<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1999
REGISTRATION NOS. 33-4410
811-4629
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 45 [X]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 46 [X]
</TABLE>
VAN KAMPEN TRUST
(Exact Name of Registrant as Specified in Agreement and Declaration of Trust)
1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555
(Address of Principal Executive Offices) (Zip Code)
(630) 684-6000
Registrant's Telephone Number, Including Area Code
A. THOMAS SMITH III
Executive Vice President,
General Counsel and Secretary
Van Kampen Investments Inc.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, Illinois 60181-5555
(Name and Address of Agent for Service)
------------------------
Copies to:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
(312) 407-0700
------------------------
Approximate Date of Proposed Public Offering: As soon as practicable
following effectiveness of this Registration Statement.
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest, par value
$0.01 per share
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<PAGE> 2
EXPLANATORY NOTE
The Registrant currently has three series. The purpose of this
Post-Effective Amendment No. 45 under the Securities Act of 1933, as amended
(the "1933 Act"), and the Investment Company Act of 1940, as amended (the "1940
Act"), is to add a new, fourth series, the Van Kampen Managed Short Term Income
Fund. This Amendment contains a prospectus and a statement of additional
information describing the new Fund.
The three prospectuses and three statements of additional information of
the other three series of the Registrant are incorporated herein by reference to
Post-Effective Amendment No. 44 which was filed with the Securities and
Exchanged Commission on May 28, 1999. This Amendment is not intended to amend
the three prospectuses and three statements of additional information
incorporated herein. The Registration Statement is organized as follows:
Facing Page
Prospectus of the Van Kampen Managed Short Term Income Fund
Statement of Additional Information of the Van Kampen Managed Short Time
Income Fund
Part C Information
Exhibits
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE FUND
MAY NOT SELL THESE SECURITIES UNTIL THE POST-EFFECTIVE AMENDMENT TO THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES.
SUBJECT TO COMPLETION -- DATED JULY 21, 1999
VAN KAMPEN
MANAGED SHORT TERM
INCOME FUND
Van Kampen Managed Short Term Income Fund is a mutual fund with an investment
objective to seek a high level of income. The Fund's management seeks to achieve
the investment objective by investing primarily in a diversified portfolio of
domestic investment-grade quality income securities, including U.S. government
securities, mortgage-backed or other asset-backed securities and
investment-grade corporate bonds, and by maintaining a dollar-weighted average
portfolio duration of less than three years.
Shares of the Fund have not been approved or disapproved by the Securities and
Exchange Commission (SEC) or any state regulators, and neither the SEC nor any
state regulator has passed upon the accuracy or adequacy of this prospectus. It
is a criminal offense to state otherwise.
This prospectus is dated , 1999.
[VAN KAMPEN FUNDS LOGO]
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary............................... 3
Fees and Expenses of the Fund..................... 6
Investment Objective, Policies and Risks.......... 7
Investment Advisory Services...................... 16
Purchase of Shares................................ 17
Redemption of Shares.............................. 24
Distributions from the Fund....................... 25
Shareholder Services.............................. 26
Federal Income Taxation........................... 28
Appendix--Description of Securities Ratings....... A-1
</TABLE>
No dealer, salesperson, or any other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus, in connection with the offer contained in this prospectus and, if
given or made, such other information or representation must not be relied upon
as having been authorized by the Fund, the Fund's investment adviser, or the
Fund's distributor. This prospectus does not constitute an offer by the Fund or
by the Fund's distributor to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful for the Fund to make such an offer in such jurisdiction.
<PAGE> 5
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The Fund is a mutual fund with an investment objective to seek a high level of
income.
INVESTMENT STRATEGIES
The Fund's management seeks to achieve the investment objective by investing
primarily in a diversified portfolio of domestic investment-grade quality income
securities, including U.S. government securities, mortgage-backed or other
asset-backed securities and investment-grade corporate bonds (see sidebar
entitled "Understanding Quality Ratings"). Under normal market conditions, at
least 65% of the Fund's total assets are invested in such securities. Under
normal market conditions, the Fund seeks to maintain a dollar-weighted average
duration of less than three years (see sidebar for "Understanding Maturities and
Understanding Duration"). To enhance yield and to add diversification, the Fund
may invest the remaining 35% of its total assets in securities that are below
investment-grade quality (commonly referred to as "junk bonds") and in foreign
income securities, including those from emerging markets. The Fund buys and
sells securities with a view to seeking a high level of income. In selecting
securities for investment, the Fund's investment adviser considers, among other
things, yields relative to risks on individual securities and trends in the
corporate and governmental securities markets, including a range of economic and
financial factors. The Fund may purchase and sell securities on a when-issued or
delayed delivery basis. The Fund may purchase or sell certain derivative
instruments (such as options, futures and options on futures and interest-rate
swaps or other interest rate-related transactions) for various risk management
and hedging purposes.
INVESTMENT RISKS
An investment in the Fund is subject to investment risks, and you could lose
money on your investment in the Fund. There can be no assurance that the Fund
will achieve its investment objective.
MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. The prices of income securities tend to fall as
interest rates rise, and such declines tend to be greater among income
securities with longer durations. Although the Fund may invest in securities of
any maturity, the Fund seeks to maintain a dollar-weighted average portfolio
duration of less than three years. This means that the Fund will be subject to
greater market risk than a fund investing solely in shorter-term securities but
less market risk than a fund investing solely in longer-term securities.
The yields and market prices of U.S. government securities may move differently
and adversely compared to the yields and market prices of the overall securities
markets. These securities, while backed by the U.S. government, are not
guaranteed against declines in their market prices. The prices of
mortgage-backed or other asset-backed securities, like those of traditional
income securities, tend to fall as interest rates rise. Mortgage-backed or other
asset-backed securities may be more susceptible to further price declines than
traditional income securities in periods of rising interest rates because of
extension risk (described below). Additionally, mortgage-backed or other
asset-backed securities may benefit less than traditional income securities
during periods of declining interest rates because of prepayment risk (described
below).
Investments in when-issued and delayed delivery transactions are subject to
changes in market conditions from the time of the commitment until settlement.
This may adversely affect the prices or yields of the securities being
purchased, as well as any portfolio securities held for payment of such
commitments. The greater the Fund's outstanding commitments for these
securities, the greater the Fund's exposure to market price fluctuation.
Lower-grade securities, especially those with longer maturities or that do not
make regular interest payments, may fluctuate more in response to negative
issuer or general economic news than higher-grade securities. Foreign markets
may, but often do not, move in tandem with changes in U.S. markets, and foreign
markets may have more price volatility that U.S. markets.
3
<PAGE> 6
UNDERSTANDING
MATURITIES
An income security can be categorized according to its maturity, which is
the length of time before the issuer must repay the principal.
<TABLE>
<C> <S>
Term Maturity Level
- --------------------------------------------------
1-3 years Short
..................................................
4-10 years Intermediate
..................................................
More than 10 years Long
..................................................
</TABLE>
UNDERSTANDING
DURATION
Duration provides an alternative approach to assessing a security's market
risk. Duration measures the expected life of a security by incorporating the
security's yield, coupon interest payments, final maturity and call features
into one measure. Whereas maturity focuses only on the final principal
repayment date of a security, duration looks at the timing and present value
of all of a security's principal, interest or other payments. Typically, an
income security with interest payments due prior to maturity has a duration
less than maturity. A zero-coupon bond, which does not make interest
payments prior to maturity, would have the same duration and maturity.
CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments
of interest and principal. Under normal market conditions, the Fund invests at
least 65% of its total assets in investment-grade quality securities and may
invest the remaining 35% of its total assets in securities below
investment-grade quality. This means that the Fund is subject to a higher level
of credit risk than a fund that buys only investment-grade quality securities.
The credit quality of "noninvestment grade" securities is considered speculative
by recognized rating agencies with respect to the issuer's continuing ability to
pay interest and principal. Lower-grade securities may have less liquidity and a
higher incidence of default than investments in higher-grade securities. The
Fund may incur higher expenditures to protect the Fund's interest in such
securities. The credit risks and market prices of lower-grade securities are
more sensitive to negative issuer developments, such as reduced revenues or
increased expenditures, or adverse economic conditions, such as a recession,
than are higher-grade securities.
UNDERSTANDING
QUALITY RATINGS
Income securities ratings are based on the issuer's ability to pay interest
and repay the principal. Securities with ratings above the line are
considered "investment grade," while those with ratings below the line are
regarded as "noninvestment grade," or "junk bonds." A detailed explanation
of these ratings can be found in the appendix to this prospectus.
<TABLE>
<CAPTION>
S&P Moody's Meaning
- ------------------------------------------------------
<C> <S> <C>
AAA Aaa Highest quality
......................................................
AA Aa High quality
......................................................
Aa A Above-average quality
......................................................
BBB Baa Average quality
- ------------------------------------------------------
BB Ba Below-average quality
......................................................
B B Marginal quality
......................................................
CCC Caa Poor quality
......................................................
CC Ca Highly speculative
......................................................
C C Lowest quality
......................................................
D -- In default
......................................................
</TABLE>
INCOME RISK. The income you receive from the Fund is based primarily on interest
rates, which can vary widely over the short- and long-term. If interest rates
drop, your income from the Fund may drop as well. The more the Fund invests in
adjustable, variable or floating rate securities or in securities susceptible to
prepayment risk, the greater the Fund's income risk.
CALL OR PREPAYMENT RISK. If interest rates fall, it is possible that issuers of
callable bonds with high interest rates will prepay or "call" their securities
before their maturity dates. In this event, the proceeds from the called
securities would be reinvested by the Fund in securities with the new, lower
interest rates, resulting in a possible decline in the Fund's income and
distributions to shareholders.
The Fund may invest in pools of mortgages or other assets issued or guaranteed
by private organizations or U.S. government agencies. These mortgage-backed or
other asset-backed securities are especially sensitive to prepayment risk
because borrowers often refinance their mortgages and prepay other debt
obligations when interest rates drop.
4
<PAGE> 7
EXTENSION RISK. The value of income securities tends to fall as interest rates
rise. For mortgage-backed or other asset-backed securities, if interest rates
rise then borrowers may prepay the principal underlying the income security more
slowly than originally expected, which may further reduce the market value of
such security and lengthen its duration.
FOREIGN RISKS. Because the Fund may own securities of foreign issuers, it may be
subject to risks not usually associated with owning securities of U.S. issuers.
These risks can include fluctuations in foreign currencies, foreign currency
exchange controls, political and economic instability, differences in financial
reporting, differences in securities regulation and trading, and foreign
taxation issues. The risks of investing in developing or emerging markets (in
which the Fund may invest) are greater than the risks associated with foreign
investments generally, including greater political uncertainties, an economy's
dependence on international development assistance, currency transfer
restrictions, and greater delays and disruptions in settlement transactions.
RISKS OF USING DERIVATIVE INVESTMENTS. In general terms, a derivative investment
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures and options on futures, interest
rate swaps and other interest-rate related transactions are examples of
derivatives. Such transactions involve risks different from the direct
investment in underlying securities such as imperfect correlation between the
value of the instruments and the underlying assets; risks of default by the
other party to certain transactions; risks that the transactions may result in
losses that partially or completely offset gains in portfolio positions; risks
that the transactions may not be liquid; and manager risk.
MANAGER RISK. As with any managed fund, the Fund's management may not be
successful in selecting the best-performing securities and the Fund's
performance may lag behind that of similar funds.
INVESTOR PROFILE
In light of its objectives and investment strategies, the Fund may be
appropriate for investors who:
- - Seek a high level of income.
- - Wish to add to their personal investment portfolios a fund that invests
primarily in domestic investment-grade quality income securities.
- - Are willing to take on the increased risks associated with limited investing
in lower-quality income securities and securities of foreign issuers.
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 about the Fund. An investment in the Fund is intended to be a long-term
investment and the Fund should not be used as a trading vehicle.
5
<PAGE> 8
FEES AND EXPENSES
OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price) 2.25%(1) None None
- --------------------------------------------------------------
Maximum deferred
sales charge (load)
(as a percentage of
the lesser of
original purchase
price or redemption None(2) 2.00%(3) 0.65%(4)
proceeds)
- --------------------------------------------------------------
Maximum sales charge
(load) imposed on
reinvested dividends
(as a percentage of
offering price) None None None
- --------------------------------------------------------------
Redemption fees (as a
percentage of amount None None None
redeemed)
- --------------------------------------------------------------
Exchange fee None None None
- --------------------------------------------------------------
</TABLE>
(1) Reduced for purchases of $25,000 and over. See "Purchase of Shares -- Class
A Shares."
(2) Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a deferred sales charge of 0.65% may be imposed on
certain redemptions made within one year of the purchase. See "Purchase of
Shares -- Class A Shares."
(3) The maximum deferred sales charge is 2.00% in the first year after purchase
and declining thereafter as follows:
Year 1-2.00%
Year 2-1.50%
Year 3-1.00%
Year 4-0.50%
After-None
See "Purchase of Shares -- Class B Shares."
(4) The maximum deferred sales charge is 0.65% in the first year after purchase
and 0.00% thereafter. See "Purchase of Shares -- Class C Shares."
ANNUAL FUND
OPERATING EXPENSES
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.40% 0.40% 0.40%
- --------------------------------------------------------------
Distribution and/or
Service (12b-1) 0.15% 0.65%(2) 0.65%(2)
Fees(1)
- --------------------------------------------------------------
Other Expenses(3) 0.25% 0.25% 0.25%
- --------------------------------------------------------------
Total Annual Fund
Operating Expenses 0.80% 1.30% 1.30%
- --------------------------------------------------------------
</TABLE>
(1) Class A Shares are subject to an annual service fee of up to 0.15% of the
average daily net assets attributable to such class of shares. Class B
Shares and Class C Shares are each subject to a combined annual distribution
and service fee of up to 0.65% of the average daily net assets attributable
to such class of shares. See "Purchase of Shares."
(2) Because Distribution and/or Service (12b-1) Fees are paid out of the Fund's
assets on an ongoing basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales
charges.
(3) "Other Expenses" have been estimated for the Fund's current fiscal year.
Example:
The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% annual return each year and
that the Fund's operating expenses remain the same each year. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
One Three
Year Years
- -----------------------------------------------------
<S> <C> <C>
Class A Shares $ $
- -----------------------------------------------------
Class B Shares $ $
- -----------------------------------------------------
Class C Shares $ $
- -----------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
One Three
Year Years
- -----------------------------------------------------
<S> <C> <C>
Class A Shares $ $
- -----------------------------------------------------
Class B Shares $ $
- -----------------------------------------------------
Class C Shares $ $
- -----------------------------------------------------
</TABLE>
6
<PAGE> 9
INVESTMENT OBJECTIVE,
POLICIES AND RISKS
The Fund's investment objective is to seek a high level of income. The Fund's
investment objective may be changed by the Fund's Board of Trustees without
shareholder approval, but no change is anticipated. If there is a change in the
investment objective of the Fund, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
positions and needs. There are risks inherent in all investments in securities;
accordingly there can be no assurance that the Fund will achieve its investment
objective.
The Fund's investment adviser seeks to achieve the investment objective by
investing primarily in a diversified portfolio of domestic investment-grade
income securities, including U.S. government securities, mortgage-backed or
other asset-backed securities and investment-grade corporate bonds. Under normal
market conditions, at least 65% of the Fund's assets are invested in such
securities. Under normal market conditions, the Fund seeks to maintain a
dollar-weighted average duration of less than three years. The remaining 35% of
the Fund's total assets may be invested in securities below investment-grade
quality and in foreign income securities including those from emerging markets.
The composition of the Fund's portfolio may vary over time based upon the Fund's
investment adviser's evaluation of general market and economic conditions,
trends in yields and interest rates and changes in fiscal or monetary policies.
The Fund's investment adviser focuses on managing the portfolio's duration and
in selecting securities from among its permitted investments based on, among
other things, the spreads in yield curves between asset classes, trends in the
corporate and governmental securities markets, a security's current income
potential, the rating assigned to the security, the issuer's experience and
managerial strength, the financial soundness of the issuer and the outlook of
its industry, changing financial condition, borrowing requirements or debt
maturity schedules, regulatory concerns, responsiveness to changes in business
conditions and interest rates, and overall credit quality.
The Fund may invest in income securities of any maturity and of many types such
as bonds, notes or other debt obligations which bear a fixed, variable or
floating rate of interest payable at regular intervals or at maturity and have
fixed or resettable maturity dates or call provisions. The Fund may purchase
income securities at a premium over the principal or face value in order to
obtain higher current income. The amount of any premium declines during the term
of the security to zero at maturity. Such decline generally is reflected in the
market price of the security and thus in the Fund's net asset value. Any such
decline is realized for accounting purposes as a capital loss at maturity or
upon resale. Prior to maturity or resale, such decline in value could be offset,
in whole or part, or increased by changes in the value of the security due to
changes in interest rate levels. See "Other Characteristics of Certain Income
Securities" below.
The value of income securities generally varies inversely with changes in
prevailing interest rates. If interest rates rise, income security prices
generally fall; if interest rates fall, income security prices generally rise.
Shorter-term securities are generally less sensitive to interest rate changes
than longer-term securities; thus, for a given change in interest rates, the
market prices of shorter-maturity income securities generally fluctuate less
than the market prices of longer-maturity income securities. Income securities
with shorter maturities generally will not offer as high a yield as those with
longer maturities assuming all other factors, including credit quality, being
equal. In pursuing its investment objective, the Fund may invest in securities
of any maturity, but the Fund seeks to maintain a dollar-weighted average
portfolio duration of less than three years. Duration is a measure of the
expected life of a debt security that was developed as an alternative to the
concept of "term to maturity." Duration incorporates an income security's yield,
coupon interest payments, final maturity and call features into one measure. A
duration calculation looks at the present value of a security's entire payment
stream whereas term to maturity is based solely on the date of a security's
final principal repayment. Certain types of income securities are subject to
additional market risks as described below.
Credit risk refers to an issuer's ability to make timely payments of interest
and principal. Under normal market conditions, the Fund invests at least 65% of
its total assets in domestic investment-grade income securities.
Investment-grade quality securities are securities rated at the time of
investment BBB or higher by Standard & Poor's ("S&P") or rated Baa or higher by
Moody's Investors Service, Inc.
7
<PAGE> 10
("Moody's") or comparably rated by another nationally recognized statistical
rating organization ("NRSRO") or, if unrated, considered by the Fund's
investment adviser to be of comparable quality. Credit quality at the time of
purchase determines which securities may be acquired, and a subsequent reduction
in ratings does not require the Fund to dispose of a security. Securities rated
BBB by S&P or Baa by Moody's are considered to be medium-grade obligations which
possess speculative characteristics so that changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than in the case of higher-rated securities. The
ratings assigned by the ratings agencies represent their opinions of the quality
of the income securities they undertake to rate, but not the market risk of such
securities. It should be emphasized that ratings are general and are not
absolute standards of quality. The Fund may invest the remaining 35% of its
total assets in lower-grade income securities. Lower rated securities, also
referred to as "junk bonds," are those securities that are rated lower than
investment-grade and unrated securities of comparable quality. Although these
securities generally offer higher yields than investment-grade quality
securities with similar maturities, lower-quality securities involve greater
risks, including the possibility of default or bankruptcy. In general,
lower-rated securities are regarded to be predominantly speculative with respect
to the issuer's capacity to pay interest and repay principal, see "Risks of
Investing in Lower-Grade Income Securities" below. For further description of
securities ratings, see the appendix to this prospectus.
U.S. GOVERNMENT SECURITIES
Securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities include: (1) U.S. Treasury obligations, which differ in their
interest rates, maturities and times of issuance: U.S. Treasury bills (maturity
of one year or less), U.S. Treasury notes (maturity of one to ten years), and
U.S. Treasury bonds (generally maturities of greater than ten years), including
the principal components or the interest components issued by the U.S.
government under the Separate Trading of Registered Interest and Principal of
Securities program (i.e., "STRIPS"), all of which are backed by the full faith
and credit of the United States; and (2) obligations issued or guaranteed by
U.S. government agencies or instrumentalities, including government issued or
guaranteed mortgage-backed securities, some of which are backed by the full
faith and credit of the U.S. Treasury, some of which are supported by the right
of the issuer to borrow from the U.S. government and some of which are backed
only by the credit of the instrumentality. U.S. government securities are
considered among the most creditworthy of fixed-income investments; however, the
yields on U.S. government securities generally are lower than yields available
from corporate debt securities.
TREASURY INFLATION-PROTECTED SECURITIES. The Fund may invest in U.S. Treasury
inflation-protected securities ("TIPS") that are designed to provide an
investment vehicle that is not vulnerable to inflation. The coupon interest rate
as a percentage of principal for these securities is established in an open
auction process and then remains constant over the life of the security. The
principal value rises or falls semi-annually based upon changes in the Consumer
Price Index. If inflation occurs, the principal and interest payments on TIPS
are adjusted to protect investors from inflationary loss. If deflation occurs,
the principal and interest payments will be adjusted downward, although the
principal will not fall below its face amount at maturity. Holders of TIPS are
taxed on the interest income received, as well as on the increase in principal
that is due to the inflation adjustment. As a result, the after-tax annual yield
on TIPS is lower than the after-tax annual yield on a fixed-principal Treasury
security of the same maturity. TIPS are expected to show less market risk/price
volatility as interest rates rise and fall than a fixed-principal Treasury
security of the same maturity. Even though TIPS should experience less market
volatility than regular fixed-principal instruments, they should not be viewed
as a surrogate for a money market instrument or other cash equivalents.
MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES
MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed securities. A
mortgage-backed security is a general obligation of the issuer, which generally
is secured by mortgages or mortgage-backed collateral. Mortgage-backed
securities may include securities issued or guaranteed by U.S. government
agencies or instrumentalities or issued by private entities such as banks,
savings and loans, mortgage bankers and other nongovernmental issuers.
Mortgage-backed securities may directly or indirectly represent a participation
in, or are secured by and payable from, mortgage loans secured by real
8
<PAGE> 11
property. Mortgage-backed securities include mortgage pass-through certificates
representing participation interests in pools of mortgage loans originated by
the U.S. government or by private lenders and guaranteed directly or indirectly
by U.S. government agencies such as GNMA, FNMA or FHLMC or by private lenders
without government guarantees. The underlying collateral may include whole
mortgage loans or pass-through certificates secured by mortgage loans.
Mortgage-backed securities issued or guaranteed by U.S. government agencies or
instrumentalities include certificates issued by the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). Guarantees by
GNMA are backed by the full faith and credit of the U.S. government. Guarantees
by other agencies or instrumentalities of the U.S. government, such as FNMA or
FHLMC, are not backed by the full faith and credit of the U.S. government,
although FNMA and FHLMC are authorized to borrow from the U.S. Treasury to meet
their obligations. Private-issuer mortgage-backed securities are obligations of
private entities. Private-issuer mortgage-backed securities are subject to the
credit risks of the issuers, although in some cases they may be supported by
insurance or guarantees.
The yield and payment characteristics of mortgage-backed securities differ from
traditional debt securities. Interest and principal payments are made regularly
and frequently, usually monthly, over the life of the mortgage loans unlike
traditional debt securities and principal may be prepaid at any time because the
underlying mortgage loans generally may be prepaid at any time. Faster or slower
prepayments than expected on underlying mortgage loans can dramatically alter
the yield to maturity of a mortgage-backed security. The value of most
mortgage-backed securities, like traditional debt securities, tends to vary
inversely with changes in interest rates (i.e., as interest rates increase, the
value of such securities decrease). Mortgage-backed securities, however, may
benefit less than traditional debt securities from declining interest rates
because prepayment of mortgages tends to accelerate during periods of declining
interest rates. Prepayments shorten the life of the security and shorten the
time over which the Fund receives income at the higher rate. Additionally, when
mortgage loans underlying mortgage-backed securities held by the Fund are
prepaid, the Fund then reinvests the prepaid amounts in other income securities,
the yields of which will reflect interest rates prevailing at the time.
Therefore, the Fund's ability to maintain a portfolio of higher-yielding
mortgage-backed securities will be adversely affected by decreasing interest
rates and the extent that prepayments occur which must be reinvested in
securities which have lower yields. Any decline in the Fund's income in turn
adversely affects the Fund's dividend payments and distribution to shareholders.
Alternatively, during periods of rising interest rates, mortgage-backed
securities are often more susceptible to extension risk (i.e. rising interest
rates could cause property owners to prepay their mortgages more slowly than
expected when the security was purchased by the Fund which may further reduce
the market value of such security and lengthen the duration of such security)
than traditional debt securities.
