITAL GAIN DIVIDENDS. Although the Fund expects that its distributions will
consist primarily of dividends from interest income, the Fund may realize
capital gains or losses when it sells securities, depending on whether the sales
prices for the securities are higher or lower than purchase prices. Net realized
capital gain represents the total profit from sales of securities minus total
losses from sales of securities including losses carried forward from prior
years. The Fund distributes any taxable net realized capital gain to
shareholders as capital gain dividends at least annually. As in the case of
dividends, capital gain dividends are automatically reinvested in additional
shares of the Fund at the next determined net asset value unless the shareholder
instructs otherwise.
SHAREHOLDER SERVICES
Listed below are some of the shareholder services the Fund offers to investors.
For a more complete description of the Fund's shareholder services, such as
investment accounts, share certificates, retirement plans, automated clearing
house deposits, dividend diversification and the systematic withdrawal plan,
please refer to the Statement of Additional Information or contact your
authorized dealer.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gain dividends in shares of the
Fund. Such shares are acquired at net asset value per share (without sales
charge) on the applicable payable date of the dividend or capital gain
distribution. 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 by
15
<PAGE> 17
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
gain dividends be reinvested at net asset value, or that both dividends and
capital gain dividends be paid in cash.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder can authorize Investor Services to charge a bank account on a
regular basis to invest predetermined amounts in the Fund. Additional
information is available from the Distributor or your authorized dealer.
CHECK WRITING PRIVILEGE. A Class A shareholder holding shares of the Fund for
which certificates have not been issued and which are in a nonescrow status may
appoint Investor Services as agent by completing the Authorization for
Redemption by Check form and the appropriate section of the application and
returning the form and the application to Investor Services. Once the form is
properly completed, signed and returned to the agent, a supply of checks drawn
on State Street Bank and Trust Company (the "Bank") will be sent to the Class A
shareholder. These checks may be made payable by the Class A shareholder to the
order of any person in any amount of $100 or more.
When a check is presented to the 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 Share account by Investor Services at the next determined
net asset value per share. Check writing redemptions represent the sale of Class
A Shares. Any gain or loss realized on the redemption of shares is a taxable
event.
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 shares held in the shareholder's account, the check will be
returned and the shareholder may be subject to additional charges.
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 by the Bank. Retirement plans and accounts that are subject to backup
withholding are not eligible for the privilege.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund (defined below) 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 a Participating Fund. Class A shares of the Fund which
have not previously been charged a sales charge (except for Class A Shares
issued under the reinvestment option) or that have been charged a lower sales
charge than the sales charge applicable of the shares of the Participating Fund
being acquired will have any applicable sales charges differential imposed upon
an exchange into a Participating Fund. Shareholders seeking an exchange into a
Participating Fund should obtain and read the current prospectus for such fund.
As used herein, "Participating Funds" refers to certain open-end investment
companies advised by Asset Management or Advisory Corp. and distributed by the
Distributor as determined from time to time by the Fund's Board of Trustees.
When Class B Shares and Class C Shares are exchanged among Participating Funds,
the holding period for purposes of computing the contingent deferred sales
charge is based upon the date of the initial purchase of such shares from a
Participating Fund. If such Class B Shares or Class C Shares are redeemed and
not exchanged for shares of another Participating Fund, Class B Shares and Class
C Shares are subject to the contingent deferred sales charge schedule imposed by
the Participating Fund from which such shares were originally purchased.
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes. If the shares exchanged have been held for less than 91
days, the sales charge paid on such shares is carried over and included in the
tax basis of the shares acquired.
A shareholder wishing to make an exchange may do so by sending a written request
to 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 the prospectus. Van
Kampen Investments, Investor Services and the Fund employ procedures considered
16
<PAGE> 18
by them to be reasonable to confirm that instructions communicated by telephone
are genuine. Such procedures include requiring certain personal identification
information prior to acting upon telephone instructions, tape-recording
telephone communications, and providing written confirmation of instructions
communicated by telephone. If reasonable procedures are employed, neither Van
Kampen Investments, Investor Services nor the Fund will be liable for following
telephone instructions which it reasonably believes to be genuine. If the
exchanging shareholder does not have an account in the fund whose shares are
being acquired, a new account will be established with the same registration,
dividend and capital gains options (except dividend diversification) 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 submit a
specific request. The Fund reserves the right to reject any order to acquire its
shares through exchange. In addition, the Fund and other Participating Funds may
restrict exchanges by shareholders engaged in excessive trading by limiting or
disallowing the exchange privileges to such shareholders. For further
information on these restrictions see the Statement of Additional Information.
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.
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 herein.
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.
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.vankampen.com for further instruction. Van Kampen Investments, Investor
Services 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 Van Kampen Investments, Investor Services 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.
FEDERAL INCOME
TAXATION
Distributions of the Fund's investment company taxable income (consisting
generally of income and net short-term capital gain) 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 gain (which is the excess of net long-term capital gain over net
short-term capital loss) as capital gain dividends, if any, are taxable to
shareholders as long-term capital gains, whether paid in cash or reinvested in
additional shares, and regardless of how long the shares of the Fund have been
held by such shareholders. Capital gain dividends may be taxed at different
rates depending on how long the Fund held the securities. The Fund expects that
its distributions will consist primarily of ordinary income. 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). Although distributions generally are treated as
taxable in the year they are
17
<PAGE> 19
paid, distributions 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.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year.
The sale or exchange of shares is a taxable transaction for federal income tax
purposes. Shareholders who sell their shares 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 the shares are held as a capital asset,
the gain or loss will be a capital gain or loss. Any capital gains may be taxed
at different rates depending on how long the shareholder held such shares.
The Fund is required, in certain circumstances, to withhold 31% of dividends and
certain other payments, including redemptions, paid to shareholders who do not
furnish to the Fund their correct taxpayer identification number (in the case of
individuals, their social security number) and certain required certifications
or who are otherwise subject to backup withholding.
Foreign shareholders, including shareholders who are non-resident aliens, may be
subject to U.S. withholding tax on certain distributions (whether received in
cash or in shares) at a rate of 30% or such lower rate as prescribed by an
applicable treaty. Prospective foreign investors should consult their U.S. tax
advisers concerning the tax consequences to them of an investment in shares.
The Fund intends to qualify as a regulated investment company under federal
income tax law. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its investment company taxable income, the Fund
will not be required to pay federal income taxes on any income it distributes to
shareholders. If the Fund distributes less than the sum of 98% of its ordinary
income and 98% of its capital gain net income, then the Fund will be subject to
a 4% excise tax on the undistributed amounts.
The federal income tax discussion set forth above is for general information
only. Prospective investors should consult their own tax advisers regarding the
specific federal tax consequences of purchasing, holding, disposing, exchanging
or selling shares, as well as the effects of state, local and foreign tax law
and any proposed tax law changes.
18
<PAGE> 20
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the Statement of Additional Information and may be obtained by
shareholders without charge by calling the telephone number on the back 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,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<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....................................... .0449 .0467 .0440 .0465 .0434
Less Distributions from Net Investment Income............... (.0449) (.0467) (.0440) (.0465) (.0434)
------ ------ ------ ------ ------
Net Asset Value, End of the Period.......................... $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
Total Return(b)............................................. 4.55% 4.78% 4.52% 4.75% 4.43%
Net Assets at End of the Period (In millions)............... $529.6 $634.1 $451.3 $440.3 $319.7
Ratio of Expenses to Average Net Assets*(a)................. 0.84% 1.02% 1.02% 1.07% 1.00%
Ratio of Net Investment Income to Average Net Assets*....... 4.38% 4.60% 4.38% 4.62% 4.28%
<CAPTION>
Class B Shares
April 18,
1995
(Commencement
of
Distribution)
to May 31,
Year Ended May 31,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<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....................................... .0374 .0391 .0363 .0388 .0047
Less Distributions from Net Investment Income............... (.0374) (.0391) (.0363) (.0388) (.0047)
------ ------ ------ ------ ------
Net Asset Value, End of the Period.......................... $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
Total Return(b)............................................. 3.78% 3.99% 3.71% 3.95% .47%**
Net Assets at End of the Period (In millions)............... $129.8 $123.0 $103.0 $81.5 $4.2
Ratio of Expenses to Average Net Assets*(a)................. 1.63% 1.79% 1.77% 1.86% 1.76%
Ratio of Net Investment Income to Average Net Assets*....... 3.71% 3.91% 3.70% 3.75% 3.52%
<CAPTION>
Class C Shares
April 18,
1995
(Commencement
of
Distribution)
Year Ended May 31,
to May 31,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................... $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
Net Investment Income....................................... .0373 .0392 .0362 .0387 .0049
Less Distributions from Net Investment Income............... (.0373) (.0392) (.0362) (.0387) (.0049)
------ ------ ------ ------ ------
Net Asset Value, End of the Period.......................... $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
Total Return(b)............................................. 3.77% 3.99% 3.72% 3.94% .49%**
Net Assets at End of the Period (In millions)............... $26.9 $16.1 $8.4 $9.7 $0.6
Ratio of Expenses to Average Net Assets*(a)................. 1.63% 1.78% 1.78% 1.87% 1.76%
Ratio of Net Investment Income to Average Net Assets*....... 3.73% 3.91% 3.64% 3.81% 3.52%
</TABLE>
* For the years ended May 31, 1995 through 1997, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to the Adviser's
reimbursement of certain expenses was less than 0.01%.
** Non-Annualized
(a) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratio would decrease by .01% for the year ended May 31,
1999.
(b) Total Return is based upon net asset value which does not include payment of
the Class B Shares or Class C Shares contingent deferred sales charge.
See Financial Statements and Notes thereto
19
<PAGE> 21
BOARD OF TRUSTEES
AND OFFICERS
BOARD OF TRUSTEES
<TABLE>
<S> <C>
J. Miles Branagan Don G. Powell*
Jerry D. Choate Philip B. Rooney
Richard M. DeMartini* Fernando Sisto
Linda Hutton Heagy Wayne W. Whalen*
R. Craig Kennedy Suzanne H. Woolsey
Jack E. Nelson Paul G. Yovovich
</TABLE>
OFFICERS
Richard F. Powers, III*
President
Dennis J. McDonnell*
Executive Vice President & Chief Investment Officer
A. Thomas Smith III*
Vice President and Secretary
Edward C. Wood III*
Vice President
Michael H. Santo*
Vice President
Peter W. Hegel*
Vice President
Stephen L. Boyd*
Vice President
John L. Sullivan*
Vice President, Chief Financial Officer & Treasurer
Curtis W. Morell*
Vice President & Chief Accounting Officer
Tanya M. Loden*
Controller
* "Interested Persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
FOR MORE INFORMATION
EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time Monday through Friday
DEALERS
For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666
TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call (800) 421-2833
FUND INFO(R)
For automated telephone services, call (800) 847-2424
WEB SITE
www.vankampen.com
VAN KAMPEN RESERVE FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Investment Adviser
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Distributor
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Reserve Fund
Custodian
STATE STREET BANK AND TRUST COMPANY
225 West Franklin Street, PO 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> 22
VAN KAMPEN
RESERVE FUND
PROSPECTUS
SEPTEMBER 28, 1999
A Statement of Additional Information, which
contains more details about the Fund, is
incorporated by reference in its entirety into
this prospectus.
You will find additional information about the
Fund in its annual and semiannual reports to
shareholders.
You can ask questions or obtain a free copy of
the Fund's reports or its Statement of
Additional Information by calling (800)
341-2911 from 7:00 a.m. to 7:00 p.m., Central
time, Monday through Friday.
Telecommunications Device for the Deaf users
may call (800) 421-2833. A free copy of the
Fund's reports can also be ordered from our
web site at www.vankampen.com.
Information about the Fund, including its
reports and Statement of Additional
Information, has been filed with the
Securities and Exchange Commission (SEC). It
can be reviewed and copied at the SEC's Public
Reference Room in Washington, DC or online at
the SEC's web site (http://www.sec.gov).
Information on the operation of the SEC's
Public Reference Room may be obtained by
calling the SEC at (800) SEC-0330. You can
also request copies of these materials, upon
payment of a duplicating fee, by writing the
Public Reference Section of the SEC,
Washington DC, 20549-6009.
[VAN KAMPEN FUNDS LOGO]
The Fund's Investment Company Act
File No. is 811-2482.
RES
PRO 9/99
<PAGE> 23
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN RESERVE FUND
Van Kampen Reserve Fund (the "Fund") is a mutual fund with an investment
objective to seek protection of capital and high current income. The Fund's
investment adviser seeks to achieve the investment objective by investing in a
portfolio of U.S. dollar-denominated money-market securities.
The Fund is organized as a diversified series of the Van Kampen Reserve
Fund, an open-end, management investment company (the "Trust").
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 that 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 1 Parkview Plaza, PO Box
5555, Oakbrook Terrace, Illinois 60181-5555 or (800) 341-2911 (or (800) 421-2833
for the hearing impaired).
