<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 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. 40 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 25 [X]
VAN KAMPEN RESERVE FUND
(Exact Name of Registrant as Specified in Agreement and 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:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on September 28, 1999 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
The information in this prospectus is not complete and may be changed. The
Fund may not sell these securities until the post-effective amendment to
the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities.
[VAN KAMPEN FUNDS LOGO]
SUBJECT TO COMPLETION--DATED JULY 30, 1999
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 management 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 , 1999
<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 management seeks to achieve the investment objective by investing in
a diversified portfolio of high-quality, 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 instruments with remaining maturities of 13
months or less and with a dollar-weighted average maturity of 90 days or less.
INVESTMENT RISKS
An investment in the Fund is subject to investment risks.
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. Credit risk should be low for the Fund because it
invests in high-quality money market instruments.
MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. An investment in the Fund 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.
MANAGER RISK. As with any managed fund, the Fund's management 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.
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 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).
3
<PAGE> 5
COMPARATIVE PERFORMANCE
As a basis for evaluating the Fund's performance and risks over time, the table
below shows the Fund's performance figures for the periods indicated. Average
annual total returns are shown 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 include the maximum 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 4.55% 4.61% 4.70%()
.......................................................
Van Kampen
Reserve Fund--
Class B Shares -0.22% -- 3.54%(1)
.......................................................
Van Kampen
Reserve Fund--
Class C Shares 2.77% -- 3.87%(1)
.......................................................
</TABLE>
Inception date (1) 4/18/95.
Investors can obtain the current 7-day yield of the Fund by calling (800)
341-2911.
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.
SHAREHOLDER FEES
(fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) None None None
................................................................
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
reinvested dividends
(as a percentage of None None None
offering price)
................................................................
Redemption fees (as a
percentage of amount None None None
redeemed)
................................................................
Exchange fee None None None
................................................................
</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 year after purchase
and 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
<PAGE> 6
ANNUAL FUND
OPERATING EXPENSES
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 0.39% 0.39% 0.39%
..............................................................
Distribution and/or
Service (12b-1) 0.14% 0.90%(2) 0.90%(2)
Fees(1)
..............................................................
Other Expenses 0.31% 0.34% 0.34%
..............................................................
Total Annual Fund
Operating Expenses 0.84% 1.63% 1.63%
..............................................................
</TABLE>
(1) Class A Shares are subject to an annual service fee of up to 0.14% 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."
(2) 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% annual return each year and
that the Fund's operating expenses remain the same each year. 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.
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 high-quality, 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 instruments with remaining maturities of
13 months or less and with a dollar-weighted average maturity of 90 days or
less.
In selecting securities for investment, the Fund's investment adviser focuses on
those securities that meet maturity, quality and diversification standards with
which money market funds must comply. The Fund's investment adviser evaluates
economic data and analyzes interest rate trends to identify attractive
investment opportunities for the Fund. The Fund focuses on those securities
offering the best value with minimal credit risk and have maturities consistent
with the investment adviser's outlook for
5
<PAGE> 7
interest rates. The Fund's investment adviser seeks to identify the best
relative values among potential investments based on an analysis of yield,
price, interest rate sensitivity and credit quality. On an ongoing basis, the
Fund's investment adviser analyzes the economic and financial outlook of the
markets for money market instruments 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 maintain the average
maturity of portfolio investments, increase the yield, maintain the quality of
the portfolio or maintain a stable share price.
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) 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, their subsidiaries or overseas branches, including
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 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 ratings categories by any two nationally
recognized statistical rating organizations ("NRSROs"), such as Standard &
Poor's ("S&P") (e.g., A-1 or A-2) or Moody's Investor Services, Inc. ("Moody's")
(e.g., P-1 or P-2) (or one NRSRO of 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. The ratings assigned by the ratings agencies represent their
opinions as to the quality of the debt securities they undertake to rate, but
not 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 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 respect from those incurred in
investing in obligations of domestic banks. Foreign banks and foreign branches
or subsidiaries of domestic banks are not necessarily subject to the same or
similar regulatory requirements that apply to domestic banks, such as mandatory
reserve requirements, loan limitations and accounting, audit and financial
record keeping requirements. In addition, less information may be publicly
available about a foreign bank or about a foreign branch of a domestic bank.
