<PAGE> 1
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VAN KAMPEN FLORIDA INSURED TAX FREE INCOME FUND
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Van Kampen Florida Insured Tax Free Income Fund (the "Fund") is a
non-diversified mutual fund, organized as a separate series of Van Kampen Tax
Free Trust. The Fund's investment objective is to provide investors a high level
of current income exempt from federal income tax and Florida intangible personal
property taxes, consistent with preservation of capital. The Fund is designed
for investors who are residents of Florida for tax purposes. Under normal market
conditions, the Fund seeks to achieve its investment objective by investing at
least 80% of its assets in a portfolio of Florida municipal securities that are
insured as to timely payment of both principal and interest by an entity whose
claims-paying ability is rated AAA by Standard and Poor's Ratings Group ("S&P")
or Aaa by Moody's Investors Service, Inc. ("Moody's") or an equivalent rating
from another nationally recognized statistical rating organization. Insured
municipal securities in which the Fund may invest include conventional
fixed-rate municipal securities, variable rate municipal securities and other
types of municipal securities described herein. Up to 20% of the Fund's total
assets may consist of uninsured Florida municipal securities rated investment
grade at the time of investment. See "Municipal Securities." There is no
assurance that the Fund will achieve its investment objective.
The investment adviser for the Fund is Van Kampen Investment Advisory Corp.
(the "Adviser"). This Prospectus sets forth the information about the Fund that
a prospective investor should know before investing in the Fund. Please read it
carefully and retain it for future reference. The address of the Fund is One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, and its telephone number is
(800) 421-5666.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE REGULATORS NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information, dated April 30, 1998, containing
additional information about the Fund has been filed with the Securities and
Exchange Commission and is hereby incorporated by reference in its entirety into
this Prospectus. A copy of the Fund's Statement of Additional Information may be
obtained without charge by calling (800) 421-5666 or for Telecommunications
Device for the Deaf at (800) 421-2833. The Statement of Additional Information
has been filed with the Securities and Exchange Commission ("SEC") and is
available along with other related Fund materials at the SEC's Internet web site
(http://www.sec.gov).
VAN KAMPEN LOGO
THIS PROSPECTUS IS DATED APRIL 30, 1998,
AS SUPPLEMENTED ON JULY 14, 1998 AND AUGUST 26, 1998.
<PAGE> 2
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Shareholder Transaction Expenses............................ 4
Annual Fund Operating Expenses and Example.................. 5
Financial Highlights........................................ 6
The Fund.................................................... 8
Investment Objective and Policies........................... 8
Municipal Securities........................................ 9
Investment Practices........................................ 11
Special Considerations Regarding the Fund................... 13
Investment Advisory Services................................ 14
Alternative Sales Arrangements.............................. 15
Purchase of Shares.......................................... 16
Shareholder Services........................................ 22
Redemption of Shares........................................ 25
Distribution and Service Plans.............................. 27
Distributions from the Fund................................. 28
Tax Status.................................................. 29
Fund Performance............................................ 32
Description of Shares of the Fund........................... 33
Additional Information...................................... 33
</TABLE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER, OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
2
<PAGE> 3
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PROSPECTUS SUMMARY
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THE FUND. Van Kampen Florida Insured Tax Free Income Fund (the "Fund") is a
non-diversified mutual fund, organized as a separate series of Van Kampen Tax
Free Trust. See "The Fund."
INVESTMENT OBJECTIVE. The Fund's investment objective is to provide investors
with a high level of current income exempt from federal income tax and Florida
intangible personal property taxes, consistent with preservation of capital. The
Fund is designed for investors who are residents of Florida for tax purposes.
INVESTMENT POLICIES. Under normal market conditions, the Fund seeks to achieve
its investment objective by investing at least 80% of its assets in a portfolio
of Florida municipal securities that are insured as to timely payment of both
principal and interest by an entity whose claims-paying ability is rated AAA by
Standard and Poor's Ratings Group ("S&P") or Aaa by Moody's Investors Service,
Inc. ("Moody's") or an equivalent rating from another nationally recognized
statistical rating organization ("NRSRO"). Up to 20% of the Fund's total assets
may consist of uninsured Florida municipal securities rated investment grade at
the time of investment. Investment grade securities are securities rated BBB or
higher by S&P or Baa or higher by Moody's or an equivalent rating from another
NRSRO. Up to 20% of the Fund's assets may be invested in municipal securities
that are subject to federal alternative minimum tax. See "Investment Objectives
and Policies," "Municipal Securities" and "Special Considerations Regarding the
Fund."
INVESTMENT RESULTS. The investment results of the Fund are shown in the table
of "Financial Highlights."
PURCHASE OF SHARES. Shares of the Fund are offered through Van Kampen Funds
Inc. (the "Distributor"), as principal underwriter, and through selected brokers
and dealers. The offering price is the net asset value per share next determined
following receipt of an investor's order to purchase plus a sales charge which,
at the option of the investor, may be imposed at the time of purchase or on a
contingent deferred basis. Investors may elect to purchase Class A Shares, Class
B Shares or Class C Shares, each with different sales charges and expenses. The
minimum initial investment is $500 for each class of shares and the minimum
subsequent investment is $25 for each class of shares (or less as described
under "Purchase of Shares"). The different classes of shares permit an investor
to choose the method of purchasing shares that is more beneficial to the
investor, taking into account the amount of the purchase, the length of time the
investor expects to hold the shares and other circumstances. See "Purchase of
Shares."
INVESTMENT ADVISER. Van Kampen Investment Advisory Corp. (the "Adviser") is the
Fund's investment adviser.
SPECIAL RISK FACTORS. The Fund may invest up to 20% of its assets in certain
derivative securities such as inverse floaters. Investment in such derivative
securities involves significant risks. Under normal market conditions, the Fund
will invest substantially all of its assets in insured Florida municipal
securities, and therefore it will be more susceptible to factors adversely
affecting issuers of Florida municipal securities than a municipal securities
fund that does not invest in Florida municipal securities to this degree. There
can be no assurance that the Fund will achieve its objective. See "Special
Considerations Regarding the Fund."
The foregoing is qualified in its entirety by reference to the more detailed
information appearing elsewhere in this Prospectus.
3
<PAGE> 4
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SHAREHOLDER TRANSACTION EXPENSES
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<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Maximum sales charge imposed on purchases (as a percentage
of the offering price).................................... 4.75%(1) None None
Maximum sales charge imposed on reinvested dividends (as a
percentage of the offering price)......................... None None(3) None(3)
Deferred sales charge (as a percentage of the lesser of
original purchase price or redemption proceeds)........... None(2) Year Year
1--4.00% 1--1.00%
Year After--None
2--3.75%
Year
3--3.50%
Year
4--2.50%
Year
5--1.50%
Year
6--1.00%
After--None
Redemption fees (as a percentage of amount redeemed)........ None None None
Exchange fees............................................... None None None
</TABLE>
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(1) Reduced on investments of $100,000 or more. See "Purchase of Shares -- Class
A Shares."
(2) Investments of $1 million or more are not subject to a sales charge at the
time of purchase, but a CDSC of 1.00% may be imposed on redemptions made
within one year of the purchase. See "Purchase of Shares -- Deferred Sales
Charge Alternative -- Class A Share Purchases of $1 Million or More."
(3) CDSC Shares received as reinvested dividends are subject to a 12b-1 fee, a
portion of which may indirectly pay for the initial sales commission
incurred by the Distributor on behalf of the investor. See "Distribution and
Service Plans."
4
<PAGE> 5
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ANNUAL FUND OPERATING EXPENSES AND EXAMPLE
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<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
Management fees(1) (as a percentage of average daily net
assets)................................................... 0.00% 0.00% 0.00%
12b-1 fees(1)(2) (as a percentage of average daily net
assets)................................................... 0.25% 1.00%(3) 1.00%(3)
Other expenses(1) (as a percentage of average daily net
assets)................................................... 0.34% 0.33% 0.37%
Total expenses(1) (as a percentage of average daily net
assets)................................................... 0.59% 1.33% 1.37%
</TABLE>
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(1) Expenses include a reimbursement of $223,516 of "Management fees" and
assumption of $88,936 of "Other expenses" by the Adviser. If the Adviser did
not reimburse fees for the fiscal year ending December 31, 1997, the
"Management fees" would have been 0.50% for each class of shares, "Other
expenses" would have been 0.54% for Class A Shares, 0.53% for Class B Shares
and 0.56% for Class C Shares and "Total expenses" would have been 1.29% for
Class A Shares, 2.03% for Class B Shares and 2.06% for Class C Shares.
(2) Includes a service fee of up to 0.25% (as a percentage of net asset value)
paid by the Fund as compensation for ongoing services rendered to investors.
With respect to each class of shares, amounts in excess of 0.25%, if any,
represent an asset based sales charge. The asset based sales charge with
respect to Class C Shares includes 0.75% (as a percentage of net asset
value) paid to investors' broker-dealers as sales compensation.
(3) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted as a fund-level expense by the
rules of the National Association of Securities Dealers, Inc.
EXAMPLE:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (i) an operating expense ratio of 0.59% for Class
A Shares, 1.33% for Class B Shares and 1.37% for Class C
Shares, (ii) 5.00% annual return and (iii) redemption at
the end of each time period:
Class A Shares............................................ $53 $66 $79 $118
Class B Shares............................................ $54 $77 $88 $140*
Class C Shares............................................ $24 $43 $75 $165
You would pay the following expenses on the same $1,000
investment assuming no redemption at the end of each
period:
Class A Shares............................................ $53 $66 $79 $118
Class B Shares............................................ $14 $42 $73 $140*
Class C Shares............................................ $14 $43 $75 $165
</TABLE>
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* Based on conversion to Class A Shares after eight years.
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The "Example" reflects expenses based on the "Annual Fund
Operating Expenses" table as shown above carried out to future years and is
included to provide a means for the investor to compare expense levels of funds
with different fee structures over varying investment periods. To facilitate
such comparison, all funds are required by the SEC to utilize a 5.00% annual
return assumption. As Fund assets increase, the fees waived or expenses
reimbursed by the Adviser are expected to decrease. Accordingly, it is unlikely
that future expenses as projected will remain consistent with those determined
based on the "Annual Fund Operating Expenses" table. Class B shares acquired
through the exchange privilege are subject to the CDSC schedule relating to the
Class B Shares of the fund from which the purpose of Class B was originally
made. The ten year amount with respect to Class B Shares of the Fund reflects
the lower aggregate 12b-1 and service fees applicable to such shares after
conversion to Class A Shares. THE INFORMATION CONTAINED IN THE ABOVE TABLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. For a more complete
description of such costs and expenses, see "Purchase of Shares," "Redemption of
Shares," "Investment Advisory Services" and "Distribution and Service Plans."
5
<PAGE> 6
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FINANCIAL HIGHLIGHTS (for a share outstanding throughout the periods)
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The following schedule presents financial highlights for one Class A Share,
one Class B Share and one Class C Share of the Fund outstanding throughout each
of the periods indicated. The financial highlights have been audited by KPMG
Peat Marwick LLP, independent certified public accountants, for each of the
periods indicated and their report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with the
financial statements and related notes thereto included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------
JULY 29, 1994
(COMMENCEMENT
OF INVESTMENT
YEAR ENDED DECEMBER 31, OPERATIONS) TO
------------------------------------------ DECEMBER 31,
1997 1996 1995 1994
---- ---- ---- --------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period.................... $15.060 $15.203 $13.796 $14.300
------- ------- ------- -------
Net Investment Income...................................... .766 .784 .789 .291
Net Realized and Unrealized Gain/Loss...................... .508 (.153) 1.416 (.507)
------- ------- ------- -------
Total from Investment Operations............................ 1.274 .631 2.205 (.216)
Less:
Distributions from and in Excess of Net Investment
Income................................................... .774 .774 .798 .288
Distributions from Net Realized Gain....................... .010 -0- -0- -0-
------- ------- ------- -------
Total Distributions......................................... .784 .774 .798 .288
Net Asset Value, End of the Period.......................... $15.550 $15.060 $15.203 $13.796
======= ======= ======= =======
Total Return*(a)............................................ 8.72% 4.37% 16.29% (1.47%)**
Net Assets at End of Period (in millions)................... $ 29.3 $ 22.2 $ 16.2 $ 9.0
Ratio of Expenses to Average Net Assets(*).................. .59% .28% .44% .49%
Ratio of Net Investment Income to Average Net Assets(*)..... 5.05% 5.31% 5.33% 5.13%
Portfolio Turnover.......................................... 48% 73% 41% 19%**
</TABLE>
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* If certain expenses had not been reimbursed by the Adviser, total return would
have been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Ratio of Expenses to Average Net Assets..................... 1.29% 1.47% 1.70% 1.99%
Ratio of Net Investment Income to Average Net Assets........ 4.35% 4.13% 4.07% 3.64%