---------------------------------------------
TABLE OF CONTENTS
---------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information......................................... B-2
Investment Objective and Policies........................... B-4
Investment Restrictions..................................... B-7
Description of Securities Ratings........................... B-9
Trustees and Officers....................................... B-14
Investment Advisory Agreement............................... B-24
Other Agreements............................................ B-25
Distribution and Service.................................... B-26
Transfer Agent.............................................. B-29
Portfolio Transactions and Brokerage Allocation............. B-29
Shareholder Services........................................ B-30
Redemption of Shares........................................ B-32
Waiver of Class B and Class C Contingent Deferred Sales
Charge.................................................... B-33
Taxation.................................................... B-35
Yield Information........................................... B-39
Other Information........................................... B-41
Report of Independent Accountants........................... F-1
Financial Statements........................................ F-2
Notes to Financial Statements............................... F-10
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED SEPTEMBER 28, 1999.
<PAGE> 24
GENERAL INFORMATION
The Fund was originally incorporated in Maryland on March 28, 1974 under
the name American Capital Reserve Fund, Inc. As of July 31, 1995, the Fund was
reorganized as a series of the Trust under the name Van Kampen American Capital
Reserve Fund. The Trust is a business trust organized under the laws of the
State of Delaware. On July 14, 1998, the Fund and the Trust adopted their
present names.
Van Kampen Asset Management Inc. (the "Adviser" or "Asset Management"), 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 Investments"), which is an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. ("Morgan Stanley Dean Witter"). The principal
office of the Fund, the Adviser, the Distributor and Van Kampen Investments is
located at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555.
Morgan Stanley Dean Witter and various of its directly or indirectly owned
subsidiaries, including Morgan Stanley Dean Witter Investment 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 securities lending.
The authorized capitalization of the Trust consists of an unlimited number
of shares of beneficial interest, par value $0.01 per share, which can be
divided into series, such as the Fund, and further subdivided into classes of
each series. Each share represents an equal proportionate interest in the assets
of the series with each other share in such series and no interest in any other
series. No series is subject to the liabilities of any other series. The
Declaration of Trust provides that shareholders are not liable for any
liabilities of the Trust or any of its series, requires inclusion of a clause to
that effect in every agreement entered into by the Trust or any of its series
and indemnifies shareholders against any such liability.
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 in accordance with provisions of the Declaration of Trust. Each
class of shares of the Fund 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. Shares of the Trust entitle their holders
to one vote per share; however, separate votes are taken by each series on
matters affecting an individual series and separate votes are taken by each
class of a series on matters affecting an individual class of such series. For
example, a change in investment policy for a series would be voted upon by
shareholders of only the series involved and a change in the distribution fee
for a class of a series would be voted upon by shareholders of only the class of
such series involved. Except as otherwise described in the Prospectus or herein,
shares do not have cumulative voting rights, preemptive rights or any
conversion, subscription or exchange rights.
B-2
<PAGE> 25
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 a majority 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
Investment Company Act of 1940, as amended (the "1940 Act"), or rules or
regulations promulgated by the Securities and Exchange Commission ("SEC").
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 debts and expenses of the
Fund have been paid. Since Class B Shares and Class C Shares have higher
distribution fees and transfer agency costs, the liquidation proceeds to holders
of Class B Shares and Class C Shares are likely to be lower than to holders of
Class A Shares.
The Trustees may amend the Declaration of Trust (including with respect to
any series) in any manner without shareholder approval, except that the Trustees
may not adopt any amendment adversely affecting the rights of shareholders of
any series without approval by a majority of the shares of each affected series
present at a meeting of shareholders (or such higher vote as may be required by
the 1940 Act or other applicable law) and except that the Trustees cannot amend
the Declaration of Trust to impose any liability on shareholders, make any
assessment on shares or impose liabilities on the Trustees without approval from
each affected shareholder or Trustee, as the case may be.
Statements contained in this Statement of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information forms a part, each such statement being
qualified in all respects by such reference.
B-3
<PAGE> 26
As of September 1, 1999, no person was known by the Fund to own
beneficially or to hold of record 5% or more of the outstanding Class A Shares,
Class B Shares or Class C Shares of the Fund except as follows:
<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 140,461,146.46 20.91%
2800 Post Oak Blvd. B 83,667,013.66 39.93%
Houston, TX 77056 C 6,472,737.59 9.49%
Donaldson Lufkin Jenrette
Securities Corp Inc
PO Box 2062
Jersey City, NJ 07303-2052 A 52,038,056.81 7.75%
Arthur B. Klussendorf
PO Box 280
Greenville, NY 12083-0280 B 153,830.60 6.39%
Edward Jones & Co
Attn Mutual Fund
Shareholder Accounting
201 Progress Pkwy
Maryland Hts, MO 63043-3009 B 149,234.38 6.20%
Van Kampen Trust Company
Custodian
IRA R/O John J. Berowski
1870 Golfview Dr.
Bartlett, IL 60103-9549 B 127,490.72 5.29%
</TABLE>
Van Kampen Trust Company acts as custodian for certain employee benefit
plans and individual retirement accounts.
INVESTMENT OBJECTIVE AND POLICIES
The following disclosures supplement disclosures set forth under the same
caption in the Prospectus and do not, standing alone, present a complete or
accurate explanation of the matters disclosed. Readers must refer also to this
caption in the Prospectus for a complete presentation of the matters disclosed
below.
MONEY-MARKET SECURITIES
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 1940 Act, certain
requirements of which are summarized below.
In accordance with Rule 2a-7, the Fund is required to (i) maintain a
dollar-weighted average portfolio maturity of 90 days or less, (ii) purchase
only instruments having remaining maturities of 13 months or less and (iii)
invest only in U.S. dollar denominated securities determined in accordance with
procedures established by the Trustees to present minimal credit risks.
Additionally, securities purchased for investment must be rated in one
B-4
<PAGE> 27
of the two highest short-term rating categories for debt obligations by any two
nationally recognized statistical rating organizations ("NRSROs") (or any one
NRSRO 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 NRSROs currently rating instruments of the type
the Fund may purchase are Moody's Investors Service, Inc. ("Moody's"), Standard
& Poor's ("S & P"), Fitch Investors Services, Inc., Duff and Phelps, Inc. and
IBCA Limited and IBCA Inc.
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 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. First tier securities are those that have been rated in the highest
rating category for short-term obligations by at least two NRSROs (or one NRSRO
if the instrument was rated by only one such organization), and unrated
securities determined by the Fund's Board of Trustees to be comparable to those
rated in the highest category. The Fund will be limited to 5% of the Fund's
total assets for other permitted investments not in the first tier ("second tier
securities"), 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.
If a security's rating is downgraded, the Adviser and/or the Fund's Board
of Trustees may have to reassess the security's credit risk. If a security has
ceased to be a first tier security, the Adviser will promptly reassess whether
the security continues to present minimal credit risk. If the Adviser becomes
aware that any NRSRO has downgraded its rating of a second tier security or
rated previously unrated security below its second highest rating category, the
Fund's Board of Trustees shall promptly reassess whether the security presents
minimal credit risk and whether it is in the best interests of the Fund to
dispose of it. If the Fund disposes of the security within five days of the
Adviser learning of the downgrade, the Adviser will provide the Board with
subsequent notice of such downgrade. If a security is in default, ceases to be a
security permitted for investment, is determined no longer to present minimal
credit risks or if an event of insolvency as defined in Rule 2a-7 occurs, the
Fund must dispose of the security as soon as practicable unless, the Fund's
Board of Trustees determines it would be in the best interests of the Fund not
to dispose of 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 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. The Fund may enter into repurchase agreements with
banks or broker-
B-5
<PAGE> 28
dealers deemed to be creditworthy by the Adviser under guidelines approved by
the Trustees. The Fund will not invest in repurchase agreements maturing in more
than seven days if any such investment, together with any other illiquid
securities held by the Fund, would exceed the Fund's limitation on illiquid
securities. The Fund does not bear the risk of a decline in value of the
underlying security unless the seller defaults under its repurchase obligation.
In the event of the bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses including: (a) possible decline in the value of the
underlying security during the period while the Fund seeks to enforce its rights
thereto; (b) possible lack of access to income on the underlying security during
this period; and (c) expenses of enforcing its rights.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that 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 in repurchase agreements
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
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 than 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 exemptive order from the SEC authorizing this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in
illiquid securities, which includes securities that are not readily marketable,
repurchase agreements which have a maturity of longer than seven days, and
generally includes securities that are restricted from sale to the public
without registration under the Securities Act of 1933, as amended (the "1933
Act"). The sale of such securities often requires more time and results in
higher brokerage charges or dealer discounts and other selling expenses than
does the sale of liquid securities trading on national securities exchanges or
in the over-the-counter markets. Restricted securities are often purchased at a
discount from the market price of unrestricted securities of the same issuer
reflecting the fact that such securities may not be readily marketable without
some time delay. Investments in securities which have no ready market are valued
at fair value as determined in good faith by the Adviser in accordance with
procedures approved by the Fund's Trustees. Ordinarily, the Fund would invest in
restricted securities only when it receives the issuer's commitment to register
the securities without expense to the Fund. However, registration and
underwriting expenses (which may range from 7% to 15% of the gross proceeds of
the securities sold) may be paid by the Fund. Restricted securities which can be
offered and sold to qualified institutional buyers under Rule 144A under the
1933 Act ("144A Securities") and are determined to be liquid under guidelines
adopted by and subject to the supervision of the Fund's Board of Trustees are
not subject to the limitation on illiquid securities. Such 144A Securities are
subject to monitoring and may become illiquid to the extent qualified
institutional buyers become, for a time, uninterested in purchasing such
securities. Factors used to determine whether 144A Securities are liquid
include, among other things, a security's trading history, the availability of
reliable pricing information, the number of dealers making quotes or making a
market in such security and the number of potential purchasers in the market for
such security. For purposes hereof, investments by the Fund
B-6
<PAGE> 29
in securities of other investment companies will not be considered investments
in restricted securities to the extent permitted by (i) the 1940 Act, (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.
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 not be changed without approval by the vote of a majority of its
outstanding voting securities 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 Fund's outstanding voting
securities. The percentage limitations contained in the restrictions and
policies set forth herein apply at the time of purchase of securities. With
respect to the limitations on illiquid securities and borrowings, the percentage
limitations apply at the time of purchase and on an ongoing basis. These
restrictions provide that the Fund shall not:
1. Purchase any security which matures more than two years from the date
of purchase. As set forth under "Investment Objective, Policies and
Risks" 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 "Description of Securities Ratings" for an explanation of
these
B-7
<PAGE> 30
ratings); and (e) repurchase agreements collateralized by the debt
securities described above.
3. Issue any senior security, although the Fund may borrow as set forth
under item 14 below.
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, as amended (the "1933
Act").
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
B-8
<PAGE> 31
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 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.
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).
DESCRIPTION OF SECURITIES RATINGS
Below is a description of the two highest rating categories for short-term
debt obligations and long-term debt obligations by the "nationally recognized
statistical rating organizations." The ratings descriptions are based on
information supplied by the ratings organizations to subscribers.
SHORT-TERM DEBT RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's"): The following rating
designations for commercial paper (defined by Moody's as promissory obligations
not having original
B-9
<PAGE> 32
maturity in excess of nine months), are judged by Moody's to be investment
grade, and indicate the relative repayment capacity of rated issuers:
<TABLE>
<S> <C>
PRIME-1: Superior capacity for repayment. Capacity will normally
be evidenced by the following characteristics: (a)
leveling market positions in well-established industries;
(b) high rates of return on funds employed; (c)
conservative capitalization structures with moderate
reliance on debt and ample asset protection; (d) broad
margins in earning coverage of fixed financial charges
and high internal cash generation; and (e) well
established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2: Strong capacity for repayment. This will normally be
evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios,
while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample
alternate liquidity is maintained.
</TABLE>
The following rating designations for state and municipal notes, are judged
by Moody's to be investment grade, and indicate the relative repayment capacity
of rated issuers:
<TABLE>
<S> <C>
MIG-1/
VMIG-1: Notes rated MIG-1/VMIG-1 are of the best quality. There
is present strong protection by established cash flows,
superior liquidity support or broad-based access to the
market for refinancing.
MIG-2/
VMIG-2: Notes which are rated MIG-2/VMIG-2 are of high quality.
Margins of protection are ample though not so large as in
the preceding group.
</TABLE>
STANDARD & POOR'S ("S&P"): The following ratings by S&P for commercial
paper (defined by S&P as debt having an original maturity of no more than 365
days) assess the likelihood of payment:
<TABLE>
<C> <S>
A-1: Strong capacity for timely payment. Those issues
determined to possess extremely strong safety
characteristics are denoted with a plus sign (+)
designation.
A-2: Satisfactory capacity for timely payment. However, the
relative degree of safety is not as high as for issues
designated "A-1."
</TABLE>
The following ratings by S&P for state and municipal notes assess the
likelihood of payment:
<TABLE>
<C> <S>
SP-1: Notes which are rated SP-1 have a very strong capacity to
pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be give
a plus (+) designation.
SP-2: Notes which are rated SP-2 have a satisfactory capacity
to pay principal and interest.
</TABLE>
B-10
<PAGE> 33
IBCA FITCH ("Fitch"): Fitch assigns the following short-term ratings to
debt obligations that are payable on demand or have original maturities of
generally up to three years, including commercial paper, certificates of
deposit, medium-term notes, and municipal and investment notes:
<TABLE>
<C> <S>
F-1+: Exceptionally strong credit quality; the strongest degree
of assurance for timely payment.