Because evidences of ownership of obligations of foreign branches or
subsidiaries of foreign banks usually are held outside the United States, the
Fund will be subject to additional risks which include
6
<PAGE> 8
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 commercial paper obligations
that (a) are rated 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) or (b) if unrated, are
issued by companies which at the time of investment have outstanding long-term
debt securities ratings of at least A by either S&P or by Moody's or if unrated,
are of comparable quality as determined in accordance with procedures
established by the Fund's Board of Trustees. 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.
OTHER INVESTMENTS. All of the Fund's investments must meet the credit quality
requirements established by the Fund's Board of Trustees following special rules
established for money market funds 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 the Fund's securities and diversifying the Fund's 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 for the Fund and the Fund's investment adviser
has the responsibility to implement those procedures in making investments for
the Fund's portfolio. Accordingly, in selecting securities for investment, the
Fund's investment adviser seeks to add value and limit risk through careful
security selection and by actively managing the Fund's portfolio. As a result,
the composition of the Fund's portfolio may vary based upon the Fund's
investment adviser's ongoing assessment and response to changing conditions
affecting the Fund's portfolio.
Further information about the types of investments and other investment
practices that may be used by the Fund is contained in the 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
7
<PAGE> 9
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. 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 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 Fund paid the Adviser an advisory fee at the
effective rate of 0. % 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. Other operating expenses paid by the Fund include service
fees, distribution fees, custodial fees, legal and independent accountant fees,
the costs of reports and proxies to shareholders, Trustees' fees (other than
those who are affiliated persons of the Adviser, Distributor or Van Kampen
Investments) and all other 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.
8
<PAGE> 10
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 in 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 a
day if deemed desirable. Net asset value 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 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 for 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 and the dividends payable on such 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"
9
<PAGE> 11
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 gains
distributions, 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 Van Kampen Investor Services Inc. ("Investor Services") at (800)
421-6714 and provide the account registration, the address, tax identification
number, the amount being wired and the name of the wiring bank. Investor
Services furnishes the investor with an account number. The investor's bank
should wire the specified amount along with the account number and registration
to the Fund's custodian: State Street Bank and Trust Company ("State Street
Bank"), 225 Franklin Street, Boston, Massachusetts 02102, ABA-011000028,
attention Van Kampen Investor Services Inc./Van Kampen Fund Account No.
9900-446-7. The investor should then immediately complete and mail the account
application form accompanying this Prospectus to Investor Services. To receive
same day credit to an account, the investor must call Investor Services, at the
telephone number listed above, by 11:00 a.m. Kansas City time with the intent to
wire funds and State Street Bank must then receive such funds by 4:00 p.m.
Boston time.
INITIAL INVESTMENT BY MAIL. To open an account by mail an investor should send a
check payable to the Fund along with a completed account application form to
Investor Services.
SUBSEQUENT INVESTMENTS BY BANK WIRE. The investor's bank should wire the
specified amount along with the account number and registration to State Street
Bank. To receive same day credit to an account, the investor must call Investor
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.
10
<PAGE> 12
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 gains 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 gains distributions.
It is presently the policy of the Distributor not to accept any order for Class
B Shares in an amount of $500,000 or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.
The amount of the contingent deferred sales charge, if any, varies depending on
the number of years from the time of payment for the purchase of Class B Shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the 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
11
<PAGE> 13
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 gains dividends. It
is presently the policy of the Distributor not to accept any order for Class C
Shares in an amount of $1 million 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
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
12
<PAGE> 14
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 Share or Class C Share was purchased. Similarly the
holding period for calculating any contingent deferred sales charge is based
upon the date of purchase of such share 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 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 order. 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-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
13
<PAGE> 15
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 REDEMPTIONS. Shareholders of the Fund who have completed the
appropriate section of the application may request expedited redemption payment
of shares having a value of $1,000 or more, by calling (800) 421-5684.
Redemption proceeds in the form of federal funds will be wired to the bank
designated in the application. Expedited redemption requests received in good
order prior to 10:00 a.m. Kansas City time are processed and the proceeds are
wired on the date of receipt. Redemption requests received by Investor Services
after such hour are 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.