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
** Non-Annualized.
See Financial Statements and Notes Thereto
6
<PAGE> 7
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FINANCIAL HIGHLIGHTS -- CONTINUED (for a share outstanding throughout the
periods)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES
-----------------------------------------------------------
JULY 29, 1994
(COMMENCEMENT
OF INVESTMENT
YEAR ENDED DECEMBER 31, OPERATIONS) TO
------------------------------------------ DECEMBER 31,
1997 1996 1995 1994
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................ $15.064 $15.201 $13.792 $14.300
------- ------- ------- -------
Net Investment Income............. .650 .677 .685 .251
Net Realized and Unrealized
Gain/Loss....................... .510 (.154) 1.415 (.509)
------- ------- ------- -------
Total from Investment Operations... 1.160 .523 2.100 (.258)
Less:
Distributions from and in Excess
of Net Investment Income........ .660 .660 .691 .250
Distributions from Net Realized
Gain............................ .010 -0- -0- -0-
------- ------- ------- -------
Total Distributions................ .670 .660 .691 .250
Net Asset Value, End of the
Period............................ $15.554 $15.064 $15.201 $13.792
======= ======= ======= =======
Total Return*(a)................... 7.91% 3.58% 15.53% (1.81%)**
Net Assets at End of Period (in
millions) (Class C is in
thousands)........................ $ 22.5 $ 18.9 $ 16.9 $ 10.9
Ratio of Expenses to Average Net
Assets*........................... 1.33% 1.03% 1.12% 1.26%
Ratio of Net Investment Income to
Average Net Assets*............... 4.30% 4.56% 4.66% 4.31%
Portfolio Turnover................. 48% 73% 41% 19%**
<CAPTION>
CLASS C SHARES
-----------------------------------------------------------
JULY 29, 1994
(COMMENCEMENT
OF INVESTMENT
YEAR ENDED DECEMBER 31, OPERATIONS) TO
------------------------------------------ DECEMBER 31,
1997 1996 1995 1994
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of the
Period............................ $ 15.081 $15.213 $13.786 $14.300
--------- ------- ------- -------
Net Investment Income............. .666 .668 .690 .249
Net Realized and Unrealized
Gain/Loss....................... .504 (.140) 1.428 (.513)
--------- ------- ------- -------
Total from Investment Operations... 1.170 .528 2.118 (.264)
Less:
Distributions from and in Excess
of Net Investment Income........ .660 .660 .691 .250
Distributions from Net Realized
Gain............................ .010 -0- -0- -0-
--------- ------- ------- -------
Total Distributions................ .670 .660 .691 .250
Net Asset Value, End of the
Period............................ $ 15.581 $15.081 $15.213 $13.786
========= ======= ======= =======
Total Return*(a)................... 7.97% 3.65% 15.61% (1.81%)**
Net Assets at End of Period (in
millions) (Class C is in
thousands)........................ $ 1,195.1 $ 849.2 $ 461.8 $ 11.4
Ratio of Expenses to Average Net
Assets*........................... 1.37% 1.03% 1.13% 1.26%
Ratio of Net Investment Income to
Average Net Assets*............... 4.38% 4.56% 4.51% 4.28%
Portfolio Turnover................. 48% 73% 41% 19%**
</TABLE>
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* If certain expenses had not been reimbursed by the Adviser, total return would
have been lower and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Ratio of Expenses to Average Net Assets..................... 2.03% 2.22% 2.38% 2.75%
Ratio of Net Investment Income to Average Net Assets........ 3.60% 3.38% 3.40% 2.81%
<CAPTION>
<S> <C> <C> <C> <C>
Ratio of Expenses to Average Net Assets..................... 2.06% 2.22% 2.39% 2.74%
Ratio of Net Investment Income to Average Net Assets........ 3.68% 3.38% 3.25% 2.87%
</TABLE>
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
** Non-Annualized.
See Financial Statements and Notes Thereto
7
<PAGE> 8
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THE FUND
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Van Kampen Florida Insured Tax Free Income Fund (the "Fund") is a
non-diversified, separate series of Van Kampen Tax Free Trust (the "Trust"), an
open-end management investment company, commonly known as a "mutual fund."
Mutual funds sell their shares to investors and invest the proceeds in a
portfolio of securities. A mutual fund allows investors to pool their money with
that of other investors in order to obtain professional investment management.
Mutual funds generally make it possible for investors to obtain greater
diversification of their investments and to simplify their recordkeeping.
Van Kampen Investment Advisory Corp. (the "Adviser") provides investment
advisory and administrative services to the Fund. The Adviser or its affiliates
act as investment advisers to other mutual funds distributed by Van Kampen Funds
Inc. ("the Distributor"). To obtain prospectuses and other information on any of
these other funds, please call the telephone number on the cover page of the
Prospectus.
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INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to provide investors a high level of
current income exempt from federal income tax and Florida intangible personal
property taxes, consistent with preservation of capital. The Fund is designed
for investors who are residents of Florida for tax purposes. The Fund's
investment objective is a fundamental policy and may not be changed without
shareholder approval of the holders of a majority of the Fund's outstanding
voting securities, as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"). Under normal market conditions, the Fund will invest up to 80%
of its assets in Florida municipal securities that are insured as to timely
payment of both principal and interest by an entity whose claims-paying ability
is rated AAA by Standard and Poor's Ratings Group ("S&P") or Aaa by Moody's
Investors Service, Inc. ("Moody's") or an equivalent rating from another
nationally recognized statistical rating organization ("NRSRO"). Up to 20% of
the Fund's total assets may consist of uninsured Florida municipal securities
rated investment grade at the time of investment. Investment grade securities
are securities rated BBB or higher by S&P or Baa or higher by Moody's, or an
equivalent rating by another NRSRO. There are market risks inherent in all
investments in securities; and accordingly there can be no assurance the Fund
will achieve its investment objective. An investment in the Fund may not be
appropriate for all investors. The Fund is not intended to be a complete
investment program, and investors should consider their long-term investment
goals and financial needs when making an investment decision with respect to the
Fund. An investment in the Fund is intended to be a long-term investment and
should not be used as a trading vehicle.
For a description of S&P's and Moody's claims-paying ability ratings and
municipal securities ratings see the Statement of Additional Information. From
time to time, the Fund temporarily may invest up to 10% of its assets in tax
exempt money market funds. Such instruments will be treated as investments in
municipal securities.
SELECTION OF INVESTMENTS. The Adviser will buy and sell securities for the
Fund's portfolio with a view to seeking a high level of current income exempt
from federal income tax and Florida intangible personal property taxes and will
select securities which the Adviser believes entail reasonable credit risk
considered in relation to the investment policies of the Fund. As a result, the
Fund will not necessarily invest in the highest yielding Florida municipal
securities permitted by its investment policies if the Adviser determines that
market risks or credit risks associated with such investments would subject the
Fund's portfolio to undue risk. The potential for realization of capital gains
resulting from possible changes in interest rates will not be a major
consideration. Other than for tax purposes, frequency of portfolio turnover
generally will not be a limiting factor if the Fund considers it advantageous to
purchase or sell securities. The Fund anticipates that its annual portfolio
turnover rate normally will be less than 200%. A high rate of portfolio turnover
involves correspondingly greater brokerage commission expenses or dealer costs
than a lower rate, which expenses and costs must be borne by the Fund and its
shareholders. High portfolio turnover may also result in the realization of
substantial net short-term capital gains and any distributions resulting from
such gains will be taxable. See "Tax Status" in this Prospectus and "Investment
Policies and Restrictions" in the Statement of Additional Information.
TEMPORARY DEFENSIVE STRATEGIES. At times, conditions in the markets for
Florida insured municipal securities may, in the Adviser's judgment, make
pursuing the Fund's basic investment strategy inconsistent with the best
interests of its shareholders. At such times, the Adviser may use alternative
strategies primarily designed to reduce fluctuations in the
8
<PAGE> 9
value of the Fund's assets. In implementing these "defensive" strategies, the
Fund may invest to a substantial degree in high-quality, short-term Florida
municipal obligations. If such municipal obligations are not available or, in
the Adviser's judgment, do not afford sufficient protection against adverse
market conditions, the Fund may invest in high-quality, municipal securities of
issuers other than issuers of Florida municipal securities. Furthermore, if such
high-quality securities are not available or, in the Adviser's judgment, do not
afford sufficient protection against adverse market conditions, the Fund may
invest in taxable obligations. Such taxable obligations may include: obligations
of the U.S. Government, its agencies or instrumentalities; other debt securities
rated within the four highest categories by either S&P or Moody's (or comparably
rated by another NRSRO); commercial paper rated in the highest grade by either
rating service (or comparably rated by another NRSRO); certificates of deposit
and bankers' acceptances; repurchase agreements with respect to any of the
foregoing investments; or any other fixed-income securities that the Adviser
considers consistent with such strategy. To the extent that the Fund invests a
substantial portion of its assets in municipal securities other than Florida
municipal securities or taxable securities for temporary defensive purposes, the
Fund will not be invested in a manner primarily designed to achieve a high level
of current income exempt from federal income tax and Florida intangible personal
property taxes. The Fund may invest in insured and uninsured securities for
temporary defensive purposes.
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's Adviser and other service providers do not properly process
and calculate date-related information and data from and after January 1, 2000.
This is commonly known as the "Year 2000 Problem." The Advisers is taking steps
that it believes are reasonably designed to address the Year 2000 Problem with
respect to computer systems that it uses and to obtain reasonable assurances
that comparable steps are being taken by the Fund's other major service
providers. At this time, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund. In addition, the Year 2000
Problem may adversely affect the issuers of securities in which the Fund may
invest which, in turn, may adversely affect the net asset value of the Fund.
- --------------------------------------------------------------------------------
MUNICIPAL SECURITIES
- --------------------------------------------------------------------------------
GENERAL. Municipal securities are obligations issued by or on behalf of
states, territories or possessions of the United States, the District of
Columbia and their political subdivisions, agencies and instrumentalities, the
interest on which, in the opinion of bond counsel or other counsel to the issuer
of such securities is, at the time of issuance, exempt from federal income tax.
Florida municipal securities are municipal securities the interest on which, in
the opinion of bond counsel or other counsel to the issuers of such securities,
is at the time of issuance exempt from Florida intangible personal property
taxes. Under normal market conditions, at least 80% of the Fund's assets will be
invested in Florida municipal securities. The policy stated in the foregoing
sentence is a fundamental policy of the Fund and cannot be changed without
approval of the shareholders of the Fund. Up to 20% of the Fund's assets may be
invested in securities that are subject to federal alternative minimum tax.
The two principal classifications of municipal securities are "general
obligation" and "revenue" securities. "General obligation" securities are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. "Revenue" securities are usually payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other specific
revenue source. Industrial development bonds are usually revenue securities, the
credit quality of which is normally directly related to the credit standing of
the industrial user involved.
Within these principal classifications of municipal securities, there are a
variety of types of municipal securities, including fixed and variable rate
securities, municipal notes, municipal leases, custodial receipts, participation
certificates and derivative municipal securities the terms of which include
elements of, or are similar in effect to, certain Strategic Transactions (as
defined below) in which the Fund may engage. Variable rate securities bear rates
of interest that are adjusted periodically according to formulae intended to
reflect market rates of interest. The Fund may also invest in derivative
variable rate securities such as inverse floaters, whose rates vary inversely
with changes in market rates of interest. When market rates of interest
decrease, the change in value of such securities will have a positive effect on
the net asset value of the Fund and when market rates of interest increase, the
change in value of such securities will have a negative effect on the net asset
value of the Fund. The extent of increases and decreases in the value of inverse
floaters and the corresponding change to the net asset value of the Fund
generally will be larger than comparable changes in the value
9
<PAGE> 10
of an equal principal amount of a fixed rate municipal security having similar
credit quality, redemption provisions and maturity. The Fund will not invest
more than 20% of its total assets in securities whose rates vary inversely with
changes in market rates of interest.
Municipal notes include tax, revenue and bond anticipation notes of short
maturity, generally less than three years, which are issued to obtain temporary
funds for various public purposes. Municipal leases are obligations issued by
state and local governments or authorities to finance the acquisition of
equipment and facilities. Certain municipal lease obligations may include
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose on a yearly basis. Custodial receipts are
underwritten by securities dealers or banks and evidence ownership of future
interest payments, principal payments or both on certain municipal securities.
Participation certificates are obligations issued by state or local governments
or authorities to finance the acquisition of equipment and facilities. They may
represent participations in a lease, an installment purchase contract, or a
conditional sales contract. Municipal securities may not be backed by the faith,
credit and taxing power of the issuer. Other than as set forth above, there is
no limitation with respect to the amount of the Fund's assets that may be
invested in the foregoing types of municipal securities. Certain of the
municipal securities in which the Fund may invest represent relatively recent
innovations in the municipal securities markets and the markets for such
securities may be less developed than the market for conventional fixed rate
municipal securities. A more detailed description of the types of municipal
securities in which the Fund may invest is included in the Statement of
Additional Information.
Under normal market conditions, longer term municipal securities generally
provide a higher yield than shorter term municipal securities, and therefore the
Fund generally expects to invest primarily in longer term municipal securities.
The Fund will, however, invest in shorter term municipal securities when it
believes market conditions warrant such investments. The net asset value of the
Fund will change with changes in the value of its portfolio securities. Because
the Fund will invest primarily in fixed income municipal securities, the net
asset value of the Fund can be expected to change as general levels of interest
rates fluctuate. When interest rates decline, the value of a portfolio invested
in fixed income securities generally can be expected to rise. Conversely, when
interest rates rise, the value of a portfolio invested in fixed income
securities generally can be expected to decline. The prices of longer term
municipal securities generally are more volatile with respect to changes in
interest rates than the prices of shorter term municipal securities. Volatility
may be greater during periods of general economic uncertainty.
Up to 20% of the Fund's assets may be invested in municipal securities that
are subject to federal alternative minimum tax. The Fund may not be a suitable
investment for investors who are already subject to the federal alternative
minimum tax or who would become subject to the federal alternative minimum tax
as a result of an investment in the Fund. In addition, income earned or deemed
to be earned with respect to the Fund's Strategic Transactions, if any, will be
taxable. See "Tax Status."