F-1: Very strong credit quality; assurance of timely payment
is only slightly less in degree than issues rated "F-1+."
F-2: Good credit quality; satisfactory degree of assurance for
timely payment, but the margin of safety is not as great
as for issues assigned "F-1+" or "F-1" ratings.
</TABLE>
DUFF & PHELPS, INC. ("Duff & Phelps"): The following ratings are for
commercial paper (defined by Duff & Phelps as obligations with maturities, when
issued, of under one year), asset-backed commercial paper, and certificates of
deposit (the ratings cover all obligations of the institution with maturities,
when issued, of under one year, including bankers' acceptance and letters of
credit):
<TABLE>
<C> <S>
D-1+: Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or
access to alternative sources of funds, is outstanding,
and safety is just below risk-free U.S. Treasury
short-term obligations.
D-1: Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental
protection factors. Risk factors are minor.
D-1-: High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection
factors. Risk factors are very small.
D-2: Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
</TABLE>
LONG-TERM DEBT RATINGS
These ratings are relevant for securities purchased by the Fund with a
remaining maturity of 397 days or less, or for rating issuers of short-term
obligations. Bonds (including municipal bonds) are rated as follows:
MOODY'S INVESTORS SERVICE, INC.:
<TABLE>
<C> <S>
AAA: Judged to be the best quality. They carry the smallest
degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin, and principal
is secure. While the various protective elements are
likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong
positions of such issues.
</TABLE>
B-11
<PAGE> 34
<TABLE>
<C> <S>
AA: Judged to be of high quality by all standards. Together with "Aaa" group
they comprise what are generally known as high- grade bonds. They are
rated lower than the best bonds because margins of protection may not be
as large as in "Aaa" securities or 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 than in "Aaa"
securities.
A: Possess many favorable investment attributes and are to be considered as
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the future.
</TABLE>
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" rating
classification. The modifier "1" indicates that the security ranks in the higher
end of its generic rating category; the modifier "2" indicates a mid-range
ranking; and the modifier "3" indicates that the issue ranks in the lower end of
its generic rating category.
STANDARD & POOR'S:
<TABLE>
<C> <S>
AAA: The highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: A strong capacity to pay interest and repay principal and
differ from "AAA" rated issues only in small degree.
A: Somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than
obligations in higher rated categories. Capacity to meet
its financial commitment on the obligation is still
strong.
</TABLE>
IBCA FITCH:
<TABLE>
<C> <S>
AAA: Bonds rated AAA by Fitch are considered to be investment
grade and of the highest credit quality. The obligor has
an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably
foreseeable events.
AA: Bonds rated AA by Fitch are considered to be investment
grade and of very high credit quality. The obligor's
ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA.
Because bonds rated in the AAA and AA categories are not
significantly vulnerable to foreseeable future
developments, short-term debt of these issues is generally
rate F-1+ by Fitch.
</TABLE>
Plus and minus signs are used by Fitch to indicate the relative position of
a
credit within a rating category. Plus and minus signs, however, are not used in
the AAA category.
DUFF & PHELPS:
<TABLE>
<C> <S>
AAA: The highest credit quality. The risk factors are
negligible, being only slightly more than for risk-free
U.S. Treasury debt.
</TABLE>
B-12
<PAGE> 35
<TABLE>
<C> <S>
AA: High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because
of economic conditions.
A: Protection factors are average but adequate. However, risk
factors are more variable in periods of greater economic
stress.
</TABLE>
Plus (+) and minus (-) signs are used in the "AA" and "A" categories to
indicate the relative position of a credit within that category.
B-13
<PAGE> 36
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. 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 Investments"), Van Kampen Investment
Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset
Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Management
Inc., Van Kampen Advisors Inc., 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. ("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 Van Kampen Exchange Fund).
TRUSTEES
<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Trustee/Director of each of
1632 Morning Mountain Road the funds in the Fund Complex. Co-founder,
Raleigh, NC 27614 and prior to August 1996, Chairman, Chief
Date of Birth: 07/14/32 Executive Officer and President, MDT
Corporation (now known as Getinge/Castle,
Inc., a subsidiary of Getinge Industrier AB),
a company which develops, manufactures,
markets and services medical and scientific
equipment.
Jerry D. Choate........................... Director of Amgen Inc., a biotechnological
Barrington Place, Building 4 company. Trustee/Director of each of the
18 E. Dundee Road, Suite 101 funds in the Fund Complex. Prior to January
Barrington, IL 60010 1999, Chairman and Chief Executive Officer of
Date of Birth: 09/16/38 The Allstate Corporation ("Allstate") and
Allstate Insurance Company. Prior to January
1995, President and Chief Executive Officer
of Allstate. Prior to August 1994, Mr. Choate
held various management positions at
Allstate.
</TABLE>
B-14
<PAGE> 37
<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Richard M. DeMartini*..................... Chairman and Chief Executive Officer of
Two World Trade Center International Private Client Group, a
66th Floor division of Morgan Stanley Dean Witter.
New York, NY 10048 Director of Dean Witter Reynolds Inc.
Date of Birth: 10/12/52 Chairman and Director of Dean Witter Capital
Corporation. Chairman, Chief Executive
Officer, President and Director of Dean
Witter Alliance Capital Corporation. Director
of the National Healthcare Resources, Inc.,
Dean Witter Realty Inc., Dean Witter Reynolds
Venture Equities Inc., DW Window Covering
Holding, Inc. and a member of the Morgan
Stanley Dean Witter Management Committee.
Trustee of the TCW/DW Funds, Director of the
Morgan Stanley Dean Witter Funds and
Trustee/Director of other funds in the Fund
Complex. Prior to March 1999, Chairman, Chief
Executive Officer, President and Director of
Morgan Stanley Dean Witter Distributors, Inc.
Prior to January 1999, Chairman of Dean
Witter Futures & Currency Management Inc. and
Demeter Management Corporation. Prior to
December 1998, President and Chief Operating
Officer of Morgan Stanley Dean Witter
Individual Asset Management and Director of
Morgan Stanley Dean Witter Trust FSB.
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.
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an
Sears Tower executive search firm. Trustee/Director of
233 South Wacker Drive each of the funds in the Fund Complex. Prior
Suite 7000 to 1997, Partner, Ray & Berndtson, Inc., an
Chicago, IL 60606 executive recruiting and management
Date of Birth: 06/03/48 consulting firm. Formerly, Executive Vice
President of ABN AMRO, N.A., a Dutch bank
holding company. Prior to 1992, Executive
Vice President of La Salle National Bank.
Trustee on the University of Chicago
Hospitals Board, Vice Chair of the Board of
The YMCA of Metropolitan Chicago and a member
of the Women's Board of the University of
Chicago. Prior to 1996, Trustee of The
International House Board.
R. Craig Kennedy.......................... President and Director, German Marshall Fund
11 DuPont Circle, N.W. of the United States. Trustee/Director of
Washington, D.C. 20016 each of the funds in the Fund Complex.
Date of Birth: 02/29/52 Formerly, advisor to the Dennis Trading Group
Inc. Prior to 1992, President and Chief
Executive Officer, Director and Member of the
Investment Committee of the Joyce Foundation,
a private foundation.
</TABLE>
B-15
<PAGE> 38
<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Jack E. Nelson............................ President and owner, Nelson Investment
423 Country Club Drive Planning Services, Inc., a financial planning
Winter Park, FL 32789 company and registered investment adviser.
Date of Birth: 02/13/36 President and owner, Nelson Ivest Brokerage
Services Inc., a member of the National
Association of Securities Dealers, Inc. and
Securities Investors Protection Corp.
Trustee/Director of each of the funds in the
Fund Complex.
Don G. Powell*............................ Currently a member of the Board of Governors
2800 Post Oak Blvd. and Executive Committee for the Investment
Houston, TX 77056 Company Institute, and a member of the Board
Date of Birth: 10/19/39 of Trustees of the Houston Museum of Natural
Science. Trustee/ Director of certain
open-end investment companies in the Fund
Complex and Trustee/Managing General Partner
of other funds advised by the Advisers or Van
Kampen Management Inc. Immediate past
Chairman of the Investment Company Institute.
Prior to January 1999, Chairman and Director
of Van Kampen Investments, the Advisers, the
Distributor, and Investor Services and
Director or officer of certain other
subsidiaries of Van Kampen Investments. Prior
to July 1998, Director and Chairman of VK/AC
Holding, Inc. (predecessor of Van Kampen
Investments). Prior to November 1996,
President, Chief Executive Officer and
Director of VK/AC Holding, Inc. (predecessor
of Van Kampen Investments).
Phillip B. Rooney......................... Vice Chairman and Director of The
One ServiceMaster Way ServiceMaster Company, a business and
Downers Grove, IL 60515 consumer services company. Director of
Date of Birth: 07/08/44 Illinois Tool Works, Inc., a manufacturing
company and the Urban Shopping Centers Inc.,
a retail mall management company. Trustee,
University of Notre Dame. Trustee/ Director
of each of the funds in the Fund Complex.
Prior to 1998, Director of Stone Smurfit
Container Corp., a paper manufacturing
company. Formerly, President, Chief Executive
Officer and Chief Operating Officer of Waste
Management, Inc., an environmental services
company.
Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean
155 Hickory Lane of the Graduate School, Stevens Institute of
Closter, NJ 07624 Technology. Director, Dynalysis of Princeton,
Date of Birth: 08/02/24 a firm engaged in engineering research.
Trustee/Director of each of the funds in the
Fund Complex.
</TABLE>
B-16
<PAGE> 39
<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps,
333 West Wacker Drive Slate, Meagher & Flom (Illinois), legal
Chicago, IL 60606 counsel to the funds in the Fund Complex, and
Date of Birth: 08/22/39 other open-end and closed-end funds advised
by the Advisers or Van Kampen Management Inc.
Trustee/Director of each of the funds in the
Fund Complex, and Trustee/Managing General
Partner of other open-end and closed-end
funds advised by the Advisers or Van Kampen
Management Inc.
Suzanne H. Woolsey, Ph.D.................. Chief Operating Officer of the National
2101 Constitution Ave., N.W. Academy of Sciences/National Research
Room 206 Council, an independent, federally chartered
Washington, D.C. 20418 policy institution. Director of Neurogen
Date of Birth: 12/27/41 Corporation, a pharmaceutical company.
Director and former Chairman of the German
Marshall Fund of the United States Trustee of
Colorado College, Vice Chair of the Board of
the Council for Excellence in Government.
Trustee/Director of each of the funds in the
Fund Complex. Prior to 1993, Executive
Director of the Commission on Behavioral and
Social Sciences and Education at the National
Academy of Sciences/ National Research
Council. Prior to 1989, Partner of Coopers &
Lybrand.
Paul G. Yovovich.......................... Private investor. Director of 3Com
Sears Tower Corporation, which provides information
233 South Wacker Drive access products and network system solutions,
Suite 9700 COMARCO, Inc., a wireless communications
Chicago, IL 60606 products company and APAC Customer Services,
Date of Birth: 10/29/53 Inc., a provider of outsourced customer
contact services. Trustee/
Director of each of the funds in the Fund
Complex. Prior to May 1996, President of
Advance Ross Corporation, an international
transaction services and pollution control
equipment manufacturing company.
</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
current or former positions with Morgan Stanley Dean Witter or its affiliates.
B-17
<PAGE> 40
OFFICERS
Messrs. Powers, McDonnell, Smith, Hegel, Sullivan, Wood and Wetherell are
located at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, IL 60181-5555. 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>
Richard F. Powers III................ Chairman, Director, President and Chief Executive
Date of Birth: 02/02/46 Officer of Van Kampen Investments. Chairman,
President Director and Chief Executive Officer of the
Advisers, the Distributor, Van Kampen Advisors
Inc. and Van Kampen Management Inc. Director and
Officer of certain other subsidiaries of Van
Kampen. President of each of the Funds in the
Fund Complex. Prior to May 1998, Executive Vice
President and Director of Marketing at Morgan
Stanley Dean Witter and Director of Dean Witter
Discover & Co. and Dean Witter Realty. Prior to
1996, Director of Dean Witter Reynolds Inc.
Dennis J. McDonnell.................. Executive Vice President and Director of Van
Date of Birth: 05/20/42 Kampen Investments. President, Chief Operating
Executive Vice President and Chief Officer and Director of the Advisers, Van Kampen
Investment Officer Advisors Inc., and Van Kampen Management Inc.
Chief Investment Officer and Executive Vice
President of each of the funds in the Fund
Complex. Chief Investment Officer, Executive Vice
President and Trustee/Managing General Partner of
other investment companies advised by the
Advisers or Van Kampen Management Inc. Prior to
July 1998, Director and Executive Vice President
of VK/AC Holding, Inc. (predecessor of Van Kampen
Investments). Prior to April 1998, President and
Director of Van Kampen Merritt Equity Advisors
Corp. Prior to April 1997, Mr. McDonnell was
Director of Van Kampen Merritt Equity Holdings
Corp. Prior to September 1996, Mr. McDonnell was
Chief Executive Officer and Director of MCM
Group, Inc. and McCarthy, Crisanti & Maffei, Inc.
a financial research firm, and Chairman and
Director of MCM Asia Pacific Company, Limited and
MCM (Europe) Limited.