The Fund may invest in collateralized mortgage obligations ("CMOs") and real
estate mortgage investment conduits ("REMICs"). CMOs are debt obligations
collateralized by whole mortgage loans or mortgage pass-through securities held
under an indenture issued by financial institutions or other mortgage lenders or
issued or guaranteed by agencies or instrumentalities of the U.S. government.
REMICs are private entities formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real estate. CMOs and REMICs generally are
issued in a number of classes or series with different payment characteristics
and maturities. The classes or series of CMOs and REMICs are retired in sequence
as the underlying mortgages are repaid. The prices and yields of CMOs and REMICs
are determined, in part, by assumptions about the cash flows from the rate of
payments of the underlying mortgages. Changes in interest rates may cause the
rate of expected prepayments of those mortgages to change. In general,
prepayments increase when general interest rates fall and decrease when interest
rates rise. Such securities are subject to market risk, extension risk and
prepayment risk like other mortgage-backed securities; and certain classes or
series may have more or less volatility depending upon the predictability of
cash flow for such class or series. Certain of these securities may have
variable or floating interest rates and others may be stripped (securities which
provide only a portion or none of the principal or interest of the underlying
security). See "Other Characteristics of Certain Income Securities" below.
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ASSET-BACKED SECURITIES. Asset-backed securities are similar to mortgage-backed
securities, however, the underlying collateral include assets such as automobile
or credit card receivables or other credit arrangements. The assets are
securitized either in a pass-through structure (similar to a mortgage pass-
through structure) or in a pay-through structure (similar to the CMO structure).
Although the collateral supporting asset-backed securities generally is of a
shorter maturity than mortgage loans, asset-backed securities are subject to
prepayments which may shorten the weighted average life of the securities and
may lower their returns in the same manner as in the case of mortgage-backed
securities.
Asset-backed securities entail certain risks not presented by mortgage-backed
securities. Asset-backed securities do not have the benefit of the same type of
security interest in the related collateral. For example, credit card
receivables are generally unsecured and a number of state and federal consumer
credit laws give debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the outstanding balance. In the case of automobile
receivables, there is a risk that the holders may not have either a proper or
first security interest in all of the obligations backing such receivables due
to the large number of vehicles involved in a typical issuance, and technical
requirements under state laws. Therefore, recoveries on repossessed collateral
may not always be available to support payments on the securities.
Additional information regarding mortgage-backed and asset-backed securities is
contained in the Fund's Statement of Additional Information.
OTHER CHARACTERISTICS OF
CERTAIN INCOME SECURITIES
VARIABLE AND FLOATING RATE SECURITIES. In addition to traditional fixed-income
securities, the Fund may invest in income securities with variable or floating
rates of interest. Variable or floating rate securities bear rates of interest
that are adjusted periodically according to formulae intended to reflect market
rates of interest. Variable or floating rate securities allow the Fund to
participate in interest rate increases through upward adjustments of the coupon
rates on such securities. However, during periods of increasing interest rates,
changes in the coupon rates may lag the change in market rates or may have
limits on the maximum increase in coupon rates. Alternatively, during periods of
declining interest rates, the coupon rates on such securities readjust downward
resulting in lower yields to the Fund.
The Fund also may invest in derivative variable rate securities, such as inverse
floaters, whose rates vary inversely with market rates of interest, or range
floaters or capped floaters, whose rates are subject to periodic or lifetime
caps, or in securities that pay a rate of interest determined by applying a
multiple to the variable rate. Investment in such securities involve special
risks as compared to a fixed-rate security. The extent of increases and
decreases in the value of derivative variable rate securities and the
corresponding change to the net asset value of the Fund in response to changes
in interest rates generally will be larger than comparable changes in the value
of an equal principal amount of a fixed-rate security having similar credit
quality, redemption provisions and maturity. The markets for such securities may
be less developed and have less liquidity than the markets for conventional
securities.
ZERO COUPON OR STRIPPED SECURITIES. The Fund may also invest in "zero coupon"
securities or "stripped" securities.
A "zero coupon" security pays no interest in cash to its holder during its life
although interest is accrued during that period. The price for a zero coupon
security is generally an amount significantly less than its face value
(sometimes referred to as a "deep discount" price) and the investment return is
based on the difference between the face value (or resale value prior to
maturity) and the investor's price to purchase the security. "Zero coupon"
securities usually trade at a deep discount from their face or par value and
will be subject to greater fluctuations of market value in response to changing
interest rates than debt obligations of comparable maturities which make
periodic distributions of interest. Such securities do not entitle the holder to
any periodic payments of interest prior to maturity which prevents the
reinvestment of such interest payments if prevailing interest rates rise. On the
other hand, because there are no periodic interest payments to be reinvested
prior to maturity, "zero coupon" securities eliminate the reinvestment risk and
may lock in a favorable rate of return to maturity if interest rates drop.
Current federal tax law requires that a holder (such as the Fund) of a "zero
coupon" security
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accrue a portion of the discount at which the security was purchased as income
each year even though the Fund receives no interest payment in cash on the
security during the year. The Fund is required to distribute substantially all
of its investment company taxable income each year and, in order to generate
sufficient cash to make distributions of such income, the Fund may have to
dispose of securities that it would otherwise continue to hold, which, in some
cases may be disadvantageous to the Fund. "Zero coupon" securities include,
among others, U.S. Treasury bills, which are initially sold at a discount to par
value, and U.S. Treasury notes and bonds which have been stripped of their
unmatured interest coupons.
Agencies or instrumentalities of the U.S. government and a number of banks and
brokerage firms have separated ("stripped") the principal portions from the
coupon portions of U.S. Treasury bonds and notes and sold them separately in the
form of receipts or certificates representing undivided interests in these
instruments (which instruments are often held by a bank in a custodial or trust
account). Depending on the issuer and the structure used, such custodial
receipts or certificates of private issuers may not offer the credit support
like U.S. government securities.
Stripped mortgage-related securities (referred to as "stripped mortgage
securities") are derivative multiclass mortgage securities. Stripped mortgage
securities may be issued by agencies or instrumentalities of the U.S.
government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Stripped
mortgage securities usually are structured with at least two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. A common type of stripped mortgage securities will have
one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to
maturity on an IO class is extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets, and a rapid
rate of principal payments may have a material adverse effect on the securities'
yield to maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities even if the security is rated the highest
quality by a NRSRO. Holders of PO securities are not entitled to any periodic
payments of interest prior to maturity. Accordingly, such securities usually
trade at a deep discount from their face or par value and are subject to greater
fluctuations of market value in response to changing interest rates than debt
obligations of comparable maturities which make current distributions of
interest. Current federal tax law requires that a holder (such as the Fund) of
principal only securities accrue a portion of the discount at which the security
was purchased as income each year even though the holder receives no interest
payment in cash on the certificate during the year. In order to generate
sufficient cash to make distributions of such income, the Fund may have to
dispose of securities that it would otherwise continue to hold, which, in some
cases, may be disadvantageous to the Fund.
Although the market for stripped securities is increasingly liquid, certain of
such securities may not be readily marketable and will be considered illiquid
for purposes of the Fund's limitation on investments in illiquid securities. The
Fund will follow established guidelines and standards for determining whether a
particular stripped security is liquid. Generally, such a security may be deemed
liquid if it can be disposed of promptly in the ordinary course of business at a
value reasonably close to that used in the calculation of the net asset value
per share.
STRUCTURED INVESTMENTS. The Fund may invest in "structured investments" which
are interests in entities organized and operated for the purpose of
restructuring the investment characteristics of other income securities. This
type of restructuring involves the deposit with or purchase by an entity of
income securities (such as mortgages or bank loans) and the issuance by that
entity of one or more classes of securities, backed by, or representing
interests in, the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly-issued securities to create
different investment characteristics such as varying maturities, payment
priorities and interest rate provisions.
Investment in structured investments involves certain risks, including the
credit risk of the issuer and the normal risks of price changes in response to
changes in interest rates. Further, in the case of certain
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<PAGE> 14
structured investments, a decline in the underlying instrument may cause the
interest rate to be reduced to zero, and any further declines in the underlying
instrument may then reduce the principal amount payable on maturity. Finally,
structured investments may be less liquid than other types of securities (and
may be subject to the Fund's limitation on investments in illiquid securities),
and may be more volatile than their underlying instruments.
RISKS OF INVESTING IN
LOWER-GRADE INCOME SECURITIES
The Fund may invest up to 35% of its total assets in lower-grade income
securities, which securities are commonly known as "junk bonds." Securities
which are in the lower-grade categories generally offer a higher current yield
than is offered by higher-grade securities of similar maturities, but they also
generally involve greater risks, such as greater credit risk, greater market
risk and volatility, greater liquidity concerns and potentially greater manager
risk. The historical conditions of the issuers of such securities may not have
been as strong as those of other issuers. These securities may be issued in
connection with corporate restructuring such as leveraged buyouts, mergers,
acquisitions, debt recapitalization or similar events. These securities are
often issued by smaller, less creditworthy companies or companies with
substantial debt and may include financially troubled companies or companies in
default or in restructuring. Such securities often are subordinated to the prior
claims of banks and other senior lenders. Investors should carefully consider
the risks of owning shares of a portfolio which invests in lower-grade
securities before investing in the Fund.
Credit risk relates to the issuer's ability to make timely payment of interest
and principal when due. Lower-grade securities are considered more susceptible
to nonpayment of interest and principal or default than higher-grade securities.
Increases in interest rates or changes in the economy may significantly affect
the ability of issuers of lower-grade debt securities to pay interest and to
repay principal, to meet projected financial goals or to obtain additional
financing. In the event that an issuer of securities held by the Fund
experiences difficulties in the timely payment of principal and interest and
such issuer seeks to restructure the terms of its borrowings, the Fund may incur
additional expenses and may determine to invest additional assets with respect
to such issuer or the project or projects to which the Fund's securities relate.
Further, the Fund may incur additional expenses to the extent that it is
required to seek recovery upon a default in the payment of interest or the
repayment of principal on its portfolio holdings, and the Fund may be unable to
obtain full recovery on such amounts.
Market risk relates to changes in market value of a security that occur as a
result of variation in the level of prevailing interest rates and yield
relationships in the debt securities market and as a result of real or perceived
changes in credit risk. The value of the Fund's investments can be expected to
fluctuate over time. 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. Debt securities with
longer maturities, which may have higher yields, may increase or decrease in
value more than debt securities with shorter maturities. However, the secondary
market prices of lower-grade debt securities generally are less sensitive to
changes in interest rate and are more sensitive to general adverse economic
changes or specific developments with respect to the particular issuers than are
the secondary market prices of higher-grade debt securities. A significant
increase in interest rates or a general economic downturn could severely disrupt
the market for lower-grade securities and adversely affect the market value of
such securities. Such events also could lead to a higher incidence of default by
issuers of lower-grade securities as compared with higher-grade securities. In
addition, changes in credit risks, interest rates, the credit markets or periods
of general economic uncertainty can be expected to result in increased
volatility in the market price of the lower-grade securities in the Fund and
thus in the net asset value of the Fund. Adverse publicity and investor
perceptions, whether or not based on rational analysis, may affect the value,
volatility and liquidity of lower-grade securities.
The markets for lower-grade securities may be less liquid than the markets for
higher-grade securities. Liquidity relates to the ability of a fund to sell a
security in a timely manner at a price which reflects the value of that
security. To the extent that there is no established retail market for some of
the lower-grade securities in which the Fund may invest, trading in such
securities may be relatively inactive. Prices of lower-grade securities may
decline rapidly in the event a significant number of holders decide to sell.
Changes in expectations regarding an individual issuer
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<PAGE> 15
of lower-grade securities generally could reduce market liquidity for such
securities and make their sale by the Fund more difficult, at least in the
absence of price concessions. The effects of adverse publicity and investor
perceptions may be more pronounced for securities for which no established
retail market exists as compared with the effects on securities for which such a
market does exist. An economic downturn or an increase in interest rates could
severely disrupt the market for such securities and adversely affect the value
of outstanding securities or the ability of the issuers to repay principal and
interest. Further, the Fund may have more difficulty selling such securities in
a timely manner and at their stated value than would be the case for securities
for which an established retail market does exist.
The Fund's investment adviser is responsible for determining the net asset value
of the Fund, subject to the supervision of the Fund's Board of Trustees. During
periods of reduced market liquidity or in the absence of readily available
market quotations for lower-grade municipal securities held in the Fund's
portfolio, the ability of the Fund's investment adviser to value the Fund's
securities becomes more difficult and the judgment of the Fund's investment
adviser may play a greater role in the valuation of the Fund's securities due to
the reduced availability of reliable objective data.
The Fund's investments in lower-grade securities may include securities rated D
by S&P or C by Moody's (the lowest-grade assigned), and unrated securities of
comparable quality. Securities assigned such ratings include those of companies
that are in default or are in bankruptcy or reorganization. Securities of such
companies are regarded by the rating agencies as having extremely poor prospects
of ever attaining any real investment standing and are usually available at deep
discounts from the face values of the instruments. A security purchased at a
deep discount may currently pay a very high effective yield. In addition, if the
financial condition of the issuer improves, the underlying value of the security
may increase, resulting in a capital gain. If the company defaults on its
obligations or remains in default, or if the plan of reorganization does not
provide sufficient payments for debtholders, the deep discount securities may
stop generating income and lose value or become worthless. The Fund's investment
adviser will balance the benefits of deep discount securities with their risks.
While a diversified portfolio may reduce the overall impact of a deep discount
security that is in default or loses its value, the risk cannot be eliminated.
Many lower-grade debt securities are not listed for trading on any national
securities exchange, and many issuers of lower-grade debt securities choose not
to have a rating assigned to their obligations by any nationally recognized
statistical rating organization. As a result, the Fund's portfolio may consist
of a relatively high proportion of unlisted or unrated securities as compared
with an investment company that invests primarily in higher-grade securities.
Unrated securities are usually not as attractive to as many buyers as are rated
securities, a factor which may make unrated securities less marketable. These
factors may have the effect of limiting the availability of the securities for
purchase by the Fund and may also limit the ability of the Fund to sell such
securities at their fair value either to meet redemption requests or in response
to changes in the economy or the financial markets. Further, to the extent the
Fund owns or may acquire illiquid or restricted lower-grade securities, these
securities may involve special registration responsibilities, liabilities and
costs, and liquidity and valuation difficulties.
The Fund will rely on its investment adviser's judgment, analysis and experience
in evaluating the creditworthiness of an issue. The amount of available
information about the financial condition of certain lower-grade issuers may be
less extensive than other issuers. In its analysis, the Fund's investment
adviser may consider the credit ratings of S&P and Moody's in evaluating
securities although the investment adviser does not rely primarily on these
ratings. Ratings evaluate only the safety of principal and interest payments,
not the market value risk. In addition, ratings are general and not absolute
standards of quality, and credit ratings are subject to the risk that the
creditworthiness of an issuer may change and the rating agencies may fail to
change such ratings in a timely fashion. A rating downgrade does not require the
Fund to dispose of a security. The Fund's investment adviser continuously
monitors the issuers of securities held in the Fund. Additionally, since most
foreign fixed income securities are not rated, the Fund will invest in such
securities based on the Fund's investment adviser's analysis without any
guidance from published ratings. Because of the number of investment
considerations involved in investing in lower-grade and foreign fixed income
securities, achievement of the Fund's investment objectives may be more
dependent upon the investment adviser's credit analysis than is the case with
investing in higher-grade securities.
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New or proposed laws may have an impact on the market for lower-grade
securities. The Fund's investment adviser is unable at this time to predict what
effect, if any, legislation may have on the market for lower-grade securities.
Special tax considerations are associated with investing in certain lower-grade
securities, such as zero coupon securities. The Fund accrues income on these
securities prior to the receipt of cash payments. The Fund must distribute
substantially all of its income to its shareholders to qualify for pass-through
treatment under federal income tax law and may, therefore, have to dispose of
its portfolio securities to satisfy distribution requirements.
RISKS OF INVESTING IN
SECURITIES OF FOREIGN ISSUERS
The Fund may invest up to 35% of its total assets in income securities of
foreign issuers. Such securities may be denominated in U.S. dollars or in
currencies other than U.S. dollars. Investments in foreign securities present
certain risks not ordinarily associated with investments in securities of U.S.
issuers. These risks include fluctuations in foreign currency exchange rates,
political, economic or legal developments (including war or other instability,
expropriation of assets, nationalization and confiscatory taxation), the
imposition of foreign exchange limitations (including currency blockage),
withholding taxes on dividend or interest payments or capital transactions or
other restrictions, higher transaction costs (including higher brokerage,
custodial and settlement costs and currency translation costs) and possible
difficulty in enforcing contractual obligations or taking judicial action. Also,
foreign securities may not be as liquid and may be more volatile than comparable
domestic securities. In addition, there often is less publicly available
information about many foreign issuers, and issuers of foreign securities are
subject to different, often less comprehensive, auditing, accounting, financial
reporting and disclosure requirements than domestic issuers. There is generally
less government regulation of stock exchanges, brokers and listed companies
abroad than in the U.S., and, with respect to certain foreign countries, there
is a possibility of expropriation or confiscatory taxation, or diplomatic
developments which could affect investment in those countries. Because there is
usually less supervision and governmental regulation of exchanges, brokers and
dealers than there is in the U.S., the Fund may experience settlement
difficulties or delays not usually encountered in the U.S. Delays in making
trades in foreign securities relating to volume constraints, limitations or
restrictions, clearance or settlement procedures, or otherwise could impact
yields and result in temporary periods when assets are not fully invested or
attractive investment opportunities are foregone. Investments in securities of
developing or emerging markets are subject to greater risks than investments in
securities of developed countries since emerging markets tend to have economic
structures that are less diverse and mature and political systems that are less
stable than developed countries. In addition to the increased risks of investing
in foreign issuers, there are often increased transactions costs associated with
investing in foreign securities including the costs incurred in connection with
converting currencies, higher foreign brokerage or dealer costs, and higher
settlement costs or custodial costs.
OTHER INVESTMENT PRACTICES
AND RISK FACTORS
WHEN-ISSUED AND DELAYED DELIVERY. The Fund may purchase and sell securities on a
"when-issued" and "delayed delivery" basis. The Fund accrues no income on such
securities until the Fund actually takes delivery of such securities. These
transactions are subject to market fluctuation; the value of the securities at
delivery may be more or less than their purchase price. The yields generally
available on comparable securities when delivery occurs may be higher than
yields on the securities obtained pursuant to such transactions. Because the
Fund relies on the buyer or seller 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. The
Fund will engage in when-issued and delayed delivery transactions for the
purpose of acquiring securities consistent with the Fund's investment objective
and policies and not for the purpose of investment leverage.
STRATEGIC TRANSACTIONS. The Fund may, but is not required to, use various
investment strategic transactions described below to earn income, facilitate
portfolio management and mitigate risks. Such strategic transactions are
generally accepted under modern portfolio management and are regularly used by
many mutual funds and other institutional investors. Although the investment
adviser seeks to use the practices to further the
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<PAGE> 17
Fund's investment objective, no assurance can be given that these practices will
achieve this result.
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 and interest rate indices, and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currency or currency
futures. Collectively, all of the above are referred to as "Strategic
Transactions." The Fund generally seeks to use Strategic Transactions as a risk
management or hedging technique to seek to protect against possible adverse
changes in the market value of securities held in or to be purchased for the
Fund's portfolios, protect the Fund's unrealized gains, facilitate the sale of
certain securities for investment purposes, protect against changes in currency
exchange notes, manage the effective maturity or duration of the Fund's
portfolio, or establish positions in the derivatives markets as a temporary
substitute for purchasing or selling particular securities. Strategic
transactions involving financial futures and options thereon will be purchased,
sold or entered into only for bone-fide hedging, risk management or portfolio
management purposes and not for speculative purposes.
Strategic Transactions have risks including the imperfect correlation between
the value of such instruments and the underlying assets, the possible default of
the other party to the transaction or illiquidity of the derivative instruments.
Furthermore, the ability to successfully use Strategic Transactions depends on
the Fund's investment adviser's ability to predict pertinent market movements,
which cannot be assured. Thus, the use of such Strategic Transactions may result
in losses greater than if they had not been used, require the Fund to sell or
purchase portfolio securities at inopportune times or for prices other than
current market values, limit the amount of appreciation the Fund can realize on
an investment, or cause the Fund to hold a security it might otherwise sell. The
use of currency transactions can result in the Fund incurring losses as a result
of a number of factors including the imposition of exchange controls, suspension
of settlements or the inability to deliver or receive a specified currency.
Money paid by the Fund as premium and money or other assets placed in margin
accounts in connection with entering into Strategic Transactions are not
otherwise available to the Fund for investment purposes.
A more complete discussion of Strategic Transactions and their risks is
contained in the Fund's Statement of Additional Information which can be
obtained by investors free of charge as described on the back cover of this
prospectus.
OTHER PRACTICES. For cash management and investment purposes, the Fund may
engage in repurchase agreements with banks and broker-dealers. Such transactions
are subject to the risk of default by the other party.
In order to generate additional income, the Fund may lend its portfolio
securities in an amount of up to 10% of its total assets to broker-dealers,
banks or other recognized institutional borrowers of securities. Such loans must
be callable at any time and the borrower at all times during the loan must
maintain cash or liquid securities as collateral or provide the Fund an
irrevocable letter of credit equal to at least 100% of the value of the
securities loaned (including accrued interest). During the time portfolio
securities are on loan, the Fund receives any dividends or interest paid on such
securities and the interest earned on the collateral which is invested
short-term instruments or receives an agreed-upon amount of interest income from
the borrower who has delivered the collateral or letter of credit. As with any
extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially.
The Fund may invest up to 15% of the Fund's net assets in illiquid securities
and certain restricted securities. Such securities may be difficult or
impossible to sell at the time and the price that the Fund would like. Thus, the
Fund may have to sell such securities at a lower price, sell other securities
instead to obtain cash or forego other investment opportunities.
Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.
Although the Fund does not intend to engage in substantial short-term trading,
it may sell securities without regard to the length of time they have been
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<PAGE> 18
held in order to take advantage of new investment opportunities or yield
differentials or otherwise. The Fund's portfolio turnover is shown under the
heading "Financial Highlights." The portfolio turnover rate may be expected to
vary from year to year. A high portfolio turnover rate (100% or more) increases
the Fund's transactions costs including brokerage commissions or dealer costs
which may adversely affect the Fund's income and total return and a high
portfolio turnover rate may result in the realization of more short-term capital
gains than if the Fund had lower portfolio turnover. The turnover rate will not
be a limiting factor, however, if the Fund's investment adviser considers
portfolio changes appropriate.
TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may invest on a temporary basis a portion or all
of its assets in cash, higher-grade income securities, securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and money
market instruments. Under normal market conditions, the potential for a high
level of income on these securities will tend to be lower than the potential for
a high level of income on other securities owned by the Fund. The effect of
taking such a defensive position may be that the Fund does not achieve its
investment objectives.
YEAR 2000 RISKS. Like other mutual funds, financial and business organizations
and individuals around the world, the Fund could be adversely affected if the
computer systems used by the Fund's investment adviser and other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Problem." The Fund's investment adviser is taking steps that it believes are
reasonably designed to address the Year 2000 Problem with respect to computer
systems that it uses and to obtain reasonable assurances that comparable steps
are being taken by the Fund's other major service providers. At this time, there
can be no assurances that these steps will be sufficient to avoid any adverse
impact to the Fund. In addition, the Year 2000 Problem may adversely affect the
markets and the issuers of securities in which the Fund may invest which, in
turn, may adversely affect the net asset value of the Fund. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing errors may
result in production problems for individual companies or issuers and overall
economic uncertainty. Earnings of individual issuers will be affected by
remediation costs, which may be substantial and may be reported inconsistently
in U.S. and foreign financial statements. Accordingly, the Fund's investments
may be adversely affected. The statements above are subject to the Year 2000
Information and Readiness Disclosure Act which Act may limit the legal rights
regarding the use of such statements in the case of a dispute.