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
municipal securities. If such a proposal were enacted, the ability of the Fund
to pay tax exempt interest dividends might be adversely affected.
INSURED MUNICIPAL SECURITIES. Insured Florida municipal securities in which
the Fund may invest will be covered by Original Issue Insurance, Secondary
Market Insurance or Portfolio Insurance. Original Issue Insurance is purchased
with respect to a particular issue of municipal securities by the issuer thereof
or a third party in conjunction with the original issue of such municipal
securities. Secondary Market Insurance is purchased by the Fund or a third party
subsequent to the time of original issuance of a municipal security. Both
Original Issue Insurance and Secondary Market Insurance remain in effect as long
as the municipal securities covered thereby remain outstanding and the insurer
remains in business, regardless of whether the Fund ultimately disposes of such
municipal securities. Portfolio Insurance may be purchased by the Fund with
respect to municipal securities which the Fund intends to purchase or already
owns and would generally terminate when the municipal security is sold by the
Fund or redeemed. There is no limitation on the percentage of the Fund's assets
that may be invested in Florida municipal securities insured by any given
insurer.
Original Issue Insurance, Secondary Market Insurance and Portfolio Insurance
generally do not insure payment on an accelerated basis, the payment of any
redemption premium (except with respect to certain premium payments in the case
of certain small issue industrial development and pollution control municipal
securities), the value of the Fund's shares or the market value of the Fund's
portfolio securities. Such insurance also does not insure against nonpayment of
principal of
10
<PAGE> 11
or interest on municipal securities resulting from the insolvency, negligence or
any other act or omission of the trustee or other paying agent for such
obligations.
The Fund's policy of investing in Florida municipal securities insured by
insurers whose claims-paying ability is rated Aaa by Moody's, AAA by S&P or the
equivalent by another NRSRO will apply only at the time of the Fund's investment
in a Florida municipal security. A subsequent downgrade by Moody's, S&P or
another NRSRO of an insurer's claims-paying ability would result in a downgrade
of the rating assigned to the Florida municipal securities insured by such
insurer, although the Florida municipal securities may have an independent
rating that is higher than the new rating assigned to the insurer's
claims-paying ability. The securities could experience a decrease in market
price as a result of such a downgrade. In the event the ratings assigned to such
municipal securities decline to below investment grade, such municipal
securities would probably become less liquid or even illiquid. There can be no
assurance that an insurer will be able to honor its obligations with respect to
Florida municipal securities in the Fund's portfolio. For a description of S&P's
and Moody's claims-paying ability ratings of insurers, see the Statement of
Additional Information.
- --------------------------------------------------------------------------------
INVESTMENT PRACTICES
- --------------------------------------------------------------------------------
In connection with the investment policies described above, the Fund also may
engage in strategic transactions and purchase and sell securities on a "when
issued" and "delayed delivery" basis. These investments entail risks. Strategic
transactions generally will not be treated as investments in tax-exempt
municipal securities for purposes of the Fund's 80% investment policy with
respect thereto.
STRATEGIC TRANSACTIONS. The Fund may purchase and sell derivative instruments
such as exchange-listed and over-the-counter put and call options on securities,
financial futures, fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and enter into various interest
rate transactions such as swaps, caps, floors or collars. Collectively, all of
the above are referred to as "Strategic Transactions." Strategic Transactions
may be used to attempt to protect against possible changes in the market value
of securities held in or to be purchased for the Fund's portfolio resulting from
securities markets, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
or to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular securities. Any or all of these investment
techniques may be used at any time and there is no particular strategy that
dictates the use of one technique rather than another, as use of any Strategic
Transaction is a function of numerous variables including market conditions. The
ability of the Fund to utilize these Strategic Transactions successfully will
depend on the Adviser's ability to predict pertinent market movements, which
cannot be assured. The Fund will comply with applicable regulatory requirements
when implementing these strategies, techniques and instruments.
Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. Use of put and call options may result in losses to the
Fund, force the sale of portfolio securities at inopportune times or for prices
other than at current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of options and futures transactions entails certain
other risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of the Fund creates the possibility that losses on the hedging
instrument may be greater than gains in the value of the Fund's position. In
addition, futures and options markets may not be liquid in all circumstances and
certain over-the-counter options may have no markets. As a result, in certain
markets, the Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the contemplated use of these futures
contracts and options thereon should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized. The Strategic Transactions that the Fund may
use and some of their risks are described more fully in the Fund's Statement of
Additional Information.
11
<PAGE> 12
Income earned or deemed to be earned by the Fund from, its Strategic
Transactions and temporary defensive strategies, if any, generally will be
taxable income of the Fund. See "Tax Status."
"WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. The Fund may also purchase
and sell municipal securities on a "when issued" and "delayed delivery" basis.
No income accrues to the Fund on municipal securities in connection with such
purchase transactions prior to the date the Fund actually takes delivery of such
securities. These transactions are subject to market fluctuation; the value of
the municipal securities at delivery may be more or less than their purchase
price, and yields generally available on municipal securities when delivery
occurs may be higher or lower than yields on the municipal securities obtained
pursuant to such transactions. Because the Fund relies on the buyer or seller,
as the case may be, to consummate the transaction, failure by the other party to
complete the transaction may result in the Fund missing the opportunity of
obtaining a price or yield considered to be advantageous. When the Fund is the
buyer in such a transaction, however, it will maintain, in a segregated account
with its custodian, cash or liquid securities having an aggregate value equal to
the amount of such purchase commitments until payment is made. The Fund will
make commitments to purchase municipal securities on such basis only with the
intention of actually acquiring these securities, but the Fund may sell such
securities prior to the settlement date if such sale is considered to be
advisable. To the extent the Fund engages in "when issued" and "delayed
delivery" transactions, it will do so for the purpose of acquiring securities
for the Fund's portfolio consistent with the Fund's investment objectives and
policies and not for the purposes of investment leverage. No specific limitation
exists as to the percentage of the Fund's assets which may be used to acquire
securities on a "when issued" or "delayed delivery" basis.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its net
assets in illiquid securities including securities the disposition of which is
subject to substantial legal or contractual restrictions on resale and
securities that are not readily marketable. The sale of restricted and illiquid
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of securities
eligible for trading on national securities exchanges or in the over-the-counter
markets. Restricted securities may sell at a price lower than similar securities
that are not subject to restrictions on resale.
OTHER PRACTICES. The Fund may borrow amounts up to 5% of its net assets in
order to pay for redemptions when liquidation of portfolio securities is
considered disadvantageous or inconvenient and may pledge up to 10% of its net
assets to secure such borrowings.
Under normal market conditions, the Fund will invest substantially all of its
assets in insured Florida municipal securities. The Fund generally will not
invest more than 25% of its total assets in any industry. Governmental issuers
of municipal securities are not considered part of any "industry." However,
municipal securities backed only by the assets and revenues of nongovernmental
users may for this purpose be deemed to be issued by such nongovernmental users,
and the 25% limitation would apply to such obligations. It is therefore possible
that the Fund may invest more than 25% of its assets in a broader segment of the
municipal securities market, such as revenue obligations of hospitals and other
health care facilities, housing agency revenue obligations, or airport revenue
obligations if the Adviser determines that the yields available from obligations
in a particular segment of the market justifies the additional risks associated
with a large investment in such segment. Although such obligations could be
supported by the credit of governmental users, or by the credit of
nongovernmental users engaged in a number of industries, economic, business,
political and other developments generally affecting the revenues of such users
(for example, proposed legislation or pending court decisions affecting the
financing of such projects and market factors affecting the demand for their
services or products) may have a general adverse effect on all municipal
securities in such a market segment.
From time to time, the Fund's investments may include securities as to which
the Fund, by itself or together with other funds or accounts managed by the
Adviser, holds a major portion or all of an issue of Florida municipal
securities. Because there may be relatively few potential purchasers for such
investments and, in some cases, there may be contractual restrictions on
resales, the Fund may find it more difficult to sell such securities at a time
when the Adviser believes it is advisable to do so.
INVESTMENT RESTRICTIONS. The Fund is subject to certain investment
restrictions which constitute fundamental policies. Fundamental policies cannot
be changed without the approval of the holders of a majority of the Fund's
outstanding voting securities, as defined in the 1940 Act. See "Investment
Policies and Restrictions" in the Statement of Additional Information.
12
<PAGE> 13
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. The income securities in which the Fund invests are
traded principally in the over-the-counter market. In the over-the-counter
market, securities generally are traded on a net basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a mark-up to the dealer. Securities purchased
in underwritten offerings generally include, in the price, a fixed amount of
compensation for the managers, underwriters and dealers. The Fund may also
purchase certain money market instruments directly from an issuer, in which case
no commissions or discounts are paid. Purchases and sales of bonds on a stock
exchange are effected through brokers who charge a commission for their
services.
The Adviser is responsible for effecting securities transactions of the Fund
and will do so in a manner deemed fair and reasonable to shareholders of the
Fund and not according to any formula. The Adviser's primary considerations in
selecting the manner of executing securities transactions for the Fund will be
prompt execution of orders, the size and breadth of the market for the security,
the reliability, integrity and financial condition and execution capability of
the firm, 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 is given to those firms which supply research and other services
in addition to execution services. However, it is not the policy of the Adviser,
absent special circumstances, to pay higher commissions to a firm because it has
supplied such services.
In effecting purchases and sales of the Fund's portfolio securities, the
Adviser and the Fund may place orders with and pay brokerage commissions to
brokers, including brokers which may be affiliated with the Fund, the Adviser
and the Distributor or dealers participating in the offering of the Fund's
shares. In addition, in selecting among firms to handle a particular
transaction, the Adviser and the Fund may take into account whether the firm has
sold or is selling shares of the Fund. See "Portfolio Transactions and Brokerage
Allocation" in the Statement of Additional Information for more information.
- --------------------------------------------------------------------------------
SPECIAL CONSIDERATIONS REGARDING THE FUND
- --------------------------------------------------------------------------------
GENERAL. The Fund may invest up to 20% of its total assets in derivative
variable rate securities such as inverse floaters whose rates of interest vary
inversely with changes in market rates of interest. When market rates of
interest decrease, the change in value of such securities will have a positive
effect on the net asset value of the Fund and when market rates of interest
increase, the change in value of such securities will have a negative effect on
the net asset value of the Fund. Investment in such securities involve special
risks as compared to a fixed rate municipal security. The extent of increases
and decreases in the value of inverse floaters and the corresponding change to
per share net asset value of the Fund generally will be larger than comparable
changes in the value of an equal principal amount of a fixed rate municipal
security having similar credit quality, redemption provisions and maturity. The
markets for inverse variable rate securities may be less developed than the
market for conventional fixed rate municipal securities.
SPECIAL CONSIDERATIONS REGARDING FLORIDA MUNICIPAL SECURITIES. As described in
this Prospectus, under normal market conditions the Fund will invest
substantially all of its assets in Florida municipal securities. The Fund is
therefore susceptible to political, economic, regulatory or other factors
affecting issuers of Florida municipal securities. Investors should be aware of
certain factors that might affect the financial condition of the issuers of
Florida municipal securities.
The following information is a summary of a more detailed description of
certain factors affecting Florida municipal securities which is contained in the
Statement of Additional Information. Investors should obtain a copy of the
Statement of Additional Information for the more detailed discussion of such
factors. Such information is derived from certain official statements of the
State of Florida published in connection with the issuance of specific Florida
municipal securities, as well as from other publicly available documents. Such
information has not been independently verified by the Fund and may not apply to
all Florida municipal securities acquired by the Fund. The Fund assumes no
responsibility for the completeness or accuracy of such information.
Florida state and local government obligations may be adversely affected by
political and economic conditions and developments within the State of Florida
and the nation as a whole.
13
<PAGE> 14
Florida's economic outlook is projected generally to reflect the national
economic outlook and is expected to experience steady if unspectacular growth
over the next couple of years. Historically, Florida's unemployment rate has
generally tracked below that of the nation; however, beginning with the
recession in the early 1990's, the trend reversed. Since 1995, the state's
unemployment rate has again been below or about the same as the nation's. The
unemployment rate for Florida in 1997 was 4.8% while the national rate in 1997
was 4.9%. Florida's unemployment rate is forecasted at 4.6% for fiscal year
1997-98 and fiscal 4.8% in year 1998-99.
For the State fiscal year which ended June 30, 1997, receipts from the sales
and use tax, the greatest single source of tax revenue to the State of Florida,
were $12,089 million, an increase of 5.5% from fiscal year 1995-96.
Tourism is one of Florida's most important industries. Approximately 47
million people visited the State in 1997. By the end of fiscal year 1998-99,
49.7 million domestic and international tourists are expected to have visited
the state. In 1999-2000, tourist arrivals should approximate 50.6 million.
County and municipal governments in Florida depend primarily upon ad valorem
property taxes, sales, motor fuel and other local excise taxes and miscellaneous
revenue sources, including revenues from utilities services. Florida school
districts derive substantially all of their revenues from local property taxes.
The overall level of revenue from these sources is in part dependent upon the
local, state and national economies. Local government obligations held by the
Fund may constitute general obligations or may be special obligations payable
solely from one or more specified revenue sources. The ability of the local
governments to repay their obligations on a timely basis will be dependent upon
the continued strength of the revenues pledged and of the overall fiscal status
of the local government.