14
<PAGE> 16
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
Interest earned from investments are 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 invested in additional full and fractional shares of the Fund at
net asset value. Shareholders may elect to receive monthly payment of dividends
in cash by written instruction to Investor Services. Dividends are paid to
shareholders of record immediately prior to the determination of net asset value
for that day. Since shares are issued and redeemed at the time net asset value
is determined, dividends commence on the day following the date shares are
issued and are paid for the day shares are redeemed. Shares redeemed that were
purchased by daily reinvestments of dividends are liquidated at the net asset
value on the last business day of the month and the proceeds of such redemption
are mailed to the shareholder electing cash payment. A redeeming shareholder
receives all dividends accrued through the date of redemption.
The per share dividends on Class B Shares and Class C Shares may be lower than
the per share dividends on Class A Shares as a result of the higher distribution
fees and transfer agency costs applicable to such classes of shares.
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 gains 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 gains
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 writing to Investor
Services. The investor may, on the initial application or prior to any
declaration, instruct that dividends be paid in cash and capital gains dividends
be reinvested at net asset value, or that both dividends and capital gains
distributions be paid in cash.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder 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
15
<PAGE> 17
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 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
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. In addition, the Fund
may modify, restrict or terminate the exchange privilege at any time on
16
<PAGE> 18
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 net investment income (consisting generally of
taxable income and net short-term capital gains) are taxable to shareholders as
ordinary income to the extent of the Fund's earnings and profits, whether paid
in cash or reinvested in additional shares. Distributions of the Fund's net
capital gains (which are the excess of net long-term capital gains over net
short-term capital losses) as capital gains 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 gains 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 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
17
<PAGE> 19
required certifications or who are otherwise subject to backup withholding.
Foreign shareholders, including shareholders who are nonresident aliens, may be
subject to U.S. withholding tax on certain distributions (whether received in
cash or in shares) at a rate of 30% or such lower rate as prescribed by 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 the federal
income tax law. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its net investment income, the Fund will not be
required to pay federal income taxes on any income it distributed to
shareholders. If the Fund distributes less than the sum of 98% of its ordinary
income and 98% of its capital gains 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 or disposing of 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(a) 1997(a) 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................... $1.00 $1.00 $1.00 $1.00
------ ------ ------ ----- -----
Net Investment Income....................................... .0467 .0440 .0465 .0434
------ ------ ------ ----- -----
Less Distributions from Net Investment Income............... (.0467) .0440 (.0465) (.0434)
------ ------ ------ ----- -----
Net Asset Value, End of the Period.......................... $1.00 $1.00 $1.00 $1.00
====== ====== ====== ===== =====
Total Return(b)............................................. 4.78% 4.52% 4.75% 4.43%
Net Assets at End of the Period (In millions)............... $634.1 $451.3 $440.3 $319.7
Ratio of Expenses to Average Net Assets(a).................. 1.02% 1.02% 1.07% 1.00%
Ratio of Net Investment Income to Average Net Assets(a)..... 4.60% 4.38% 4.62% 4.28%
<CAPTION>
April 18 1995
(Commencement
of
Class B Shares Distribution)
Year Ended May 31, to May 31,
1999 1998(a) 1997(a) 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................... $1.00 $1.00 $1.00 $1.00
------ ------ ------ ----- ------
Net Investment Income....................................... .0391 .0363 .0388 .0047
------ ------ ------ ----- ------
Less Distributions from Net Investment Income............... .0.391 .0363 .0388 .0047
------ ------ ------ ----- ------
Net Asset Value, End of the Period.......................... $1.00 $1.00 $1.00 $1.00
====== ====== ====== ===== ======
Total Return(b)............................................. 3.99% 3.71% 3.95% 47%*
Net Assets at End of the Period (In millions)............... $123.0 $103.0 $81.5 $4.2
Ratio of Expenses to Average Net Assets(a).................. 1.79% 1.77% 1.86% 1.76%
Ratio of Net Investment Income to Average Net Assets(a)..... 3.91% 3.70% 3/75% 3.52%
<CAPTION>
April 18 1995
(Commencement
Class C Shares
of
Distribution)
Year Ended May 31,
to May 31,
1999 1998(a) 1997(a) 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................... $1.00 $1.00 $1.00 $1.00
------ ------ ------ ----- -----
Net Investment Income....................................... .0392 .0362 .0387 .0049
------ ------ ------ ----- -----
Less Distributions from Net Investment Income............... .0392 .0362 .0387 .0049
------ ------ ------ ----- -----
Net Asset Value, End of the Period.......................... $1.00 $1.00 $1.00 $1.00
====== ====== ====== ===== =====
Total Return(b)............................................. 3.99% 3.72% 3.94% .49%*
Net Assets at End of the Period (In millions)............... $16.1 $8.4 $9.7 $0.6
Ratio of Expenses to Average Net Assets(a).................. 1.78% 1.78% 1.87% 1.76%
Ratio of Net Investment Income to Average Net Assets(a)..... 3.91% 3.64% 3.81% 3.52%
</TABLE>
* Non-Annualized
(a) 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 expenses was less than 0.01%.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
See Financial Statements and Notes thereto
19
<PAGE> 21
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
, 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 Public
Reference Room in Washington, DC or online at
the SEC's web site (http://www.sec.gov). For
more information, please call the SEC at (800)
SEC-0330. You can also request these materials
by writing the Public Reference Section of the
SEC, Washington DC, 20549-6009, and paying a
duplication fee.