INVESTMENT ADVISORY
SERVICES
THE ADVISER. Van Kampen Investment Advisory Corp. is the Fund's investment
adviser (the "Adviser" or "Advisory Corp."). The Adviser is a wholly owned
subsidiary of Van Kampen Investments Inc. ("Van Kampen Investments"). Van Kampen
Investments is a diversified asset management company with more than two million
retail investor accounts, extensive capabilities for managing institutional
portfolios, and more than $75 billion under management or supervision. Van
Kampen Investments' more than 50 open-end and 39 closed-end funds and more than
2,500 unit investment trusts are professionally distributed by leading financial
advisers nationwide. Van Kampen Funds Inc., the distributor of the Fund (the
"Distributor") and the sponsor of the funds mentioned above, is also a wholly
owned subsidiary of Van Kampen Investments. Van Kampen Investments is an
indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. The
Adviser's principal office is located at 1 Parkview Plaza, PO Box 5555, Oakbrook
Terrace, Illinois 60181-5555.
ADVISORY AGREEMENT. The Fund retains the Adviser to manage the investment of its
assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed based upon an annual rate applied to average daily net assets of the
Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Assets % Per Annum
- ------------------------------------------------------
<S> <C> <C> <C>
First $500 million 0.400 of 1.00%
......................................................
Next $500 million 0.350 of 1.00%
......................................................
Over $1 billion 0.300 of 1.00%
......................................................
</TABLE>
16
<PAGE> 19
Under the Advisory Agreement, the Adviser furnishes offices, necessary
facilities and equipment, provides administrative services, and permits its
officers and employees to serve without compensation as trustees of the Trust or
officers of the Fund if elected to such positions. The Fund pays all charges and
expenses of its day-to-day operations, including the compensation of trustees of
the Trust (other than those who are affiliated persons of the Adviser,
Distributor or Van Kampen Investments), the charges and expenses of legal
counsel and independent accountants, distribution fees, service fees, custodian
fees, the costs of providing reports to shareholders, and all other ordinary
business expenses not specifically assumed by the Adviser.
From time to time, the Adviser or the Distributor may voluntarily undertake to
reduce the Fund's expenses by reducing the fees payable to them or by reducing
other expenses of the Fund in accordance with such limitations as the Adviser or
Distributor may establish.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Asset Management
Inc. ("Asset Management").
PERSONAL INVESTMENT POLICIES. The Fund and the Adviser have adopted Codes of
Ethics designed to recognize the fiduciary relationship between the Fund and the
Adviser and its employees. The Codes of Ethics permit directors, trustees,
officers and employees to buy and sell securities for their personal accounts
subject to certain restrictions. Persons with access to certain sensitive
information are subject to pre-clearance and other procedures designed to
prevent conflicts of interest.
PORTFOLIO MANAGEMENT. The Fund is managed by Thomas J. Slefinger, Senior Vice
President of the Adviser, Mr. Slefinger is primarily responsible for the
day-to-day management of the Fund's investment portfolio. Mr. Slefinger has been
employed by the Adviser since July 1989.
PURCHASE OF SHARES
GENERAL
The Fund offers three classes of shares designated as Class A Shares, Class B
Shares and Class C Shares. By offering three classes of shares, the Fund permits
each investor to choose the class of shares that is most beneficial given the
amount to be invested and the length of time the investor expects to hold the
shares.
Initial investments must be at least $1,000 for each class of shares, and
subsequent investments must be at least $25 for each class of shares. Both
minimums may be waived by the Distributor for plans involving periodic
investments.
Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares bear the sales charge expenses at the time of redemption and any
expenses (including higher distribution fees and transfer agency costs)
resulting from such deferred sales charge arrangement, (ii) generally, each
class of shares has exclusive voting rights with respect to approvals of the
Rule 12b-1 distribution plan (described below) pursuant to which its
distribution fee or service fee is paid, (iii) each class of shares has
different exchange privileges, (iv) certain classes of shares are subject to a
conversion feature and (v) certain classes of shares have different shareholder
service options available.
The offering price of the Fund's shares is based upon the Fund's net asset value
per share (plus sales charges, where applicable). The net asset values per share
of the Class A Shares, Class B Shares and Class C Shares are generally expected
to be substantially the same. In certain circumstances, however, the per share
net asset values of the classes of shares may differ from one another,
reflecting the daily expense accruals of the higher distribution fees and
transfer agency costs applicable to the Class B Shares and Class C Shares and
the differential in the dividends that may be paid on each class of shares.
The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day in which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund reserves the right to calculate net asset value per share and
adjust the offering price more frequently than once a day if deemed desirable.
17
<PAGE> 20
Net asset value per share for each class is determined by dividing the value of
the Fund's portfolio securities, cash and other assets (including accrued
interest) attributable to such class, less all liabilities (including accrued
expenses) attributable to such class, by the total number of shares of the class
outstanding. Such computation is made by using prices as of the close of trading
on the Exchange and (i) valuing securities listed or traded on a national
securities exchange at the last reported sale price, or if there has been no
sale that day, at the mean between the last reported bid and asked prices, (ii)
valuing over-the-counter securities at the last reported sale price from the
National Association of Securities Dealers Automated Quotations ("NASDAQ"),
(iii) valuing unlisted securities at the last quoted bid price, (iv) valuing any
fixed-income securities for which market quotations are not readily available
based on prices provided by market makers or estimates of market values obtained
from yield data relating to instruments or securities with similar
characteristics and (v) valuing all other assets at fair value as determined in
good faith by the Adviser in accordance with procedures established by the Board
of Trustees. Securities with remaining maturity of 60 days or less are valued on
an amortized cost basis, which approximates market value or fair value.
The Fund has adopted a distribution plan (the "Distribution Plan") with respect
to each class of its shares pursuant to Rule 12b-1 under the 1940 Act. The Fund
also has adopted a service plan (the "Service Plan") with respect to each class
of its shares. Under the Distribution Plan and the Service Plan, the Fund pays
distribution fees in connection with the sale and distribution of its shares and
service fees in connection with the provision of ongoing services to
shareholders of each class.
The amount of distribution and service fees varies among the classes offered by
the Fund. Because these fees are paid out of the Fund's assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing a class of shares subject to higher distribution and service fees,
you may pay more over time than on a class of shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares and the dividends payable on such class of
shares will be reduced by the amount of the distribution fees and other expenses
associated with such class of shares. To assist investors in comparing classes
of shares, the tables under the heading "Fees and Expenses of the Fund" provide
a summary of sales charges and expenses and an example of the sales charges and
expenses of the Fund applicable to each class of shares.
The shares are offered to the public on a continuous basis through the
Distributor as principal underwriter, which is located at 1 Parkview Plaza, PO
Box 5555, Oakbrook Terrace, Illinois 60181-5555. Shares also are offered through
members of the NASD who are acting as securities dealers ("dealers") and NASD
members or eligible non-NASD members who are acting as brokers or agents or
investors ("brokers"). "Dealers" and "brokers" are sometimes referred to herein
as "authorized dealers."
Shares may be purchased on any business day by completing the application
accompanying this prospectus and forwarding the application, directly or through
an authorized dealer, to the Fund's shareholder service agent, Van Kampen
Investor Services Inc. ("Investor Services"), a wholly owned subsidiary of Van
Kampen Investments. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A Shares, Class B Shares or Class C Shares.
Sales personnel of authorized dealers distributing the Fund's shares are
entitled to receive compensation for selling such shares and may receive
differing compensation for selling Class A Shares, Class B Shares or Class C
Shares.
The offering price for shares is based on the next calculation of net asset
value per share (plus sales charges, where applicable) after an order is
received by Investor Services. Orders received by authorized dealers prior to
the close of the Exchange are priced based on the date of receipt provided such
order is transmitted to Investor Services prior to Investor Services' close of
business on such date. Orders received by authorized dealers after the close of
the Exchange or transmitted to Investor Services after its close of business are
priced based on the date of the next computed net asset value per share provided
they are received by Investor Services prior to Investor Services' close of
business on such date. It is the responsibility of authorized dealers to
transmit orders received by them to Investor Services so they will be received
in a timely manner.
18
<PAGE> 21
The Fund and the Distributor reserve the right to refuse any order for the
purchase of shares. The Fund also reserves the right to suspend the sale of the
Fund's shares in response to conditions in the securities markets or for other
reasons. Shares of the Fund may be sold in foreign countries where permissible.
Investor accounts will automatically be credited with additional shares of the
Fund after any Fund distributions, such as dividends and capital gains
distributions, unless the investor instructs the Fund otherwise. Investors
wishing to receive cash instead of additional shares should contact the Fund at
(800) 341-2911 or by writing to the Fund, c/o Van Kampen Investors Services
Inc., PO Box 418256, Kansas City, MO 64141-9256.
CLASS A SHARES
Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 2.25% of the offering price (or % of the net amount
invested), reduced on investments of $25,000 or more as follows:
CLASS A SHARES
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
As % of As % of
Size of Offering Net Amount
Investment Price Invested
- ----------------------------------------------------------
<S> <C> <C>
Less than $25,000 2.25% %
- ----------------------------------------------------------
$25,000 but less than
$250,000 1.75% %
- ----------------------------------------------------------
$250,000 but less than
$500,000 1.50% %
- ----------------------------------------------------------
$500,000 but less than
$1,000,000 1.25% %
- ----------------------------------------------------------
$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 contingent
deferred sales charge of 0.65% on certain redemptions made within one year of
the purchase. The contingent deferred sales charge is assessed on an amount
equal to the lesser of the then current market value or the cost of the shares
being redeemed. Accordingly, no sales charge is imposed on increases in net
asset value above the initial purchase price.
No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gains distributions.
Under the Distribution Plan and Service Plan, the Fund may spend a total of
0.15% per year of the Fund's average daily net assets attributable to the Class
A Shares of the Fund. From such amount, under the Service Plan, the Fund may
spend up to 0.15% per year of the Fund's average daily net assets attributable
to the Class A Shares for the ongoing provision of services to Class A
shareholders by the Distributor and by brokers, dealers or financial
intermediaries and for the maintenance of such shareholders' accounts.
CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
deferred sales charge if redeemed
19
<PAGE> 22
within four years of purchase as shown in the table as follows:
CLASS B SHARES
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge
as a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
- ------------------------------------------------
<S> <C>
First 2.00%
- ------------------------------------------------
Second 1.50%
- ------------------------------------------------
Third 1.00%
- ------------------------------------------------
Fourth 0.50%
- ------------------------------------------------
Fifth and After None
- ------------------------------------------------
</TABLE>
The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gains distributions.
It is presently the policy of the Distributor not to accept any order for Class
B Shares in an amount of $500,000 or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.
The amount of the contingent deferred sales charge, if any, varies depending on
the number of years from the time of payment for the purchase of Class B Shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of shares, all
payments during a month are totaled and deemed to have been made on the last day
of the month.
In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed that the redemption is first of any shares in the
shareholder's Fund account that are not subject to a contingent deferred sales
charge and then of shares held the longest in the shareholder's account.
Under the Distribution Plan, the Fund may spend up to 0.50% per year of the
average daily net assets of the Fund attributable to the Class B Shares of the
Fund. In addition, under the Service Plan, the Fund may spend up to 0.15% per
year of the Fund's average daily net assets attributable to the Class B Shares
for the ongoing provision of services to Class B shareholders by the Distributor
and by brokers, dealers or financial intermediaries and for the maintenance of
such shareholders' accounts.
CLASS C SHARES
Class C Shares of the Fund are sold at net asset value and are subject to a
deferred sales charge of .65% of the dollar amount subject to charge if redeemed
within one year of purchase.
The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gains distributions.
It is presently the policy of the Distributor not to accept any order for Class
C Shares in an amount of $1 million or more because it ordinarily will be more
advantageous for an investor making such an investment to purchase Class A
Shares.
In determining whether a contingent deferred sales charge is applicable to a
redemption, it is assumed that the redemption is first of any shares in the
shareholder's Fund account that are not subject to a contingent deferred sales
charge and then of shares held the longest in the shareholder's account.
Under the Distribution Plan, the Fund may spend up to 0.50% per year of the
average daily net assets of the Fund attributable to the Class C Shares of the
Fund. In addition, under the Service Plan the Fund may spend up to 0.15% per
year of the Fund's average daily net assets attributable to the Class C Shares
for the ongoing provision of services to Class C shareholders by the Distributor
and by brokers, dealers or financial intermediaries and for the maintenance of
such shareholders' accounts.
CONVERSION FEATURE
Class B Shares, and any dividend reinvestment plan Class B Shares received on
such shares, automatically convert to Class A Shares six years after the end of
the calendar month in which the shares were purchased. Such conversion will be
on the basis of the relative net asset value per share, without the
20
<PAGE> 23
imposition of any sales load, fee or other charge. The conversion schedule
applicable to a share of the Fund acquired through the exchange privilege from
another Van Kampen fund participating in the exchange program is determined by
reference to the Van Kampen fund from which such share was originally purchased.
The conversion of such shares to Class A Shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fee and transfer agency costs with respect to such
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the federal income tax law and (ii) the
conversion of shares does not constitute a taxable event under federal income
tax law. The conversion may be suspended if such an opinion is no longer
available and such shares might continue to be subject to the higher aggregate
fees applicable to such shares for an indefinite period.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge is waived on redemptions of Class B Shares
and Class C Shares (i) within one year following the death or disability (as
disability is defined by federal income tax law) of a shareholder, (ii) for
required minimum distributions from an individual retirement account ("IRA") or
certain other retirement plan distributions, (iii) for withdrawals under the
Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, (iv) if no commission or transaction fee is paid to
authorized dealers at the time of purchase of such shares and (v) if made by
involuntary liquidation by the Fund of a shareholder's account as described
under the heading "Redemption of Shares." The contingent deferred sales charge
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. For a more complete description of contingent
deferred sales charge waivers, please refer to the Fund's Statement of
Additional Information or contact your authorized dealer.
QUANTITY DISCOUNTS
Investors purchasing Class A Shares may, under certain circumstances described
below, be entitled to pay reduced sales charges. Investors, or their authorized
dealers, 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 authorized dealer 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 for a single trust or
for a single fiduciary account, or a "company" as defined in Section 2(a)(8) of
the 1940 Act.
As used herein, "Participating Funds" refers to certain open-end investment
companies advised by Asset Management or Advisory Corp. and distributed by the
Distributor as determined from time to time by the Fund's Board of Trustees.
VOLUME DISCOUNTS. The size of investment shown in the Class A Shares sales
charge table applies to the total dollar amount being invested by any person in
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 Class A Shares
sales charge table may also be determined by combining the amount being invested
in shares of the Participating Funds plus the current offering price of all
shares of the 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 investments over a 13-month
period to determine the sales charge as outlined in the Class A Shares sales
charge table. The size of investment shown in the Class A Shares sales charge
table includes purchases of shares of the Participating Funds over a 13-month
period based on the total amount of intended purchases plus the value of all
shares of the Participating Funds 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. The initial
purchase must be for an amount equal to at least 5%
21
<PAGE> 24
of the minimum total purchase amount of the level selected. If trades not
initially made under a Letter of Intent subsequently qualify for a lower sales
charge through the 90-day backdating provisions, an adjustment will be made at
the time of the expiration of the Letter of Intent to give effect to the lower
charge. Such adjustment in sales charge will be used to purchase additional
shares for the shareholder at the applicable discount category. The Fund
initially will escrow shares totaling 5% of the dollar amount of the Letter of
Intent to be held by Investor Services in the name of the shareholder. In the
event the Letter of Intent goal is not achieved within the specified period, the
investor must pay the difference between the sales charge applicable to the
purchases made and the sales charges previously paid. Such payments may be made
directly to the Distributor or, if not paid, the Distributor will liquidate
sufficient escrowed shares to obtain the difference.
OTHER PURCHASE PROGRAMS
Purchasers of Class A Shares may be entitled to reduced initial sales charges in
connection with the unit investment trust reinvestment program 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 PROGRAM. The Fund permits unitholders of unit
investment trusts to reinvest distributions from such trusts in Class A Shares
of the Fund at net asset value per share and with no minimum initial or
subsequent investment requirement, if the administrator of an investor's unit
investment trust program meets certain uniform criteria relating to cost savings
by the Fund and the Distributor. The 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
the authorized dealer, 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 terms and conditions that apply to the program,
should contact their authorized dealer 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 investor participating in the program in a computerized
format fully compatible with Investor Services' processing system.
As further requirements for obtaining these special benefits, the Fund also
requires that all dividends and other distributions by the Fund be reinvested in
additional shares without any systematic withdrawal program. There will be no
minimum for reinvestments from unit investment trusts. The Fund will send
account activity statements to such participants on a quarterly basis only, even
if their investments are made more frequently. The Fund reserves the right to
modify or terminate this program at any time.
NET ASSET VALUE 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 Morgan Stanley
Dean Witter & Co. and any of its subsidiaries, and such persons' families and
their beneficial accounts.
2. Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. 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
22
<PAGE> 25
authorized 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 details with respect to such alliance programs.
6. Beneficial owners of shares of 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 bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer 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 Internal Revenue Code of 1986, as
amended (the "Code"), or custodial accounts held by a bank created pursuant
to Section 403(b) of the Code and sponsored by nonprofit 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 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 serves 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.
Prior to February 1, 1997, a commission will be paid to authorized dealers
who initiate and are responsible for such purchases within a rolling
twelve-month period as follows: 1.00% on sales to $5 million, plus 0.50% on
the next $5 million, plus 0.25% on the excess over $10 million. For purchases
on February 1, 1997 and thereafter, a commission will be paid 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, plus 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 economies 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
contingent deferred sales charge 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.
23
<PAGE> 26
Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with Investor Services by 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 dealer 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 dealers will be paid a service fee as described 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.
REDEMPTION OF
SHARES
Generally shareholders may redeem for cash some or all of their shares without
charge by the Fund (other than applicable sales charge) at any time. As
described under the heading "Purchase of Shares," redemptions of Class B Shares
and Class C Shares may be subject to a contingent deferred sales charge. In
addition, certain redemptions of Class A Shares for shareholder accounts of $1
million or more may be subject to a contingent deferred sales charge.
Redemptions completed through an authorized dealer or a custodian of a
retirement plan account may involve additional fees charged by the dealer or
custodian.
Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the request and any other necessary documents in
proper order. Such payment may be postponed or the right of redemption suspended
as provided by the rules of the SEC. Such payment may, under certain
circumstances, be paid wholly or in part by a distribution-in-kind of portfolio
securities. If the shares to be redeemed have been recently purchased by check,
Investor Services may delay the payment of redemption proceeds until it confirms
the purchase check has cleared, which may take up to 15 days. A taxable gain or
loss will be recognized by the shareholder upon redemption of shares.
WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor Services
Inc., PO Box 418256, Kansas City, MO 64141-9256. The request for redemption
should indicate the number of shares to be redeemed, the class designation of
such shares and the shareholder's account number. The redemption request must be
signed by all persons in whose names the shares are registered. Signatures must
conform exactly to the account registration. If the proceeds of the redemption
exceed $50,000, or if the proceeds are not to be paid to the record owner at the
record address, or if the record address has changed within the previous 30
days, signature(s) must be guaranteed by one of the following: a bank or trust
company; a broker-dealer; a credit union; a national securities exchange,
registered securities association or clearing agency; a savings and loan
association; or a federal savings bank.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. In the case of shareholders holding
certificates, the certificates for the shares being redeemed properly endorsed
for transfer must accompany the redemption request. In the event the redemption
is requested by a corporation, partnership, trust, fiduciary, executor or
administrator, and the name and title of the individual(s) authorizing such
redemption is not shown in the account registration, a copy of the corporate
resolution or other legal documentation appointing the authorized signer and
certified within the prior 120 days must accompany the redemption request. IRA
redemption requests should be sent to the IRA custodian to be forwarded to
Investor Services. Contact the IRA custodian for further information.
In the case of written redemption requests sent directly to Investor Services,
the redemption price is the net asset value per share next determined after the
request in proper form is received by Investor Services.
AUTHORIZED DEALER REDEMPTION REQUESTS. Shareholders may place redemption
requests through an authorized dealer. Orders sent through authorized dealers
must be at least $500 (unless transmitted by your authorized dealer via the
FUNDSERV network). The redemption price for such shares is the net asset value
per share next calculated after an order in proper form is received by an
authorized dealer
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<PAGE> 27
provided such order is transmitted to the Distributor prior to the Distributor's
close of business on such day. It is the responsibility of authorized dealers to
transmit redemption requests received by them to the Distributor so they will be
received prior to such time. Redemptions completed through an authorized dealer
may involve additional fees charged by the dealer.
TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. To establish
such privilege, a shareholder must complete the appropriate section of the
application form accompanying this prospectus or call the Fund at (800) 341-2911
to request that a copy of the Telephone Redemption Authorization form be sent to
them for completion. To redeem shares, contact the telephone transaction line at
(800) 421-5684. Van Kampen Investments, Investor Services and the Fund employ
procedures considered by them to be reasonable to confirm that instructions
communicated by telephone are genuine. Such procedures include requiring certain
personal identification information prior to acting upon telephone instructions,
tape recording telephone communications and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
neither Van Kampen Investments, Investor Services nor the Fund will be liable
for following telephone instructions which it reasonably believes to be genuine.
Telephone redemptions may not be available if the shareholder cannot reach
Investor Services by telephone, whether because all telephone lines are busy or
for any other reason; in such case, a shareholder would have to use the Fund's
other redemption procedure previously described. Requests received by Investor
Services prior to 4:00 p.m., New York time, will be processed at the next
determined net asset value per share. These privileges are available for all
accounts other than retirement accounts or accounts with shares represented by
certificates. If an account has multiple owners, Investor Services may rely on
the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 30 days prior to a telephone redemption request. Proceeds from
redemptions payable by wire transfer are expected to be wired on the next
business day following the date of redemption. The Fund reserves the right at
any time to terminate, limit or otherwise modify this redemption privilege.
OTHER REDEMPTION INFORMATION. The Fund may redeem any shareholder account with a
value on the date of the notice of redemption less than the minimum initial
investment as specified in this prospectus. At least 60 days advance written
notice of any such involuntary redemption will be given and the shareholder will
be given an opportunity to purchase the required value of additional shares at
the next determined net asset value without sales charge. Any involuntary
redemption may only occur if the shareholder account is less than the minimum
initial investment due to shareholder redemptions.
DISTRIBUTIONS FROM THE FUND
In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive two kinds of return from the Fund: dividends and
capital gains distributions.
DIVIDENDS. Interest earned from investments is the Fund's main source of income.
The Fund's present policy, which may be changed at any time by the Board of
Trustees, is to distribute all or substantially all of this income, less
expenses, monthly as dividends to shareholders. Dividends are automatically
applied to purchase additional shares of the Fund at the next determined net
asset value unless the shareholder instructs otherwise.
The per share dividends on Class B Shares and Class C Shares may be lower than
the per share dividends on Class A Shares as a result of the higher distribution
fees and transfer agency costs applicable to such classes of shares.
CAPITAL GAINS. The Fund may realize capital gains or losses when it sells
securities, depending on whether the sales prices for the securities are higher
or lower
25
<PAGE> 28
than purchase prices. Net realized capital gains represent the total profit from
sales of securities minus total losses from sales of securities including losses
carried forward from prior years. The Fund distributes any taxable net realized
capital gains to shareholders as capital gains distributions at least annually.
As in the case of dividends, capital gains distributions are automatically
reinvested in additional shares of the Fund at net asset value unless the
shareholder instructs otherwise.
SHAREHOLDER SERVICES
Listed below are some of the shareholder services the Fund offers to investors.
For a more complete description of the Fund's shareholder services, such as
investment accounts, share certificates, retirement plans, automated clearing
house deposits, dividend diversification and the systematic withdrawal plan,
please refer to the Statement of Additional Information or contact your
authorized dealer.
REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gains distributions in shares of
the Fund. Such shares are acquired at net asset value per share (without sales
charge) on the applicable payable date of the dividend or capital gains
distribution. Unless the shareholder instructs otherwise, the reinvestment plan
is automatic. This instruction may be made by telephone by calling (800)
341-2911 ((800) 421-2833 for the hearing impaired) or by writing to Investor
Services. The investor may, on the initial application or prior to any
declaration, instruct that dividends be paid in cash and capital gains
distributions be reinvested at net asset value, or that both dividends and
capital gains distributions be paid in cash.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder can authorize Investor Services to charge a bank account on a
regular basis to invest predetermined amounts in the Fund. Additional
information is available from the Distributor or your authorized dealer.
CHECK WRITING PRIVILEGE. A Class A shareholder holding shares of the Fund for
which certificates have not been issued and which are in a 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 the Class A
shareholder. These checks may be made payable by the Class A shareholder to the
order of any person in any amount of $100 or more.