Voters at the general election in November 1994 approved an amendment to the
Constitution of the State of Florida limiting future state revenues. It is
unclear what effect, if any, such amendment would have on state or local
government debt obligations.
The value of Florida municipal instruments may also be affected by general
conditions in the money markets or the municipal bond markets, the levels of
federal income tax rates, the supply of tax-exempt bonds, the credit quality and
rating of the issues and perceptions with respect to the level of interest
rates.
There can be no assurance that there will not be a decline in economic
conditions or that particular Florida municipal securities in the portfolio of
the Fund will not be adversely affected by any such changes.
More detailed information concerning Florida municipal securities and the
State of Florida is included in the Statement of Additional Information.
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
THE ADVISER. Van Kampen Investment Advisory Corp. (the "Adviser") is the
investment adviser for the Fund. The Adviser is a wholly-owned subsidiary of Van
Kampen Investments Inc. ("Van Kampen"). Van Kampen is a diversified asset
management company with more than two million retail investor accounts,
extensive capabilities for managing institutional portfolios, and more than $60
billion under management or supervision. Van Kampen's more than 50 open-end and
39 closed-end funds and more than 2,500 unit investment trusts are
professionally distributed by leading financial advisers nationwide. Van Kampen
Funds Inc. (the "Distributor"), the distributor of the Fund and sponsor of the
funds mentioned above, is a wholly-owned subsidiary of Van Kampen. Van Kampen is
an indirect wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. The
Adviser's principal office is located at One Parkview Plaza, Oakbrook Terrace,
Illinois 60181.
Morgan Stanley Dean Witter & Co. and various of its directly or indirectly
owned subsidiaries, including Morgan Stanley Asset Management Inc., an
investment adviser, Morgan Stanley & Co. Incorporated, a registered
broker-dealer and investment adviser, and Morgan Stanley International, are
engaged in a wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; credit services; asset management;
trading of futures, options, foreign exchange, commodities and swaps (involving
foreign exchange, commodities, indices and interest rates); real estate advice,
financial and investing; and global custody, securities clearance services and
securities lending.
14
<PAGE> 15
ADVISORY AGREEMENT. The business and affairs of the Fund are managed under
the direction of the Board of Trustees of the Trust, of which the Fund is a
separate series. Subject to their authority, the Adviser and the respective
officers of the Fund supervise and implement the Fund's investment activities
and are responsible for overall management of the Fund's business affairs. The
Fund pays the Adviser a fee equal to a percentage of the average daily net
assets of the Fund as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS % PER ANNUM
------------------------ -----------
<S> <C>
First $500 million.......................................... 0.500 of 1.00%
Over $500 million........................................... 0.450 of 1.00%
</TABLE>
Under its investment advisory agreement with the Adviser, the Fund has agreed
to assume and pay the charges and expenses of the Fund's operations, including
the compensation of the Trustees of the Trust (other than those who are
affiliated persons, as defined in the 1940 Act, of the Adviser, the Distributor,
Van Kampen Investor Services Inc. ("Investor Services"), Van Kampen or Morgan
Stanley Dean Witter & Co.), the charges and expenses of independent accountants,
legal counsel, transfer agent or dividend disbursing agent and the custodian
(including fees for safekeeping of securities), costs of calculating net asset
value, costs of acquiring and disposing of portfolio securities, interest (if
any) on obligations incurred by the Fund, costs of share certificates,
membership dues in the Investment Company Institute or any similar organization,
reports and notices to shareholders, costs of registering shares of the Fund
under the federal securities laws, miscellaneous expenses and all taxes and fees
to federal, state or other governmental agencies. The Adviser reserves the right
in its sole discretion from time-to-time to waive all or a portion of its
management fee, or to reimburse the Fund for all or a portion of its other
expenses.
PERSONAL INVESTMENT POLICIES. The Fund and the Adviser have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
Adviser and its employees. The Codes permit directors, trustees, officers and
employees to buy and sell securities for their personal accounts subject to
certain restrictions. Persons with access to certain sensitive information are
subject to preclearance and other procedures designed to prevent conflicts of
interest.
PORTFOLIO MANAGEMENT. Thomas M. Byron, Vice President of the Adviser, has been
primarily responsible for the day-to-day management of the Fund's portfolio
since January of 1997. Prior to January of 1997, Mr. Byron was manager of the
Unit Investment Trust Purchasing Desk and assumed buying responsibilities for
all national tax-free and taxable unit trusts for the Adviser since April of
1994. Prior to April of 1994, Mr. Byron was responsible for buying the state
unit investment trusts for the Adviser. Mr. Byron has been employed by the
Adviser since 1981.
- --------------------------------------------------------------------------------
ALTERNATIVE SALES ARRANGEMENTS
- --------------------------------------------------------------------------------
The Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares that is more beneficial to the investor, taking into account
the amount of the purchase, the length of time the investor expects to hold the
shares, whether the investor wishes to receive dividends in cash or to reinvest
them in additional shares of the Fund, and other circumstances. Investors should
consider such factors together with the amount of sales charges and accumulated
distribution and service fees with respect to each class of shares that may be
incurred over the anticipated duration of their investment in the Fund.
The Fund offers three classes of shares, designated Class A Shares, Class B
Shares and Class C Shares. Shares of each class are offered at a price equal to
their net asset value per share plus a sales charge which, at the election of
the purchaser, may be imposed (a) at the time of purchase ("Class A Shares") or
(b) on a contingent deferred basis (Class A Share accounts over $1 million,
"Class B Shares" and "Class C Shares"). Class A Shares accounts over $1 million
or otherwise subject to a contingent deferred sales charge ("CDSC"), Class B
Shares and Class C Shares sometimes are referred to herein collectively as
"Contingent Deferred Sales Charge Shares" or "CDSC Shares."
The minimum initial investment with respect to each class of shares is $500.
The minimum subsequent investment with respect to each class of shares is $25.
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 or Class C Shares. 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.
15
<PAGE> 16
An investor should carefully consider the sales charges applicable to each
class of shares and the estimated period of their investment to determine which
class of shares is more beneficial for the investor to purchase. For example,
investors who would qualify for a significant purchase price discount from the
maximum sales charge on Class A Shares may determine that payment of such a
reduced front-end sales charge is superior to electing to purchase Class B
Shares or Class C Shares, each with no front-end sales charge but subject to a
CDSC and a higher aggregate distribution and service fee. However, because
initial sales charges are deducted at the time of purchase of Class A Share
accounts under $1 million, a purchaser of such Class A Shares would not have all
of his or her funds invested initially and therefore, would initially own fewer
shares than if Class B Shares or Class C Shares had been purchased. On the other
hand, an investor whose purchase would not qualify for price discounts
applicable to Class A Shares and intends to remain invested until after the
expiration of the applicable CDSC may wish to defer the sales charge and have
all his or her funds initially invested in Class B Shares or Class C Shares. If
such an investor anticipates that he or she will redeem such shares prior to the
expiration of the CDSC period applicable to Class B Shares, the investor may
wish to acquire Class C Shares. Investors must weigh the benefit of deferring
the sales charge and having all of their funds invested against the higher
aggregate distribution and service fee applicable to Class B Shares and Class C
Shares (discussed below).
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except each class of shares (i)
bears those distribution fees, service fees and administrative expenses
applicable to the respective class of shares as a result of its sales
arrangements, (ii) has exclusive voting rights with respect to those provisions
of the Fund's Rule 12b-1 distribution plan which relate only to such class and
(iii) has a different exchange privilege. Generally, a class of shares subject
to a higher ongoing distribution and service fee or subject to the conversion
feature will have a higher expense ratio and pay lower dividends than a class of
shares subject to a lower ongoing distribution and service fee or not subject to
the conversion feature. The per share net asset values of the different classes
of shares are expected to be substantially the same; from time to time, however,
the per share net asset values of the classes may differ. The net asset value
per share of each class of shares of the Fund will be determined as described in
this Prospectus under "Purchase of Shares--Net Asset Value."
The administrative expenses that may be allocated to a specific class of
shares may consist of (i) Investor Services' expenses attributable to a specific
class of shares, which expenses typically will be higher with respect to classes
of shares subject to the conversion feature; (ii) printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxy statements to current shareholders of a specific class;
(iii) Securities and Exchange Commission (the "SEC") registration fees incurred
by a class of shares; (iv) the expense of administrative personnel and services
as required to support the shareholders of a specific class; (v) Trustees' fees
or expense incurred as a result of issues relating to one class of shares; (vi)
accounting expenses relating solely to one class of shares; and (vii) any other
incremental expenses subsequently identified that should be properly allocated
to one or more classes of shares. All such expenses incurred by a class will be
borne on a pro rata basis by the outstanding shares of such class. All
allocations of administrative expenses to a particular class of shares will be
limited to the extent necessary to preserve the Fund's qualification as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code").
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
The Fund offers three classes of shares to the public on a continuous basis
through the Distributor, as principal underwriter, which is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181. Shares also are offered
through members of the National Association of Securities Dealers, Inc. ("NASD")
acting as securities dealers ("dealers") and through NASD members acting as
brokers for investors ("brokers") or eligible non-NASD members acting as agents
for investors ("financial intermediaries"). The Fund reserves the right to
suspend or terminate the continuous public offering of its shares at any time
and without prior notice.
The Fund's shares are offered at the net asset value per share next computed
after an investor places an order to purchase directly with the investor's
broker, dealer or financial intermediary or directly with the Distributor plus
any applicable sales charge. Sales personnel or brokers, dealers and financial
intermediaries distributing the Fund's shares may receive different compensation
for selling different classes of shares. It is the responsibility of the
investor's broker, dealer or financial intermediary to transmit the order to the
Distributor. Because the Fund generally will determine net asset value once each
business day as of the close of business, purchase orders placed through an
investor's broker, dealer or
16
<PAGE> 17
financial intermediary must be transmitted to the Distributor by such broker,
dealer or financial intermediary prior to such time in order for the investor's
order to be fulfilled on the basis of the net asset value to be determined that
day. Any change in the purchase price due to the failure of the Distributor to
receive a purchase order prior to such time must be settled between the investor
and the broker, dealer or financial intermediary submitting the order.
The Distributor may from time to time implement programs under which a broker,
dealer or financial intermediary's sales force may be eligible to win nominal
awards for certain sales efforts or under which the Distributor will reallow to
any broker, dealer or financial intermediary 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
broker, dealer or financial intermediary 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 it, pay fees to, and sponsor business seminars
for, qualifying brokers, dealers or financial intermediaries for certain
services or activities which are primarily intended to result in sales of shares
of the Fund. Fees may include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States for meetings or seminars of a business nature. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. Such payments to brokers,
dealers and financial intermediaries for sales contests, other sales programs
and seminars are made by the Distributor out of its own assets and not out of
the assets of the Fund. 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 pays for shares or the amount that the Fund will receive
from such sale.
CLASS A SHARES
The public offering price of Class A Shares is the net asset value plus sales
charge. The table below shows total sales charges and dealer concessions
reallowed to dealers and agency commissions paid to brokers with respect to
sales of Class A Shares. The sales charge is allocated between the investor's
broker, dealer or financial intermediary and the Distributor. As indicated
previously, at the discretion of the Distributor the entire sales charge may be
reallowed to such broker, dealer or financial intermediary. The staff of the SEC
has taken the position that dealers who receive 90% or more of the sales charge
may be deemed to be underwriters for purposes of the Securities Act of 1933, as
amended.
SALES CHARGE TABLE
<TABLE>
<CAPTION>
DEALER
CONCESSION
OR AGENCY
TOTAL SALES CHARGE COMMISSION
---------------------------------- --------------
SIZE OF TRANSACTION PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AT OFFERING PRICE OFFERING PRICE NET ASSET VALUE OFFERING PRICE
------------------- -------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000.......................................... 4.75% 4.99% 4.25%
$100,000 but less than $250,000............................. 3.75 3.90 3.25
$250,000 but less than $500,000............................. 2.75 2.83 2.25
$500,000 but less than $1,000,000........................... 2.00 2.04 1.75
$1,000,000 or more*......................................... * * *
</TABLE>
- --------------------------------------------------------------------------------
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund imposes a CDSC of
1.00% on redemptions made within one year of the purchase. A commission
will be paid to brokers, dealers or financial intermediaries who initiate
and are responsible for purchases of $1 million or more as follows: 1.00%
on sales to $2 million, plus 0.80% on the next $1 million and 0.50% on the
excess over $3 million. See "Purchase of Shares--Deferred Sales Charge
Alternatives" for additional information with respect to CDSCs.
17
<PAGE> 18
QUANTITY DISCOUNTS
Investors purchasing Class A Shares may, under certain circumstances, be
entitled to pay reduced sales charges. The circumstances under which such
investors may pay reduced sales charges are described below.
Investors, or their brokers, dealers or financial intermediaries, must notify
the Fund at the time of the purchase order whenever a quantity discount is
applicable to purchases. Upon such notification, an investor will receive the
lowest applicable sales charge. Quantity discounts may be modified or terminated
at any time. For more information about quantity discounts, investors should
contact their broker, dealer or financial intermediary or the Distributor.
A person eligible for a reduced sales charge includes an individual, his or
her spouse and children under 21 years of age and any corporation, partnership
or sole proprietorship which is 100% owned, either alone or in combination, by
any of the foregoing; a trustee or other fiduciary purchasing of a single trust
or for a single fiduciary account; or a "company" as defined is section 2(a)(8)
of the 1940 Act.