[VAN KAMPEN FUNDS LOGO]
The Fund's Investment Company Act
File No. is 811-2482.
RES
PRO 9/99
<PAGE> 23
The information in this statement of additional information is not complete and
may be changed. The Fund may not sell these securities until the post- effective
amendment to the registration statement filed with the Securities and Exchange
Commission is effective. This statement of additional information is not a
prospectus. This statement of additional information is not an offer to sell
these securities and is not soliciting an offer to buy these securities.
SUBJECT TO COMPLETION -- DATED JULY 30, 1999
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
management 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 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-3
Investment Restrictions..................................... B-7
Trustees and Officers....................................... B-10
Investment Advisory Agreement............................... B-19
Other Agreements............................................ B-20
Distribution and Service.................................... B-21
Transfer Agent.............................................. B-24
Portfolio Transactions and Brokerage Allocation............. B-24
Shareholder Services........................................ B-25
Redemption of Shares........................................ B-28
Waiver of Class B and Class C Contingent Deferred Sales
Charge.................................................... B-28
Taxation.................................................... B-30
Fund Performance............................................ B-35
Other Information........................................... B-37
Report of Independent Accountants........................... F-
Financial Statements........................................ F-
Notes to Financial Statements...............................
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED , 1999.
<PAGE> 24
GENERAL INFORMATION
The Fund was originally incorporated in Maryland under the name Van Kampen
American Capital Reserve Fund, Inc., on March 28, 1974. As of July 31, 1995, the
Fund was renamed Van Kampen American Capital Fund, and was reorganized as a
series of the Trust. 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.
As of , 1999, no person was known by the Fund to own beneficially
or 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
2800 Post Oak Blvd.
Houston, TX 77056
</TABLE>
Van Kampen Trust Company acts as custodian for certain employee benefit
plans and independent 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.
B-3
<PAGE> 26
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 of the
two highest rating categories for debt obligations by at least two nationally
recognized statistical rating organizations ("NRSROs") (or 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 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 Board
determines it would be in the best interests of the Fund not to dispose of the
B-4
<PAGE> 27
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-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. 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.
Repurchase agreements are fully collateralized by the underlying securities
and are considered to be loans under the 1940 Act. The Fund pays 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 will be required to maintain the value of the underlying securities
marked-to-market daily at not less than the repurchase price. The underlying
securities (normally securities of the U.S. government, or its agencies and
instrumentalities) may have maturity dates exceeding one year. The Fund does not
bear the risk of a decline in value of the underlying security unless the seller
defaults under its repurchase obligation.
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
B-5
<PAGE> 28
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. 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 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.
B-6
<PAGE> 29
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 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 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
B-7
<PAGE> 30
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 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>
B-8
<PAGE> 31
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>
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
B-9
<PAGE> 32
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.
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.
</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.
</TABLE>
B-10
<PAGE> 33
<TABLE>
<C> <S>
AA: A strong capacity to pay interest and repay principal and differ from
"AAA" rated issues only in small degree.
</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.
AA: High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because
of economic conditions. Plus (+) and minus (-) signs are
used in the "AA" category to indicate the relative
position of a credit within that category.
</TABLE>
B-11
<PAGE> 34
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-12
<PAGE> 35
<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 is 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-13
<PAGE> 36
<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. Prior to November 1996,
President, Chief Executive Officer and
Director of VK/AC Holding, Inc.