When a check is presented to the Bank for payment, full and fractional Class A
Shares required to cover the amount of the check are redeemed from the
shareholder's Class A account by Investor Services at the next determined net
asset value per share. Check writing redemptions represent the sale of Class A
Shares. Any gain or loss realized on the sale of shares is a taxable event.
Checks will not be honored for redemption of Class A Shares held less than 15
calendar days, unless such Class A Shares have been paid for by bank wire. Any
Class A Shares for which there are outstanding certificates may not be redeemed
by check. If the amount of the check is greater than the proceeds of all
uncertificated shares held in the shareholder's Class A account, the check will
be returned and the shareholder may be subject to additional charges. A Class A
shareholder may not liquidate the entire account by means of a check. The check
writing privilege may be terminated or suspended at any time by the Fund or the
Bank. Retirement plans and accounts that are subject to backup withholding are
not eligible for the privilege.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund based on the next computed net asset value per
share of each fund after requesting the exchange without any sales charge,
subject to certain limitations. Shares of the Fund may be exchanged for shares
of any Participating Fund only if shares of that Participating Fund are
available for sale; however, during periods of suspension of sales, shares of a
Participating Fund may be available for sale only to existing shareholders of a
Participating Fund. Shareholders seeking an exchange into a Participating Fund
should obtain and read the current prospectus for such fund.
To be eligible for exchange, shares of the Fund must have been registered in the
shareholder's name at least 30 days prior to an exchange. Shares of the Fund
registered in a shareholder's name for less than
26
<PAGE> 29
30 days may only be exchanged upon receipt of prior approval of the Adviser. It
is the policy of the Adviser, under normal circumstances, not to approve such
requests.
When Class B Shares and Class C Shares are exchanged among Participating Funds,
the holding period for purposes of computing the contingent deferred sales
charge is based upon the date of the initial purchase of such shares from a
Participating Fund. If such Class B Shares or Class C Shares are redeemed and
not exchanged for shares of another Participating Fund, Class B Shares and Class
C Shares are subject to the contingent deferred sales charge schedule imposed by
the Participating Fund from which such shares were originally purchased.
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes. If the shares exchanged have been held for less than 91
days, the sales charge paid on such shares is carried over and included in the
tax basis of the shares acquired.
A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services or by contacting the telephone transaction line at (800)
421-5684. A shareholder automatically has telephone exchange privileges unless
otherwise designated in the application form accompanying the prospectus. Van
Kampen Investments and its subsidiaries, including Investor Services, and the
Fund employ procedures considered by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape recording telephone communications, and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither Van Kampen Investments, Investor Services nor
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. Shareholders must satisfy the minimum investment amount
requirements of the target fund for the exchange request to be processed. If the
exchanging shareholder does not have an account in the fund whose shares are
being acquired, a new account will be established with the same registration,
dividend and capital gains options (except dividend diversification) and
authorized dealer of record as the account from which shares are exchanged,
unless otherwise specified by the shareholder. In order to establish a
systematic withdrawal plan for the new account or reinvest dividends from the
new account into another fund, however, an exchanging shareholder must submit a
specific request. The Fund reserves the right to reject any order to acquire its
shares through exchange. In addition, the Fund and other Participating Funds may
restrict exchanges by shareholders engaged in excessive trading by limiting or
disallowing the exchange privileges to such shareholders as described in the
Fund's Statement of Additional Information. 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.
For purposes of determining the sales charge rate previously paid on Class A
Shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is deemed to have been sold with a sales charge rate equal to the rate
previously paid on the security on which the dividend or distribution was paid.
If a shareholder exchanges less than all of such shareholders securities, the
security upon which the highest sales charge rate was previously paid is deemed
exchanged first.
Exchange requests received on a business day prior to the time shares of the
funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares in the fund from which the
shareholder is withdrawing an investment will be redeemed at the net asset value
per share next determined on the date of receipt. Shares of the new fund into
which the shareholder is investing will also normally be purchased at the net
asset value per share, plus any applicable sales charge, next determined on the
date of receipt. Exchange requests received on a business day after the time
shares of the funds involved in the request are priced will be processed on the
next business day in the manner described herein.
A prospectus of any of these Participating Funds may be obtained from any
authorized dealer or the Distributor. An investor considering an exchange to one
of such funds should refer to the prospectus for additional information
regarding such fund prior to investing.
INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform
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<PAGE> 30
certain transactions through the internet. Please refer to our web site at
www.vankampen.com for further instruction. Van Kampen Investments, Investor
Services and the Fund employ procedures considered by them to be reasonable to
confirm that instructions communicated through the internet are genuine. Such
procedures include requiring use of a personal identification number prior to
acting upon internet instructions and providing written confirmation of
instructions communicated through the internet. If reasonable procedures are
employed, neither Van Kampen Investments, Investors Services nor the Fund will
be liable for following instructions through the internet which it reasonably
believes to be genuine. If an account has multiple owners, Investor Services may
rely on the instructions of any one owner.
FEDERAL INCOME
TAXATION
Distributions of the Fund's net investment income (consisting generally of
taxable income and net short-term capital gains) are taxable to shareholders as
ordinary income to the extent of the Fund's earnings and profits, whether paid
in cash or reinvested in additional shares. Distributions of the Fund's net
capital gains (which are the excess of net long-term capital gains over net
short-term capital losses) as capital gains dividends, if any, are taxable to
shareholders as long-term capital gains, whether paid in cash or reinvested in
additional shares, and regardless of how long the shares of the Fund have been
held by such shareholders. Capital gains dividends may be taxed at different
rates depending on how long the Fund held the securities. The Fund expects that
its distributions will consist of ordinary income and capital gains dividends.
Distributions in excess of the Fund's earnings and profits will first reduce the
adjusted tax basis of a holder's shares and, after such adjusted tax basis is
reduced to zero, will constitute capital gains to such holder (assuming such
shares are held as a capital asset). Although distributions generally are
treated as taxable in the year they are paid, distributions declared in October,
November or December, payable to shareholders of record on a specified date in
such month and paid during January of the following year will be treated as
having been distributed by the Fund and received by the shareholders on the
December 31st prior to the date of payment. The Fund will inform shareholders of
the source and tax status of all distributions promptly after the close of each
calendar year.
The sale or exchange of shares is a taxable transaction for federal income tax
purposes. Shareholders who sell their shares will generally recognize gain or
loss in an amount equal to the difference between their adjusted tax basis in
the shares and the amount received. If the shares are held as a capital asset,
the gain or loss will be a capital gain or loss. Any capital gains may be taxed
at different rates depending on how long the shareholder held such shares.
The Fund is required, in certain circumstances, to withhold 31% of dividends and
certain other payments, including redemptions, paid to shareholders who do not
furnish to the Fund their correct taxpayer identification number (in the case of
individuals, their social security number) and certain required certifications
or who are otherwise subject to backup withholding.
Foreign shareholders, including shareholders who are non-resident aliens, may be
subject to U.S. withholding tax on certain distributions (whether received in
cash or in shares) at a rate of 30% or such lower rate as prescribed by an
applicable treaty. Prospective foreign investors should consult their U.S. tax
advisers concerning the tax consequences to them of an investment in shares.
The Fund intends to qualify as a regulated investment company under the federal
income tax law. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its net investment income, the Fund will not be
required to pay federal income taxes on any income it distributed to
shareholders. If the Fund distributes less than the sum of 98% of its ordinary
income and 98% of its capital gains net income, then the Fund will be subject to
a 4% excise tax on such undistributed amounts.
The federal income tax discussion set forth above is for general information
only. Prospective investors should consult their own tax advisers regarding the
specific federal tax consequences of purchasing, holding, exchanging or selling
shares, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.
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APPENDIX -- DESCRIPTION
OF SECURITIES RATINGS
STANDARD & POOR'S -- A brief description of the applicable Standard & Poor's
(S&P) rating symbols and their meanings (as published by S&P) follow:
A S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. S&P does not perform an audit
in connection with any rating and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended, or withdrawn as a result of
changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of payment--capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation:
2. Nature of and provisions of the obligation:
3. Protection afforded by, and relative position of, the obligation in the event
of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditor's rights.
1. LONG-TERM DEBT -- INVESTMENT GRADE
AAA: Debt rated "AAA" has the highest rating assigned by S&P. Capacity to meet
its financial commitment on the obligation is extremely strong.
AA: Debt rated "AA" differs from the highest rated issues only in small degree.
Capacity to meet its financial commitment on the obligation is very strong.
A: Debt rated "A" is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rated
categories. Capacity to meet its financial commitment on the obligation is still
strong.
BBB: Debt rated "BBB" exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligation.
SPECULATIVE GRADE
BB, B, CCC, CC, C: Debts rated "BB", "B", "CCC", "CC" and "C" are regarded as
having significant speculative characteristics. "BB" indicates the least degree
of speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB: Debt rated "BB" is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
B: Debt rated "B" is more vulnerable to nonpayment than obligations rated "BB",
but the obligor currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment on
the obligation.
CCC: Debt rated "CCC" is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: Debt rated "CC" is currently highly vulnerable to nonpayment.
A-1
<PAGE> 32
C: The "C" rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on this obligation
are being continued.
D: Debt rated "D" is in payment default. The "D" rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The 'D' rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
r: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
DEBT OBLIGATIONS OF ISSUERS OUTSIDE THE UNITED STATES AND ITS TERRITORIES are
rated on the same basis as domestic corporate and municipal issues. The ratings
measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.
BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories ("AAA", "AA", "A", "BBB", commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain ratings or
other standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.
2. COMMERCIAL PAPER
A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:
A-1: The highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C: This rating is assigned to short-term debt obligations currently vulnerable
to nonpayment and is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the obligation.
D: Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The "D" rating also will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
A commercial paper rating is not a recommendation to purchase, sell or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on
A-2
<PAGE> 33
current information furnished to S&P by the issuer or obtained from other
sources it considers reliable. S&P does not perform an audit in connection with
any rating and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or based on other circumstances.
3. PREFERRED STOCK
A S&P preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations. A preferred stock rating differs from a bond rating inasmuch as it
is assigned to an equity issue, which issue is intrinsically different from, and
subordinated to, a debt issue. Therefore, to reflect this difference, the
preferred stock rating symbol will normally not be higher than the bond rating
symbol assigned to, or that would be assigned to, the senior debt of the same
issuer.
The preferred stock ratings are based on the following considerations:
i. Likelihood of payment-capacity and willingness of the issuer to meet the
timely payment of preferred stock dividends and any applicable sinking fund
requirements in accordance with the terms of the obligation.
ii. Nature of, and provisions of, the issuer.
iii. Relative position of the issue in the event of bankruptcy, reorganization,
or other arrangements under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA: This is the highest rating that may be assigned by S&P to a preferred stock
issue and indicates an extremely strong capacity to pay the preferred stock
obligations.
AA: A preferred stock issue rated "AA" also qualifies as a high-quality, fixed
income security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated "AAA".
A: An issue rated "A" is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB: An issue rated "BBB" is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.
BB, B and CCC: Preferred stock rated "B", "B", and "CCC" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations.
"BB" indicates the lowest degree of speculation and "CCC" the highest. While
such issues will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
CC: The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments, but that is currently paying.
C: A preferred stock rated "C" is a nonpaying issue.
D: A preferred stock rated "D" is a nonpaying issue with the issuer in default
on debt instruments.
NR: This indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy. PLUS (+) or MINUS (-): To provide more
detailed indications of preferred stock quality, ratings from "AA" to "CCC" may
be modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
A preferred stock rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in, or unavailability of, such
information, or based on other circumstances.
MOODY'S INVESTORS SERVICE -- a brief description of the applicable Moody's
Investors Service (Moody's)
A-3
<PAGE> 34
rating symbols and their meanings (as published by Moody's Investors Service)
follows:
1. LONG-TERM DEBT
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long- term risks appear somewhat larger than the Aaa securities.
A: Bonds which are rated a possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payment
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the issue ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated as a
matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published in
Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
2. SHORT-TERM DEBT
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year unless explicitly noted.
A-4
<PAGE> 35
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issues:
Issuers rated Prime-1 (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics:
- -- Leading market positions in well-established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- -- Broad margins is earnings coverage of fixed financial charges and high
internal cash generation.
- -- Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes of the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
3. PREFERRED STOCK
Preferred stock rating symbols and their definitions are as follows:
AAA: As issue which is rated "AAA" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
AA: An issue which is rated "AA" is considered a high-grade preferred stock.
This rating indicates that there is a reasonable assurance the earnings and
asset protection will remain relatively well maintained in the foreseeable
future.
A: An issue which is rated "A" is considered to be an upper-medium-grade
preferred stock. While risks are judged to be somewhat greater than in the "AAA"
and "AA" classifications, earnings and asset protections are, nevertheless,
expected to be maintained at adequate levels.
BAA: An issue which is rated "BAA" is considered to be a medium-grade preferred
stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
BA: An issue which is rated "BA" is considered to have speculative elements and
its future cannot be considered well assured. Earnings and asset protection may
be very moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
B: An issue which is rated "B" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
CAA: An issue which is rated "CAA" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
CA: An issue which is rated "CA" is speculative in a high degree and is likely
to be in arrears on dividends with little likelihood of eventual payment.
C: This is the lowest rated class of preferred or preference stock. Issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each rating classification.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category, the modifier 2 indicates a mid-range ranking, and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
A-5
<PAGE> 36
FOR MORE INFORMATION
EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911
7:00 a.m. to 7:00 p.m. Central time, Monday through Friday
DEALERS
For dealer information, selling agreements, wire orders, or
redemptions, call the Distributor at (800) 421-5666
TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call (800) 421-2833
FUNDINFO(R)
For automated telephone services, call (800) 847-2424
WEB SITE
www.vankampen.com
VAN KAMPEN MANAGED SHORT TERM INCOME FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Investment Adviser
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Distributor
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 418256
Kansas City, MO 64141-9256
Attn: Van Kampen Managed Short
Term Income Fund
Custodian
STATE STREET BANK AND TRUST COMPANY
225 West Franklin Street, PO Box 1713
Boston, MA 02105-1713
Attn: Van Kampen Managed Short
Term Income Fund
Legal Counsel
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Accountants
KPMG LLP
303 East Wacker Drive
Chicago, IL 60601
<PAGE> 37
VAN KAMPEN
MANAGED SHORT TERM
INCOME FUND
PROSPECTUS
, 1999
A Statement of Additional Information, which
contains more details about the Fund, is
incorporated by reference in its entirety into
this prospectus.
You will find additional information about the
Fund in its annual and semiannual reports to
shareholders. The annual report explains the
market conditions and investment strategies
affecting the Fund's performance during its
last fiscal year.
You can ask questions or obtain a free copy of
the Fund's reports or its Statement of
Additional Information by calling (800)
341-2911 from 7:00 a.m. to 7:00 p.m., Central
time, Monday through Friday.
Telecommunications Device for the Deaf users
may call (800) 421-2833. A free copy of the
Fund's reports can also be ordered from our
web site at www.vankampen.com.
Information about the Fund, including its
reports and Statement of Additional
Information, has been filed with the
Securities and Exchange Commission (SEC). It
can be reviewed and copied at the SEC Public
Reference Room in Washington, DC or online at
the SEC's Web site (http://www.sec.gov). For
more information, please call the SEC at (800)
SEC-0330. You can also request these materials
by writing the Public Reference Section of the
SEC, Washington DC, 20549-6009, and paying a
duplication fee.
[VAN KAMPEN FUNDS LOGO]
Investment Company Act File No.
811-4629.
MSTI PRO 10/99
<PAGE> 38
The information in this statement of additional information is not complete and
may be changed. The Fund may not sell these securities until the post- effective
amendment to the registration statement filed with the Securities and Exchange
Commission is effective. This statement of additional information is not a
prospectus. This statement of additional information is not an offer to sell
these securities and is not soliciting an offer to buy these securities.
SUBJECT TO COMPLETION -- DATED JULY 21, 1999
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN
MANAGED SHORT TERM INCOME FUND
Van Kampen Managed Short Term Income Fund ("Fund") is a mutual fund with an
investment objective to seek a high level of income. The Fund's management seeks
to achieve the investment objective by investing primarily in a diversified
portfolio of domestic investment-grade quality income securities, including U.S.
government securities, mortgage-backed and other asset-backed securities and
investment-grade corporate bonds, and by maintaining a dollar-weighted average
portfolio duration of less than three years.
The Fund is organized as a diversified series of the Van Kampen Trust, an
open-end, management investment company (the "Trust").
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information should be read in conjunction with the
Fund's prospectus (the "Prospectus") dated as of the same date as this Statement
of Additional Information. This Statement of Additional Information does not
include all the information that a prospective investor should consider before
purchasing shares of the Fund. Investors should obtain and read the Prospectus
prior to purchasing shares of the Fund. A Prospectus may be obtained without
charge by writing or calling Van Kampen Funds Inc. at 1 Parkview Plaza, PO Box
5555, Oakbrook Terrace, Illinois 60181-5555 (or (800) 341-2911 (or (800)
421-2833 for the hearing impaired).
---------------------------------------------
TABLE OF CONTENTS
---------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information......................................... B-2
Investment Objective and Policies........................... B-3
Strategic Transactions...................................... B-16
Investment Restrictions..................................... B-25
Trustees and Officers....................................... B-27
Investment Advisory Agreement............................... B-39
Other Agreements............................................ B-40
Distribution and Service.................................... B-41
Transfer Agent.............................................. B-44
Portfolio Transactions and Brokerage Allocation............. B-44
Shareholder Services........................................ B-45
Redemption of Shares........................................ B-48
Contingent Deferred Sales Charge-Class A.................... B-48
Waiver of Class B and Class C Contingent Deferred Sales
Charge.................................................... B-49
Taxation.................................................... B-50
Fund Performance............................................ B-55
Other Information........................................... B-58
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED , 1999.
<PAGE> 39
GENERAL INFORMATION
The Fund is a separate diversified series of the Trust. The Trust is an
unincorporated business trust established under the laws of the State of
Delaware by an Agreement and Declaration of Trust (the "Declaration of Trust")
dated May 10, 1995. The Declaration of Trust permits the Trustees to create one
or more separate investment portfolios and issue a series of shares for each
portfolio, such as the Fund. The Trustees can further sub-divide each series of
shares into one or more classes of shares for each portfolio.
The Trust was originally organized in 1986 under the name Van Kampen
Merritt Trust as a Massachusetts business trust (the "Massachusetts Trust"). The
Massachusetts Trust was reorganized into the Trust under the name Van Kampen
American Capital Trust on July 31, 1995. The Trust was created for the purpose
of facilitating the Massachusetts Trust reorganization into a Delaware business
trust. On July 14, 1998, the Trust adopted its current name.
Van Kampen Investment Advisory Corp. (the "Adviser" or "Advisory Corp."),
Van Kampen Funds Inc. (the "Distributor"), and Van Kampen Investor Services Inc.
("Investor Services") are wholly owned subsidiaries of Van Kampen Investments
Inc. ("Van Kampen Investments"), which is an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. ("Morgan Stanley Dean Witter"). The principal
office of the Fund, the Adviser, the Distributor and Van Kampen Investments is
located at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555.
Morgan Stanley Dean Witter and various of its directly or indirectly owned
subsidiaries, including Morgan Stanley Dean Witter Investment Management Inc.,
an investment adviser, Morgan Stanley & Co. Incorporated, a registered
broker-dealer and investment adviser, and Morgan Stanley International, are
engaged in a wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading; merger, acquisition,
restructuring and other corporate finance advisory activities; merchant banking;
stock brokerage and research services; credit services; asset management;
trading of futures, options, foreign exchange, commodities and swaps (involving
foreign exchange, commodities, indices and interest rates); real estate advice,
financing and investing; and securities lending.
The authorized capitalization of the Trust consists of an unlimited number
of shares of beneficial interest, par value $0.01 per share, which can be
divided into series, such as the Fund, and further subdivided into classes of
each series. Each share represents an equal proportionate interest in the assets
of the series with each other share in such series and no interest in any other
series. No series is subject to the liabilities of any other series. The
Declaration of Trust provides that shareholders are not liable for any
liabilities of the Trust or any of its series, requires inclusion of a clause to
that effect in every agreement entered into by the Trust or any of its series
and indemnifies shareholders against any such liability.
The Fund currently offers three classes of shares, designated Class A
Shares, Class B Shares and Class C Shares. Other classes may be established from
time to time in accordance with provisions of the Declaration of Trust. Each
class of shares of the Fund generally are identical in all respects except that
each class bears certain distribution expenses and has exclusive voting rights
with respect to its distribution fee. Shares of the Trust entitle their holders
to one vote per share; however, separate votes are taken by each
B-2
<PAGE> 40
series on matters affecting an individual series and separate votes are taken by
each class of a series on matters affecting an individual class of such series.
For example, a change in investment policy for a series would be voted upon by
shareholders of only the series involved and a change in the distribution fee
for a class of a series would be voted upon by shareholders of only the class of
such series involved. Except as otherwise described in the Prospectus or herein,
shares do not have cumulative voting rights, preemptive rights or any
conversion, subscription or exchange rights.
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 Fund will assist such holders in
communicating with other shareholders of the Fund to the extent required by the
Investment Company Act of 1940, as amended (the "1940 Act"), or rules or
regulations promulgated by the Securities and Exchange Commission ("SEC").
In the event of liquidation, each of the shares of the Fund is entitled to
its portion of all of the Fund's net assets after all debts and expenses of the
Fund have been paid. Since Class B Shares and Class C Shares have higher
distribution fees and transfer agency costs, the liquidation proceeds to holders
of Class B Shares and Class C Shares are likely to be lower than to holders of
Class A Shares.
The Trustees may amend the Declaration of Trust (including with respect to
any series) in any manner without shareholder approval, except that the Trustees
may not adopt any amendment adversely affecting the rights of shareholders of
any series without approval by a majority of the shares of each affected series
present at a meeting of shareholders (or such higher vote as may be required by
the 1940 Act or other applicable law) and except that the Trustees cannot amend
the Declaration of Trust to impose any liability on shareholders, make any
assessment on shares or impose liabilities on the Trustees without approval from
each affected shareholder or Trustee, as the case may be.
Statements contained in this Statement of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information forms a part, each such statement being
qualified in all respects by such reference.
As of the date of this Statement of Additional Information, no person was
known by the Fund to own beneficially or to hold of record 5% or more of the
outstanding Class A Shares, Class B Shares or Class C Shares of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The following disclosures supplement disclosures set forth under the same
caption in the Prospectus and do not, standing alone, present a complete or
accurate explanation of the matters disclosed. Readers must refer also to this
caption in the Prospectus for a complete presentation of the matters disclosed
below.
B-3
<PAGE> 41
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreements with banks or broker-dealers
in order to earn a return on temporarily available cash. A repurchase agreement
is a short-term investment in which the purchaser (i.e., the Fund) acquires
ownership of a debt security and the seller agrees to repurchase the obligation
at a future time and set price, thereby determining the yield during the holding
period. Repurchase agreements involve certain risks in the event of default by
the other party. The Fund may enter into repurchase agreements with banks or
broker-dealers deemed to be creditworthy by the Adviser under guidelines
approved by the Trustees. The Fund will not invest in repurchase agreements
maturing in more than seven days if any such investment, together with any other
illiquid securities held by the Fund, would exceed the Fund's limitation on
illiquid securities described below. In the event of the bankruptcy or other
default of a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and losses including: (a)
possible decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto; (b) possible lack of access to
income on the underlying security during this period; and (c) expenses of
enforcing its rights.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater diversity of
investments for the Fund than would be available to the Fund investing
separately. The manner in which the joint account is managed is subject to
conditions set forth in an exemptive order from the SEC authorizing this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.
Repurchase agreements are fully collateralized by the underlying debt
securities and are considered to be loans under the 1940 Act. The Fund pays for
such securities only upon physical delivery or evidence of book entry transfer
to the account of a custodian or bank acting as agent. The seller under a
repurchase agreement will be required to maintain the value of the underlying
securities marked-to-market daily at not less than the repurchase price. The
underlying securities (normally securities of the U.S. government, or its
agencies and instrumentalities) may have maturity dates exceeding one year. The
Fund does not bear the risk of a decline in value of the underlying security
unless the seller defaults under its repurchase obligation.
"WHEN-ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS
The Fund may purchase and sell portfolio securities on a "when-issued" and
"delayed delivery" basis. No income accrues to the Fund on 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 securities at delivery may be more or less than
their purchase price, and yields generally available on comparable securities
when delivery occurs may be higher or lower than yields on the securities
obtained pursuant to such transactions. Because the Fund relies on the buyer or
B-4
<PAGE> 42
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 portfolio securities having an aggregate
value equal to the amount of such purchase commitments until payment is made.