As used herein, "Participating Funds" refers to certain open-end investment
companies advised by the Adviser or Van Kampen Asset Management Inc. ("Asset
Management") and distributed by the Distributor as determined from time to time
by the Fund's Board of Trustees. Additional funds may be added from time to time
as determined by the Fund's Board of Trustees as Participating Funds.
VOLUME DISCOUNTS. The size of investment shown in the preceding sales charge
table applies to the total dollar amount being invested by any person at any one
time in Class A Shares of the Fund, or in any combination of shares of the Fund
and shares of other Participating Funds, although other Participating Funds may
have different sales charges.
CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the preceding
sales charge table may also be determined by combining the amount being invested
in Class A Shares of the Fund with other shares of the Fund and shares of
Participating Funds, plus the current offering price of all shares of the Fund
and other Participating Funds which have been previously purchased and are still
owned.
LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor
to obtain a reduced sales charge by aggregating the amount being invested over a
13-month period to determine the sales charge as outlined in the preceding sales
charge table. The size of investment shown in the preceding sales charge table
includes the amount of intended purchases of Class A Shares of the Fund with
other shares of the Fund and shares of the Participating Funds plus the value of
all shares of the Fund and other Participating Funds previously purchased during
such 13-month period and still owned. An investor may elect to compute the
13-month period starting up to 90 days before the date of execution of a Letter
of Intent. Each investment made during the period receives the reduced sales
charge applicable to the total amount of the investment goal. If trades not
initially made under a Letter of Intent subsequently qualify for a lower sales
charge through the 90-day back-dating provision, an adjustment will be made at
the expiration of the Letter of Intent to give effect to the lower charge. If
the goal is not achieved within the 13-month period, the investor must pay the
difference between the sales charge applicable to the purchases made and the
sales charges previously paid. When an investor signs a Letter of Intent, shares
equal to at least 5% of the total purchase amount of the level selected will be
restricted from sale or redemption by the investor until the Letter of Intent is
satisfied or any additional sales charges have been paid; if the Letter of
Intent is not satisfied by the investor and any additional sales charges are not
paid, sufficient restricted shares will be redeemed by the Fund to pay such
charges. Additional information is contained in the application accompanying
this Prospectus.
OTHER PURCHASE PROGRAMS
Purchasers of Class A Shares may be entitled to reduced initial sales charges
in connection with unit investment trust reinvestment programs and purchases by
registered representatives of selling firms or purchases by persons affiliated
with the Fund or the Distributor. The Fund reserves the right to modify or
terminate these arrangements at any time.
UNIT INVESTMENT TRUST REINVESTMENT PROGRAMS. 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 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 total sales charge for all other investments made
from unit trust distributions will be 1.00% of the offering price (1.01% of net
asset value). Of this amount, the Distributor will pay to
18
<PAGE> 19
the broker, dealer or financial intermediary, if any, through which such
participation in the qualifying program was initiated 0.50% of the offering
price as a dealer concession or agency commission. Persons desiring more
information with respect to this program, including the applicable terms and
conditions thereof, should contact their broker, dealer, financial intermediary
or 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 participating investor 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 monthly basis only, even
if their investments are made more frequently. The Fund reserves the right to
modify or terminate this program at any time.
NAV PURCHASE OPTIONS. Class A Shares of the Fund may be purchased at net asset
value, upon written assurance that the purchase is made for investment purposes
and that the shares will not be resold except through redemption by the Fund,
by:
(1) Current or retired trustees or directors of funds advised by the Adviser
or Asset Management and such persons' families and their beneficial
accounts.
(2) Current or retired directors, officers and employees of Morgan Stanley
Group Inc. and any of its subsidiaries, employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser, and such persons' families and their beneficial accounts.
(3) Directors, officers, employees and when permitted, registered
representatives of financial institutions that have a selling group
agreement with the Distributor and their spouses and children under 21
years of age when purchasing for any accounts they beneficially own, or,
in the case of any such financial institution, when purchasing for
retirement plans for such institution's employees; provided that such
purchases are otherwise permitted by such institutions.
(4) Registered investment advisers who charge a fee for their services, trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay Participating Dealers
through which purchases are made an amount up to 0.50% of the amount
invested over a 12-month period.
(5) Trustees and other fiduciaries purchasing shares for retirement plans
which invest in multiple fund families through broker-dealer retirement
plan alliance programs that have entered into agreements with the
Distributor and which are subject to certain minimum size and operational
requirements. Trustees and other fiduciaries should refer to the Statement
of Additional Information for further detail with respect to such
programs.
(6) Beneficial owners of shares of a Participating Funds held by a retirement
plan or held in a tax-advantaged retirement account who purchase shares of
the Fund with proceeds from distributions from such a plan or retirement
account other than distributions taken to correct an excess contribution.
(7) Accounts as to which a broker, dealer or financial intermediary charges an
account management fee ("wrap accounts"), provided the broker, dealer or
financial intermediary has a separate agreement with the Distributor.
(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the Code, or custodial accounts
held by a bank created pursuant to Section 403(b) of the Code and
sponsored by non-profit organizations defined under Section 501(c)(3) of
the Code and assets held by an employer or trustee in connection with an
eligible deferred compensation plan under Section 457 of the Code. Such
plans will qualify for purchases at net asset value provided, for plans
initially establishing accounts with the Distributor in the Participating
Funds after February 1, 1997, that (1) the initial amount invested in the
Participating Funds is at least $500,000 or (2) such shares are purchased
by an employer sponsored plan with more than 100 eligible employees. Such
plans that have been established with a Participating Fund or have
received proposals from the
19
<PAGE> 20
Distributor prior to February 1, 1997 based on net asset value purchase
privileges previously in effect will be qualified to purchase shares of
the Participating Funds at net asset value for accounts established on or
before May 1, 1997. Section 403(b) and similar accounts for which Van
Kampen Trust Company served as custodian will not be eligible for net
asset value purchases based on the aggregate investment made by the plan
or the number of eligible employees, except under certain uniform criteria
established by the Distributor from time to time. A commission will be
paid on the foregoing purchases as follows: 1.00% on sales to $2 million,
plus 0.80% on the next $1 million, plus 0.50% on the next $47 million and
0.25% on the excess over $50 million.
(9) Individuals who are members of a "qualified group". For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the
Fund and Participating funds, (iv) has a membership that the authorized
dealer can certify as to the group's members and (v) satisfies other
uniform criteria established by the Distributor for the purpose of
realizing economics of scale in distributing such shares. A qualified
group does not include one whose sole organizational nexus, for example,
is that its participants are credit card holders of the same institution,
policy holders of an insurance company, customers of a bank or
broker-dealer, clients of an investment adviser or other similar groups.
Shares purchased in each group's participants account in connection with
this privilege will be subject to a CDSC of 1.00% in the event of
redemption within one year of purchase, and a commission will be paid to
authorized dealers who initiate and are responsible for such sales to each
individual as follows: 1.00% on sales to $2 million, plus 0.80% on the
next $1 million and 0.50% on the excess over $3 million.
The term "families" includes a person's spouse, children under 21 years of age
and grandchildren, parents, and a person's spouse's parents.
Purchase orders made pursuant to clause (4) may be placed either through
authorized brokers, dealers or financial intermediaries as described above or
directly with Investor Services, the investment adviser, trust company or bank
trust department, provided that Investor Services receives federal funds for the
purchase by the close of business on the next business day following acceptance
of the order. An authorized broker, dealer or financial intermediary may charge
a transaction fee for placing an order to purchase shares pursuant to this
provision or for placing a redemption order with respect to such shares.
Authorized brokers, dealers or financial intermediaries will be paid a service
fee as described herein under "Distribution and Service Plans" on purchases made
as described in (3) through (9) above. The Fund may terminate, or amend the
terms of, offering shares of the Fund at net asset value to such groups at any
time.
DEFERRED SALES CHARGE ALTERNATIVE
Investors choosing the deferred sales charge alternative may purchase Class A
Shares in an amount of $1 million or more, Class B Shares or Class C Shares. The
public offering price of a CDSC Share is equal to the net asset value per share
without the imposition of a sales charge at the time of purchase. CDSC Shares
are sold without an initial sales charge so that the Fund may invest the full
amount of the investor's purchase payment. The Distributor will compensate
brokers, dealers and financial intermediaries participating in the continuous
public offering of the CDSC Shares out of its own assets, and not out of assets
of the Fund, at a percentage rate of the dollar value of the CDSC Shares
purchased from the Fund by such brokers, dealers and financial intermediaries,
which percentage rate will be equal to (i) with respect to Class A Shares, 1.00%
on sales to $2 million, plus 0.80% on the next $1 million and 0.50% on the
excess over $3 million; (ii) 4.00% with respect to Class B Shares; and (iii)
1.00% with respect to Class C Shares. Such compensation will not change the
price an investor will pay for CDSC Shares or the amount that the Fund will
receive from such sale.
CDSC Shares redeemed within a specified period of time generally will be
subject to a CDSC at the rates set forth below charged as a percentage of the
dollar amount subject thereto. The amount of the CDSC will vary depending on (i)
the class of CDSC Shares to which such shares belong and (ii) the number of
years from the time of payment for the purchase of the CDSC Shares until the
time of their redemption. The charge will be assessed on an amount equal to the
lesser of the then current market value or the original purchase price of the
CDSC Shares being redeemed. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
CDSC will be assessed on CDSC Shares derived from reinvestment of dividends or
capital gains distributions. Solely for purposes of determining the number of
years from the time of any payment for the purchases of CDSC Shares, all
payments during a month will be aggregated and deemed to have been made on the
last day of the month.
20
<PAGE> 21
Proceeds from the CDSC and the distribution fee applicable to a class of CDSC
Shares are paid to the Distributor and are used by the Distributor to defray its
expenses related to providing distribution related services to the Fund in
connection with the sale of shares of such class of CDSC Shares, such as the
payment of compensation to selected dealers and agents and for selling such
shares. The combination of the CDSC and the distribution fees facilitates the
ability of the Fund to sell such CDSC Shares without a sales charge being
deducted at the time of purchase.
In determining whether a CDSC is applicable to a redemption of CDSC Shares, it
will be assumed that the redemption is made first of any CDSC Shares acquired
pursuant to reinvestment of dividends or distributions, second of CDSC Shares
that have been held for a sufficient period of time such that the CDSC no longer
is applicable to such shares, third of Class A Shares in the shareholder's Fund
account that have converted from Class B Shares or Class C Shares, if any, and
fourth of CDSC Shares held longest during the period of time that a CDSC is
applicable to such CDSC Shares. The charge will not be applied to dollar amounts
representing an increase in the net asset value since the time of purchase.
To provide an example, assume an investor purchased 100 Class B Shares at $10
per share (at a cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor has acquired 10
additional Class B Shares upon dividend reinvestment. If at such time the
investor makes his first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to charge because of dividend reinvestment. With respect to
the remaining 40 shares, the charge is applied only to the original cost of $10
per share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 3.75% (the
applicable rate in the second year after purchase).
CLASS A SHARE PURCHASES OF $1 MILLION OR MORE. No sales charge is payable at
the time of purchase on investments in Class A Shares of $1 million or more,
although for such investments the Fund imposes a CDSC of 1.00% on redemptions
made within one year of the purchase. A commission will be paid to dealers who
initiate and are responsible for purchases of $1 million or more as follows:
1.00% on sales to $2 million, plus 0.80% on the next $1 million, and 0.50% on
the excess over $3 million.
CLASS B SHARES. Class B Shares redeemed within seven years of purchase
generally will be subject to a CDSC at the rates set forth below, charged as a
percentage of the dollar amount subject thereto:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
- ---------------------------------------------------------------------------------
<S> <C>
First.................................................. 4.00%
Second................................................. 3.75%
Third.................................................. 3.50%
Fourth................................................. 2.50%
Fifth.................................................. 1.50%
Sixth.................................................. 1.00%
Seventh and after...................................... 0.00%
</TABLE>
The CDSC generally is waived on redemptions of Class B Shares made pursuant to
the Systematic Withdrawal Plan. See "Shareholder Services--Systematic Withdrawal
Plan."
CLASS C SHARES. Class C Shares redeemed within the first 12 months of purchase
generally will be subject to a CDSC of 1.00% of the dollar amount subject
thereto. Class C Shares redeemed thereafter will not be subject to a CDSC.
CONVERSION FEATURE. Class B Shares purchased on or after June 1, 1996 and any
dividend reinvestment plan shares received thereon automatically convert to
Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan shares received thereon, automatically convert to
Class A shares seven years after the end of the calendar month in which the
shares were purchased. Class C Shares purchased before January 1, 1997, and any
dividend reinvestment plan shares received thereon automatically convert to
Class A Shares ten years after the end of the calendar month in which such
shares were purchased. Such conversion will be on the basis of the relative net
asset values per share, without the imposition of any sales load, fee or other
charge. The conversion schedule applicable to a share acquired through the
exchange privilege is determined by reference to the Participating Fund from
which such share originally was purchased. The conversion of such
21
<PAGE> 22
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 Code, and (ii) that the conversion of such 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.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE. The CDSC is waived on redemptions
of Class B Shares and Class C Shares: (i) following the death or disability (as
defined in the Code) of a shareholder; (ii) in connection with required minimum
distributions from an IRA or another retirement plan; (iii) pursuant to the
Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account; (iv) in circumstances under which no commission or
transaction fee is paid to authorized dealers at the time of purchase of such
shares; and (v) effected pursuant to the right of the Fund to liquidate a
shareholder's account as described herein under "Redemption of Shares." The CDSC
also is waived on redemptions of Class C Shares as it relates to the
reinvestment of redemption proceeds in shares of the same class of the Fund
within 180 days after redemption. See "Shareholder Services" and "Redemption of
Shares" for further discussion of the waiver provisions.