</TABLE>
B-18
<PAGE> 41
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
A. Thomas Smith III.................. Executive Vice President, General Counsel,
Date of Birth: 12/14/56 Secretary and Director of Van Kampen Investments,
Vice President and Secretary the Advisers, Van Kampen Advisors Inc., Van
Kampen Management Inc., the Distributor, American
Capital Contractual Services, Inc., Van Kampen
Exchange Corp., Van Kampen Recordkeeping Services
Inc., Investor Services, Van Kampen Insurance
Agency of Illinois Inc. and Van Kampen System
Inc. Vice President and Secretary of each of the
funds in the Fund Complex. Vice President and
Secretary/Vice President, Principal Legal Officer
and Secretary of other investment companies
advised by the Advisers or their affiliates.
Prior to January 1999, counsel to New York Life
Insurance Company ("New York Life"), and prior to
March 1997, Vice President and Associate General
Counsel of New York Life. Prior to December 1993,
Assistant General Counsel of The Dreyfus
Corporation. Prior to August 1991, Senior
Associate, Willkie Farr & Gallagher. Prior to
January 1989, Mr. Smith was a Staff Attorney at
the Securities and Exchange Commission, Division
of Investment Management, Office of Chief
Counsel.
Michael H. Santo..................... Executive Vice President, Chief Administrative
Date of Birth: 10/22/55 Officer and Director of Van Kampen Investments,
Vice President the Advisers, the Distributor, Van Kampen
Advisors Inc., Van Kampen Management Inc. and Van
Kampen Investor Services Inc. Director or Officer
of certain other subsidiaries of Van Kampen.
Prior to 1998, Senior Vice President and Senior
Planning Officer for Individual Asset Management
of Morgan Stanley Dean Witter and its
predecessor. Vice President of each of the funds
in the Fund Complex and certain other investment
companies advised by the Advisers and their
affiliates.
Peter W. Hegel....................... Executive Vice President of the Advisers, Van
Date of Birth: 06/25/56 Kampen Management Inc. and Van Kampen Advisors
Vice President Inc. Vice President of each of the funds in the
Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates. Prior to September 1996, Director of
McCarthy, Crisanti & Maffei, Inc, a financial
research company.
</TABLE>
B-19
<PAGE> 42
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Stephen L. Boyd...................... Vice President and Chief Investment Officer for
Date of Birth: 11/16/40 equity investments at the Advisers. Vice
Vice President President of each of the funds in the Fund
Complex and certain other investment companies
advised by the Advisers or their affiliates.
Prior to October 1998, Vice President and Senior
Portfolio Manager with AIM Capital Management,
Inc. Prior to February 1998, Senior Vice
President of Van Kampen American Capital Asset
Management, Inc., Van Kampen American Capital
Investment Advisory Corp. and Van Kampen American
Capital Management, Inc.
John L. Sullivan..................... Senior Vice President of Van Kampen Investments
Date of Birth: 08/20/55 and the Advisers. Chief Financial Officer, Vice
Vice President, Chief Financial President and Treasurer of each of the funds in
Officer and Treasurer 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
Date of Birth: 08/04/46 President and Chief Accounting Officer of each of
Vice President and Chief Accounting the funds in the Fund Complex and other
Officer investment companies advised by the Advisers or
their affiliates.
Edward C. Wood III................... Senior Vice President of the Advisers, Van Kampen
Date of Birth: 01/11/56 Investments and Van Kampen Management Inc. Senior
Vice President Vice President and Chief Operating Officer of the
Distributor. Vice President of each of the funds
in the Fund Complex and other investment
companies advised by the Advisers or their
affiliates.
Tanya M. Loden....................... Vice President of Van Kampen Investments and the
Date of Birth: 11/19/59 Advisers. Controller of each of the funds in the
Controller Fund Complex and other investment companies
advised by the Advisers or their affiliates.
Weston B. Wetherell.................. Vice President, Deputy General Counsel and
Date of Birth: 06/15/56 Assistant Secretary of Van Kampen Investments,
Assistant Secretary the Advisers, the Distributor, Van Kampen
Management Inc. and Van Kampen Advisors Inc.
Assistant Secretary of each of the funds in the
Fund Complex and Assistant Secretary/Legal
Officer and Assistant Secretary of other
investment companies advised by the Advisers or
their affiliates.
</TABLE>
B-20
<PAGE> 43
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Sara L. Badler....................... Senior Vice President, Deputy General Counsel and
Date of Birth: 10/12/60 Assistant Secretary of Van Kampen Investments,
Assistant Secretary the Advisers, the Distributor, Van Kampen
Management Inc. and Van Kampen Advisors Inc.
Assistant Secretary of each of the Funds in the
Fund Complex. Prior to September 1999, Associate
General Counsel of New York Life Insurance
Company and Secretary of the MainStay
Institutional Funds, MainStay VP Series Fund Inc.
and The MainStay Funds.
Michael Robert Sullivan.............. Assistant Vice President of Van Kampen
Date of Birth: 03/30/33 Investments, the Advisers and Van Kampen
Assistant Controller Management Inc. Assistant Controller of each of
the funds in the Fund Complex and other
investment companies advised by the Advisers or
their affiliates.
Jacqueline F. Dentner................ Assistant Vice President of the Adviser. She is a
Date of Birth: 08/12/65 Certified Internal Auditor. Prior to July 1998,
Assistant Treasurer Manager of Risk Assessment and Internal Audit for
The Vanguard Group of Investment Companies.
Assistant Treasurer of each of the funds in the
Fund Complex and certain other investment
companies advised by the Advisers and their
affiliates.
James M. Dykas....................... Assistant Vice President of the Adviser.
Date of Birth: 01/25/66 Assistant Treasurer of each of the funds in the
Assistant Treasurer Fund Complex and certain other investment
companies advised by the Advisers and their
affiliates.
</TABLE>
Each trustee/director who is not an affiliated person of Van Kampen
Investments, the Advisers or the Distributor (each a "Non-Affiliated Trustee")
holds the same position with each of the funds in the Fund Complex. Messrs.
DeMartini and Powell hold the same position with each of the Funds in the Fund
Complex except for the Van Kampen Technology Fund. As of the date of this
Statement of Additional Information, there are 66 operating funds in the Fund
Complex. Each 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 Van Kampen Series Fund,
Inc.) 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 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 Van
Kampen Series Fund, Inc.) provides a retirement plan to its Non-Affiliated
Trustees that provides Non-Affiliated Trustees with compensation after
retirement, provided that certain eligibility requirements are met as more fully
described below.
The compensation of each Non-Affiliated Trustee includes an annual retainer
in an amount equal to $50,000 per calendar year, due in four quarterly
installments on the first
B-21
<PAGE> 44
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 Van Kampen
Series Fund, Inc.) on the basis of the relative net assets of each fund as of
the last business day of the preceding calendar quarter. 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 Van Kampen Series Fund,
Inc.) 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.
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 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.
B-22
<PAGE> 45
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 Estimated
Pension or Maximum Total
Aggregate Retirement Annual Compensation
Year First Compensation Benefits Benefits from before
Appointed or before Accrued as the Fund Deferral from
Elected to Deferral from Part of Upon Fund
Name(1) the Board the Trust(2) Expenses(3) Retirement(4) Complex(5)
------- ------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
J. Miles Branagan 1991 $2,398 $35,691 $60,000 $125,200
Jerry D. Choate(1) 1999 547 0 60,000 0
Linda Hutton Heagy 1995 2,398 3,861 60,000 112,800
R. Craig Kennedy 1995 2,398 2,652 60,000 125,200
Jack E. Nelson 1995 2,398 18,385 60,000 125,200
Phillip B. Rooney 1997 2,198 6,002 60,000 125,200
Fernando Sisto 1978 2,398 68,615 60,000 125,200
Wayne W. Whalen 1995 2,398 12,658 60,000 125,200
Suzanne H. Woolsey(1) 1999 547 0 60,000 0
Paul G. Yovovich(1) 1998 1,784 0 60,000 25,300
</TABLE>
- ------------------------------------
(1) Trustees not eligible for compensation are not included in the Compensation
Table. Mr. Yovovich became a member of the Board of Trustees for the Fund
and other funds in the Fund Complex on October 22, 1998 and therefore does
not have a full year of information to report. Mr. Choate and Ms. Woolsey
became members of the Board of Trustees for the Fund and other funds in the
Fund Complex on May 26, 1999 and therefore do not have a full year of
information to report.
(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended May 31, 1999. The
following trustees deferred compensation from the Fund during the fiscal
year ended May 31, 1999: Mr. Branagan, $2,398; Ms. Heagy, $2,398; Mr.
Kennedy, $1,199; Mr. Nelson, $2,398; Mr. Rooney, $2,198; Mr. Sisto, $1,199;
Mr. Whalen, $2,398 and Mr. Yovovich, $1,200. Amounts deferred are retained
by the Fund and earn a rate of return determined by reference to either the
return on the 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 the Fund's fiscal
year ended May 31, 1999 is as follows: Mr. Branagan, $6,647; Mr. Caruso,
$1,784; Mr. Gaughan, $302; Ms. Heagy, $7,675; Mr. Kennedy, $4,865; Mr.
Miller, $2,288; Mr. Nelson, $10,399; Mr. Rees, $31,195; Mr. Robinson,
$4,468; Mr. Rooney, $4,722; Mr. Sisto, $10,737; Mr. Whalen,
B-23
<PAGE> 46
$9,237; and Mr. Yovovich, $1,237. The deferred compensation plan is
described above the Compensation Table.
(3) The amounts shown in this column represent the sum of the retirement
benefits accrued by the operating investment companies in the Fund Complex
for each of the trustees for the funds' respective fiscal years ended in
1998. The retirement plan is described above the Compensation Table.
(4) For each trustee, this is the sum of the estimated maximum annual benefits
payable by the funds 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 funds in the Fund Complex as of December 31, 1998 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, 1998. 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 $285,825 during the calendar year
ended December 31, 1998.
As of September 1, 1999, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund.
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 the Fund's assets, including the placing of
orders for the purchase and sale of portfolio securities. The Adviser obtains
and evaluates economic, statistical and financial information to formulate and
implement the Fund's investment objectives. The Adviser also furnishes offices,
necessary facilities and equipment, provides administrative services, and
permits its officers and employees to serve without compensation as trustees of
the Trust or officers of the Fund if elected to such positions. The Fund pays
all charges and expenses of its day-to-day operations, including the
compensation of trustees of the Trust (other than those who are affiliated
persons of the Adviser, Distributor or Van Kampen Investments), the cost of the
Fund's accounting services, including the compensation of the Fund's treasurer
and other accounting personnel, the charges and expenses of legal counsel and
independent accountants, distribution fees,
B-24
<PAGE> 47
service fees, custodian fees, the costs of providing reports to shareholders,
and all other ordinary business expenses not specifically assumed by the
Adviser. The Advisory Agreement also provides that the Adviser shall not be
liable to the Fund for any actions or omissions if it acted without willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations.
Under the Advisory Agreement, the Fund pays to the Adviser, as compensation
for the services rendered, facilities furnished, and expenses paid by it, a
monthly fee computed based upon an annual rate applied to the average daily net
assets of the Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
------------------------ -----------
<S> <C>
First $150 million................................... 0.50 of 1.00%
Next $100 million.................................... 0.45 of 1.00%
Next $100 million.................................... 0.40 of 1.00%
Over $350 million.................................... 0.35 of 1.00%
</TABLE>
The Fund's average daily net assets are determined by taking the average of
all of the determinations of the net assets during a given calendar month. Such
fee is payable for each calendar month as soon as practicable after the end of
that month.
The Advisory Agreement also provides that, in the event the ordinary
business expenses of the Fund for any fiscal year exceed 1% of the Fund's
average daily 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 Fund except (1) interest & 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 may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Trustees or (ii) by a vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of 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, 1999, 1998 and 1997, the Adviser
received approximately $3,246,800, $2,251,200 and $2,170,600, 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
to the Fund, which include, maintaining the books and records of the Fund,
calculating the Fund's net asset value and coordinating tax compliance and other
regulatory issues. The Fund pays all costs and expenses related to such
services, including all salary and related benefits of accounting personnel, as
well as the overhead and expenses of office space and the
B-25
<PAGE> 48
equipment necessary to render such services. The Fund shares together with the
other Van Kampen funds 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 costs based
proportionally on their respective net assets per fund.
During the fiscal years ended May 31, 1999, 1998 and 1997, Advisory Corp.
received approximately $227,500, $131,800 and $90,200, respectively, in
accounting services fees from the Fund.
DISTRIBUTION AND SERVICE
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 on a continuous basis. 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)(i) by the Fund's
Trustees or (ii) by a vote of a majority of the Fund's outstanding voting
securities and (b) by the affirmative vote of a majority of Trustees who are not
parties to the Distribution and Service Agreement or interested persons of any
party, by votes cast in person at a meeting called for such purpose. The
Distribution and Service Agreement provides that it will terminate if assigned,
and that it may be terminated without penalty by either party on 90 days'
written notice.
With respect to sales of Class B Shares and Class C Shares of the Fund, a
commission or transaction fee generally will be paid by the Distributor at the
time of purchase directly out of the Distributor's assets (and not out of the
Fund's assets) to authorized dealers who initiate and are responsible for such
purchases computed based on a percentage of the dollar value of such shares sold
of 4.00% on Class B Shares and 1.00% on Class C Shares.