The Fund will make commitments to purchase 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".
LENDING OF SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to broker-dealers and other financial institutions provided
such loans are at all times secured by collateral that is at least equal to the
market value, determined daily, of the loaned securities and such loans are
callable at any time by the Fund. The advantage of such loans is that the Fund
continues to receive the interest or dividends on the loaned securities, while
at the same time earning interest on the collateral which is invested in
short-term obligations. The Fund may pay reasonable finders', administrative and
custodial fees in connection with loans of its securities. There is no assurance
as to the extent to which securities loans can be effected.
If the borrower fails to return the borrowed securities or maintain the
requisite amount of collateral, the loan automatically terminates, and the Fund
could use the collateral to replace the securities while holding the borrower
liable for any excess of replacement cost over collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will only be made to
firms deemed by the Fund's management to be creditworthy and when the
consideration which can be earned from such loans is believed to justify the
attendant risks. On termination of the loan, the borrower is required to return
the securities to the Fund; any gains or loss in the market price during the
loan would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in whole or in
part as may be appropriate, to permit the exercise of such rights if the matters
involved would have a material effect on the Fund's investment in the securities
which are the subject of the loan.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for a fiscal year by the average
monthly value of the Fund's portfolio securities during such fiscal year. The
turnover rate may vary greatly from year to year as well as within a year. The
Fund's portfolio turnover rate is the lesser of the value of the securities
purchased or securities sold divided by the average value of the securities held
in the Fund's portfolio excluding all securities whose maturities at acquisition
were one year or less. A high portfolio turnover rate (100% or more) increases
the Fund's transaction costs, including brokerage commissions and dealer costs,
and may result in the realization of more short-term capital gains than if the
Fund had a lower portfolio
B-5
<PAGE> 43
turnover. The turnover rate will not be a limiting factor, however, if the
Adviser deems portfolio changes appropriate.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in illiquid securities,
which includes securities that are not readily marketable, repurchase agreements
which have a maturity of longer than seven days and generally includes
securities that are restricted from sale to the public without registration
under the Securities Act of 1933, as amended (the "1933 Act"). The sale of such
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of liquid
securities trading on national securities exchanges or in the over-the-counter
markets. Restricted securities are often purchased at a discount from the market
price of unrestricted securities of the same issuer reflecting the fact that
such securities may not be readily marketable without some time delay.
Investments in securities which have no ready market are valued at fair value as
determined in good faith by the Adviser in accordance with procedures approved
by the Fund's Trustees. Ordinarily, the Fund would invest in restricted
securities only when it receives the issuer's commitment to register the
securities without expense to the Fund. However, registration and underwriting
expenses (which may range from 7% to 15% of the gross proceeds of the securities
sold) may be paid by the Fund. Restricted securities which can be offered and
sold to qualified institutional buyers under Rule 144A under the 1933 Act ("144A
Securities") and are determined to be liquid under guidelines adopted by and
subject to the supervision of the Fund's Board of Trustees are not subject to
the limitation on illiquid securities. Such 144A Securities are subject to
monitoring and may become illiquid to the extent qualified institutional buyers
become, for a time, uninterested in purchasing such securities. Factors used to
determine whether 144A Securities are liquid include, among other things, a
security's trading history, the availability of reliable pricing information,
the number of dealers making quotes or making a market in such security and the
number of potential purchasers in the market for such security. For purposes
hereof, investments by the Fund in securities of other investment companies will
not be considered investments in restricted securities to the extent permitted
by (i) the 1940 Act, as amended from time to time, (ii) the rules and
regulations promulgated by the SEC under the 1940 Act, as amended from time to
time, or (iii) an exemption or other relief from the provisions of the 1940 Act.
DURATION
Duration is a measure of the expected life of a debt security that was
developed as an alternative to the concept of "term to maturity." Duration
incorporates a debt security's yield, coupon interest payments, final maturity
and call features into one measure. Traditionally a debt security's "term to
maturity" has been used as a proxy for the sensitivity of the security's price
to changes in interest rates. However, "term to maturity" measures only the time
a debt security provides its final payment taking no account of the pattern of
the security's payments of interest or principal prior to maturity. Duration is
a measure of the expected life of a debt security on a present value basis
expressed in years. It measures the length of the time interval between the
present and the time when the interest and principal payments are scheduled (or
in the case of a callable bond, expected to be received), weighing them by the
present value of the cash to be received at each future point in time. For any
debt security with interest payments occurring prior to the
B-6
<PAGE> 44
payment of principal, duration is always less than maturity, and for zero coupon
issues, duration and term to maturity are equal. In general, the lower the
coupon rate of interest or the longer the maturity, or the lower the
yield-to-maturity of a debt security, the longer its duration; conversely, the
higher the coupon rate of interest, the shorter the maturity or the higher the
yield-to-maturity of a debt security, the shorter its duration. There are some
situations where even the standard duration calculation does not properly
reflect the interest rate exposure of a security. For example, floating and
variable rate securities often have final maturities of ten or more years;
however, their interest rate exposure corresponds to the frequency of the coupon
reset. Another example where the interest rate exposure is not properly captured
by the duration is the case of mortgage pass-through securities. The stated
final maturity of such securities is generally 30 years, but current prepayment
rates are more critical in determining the securities' interest rate exposure.
In these and other similar situations, the Adviser will use more sophisticated
analytical techniques that incorporate the economic life of a security into the
determination of its interest rate exposure.
MORTGAGE-BACKED SECURITIES
"Mortgage-Backed Securities" are securities that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
secured by real property. There are currently three basic types of
Mortgage-Backed Securities: (i) those issued or guaranteed by the U.S.
government or one of its agencies or instrumentalities, such as Government
National Mortgage Association (GNMA), Federal National Mortgage Association
(FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) securities; (ii) those
issued by private issuers that represent an interest in or are collateralized by
Mortgage-Backed Securities issued or guaranteed by the U.S. government or one of
its agencies or instrumentalities; and (iii) those issued by private issuers
that represent an interest in or are collateralized by whole mortgage loans or
Mortgage-Backed Securities without a government guarantee but usually having
some form of private credit enhancement.
Mortgage-Backed Securities may represent an undivided ownership interests
in pools of mortgages. The mortgages backing these securities may include
conventional 30-year fixed rate mortgages, 15-year fixed rate mortgages,
graduated payment mortgages and adjustable rate mortgages. The U.S. government
or the issuing agency guarantees the payment of the interest on and principal of
these securities. However, the guarantees do not extend to the securities' yield
or value, which are likely to vary inversely with fluctuations in interest
rates, nor do the guarantees extend to the yield or value of the Fund's shares.
These securities are in most cases "pass-through" instruments, through which the
holders receive a share of all interest and principal payments from the
mortgages underlying the securities, net of certain fees. Because the principal
amounts of such underlying mortgages may generally be prepaid in whole or in
part by the mortgagees at any time without penalty and the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life of a particular issue of pass-through securities.
Mortgage-Backed Securities are subject to more rapid repayment than their stated
maturity date would indicate as a result of the pass-through of prepayments of
principal on the underlying mortgage obligations. The remaining maturity of a
Mortgage-Backed Security will be deemed to be equal to the average maturity of
the mortgages underlying such security determined by the Adviser on the basis of
assumed
B-7
<PAGE> 45
prepayment rates with respect to such mortgages. The remaining expected average
life of a pool of mortgages underlying a Mortgage-Backed Security is a
prediction of when the mortgages will be repaid and is based upon a variety of
factors such as the demographic and geographic characteristics of the borrowers
and the mortgaged properties, the length of time that each of the mortgages has
been outstanding, the interest rates payable on the mortgages and the current
interest rate environment. While the timing of prepayments of graduated payment
mortgages differs somewhat from that of conventional mortgages, the prepayment
experience of graduated payment mortgages is basically the same as that of the
conventional mortgages of the same maturity dates over the life of the pool.
The yield characteristics of Mortgage-Backed Securities differ from
traditional debt securities. Among the major differences are that interest and
principal prepayments are made more frequently, usually monthly, and that
principal may be prepaid at any time because the underlying mortgage loans or
other assets generally may be prepaid at any time. As a result, if the Fund
purchases such a security at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if the Fund purchases these securities at a discount, faster than
expected prepayments will increase, while slower than expected prepayments will
reduce, yield to maturity. Stripped Mortgage-Backed Securities (defined herein)
are highly sensitive to changes in prepayment and interest rates.
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in mortgagors'
housing needs, job transfers, unemployment, mortgagors' net equity in the
mortgaged properties and servicing decisions. Generally, however, prepayments on
mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Accordingly, amounts
available for reinvestment by the Fund are likely to be greater during a period
of declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates. Mortgage-Backed
Securities, like traditional debt securities, may decrease in value as a result
of increases in interest rates; however, Mortgage-Backed Securities may be more
susceptible to further declines in value during periods of rising interest rates
than traditional debt securities because of extension risk (i.e. rising interest
rates could cause property owners to prepay their mortgages more slowly than
expected when the security was purchased by the Fund which may further reduce
the market value of such security and lengthen the duration of the security). In
addition, Mortgage-Backed Securities tend to benefit less than traditional debt
securities from declining interest rates because of the risk of prepayment (i.e.
underlying mortgages often get prepaid faster than expected in periods of
declining interest rates).
The Fund's yield may also be affected by the yields on instruments in which
the Fund is able to reinvest the proceeds of payments and prepayments.
Accelerated prepayments on securities purchased by the Fund at a premium also
impose a risk of loss of principal because the premium may not have been fully
amortized at the time the principal is repaid in full.
During periods of declining interest rates, prepayment of mortgages
underlying Mortgage-Backed Securities can be expected to accelerate. When the
mortgage obligations are prepaid, the Fund reinvests the prepaid amounts in
other income producing securities, the yields of which reflect interest rates
prevailing at the time. Therefore, the Fund's
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ability to maintain a portfolio of high-yielding Mortgage-Backed Securities will
be adversely affected to the extent that prepayments of mortgages must be
reinvested in securities which have lower yields than the prepaid
Mortgage-Backed Securities. Moreover, prepayments of mortgages which underlie
securities purchased by the Fund at a premium would result in capital losses.
Guaranteed Mortgage Pass-Through Securities. The Fund may invest in
mortgage pass-through securities representing participation interest in pools of
residential mortgage loans originated by U.S. governmental or private lenders or
guaranteed, to the extent provided in such securities, by the U.S. government or
one of its agencies or instrumentalities. Mortgage pass-through securities
provide for monthly payments that are a "pass-through" of the monthly interest
and principal payments (including any prepayment) made by the individual
borrowers on the pooled mortgage loans, net of any fees paid to the guarantor of
such securities and the servicer of the underlying mortgage loans.
The guaranteed mortgage pass-through securities that the Fund may invest in
include those issued or guaranteed by GNMA, FNMA and FHLMC. Each of GNMA, FNMA
and FHLMC guarantee timely distributions of interest to security holders. GNMA
and FNMA also guarantee timely distribution of scheduled principal. FHLMC
guarantees only ultimate collection of principal on the underlying loans, which
collection may take up to one year. The Fund may also invest in other agency
securities, including but not limited to securities issued by the Small Business
Administration, Export-Import Bank of the United States, Federal Housing
Administration, Farm Credit Administration, Federal Home Loan Banks, General
Services Administration, U.S. Department of Transportation, U.S. Department of
Housing and Urban Development, and Student Loan Marketing Association. These
securities generally are not backed by the full faith and credit of the United
States.
Private Mortgage Pass-Through Securities. Private mortgage pass-through
securities ("Private Pass-Throughs") are structured similarly to the GNMA, FNMA
and FHLMC mortgage pass-through securities described above and are issued by
originators of and investors in mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing. Private Pass-Throughs constituting ARMS
are backed by a pool of conventional adjustable rate mortgage loans. Since
Private Pass-Throughs typically are not guaranteed by an entity having the
credit status of GNMA, FNMA or FHLMC, such securities generally are structured
with one or more types of credit enhancement.
GNMA Certificates. GNMA is a wholly-owned corporate instrumentality of the
United States within the Department of Housing and Urban Development. The
National Housing Act of 1934, as amended (the "Housing Act"), authorizes GNMA to
guarantee the timely payment of the principal of and interest on certificates
that are based on and backed by a pool of mortgage loans insured by the Federal
Housing Administration under the Housing Act, or Title V of the Housing Act of
1949 ("FHA Loans"), or guaranteed by the Veteran's Administration under the
Servicemen's Readjustment Act of 1944, as amended ("VA Loans"), or by pools of
other eligible mortgage loans. The Housing Act provides that the full faith and
credit of the U.S. government is pledged to the payment of all amounts that may
be required to be paid under any guarantee. In order to meet its
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obligations under such guarantee, GNMA is authorized to borrow from the U.S.
Treasury with no limitations as to amount.
GNMA Certificates will represent a pro rata interest in one or more pools
of the following types of mortgage loans: (i) fixed rate level payment mortgage
loans; (ii) fixed rate graduated payment mortgage loans; (iii) fixed rate
growing equity mortgage loans; (iv) fixed rate mortgage loans secured by
manufactured (mobile) homes; (v) mortgage loans on multifamily residential
properties under construction; (vi) mortgage loans on completed multifamily
projects; (vii) fixed rate mortgage loans as to which escrowed funds are used to
reduce the borrower's monthly payments during the early years of the mortgage
loans ("buydown" mortgage loans); (viii) mortgage loans that provide for
adjustments in payments based on periodic changes in interest rates or in other
payment terms of the mortgage loans; and (ix) mortgage-backed serial notes. All
of these mortgage loans will be FHA Loans or VA Loans and, except as otherwise
specified above, will be fully-amortizing loans secured by first liens on one-
to four-family housing units.
FNMA Certificates. FNMA is a federally chartered and privately owned
corporation organized and existing under the Federal National Mortgage
Association Charter Act. FNMA was originally established in 1938 as a U.S.
government agency to provide supplemental liquidity to the mortgage market and
was transformed into a stockholder owned and privately managed corporation by
legislation enacted in 1968. FNMA provides funds to the mortgage market
primarily by purchasing home mortgage loans from local lenders, thereby
replenishing their funds for additional lending. FNMA acquires funds to purchase
home mortgage loans from many capital market investors that may not ordinarily
invest in mortgage loans directly, thereby expanding the total amount of funds
available for housing.
Each FNMA Certificate will entitle the registered holder thereof to receive
amounts representing such holder's pro rata interest in scheduled principal
payments and interest payments (at such FNMA Certificate's pass-through rate,
which is net of any servicing and guarantee fees on the underlying mortgage
loans), and any principal prepayments on the mortgage loans in the pool
represented by such FNMA Certificate and such holder's proportionate interest in
the full principal amount of any foreclosed or otherwise finally liquidated
mortgage loan. The full and timely payment of principal of and interest on each
FNMA Certificate will be guaranteed by FNMA, which guarantee is not backed by
the full faith and credit of the U.S. government.
Each FNMA Certificate will represent a pro rata interest in one or more
pools of FHA Loans, VA Loans or conventional mortgage loans (i.e., mortgage
loans that are not insured or guaranteed by any governmental agency) of the
following types: (i) fixed rate level payment mortgage loans; (ii) fixed rate
growing equity mortgage loans; (iii) fixed rate graduated payment mortgage
loans; (iv) variable rate mortgage loans; (v) other adjustable rate mortgage
loans; and (vi) fixed rate loans secured by multifamily projects.
FHLMC Certificates. FHLMC is a corporate instrumentality of the United
States created pursuant to the Emergency Home Finance Act of 1970, as amended
(the "FHLMC Act"). FHLMC was established primarily for the purpose of increasing
the availability of mortgage credit for the financing of needed housing. The
principal activity of FHLMC currently consists of the purchase of first lien,
conventional, residential mortgage
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loans and participation interests in such mortgage loans and the resale of the
mortgage loans so purchased in the form of mortgage securities, primarily
Freddie Mac Certificates.
FHLMC guarantees to each registered holder of a FHLMC Certificate the
timely payment of interest at the rate provided for by such FHLMC Certificate,
whether or not received. Freddie Mac also guarantees to each registered holder
of a FHLMC Certificate ultimate collection of all principal of the related
mortgage loans, without any offset or deduction, but does not, generally,
guarantee the timely payment of scheduled principal. FHLMC may remit the amount
due on account of its guarantee of collection of principal at any time after
default on an underlying mortgage loan, but not later than 30 days following (i)
foreclosure sale, (ii) payment of a claim by any mortgage insurer, or (iii) the
expiration of any right of redemption, whichever occurs later, but in any event
no later than one year after demand has been made upon the mortgagor for
accelerated payment of principal. The obligation of FHLMC under its guarantee
are obligations solely of FHLMC and are not backed by the full faith and credit
of the U.S. government.
FHLMC Certificates represent a pro rata interest in a group of mortgage
loans (a "FHLMC Certificate group") purchased by FHLMC. The mortgage loans
underlying the FHLMC Certificates will consist of fixed rate or adjustable rate
mortgage loans with original terms to maturity of between ten and thirty years,
substantially all of which are secured by first liens on one- to four-family
residential properties or multifamily projects. Each mortgage loan must meet the
applicable standards set forth in the FHLMC Act. A FHLMC Certificate group may
include whole loans, participation interests in whole loans and undivided
interests in whole loans and participations comprising another FHLMC Certificate
group.
Collateralized Mortgage Obligations and Multiclass Pass-Through Securities.
Collateralized mortgage obligations ("CMOs") are debt obligations which are
secured by mortgage loans or other mortgage-backed securities (such collateral
is collectively hereinafter referred to as "Mortgage Assets"). Multiclass
pass-through securities are equity interests in a trust composed of Mortgage
Assets. Unless the context indicates otherwise, all references herein to CMOs
include multiclass pass-through securities. Payments of principal of and
interest on the Mortgage Assets, and any reinvestment income thereon, provide
the funds to pay debt service on the CMOs or make scheduled distributions on the
multiclass pass-through securities. CMOs may be issued by agencies or
instrumentalities of the U.S. government, or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose subsidiaries of
the foregoing. The issuer of a series of CMOs may elect to be treated as a Real
Estate Mortgage Investment Conduit (a "REMIC"). All future references to CMOs
shall also be deemed to include REMICs.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," may be issued at a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayments on the underlying Mortgage Assets may
cause the CMOs to be retired substantially earlier than their stated maturities
or final distribution dates. Interest is paid or accrues on all classes of a CMO
on a monthly, quarterly or semi-annual basis. The principal of and interest on
the Mortgage Assets may be allocated among the several classes of a series of a
CMO in many ways. By investing in particular tranches of a CMO with specified
cash flows, the Fund may gain more predictability of cash flows than if it had
invested in the
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underlying Mortgage Assets. Generally, the more predictable the cash flow of a
CMO tranche, the lower the anticipated yield will be on that tranche at the time
of issuance relative to prevailing market yields on mortgage-backed securities.
As part of the process of creating more predictable cash flows on most of the
tranches in a series of CMOs, one or more tranches generally must be created
that absorb most of the volatility in the cash flows on the underlying Mortgage
Assets. The yields on these tranches are generally higher than prevailing market
yields on mortgage-backed securities with similar average lives. Because of the
uncertainty of the cash flows on these tranches, and the sensitivity thereof to
changes in prepayment rates on the underlying Mortgage Assets, the market prices
of and yield on these tranches tend to be more volatile.
One or more tranches of a CMO may have coupon rates which reset
periodically at a specified increment over an index such as LIBOR. These
adjustable rate tranches are known as "floating rate CMOs," "inverse floating
CMOs" and "interest only CMOs". Floating rate CMOs may be backed by fixed rate
or adjustable rate mortgages; to date, fixed rate mortgages have been more
commonly utilized for this purpose. Floating rate CMOs are typically issued with
lifetime caps on the coupon rate thereon. These caps, similar to the caps on
adjustable rate mortgages, represent a ceiling beyond which the coupon rate on a
floating rate CMO may not be increased regardless of increases in the interest
rate index to which the floating rate CMO is geared. Inverse floating rate CMOs
pay interest at rates that vary inversely with changes in market rates of
interest and may pay a rate of interest determined by applying a multiple to the
floating rate. Accordingly, when market rates of interest decrease, the change
in value of inverse floating CMOs owned by the Fund 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 inverse floating rate CMOs owned by the Fund will have a
negative effect on the net asset value of the Fund. In addition, the extent of
increases and decreases in the net asset value of the Fund in response to
changes in market rates of interest generally will be larger than comparable
changes in the net asset value of the Fund if the Fund held an equal principal
amount of a fixed rate CMO security having similar credit quality, redemption
provisions and maturity.
The Fund also may invest in, among other things, parallel pay CMOs and
Planned Amortization Class CMOs (PAC Bonds). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally require payments of a
specified amount of principal on each payment date.
In reliance on an SEC interpretation, the Fund's investment in certain
qualifying collateralized mortgage obligations (CMOs), including CMOs that have
elected to be treated as Real Estate Mortgage Investment Conduits (REMICs), are
not subject to the 1940 Act's limitation on acquiring interests in other
investment companies. In order to be able to rely on the SEC's interpretation,
the CMOs and REMICs must be unmanaged, fixed-asset issuers that (a) invest
primarily in mortgage-backed securities, (b) do not issue redeemable securities,
(c) operate under general exemptive orders exempting them from all provisions of
the 1940 Act, and (d) are not registered or regulated under the 1940 Act as
investment companies. To the extent that the Fund selects CMOs or REMICs that do
not meet the above requirements, the Fund may not invest more than 10% of its
assets in
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all such entities and may not acquire more than 3% of the voting securities of
any single such entity.
Stripped Mortgage-Backed Securities. Stripped Mortgage-Backed Securities
are derivative multi-class mortgage securities. Stripped Mortgage-Backed
Securities may be issued by agencies or instrumentalities of the U.S.
government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.
Stripped Mortgage-Backed Securities are generally structured with two
classes that receive different proportions of the interest and principal
distributions on a pool of mortgage assets. A common type of Stripped
Mortgage-Backed Securities will have one class receiving a small portion of the
interest and a larger portion of the principal from the mortgage assets, while
the other classes will receive primarily interest and only a small portion of
the principal. In the most extreme case, one class will receive all of the
interest (the interest-only or "IO" class), while the other class will receive
all of the principal (the principal-only or "PO" class). The yields to maturity
on IOs and POs are especially sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets, and principal
payments may have a material effect on yield to maturity. If the underlying
mortgage assets experience greater than anticipated prepayments of principal,
the Fund may not fully recoup its initial investment in IOs. Conversely, if the
underlying mortgage assets experience less than anticipated prepayments of
principal, the yield on POs could be materially adversely affected. The market
value of such Stripped Mortgage-Backed Securities, including adjustable rate
U.S. government IOs, are subject to greater risk of fluctuation in response to
changes in market interest rates than other adjustable rate securities, and such
greater risk of fluctuation may adversely affect the ability of the Fund to
maintain a relatively stable net asset value.
Types of Credit Support. To lessen the effect of failures by obligors on
underlying mortgages to make payments, certain Mortgage-Backed Securities may
contain elements of credit support. Such credit support falls into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the pass-through of
payments due on the underlying pool occurs in a timely fashion. Protection
against losses resulting from ultimate default enhances the likelihood of
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor from third parties, through
various means of structuring the transaction or through a combination of such
approaches. The Fund will not pay any additional fees for such credit support,
although the existence of credit support may increase the price of a security.
The ratings of securities for which third-party credit enhancement provides
liquidity protection or protection against losses from default are generally
dependent upon the continued creditworthiness of the enhancement provider. The
ratings of such securities could be subject to reduction in the event of
deterioration in the creditworthiness of the credit enhancement provider even in
cases where the delinquency and loss experience on the underlying pool of assets
is better than expected.
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Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over-collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceed those required to make payment on the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information with
respect to the level of credit risk associated with the underlying assets. Other
information which may be considered include demographic factors, loan
underwriting practices and general market and economic conditions. Delinquency
or loss in excess of that which is anticipated could adversely affect the return
on an investment in such a security.
Adjustable Rate Mortgage-Backed Securities. Adjustable rate Mortgage-Backed
Securities are debt securities having interest rates which are adjusted or reset
at periodic intervals ranging, in general, from one month to three years, based
on a spread over a specific interest rate or interest rate index. There are
three main categories of indices: (i) those based on U.S. government securities,
(ii) those derived from a calculated measure such as a cost of funds index and
(iii) those based on a moving average of interest rates, including mortgage
rates. Commonly utilized indices include, for example, the One Year Constant
Maturity Treasury Index, the London Interbank Offered Rate (LIBOR), the Federal
Home Loan Bank Cost of Funds, the prime rate and commercial paper rates.