NET ASSET VALUE
The net asset value per share of the Fund will be determined separately for
each class of shares. The net asset value per share of a given class of shares
of the Fund is determined by calculating the total value of the Fund's assets
attributable to such class of shares, deducting its total liabilities
attributable to such class of shares, and dividing the result by the number of
shares of such class outstanding. The net asset value for the Fund is computed
once daily as of 5:00 p.m. Eastern time Monday through Friday, except on
customary business holidays, or except on any day on which no purchase or
redemption orders are received, or there is not a sufficient degree of trading
in the Fund's portfolio securities such that the Fund's net asset value per
share might be materially affected. The Fund reserves the right to calculate the
net asset value and to adjust the public offering price based thereon more
frequently than once a day if deemed desirable. The net asset value per share of
the different class of shares are expected to be substantially the same; from
time to time, however, the per share net asset value of the different class of
shares may differ.
Portfolio securities are valued by using market quotations, prices provided by
market makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics in accordance with
procedures established in good faith by the Board of Trustees of the Trust, of
which the Fund is a series. Securities with remaining maturities of 60 days or
less are valued at amortized cost when amortized cost is determined in good
faith by or under the direction of the Board of Trustees of the Trust to be
representative of the fair value at which it is expected such securities may be
resold. Any securities or other assets for which current market quotations are
not readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of Trustees of the Trust.
- --------------------------------------------------------------------------------
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. Unless otherwise described below, each of these
services may be modified or terminated by the Fund at any time.
INVESTMENT ACCOUNT. Investor Services, transfer agent for the Fund and a
wholly-owned subsidiary of Van Kampen, performs bookkeeping, data processing and
administration services related to the maintenance of shareholder accounts. Each
shareholder has an investment account under which the investor's shares of the
Fund are held by Investor Services. Except as described in this Prospectus,
after each share transaction in an account, the shareholder receives a statement
showing the activity in the account. Each shareholder who has an account in any
of the Participating Funds will receive quarterly statements 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 dividends and capital gains distributions
and systematic
22
<PAGE> 23
purchases or redemptions. Additions to an investment account may be made at any
time by purchasing shares through authorized brokers, dealers or financial
intermediaries or by mailing a check directly to Investor Services.
SHARE CERTIFICATES. Generally, the Fund will not issue share certificates.
However, upon written or telephone request to the Fund, a share certificate will
be issued, representing shares (with the exception of fractional shares) of the
Fund. A shareholder will be required to surrender such certificates upon
redemption thereof. In addition, if such certificates are lost the shareholder
must write to Van Kampen Funds, c/o Van Kampen Investor Services Inc., P.O. Box
418256, Kansas City, MO 64141-9256, requesting an "affidavit of loss" and to
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.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value per share (without sales
charge) on the record date of such dividend or 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 in writing to Investor Services. The investor may,
on the initial application or prior to any declaration, instruct that dividends
be paid in cash and capital gains distributions be reinvested at net asset
value, or that both dividends and capital gains distributions be paid in cash.
For further information, see "Distributions from the Fund."
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under
which a shareholder can authorize Investor Services to debit a bank account on a
regular basis to invest pre-determined amounts in the Fund. Additional
information is available from the Distributor or authorized brokers, dealers or
financial intermediaries.
DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by
completing the appropriate section of the application form accompanied by this
Prospectus or by calling (800) 341-2911 ((800) 421-2833 for the hearing
impaired), elect to have all dividends and other distributions paid on a class
of shares of the Fund invested into shares of the same class of any
Participating Fund so long as the shareholder has a pre-existing account for
such class of shares exists for such shareholder.
If the qualified pre-existing account does not exist, the shareholder must
establish a new account subject to minimum investment and other requirements of
the fund into which distributions would be invested. Distributions are invested
into the selected fund at its net asset value as of the payable date of the
distribution only if shares of such selected fund have been registered for sale
in the investor's state.
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 values of
each fund after requesting the exchange without any sales charge, subject to
certain limitations. Shares of the Fund may be exchanged with shares of another
Participating Fund, subject to certain limitations. Shareholders seeking an
exchange into a Participating Fund should obtain and read a current prospectus
for such Participating Fund. SHAREHOLDERS MAY ONLY EXCHANGE INTO SUCH OTHER
FUNDS AS ARE LEGALLY AVAILABLE FOR SALE IN THEIR STATE.
To be eligible for exchange, shares of the Fund must have been registered in
the shareholder's name for at least 30 days prior to an exchange. Shares of the
Fund registered in a shareholder's name for less than 30 days may only be
exchanged upon receipt of prior approval of the Adviser. Under normal
circumstances, it is the policy of the Adviser not to approve such requests.
Class A Shares of Van Kampen funds that generally impose an initial sales
charge are not subject to any sales charge upon exchange into the Fund. Class A
Shares of Van Kampen funds that generally do not impose an initial sales charge
are subject to the appropriate sales charge applicable to Class A Shares of the
Fund.
When Class B Shares and Class C Shares are exchanged among Participating
Funds, the holding period for purposes of computing the CDSC is based upon the
date of the initial purchase of such Shares from a Participating Fund (the
"Original Fund"). Upon redemption from the Participating Funds' complex of
Funds, Class B Shares and Class C Shares are subject to the CDSC schedule
imposed by the Original Fund.
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<PAGE> 24
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) 341-2911 ((800) 421-2833 for the hearing impaired). A shareholder
automatically has telephone exchange privileges unless otherwise designated in
the application form accompanied by this Prospectus. The exchange will take
place at the relative net asset values of the shares next determined after
receipt of such request with adjustment for any additional sales charge. Any
shares exchanged begin earning dividends on the next business day after the
exchange is affected. Van Kampen and its subsidiaries, including Investor
Services (collectively, "VK"), and the Fund employ procedures considered by them
to be reasonable to confirm that instructions communicated by telephone are
genuine. Such procedures include requiring certain personal identification
information prior to acting upon telephone instructions, tape recording
telephone communications, and providing written confirmation of instructions
communicated by telephone. If reasonable procedures are employed, a shareholder
agrees that neither VK nor the Fund will be liable for following telephone
instructions which it reasonably believes to be genuine. VK and the Fund may be
liable for any losses due to unauthorized or fraudulent instructions if
reasonable procedures are not followed. If the exchanging shareholder does not
have an account in the fund whose shares are being acquired, a new account will
be established with the same registration, dividend and capital gains options
(except dividend diversification options) and broker, dealer or financial
intermediary of record as the account from which shares are exchanged, unless
otherwise specified by the shareholder. In order to establish a systematic
withdrawal plan for the new account or reinvest dividends from the new account
into another fund, an exchanging shareholder must file a specific written
request. The Fund reserves the right to reject any order to acquire shares
through exchange. In addition, the Fund may modify, restrict or terminate the
exchange privilege at any time on 60 days' notice to its shareholders of any
termination or material amendment.
A prospectus of any of these mutual funds may be obtained from any broker,
dealer or financial intermediary or the Distributor. An investor considering an
exchange to one of such funds should refer to the prospectus for additional
information regarding such fund prior to investing.
SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account
total $10,000 or more at the 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, semi-annual or annual withdrawal plan. This plan provides
for the orderly use of the entire account, not only the income but also the
capital, if necessary. Each withdrawal constitutes a redemption of shares on
which taxable gain or loss will be recognized. The plan holder may arrange for
monthly, quarterly, semi-annual, or annual checks in any amount not less than
$25.
Holders of Class B Shares and Class C Shares who establish a withdrawal plan
may redeem up to 12% annually of the shareholder's initial account balance
without incurring a CDSC. Initial account balance means the amount of the
shareholder's investment at the time the election to participate in the plan is
made.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under the plan are reinvested in additional shares
at the next determined net asset value. If periodic withdrawals continuously
exceed reinvested dividends and capital gains distributions, the shareholder's
original investment will be correspondingly reduced and ultimately exhausted.
Withdrawals made concurrently with purchases 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 thirty days' notice to its shareholders.
CHECK WRITING PRIVILEGE. Holders of Class A Shares of the Fund for which
certificates have not been issued and which are in a non-escrow status may
appoint Investor Services as agent by completing the Authorization for
Redemption by Check Form and the appropriate section of the 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 such
shareholder. These checks may be made payable by the holder of Class A Shares to
the order of any person in any amount of $100 or more.
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<PAGE> 25
When a check is presented to the Bank for payment, full and fractional Class A
Shares required to cover the amount of the check are redeemed from the
shareholder's account by Investor Services at the next determined net asset
value. Check writing redemptions represent the sale of Class A Shares. Any gain
or loss realized on the sale of Class A Shares is a taxable event. See
"Redemption of Shares."
Checks will not be honored for redemption of Class A Shares held less than 15
calendar days, unless such Class A Shares have been paid for by bank wire. Any
Class A Shares for which there are outstanding certificates may not be redeemed
by check. If the amount of the check is greater than the proceeds of all
uncertificated shares held in the shareholder's Class A Share account, the check
will be returned and the shareholder may be subject to additional charges.
Holders of Class A Shares 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 the Bank. Retirement plans and accounts that are subject to backup
withholding are not eligible for the privilege. A "stop payment" system is not
available on these checks. See the Statement of Additional Information for
further information regarding the establishment of the privilege.
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.
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.vkac.com
for further instruction. VK and the Fund employ procedures considered by them to
be reasonable to confirm that instructions communicated through the internet are
genuine. Such procedures include requiring use of a personal identification
number prior to acting upon internet instructions and providing written
confirmation of instructions communicated through the internet. If reasonable
procedures are employed, neither VK nor the Fund will be liable for following
instructions through the internet which it reasonably believes to be genuine. If
an account has multiple owners, Investor Services may rely on the instructions
of any one owner.
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REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
Shareholders may redeem for cash some or all of their shares without charge by
the Fund (other than, with respect to CDSC Shares, the applicable contingent
deferred sales charge) at any time by sending a written request in proper form
directly to Van Kampen Investor Services Inc., P.O. Box 418256, Kansas City,
Missouri 64141-9256, by placing the redemption request through an authorized
dealer or by calling the Fund.
WRITTEN REDEMPTION REQUESTS. In the case of redemption requests sent directly
to Investor Services, the redemption request should indicate the number of
shares to be redeemed, the class designation of such shares, the account number
and be signed exactly as the shares are registered. Signatures must conform
exactly to the account registration. If the proceeds of the redemption would
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. If certificates are held for the shares
being redeemed, such certificates must be endorsed for transfer or accompanied
by an endorsed stock power and sent with the redemption request. In the event
the redemption is requested by a corporation, partnership, trust, fiduciary,
executor or administrator, and the name and title of the individual(s)
authorizing such redemption is not shown in the account registration, a copy of
the corporate resolution or other legal documentation appointing the authorized
signer and certified within the prior 120 days must accompany the redemption
request.
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<PAGE> 26
In the case of redemption requests sent directly to Investor Services, the
redemption price is the net asset value per share next determined after the
request is received by Investor Services in proper form. Payment for shares
redeemed (less any sales charge, if applicable) ordinarily will be made by check
mailed within three business days after acceptance by Investor Services of the
request and any other necessary documents in proper order. Such payments may be
postponed or the right of redemption suspended as provided by the rules of the
SEC. If the shares to be redeemed have been recently purchased by check,
Investor Services may delay mailing a redemption check until it confirms that
the purchase check has cleared, which may take up to 15 days. Any gain or loss
realized on the redemption of shares is a taxable event.
DEALER REDEMPTION REQUESTS. Shareholders may sell shares through their
securities dealer, who will telephone the request to the Distributor. Orders
received from dealers must be at least $500 unless transmitted via the FUNDSERV
network. The redemption price for such shares is the net asset value next
calculated after an order is received by a 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 dealers to transmit redemption requests
received by them to the Distributor so they will be received prior to such time.
Any change in the redemption price due to failure of the Distributor to receive
a sell order prior to such time must be settled between the shareholder and
dealer. Shareholders must submit a written redemption request in proper form (as
described above under "Written Redemption Requests") to the dealer within three
business days after calling the dealer with the sell order. Payment for shares
redeemed (less any sales charge, if applicable) will ordinarily be made by check
mailed within three business days to 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 accompanying this Prospectus or call the Fund at (800) 341-2911
((800) 421-2833 for the hearing impaired) to request that a copy of the
Telephone Redemption Authorization form be sent to them for completion. To
redeem shares, contact the telephone transaction line at (800) 421-5684. VK and
the Fund employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, a shareholder agrees that neither VK nor the Fund will
be liable for following instructions which it reasonably believes to be genuine.