Proceeds from any contingent deferred sales charge and any distribution
fees on Class B Shares and Class C Shares of the Fund are paid to the
Distributor and are used by the Distributor to defray its distribution related
expenses in connection with the sale of the Fund's shares, such as the payment
to authorized dealers for selling such shares. With respect to Class C Shares,
the authorized dealers generally are paid the ongoing commission 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.
In addition to reallowances or commissions described above, 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 the sales generated
by the authorized dealer at the public offering price during such
B-26
<PAGE> 49
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
or other Van Kampen funds. Fees may include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited registered
representatives for meetings or seminars of a business nature. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its sales of shares and increases in assets under
management. All of the foregoing payments are made by the Distributor out of its
own assets. Such fees paid for such services and activities with respect to the
Fund will not exceed in the aggregate 1.25% of the average total daily net
assets of the Fund on an annual basis. These programs will not change the price
an investor will pay for shares or the amount that a Fund will receive from such
sale.
Banks are currently prohibited under the Glass-Steagall Act from providing
certain underwriting or distribution services. If banking firms were prohibited
from acting in any capacity or providing any of the described services, the
Distributor would consider what action, if any, would be appropriate. The
Distributor does not believe that termination of a relationship with a bank
would result in any material adverse consequences to the Fund. State securities
laws regarding registration of banks and other financial institutions may differ
from the interpretations of federal law expressed herein, and banks and other
financial institutions may be required to register as dealers pursuant to
certain state laws.
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 the Distribution and Service Agreement with the Distributor of each
class of the Fund's shares and 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
B-27
<PAGE> 50
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.
The Plans generally provide for the Fund to reimburse the lesser of (i) the
distribution and service fees at the rates specified in the Prospectus or (ii)
the amount of the Distributor's actual expenses incurred less any contingent
deferred sales charges it received. For Class A Shares, to the extent the
Distributor is not fully reimbursed in a given year, there is no carryover of
such unreimbursed amounts to succeeding years. For each of the Class B Shares
and Class C Shares, to the extent the Distributor is not fully reimbursed in a
given year, any unreimbursed expenses for such class will be carried forward and
paid by the Fund in future years so long as such Plans are 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 for
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, 1999, there were $3,424,023 and
$235,908 of unreimbursed distribution-related expenses with respect to Class B
Shares and Class C Shares, respectively, representing 2.64% and 0.88% of the
Fund's net assets attributable to Class B Shares and Class C Shares,
respectively. If the Plans were 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 contingent deferred sales
charges.
For the fiscal year ended May 31, 1999, the Fund's aggregate expenses paid
under the Plans for Class A Shares were $913,917 or 0.14% of the Class A Shares'
average daily net assets. For the fiscal year ended May 31, 1999, the Fund's
aggregate expenses paid under the Plans for Class B Shares were $1,243,905 or
0.90% of the Class B Shares' average daily net assets. Such expenses were paid
to reimburse the Distributor for the following payments: $1,016,224 for
commissions and transaction fees paid to financial intermediaries in respect of
sales of Class B Shares of the Fund and $227,681 for fees paid to financial
intermediaries for servicing Class B shareholders and administering the Class B
Share Plans. For the fiscal year ended May 31, 1999, the Fund's aggregate
expenses paid under the Plans for Class C Shares were $219,103 or 0.90% of the
Class C Shares' average daily net assets. Such expenses were paid to reimburse
the Distributor for the following payments: $125,920 for commissions and
transaction fees paid to financial intermediaries in respect of sales of Class C
Shares of the Fund and $93,183 for fees paid to financial
B-28
<PAGE> 51
intermediaries for servicing Class C shareholders and administering the Class C
Share Plans.
TRANSFER AGENT
The Fund's transfer agent, shareholder service agent and divided disbursing
agent is Van Kampen Investor Services Inc., PO Box 218256, Kansas City, MO
64121-8256. The transfer agency prices are determined through negotiations with
the Fund's Board of Trustees and are based on competitive benchmarks.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
The Adviser is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of prices and any brokerage commissions on such transactions. While
the Adviser will be primarily responsible for the placement of the Fund's
portfolio business, the policies and practices in this regard will at all times
be subject to review by the Trustees of the Fund.
As most transactions made by the Fund are principal transactions at net
prices, the Fund generally incurs little or no brokerage costs. The portfolio
securities in which the Fund invests are normally purchased directly from the
issuer or in the over-the-counter market from an underwriter or market maker for
the securities. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers include a spread or markup to the dealer
between the bid and asked price. Sales to dealers are effected at bid prices.
The Fund may also purchase certain of its money-market instruments directly from
an issuer, in which case no commissions or discounts are paid, or may purchase
and sell listed securities on an exchange, which are effected through brokers
who charge a commission for their shares.
The Adviser is responsible for placing portfolio transactions and does so
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 the most favorable price. In
selecting broker/dealers and in negotiating prices and any brokerage commissions
on such transactions, the Adviser considers the firm's reliability, integrity
and financial condition and the firm's execution capability, the size and
breadth of the market for the security, the size of and difficulty in executing
the order, and the best net price. There are many instances when, in the
judgment of the Adviser, more than one firm can offer comparable execution
services. In selecting among such firms, consideration may be given to those
firms which supply research and other services in addition to execution
services. The Adviser is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms which do
not provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. No specific value can
be assigned to such research services which are furnished without cost to the
Adviser. Since statistical and other research information is only supplementary
to the research efforts of the Adviser to the Fund and still must be analyzed
and reviewed by its staff, the receipt of research information is not expected
to reduce its expenses materially. The investment advisory fee is not reduced as
a result of the Adviser's receipt of such research services. Services provided
may include
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(a) furnishing advice as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; (b) furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts; and (c) effecting
securities transactions and performing functions incidental thereto (such as
clearance, settlement and custody). Research services furnished by firms through
which the Fund effects its securities transactions may be used by the Adviser in
servicing all of its advisory accounts; not all of such services may be used by
the Adviser in connection with the Fund. The Adviser also may place portfolio
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 the Fund's shares if it reasonably believes
that the quality of execution and the commission are comparable to that
available from other qualified firms. Similarly, to the extent permitted by law
and subject to the same considerations on quality of execution and comparable
commission rates, the Adviser may direct an executing broker to pay a portion or
all of any commissions, concessions or discounts to a firm supplying research or
other services or to a firm participating in the distribution of the Fund's
shares.
The Adviser may place portfolio transactions at or about the same time for
other advisory accounts, including other investment companies. The Adviser seeks
to allocate portfolio transactions equitably whenever concurrent decisions are
made to purchase or sell securities for 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 among the
Fund and other advisory accounts, the main factors considered by the Adviser are
the respective sizes of the Fund and other advisory accounts, 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.
During the past three years, the Fund paid no commissions to brokers on the
purchase or sale of portfolio securities.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. Below is a
description of such services. The following information supplements the section
in the Fund's Prospectus captioned "Shareholder Services."
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.
Investor Services performs bookkeeping, data processing and administrative
services related to the maintenance of shareholder accounts. Except as described
in the Prospectus and this Statement of Additional Information, after each share
transaction in an account, the shareholder receives a statement showing the
activity in the account. Each shareholder who has an account in any of the
Participating Funds (as defined in the Prospectus) will receive statements
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quarterly from Investor Services showing any reinvestments of dividends and
capital gain dividends 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
gain dividends 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 an exchange or
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen Funds Inc., c/o Investor Services, PO Box 218256,
Kansas City, MO 64121-8256, 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 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.
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 be credited with 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 form accompanying the Prospectus or by calling (800)
341-2911
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((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.
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, semiannual or annual withdrawal plan. This plan provides for the
orderly use of the entire account, not only the income but also the capital, if
necessary. Each withdrawal constitutes a redemption of shares on which any
capital gain or loss will be recognized. The planholder may arrange for monthly,
quarterly, semiannual or annual checks in any amount, not less than $25. Such a
systematic withdrawal plan may also 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 who establish a withdrawal
plan may redeem up to 12% annually of the shareholder's initial account balance
without incurring a contingent deferred sales charge. Initial account balance
means the amount of the shareholder's investment 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 gain dividends
on shares held under the plans are reinvested in additional shares at the next
determined net asset value per share. If periodic withdrawals continuously
exceed reinvested dividends and capital gain dividends, 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 redemption of shares
is a taxable event. The Fund reserves the right to amend or terminate the
systematic withdrawal program upon 30 days' notice to its shareholders.
REDEMPTION OF SHARES
Redemptions are not made on days during which the New York Stock Exchange
(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) the SEC determines trading on the Exchange is restricted; (c) the SEC
determines an emergency
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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.
Additionally, if the Board of Trustees determines that payment wholly or
partly in cash would be detrimental to the best interests of the remaining
shareholders of the Fund, the Fund may pay the redemption proceeds in whole or
in part by a distribution-in-kind of portfolio securities held by the Fund in
lieu of cash in conformity with applicable rules of the SEC. Shareholders may
incur brokerage charges upon the sale of portfolio securities so received in
payment of redemptions.
WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE ("CDSC-CLASS B
AND C")
As described in the Prospectus under "Redemption of Shares," redemptions of
Class B Shares and Class C Shares will be subject to a contingent deferred sales
charge. The CDSC-Class B and C is waived on redemptions of Class B Shares and
Class C Shares in the circumstances described below:
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.
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;
in such event, as described below, the Fund will "tack" the period for which the
original shares were held on to the holding period of the shares acquired in the
transfer or rollover for purposes of determining what, if any, CDSC-
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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), the financial hardship of the
employee pursuant to United States Treasury Regulations Section 401(k)-1(d)(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.
REDEMPTION PURSUANT TO THE FUND'S SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to participate in a systematic withdrawal 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 the 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.
NO INITIAL COMMISSION OR TRANSACTION FEE
The Fund will waive the CDSC-Class B and C in circumstances under which no
commission or transaction fee is paid to authorized dealers at the time of
purchase of shares.
INVOLUNTARY REDEMPTIONS OF SHARES
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the account up
to the required minimum balance. The Fund will waive the CDSC-Class B and C upon
such involuntary redemption.
REINVESTMENT OF REDEMPTION PROCEEDS
A shareholder who has redeemed Class C Shares of the 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
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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.
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.
TAXATION
FEDERAL INCOME TAXATION
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 diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its investment company taxable income (including ordinary income
and net short-term capital gain, but not net capital gain, which is the excess
of net long-term capital gain over net short-term capital loss) and meets
certain other requirement, 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 necessary to satisfy the 90% distribution requirement.
The Fund will not be subject to federal income tax on any net capital gain
distributed to shareholders.
In order to avoid a 4% excise tax, the Fund will be required to distribute,
by December 31st of each year, at least an amount equal to the sum of (i) 98% of
its ordinary income for such year and (ii) 98% of its capital gains net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31st of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gains net income retained by, and subject to federal income tax in
the hands of, the Fund will be treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the Fund would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its shareholders) and all distributions out of earnings and
profits would 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 on 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and profits to shareholders (less any interest charge). In addition, if
the Fund failed to qualify as a regulated investment company for its first
taxable year or, if immediately after qualifying as a regulated investment
company for any taxable year, it failed to qualify for a period greater than one
taxable year, the Fund would be required to recognize any net built-in gains
(the excess of aggregate gains, including
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items of income, over aggregate losses that would have been realized if it had
been liquidated) in order to qualify as a regulated investment company in a
subsequent year.
Investments of the Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
shareholders. For example, with respect to securities issued at a discount, the
Fund will be required to accrue as income each year a portion of the discount
and to distribute such income each year in order to maintain its qualification
as a regulated investment company and to avoid income and excise taxes. In order
to generate sufficient cash to make distributions necessary to satisfy the 90%
distribution requirement and to avoid income and excise taxes, the Fund may have
to dispose of securities that it would otherwise have continued to hold.
DISTRIBUTIONS
Distributions of the Fund's investment company taxable 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 gain as 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.
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.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Distributions from
the Fund generally will not be eligible 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 a 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.
Income from investments in foreign securities received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions.
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Such taxes generally will not be deductible or creditable by shareholders. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes.
Certain foreign currency gains or losses attributable to currency exchange
rate fluctuations are treated as ordinary income or loss. Such income or loss
may increase or decrease (or possibly eliminate) the Fund's income available for
distribution. If, under the rules governing the tax treatment of foreign
currency gains and losses, the Fund's income available for distribution is
decreased or eliminated, all or a portion of the dividends declared by the Fund
may be treated for federal income tax purposes as a return of capital or, in
some circumstances, as capital gains. Generally, a shareholder's tax basis in
Fund shares will be reduced to the extent that an amount distributed to such
shareholder is treated as a return of capital.
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. For a summary of the tax rates applicable
to capital gains (including capital gain dividends), see "Capital Gains Rates"
below. 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 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.
CAPITAL GAINS RATES
The maximum tax rate applicable to net capital gains recognized by
individuals and other non-corporate taxpayers 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. The maximum long-term
capital gains rate for corporations is 35%.
NON-U.S. SHAREHOLDERS
A shareholder who is not (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized under the laws of the
United States or any state thereof, (iii) an estate, the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States fiduciaries who have
the authority to control all substantial decisions of the trust (a "Non-U.S.