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-14
<PAGE> 37
<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-15
<PAGE> 38
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................ President and Chief Executive Officer of Van
Date of Birth: 02/02/46 Kampen Investments. President of each of the
President 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
Chief Investment Officer and Officer and Director of the Advisers, Van Kampen
Executive Vice President Advisors Inc., and Van Kampen Management Inc.
Chief Investment Officer and Executive Vice
President of each of the funds in the Fund
Complex. President, Chairman of the Board and
Trustee/Managing General Partner of other
investment companies advised by the Advisers or
Van Kampen Management Inc. Prior to July 1998,
Director and Executive Vice President of VK/AC
Holding, Inc. 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-16
<PAGE> 39
<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 and certain 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.
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.
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, 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. Treasurer, Vice President and
Treasurer, Vice President and Chief Chief Financial Officer of each of the funds in
Financial Officer the Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates.
</TABLE>
B-17
<PAGE> 40
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
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 certain 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 certain 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 other investment companies
advised by the Advisers or their affiliates.
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.
</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.
B-18
<PAGE> 41
The compensation of each Non-Affiliated Trustee includes an annual retainer
in an amount equal to $50,000 per calendar year, due in four quarterly
installments on the first business day of each quarter. Payment of the annual
retainer is allocated among the funds in the Fund Complex (except the money
market series of the 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-19
<PAGE> 42
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 $5,456 $35,691 $60,000 $125,200
Jerry D. Choate(5) 1999 0 0 60,000 0
Linda Hutton Heagy 1995 5,456 3,861 60,000 112,800
R. Craig Kennedy 1995 5,456 2,652 60,000 125,200
Jack E. Nelson 1995 5,456 18,385 60,000 125,200
Phillip B. Rooney 1997 4,256 6,002 60,000 125,200
Dr. Fernando Sisto 1991 5,456 68,615 60,000 125,200
Wayne W. Whalen 1995 5,456 12,658 60,000 125,200
Suzanne H. Woolsey(5) 1999 0 0 60,000 0
Paul G. Yovovich(5) 1998 2,834 0 60,000 25,300
</TABLE>
- ------------------------------------
(1) Trustees not eligible for compensation are not included in the Compensation
Table.
(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral with respect to the Fund's fiscal year ended May 31, 1999. The
following trustees deferred compensation from the Fund during the fiscal
year ended May 31, 1999: Mr. Branagan, $ ; Ms. Heagy, $ ; Mr.
Kennedy, $ ; Mr. Nelson, $ ; Mr. Rooney, $ ; Dr. Sisto,
$ ; Mr. Whalen, $ and Mr. Yovovich, $ . Amounts deferred are
retained by the Fund and earn a rate of return determined by reference to
either the return on the common shares of the Fund or other funds in the
Fund Complex as selected by the respective Non-Affiliated Trustee, with the
same economic effect as if such Non-Affiliated Trustee had invested in one
or more funds in the Fund Complex. To the extent permitted by the 1940 Act,
each fund may invest in securities of those funds selected by the
Non-Affiliated Trustees in order to match the deferred compensation
obligation. The cumulative deferred compensation (including interest)
accrued with respect to each trustee, including former trustees, from the
Fund as of the Fund's fiscal year ended May 31, 1999 is as follows: Mr.
Branagan, $ ; Dr. Caruso, $ ; Mr. Gaughan, $ ; Ms. Heagy,
$ ; Mr. Kennedy, $ ; Mr. Miller, $ ; Mr. Nelson, $ ;
Mr. Rees, $ ; Mr. Robinson, $ ; Mr. Rooney, $ ; Dr. Sisto,
$ ; Mr. Whalen, $ ; and Mr. Yovovich, $ . 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.
B-20
<PAGE> 43
(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) 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
complete year of information to report. Mr. Choate and Dr. 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 any prior year information
to report in the table. 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 July , 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, 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
B-21
<PAGE> 44
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 payable 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 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.
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 $ , $2,251,176 and $2,170,578, 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 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.