VK and the Fund may be liable for any losses due to unauthorized or fraudulent
instructions if reasonable procedures are not followed. Telephone redemptions
may not be available if the shareholder cannot reach Investor Services by
telephone, whether because all telephone lines are busy or for any other reason;
in such case, a shareholder would have to use the Fund's other redemption
procedures previously described. Requests received by Investor Services prior to
4:00 p.m., New York time, on a regular business day will be processed at the net
asset value per share determined that day. These privileges are available for
all accounts other than retirement accounts. The telephone redemption privilege
is not available for shares represented by certificates. If the shares to be
redeemed have been recently purchased by check, Investor Services may delay
mailing a redemption check or wiring redemption proceeds until it confirms that
the purchase check has cleared, usually a period of up to 15 days. 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 sent to the shareholders'
address of record and amounts of at least $1,000 and up to $1 million may be
redeemed daily if the proceeds are to be paid by wire sent to the shareholder's
bank account of record. The proceeds must be payable to the shareholder(s) of
record. Proceeds from redemptions to be paid by check ordinarily will be mailed
within three business days to the shareholder's address of record. Proceeds from
redemptions to be paid by wire ordinarily will be wired on the next business day
to the shareholder's bank account of record. This privilege is not available if
the address of record has been changed within 30 days prior to a telephone
redemption request. The Fund reserves the right at any time to terminate, limit
or otherwise modify this telephone redemption privilege.
GENERAL REDEMPTION INFORMATION. The Fund may redeem any shareholder account
with a net asset value on the date of the notice of redemption less than the
minimum investment as specified by the Trustees. At least 60 days advance
written notice of any such involuntary redemption is required and the
shareholder is given an opportunity to purchase the required value of additional
shares at the next determined net asset value without sales charge. Any
involuntary redemption may only occur if the shareholder account is less than
the minimum investment due to shareholder redemptions.
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<PAGE> 27
REDEMPTION UPON DEATH OR DISABILITY. The Fund will waive the CDSC on
redemptions following the death or disability of holders of Class B Shares and
Class C Shares. An individual will be considered disabled for this purpose if he
or she meets the definition thereof in Section 72(m)(7) of the Code, which in
pertinent part defines a person as disabled if such person "is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or to be
of long-continued and indefinite duration." While the Fund does not specifically
adopt the balance of the Code's definition which pertains to furnishing the
Secretary of Treasury with such proof as he or she may require, the Distributor
will require satisfactory proof of disability before it determines to waive the
CDSC on Class B Shares and Class C Shares.
In cases of death or disability, the CDSCs on Class B Shares and Class C
Shares will be waived where the decedent or disabled person is either an
individual shareholder or owns the shares as a joint tenant with right of
survivorship or is the beneficial owner of a custodial or fiduciary account, and
where the redemption is made within one year of the death or initial
determination of disability. This waiver of the CDSC on Class B Shares and Class
C Shares applies to a total or partial redemption, but only to redemptions of
shares held at the time of the initial determination of disability.
REINSTATEMENT PRIVILEGE. Holders of Class A Shares or Class B Shares who have
redeemed shares of the Fund may reinstate any portion or all of the net proceeds
of such redemption in Class A Shares of the Fund. Holders of Class C Shares who
have redeemed shares of the Fund may reinstate any portion or all of the net
proceeds of such redemption in Class C Shares of the Fund with credit given for
any CDSC paid upon such redemption. Such reinstatement is made at the net asset
value (without sales charge except as described under "Shareholder
Services -- Exchange Privilege") next determined after the order is received,
which must be within 180 days after the date of the redemption. See "Purchase of
Shares -- Waiver of Contingent Deferred Sales Charge." Reinstatement at net
asset value is also offered to participants in those eligible retirement plans
held or administered by Van Kampen Trust Company for repayment of principal (and
interest) on their borrowings on such plans.
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DISTRIBUTION AND SERVICE PLANS
- --------------------------------------------------------------------------------
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan provide
that the Fund may spend a portion of the Fund's average daily net assets
attributable to each class of shares in connection with distribution of the
respective class of shares and in connection with the provision of ongoing
services to shareholders of each class. The Distribution Plan and the Service
Plan are being implemented through an agreement with the Distributor and
sub-agreements between the Distributor and brokers, dealers or financial
intermediaries (collectively, "Selling Agreements") that may provide for their
customers or clients certain services or assistance.
CLASS A SHARES. The Fund may spend an aggregate amount up to 0.25% per year of
the average daily net assets attributable to the Class A Shares of the Fund
pursuant to the Distribution Plan and Service Plan. From such amount, the Fund
may spend up to 0.25% per year of the Fund's average daily net assets
attributable to the Class A Shares pursuant to the Service Plan in connection
with the ongoing provision of services to holders of such shares by the
Distributor and by brokers, dealers or financial intermediaries and in
connection with the maintenance of such shareholders' accounts. The Fund pays
the Distributor the lesser of the balance of the 0.25% not paid to such brokers,
dealers or financial intermediaries or the amount of the Distributor's actual
distribution-related expense.
CLASS B SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class B Shares of the Fund pursuant to the
Distribution Plan. In addition, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets attributable to the Class B Shares pursuant to
the Service Plan in connection with the ongoing provision of services to holders
of such shares by the Distributor and by brokers, dealers or financial
intermediaries and in connection with the maintenance of such shareholders'
accounts.
CLASS C SHARES. The Fund may spend up to 0.75% per year of the average daily
net assets attributable to the Class C Shares of the Fund pursuant to the
Distribution Plan. From such amount, the Fund, or the Distributor as agent for
the Fund, pays brokers, dealers or financial intermediaries in connection with
the distribution of the Class C Shares up to 0.75% of the Fund's average daily
net assets attributable to Class C Shares maintained in the Fund more than one
year by such broker's, dealer's or financial intermediary's customers. The Fund
pays the Distributor the lesser of the balance of
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<PAGE> 28
0.75% not paid to such brokers, dealers or financial intermediaries or the
amount of the Distributor's actual distribution-related expense attributable to
the Class C Shares. In addition, the Fund may spend up to 0.25% per year of the
Fund's average daily net assets attributable to the Class C Shares pursuant to
the Service Plan in connection with the ongoing provision of services to holders
of such shares by the Distributor and by brokers, dealers or financial
intermediaries and in connection with the maintenance of such shareholders'
accounts.
OTHER INFORMATION. Amounts payable to the Distributor with respect to the
Class A Shares under the Distribution Plan in a given year may not fully
reimburse the Distributor for its actual distribution-related expenses during
such year. In such event, with respect to the Class A Shares, there is no
carryover of such reimbursement obligations to succeeding years.
The Distributor's actual expenses with respect to a class of CDSC Shares (for
purposes of this section, excluding any Class A Shares that may be subject to a
CDSC) for any given year may exceed the amounts payable to the Distributor with
respect to such class of CDSC Shares under the Distribution Plan, the Service
Plan and payments received pursuant to the CDSC. In such event, with respect to
any such class of CDSC Shares, any unreimbursed expenses will be carried forward
and paid by the Fund (up to the amount of the actual expenses incurred) in
future years so long as such Distribution Plan is in effect. Except as mandated
by applicable law, the Fund does not impose any limit with respect to the number
of years into the future that such unreimbursed expenses may be carried forward
(on a Fund level basis). Because such expenses are accounted on a Fund level
basis, in periods of extreme net asset value fluctuation such amounts with
respect to a particular CDSC Share may be greater or less than the amount of the
initial commission (including carrying cost) paid by the Distributor with
respect to such CDSC Share. In such circumstances, a shareholder of such CDSC
Share may be deemed to incur expenses attributable to other shareholders of such
class. As of December 31, 1997, there were $872,421 and $11,946 of unreimbursed
distribution-related expenses with respect to Class B Shares and Class C Shares,
respectively, representing 3.88% and 1.00% of the Fund's net assets attributable
to Class B Shares and Class C Shares, respectively. If the Distribution Plan was
terminated or not continued, the Fund would not be contractually obligated to
pay the Distributor for any expenses not previously reimbursed by the Fund or
recovered through CDSCs.
Because the Fund is a series of the Trust, amounts paid to the Distributor as
reimbursement for expenses of one series of the Trust may indirectly benefit the
other funds which are series of the Trust. The Distributor will endeavor to
allocate such expenses among such funds in an equitable manner. The Distributor
will not use the proceeds from the CDSC applicable to a particular class of
shares to defray distribution-related expenses attributable to any other class
of shares. Various federal and state laws prohibit national banks and some
state-chartered commercial banks from underwriting or dealing in the Fund's
shares. In addition, state securities laws on this issue may differ from the
interpretations of federal law, and banks and financial institutions may be
required to register as dealers pursuant to state law. In the unlikely event
that a court were to find that these laws prevent such banks from providing such
services described above, the Fund would seek alternate providers and expects
that shareholders would not experience any disadvantage.
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DISTRIBUTIONS FROM THE FUND
- --------------------------------------------------------------------------------
The Fund's present policy, which may be changed at any time by the Board of
Trustees, is to declare daily and pay monthly distributions of all or
substantially all net investment income of the Fund. Net investment income
consists of all interest income and dividends, other ordinary income earned by
the Fund, less all expenses of the Fund attributable to the class of shares in
question. Net short-term capital gains, if any, may be distributed throughout
the year. Expenses of the Fund are accrued each day. Net realized long-term
capital gains, if any, are expected to be distributed, to the extent permitted
by applicable law, to shareholders at least annually. Distributions cannot be
assured, and the amount of each monthly distribution may vary.
Distributions with respect to each class of shares will be calculated in the
same manner on the same day and will be in the same amount, except that the
different distribution and service fees and any incremental administrative
expenses relating to each class of shares will be borne exclusively by the
respective class and may cause the distributions relating to the different
classes of shares to differ. Generally, distributions with respect to a class of
shares subject to a higher distribution fee will be lower than distributions
with respect to a class of shares subject to a lower distribution fee.
Investors will be entitled to begin receiving dividends on their shares on the
business day after Investor Services receives payments for such shares. However,
shares become entitled to dividends on the day Investor Services receives
payment for
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<PAGE> 29
the shares either through a fed wire or NSCC settlement. Shares remain entitled
to dividends through the day such shares are processed for payment on
redemption.
Distribution checks may be sent to parties other than the shareholder in whose
name the account is registered. Persons wishing to utilize this service should
complete the appropriate section of the account application accompanying this
Prospectus or available from Van Kampen Funds, c/o Van Kampen Investor Services
Inc., P.O. Box 418256, Kansas City, MO 64141-9256. After Investor Services
receives this completed form, distribution checks will be sent to the bank or
other person so designated by such shareholder.
PURCHASE OF ADDITIONAL SHARES WITH DISTRIBUTIONS. The Fund automatically will
credit monthly distributions and any annual net long-term capital gain
distributions to a shareholder's account in additional shares of the Fund valued
at net asset value, without a sales charge. Unless a shareholder elects
otherwise, the reinvestment plan is automatic. This instruction may be made by
telephone by calling (800) 341-2911 ((800) 421-2833 for the hearing impaired) or
in writing to Investor Services. See "Shareholder Services -- Reinvestment
Plan."
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TAX STATUS
- --------------------------------------------------------------------------------
FLORIDA TAXATION
The following Florida tax discussion is based on the advice of Squire, Sanders
& Dempsey L.L.P., special counsel to the Fund for Florida tax matters.
Under existing Florida law, shares of the Fund will not be subject to the
Florida intangible personal property tax for any year if, on the last business
day of the previous calendar year, the Fund's portfolio consisted solely of (1)
notes, bonds and other obligations issued by the State of Florida or its
municipalities, counties, and other taxing districts, or by the United States
Government and its agencies, or by the governments of Puerto Rico, Guam or the
U.S. Virgin Islands, or (2) other intangible personal property exempt from the
Florida intangible personal property tax. (FOR THIS PURPOSE, OBLIGATIONS ISSUED
BY A NONPROFIT CORPORATION FORMED UNDER THE GENERAL NONPROFIT CORPORATION LAW OF
A STATE ARE NOT EXEMPT FROM THE FLORIDA INTANGIBLE PERSONAL PROPERTY TAX EVEN IF
THEY ARE CONSIDERED FOR FEDERAL INCOME TAX PURPOSES TO BE OBLIGATIONS ISSUED "ON
BEHALF OF" A GOVERNMENTAL UNIT THE INTEREST ON WHICH IS EXEMPT FROM FEDERAL
INCOME TAX.) Shares of the Fund will generally be subject to the Florida
intangible personal property tax for any year if, on the last business day of
the previous calendar year, the Fund's portfolio consists of any asset that is
not exempt from the Florida intangible property tax.
The State of Florida and its political subdivisions do not impose income taxes
on individuals, and therefore individual shareholders of the Fund will not be
subject to a Florida income tax on distributions from the Fund or on gain from
the sale or other disposition of shares of the Fund.
Corporations (and certain other entities treated as corporations under the
Florida Income Tax Code) that are subject to the Florida income tax will be
taxable on distributions from the Fund and on gain from the sale or other
disposition of shares of the Fund to the extent such income or gain is allocated
or apportioned to Florida. Accordingly, investment in shares of the Fund may not
be appropriate for such corporations.
The transfer of shares of the Fund will not be subject to the Florida
documentary stamp tax. Shares of the Fund will be included in assets subject to
Florida estate tax.
Under current Florida tax law, the Florida intangible personal property tax
rate is $2.00 per $1,000 of taxable intangible property. Shareholders subject to
taxation in a state other than Florida may realize a lower after-tax rate of
return than Florida shareholders if the dividends distributed by the Fund are
not exempt from taxation in such other state.
FEDERAL TAXATION
The following federal income tax discussion is based on the advice of Skadden,
Arps, Slate, Meagher & Flom (Illinois).
FEDERAL INCOME TAXATION. The Fund has qualified and intends to continue to
qualify each year and to elect to be treated as a regulated investment company
under Subchapter M of the Code. To qualify as a regulated investment company,
the Fund must comply with certain requirements of the Code relating to, among
other things, the source of its income and diversification of its assets.