Shareholder") generally will be subject to withholding of United States federal
income tax at a 30% rate (or lower applicable treaty rate) on dividends from the
Fund (other than capital gain dividends) that are not "effectively connected"
with a United States trade or business carried on by such shareholder.
Accordingly, investment in the Fund is likely to be appropriate for a Non-U.S.
Shareholder only if such person can utilize
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a foreign tax credit or corresponding tax benefit in respect of such United
States withholding tax.
Non-effectively connected capital gains dividends and gains realized from
the sale of shares will not be subject to United States federal income tax in
the case of (i) a Non-U.S. Shareholder that is a corporation and (ii) a Non-U.S.
Shareholder that is not present in the United States for more than 182 days
during the taxable year (assuming that certain other conditions are met).
However, certain Non-U.S. Shareholders may nonetheless be subject to backup
withholding on capital gain dividends and gross proceeds paid to them upon the
sale of their shares. See "Backup Withholding" below.
If income from the Fund or gains realized from the sale of shares is
effectively connected with a Non-U.S. Shareholder's United States trade or
business, then such amounts will be subject to United States federal income tax
on a net basis at the tax rates applicable to United States citizens or domestic
corporations. Non-U.S. Shareholders that are corporations may also be subject to
an additional "branch profits tax" with respect to income from the Fund that is
effectively connected with a United States trade or business.
Final United States Treasury Regulations, effective for payments made after
December 31, 2000, modify the withholding, backup withholding and information
reporting rules including the procedures to be followed by Non-U.S. Shareholders
establishing foreign status. Prospective investors should consult their tax
advisors concerning the applicability and effect of such Treasury Regulations on
an investment in shares of the Fund.
The tax consequences to a Non-U.S. Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Non-U.S. Shareholders may be required to provide appropriate
documentation to establish their entitlement to the benefits of such a treaty.
Foreign investors are advised to consult their tax advisers with respect to the
tax implications of purchasing, holding and disposing of shares of the Fund.
BACKUP WITHHOLDING
The Fund may be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividends and redemption proceeds paid to
non-corporate shareholders. This tax may be withheld from dividends if (i) the
shareholder fails to furnish the Fund with its correct taxpayer identification
number, (ii) the IRS notifies the Fund that the shareholder has failed to
properly report certain interest and dividend income to the IRS and to respond
to notices to that effect or (iii) when required to do so, the shareholder fails
to certify that he or she is not subject to backup withholding. Redemption
proceeds may be subject to withholding under the circumstances described in (i)
above.
The Fund must report annually to the IRS and to each Non-U.S. Shareholder
the amount of dividends paid to such shareholder and the amount, if any, of tax
withheld pursuant to backup withholding rules with respect to such dividends.
This information may also be made available to the tax authorities in the
Non-U.S. Shareholder's country of residence.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from payments made to a shareholder may be refunded or
credited
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against such shareholder's United States federal income tax liability, if any,
provided that the required information is furnished to the IRS.
GENERAL
The federal income tax discussion set forth above is for general
information only. Prospective investors should consult their advisors regarding
the specific federal tax consequences of purchasing, holding and disposing of
shares, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.
YIELD INFORMATION
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 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 a 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
effective 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.
Yield and effective yield are calculated separately for Class A Shares,
Class B Shares and Class C Shares. Because of the differences in distribution
fees, the yield and effective yield for each class of shares will differ.
The yield and effective 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, their quality and length of maturity, and
the Fund's operating expenses. The length of maturity for the Fund is the
average dollar-weighted maturity of
B-39
<PAGE> 62
the Fund. This means that the Fund 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.
The yield and effective yield fluctuate daily as the income earned on the
investments of the Fund fluctuates. Accordingly, there is no assurance that the
yield and effective yield quoted on any given occasion will remain in effect for
any period of time. It should also be emphasized 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.
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.
Additionally, since yield and effective yield fluctuate, 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 and effective yield are generally a
function of the kind and quality of the instrument held in a fund's portfolio,
portfolio maturity, operating expenses and market conditions.
From time to time marketing materials may provide a portfolio manager
update, an adviser update and discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top five sector holdings and ten largest holdings. Materials
may also mention how the Distributor believes the Fund compares relative to
other Van Kampen funds. The Fund will also be marketed on the Internet.
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 rankings or ratings prepared by Lipper Analytical Services,
Inc., CDA, Morningstar Mutual Funds or similar independent services which
monitor the performance of mutual funds with the Consumer Price Index, the Dow
Jones Industrial Average, Standard & Poor's indices, NASDAQ Composite Index,
other appropriate indices 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. Such comparative performance information will
be stated in the same terms in which the comparative data or indices are stated.
Such advertisements and sales material may include the yield quotation as of a
current period. Such yield information will be calculated pursuant to rules
established by the SEC and will be computed separately for each class of the
Fund's shares. For these purposes, the performance of the Fund, as well as the
performance of other mutual funds or indices, do not reflect sales charges, the
inclusion of which would reduce the Fund's performance. 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. For example, the Fund may, from time to time: (1) illustrate the
benefits of tax-deferral by comparing taxable investments to investments made
through tax-deferred retirement plans;
B-40
<PAGE> 63
(2) illustrate in graph or chart form, or otherwise, the benefits of dollar-cost
averaging by comparing investments made pursuant to a systematic investment plan
to investments made in a rising market; (3) illustrate allocations among
different types of mutual funds for investors at different stages of their
lives; and (4) in reports or other communications to shareholders or in
advertising material, illustrate the benefits of compounding at various assumed
yields.
The Fund's Annual Report and Semiannual Report contain additional
performance information. A copy of the Annual Report or Semiannual Report may be
obtained without charge by calling or writing the Fund at the telephone number
and address printed on the back cover of the Prospectus.
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 Drive, Chicago, Illinois
60601, the independent accountants for the Fund, performs an annual audit of the
Fund's financial statements.
LEGAL COUNSEL
Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom (Illinois).
B-41
<PAGE> 64
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Van Kampen 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 Reserve Fund (the
"Fund") at May 31, 1999, 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, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
July 1, 1999
F-1
<PAGE> 65
PORTFOLIO OF INVESTMENTS
May 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Yield on
Amount Date of Amortized
(000) Description Purchase Maturity Cost
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS 19.8%
$ 8,900 Federal Home Loan Bank............... 5.016% 01/05/00 $ 8,899,169
17,940 Federal Home Loan Mortgage Corp.
Discount Note........................ 4.772 08/06/99 17,785,088
20,000 Federal National Mortgage Association
Discount Note........................ 4.837 06/24/99 19,939,689
12,720 Federal National Mortgage Association
Discount Note........................ 4.752 07/22/99 12,635,306
24,000 Federal National Mortgage Association
Discount Note........................ 4.862 09/22/99 23,642,167
18,107 Federal National Mortgage Association
Discount Note........................ 4.912 11/04/99 17,730,374
10,000 Federal National Mortgage Association
Medium Term Note..................... 4.783 06/30/99 10,009,481
25,000 Federal National Mortgage Association
Medium Term Note..................... 4.931 07/30/99 25,003,472
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS..................... 135,644,746
------------
CERTIFICATES OF DEPOSIT 20.8%
10,000 Bank of Nova Scotia.................. 5.100 02/09/00 9,997,995
25,000 Commerzbank, AG...................... 5.000 02/01/00 24,995,952
23,000 Dresdner Bank, AG.................... 4.810 06/07/99 22,999,993
20,000 National Westminster Bank Plc........ 5.010 01/07/00 19,994,395
20,200 Rabobank Nederland, NV............... 4.860 08/10/99 20,200,383
25,000 Societe Generale..................... 4.860 07/15/99 25,000,000
20,000 State Street Bank & Trust Co. ....... 4.860 06/15/99 20,000,000
------------
TOTAL CERTIFICATES OF DEPOSIT................................ 143,188,718
------------
COMMERCIAL PAPER 53.0%
25,000 Abbott Labs.......................... 4.819 06/17/99 24,946,667
25,000 American Express Co. ................ 4.849 07/28/99 24,810,396
25,000 American General Finance Corp........ 4.874 08/13/99 24,756,160
25,000 Associates Corp. of North America.... 4.839 06/07/99 24,980,000
25,000 Chevron USA, Inc..................... 4.838 06/01/99 25,000,000
25,000 CIT Group Holdings, Inc. ............ 4.799 06/22/99 24,930,583
25,000 Coca Cola Co. ....................... 4.788 06/03/99 24,993,389
</TABLE>
See Notes to Financial Statements
F-2
<PAGE> 66
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Yield on
Amount Date of Amortized
(000) Description Purchase Maturity Cost
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
$25,000 Ford Motor Credit Corp............... 4.827% 06/10/99 $ 24,970,062
20,000 General Electric Capital Corp........ 4.923 06/01/99 20,000,000
25,000 General Electric Capital Corp........ 4.899 08/05/99 24,782,431
25,000 IBM Credit Corp. .................... 4.771 06/28/99 24,910,938
25,000 John Deere Capital Corp.............. 4.858 07/07/99 24,880,000
25,000 Norwest Financial Inc. .............. 4.761 06/01/99 25,000,000
20,000 Prudential Funding Corp. ............ 4.853 06/01/99 20,000,000
25,000 Prudential Funding Corp. ............ 4.889 08/18/99 24,738,375
------------
TOTAL COMMERCIAL PAPER....................................... 363,699,001
------------
NOTES 6.5%
20,000 First Chicago Corp. National Bank.... 4.970 09/01/99 20,000,000
25,000 Lasalle National Bank................ 4.860 06/11/99 25,000,000
------------
TOTAL NOTES.................................................. 45,000,000
------------
REPURCHASE AGREEMENTS 39.1%
BankAmerica Securities ($135,296,000 par collateralized by
U.S. Government obligations in a pooled cash account, dated
05/28/99, to be sold on 06/01/99 at $135,368,910)............ 135,296,000
Warburg Dillon Read ($132,824,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated
05/28/99 to be sold on 06/01/99 at $132,894,840)............. 132,824,000
------------
TOTAL REPURCHASE AGREEMENTS.................................. 268,120,000
------------
TOTAL INVESTMENTS 139.2% (A)................................ 955,652,465
LIABILITIES IN EXCESS OF OTHER ASSETS (39.2%)............... (269,336,225)
------------
NET ASSETS 100.0%........................................... $686,316,240
============
</TABLE>
(a) At May 31, 1999, cost is identical for both book and federal income tax
purposes.
See Notes to Financial Statements
F-3
<PAGE> 67
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments, at amortized cost which approximates
market, including repurchase agreements of $268,120,000... $955,652,465
Receivables:
Fund Shares Sold.......................................... 3,141,280
Interest.................................................. 2,871,901
Other....................................................... 86,313
------------
Total Assets.......................................... 961,751,959
------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 273,885,448
Distributor and Affiliates................................ 670,792
Investment Advisory Fee................................... 292,978
Income Distributions...................................... 22,912
Custodian Bank............................................ 9,386
Accrued Expenses............................................ 344,305
Trustees' Deferred Compensation and Retirement Plans........ 209,898
------------
Total Liabilities..................................... 275,435,719
------------
NET ASSETS.................................................. $686,316,240
============
NET ASSETS CONSIST OF:
Capital (par value of $.01 per share with an unlimited
number of shares authorized).............................. $686,335,133
Accumulated Undistributed Net Investment Income............. 43,171
Accumulated Net Realized Loss............................... (62,064)
------------
NET ASSETS.................................................. $686,316,240
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net Asset Value, Offering Price and Redemption Price per
share (Based on net assets of $529,609,515 and
529,626,999 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 $129,787,484 and 129,788,943 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 $26,919,241 and 26,923,579 shares of
beneficial interest issued and outstanding)............. $ 1.00
============
</TABLE>
See Notes to Financial Statements
F-4
<PAGE> 68
STATEMENT OF OPERATIONS
For the Year Ended May 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $43,073,518
-----------
EXPENSES:
Investment Advisory Fee..................................... 3,246,846
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $901,403, $1,370,540 and $226,498,
respectively)............................................. 2,498,441
Shareholder Services........................................ 1,748,775
Custody..................................................... 170,096
Trustees' Fees and Related Expenses......................... 49,776
Legal....................................................... 24,140
Other....................................................... 597,745
-----------
Total Expenses.......................................... 8,335,819
Less Credits Earned on Overnight Cash Balances.......... 120,021
-----------
Net Expenses............................................ 8,215,798
-----------
NET INVESTMENT INCOME....................................... $34,857,720
===========
NET REALIZED GAIN........................................... $ 31,626
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $34,889,346
===========
</TABLE>
See Notes to Financial Statements
F-5
<PAGE> 69
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended May 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
May 31, 1999 May 31, 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income......................... $ 34,857,720 $ 24,003,578
Net Realized Gain/Loss........................ 31,626 (25,912)
---------------- ----------------
Change in Net Assets from Operations.......... 34,889,346 23,977,666
---------------- ----------------
Distributions from Net Investment Income:
Class A Shares.............................. (28,300,866) (20,677,191)
Class B Shares.............................. (5,631,517) (2,897,824)
Class C Shares.............................. (934,371) (402,667)
---------------- ----------------
Total Distributions........................... (34,866,754) (23,977,682)
---------------- ----------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES.................................. 22,592 (16)
---------------- ----------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold..................... 22,546,743,249 11,140,736,165
Net Asset Value of Shares Issued Through
Dividend Reinvestment....................... 34,866,754 23,977,682
Cost of Shares Repurchased.................... (22,668,497,361) (10,954,208,156)
---------------- ----------------
Net Change in Net Assets from Capital
Transactions................................ (86,887,358) 210,505,691
---------------- ----------------
TOTAL INCREASE/DECREASE IN NET ASSETS......... (86,864,766) 210,505,675
NET ASSETS:
Beginning of the Period....................... 773,181,006 562,675,331
---------------- ----------------
End of the Period (Including accumulated
undistributed net investment income of
$43,171 and $52,205,
respectively)............................... $ 686,316,240 $ 773,181,006
================ ================
</TABLE>
See Notes to Financial Statements
F-6
<PAGE> 70
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended May 31,
-----------------------------------------------
Class A Shares 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------
<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................. .0449 .0467 .0440 .0465 .0434
Less Distributions from Net Investment
Income.............................. (.0449) (.0467) (.0440) (.0465) (.0434)
------- ------- ------- ------- -------
New Asset Value, End of the Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return.......................... 4.55% 4.78% 4.52% 4.75% 4.43%
Net Assets at End of the Period (In
millions)........................... $ 529.6 $ 634.1 $ 451.3 $ 440.3 $ 319.7
Ratio of Expenses to Average Net
Assets*(a).......................... 0.84% 1.02% 1.02% 1.07% 1.00%
Ratio of Net Investment Income to
Average Net Assets*................. 4.38% 4.60% 4.38% 4.62% 4.28%
</TABLE>
* For the years ended May 31, 1995 through 1997, the impact on the Ratios of
Expenses and Net Investment Income to Average Net Assets due to Van Kampen's
reimbursement of certain expenses was less than 0.01%.