Adjustable rate securities allow the Fund to participate in increases in
interest rates through periodic upward adjustments of the coupon rates of such
securities, resulting in higher yields. During periods of declining interest
rates, however, coupon rates may readjust downward resulting in lower yields to
the Fund. During periods of rising interest rates, changes in the coupon rate of
adjustable rate securities will lag behind changes in the market interest rate,
which may result in such security having a lower value until the coupon resets
to reflect more closely market interest rates. Investors who redeem shares of
the Fund prior to the time the coupon rates of the Fund's portfolio securities
are adjusted could suffer some loss on their investment in the Fund's shares.
Adjustable rate securities typically limit the maximum amount the coupon rate
may be adjusted during any adjustment period, in any one year and during the
term of the security. During periods of significant fluctuations in market rates
of interest the net asset value of the Fund may fluctuate more significantly
since these limits may prevent the Fund's portfolio securities from fully
adjusting to reflect market rates.
The Fund may invest in adjustable rate securities with interest rates that
adjust or vary inversely to changes in market interest rates. Such securities,
which are referred to as "inverse floating obligations," provide opportunities
for high current income, but the market value of such securities may be more
volatile in response to changes in market interest rates. Certain of such
inverse floating obligations have coupon rates that adjust to changes in market
interest rates to a greater degree than the change in the market rate and
accordingly have investment characteristics similar to investment leverage. As a
result, the market value of such inverse floating obligations are subject to
greater risk of
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fluctuation than other adjustable rate securities which do not vary inversely to
changes in market interest rates, and such greater risk of fluctuation may
adversely affect the ability of the Fund to maintain a relatively stable net
asset value.
ASSET-BACKED SECURITIES
"Asset-Backed Securities" have structural characteristics similar to
Mortgage-Backed Securities but have underlying assets that are not mortgage
loans or interests in mortgage loans. Through the use of trusts and special
purpose corporations, various types of assets, including assets such as
automobile and credit card receivables and home equity loans, have been
securitized in pass-through structures similar to the mortgage pass-through
structures or pay-through structures. In general, these types of loans are of
shorter average life than mortgage loans and are less likely to have substantial
prepayments.
Asset-Backed Securities present certain risks that are not presented by
Mortgage-Backed Securities, including the risk that these securities do not
have the benefit of a security interest in the related collateral. For example,
credit card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, some of
which give such debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. Most issues of Asset-Backed Securities
backed by automobile receivables permit the servicers of such receivable to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related Asset-Backed
Securities. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirement under state laws, the trustee for the
holders of Asset-Backed Securities backed by automobile receivables may not have
a proper security interest in the obligations backing such receivables.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.
STRUCTURED INVESTMENTS
The Fund may invest a portion of its assets in interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of other debt securities, including debt securities issued by
foreign governments. This type of restructuring involves the deposit with or
purchase by an entity, such as a corporation or trust, of specified instruments
(such as commercial bank loans) and the issuance by that entity of one or more
classes of securities ("Structured Investments") backed by, or representing
interests in, the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly issued Structured Investments to
create securities with different investment characteristics such as varying
maturities, payment priorities and interest rate provisions, and the extent of
the payments made with respect to Structured Investments is dependent on the
extent of the cash flow on the underlying instruments. The Fund may invest in a
class of structured investments that is subordinated to the right of payment of
another class. Subordinated structured investments typically have higher yields
and present greater risks than unsubordinated structured investments.
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STRATEGIC TRANSACTIONS
The Fund may, but is not required to, use various investment strategies as
described below to earn income, facilitate portfolio management, and mitigate
risks. Such strategies are generally accepted under modern portfolio management
and are regularly used by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell derivative securities such as exchange-listed and
over-the-counter put and call options on securities, financial futures, equity,
fixed-income and interest rate indices and other financial instruments, purchase
and sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currency or currency futures
(collectively, all the above are called "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 or currency exchange 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.
The Fund may sell options on securities the Fund owns or has the right to
purchase without additional payments, up to 25% of the Fund's net assets, for
non-hedging purposes. When the Fund sells an option, if the underlying
securities do not increase (in the case of a call option) or decrease (in the
case of a put option) to a price level that would make the exercise of the
option profitable to the holder of the option, the option generally will expire
without being exercised and the Fund will realize as profit the premium received
for such option. When a call option of which the Fund is the writer is
exercised, the option holder purchases the underlying security at the strike
price and the Fund does not participate in any increase in the price of such
securities above the strike price. In addition, the Fund would need to replace
the underlying securities at prices which may not be advantageous to the Fund.
When a put option of which the Fund is the writer is exercised, the Fund will be
required to purchase the underlying securities at the strike price, which may be
in excess of the market value of such 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 involving financial futures
and options thereon will be purchased, sold or entered into only for bona fide
hedging, risk management or portfolio management purposes and not for
speculative purposes.
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
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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 or
purchase of portfolio securities at inopportune times or for prices other than
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 currency transactions can result in the Fund incurring losses as a
result of a number of factors including the imposition of exchange controls,
suspension of settlements, or the inability to deliver or receive a specified
currency. 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 use of these futures contracts and
options transactions for hedging 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. Income earned or deemed to be earned, if
any, by the Fund from its Strategic Transactions will generally be taxable.
General Characteristics of Options. Put options and call options typically
have similar structural characteristics and operational mechanics regardless of
the underlying instrument on which they are purchased or sold. Thus, the
following general discussion relates to each of the particular types of options
discussed in greater detail below. In addition, many Strategic Transactions
involving options require segregation of Fund assets in special accounts, as
described below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving the Fund the right to sell such instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. The Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect the Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. The Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as
B-17
<PAGE> 55
the Options Clearing Corporation ("OCC"), which guarantees the performance of
the obligations of the parties to such options. The discussion below uses the
OCC as a paradigm, but is also applicable to other financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
The Fund's ability to close out its position as a purchaser or seller of an
OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only enter into OTC options that have a buy-back provision permitting
the Fund to require the Counterparty to close out the option at a formula price
within seven days. The Fund expects generally to enter into OTC options that
have cash settlement provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the
B-18
<PAGE> 56
creditworthiness of each such Counterparty or any guarantor or credit
enhancement of the Counterparty's credit to determine the likelihood that the
terms of the OTC option will be satisfied. The Fund will engage in OTC option
transactions only with U.S. government securities dealers recognized by the
Federal Reserve Bank of New York as "primary dealers", or broker dealers,
domestic or foreign banks or other financial institutions which have received
(or the guarantors of the obligation of which have received) a short-term credit
rating of "A-1" from Standard & Poor's ("S&P") or "P-1" from Moody's Investors
Service, Inc. ("Moody's") or an equivalent rating from any other nationally
recognized statistical rating organization ("NRSRO"). Certain OTC options on
securities may be illiquid, and are subject to the Fund's limitation on illiquid
securities.
If the Fund sells a call option, the premium that it receives may serve as
a partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call or put options on securities, including
U.S. Treasury and agency securities, foreign sovereign debt, mortgage-backed
securities, corporate debt securities and Eurodollar instruments and foreign
debt securities that are traded on U.S. and foreign securities exchanges and in
the over-the-counter markets and related futures on such securities, indices,
currencies and futures. All calls sold by the Fund must be "covered" (i.e., the
Fund must own the securities or futures contract subject to the call) or must
meet the asset segregation requirements described below as long as the call is
outstanding. Even though the Fund will receive the option premium to help
protect it against loss, a call sold by the Fund exposes the Fund during the
term of the option to possible loss of opportunity to realize appreciation in
the market price of the underlying security or instrument and may require the
Fund to hold a security or instrument which it might otherwise have sold. In
selling put options, there is a risk that the Fund may be required to buy the
underlying security at a disadvantageous price above the market price.
General Characteristics of Futures. The Fund may enter into financial
futures contracts or purchase or sell put and call options on such futures as a
hedge against anticipated interest rate or currency market changes, for duration
management and for risk management purposes. Futures generally are bought and
sold on the commodities exchanges where they are listed with payment of initial
and variation margin as described below. The purchase of a futures contract
creates a firm obligation by the Fund, as purchaser, to take delivery from the
seller the specific type of financial instrument called for in the contract at a
specific future time for a specified price. The sale of a futures contract
creates a firm obligation by the Fund, as seller, to deliver to the buyer the
specific type of financial instrument called for in the contract at a specific
future time for a specified price (or, with respect to index futures and
Eurodollar instruments, the net cash amount). Options on futures contracts are
similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such option.
The Fund's use of financial futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
rules and regulations of the Commodity Futures Trading Commission ("CFTC") and
will be entered into only for bona fide hedging, risk management (including
duration management) or other portfolio
B-19
<PAGE> 57
management purposes. Typically, maintaining a futures contract or selling an
option thereon requires the Fund to deposit with a financial intermediary as
security for its obligations an amount of cash or other specified assets
(initial margin) which initially is typically 1% to 10% of the face amount of
the contract (but may be higher in some circumstances). Additional cash or
assets (variation margin) may be required to be deposited thereafter on a daily
basis as the mark to market value of the contract fluctuates. The purchase of
options on financial futures involves payment of a premium for the option
without any further obligation on the part of the Fund. If the Fund exercises an
option on a futures contract it will be obligated to post initial margin (and
potential subsequent variation margin) for the resulting futures position just
as it would for any position. Futures contracts and options thereon are
generally settled by entering into an offsetting transaction but there can be no
assurance that the position can be offset prior to settlement at an advantageous
price nor that delivery will occur.
The Fund will not enter into a futures contract or related option (except
for closing transactions) for other than bona fide hedging purposes if,
immediately thereafter, the sum of the amount of its initial margin and premiums
on open futures contracts and options thereon would exceed 5% of the Fund's
total assets (taken at current value); however, in the case of an option that is
in-the-money at the time of the purchase, the in-the-money amount may be
excluded in calculating the 5% limitation. The segregation requirements with
respect to futures contracts and options thereon are described below.
Options on Securities Indices and Other Financial Indices. The Fund also
may purchase and sell call and put options on securities indices and other
financial indices and in so doing can achieve many of the same objectives it
would achieve through the sale or purchase of options on individual securities
or other instruments. Options on securities indices and other financial indices
are similar to options on a security or other instrument except that, rather
than settling by physical delivery of the underlying instrument, they settle by
cash settlement, i.e., an option on an index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the index upon which the option is based exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option (except if, in
the case of an OTC option, physical delivery is specified). This amount of cash
is equal to the excess of the closing price of the index over the exercise price
of the option, which also may be multiplied by a formula value. The seller of
the option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions. The Fund may engage in currency transactions with
Counterparties in order to hedge the value of currencies against fluctuations in
relative value. Currency transactions include forward currency contracts,
exchange listed currency futures, exchange listed and OTC options on currencies,
and currency swaps. A forward currency contract involves a privately negotiated
obligation to purchase or sell (with delivery generally required) a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency swap is an agreement to exchange cash flows based on the
notional difference among two or more currencies and operates similarly to an
B-20
<PAGE> 58
interest rate swap, which is described below. The Fund may enter into currency
transactions with Counterparties rated A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from an NRSRO or (except for OTC
options) are determined to be of equivalent credit quality by the Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure to an
extent greater, after netting all transactions intended to wholly or partially
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency
other than with respect to cross-hedging or proxy hedging as described below.
The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which Fund expects to
have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, and to buy U.S. dollars. The amount of the contract
would not exceed the value of the Fund's securities denominated in linked
currencies. For example, if the Adviser considers the Austrian schilling is
linked to the German deutschemark (the "D-mark"), the Fund holds securities
denominated in Austrian schillings and the Adviser believes that the value of
schillings will decline against the U.S. dollar, the Adviser may enter into a
contract to sell D-marks and buy dollars. Currency hedging involves some of the
same risks and considerations as other transactions with similar instruments.
Currency transactions can result in losses to the Fund if the currency being
hedged fluctuates in value to a degree or in a direction that is not
anticipated. Further, there is the risk that the perceived linkage between
various currencies may not be present or may not be present during the
particular time that the Fund is engaging in proxy hedging. If the Fund enters
into a currency hedging transaction, the Fund will comply with the asset
segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from other transactions. Because currency control is of great
importance to the issuing governments and influences economic planning and
policy, purchases and sales of currency and related instruments can be
negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
B-21
<PAGE> 59
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions and multiple
currency transactions (including forward currency contracts), multiple interest
rate transactions and any combination of futures, options, currency and interest
rate transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into
which the Fund may enter are interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars. The Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of a floor entitles the purchaser to receive payments on a notional
principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates or values.
The Fund may into swaps, caps, floors, collars on either an asset-based or
liability-based basis, depending on whether it is hedging its assets or its
liabilities and will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in
B-22
<PAGE> 60
a cash settlement on the payment date or dates specified in the instrument, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payments. Inasmuch as these swaps, caps, floors and collars are entered into for
good faith hedging purposes, the Adviser and the Fund believe such obligations
do not constitute senior securities under the 1940 Act and, accordingly, will
not treat them as being subject to its borrowing restrictions. The Fund will not
enter into any swap, cap, floor or collar transaction unless, at the time of
entering into such transaction, the unsecured long-term debt of the
Counterparty, combined with any credit enhancements, is rated at least
"A" by S&P or Moody's or has an equivalent rating from an NRSRO or is determined
to be of equivalent credit quality by the Adviser. If there is a default by the
Counterparty, the Fund may have contractual remedies pursuant to the agreements
related to the transaction. A large number of banks and investment banking firms
now act both as principals and agents utilizing standardized swap documentation.
As a result, the swap market has become relatively liquid. Caps, floors and
collars are more recent innovations for which standardized documentation has not
yet been fully developed and, accordingly, they are less liquid than swaps.
Risks of Strategic Transactions Outside the United States. When conducted
outside the United States, Strategic Transactions may not be regulated as
rigorously as in the United States, may not involve a clearing mechanism and
related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected by:
(i) other complex foreign political, legal and economic factors, (ii) lesser
availability than in the United States of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(iv) the imposition of different exercise and settlement terms and procedures
and margin requirements than in the United States, and (v) lower trading volume
and liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions,
in addition to other requirements, require that the Fund segregate cash or
liquid securities with its custodian to the extent Fund obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency. In general, either the full amount of any obligation by
the Fund to pay or deliver securities or assets must be covered at all times by
the securities, instruments or currency required to be delivered, or, subject to
any regulatory restrictions, an amount of cash or liquid securities at least
equal to the current amount of the obligation must be segregated with the
custodian. The segregated assets cannot be sold or transferred unless equivalent
assets are substituted in their place or it is no longer necessary to segregate
them. For example, a call option written by the Fund will require the Fund to
hold the securities subject to the call (or securities convertible into the
needed securities without additional consideration) or to segregate cash or
liquid securities sufficient to purchase and deliver the securities if the call
is exercised. A call option sold by the Fund on an index will require the Fund
to own portfolio securities which correlate with the index or to segregate cash
or liquid securities equal to the excess of the index value over the exercise
price on a current basis. A put option written by the Fund requires the Fund to
segregate cash or liquid securities equal to the exercise price.
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<PAGE> 61
Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's obligations
or to segregate cash or liquid securities equal to the amount of the Fund's
obligation.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, swaps, caps, floors and collars will generally provide for cash
settlement. As a result, when the Fund sells these instruments it will only
segregate an amount of assets equal to its accrued net obligations, as there is
no requirement for payment or delivery of amounts in excess of the net amount.
These amounts will equal 100% of the exercise price in the case of a non
cash-settled put, the same as an OCC guaranteed listed option sold by the Fund,
or the in-the-money amount plus any sell-back formula amount in the case of a
cash-settled put or call. In addition, when the Fund sells a call option on an
index at a time when the in-the-money amount exceeds the exercise price, the
Fund will segregate, until the option expires or is closed out, cash or liquid
securities equal in value to such excess. OCC issued and exchange listed options
sold by the Fund other than those above generally settle with physical delivery,
and the Fund will segregate an amount of assets equal to the full value of the
option. OTC options settling with physical delivery, or with an election of
either physical delivery or cash settlement, will be treated the same as other
options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash or liquid
securities.
With respect to swaps, the Fund will accrue the net amount of the excess,
if any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid securities having a
value equal to the accrued excess. Caps, floors and collars require segregation
of assets with a value equal to the Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund also may enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions also may be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
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<PAGE> 62
The Fund's activities involving Strategic Transactions may be limited by
the requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions
which may not be changed without approval by the vote of a majority of its
outstanding voting securities which is defined by the 1940 Act as the lesser of
(i) 67% or more of the voting securities present at a meeting, if the holders of
more than 50% of the outstanding voting securities of the Fund are present or
represented by proxy; or (ii) more than 50% of the Fund's outstanding voting
securities. The percentage limitations contained in the restrictions and
policies set forth herein apply at the time of purchase of securities. These
restrictions provide that the Fund shall not:
1. Invest in a manner inconsistent with its classification as a
"diversified company" as provided by (i) the 1940 Act, as amended from
time to time, (ii) the rules and regulations promulgated by the SEC
under the 1940 Act, as amended from time to time, or (iii) an exemption
or other relief applicable to the Fund from the provisions of the 1940
Act.
2. Issue senior securities nor borrow money, except the Fund may issue
senior securities or borrow money to the extent permitted by (i) the
1940 Act, as amended from time to time, (ii) the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to
time, or (iii) an exemption or other relief applicable to the Fund from
the provisions of the 1940 Act.
3. Act as an underwriter of securities issued by others, except to the
extent that, in connection with the disposition of portfolio
securities, it may be deemed to be an underwriter under applicable
securities laws.
4. Invest in any security if, as a result, more than 25% of the value of
the Fund's total assets, taken at market value at the time of each
investment, are in the securities of issuers in any particular industry
(excluding securities issued or guaranteed by the U.S. Government and
it agencies and instrumentalities or securities of state and municipal
governments or their political subdivisions or when the Fund has taken
a temporary defensive position or as otherwise provided by (i) the 1940
Act, as amended from time to time, (ii) the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to
time, or (iii) an exemption or other relief applicable to the Fund from
the provisions of the 1940 Act).
5. Purchase or sell real estate except that the Fund may: (i) acquire or
lease office space for its own use, (ii) invest in securities of
issuers that invest in real estate or interests therein or that are
engaged in or operate in the real estate industry, (iii) invest in
securities that are secured by real estate or interests therein, (iv)
purchase and sell mortgage-related securities, (v) hold and sell real
estate acquired by the Fund as a result of the ownership of securities
and (vi) as otherwise permitted by the 1940 Act, as amended from time
to time, the rules and regulations promulgated by the SEC under the
1940 Act, as amended from
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<PAGE> 63
time to time, or an exemption or other relief applicable to the Fund
from the provisions of the 1940 Act.
6. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments; provided that this
restriction shall not prohibit the Fund from purchasing or selling
options, futures contracts and related options thereon, forward
contracts, swaps, caps, floors, collars and any other financial
instruments or from investing in securities or other instruments backed
by physical commodities or as otherwise permitted by (i) the 1940 Act,
as amended from time to time, (ii) the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to
time, or (iii) an exemption or other relief applicable to the Fund from
the provisions of the 1940 Act.
7. Make loans of money or property to any person, except (i) to the extent
that securities or interests in which the Fund may invest are
considered to be loans, (ii) through the loan of portfolio securities,
(iii) to the extent that the Fund may lend money or property in
connection with the maintenance of the value of, or the Fund's interest
with respect to, the securities owned by the Fund, (iv) by engaging in
repurchase agreements or (v) as may otherwise be permitted by the 1940
Act, as amended from time to time, the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to
time, or an exemption or other relief applicable to the Fund from the
provisions of the 1940 Act.
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<PAGE> 64
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and officers of the Fund and
executive officers of the Fund's investment adviser and their principal
occupations for the last five years and their affiliations, if any, with Van
Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment
Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset
Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Management
Inc., Van Kampen Advisors Inc., Van Kampen Insurance Agency of Illinois Inc.,
Van Kampen Insurance Agency of Texas Inc., Van Kampen System Inc., Van Kampen
Recordkeeping Services Inc., American Capital Contractual Services, Inc., Van
Kampen Trust Company, Van Kampen Exchange Corp. and Van Kampen Investor Services
Inc. ("Investor Services"). Advisory Corp. and Asset Management sometimes are
referred to herein collectively as the "Advisers". For purposes hereof, the term
"Fund Complex" includes each of the open-end investment companies advised by the
Advisers (excluding Van Kampen Exchange Fund).
TRUSTEES
<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
J. Miles Branagan......................... Private investor. Trustee/Director of each of
1632 Morning Mountain Road the funds in the Fund Complex. Co-founder,
Raleigh, NC 27614 and prior to August 1996, Chairman, Chief
Date of Birth: 07/14/32 Executive Officer and President, MDT
Corporation (now known as Getinge/Castle,
Inc., a subsidiary of Getinge Industrier AB),
a company which develops, manufactures,
markets and services medical and scientific
equipment.
Jerry D. Choate........................... Director of Amgen Inc., a biotechnological
Barrington Place, Building 4 company. Trustee/Director of each of the
18 E. Dundee Road, Suite 101 funds in the Fund Complex. Prior to January
Barrington, IL 60010 1999, Chairman and Chief Executive Officer of
Date of Birth: 09/16/38 The Allstate Corporation ("Allstate") and
Allstate Insurance Company. Prior to January
1995, President and Chief Executive Officer
of Allstate. Prior to August 1994, Mr. Choate
held various management positions at
Allstate.
</TABLE>
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<PAGE> 65
<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Richard M. DeMartini*..................... Chairman and Chief Executive Officer of
Two World Trade Center International Private Client Group, a
66th Floor division of Morgan Stanley Dean Witter.
New York, NY 10048 Director of Dean Witter Reynolds Inc.
Date of Birth: 10/12/52 Chairman and Director of Dean Witter Capital
Corporation. Chairman, Chief Executive
Officer, President and Director of Dean
Witter Alliance Capital Corporation, Director
of the National Healthcare Resources, Inc.,
Dean Witter Realty Inc., Dean Witter Reynolds
Venture Equities Inc., DW Window Covering
Holding, Inc. and is a member of the Morgan
Stanley Dean Witter Management Committee.
Trustee of the TCW/DW Funds, Director of the
Morgan Stanley Dean Witter Funds and
Trustee/Director of other funds in the Fund
Complex. Prior to March 1999, Chairman, Chief
Executive Officer, President and Director of
Morgan Stanley Dean Witter Distributors, Inc.
Prior to January 1999, Chairman of Dean
Witter Futures & Currency Management Inc. and
Demeter Management Corporation. Prior to
December 1998, President and Chief Operating
Officer of Morgan Stanley Dean Witter
Individual Asset Management and Director of
Morgan Stanley Dean Witter Trust FSB.
Formerly Vice Chairman of the Board of the
National Association of Securities Dealers,
Inc. and Chairman of the Board of the Nasdaq
Stock Market, Inc.
Linda Hutton Heagy........................ Managing Partner of Heidrick & Stuggles, an
Sears Tower executive search firm. Trustee/Director of
233 South Wacker Drive each of the funds in the Fund Complex. Prior
Suite 7000 to 1997, Partner, Ray & Berndtson, Inc., an
Chicago, IL 60606 executive recruiting and management
Date of Birth: 06/03/48 consulting firm. Formerly, Executive Vice
President of ABN AMRO, N.A., a Dutch bank
holding company. Prior to 1992, Executive
Vice President of La Salle National Bank.
Trustee on the University of Chicago
Hospitals Board, Vice Chair of the Board of
The YMCA of Metropolitan Chicago and a member
of the Women's Board of the University of
Chicago. Prior to 1996, Trustee of The
International House Board.
R. Craig Kennedy.......................... President and Director, German Marshall Fund
11 DuPont Circle, N.W. of the United States. Trustee/Director of
Washington, D.C. 20016 each of the funds in the Fund Complex.
Date of Birth: 02/29/52 Formerly, advisor to the Dennis Trading Group
Inc. Prior to 1992, President and Chief
Executive Officer, Director and Member of the
Investment Committee of the Joyce Foundation,
a private foundation.
</TABLE>
B-28
<PAGE> 66
<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Jack E. Nelson............................ President and owner, Nelson Investment
423 Country Club Drive Planning Services, Inc., a financial planning
Winter Park, FL 32789 company and registered investment adviser.