29
<PAGE> 30
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its net investment income (including tax-exempt interest, 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 31 of each year, at least 98% of its ordinary income (not including
tax-exempt income) for such year and at least 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 31 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 mark-to-market some of the positions in its portfolio (i.e.,
treat them as if they were sold for fair market value at the end of the
tax-year), which may cause the Fund to recognize income 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.
The Fund's ability to dispose of portfolio securities may be limited by the
requirement for qualification as a regulated investment company that less than
30% of the Fund's annual gross income be derived from the disposition of
securities held for less than three months.
Investments of the Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
shareholders. For example, with respect to securities issued at a discount, the
Fund will be required to accrue as income each year a portion of the discount
and to distribute such income each year in order to maintain its qualification
as a regulated investment company and to avoid income and excise taxes. In order
to generate sufficient cash to make distributions necessary to satisfy the 90%
distribution requirement and to avoid income and excise taxes, the Fund may have
to dispose of securities that it would otherwise have continued to hold. A
portion of the discount relating to certain stripped tax-exempt obligations may
constitute taxable income when distributed to shareholders.
DISTRIBUTIONS. The Fund intends to invest in sufficient tax-exempt municipal
securities to permit payment of "exempt-interest dividends" (as defined in the
Code). Dividends paid by the Fund from the net tax-exempt interest earned from
municipal securities qualify as exempt-interest dividends if, at the close of
each quarter of its taxable year, at least 50% of the value of the total assets
of the Fund consists of municipal securities.
The Tax Reform Act of 1986 (the "Tax Reform Act") may have an adverse impact
upon the Fund and its shareholders. The Tax Reform Act imposed new limitations
on the use and investment of the proceeds of state and local government bonds
and other funds, which limitations must be satisfied in order to maintain the
exclusion from gross income for interest
30
<PAGE> 31
on such bonds. The provisions of the Tax Reform Act generally apply to bonds
issued after August 15, 1986. In light of these requirements, bond counsel
qualify their opinions as to the federal tax status of bonds issued after August
15, 1986 by making them contingent on the issuer's future compliance with these
limitations. Any failure on the part of an issuer to comply could cause the
interest on its bonds to become taxable to investors retroactive to the date the
bonds were issued.
Except as provided below, exempt-interest dividends paid to shareholders
generally are not includable in the shareholders' gross income for federal
income tax purposes. The percentage of the total dividends paid by the Fund
during any taxable year that qualify as exempt-interest dividends will be the
same for all shareholders of the Fund receiving dividends during such year.
The Tax Reform Act also makes interest on certain "private-activity bonds" an
item of tax preference subject to the alternative minimum tax on individuals and
corporations. The Fund invests a portion of its assets in municipal securities
subject to this provision so that a portion of its exempt-interest dividends is
an item of tax preference to the extent such dividends represent interest
received from these private-activity bonds. Accordingly, investment in the Fund
could cause shareholders to be subject to (or result in an increased liability
under) the alternative minimum tax. The Tax Reform Act also imposed per capita
volume limitations on certain private-activity bonds which could limit the
amount of such bonds available for investment by the Fund.
Exempt-interest dividends are included in determining what portion, if any, of
a person's social security and railroad retirement benefits will be includable
in gross income subject to federal income tax.
Although exempt-interest dividends generally may be treated by Fund
shareholders as items of interest excluded from their gross income, each
shareholder is advised to consult his tax adviser with respect to whether
exempt-interest dividends retain this exclusion if the purchaser would be
treated as a "substantial user" (or a "related person" of a substantial user) of
the facilities financed with respect to any of the tax-exempt obligations held
by the Fund, or by the Trust if it is required to qualify as a regulated
investment company as described below. "Substantial user" is defined under U.S.
Treasury Regulations to include a non-exempt person who regularly uses in his
trade or business a part of any facilities financed with the tax-exempt
obligations and whose gross revenues derived from such facilities exceed five
percent of the total revenues derived from the facilities by all users, or who
occupies more than 5% of the useable area of the facilities or for whom the
facilities or a part thereof were specifically constructed, reconstructed or
acquired. Examples of "related persons" include certain related natural persons,
affiliated corporations, a partnership and its partners and an S corporation and
its shareholders.
The Omnibus Budget Reconciliation Act of 1993 included certain provisions that
requires gains on dispositions of tax-exempt securities purchased at a market
discount be treated as ordinary income to the extent of the accrued market
discount, if the securities are acquired after April 30, 1993. Such securities
were exempt from the market discount rules under prior law. Interest on
indebtedness incurred or continued by a shareholder to purchase or carry shares
of the Fund is not deductible for federal income tax purposes if the Fund
distributes exempt-interest dividends during the shareholder's taxable year. If
a shareholder receives an exempt-interest dividend with respect to any shares
and such shares are held for six months or less, any short-term capital loss on
the sale or exchange of the shares will be disallowed to the extent of the
amount of such exempt-interest dividend.
While the Fund expects that a major portion of its net investment income will
constitute tax-exempt interest, a significant portion may consist of investment
company taxable income. Distributions of the Fund's net investment company
taxable income are taxable to shareholders as ordinary income to the extent of
the Fund's earnings and profits, whether paid in cash or reinvested in
additional shares. Distributions of the Fund's net capital gains ("capital gains
dividends"), if any, are taxable to shareholders as long-term capital gains
regardless of the length of time shares of the Fund have been held by such
shareholders. Interest on indebtedness which is incurred to purchase or carry
shares of a mutual fund which distributes exempt-interest dividends during the
year is not deductible for federal income tax purposes. 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). 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.
31
<PAGE> 32
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. The aggregate
amount of dividends so designated cannot exceed, however, the amount of interest
exempt from tax under Section 103 of the Code received by the Fund during the
year over any amounts disallowed as deductions under Sections 265 and 171(a)(2)
of the Code. Since the percentage of dividends which are "exempt-interest"
dividends is determined on an average annual method for the fiscal year, the
percentage of income designated as tax-exempt for any particular dividend may be
substantially different from the percentage of the Fund's income that was tax
exempt during the period covered by the dividend, Fund distributions generally
will not qualify for the dividends received deduction for corporations.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31 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.
The Fund is required, in certain circumstances, to withhold 31% of dividends
and certain other payments, including redemptions, paid to shareholders who do
not furnish to the Fund their correct taxpayer identification number (in the
case of individuals, their social security number) and certain required
certifications or who are otherwise subject to backup withholding.
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 and will be long-term if such shares
have been held for more than one year. Any loss realized upon a taxable
disposition of shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gains dividends received with respect
to such shares. For 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.
GENERAL. The federal, state and local income tax discussion set forth above
is for general information only. Prospective investors should consult their
advisors regarding the specific federal tax consequences of holding and
disposing of shares, as well as the effects of state, local and foreign tax law
and any proposed tax law changes.
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FUND PERFORMANCE
- --------------------------------------------------------------------------------
From time to time advertisements and other sales materials for the Fund may
include information concerning the historical performance of the Fund. Any such
information will include the average total return of the Fund calculated on a
compounded basis for specified periods of time. Such advertisements and sales
material may also include a yield quotation as of a current period. In each
case, such total return and yield information, if any, will be calculated
pursuant to rules established by the SEC and will be computed separately for
each class of the Fund's shares. In lieu of or in addition to total return and
yield calculations, such information may include performance rankings and
similar information from independent organizations such as Lipper Analytical
Services, Inc. or nationally recognized financial publications.
From time to time, the Fund may include in its sales literature and
shareholder reports a quotation of the current "distribution rate" for each
class of shares of the Fund. Distribution rate is a measure of the level of
income and short-term capital gain dividends, if any, distributed for a
specified period. Distribution rate is determined by annualizing the
distributions per share for a stated period and dividing the result by the
public offering price for the same period. It differs from yield, which is a
measure of the income actually earned by the Fund's investments, and from total
return, which is a measure of the income actually earned by, plus the effect of
any realized and unrealized appreciation or depreciation of such investments
during a stated period. Distribution rate is, therefore, not intended to be a
complete measure of the Fund's performance. Distribution rate may sometimes be
greater than yield since, for instance, it may not include the effect of
amortization of bond premiums, and may include non-recurring short-term capital
gains and premiums from
32
<PAGE> 33
futures transactions engaged in by the Fund. Distribution rates will be computed
separately for each class of the Fund's shares.
From time to time, the Fund may compare its performance to certain securities
and unmanaged indices which may have different risk or reward characteristics
than the Fund. Such characteristics may include, but are not limited to, tax
features, guarantees, insurance and the fluctuation of principal or return. In
addition, from time to time, the Fund may utilize sales literature that includes
hypotheticals.
Further information about the Fund's performance is contained in the Fund's
Annual Report and Semi-Annual Report and the Fund's Statement of Additional
Information, each of which can be obtained without charge by calling (800)
421-5666 ((800) 421-2833 for the hearing impaired).
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
The Fund is a series of the Van Kampen Tax Free Trust, a Delaware business
trust organized as of May 10, 1995 (the "Trust"). The Fund was originally
organized in 1994 under the name Van Kampen Merritt Florida Insured Tax Free
Fund as a sub-trust of the Van Kampen Merritt Tax Free Fund, a Massachusetts
business trust. The Fund was reorganized as a series of the Trust as of July 31,
1995 and on July 14, 1998 adopted its current name. Shares of the Trust entitle
their holders to one vote per share; however, separate votes are taken by each
series on matters affecting an individual series.
The authorized capitalization of the Fund consists of an unlimited number of
shares of beneficial interest, $0.01 par value, divided into three classes,
designated Class A Shares, Class B Shares and Class C Shares. Each class of
shares represents an interest in the same assets of the Fund and are identical
in all respects except that each class bears certain distribution expenses and
has exclusive voting rights with respect to its distribution fee. See
"Distribution and Service Plans."
The Fund is permitted to issue an unlimited number of classes of shares. Each
class of shares is equal as to earnings, assets and voting privileges, except as
noted above, and each class bears the expenses related to the distribution of
its shares. There are no conversion, preemptive or other subscription rights,
except with respect to the conversion of Class B Shares and certain Class C
Shares into Class A Shares as described above. In the event of liquidation, each
of the shares of the Fund is entitled to its portion of all of the Fund's net
assets after all debt and expenses of the Fund have been paid. Since Class B
Shares and Class C Shares pay higher distribution fees and transfer agency
costs, the liquidation proceeds to Class B Shareholders and Class C Shareholders
are likely to be lower than to other shareholders.
The Trust does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. However, the holders of 10% or more of the
outstanding shares may by written request require a meeting to consider the
removal of Trustees by a vote of two-thirds of the shares then outstanding cast
in person or by proxy at such meeting. The Trust will assist such holders in
communicating with other shareholders of the Fund to the extent required by the
1940 Act. More detailed information concerning the Trust is set forth in the
Statement of Additional Information.
The Fund's Declaration of Trust provides that no Trustee, officer or
shareholder of the Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or liability of the Fund but the assets of the Fund only shall be liable.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
This Prospectus and the Statement of Additional Information do not contain all
the information set forth in the Registration Statement filed by the Fund with
the SEC under the Securities Act of 1933, as amended. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the office of the SEC in Washington, D.C.
At the Joint Quarterly Meeting of the Board of Trustees held on July 30, 1998,
the Trustees approved the changing of the Fund's fiscal year end to September
30. Previously, the Fund's fiscal year end was December 31. The Fund sends to
its shareholders, at least semi-annually, reports showing the Fund's portfolio
and other information. An Annual Report, containing financial statements audited
by the Fund's independent auditors, is sent to shareholders each year. After the
end of each year, shareholders will receive federal income tax information
regarding dividends and capital gains distributions.
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<PAGE> 34
EXISTING SHAREHOLDERS--
FOR INFORMATION ON YOUR
EXISTING ACCOUNT PLEASE CALL
THE FUND'S TOLL-FREE
NUMBER--(800) 341-2911.
PROSPECTIVE INVESTORS--CALL
YOUR BROKER OR (800) 421-5666.
DEALERS--FOR DEALER
INFORMATION, SELLING
AGREEMENTS, WIRE ORDERS,
OR REDEMPTIONS CALL THE
DISTRIBUTOR'S TOLL-FREE
NUMBER--(800) 421-5666.
FOR SHAREHOLDER AND
DEALER INQUIRIES THROUGH
TELECOMMUNICATIONS
DEVICE FOR THE DEAF (TDD)
DIAL (800) 421-2833.
FOR AUTOMATED TELEPHONE
SERVICES DIAL (800) 847-2424.
VAN KAMPEN FLORIDA INSURED TAX FREE
INCOME FUND
One Parkview Plaza
Oakbrook Terrace, IL 60181
Investment Adviser
VAN KAMPEN INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Distributor
VAN KAMPEN FUNDS INC.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen Florida Insured Tax Free
Income Fund
Custodian
STATE STREET BANK AND
TRUST COMPANY
225 West Franklin Street, P.O. Box 1713
Boston, MA 02105-1713
Attn: Van Kampen Florida Insured Tax Free
Income Fund
Legal Counsel
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
KPMG PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601
<PAGE> 35
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FLORIDA INSURED
TAX FREE
INCOME FUND
- --------------------------------------------------------------------------------
P R O S P E C T U S
APRIL 30, 1998, AS SUPPLEMENTED
ON JULY 14, 1998 AND AUGUST 26, 1998
VAN KAMPEN LOGO
FLI PRO 8/98