B-22
<PAGE> 45
During the fiscal years ended May 31, 1999, 1998 and 1997, Advisory Corp.
received $ , $131,834 and $90,167, 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 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
representa-
B-23
<PAGE> 46
tives 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, sub-agreements between the Distributor and members
of the NASD who are acting as securities dealers and NASD members or eligible
non-members who are acting as brokers or agents and similar agreements between
the Fund and financial intermediaries who are acting as brokers (collectively,
"Selling Agreements") that may provide for their customers or clients certain
services or assistance, which may include, but not be limited to, processing
purchase and redemption transactions, establishing and maintaining shareholder
accounts regarding the Fund, and such other services as may be agreed to from
time to time and as may be permitted by applicable statute, rule or regulation.
Brokers, dealers and financial intermediaries that have entered into
sub-agreements with the Distributor and sell shares of the Fund are referred to
herein as "financial intermediaries."
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to any
B-24
<PAGE> 47
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 $ and
$ of unreimbursed distribution-related expenses with respect to Class B
Shares and Class C Shares, respectively, representing % and % 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 $ or % 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 $ or % of the Class B
Shares' average daily net assets. Such expenses were paid to reimburse the
Distributor for the following payments: $ for commissions and
transaction fees paid to financial intermediaries in respect of sales of Class B
Shares of the Fund and $ 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 $ or % of the Class C Shares'
average daily net assets. Such expenses were paid to reimburse the Distributor
for the following payments: $ for commissions and transaction fees paid
to financial intermediaries in respect of sales of Class C Shares of the Fund
and $ for fees paid to financial intermediaries for servicing Class C
shareholders and administering the Class C Share Plans.
B-25
<PAGE> 48
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. During the fiscal years ended May 31, 1999, 1998 and 1997, Investor
Services received fees aggregating $ , $1,321,365 and $1,374,092,
respectively for these services. Prior to 1998, these services were provided at
cost plus a profit. Beginning in 1998, 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 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.
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 (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
B-26
<PAGE> 49
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 will receive statements quarterly from Investor Services
showing any reinvestments of dividends and capital gains distributions and any
other activity in the account since the preceding statement. Such shareholders
also will receive separate confirmations for each purchase or sale transaction
other than reinvestment of
B-27
<PAGE> 50
dividends and capital gains distributions and systematic purchases or
redemptions. Additions to an investment account may be made at any time by
purchasing shares through authorized dealers or by mailing a check directly to
Investor Services.
SHARE CERTIFICATES
Generally, the Fund will not issue share certificates. However, upon
written or telephone request to the Fund, a share certificate will be issued
representing shares (with the exception of fractional shares) of the Fund. A
shareholder will be required to surrender such certificates upon redemption
thereof. In addition, if such certificates are lost the shareholder must write
to Van Kampen Funds, c/o Investor Services, PO Box 418256, Kansas City, MO
64141-9256, requesting an "affidavit of loss" and obtain a Surety Bond in a form
acceptable to Investor Services. On the date the letter is received, Investor
Services will calculate a fee for replacing the lost certificate equal to 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 ((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
B-28
<PAGE> 51
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
offering price next computed 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 offering price next
computed 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.
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 gains
distributions 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 gains distributions, the
shareholder's original investment will be correspondingly reduced and ultimately
exhausted. Withdrawals made concurrently with the purchase of additional shares
ordinarily will be disadvantageous to the shareholder because of the duplication
of sales charges. Any gain or loss realized by the shareholder upon redemption
of shares is a taxable event. The Fund reserves the right to amend or terminate
the systematic withdrawal program on 30 days' notice to its shareholders. See
"Shareholder Services -- Retirement Plans".
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 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.
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<PAGE> 52
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 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-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
B-30
<PAGE> 53
402(g)(2), the financial hardship of the employer pursuant to Code 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.
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
B-31
<PAGE> 54
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 net investment income (including taxable income and net
short-term capital gain, but not net capital gains, which are the excess of net
long-term capital gains over net short-term capital losses), it will not be
required to pay federal income taxes on any income distributed to shareholders.
The Fund intends to distribute at least the minimum amount of net investment
income necessary to satisfy the 90% distribution requirement. The Fund will not
be subject to federal income tax on any net capital gains distributed to
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 gain 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 gain 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 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.
Some of the Fund's investment practices are subject to special provisions
of the Code that, among other things, may defer the use of certain losses of the
Fund and affect the holding period of the securities held by the Fund and the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund to recognize income or gain without receiving cash with which
to make distributions in amounts necessary to satisfy the 90% distribution
requirement and the distribution requirements for avoiding income and excise
taxes. The Fund will monitor its transactions and may make certain tax elections
in order to mitigate the effect of these rules and prevent disqualification of
the Fund as a regulated investment company.