(a) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratio would decrease by .01% for the year ended May 31,
1999.
See Notes to Financial Statements
F-7
<PAGE> 71
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 18, 1995
Year Ended May 31, (Commencement of
------------------------------------- Distribution) to
Class B Shares 1999 1998 1997 1996 May 31, 1995
- ----------------------------------------------------------------------------------------
<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......... .0374 .0391 .0363 .0388 .0047
Less Distributions from Net
Investment Income........... (.0374) (.0391) (.0363) (.0388) (.0047)
------- ------- ------- ------- -------
New Asset Value, End of the
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return (a).............. 3.78% 3.99% 3.71% 3.95% .47%*
Net Assets at End of the
Period (In millions)........ $ 129.8 $ 123.0 $ 103.0 $ 81.5 $ 4.2
Ratio of Expenses to Average
Net Assets**(b)............. 1.63% 1.79% 1.77% 1.86% 1.76%
Ratio of Net Investment Income
to Average Net Assets**..... 3.71% 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 Van Kampen's reimbursement of certain 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.
(b) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratio would decrease by .01% for the year ended May 31,
1999.
See Notes to Financial Statements
F-8
<PAGE> 72
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 18, 1995
Year Ended May 31, (Commencement of
------------------------------------- Distribution) to
Class C Shares 1999 1998 1997 1996 May 31, 1995
- ----------------------------------------------------------------------------------------
<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......... .0373 .0392 .0362 .0387 .0049
Less Distributions from Net
Investment Income........... (.0373) (.0392) (.0362) (.0387) (.0049)
------- ------- ------- ------- -------
Net Asset Value, End of the
Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return (a).............. 3.77% 3.99% 3.72% 3.94% .49%*
Net Assets at End of the
Period (In millions)........ $ 26.9 $ 16.1 $ 8.4 $ 9.7 $ 0.6
Ratio of Expenses to Average
Net Assets**(b)............. 1.63% 1.78% 1.78% 1.87% 1.76%
Ratio of Net Investment Income
to Average Net Assets**..... 3.73% 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 Van Kampen's reimbursement of certain 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.
(b) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on overnight cash balances. If these credits were reflected as a reduction
of expenses, the ratio would decrease by .01% for the year ended May 31,
1999.
See Notes to Financial Statements
F-9
<PAGE> 73
NOTES TO FINANCIAL STATEMENTS
May 31, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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 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.
F-10
<PAGE> 74
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1999
- --------------------------------------------------------------------------------
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.
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, 1999, the Fund had an accumulated capital loss carryforward
for tax purposes of $62,064 which will expire between May 31, 2001 and May 31,
2006.
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 capital gains, if any, and automatically reinvests such
dividends daily. Shareholders can elect to receive the cash equivalent of their
daily dividends at each month end.
E. EXPENSE REDUCTIONS--During the year ended May 31, 1999, the Fund's custody
fee was reduced by $120,021 as a result of credits earned on overnight cash
balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide facilities and investment advice to the Fund for an annual fee payable
monthly 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, 1999, the Fund recognized expenses of
approximately $24,100 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, 1999, the Fund recognized expenses of
approximately $227,500 representing Van Kampen Funds Inc.'s, or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
F-11
<PAGE> 75
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1999
- --------------------------------------------------------------------------------
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the year ended May
31, 1999, the Fund recognized expenses of approximately $1,146,300. 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
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. 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
At May 31, 1999, capital aggregated $529,613,415, $129,798,384, and $26,923,334
for Classes A, B and C, respectively. For the year ended May 31, 1999,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A............................. 20,964,963,416 $ 20,964,963,502
Class B............................. 1,241,941,716 1,241,941,716
Class C............................. 339,838,031 339,838,031
--------------- ----------------
Total Sales........................... 22,546,743,163 $ 22,546,743,249
=============== ================
Dividend Reinvestment:
Class A............................. 28,300,866 $ 28,300,866
Class B............................. 5,631,517 5,631,517
Class C............................. 934,371 934,371
--------------- ----------------
Total Dividend Reinvestment........... 34,866,754 $ 34,866,754
=============== ================
Repurchases:
Class A............................. (21,097,762,520) $(21,097,762,520)
Class B............................. (1,240,799,799) (1,240,799,799)
Class C............................. (329,935,042) (329,935,042)
--------------- ----------------
Total Repurchases..................... (22,668,497,361) $(22,668,497,361)
=============== ================
</TABLE>
F-12
<PAGE> 76
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1999
- --------------------------------------------------------------------------------
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>
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
F-13
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1999
- --------------------------------------------------------------------------------
and service fees and incremental transfer agency costs. Class B shares will
automatically convert to Class A shares after the eighth year following
purchase.
<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, 1999, Van Kampen, as Distributor for the Fund,
received commissions on redeemed shares which were subject to a CDSC of
approximately $973,600. 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, 1999, are payments retained by
Van Kampen of approximately $1,204,500.
F-14
<PAGE> 78
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
<TABLE>
<C> <S>
(a)(1) First Amended and Restated Agreement and Declaration of
Trust(1)
(2) Second Certificate of Amendment(3)
(3) Second Amended and Restated Certificate of Designation(3)
(b) Amended and Restated Bylaws(1)
(c)(1) Specimen Class A Share Certificate(3)
(2) Specimen Class B Share Certificate(3)
(3) Specimen Class C Share Certificate(3)
(d) Investment Advisory Agreement(2)
(e)(1) Distribution and Service Agreement(2)
(2) Form of Dealer Agreement(1)
(3) Form of Broker Fully Disclosed Clearing Agreement(1)
(4) Form of Bank Fully Disclosed Clearing Agreement(1)
(f)(1) Form of Trustee Deferred Compensation Plan(4)
(2) Form of Trustee Retirement Plan(4)
(g)(1) Custodian Contract(2)
(2) Transfer Agency and Service Agreement(2)
(h)(1) Fund Accounting Agreement(2)
(i) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(1)
(j) Consent of PricewaterhouseCoopers LLP+
(k) Not Applicable
(l) Not Applicable
(m)(1) Plan of Distribution pursuant to Rule 12b-1(2)
(2) Form of Shareholder Assistance Agreement(2)
(3) Form of Administrative Services Agreement(2)
(o) Amended Multi-Class Plan(2)
(p) Power of Attorney+
(z)(1) List of certain investment companies in response to Item
27(a)+
(2) List of officers and directors of Van Kampen Funds Inc. in
response to Item 27(b)+
</TABLE>
(1) 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.
(2) 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.
(3) Incorporated herein by reference to Post-Effective Amendment No. 39 to the
Registrant's Registration Statement on Form N1-A, File No. 2-50870, filed
September 15, 1998.
(4) Incorporated herein by reference to Post-Effective Amendment No. 81 to Van
Kampen Harbor Fund's Registration Statement on Form N-1A, File No. 2-12685,
and 811-734, filed April 29, 1999.
+ Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See the Statement of Additional Information.
C-1
<PAGE> 79
ITEM 25. INDEMNIFICATION.
Pursuant to Del. Code Ann. Title 12 Section 3817, a Delaware business trust
may provide in its governing instrument for the indemnification of its officers
and trustees from and against any and all claims and demands whatsoever.
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 interests of the Trust,
(ii) willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office, or (iii) for a criminal
proceeding not having a reasonable cause to believe that such conduct was
unlawful (collectively "Disabling Conduct"). Absent a court determination that
an officer or trustee seeking indemnification was not liable on the merits or
guilty of Disabling Conduct in the conduct of his or her office, the decision by
the Registrant to indemnify such person must be based upon the reasonable
determination of independent counsel or non-party independent trustees, after
review of the facts, that such officer or trustee is not guilty of Disabling
Conduct in the conduct of his or her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officers or trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides a security for the
undertaking; (2) the Registrant is insured against losses arising from lawful
advances; or (3) a majority of a quorum of the Registrant's disinterested,
non-party trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that a recipient of
the advance ultimately will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "1933 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
1933 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 1933 Act and
will be governed by the final adjudication of such issue.
Pursuant to Section 7 of the Distribution and Service Agreement, the
Registrant agrees to indemnify and hold harmless Van Kampen Funds Inc. (the
"Distributor") and each of its trustees and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damages or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damages,
or expense and reasonable counsel fees) arising by reason of any person
acquiring any shares, based upon the ground that the Registration Statement,
prospectus, shareholder reports or other information filed or made public by the
Registrant (as from time to time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be stated or
necessary in
C-2
<PAGE> 80
order to make the statements not misleading under the 1933 Act, or any other
statute or the common law. The Registrant does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or omission was
made in reliance upon, and in conformity with, information furnished to the
Registrant by or on behalf of the Distributor. In no case is the indemnity of
the Registrant in favor of the Distributor or any person indemnified to be
deemed to protect the Distributor or any person against any liability to the
Fund or its security holders to which the Distributor or such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the agreement.
See also "Investment Advisory Agreement" in the Statement of Additional
Information.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Investment Advisory Services" in the Prospectus and "Investment
Advisory Agreement," "Other Agreements" and "Trustees and Officers" in the
Statement of Additional Information for information regarding the business of
Van Kampen Asset Management Inc. (the "Adviser"). For information as to the
business, profession, vocation and employment of a substantial nature of each of
the officers and directors of the Adviser, reference is made to the Adviser's
current Form ADV (File No. 801-1669) filed under the Investment Advisers Act of
1940, as amended, incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) The sole principal underwriter is Van Kampen Funds Inc. which acts as
principal underwriter for certain investment companies and unit investment
trusts. See Exhibit (z)(1).
(b) Van Kampen Funds Inc. is an affiliated person of the Registrant and is
the only principal underwriter for the Registrant. The name, principal business
address and positions and offices with Van Kampen Funds Inc. of each of the
trustees and officers thereof are set forth in Exhibit (z)(2). 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 the
Registrant.
C-3
<PAGE> 81
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents of the Registrant required by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
promulgated thereunder to be maintained (i) by the Registrant will be maintained
at its offices located at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace,
Illinois 60181-5555; Van Kampen Investor Services Inc., 7501 Tiffany Springs
Parkway, Kansas City, Missouri 64153; or at State Street Bank and Trust Company,
1776 Heritage Drive, North Quincy, Massachusetts 02171, (ii) by the Adviser,
will be maintained at its offices located at 1 Parkview Plaza, PO Box 5555,
Oakbrook Terrace, Illinois 60181-5555 and (iii) by Van Kampen Funds Inc., the
principal underwriter, will be maintained at its offices located at 1 Parkview
Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-4
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, 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 1933 Act 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 the State of Illinois, on the
28th day of September, 1999.
VAN KAMPEN RESERVE FUND
By: /s/ A. THOMAS SMITH III
-------------------------------------
A. Thomas Smith III, Secretary
Pursuant to the requirements of the 1933 Act, this Amendment to the
Registration Statement has been signed on September 28, 1999, by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
Principal Executive Officer:
/s/ RICHARD F. POWERS, III* President
- ------------------------------------------------
Richard F. Powers, III
Principal Financial Officer:
/s/ JOHN L. SULLIVAN* Vice President, Chief Financial Officer and Treasurer
- ------------------------------------------------
John L. Sullivan
Trustees:
/s/ J. MILES BRANAGAN* Trustee
- ------------------------------------------------
J. Miles Branagan
/s/ JERRY D. CHOATE* Trustee
- ------------------------------------------------
Jerry D. Choate
/s/ RICHARD M. DEMARTINI* Trustee
- ------------------------------------------------
Richard M. DeMartini
/s/ LINDA HUTTON HEAGY* Trustee
- ------------------------------------------------
Linda Hutton Heagy
/s/ R. CRAIG KENNEDY* Trustee
- ------------------------------------------------
R. Craig Kennedy
/s/ JACK E. NELSON* Trustee
- ------------------------------------------------
Jack E. Nelson
/s/ DON G. POWELL* Trustee
- ------------------------------------------------
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
/s/ SUZANNE H. WOOLSEY* Trustee
- ------------------------------------------------
Suzanne H. Woolsey
/s/ PAUL G. YOVOVICH* Trustee
- ------------------------------------------------
Paul G. Yovovich
- ---------------
* Signed by A. Thomas Smith III pursuant to a power of attorney filed herewith.