Date of Birth: 02/13/36 President and owner, Nelson Ivest Brokerage
Services Inc., a member of the National
Association of Securities Dealers, Inc. and
Securities Investors Protection Corp.
Trustee/Director of each of the funds in the
Fund Complex.
Don G. Powell*............................ Currently a member of the Board of Governors
2800 Post Oak Blvd. and Executive Committee for the Investment
Houston, TX 77056 Company Institute, and a member of the Board
Date of Birth: 10/19/39 of Trustees of the Houston Museum of Natural
Science. Trustee/ Director of certain
open-end investment companies in the Fund
Complex and Trustee/Managing General Partner
of other funds advised by the Advisers or Van
Kampen Management Inc. Immediate past
Chairman of the Investment Company Institute.
Prior to January 1999, Chairman and Director
of Van Kampen Investments, the Advisers, the
Distributor, and Investor Services and
Director or officer of certain other
subsidiaries of Van Kampen Investments. Prior
to July 1998, Director and Chairman of VK/AC
Holding, Inc. Prior to November 1996,
President, Chief Executive Officer and
Director of VK/AC Holding, Inc.
Phillip B. Rooney......................... Vice Chairman and Director of The
One ServiceMaster Way ServiceMaster Company, a business and
Downers Grove, IL 60515 consumer services company. Director of
Date of Birth: 07/08/44 Illinois Tool Works, Inc., a manufacturing
company and the Urban Shopping Centers Inc.,
a retail mall management company. Trustee,
University of Notre Dame. Trustee/ Director
of each of the funds in the Fund Complex.
Prior to 1998, Director of Stone Smurfit
Container Corp., a paper manufacturing
company. Formerly, President, Chief Executive
Officer and Chief Operating Officer of Waste
Management, Inc., an environmental services
company.
Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean
155 Hickory Lane of the Graduate School, Stevens Institute of
Closter, NJ 07624 Technology. Director, Dynalysis of Princeton,
Date of Birth: 08/02/24 a firm engaged in engineering research.
Trustee/Director of each of the funds in the
Fund Complex.
</TABLE>
B-29
<PAGE> 67
<TABLE>
<CAPTION>
Principal Occupations or
Name, Address and Age Employment in Past 5 Years
--------------------- --------------------------
<S> <C>
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps,
333 West Wacker Drive Slate, Meagher & Flom (Illinois), legal
Chicago, IL 60606 counsel to the funds in the Fund Complex, and
Date of Birth: 08/22/39 other open-end and closed-end funds advised
by the Advisers or Van Kampen Management Inc.
Trustee/Director of each of the funds in the
Fund Complex, and Trustee/Managing General
Partner of other open-end and closed-end
funds advised by the Advisers or Van Kampen
Management Inc.
Suzanne H. Woolsey, Ph.D.................. Chief Operating Officer of the National
2101 Constitution Ave., N.W. Academy of Sciences/National Research
Room 206 Council, an independent, federally chartered
Washington, D.C. 20418 policy institution. Director of Neurogen
Date of Birth: 12/27/41 Corporation, a pharmaceutical company.
Director and former Chairman of the German
Marshall Fund of the United States Trustee of
Colorado College, Vice Chair of the Board of
the Council for Excellence in Government.
Trustee/Director of each of the funds in the
Fund Complex. Prior to 1993, Executive
Director of the Commission on Behavioral and
Social Sciences and Education at the National
Academy of Sciences/ National Research
Council. Prior to 1989, Partner of Coopers &
Lybrand.
Paul G. Yovovich.......................... Private investor. Director of 3Com
Sears Tower Corporation, which provides information
233 South Wacker Drive access products and network system solutions,
Suite 9700 COMARCO, Inc., a wireless communications
Chicago, IL 60606 products company and APAC Customer Services,
Date of Birth: 10/29/53 Inc., a provider of outsourced customer
contact services. Trustee/Director of each of
the funds in the Fund Complex. Prior to May
1996, President of Advance Ross Corporation,
an international transaction services and
pollution control equipment manufacturing
company.
</TABLE>
- ------------------------------------
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19)
of the 1940 Act). Mr. Whalen is an interested person of the Fund by reason of
his firm currently acting as legal counsel to the Fund. Messrs. DeMartini and
Powell are interested persons of the Fund and the Advisers by reason of their
current or former positions with Morgan Stanley Dean Witter or its affiliates.
B-30
<PAGE> 68
OFFICERS
Messrs. Powers, McDonnell, Smith, Hegel, Sullivan, Wood and Wetherell are
located at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, IL 60181-5555. The
Fund's other officers are located at 2800 Post Oak Blvd., Houston, TX 77056.
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Richard F. Powers III................ President and Chief Executive Officer of Van
Date of Birth: 02/02/46 Kampen Investments. President of each of the
President Funds in the Fund Complex. Prior to May 1998,
Executive Vice President and Director of
Marketing at Morgan Stanley Dean Witter and
Director of Dean Witter Discover & Co. and Dean
Witter Realty. Prior to 1996, Director of Dean
Witter Reynolds Inc.
Dennis J. McDonnell.................. Executive Vice President and Director of Van
Date of Birth: 05/20/42 Kampen Investments. President, Chief Operating
Chief Investment Officer and Officer and Director of the Advisers, Van Kampen
Executive Vice President Advisors Inc., and Van Kampen Management Inc.
Chief Investment Officer and Executive Vice
President of each of the funds in the Fund
Complex. President, Chairman of the Board and
Trustee/Managing General Partner of other
investment companies advised by the Advisers or
Van Kampen Management Inc. Prior to July 1998,
Director and Executive Vice President of VK/AC
Holding, Inc. Prior to April 1998, President and
Director of Van Kampen Merritt Equity Advisors
Corp. Prior to April 1997, Mr. McDonnell was
Director of Van Kampen Merritt Equity Holdings
Corp. Prior to September 1996, Mr. McDonnell was
Chief Executive Officer and Director of MCM
Group, Inc. and McCarthy, Crisanti & Maffei, Inc.
a financial research firm, and Chairman and
Director of MCM Asia Pacific Company, Limited and
MCM (Europe) Limited.
</TABLE>
B-31
<PAGE> 69
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
A. Thomas Smith III.................. Executive Vice President, General Counsel,
Date of Birth: 12/14/56 Secretary and Director of the Advisers, Van
Vice President and Secretary Kampen Advisors Inc., Van Kampen Management Inc.,
the Distributor, American Capital Contractual
Services, Inc., Van Kampen Exchange Corp., Van
Kampen Recordkeeping Services Inc., Investor
Services, Van Kampen Insurance Agency of Illinois
Inc. and Van Kampen System Inc. Vice President
and Secretary of each of the funds in the Fund
Complex and certain other investment companies
advised by the Advisers or their affiliates.
Prior to January 1999, counsel to New York Life
Insurance Company ("New York Life"), and prior to
March 1997, Vice President and Associate General
Counsel of New York Life. Prior to December 1993,
Assistant General Counsel of The Dreyfus
Corporation. Prior to August 1991, Senior
Associate, Willkie Farr & Gallagher. Prior to
January 1989, Mr. Smith was a Staff Attorney at
the Securities and Exchange Commission, Division
of Investment Management, Office of Chief
Counsel.
Peter W. Hegel....................... Executive Vice President of the Advisers, Van
Date of Birth: 06/25/56 Kampen Management Inc. and Van Kampen Advisors
Vice President Inc. Vice President of each of the funds in the
Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates. Prior to September 1996, Director of
McCarthy, Crisanti & Maffei, Inc, a financial
research company.
Stephen L. Boyd...................... Vice President and Chief Investment Officer for
Date of Birth: 11/16/40 equity investments at the Advisers. Vice
Vice President President of each of the funds in the Fund
Complex and certain other investment companies
advised by the Advisers or their affiliates.
Prior to October 1998, Vice President, Senior
Portfolio Manager with AIM Capital Management,
Inc. Prior to February 1998, Senior Vice
President of Van Kampen American Capital Asset
Management, Inc., Van Kampen American Capital
Investment Advisory Corp. and Van Kampen American
Capital Management, Inc.
John L. Sullivan..................... Senior Vice President of Van Kampen Investments
Date of Birth: 08/20/55 and the Advisers. Treasurer, Vice President and
Treasurer, Vice President and Chief Chief Financial Officer of each of the funds in
Financial Officer the Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates.
</TABLE>
B-32
<PAGE> 70
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Curtis W. Morell..................... Senior Vice President of the Advisers, Vice
Date of Birth: 08/04/46 President and Chief Accounting Officer of each of
Vice President and Chief Accounting the funds in the Fund Complex and certain other
Officer investment companies advised by the Advisers or
their affiliates.
Edward C. Wood III................... Senior Vice President of the Advisers, Van Kampen
Date of Birth: 01/11/56 Investments and Van Kampen Management Inc. Senior
Vice President Vice President and Chief Operating Officer of the
Distributor. Vice President of each of the funds
in the Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates.
Tanya M. Loden....................... Vice President of Van Kampen Investments and the
Date of Birth: 11/19/59 Advisers. Controller of each of the funds in the
Controller Fund Complex and other investment companies
advised by the Advisers or their affiliates.
</TABLE>
B-33
<PAGE> 71
<TABLE>
<CAPTION>
Name, Age, Positions and Principal Occupations
Offices with Fund During Past 5 Years
------------------------ ---------------------
<S> <C>
Weston B. Wetherell.................. Vice President, Deputy General Counsel and
Date of Birth: 06/15/56 Assistant Secretary of Van Kampen Investments,
Assistant Secretary the Advisers, the Distributor, Van Kampen
Management Inc. and Van Kampen Advisors Inc.
Assistant Secretary of each of the funds in the
Fund Complex and other investment companies
advised by the Advisers or their affiliates.
Michael Robert Sullivan.............. Assistant Vice President of Van Kampen
Date of Birth: 03/30/33 Investments, the Advisers and Van Kampen
Assistant Controller Management Inc. Assistant Controller of each of
the funds in the Fund Complex and other
investment companies advised by the Advisers or
their affiliates.
</TABLE>
Each trustee/director who is not an affiliated person of Van Kampen
Investments, the Advisers or the Distributor (each a "Non-Affiliated Trustee")
holds the same position with each of the funds in the Fund Complex. Messrs.
DeMartini and Powell hold the same position with each of the Funds in the Fund
Complex except for the Van Kampen Technology Fund. As of the date of this
Statement of Additional Information, there are 64 operating funds in the Fund
Complex. Each Non-Affiliated Trustee is compensated by an annual retainer and
meeting fees for services to the funds in the Fund Complex. Each fund in the
Fund Complex (except the money market series of the Van Kampen Series Fund,
Inc.) provides a deferred compensation plan to its Non-Affiliated Trustees that
allows trustees/directors to defer receipt of their compensation and earn a
return on such deferred amounts. Deferring compensation has the economic effect
as if the Non-Affiliated Trustee reinvested his or her compensation into the
funds. Each fund in the Fund Complex (except the money market series of the Van
Kampen Series Fund, Inc.) provides a retirement plan to its Non-Affiliated
Trustees that provides Non-Affiliated Trustees with compensation after
retirement, provided that certain eligibility requirements are met as more fully
described below.
The compensation of each Non-Affiliated Trustee includes an annual retainer
in an amount equal to $50,000 per calendar year, due in four quarterly
installments on the first business day of each quarter. Payment of the annual
retainer is allocated among the funds in the Fund Complex (except the money
market series of the Van Kampen Series Fund, Inc.) on the basis of the relative
net assets of each fund as of the last business day of the preceding calendar
quarter. The compensation of each Non-Affiliated Trustee includes a per meeting
fee from each fund in the Fund Complex (except the money market series of the
Van Kampen Series Fund, Inc.) in the amount of $200 per quarterly or special
meeting attended by the Non-Affiliated Trustee, due on the date of the meeting,
plus reasonable expenses incurred by the Non-Affiliated Trustee in connection
with his or her services as a trustee, provided that no compensation will be
paid in connection with certain telephonic special meetings.
Under the deferred compensation plan, each Non-Affiliated Trustee generally
can elect to defer receipt of all or a portion of the compensation earned by
such Non-Affiliated Trustee until retirement. Amounts deferred are retained by
the Fund and earn a rate of
B-34
<PAGE> 72
return determined by reference to the return on the common shares of such Fund
or other funds in the Fund Complex as selected by the respective Non-Affiliated
Trustee, with the same economic effect as if such Non-Affiliated Trustee had
invested in one or more funds in the Fund Complex. To the extent permitted by
the 1940 Act, the Fund may invest in securities of those funds selected by the
Non-Affiliated Trustees in order to match the deferred compensation obligation.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Fund.
Under the retirement plan, a Non-Affiliated Trustee who is receiving
compensation from such Fund prior to such Non-Affiliated Trustee's retirement,
has at least 10 years of service (including years of service prior to adoption
of the retirement plan) and retires at or after attaining the age of 60, is
eligible to receive a retirement benefit equal to $2,500 per year for each of
the ten years following such retirement from such Fund. Non-Affiliated Trustees
retiring prior to the age of 60 or with fewer than 10 years but more than 5
years of service may receive reduced retirement benefits from such Fund. Each
trustee/director has served as a member of the Board of Trustees of the Fund
since he or she was first appointed or elected in the year set forth below. The
retirement plan contains a Fund Complex retirement benefit cap of $60,000 per
year.
B-35
<PAGE> 73
Additional information regarding compensation and benefits for trustees is
set forth below for the periods described in the notes accompanying the table.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Fund Complex
-------------------------------------------
Aggregate
Aggregate Estimated
Pension or Maximum Total
Aggregate Retirement Annual Compensation
Compensation Benefits Benefits from before
before Accrued as the Fund Deferral from
Deferral from Part of Upon Fund
Name(1) the Trust(2) Expenses(3) Retirement(4) Complex(5)
------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
J. Miles Branagan $5,456 $35,691 $60,000 $125,200
Jerry D. Choate(5) 0 0 60,000 0
Linda Hutton Heagy 5,456 3,861 60,000 112,800
R. Craig Kennedy 5,456 2,652 60,000 125,200
Jack E. Nelson 5,456 18,385 60,000 125,200
Phillip B. Rooney 4,256 6,002 60,000 125,200
Dr. Fernando Sisto 5,456 68,615 60,000 125,200
Wayne W. Whalen 5,456 12,658 60,000 125,200
Suzanne H. Woolsey(5) 0 0 60,000 0
Paul G. Yovovich(5) 2,834 0 60,000 25,300
</TABLE>
- ------------------------------------
(1) Trustees not eligible for compensation are not included in the Compensation
Table.
(2) The amounts shown in this column represent the Aggregate Compensation before
Deferral from all three operating series of the Trust with respect to the
Trust's fiscal period ended March 31, 1999. As of March 31, 1999, the Fund
had not commenced investment operations and, accordingly, no trustees
received compensation related to the Fund other than organizational meeting
fees which were paid by the Adviser. For the first fiscal year following the
commencement of investment operations of the Fund, the estimated aggregate
compensation per trustee from the Fund is anticipated to be approximately
$1,000. The details of aggregate compensation before deferral for each
series are shown in Table A below. Certain trustees deferred compensation
from the Trust during the fiscal period ended March 31, 1999; the aggregate
compensation deferred from all three operating series of the Trust is as
follows: Mr. Branagan, $5,456; Ms. Heagy, $5,456; Mr. Kennedy, $2,730; Mr.
Nelson, $5,456; Mr. Rooney, $4,256; Dr. Sisto, $2,730; Mr. Whalen, $5,456
and Mr. Yovovich, $1,430. The details of amounts deferred for each series
are shown in Table B below. Amounts deferred are retained by the respective
fund and earn a rate of return determined by reference to either the return
on the common shares of the Fund or other funds in the Fund Complex as
selected by the respective Non-Affiliated Trustee, with the same economic
effect as if such Non-Affiliated Trustee had invested in one or more funds
in the Fund Complex. To the extent permitted by the 1940 Act, each fund may
invest in securities of those funds selected by the Non-Affiliated Trustees
in order to match the deferred compensation obligation. The cumulative
deferred compensation (including interest) accrued with respect to each
trustee, including former trustees, from all three operating series of the
Trust as of the Trust's fiscal period ended
B-36
<PAGE> 74
March 31, 1999 is as follows: Mr. Branagan, $33,086; Dr. Caruso, $465; Mr.
Gaughan, $2,107; Ms. Heagy, $29,949; Mr. Kennedy, $31,482; Mr. Miller, $18,270;
Mr. Nelson, $59,582; Mr. Rees, $4,276; Mr. Robinson, $38,377; Mr. Rooney,
$18,730; Dr. Sisto, $13,897; Mr. Whalen, $50,755; and Mr. Yovovich, $1,489.
The details of cumulative deferred compensation (including interest) for
each series of the Trust are shown in Table C. The deferred compensation
plan is described above the Compensation Table.
(3) The amounts shown in this column represent the sum of the retirement
benefits accrued by the operating investment companies in the Fund Complex
for each of the trustees for the Funds' respective fiscal years ended in
1998. The retirement plan is described above the Compensation Table.
(4) For each trustee, this is the sum of the estimated maximum annual benefits
payable by the funds in the Fund Complex for each year of the 10-year period
commencing in the year of such trustee's anticipated retirement. The
Retirement Plan is described above the Compensation Table. Each
Non-Affiliated Trustee has served as a member of the Board of Trustees since
the year set forth in Table D below.
(5) Mr. Yovovich became a member of the Board of Trustees for the Fund and other
funds in the Fund Complex on October 22, 1998 and therefore does not have a
complete year of information to report. Mr. Choate and Dr. Woolsey became
members of the Board of Trustees for the Fund and other funds in the Fund
Complex on May 26, 1999 and therefore do not have any prior year information
to report in the table. The amounts shown in this column represent the
aggregate compensation paid by all funds in the Fund Complex as of December
31, 1998 before deferral by the trustees under the deferred compensation
plan. Because the funds in the Fund Complex have different fiscal year ends,
the amounts shown in this column are presented on a calendar year basis.
Certain trustees deferred all or a portion of their aggregate compensation
from the Fund Complex during the calendar year ended December 31, 1998. The
deferred compensation earns a rate of return determined by reference to the
return on the shares of the funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, the Fund may invest in
securities of those investment companies selected by the Non-Affiliated
Trustees in order to match the deferred compensation obligation. The
Advisers and their affiliates also serve as investment adviser for other
investment companies; however, with the exception of Mr. Whalen, the
Non-Affiliated Trustees were not trustees of such investment companies.
Combining the Fund Complex with other investment companies advised by the
Advisers and their affiliates, Mr. Whalen received Total Compensation of
$285,825 during the calendar year ended December 31, 1998.
As of the date of this Statement of Additional Information, the trustees
and officers of the Fund as a group owned less than 1% of the shares of the
Fund.
B-37
<PAGE> 75
TABLE A
1999 AGGREGATE COMPENSATION FROM THE TRUST AND EACH SERIES
<TABLE>
<CAPTION>
TRUSTEE
FISCAL ---------------------------------------------------------------------------------------------
FUND NAME YEAR-END* BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN WOOLSEY YOVOVICH
--------- --------- -------- ------ ----- ------- ------ ------ ----- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Yield Fund....... 3/31
Short-Term Global
Income Fund......... 3/31
Strategic Income
Fund................ 3/31
Managed Short Term
Income Fund......... 3/31 ** ** ** ** ** ** ** ** ** **
------ -- ------ ------ ------ ------ ------ ------ ------ ------
Trust Total.........
</TABLE>
- ------------------------------------
* Each Fund recently changed its fiscal year-end from June 30 to March 31.
Accordingly, the information reported in this column represents information
for the nine-month fiscal period ended March 31, 1999. The Managed Short Term
Income Fund had not commenced investment operations as of March 31, 1999.
** Such trustees received an organizational meeting fee of $200/trustee paid by
the Adviser in connection with the Fund's organization.
TABLE B
1999 AGGREGATE COMPENSATION DEFERRED FROM
THE TRUST AND EACH SERIES
<TABLE>
<CAPTION>
TRUSTEE
FISCAL ---------------------------------------------------------------------------------------------
FUND NAME YEAR-END* BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN WOOLSEY YOVOVICH
--------- --------- -------- ------ ----- ------- ------ ------ ----- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Yield Fund....... 3/31
Short-Term Global
Income Fund......... 3/31
Strategic Income
Fund................ 3/31
Managed Short Term
Income Fund......... 3/31 ** ** ** ** ** ** ** ** ** **
------ -- ------ ------ ------ ------ ------ ------ ------ ------
Trust Total.........
</TABLE>
- ------------------------------------
* Each Fund recently changed its fiscal year-end from June 30 to March 31.
Accordingly, the information reported in this column represents information
for the nine-month fiscal period ended March 31, 1999. The Managed Short Term
Income Fund had not commenced investment operations as of March 31, 1999.
** Such trustees received an organizational meeting fee of $200/trustee paid by
the Adviser in connection with the Fund's organization.
B-38
<PAGE> 76
TABLE C
1999 CUMULATIVE COMPENSATION DEFERRED
(PLUS INTEREST) FROM THE TRUST AND EACH SERIES
<TABLE>
<CAPTION>
CURRENT TRUSTEES
FISCAL -----------------------------------------------------------------------------
FUND NAME YEAR-END* BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN
--------- --------- -------- ------ ----- ------- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Yield Fund......... 3/31
Short-Term Global Income
Fund.................. 3/31
Strategic Income Fund... 3/31
Managed Short Term
Income Fund........... 3/31 0 0 0 0 0 0 0 0
---- ------- -- ------- ------- ------- ------- ------- -------
Trust Total...........
<CAPTION>
CURRENT TRUSTEES FORMER TRUSTEES
------------------ ----------------------------------------------
FUND NAME WOOLSEY YOVOVICH CARUSO GAUGHAN MILLER REES ROBINSON
--------- ------- -------- ------ ------- ------ ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
High Yield Fund.........
Short-Term Global Income
Fund..................
Strategic Income Fund...
Managed Short Term
Income Fund........... 0 0 0 0 0 0 0
-- ------ ---- ------ ------- ------ -------
Trust Total...........
</TABLE>
- ------------------------------------
* Each Fund recently changed its fiscal year-end from June 30 to March 31.
Accordingly, the information reported in this column represents information
for the nine-month fiscal period ended March 31, 1999. The Managed Short Term
Income Fund had not commenced investment operations as of March 31, 1999.
TABLE D
YEAR OF ELECTION OR APPOINTMENT TO EACH SERIES OF THE TRUST
<TABLE>
<CAPTION>
TRUSTEE
-------------------------------------------------------------------------------------------
FUND NAME BRANAGAN CHOATE HEAGY KENNEDY NELSON ROONEY SISTO WHALEN WOOLSEY YOVOVICH
--------- -------- ------ ----- ------- ------ ------ ----- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Yield Fund................... 1995 1999 1995 1993 1986 1997 1995 1986 1999 1998
Short-Term Global Income Fund..... 1995 1999 1995 1993 1990 1997 1995 1990 1999 1998
Strategic Income Fund............. 1995 1999 1995 1993 1993 1997 1995 1993 1999 1998
Managed Short Term Income Fund.... 1999 1999 1999 1999 1999 1999 1999 1999 1999 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of the Fund's assets, including the placing of
orders for the purchase and sale of portfolio securities. The Adviser obtains
and evaluates economic, statistical and financial information to formulate and
implement the Fund's investment objectives. The Adviser also furnishes offices,
necessary facilities and equipment, provides administrative services, and
permits its officers and employees to serve without compensation as trustees of
the Trust or officers of the Fund if elected to such positions. The Fund pays
all charges and expenses of its day-to-day operations, including the
compensation of trustees of the Trust (other than those who are affiliated
persons of the Adviser, Distributor or Van Kampen Investments), the charges and
expenses of legal counsel and independent accountants, distribution fees,
service fees, custodian fees, the costs of providing reports to shareholders,
and all other ordinary business expenses not specifically assumed by the
Adviser. The Advisory Agreement also provides that the Adviser shall not be
liable to the Fund for any actions or omissions if it acted without willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations.
Under the Advisory Agreement, the Fund pays to the Adviser, as compensation
for the services rendered, facilities furnished, and expenses paid by it, a
monthly fee payable computed based upon an annual rate applied to the average
daily net assets of the Fund as follows: 0.400% on the first $500 million of
average daily net assets; 0.350% on the next
B-39
<PAGE> 77
$500 million of average daily net assets; and 0.300% on the average daily net
assets over $1 billion.