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
B-32
<PAGE> 55
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 net investment income are taxable to
shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gains ("capital gain dividends"), if any, are taxable
to shareholders as long-term capital gains regardless of the length of time
shares of the Fund have been held by such shareholders. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). For a summary of the tax rates applicable to capital gains
(including capital gain dividends), see "Capital Gains Rates" below. Tax-exempt
shareholders not subject to federal income tax on their income generally will
not be taxed on distributions from the Fund.
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. Some portion of
the distributions from the Fund may be eligible for the dividends received
deduction for corporations if the Fund receives qualifying dividends during the
year and if certain other requirements of the Code are satisfied.
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. Such taxes will not be deductible or creditable by
shareholders. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes.
Under Code Section 988, foreign currency gains or losses from certain
forward contracts not traded in the interbank market as well as certain other
gains or losses attributable to currency exchange rate fluctuations are
typically treated as ordinary income
B-33
<PAGE> 56
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 gain. 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, 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. SHAREHOLDER
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.
Non-effectively connected capital gain 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
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<PAGE> 57
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, may affect the procedures to be followed by Non-U.S.
Shareholders in establishing foreign status for purposes of the withholding,
backup withholding and information reporting rules. 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 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
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<PAGE> 58
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 is calculated separately for Class A Shares, Class B Shares and Class
C Shares. Because of the differences in distribution fees, the yield for each
class of shares will differ.
The yield quoted at any time represents the amount being earned on a
current basis for the indicated period and is a function of the types of
instruments in the Fund, 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 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 fluctuates daily as the income earned on the investments of the
Fund fluctuates. Accordingly, there is no assurance that the yield quoted on any
given occasion will remain in effect for any period of time. It should also be
emphasized that the Fund is an open-end investment company and that there is no
guarantee that the net asset value will remain constant. A shareholder's
investment in the Fund is not insured. Investors
B-36
<PAGE> 59
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 fluctuates, yield data cannot necessarily be used
to compare an investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed or
guaranteed fixed yield for a stated period of time. Shareholders should remember
that yield is generally a function of the kind and quality of the instrument
held in a 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 or discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top five sectors, ten largest holdings and other Fund asset
structures. The top 10 holdings of the Fund may also be listed in marketing
pieces. Materials may also mention how Van Kampen Investments believes the Fund
compares relative to other Van Kampen funds. Materials may also discuss the
Dalbar Financial Services study from 1984 to 1994 which examined investor cash
flow into and out of all types of mutual funds. The ten-year study found the
investors who bought mutual fund shares and held such shares outperformed
investors who bought and sold. The Dalbar study conclusions were consistent
regardless if shareholders purchased their funds in direct or sales force
distribution channels. The study showed that investors working with a
professional representative have tended over time to earn higher returns than
those who invested other than with a professional representative. The Fund may
also be marketed on the internet.
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.
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<PAGE> 60
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).
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<PAGE> 61
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
<TABLE>
<C> <S>
(a)(1) First Amended and Restated Agreement and Declaration of
Trust(8)
(2) Second Certificate of Amendment(10)
(3) Second Amended and Restated Certificate of Designation(10)
(b) Amended and Restated Bylaws(8)
(c)(1) Specimen Class A Shares Share Certificate(10)
(2) Specimen Class B Shares Share Certificate(10)
(3) Specimen Class C Shares Share Certificate(10)
(d) Investment Advisory Agreement(9)
(e)(1) Distribution and Service Agreement(9)
(2) Form of Dealer Agreement(8)
(3) Form of Broker Fully Disclosed Clearing Agreement(8)
(4) Form of Bank Fully Disclosed Clearing Agreement(8)
(f)(1) Form of Trustee Deferred Compensation Plan++
(2) Form of Trustee Retirement Plan++
(g)(1) Custodian Contract(9)
(2) Transfer Agency and Service Agreement(9)
(h)(1) Data Access Services Agreement(7)
(2) Fund Accounting Agreement(9)
(i) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(8)
(j) Consent of PricewaterhouseCoopers LLP++
(m)(1) Plan of Distribution pursuant to Rule 12b-1(9)
(2) Form of Shareholder Assistance Agreement(9)
(3) Form of Administrative Services Agreement(9)
(o) Amended Multi-Class Plan(9)
(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. 44 to Van
Kampen American Capital Emerging Growth Fund's Registration Statement on
Form N-1A, File No. 2-33214, filed December 21, 1990.