/s/ A. THOMAS SMITH III September 28, 1999
- ------------------------------------------------
A. Thomas Smith III
Attorney-in-Fact
</TABLE>
C-5
<PAGE> 83
SCHEDULE OF EXHIBITS TO
POST-EFFECTIVE AMENDMENT 41 TO FORM N-1A
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <S>
(j) Consent of PricewaterhouseCoopers LLP
(p) Power of Attorney
(z)(1) List of certain investment companies in response to Item
27(a)
(2) List of officers and directors of Van Kampen Funds Inc. in
response to Item 27(b)
</TABLE>
<PAGE> 1
EXHIBIT (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 41 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated July
1, 1999, 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 27, 1999
<PAGE> 1
EXHIBIT (p)
POWER OF ATTORNEY
The undersigned, being Officers and Trustees of each of the Van Kampen
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 Pennsylvania Tax Free Income Fund being a Pennsylvania trust, and
being Officers and Directors of the Van Kampen Series Fund, Inc. (the
"Corporation"), a Maryland corporation, do hereby, in the capacities shown
below, appoint Richard F. Powers, III, Dennis J. McDonnell and A. Thomas Smith
III, each of Oakbrook Terrace, Illinois, as 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: June 23, 1999
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ RICHARD F. POWERS III President
--------------------------
Richard F. Powers III
/s/ JOHN L. SULLIVAN Vice President, Chief Financial Officer
-------------------------- and Treasurer
John L. Sullivan
/s/ J. MILES BRANAGAN Trustee/Director
--------------------------
J. Miles Branagan
/s/ JERRY D. CHOATE Trustee/Director
--------------------------
Jerry D. Choate
/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
/s/ SUZANNE H. WOOLSEY Trustee/Director
--------------------------
Suzanne H. Woolsey
/s/ PAUL G. YOVOVICH Trustee/Director
--------------------------
Paul G. Yovovich
</TABLE>
<PAGE> 2
SCHEDULE 1
VAN KAMPEN U.S. GOVERNMENT TRUST
VAN KAMPEN TAX FREE TRUST
VAN KAMPEN TRUST
VAN KAMPEN EQUITY TRUST
VAN KAMPEN PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN TAX FREE MONEY 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 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
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN PACE FUND
VAN KAMPEN REAL ESTATE SECURITIES FUND
VAN KAMPEN RESERVE FUND
VAN KAMPEN TAX-EXEMPT TRUST
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN WORLD PORTFOLIO SERIES TRUST
<PAGE> 1
EXHIBIT (z)(1)
Item 27(a)
- ----------
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 California Tax Free Income Fund*
Van Kampen Michigan Tax Free Income Fund*
Van Kampen Missouri Tax Free Income Fund*
Van Kampen Ohio 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 Aggressive Growth Fund
Van Kampen Great American Companies Fund
Van Kampen Growth Fund
Van Kampen Mid Cap Value Fund
Van Kampen Prospector Fund
Van Kampen Small Cap Value Fund
Van Kampen Utility Fund
Van Kampen Equity Trust II
Van Kampen Technology 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 Exchange Fund
The Explorer Institutional Trust
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 2
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 on behalf of its series
Asset Allocation Portfolio
Comstock 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
Van Kampen Limited Maturity Government 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 U.S. Government Trust for Income
Van Kampen 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 Debt Fund*
Van Kampen Emerging Markets Fund
Van Kampen Equity Growth Fund
Van Kampen European Equity Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Equity 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 Mid Cap Growth Fund*
Morgan Stanley Money Market Fund
Morgan Stanley Tax-Free Money Market Fund*
Van Kampen Value Fund
Van Kampen Worldwide High Income Fund
<PAGE> 3
<TABLE>
<S> <C>
Insured Municipals Income Trust Series 414
Strategic Municipal Trust, Intermediate Series 2
California Insured Municipals Income Trust Series 182
Florida Insured Municipals Income Trust Series 126
Georgia Insured Municipals Income Trust Series 89
Michigan Insured Municipals Income Trust Series 158
Missouri Insured Municipals Income Trust Series 113
Pennsylvania Insured Municipals Income Trust Series 244
Virginia Investors' Quality Tax-Exempt Trust Series 86
Van Kampen Focus Portfolios Insured Income Trust Series 74
Internet Trust Series 15
Pacific Strategic 10 Trust August 1999 Series
The Dow SM Strategic 10 Trust September 1999 Series
The Dow SM Strategic 10 Trust September 1999
Traditional Series
The Dow SM Strategic 5 Trust September 1999 Series
The Dow SM Strategic 5 Trust September 1999
Traditional Series
EAFE Strategic 20 Trust September 1999 Series
Strategic Picks Opportunity Trust September 1999 Series
Great International Firms Trust Series 9
Brand Name Equity Trust Series 10
Dow 30 Index Trust Series 8
Dow 30 Index and Treasury Trust Series 10
Global Energy Trust Series 10
Financial Institutions Trust Series 1
Edward Jones Select Growth Trust August 1999 Series
Internet Trust Series 16A
Internet Trust Series 16B
Morgan Stanley High-Technology 35 Index Trust Series 8A
Morgan Stanley High-Technology 35 Index Trust Series 8B
Pharmaceutical Trust Series 7A
Pharmaceutical Trust Series 7B
Telecommunications & Bandwidth Trust Series 7A
Telecommunications & Bandwidth Trust Series 7B
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
New Frontier Utility Trust Series 7A
New Frontier Utility Trust Series 7B
Roaring 2000s Trust Series 3
Roaring 2000s Trust Traditional Series 3
Robert Baird - Utility & Communications Trust Series 1
Josepthal - Small Cap Focus Portfolio Series 1
Morgan Stanley Multinational Index Trust Series 1A
Morgan Stanley Multinational Index Trust Series 1B
Software Trust Series 1A
Software Trust Series 1B
Gruntal - E-Commerce Software Growth Trust Series 1
Wheat First Union - Mid-Cap Banking Opportunity Trust Series 1
</TABLE>
* Funds that have not commenced investment operations.
<PAGE> 1
EXHIBIT (z)(2)
Item 27(b)
- ----------
<TABLE>
<S> <C> <C>
Richard F. Powers III Chairman & Chief Executive Officer Oakbrook Terrace, IL
John H. Zimmerman III President Oakbrook Terrace, IL
A. Thomas Smith III Executive Vice President, General Oakbrook Terrace, IL
Counsel & Secretary;
Vice President and Secretary of
the Funds
William R. Rybak Executive Vice President, Chief
Financial Officer & Treasurer Oakbrook Terrace, IL
Michael H. Santo Executive Vice President & Chief
Administrative Officer Oakbrook Terrace, IL
Laurence J. Althoff Sr. Vice President & Controller Oakbrook Terrace, IL
Sara L. Badler Sr. Vice President; Oakbrook Terrace, IL
Assistant Secretary of the Funds
James J. Boyne Sr. Vice President, Associate General Oakbrook Terrace, IL
Counsel & Assistant Secretary
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
John E. Doyle Sr. Vice President Oakbrook Terrace, IL
Richard G. Golod Sr. Vice President Annapolis, MD
Steven T. Johnson Sr. Vice President Oakbrook Terrace, IL
Walter E. Rein Sr. Vice President Oakbrook Terrace, IL
James J. Ryan 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
Patrick J. Woelfel Sr. Vice President Oakbrook Terrace, IL
Edward G. Wood, III Sr. Vice President,
Chief Operating Officer; Oakbrook Terrace. IL
Vice President of the Funds
Patricia A. Bettlach 1st Vice President Chesterfield, MO
Glenn M. Cackovic 1st Vice President Laguna Niguel, CA
Eric J. Hargens 1st Vice President Orlando, FL
Gregory Heffington 1st Vice President Ft. Collins, CO
David S. Hogaboom 1st Vice President Oakbrook Terrace, IL
Dominic C. Martellaro 1st Vice President Danville, CA
Carl Mayfield 1st Vice President Lakewood, CO
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
Maura A. McGrath 1st Vice President New York, NY
Thomas Rowley 1st Vice President St. Louis, MO
Andrew J. Scherer 1st Vice President Oakbrook Terrace, IL
George J. Vogel 1st Vice President Oakbrook Terrace, IL
James D. Stevens 1st Vice President North Andover, MA
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
James R. Yount 1st Vice President Mercer Island, WA
James K. Ambrosio Vice President Massapequa, NY
Brian P. Arcara Vice President Buffalo, NY
Scott C. Bernstiel Vice President Plainsboro, NJ
Carol S. Biegel Vice President Oakbrook Terrace, IL
Christopher M. Bisaillon Vice President Oakbrook Terrace, IL
Michael P. Boos Vice President Oakbrook Terrace, IL
Robert C. Brooks Vice President Oakbrook Terrace, IL
Elizabeth M. Brown Vice President Houston, TX
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Christine Cleary Byrum Vice President Tampa, FL
Daniel R. Chambers Vice President Austin, TX
Richard J. Charlino Vice President Oakbrook Terrace, IL
Deanne 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
Michael E. Eccleston Vice President Oakbrook Terrace, IL
Christopher J. Egan Vice President Oakbrook Terrace, 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
Susan J. Hill Vice President Oakbrook Terrace, IL
Thomas R. Hindelang Vice President Gilbert, AZ
Bryn M. Hoggard Vice President Houston, TX
Michael B. Hughes Vice President Oakbrook Terrace, IL
Lowell Jackson Vice President Norcross, GA
Kevin G. Jajuga Vice President Baltimore, MD
Dana R. Klein Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Senior Compliance Director Oakbrook Terrace, IL
Richard D. Kozlowski Vice President Atlanta, GA
Patricia D. Lathrop Vice President Tampa, FL
Brian Laux Vice President Staten Island, NY
Tony E. Leal Vice President Daphne, AL
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
S. William Lehew III Vice President Charlotte, NC
Jonathan Linstra Vice President Oakbrook Terrace, IL
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Walter Lynn Vice President Flower Mound, TX
Linda S. MacAyeal Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Brooks D. McCartney Vice President Puyallup, WA
Anne Therese McGrath Vice President Los Gatos, CA
John Mills Vice President Kenner, LA
Stuart R. Moehlman Vice President Houston, TX
Ted Morrow Vice President Dallas, TX
Robert Muller, Jr. Vice President Cypress, TX
Peter Nicholas Vice President Beverly, MA
Steven R. Norvid 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
Richard J. Poli Vice President Philadelphia, PA
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
Heather R. Sabo Vice President Richmond, VA
Stephanie Scarlata Vice President Bedford Corners, NY
Christina L. Schmieder Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Gwen L. Shaneyfalt Vice President Oakbrook Terrace, IL
Jeffrey C. Shirk Vice President Swampscott, MA
Traci T. Sorenson 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
Richard Stefanec Vice President Los Angles, CA
William C. Strafford Vice President Granger, IN
Mark A. Syswerda Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Todd A. 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, Deputy General Oakbrook Terrace, IL
Counsel & Asst. Secretary;
Assistant Secretary of the Funds
Frank L. Wheeler Vice President Oakbrook Terrace, IL
Harold Whitworth, III Vice President Oakbrook Terrace, IL
Joel John Wilczewski Vice President Oakbrook Terrace, IL
Thomas M. Wilson Vice President Oakbrook Terrace, IL
Barbara A. Withers Vice President Oakbrook Terrace, IL
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
David M. Wynn Vice President Phoenix, AZ
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
Billie J. Bronaugh Asst. Vice President Houston, TX
Gregory T. Brunk Asst. Vice President Oakbrook Terrace, IL
Gina Costello Asst. Vice President Oakbrook Terrace, IL
Sarah K. Geiser Asst. Vice President Oakbrook Terrace, IL
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Laurie L. Jones Asst. Vice President Houston, TX
Robin R. Jordan Asst. Vice President Oakbrook Terrace, IL
Ivan R. Lowe Asst. Vice President Houston, TX
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
Thomas J. Sauerborn Asst. Vice President New York, NY
David T. Saylor Asst. Vice President Oakbrook Terrace, IL
Lauren B. Sinai Asst. Vice President Oakbrook Terrace, IL
Scott Stevens 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
Cathy Napoli Assistant Secretary Oakbrook Terrace, IL
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
Richard F. Powers III Director Oakbrook Terrace, IL
A. Thomas Smith III Director Oakbrook Terrace, IL
William R. Rybak Director Oakbrook Terrace, IL
John H. Zimmerman III Director Oakbrook Terrace, IL
</TABLE>