(2) Incorporated herein by reference to Post-Effective Amendment No. 61 to Van
Kampen American Capital Growth and Income Fund's Registration Statement on
Form N-1A, File No. 2-21657, filed March 26, 1991.
(3) Incorporated herein by reference to Post-Effective Amendment No. 30 to
Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed
September 24, 1992.
(4) Incorporated herein by reference to Post-Effective Amendment No. 31 to
Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed
September 24, 1993.
(5) Incorporated herein by reference to Post-Effective Amendment No. 9 to Van
Kampen American Capital World Portfolio Series Trust's Registration
Statement on Form N-1A, File No. 33-37879, filed September 24, 1993.
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<PAGE> 62
(6) Incorporated herein by reference to Post-Effective Amendment No. 69 to Van
Kampen American Capital Growth and Income Fund's Registration Statement on
Form N-1A, File No. 2-21657, filed March 24, 1994.
(7) Incorporated herein by reference to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed
May 19, 1994.
(8) Incorporated herein by reference to Post-Effective Amendment No. 37 to
Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed
September 27, 1996.
(9) Incorporated herein by reference to Post-Effective Amendment No. 38 to the
Registrant's Registration Statement on Form N1-A, File No. 2-50870, filed
September 26, 1997.
(10) 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.
+ Filed herewith.
++ To be filed by further amendments.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See Statement of Additional Information.
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 interest of the Trust,
(ii) willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office, or (iii) for a criminal
proceeding not having a reasonable cause to believe that such conduct was
unlawful (collectively "Disabling Conduct"). Absent a court determination that
an officer or trustee seeking indemnification was not liable on the merits or
guilty of Disabling Conduct in the conduct of his or her office, the decision by
the Registrant to indemnify such person must be based upon the reasonable
determination of independent counsel or non-party independent trustees, after
review of the facts, that such officer or trustee is not guilty of Disabling
Conduct in the conduct of his or her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officers or trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides a security for the
undertaking; (2) the Registrant is insured against losses arising from lawful
advances; or (3) a majority of a quorum of the Registrant's disinterested,
non-party trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that a recipient of
the advance ultimately will be found entitled to indemnification.
C-2
<PAGE> 63
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 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 or 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) incorporated by reference herein.
(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 of the Registrant are disclosed 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) Not applicable.
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<PAGE> 64
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
the Registrant will be maintained at its offices located at 1 Parkview Plaza,
P.O. 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, P.O. 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, P.O. Box 5555,
Oakbrook Terrace, Illinois 60181-5555.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
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<PAGE> 65
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, has duly caused this amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oakbrook Terrace, and State of Illinois on the 30th
day of July, 1999.
VAN KAMPEN RESERVE FUND
By: /s/ A. THOMAS SMITH III
-------------------------------------
A. Thomas Smith III, Vice President
and Secretary
Pursuant to the requirements of the 1933 Act, this amendment to the
Registration Statement has been signed on July 30, 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 July 30, 1999
- ------------------------------------------------
A. Thomas Smith III
Attorney-in-Fact
</TABLE>
C-5
<PAGE> 66
SCHEDULE OF EXHIBITS TO
POST-EFFECTIVE AMENDMENT 40 TO FORM N-1A AS
SUBMITTED TO THE SECURITIES AND EXCHANGE
COMMISSION ON JULY 30, 1999
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
(p) Power of Attorney
</TABLE>
<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 business
trust (individually, a "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>
RICHARD F. POWERS, III President
---------------------------
Richard F. Powers, III
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
---------------------------
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 LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
VAN KAMPEN GOVERNMENT SECURITIES FUND
VAN KAMPEN GROWTH AND INCOME FUND
VAN KAMPEN HARBOR FUND
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN LIFE INVESTMENT TRUST
VAN KAMPEN PACE FUND
VAN KAMPEN REAL ESTATE SECURITIES FUND
VAN KAMPEN RESERVE FUND
VAN KAMPEN TAX-EXEMPT FUND
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN WORLD PORTFOLIO SERIES TRUST