The Fund's average daily net assets are determined by taking the average of
all of the determinations of the net assets during a given calendar month. Such
fee is payable for each calendar month as soon as practicable after the end of
that month.
The Advisory Agreement also provides that, in the event the expenses of the
Fund for any fiscal year exceed the most restrictive expense limitation
applicable in the states where the Fund's shares are qualified for sale, the
compensation due the Adviser will be reduced by the amount of such excess and
that, if a reduction in and refund of the advisory fee is insufficient, the
Adviser will pay the Fund monthly an amount sufficient to make up the
deficiency, subject to readjustment during the year.
The Advisory Agreement may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Trustees or (ii) by a vote of a
majority of the Fund's outstanding voting securities and (b) by the affirmative
vote of a majority of the Trustees who are not parties to the agreement or
interested persons of any such party by votes cast in person at a meeting called
for such purpose. The Advisory Agreement provides that it shall terminate
automatically if assigned and that it may be terminated without penalty by
either party on 60 days' written notice.
OTHER AGREEMENTS
Accounting Services Agreement. The Fund has entered into an accounting
services agreement pursuant to which Advisory Corp. provides accounting services
to the Fund, which include, maintaining the books and records of the Fund,
calculating the Fund's net asset value and coordinating tax compliance and other
regulatory issues. The Fund pays all costs and expenses related to such
services, including all salary and related benefits of accounting personnel, as
well as the overhead and expenses of office space and the equipment necessary to
render such services. The Fund shares together with the other Van Kampen funds
in the cost of providing such services with 25% of such costs shared
proportionately based on the respective number of classes of securities issued
per fund and the remaining 75% of such costs based proportionally on their
respective net assets per fund.
Legal Services Agreement. The Fund and certain of the other Van Kampen
funds advised by the Adviser or it affiliates and distributed by the Distributor
have entered into legal services agreements pursuant to which Van Kampen
Investments provides legal services, including without limitation: accurate
maintenance of the Fund's minute books and records, preparation and oversight of
the Fund's regulatory reports, and other information provided to shareholders,
as well as responding to day-to-day legal issues on behalf of the funds. Payment
by the Fund for such services is made on a cost basis for the salary and salary
related benefits, including but not limited to bonuses, group insurance and
other regular wages for the employment of personnel, as well as overhead and the
expenses related to the office space and the equipment necessary to render the
legal services. Other funds distributed by the Distributor also receive legal
services from Van Kampen Investments. Of the total costs for legal services
provided to funds distributed by the Distributor, one half of such costs are
allocated equally to each fund and the remaining one half of such costs are
allocated to specific funds based on monthly time records.
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DISTRIBUTION AND SERVICE
The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
authorized dealers on a continuous basis. The Distributor's obligation is an
agency or "best efforts" arrangement under which the Distributor is required to
take and pay for only such shares of the Fund as may be sold to the public. The
Distributor is not obligated to sell any stated number of shares. The
Distributor bears the cost of printing (but not typesetting) prospectuses used
in connection with this offering and certain other costs including the cost of
supplemental sales literature and advertising. The Distribution and Service
Agreement is renewable from year to year if approved (a)(i) by the Fund's
Trustees or (ii) by a vote of a majority of the Fund's outstanding voting
securities and (b) by the affirmative vote of a majority of Trustees who are not
parties to the Distribution and Service Agreement or interested persons of any
party, by votes cast in person at a meeting called for such purpose. The
Distribution and Service Agreement provides that it will terminate if assigned,
and that it may be terminated without penalty by either party on 90 days'
written notice.
With respect to sales of Class A Shares of the Fund, the total sales
charges and concessions reallowed to authorized dealers at the time of purchase
are as follows:
CLASS A SHARES SALES CHARGE TABLE
<TABLE>
<CAPTION>
Total Sales Charge
------------------------- Reallowed
As % of As % of Net To Dealers
Size of Offering Amount As a % of
Investment Price Invested Offering Price
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000........................... 2.25% % 2.00%
$25,000 but less than $250,000.............. 1.75% % 1.50%
$250,000 but less than $500,000............. 1.50% % 1.25%
$500,000 but less than $1,000,000........... 1.25% % 1.00%
$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 contingent
deferred sales charge of 0.65% on certain redemptions made within one year of
the purchase. A commission or transaction fee will be paid by the Distributor
at the time of purchase directly out of the Distributor's assets (and not out
of the Fund's assets) to authorized dealers who initiate and are responsible
for purchases of $1 million or more computed based on a percentage of the
dollar value of such shares sold 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.
With respect to sales of Class B Shares and Class C Shares of the Fund, a
commission or transaction fee generally will be paid by the Distributor at the
time of purchase directly out of the Distributor's assets (and not out of the
Fund's assets) to authorized dealers who initiate and are responsible for such
purchases computed based on a percentage of the dollar value of such shares sold
of 2.00% on Class B Shares and 0.65% on Class C Shares.
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Proceeds from any contingent deferred sales charge and any distribution
fees on Class B Shares and Class C Shares of the Fund are paid to the
Distributor and are used by the Distributor to defray its distribution related
expenses in connection with the sale of the Fund's shares, such as the payment
to authorized dealers for selling such shares. With respect to Class C Shares,
the authorized dealers generally are paid the ongoing commission and transaction
fees of up to 0.50% of the average daily net assets of the Fund's Class C Shares
annually commencing in the second year after purchase.
In addition to reallowances or commissions described above, the Distributor
may from time to time implement programs under which an authorized dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any authorized dealer that sponsors
sales contests or recognition programs conforming to criteria established by the
Distributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the authorized dealer at the public offering price during such programs.
Other programs provide, among other things and subject to certain conditions,
for certain favorable distribution arrangements for shares of the Fund. Also,
the Distributor in its discretion may from time to time, pursuant to objective
criteria established by the Distributor, pay fees to, and sponsor business
seminars for, qualifying authorized dealers for certain services or activities
which are primarily intended to result in sales of shares of the Fund or other
Van Kampen funds. Fees may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives for meetings or seminars of a business nature. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its sales of shares and increases in assets under
management. All of the foregoing payments are made by the Distributor out of its
own assets. Such fees paid for such services and activities with respect to the
Fund will not exceed in the aggregate 1.25% of the average total daily net
assets of the Fund on an annual basis. These programs will not change the price
an investor will pay for shares or the amount that a Fund will receive from such
sale.
Banks are currently prohibited under the Glass-Steagall Act from providing
certain underwriting or distribution services. If banking firms were prohibited
from acting in any capacity or providing any of the described services, the
Distributor would consider what action, if any, would be appropriate. The
Distributor does not believe that termination of a relationship with a bank
would result in any material adverse consequences to the Fund. State securities
laws regarding registration of banks and other financial institutions may differ
from the interpretations of federal law expressed herein, and banks and other
financial institutions may be required to register as dealers pursuant to
certain state laws.
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act.
The Fund also has adopted a service plan (the "Service Plan") with respect to
each class of its shares. The Distribution Plan and the Service Plan sometimes
are referred to herein as the "Plans". The Plans provide that the Fund may spend
a portion of the Fund's average daily net assets attributable to each class of
shares in connection with distribution of the respective class of shares and in
connection with the provision of ongoing services to shareholders of such class,
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<PAGE> 80
respectively. The Distribution Plan and the Service Plan are being implemented
through the Distribution and Service Agreement with the Distributor of each
class of the Fund's shares, sub-agreements between the Distributor and members
of the NASD who are acting as securities dealers and NASD members or eligible
non-members who are acting as brokers or agents and similar agreements between
the Fund and financial intermediaries who are acting as brokers (collectively,
"Selling Agreements") that may provide for their customers or clients certain
services or assistance, which may include, but not be limited to, processing
purchase and redemption transactions, establishing and maintaining shareholder
accounts regarding the Fund, and such other services as may be agreed to from
time to time and as may be permitted by applicable statute, rule or regulation.
Brokers, dealers and financial intermediaries that have entered into
sub-agreements with the Distributor and sell shares of the Fund are referred to
herein as "financial intermediaries."
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to any class of shares without approval by a vote of a majority of the
outstanding voting shares of such class, and all material amendments to either
of the Plans must be approved by the Trustees and also by the disinterested
Trustees. Each of the Plans may be terminated with respect to any class of
shares at any time by a vote of a majority of the disinterested Trustees or by a
vote of a majority of the outstanding voting shares of such class.
The Plans generally provide for the Fund to reimburse the lesser of (i) the
distribution and service fees at the rates specified in the Prospectus or (ii)
the amount of the Distributor's actual expenses incurred less any contingent
deferred sales charges it received. For Class A Shares, to the extent the
Distributor is not fully reimbursed in a given year, there is no carryover of
such unreimbursed amounts to succeeding years. For each of the Class B Shares
and Class C Shares, to the extent the Distributor is not fully reimbursed in a
given year, any unreimbursed expenses for such class will be carried forward and
paid by the Fund in future years so long as such Plans are in effect. Except as
mandated by applicable law, the Fund does not impose any limit with respect to
the number of years into the future that such unreimbursed expenses may be
carried forward (on a Fund level basis). Because such expenses are accounted for
on a Fund level basis, in periods of extreme net asset value fluctuation such
amounts with respect to a particular Class B Share or Class C Share may be
greater or less than the amount of the initial commission (including carrying
cost) paid by the Distributor with respect to such share. In such circumstances,
a shareholder of a share may be deemed to incur expenses attributable to other
shareholders of such class. If the Plans were terminated or not continued, the
Fund would not be contractually obligated to pay the Distributor for any
expenses not previously reimbursed by the Fund or recovered through contingent
deferred sales charges.
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<PAGE> 81
TRANSFER AGENT
The Fund's transfer agent is Van Kampen Investor Services Inc., PO Box
418256, Kansas City, MO 64141-9256. The transfer agency prices are determined
through negotiations with the Fund's Board of Trustees and are based on
competitive benchmarks.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
The Adviser is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of prices and any brokerage commissions on such transactions. While
the Adviser will be primarily responsible for the placement of the Fund's
portfolio business, the policies and practices in this regard will at all times
be subject to review by the Trustees of the Fund.
The Adviser is responsible for placing portfolio transactions and does so
in a manner deemed fair and reasonable to the Fund and not according to any
formula. The primary consideration in all portfolio transactions is prompt
execution of orders in an effective manner at the most favorable price. In
selecting broker/dealers and in negotiating prices and any brokerage commissions
on such transactions, the Adviser considers the firm's reliability, integrity
and financial condition and the firm's execution capability, the size and
breadth of the market for the security, the size of and difficulty in executing
the order, and the best net price. There are many instances when, in the
judgment of the Adviser, more than one firm can offer comparable execution
services. In selecting among such firms, consideration may be given to those
firms which supply research and other services in addition to execution
services. The Adviser is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms which do
not provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. No specific value can
be assigned to such research services which are furnished without cost to the
Adviser. Since statistical and other research information is only supplementary
to the research efforts of the Adviser to the Fund and still must be analyzed
and reviewed by its staff, the receipt of research information is not expected
to reduce its expenses materially. The investment advisory fee is not reduced as
a result of the Adviser's receipt of such research services. Services provided
may include (a) furnishing advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody). Research
services furnished by firms through which the Fund effects its securities
transactions may be used by the Adviser in servicing all of its advisory
accounts; not all of such services may be used by the Adviser in connection with
the Fund. The Adviser also may place portfolio transactions, to the extent
permitted by law, with brokerage firms affiliated with the Fund, the Adviser or
the Distributor and with brokerage firms participating in the distribution of
the Fund's shares if it reasonably believes that the quality of execution and
the commission are comparable to that available from other qualified firms.
Similarly, to the extent permitted by law and subject to the same considerations
on quality of execution and comparable commission rates, the Adviser may direct
an executing broker to pay a portion or all of any commissions, concessions or
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<PAGE> 82
discounts to a firm supplying research or other services or to a firm
participating in the distribution of the Fund's shares.
The Adviser may place portfolio transactions at or about the same time for
other advisory accounts, including other investment companies. The Adviser seeks
to allocate portfolio transactions equitably whenever concurrent decisions are
made to purchase or sell securities for the Fund and another advisory account.
In some cases, this procedure could have an adverse effect on the price or the
amount of securities available to the Fund. In making such allocations among the
Fund and other advisory accounts, the main factors considered by the Adviser are
the respective sizes of the Fund and other advisory accounts, the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and opinions of the persons responsible
for recommending the investment.
The Trustees have adopted certain policies incorporating the standards of
Rule 17e-1 issued by the SEC under the 1940 Act which requires that the
commissions paid to affiliates of the Fund must be reasonable and fair compared
to the commissions, fees or other remuneration received or to be received by
other brokers in connection with comparable transactions involving similar
securities during a comparable period of time. The rule and procedures also
contain review requirements and require the Adviser to furnish reports to the
Trustees and to maintain records in connection with such reviews. After
consideration of all factors deemed relevant, the Trustees will consider from
time to time whether the advisory fee for the Fund will be reduced by all or a
portion of the brokerage commission given to affiliated brokers.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. Below is a
description of such services. The following information supplements the section
in the Fund's Prospectus captioned "Shareholder Services."
INVESTMENT ACCOUNT
Each shareholder has an investment account under which the investor's
shares of the Fund are held by Investor Services, the Fund's transfer agent.
Investor Services performs bookkeeping, data processing and administrative
services related to the maintenance of shareholder accounts. Except as described
in the Prospectus and this Statement of Additional Information, after each share
transaction in an account, the shareholder receives a statement showing the
activity in the account. Each shareholder who has an account in any of the
Participating Funds will receive statements quarterly from Investor Services
showing any reinvestments of dividends and capital gains distributions and any
other activity in the account since the preceding statement. Such shareholders
also will receive separate confirmations for each purchase or sale transaction
other than reinvestment of dividends and capital gains distributions and
systematic purchases or redemptions. Additions to an investment account may be
made at any time by purchasing shares through authorized dealers or by mailing a
check directly to Investor Services.
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<PAGE> 83
SHARE CERTIFICATES
Generally, the Fund will not issue share certificates. However, upon
written or telephone request to the Fund, a share certificate will be issued
representing shares (with the exception of fractional shares) of the Fund. A
shareholder will be required to surrender such certificates upon redemption
thereof. In addition, if such certificates are lost the shareholder must write
to Van Kampen Funds, c/o Investor Services, PO Box 418256, Kansas City, MO
64141-9256, requesting an "affidavit of loss" and obtain a Surety Bond in a form
acceptable to Investor Services. On the date the letter is received, Investor
Services will calculate a fee for replacing the lost certificate equal to no
more than 2.00% of the net asset value of the issued shares, and bill the party
to whom the replacement certificate was mailed.
RETIREMENT PLANS
Eligible investors may establish individual retirement accounts ("IRAs");
SEP; 401(k) plans; Section 403(b)(7) plans in the case of employees of public
school systems and certain non-profit organizations; or other pension or profit
sharing plans. Documents and forms containing detailed information regarding
these plans are available from the Distributor. Van Kampen Trust Company serves
as custodian under the IRA, 403(b)(7) and Keogh plans. Details regarding fees,
as well as full plan administration for profit sharing, pension and 401(k)
plans, are available from the Distributor.
AUTOMATED CLEARING HOUSE ("ACH") DEPOSITS
Holders of Class A Shares can use ACH to have redemption proceeds deposited
electronically into their bank accounts. Redemptions transferred to a bank
account via the ACH plan are available to be credited to the account on the
second business day following normal payment. In order to utilize this option,
the shareholder's bank must be a member of ACH. In addition, the shareholder
must fill out the appropriate section of the account application. The
shareholder must also include a voided check or deposit slip from the bank
account into which redemptions are to be deposited together with the completed
application. Once Investor Services has received the application and the voided
check or deposit slip, such shareholder's designated bank account, following any
redemption, will be credited with the proceeds of such redemption. Once enrolled
in the ACH plan, a shareholder may terminate participation at any time by
writing Investor Services.
DIVIDEND DIVERSIFICATION
A shareholder may, upon written request or by completing the appropriate
section of the application form accompanying the Prospectus or by calling (800)
341-2911 ((800) 421-2833 for the hearing impaired), elect to have all dividends
and other distributions paid on a class of shares of the Fund invested into
shares of the same class of any Participating Fund so long as the investor has a
pre-existing account for such class of shares of the other fund. Both accounts
must be of the same type, either non-retirement or retirement. If the accounts
are retirement accounts, they must both be for the same class and of the same
type of retirement plan (e.g. IRA, 403(b)(7), 401(k), Keogh) and for the benefit
of the same individual. If a qualified, pre-existing account does not exist, the
shareholder must establish a new account subject to minimum investment and other
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<PAGE> 84
requirements of the fund into which distributions would be invested.
Distributions are invested into the selected fund at its net asset value per
share as of the payable date of the distribution.
SYSTEMATIC WITHDRAWAL PLAN
Any investor whose shares in a single account total $10,000 or more at the
offering price next computed after receipt of instructions may establish a
monthly, quarterly, semi-annual or annual withdrawal plan. Any investor whose
shares in a single account total $5,000 or more at the offering price next
computed after receipt of instructions may establish a quarterly, semiannual or
annual withdrawal plan. This plan provides for the orderly use of the entire
account, not only the income but also the capital, if necessary. Each withdrawal
constitutes a redemption of shares on which any capital gain or loss will be
recognized. The planholder may arrange for monthly, quarterly, semi-annual or
annual checks in any amount, not less than $25. Such a systematic withdrawal
plan may also be maintained by an investor purchasing shares for a retirement
plan established on a form made available by the Fund. See "Shareholder Services
- -- Retirement Plans."
Class B shareholders and Class C shareholders who establish a withdrawal
plan may redeem up to 12% annually of the shareholder's initial account balance
without incurring a contingent deferred sales charge. Initial account balance
means the amount of the shareholder's investment at the time the election to
participate in the plan is made.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gains
distributions on shares held under the plans are reinvested in additional shares
at the next determined net asset value per share. If periodic withdrawals
continuously exceed reinvested dividends and capital gains distributions, the
shareholder's original investment will be correspondingly reduced and ultimately
exhausted. Withdrawals made concurrently with the purchase of additional shares
ordinarily will be disadvantageous to the shareholder because of the duplication
of sales charges. Any gain or loss realized by the shareholder upon redemption
of shares is a taxable event. The Fund reserves the right to amend or terminate
the systematic withdrawal program on 30 days' notice to its shareholders.
EXCHANGE PRIVILEGE
The following information supplements the section in the Fund's Prospectus
under the same heading. Beginning December 1, 1999, all shareholders will be
limited to eight (8) exchanges per fund during a rolling 365-day period.
Exchange privileges will be suspended on a particular fund if more than
eight (8) exchanges out of that fund are made during a rolling 365-day period.
If exchange privileges are suspended, subsequent exchange requests will not be
processed. Exchange privileges will be restored when the account history shows
fewer than eight (8) exchanges in the rolling 365-day period.
This policy change does not apply to money market funds, systematic
exchange plans, or employer-sponsored retirement plans.
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<PAGE> 85
REINSTATEMENT PRIVILEGE
A Class A shareholder or Class B shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class A Shares of the Fund. A Class C shareholder who has redeemed shares of the
Fund may reinstate any portion or all of the net proceeds of such redemption in
Class C Shares of the Fund with credit given for any contingent deferred sales
charge paid upon such redemption. Such reinstatement is made at the net asset
value per share (without sales charge) next determined after the order is
received, which must be within 180 days after the date of the redemption.
Reinstatement at net asset value per share 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.
REDEMPTION OF SHARES
Redemptions are not made on days during which the New York Stock Exchange
(the "Exchange") is closed. The right of redemption may be suspended and the
payment therefor may be postponed for more than seven days during any period
when (a) the Exchange is closed for other than customary weekends or holidays;
(b) trading on the Exchange is restricted; (c) an emergency exists as a result
of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund to fairly determine
the value of its net assets; or (d) the SEC, by order, so permits.
Additionally, if the Board of Trustees determines that payment wholly or
partly in cash would be detrimental to the best interests of the remaining
shareholders of the Fund, the Fund may pay the redemption proceeds in whole or
in part by a distribution-in-kind of portfolio securities held by the Fund in
lieu of cash in conformity with applicable rules of the SEC. Shareholders may
incur brokerage charges upon the sale of portfolio securities so received in
payment of redemptions.
CONTINGENT DEFERRED SALES CHARGE-CLASS A ("CDSC-CLASS A")
As described in the Prospectus under "Purchase of Shares -- Class A
Shares," there is no sales charge payable on Class A Shares at the time of
purchase on investments of $1 million or more, but a contingent deferred sales
charge ("CDSC -- Class A") may be imposed on certain redemptions made within one
year of purchase. For purposes of the CDSC-Class A, when shares of one fund are
exchanged for shares of another fund, the purchase date for the shares of the
fund exchanged into will be assumed to be the date on which shares were
purchased in the fund from which the exchange was made. If the exchanged shares
themselves are acquired through an exchange, the purchase date is assumed to
carry over from the date of the original election to purchase shares subject to
a CDSC-Class A rather than a front-end load sales charge. In determining whether
a CDSC-Class A is payable, it is assumed that shares held the longest are the
first to be redeemed.
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<PAGE> 86
WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE ("CDSC-CLASS B
AND C")
As described in the Prospectus under "Redemption of Shares," redemptions of
Class B Shares and Class C Shares will be subject to a contingent deferred sales
charge. The CDSC-Class B and C is waived on redemptions of Class B Shares and
Class C Shares in the circumstances described below:
REDEMPTION UPON DEATH OR DISABILITY
The Fund will waive the CDSC-Class B and C on redemptions following the
death or disability of a Class B shareholder and Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Internal Revenue Code of 1986, as
amended (the "Code"), which in pertinent part defines a person as disabled if
such person "is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or to be of long-continued and indefinite duration."
While the Fund does not specifically adopt the balance of the Code's definition
which pertains to furnishing the Secretary of Treasury with such proof as he or
she may require, the Distributor will require satisfactory proof of death or
disability before it determines to waive the CDSC-Class B and C.
In cases of death or disability, the CDSC-Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC-Class B and C applies to a total or partial redemption,
but only to redemptions of shares held at the time of the death or initial
determination of disability.
REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS
The Fund will waive the CDSC-Class B and C when a total or partial
redemption is made in connection with certain distributions from retirement
plans. The charge will be waived upon the tax-free rollover or transfer of
assets to another retirement plan invested in one or more Participating Funds;
in such event, as described below, the Fund will "tack" the period for which the
original shares were held on to the holding period of the shares acquired in the
transfer or rollover for purposes of determining what, if any, CDSC-Class B and
C is applicable in the event that such acquired shares are redeemed following
the transfer or rollover. The charge also will be waived on any redemption which
results from the return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code, the return of excess deferral amounts pursuant to Code
Section 401(k)(8) or 402(g)(2), the financial hardship of the employer pursuant
to Code Section 401(k)-1(d)(2) or from the death or disability of the employee
(see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In addition, the charge will be
waived on any minimum distribution required to be distributed in accordance with
Code Section 401(a)(9).
The Fund does not intend to waive the CDSC-Class B and C for any
distributions from IRAs or other retirement plans not specifically described
above.
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REDEMPTION PURSUANT TO THE FUND'S SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to participate in a systematic withdrawal plan with
respect to the shareholder's investment in the Fund. Under the plan, a dollar
amount of a participating shareholder's investment in the Fund will be redeemed
systematically by the Fund on a periodic basis, and the proceeds mailed to the
shareholder. The amount to be redeemed and frequency of the systematic
withdrawals will be specified by the shareholder upon his or her election to
participate in the plan. The CDSC-Class B and C will be waived on redemptions
made under the plan.
The amount of the shareholder's investment in a Fund at the time the
election to participate in the plan is made with respect to the Fund is
hereinafter referred to as the "initial account balance." The amount to be
systematically redeemed from the Fund without the imposition of a CDSC-Class B
and C may not exceed a maximum of 12% annually of the shareholder's initial
account balance. The Fund reserves the right to change the terms and conditions
of the plan and the ability to offer the plan.
NO INITIAL COMMISSION OR TRANSACTION FEE
The Fund will waive the CDSC-Class B and C in circumstances under which no
commission or transaction fee is paid to authorized dealers at the time of
purchase of shares.
INVOLUNTARY REDEMPTIONS OF SHARES
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the account up
to the required minimum balance. The Fund will waive the CDSC-Class B and C upon
such involuntary redemption.
REDEMPTION BY ADVISER
The Fund may waive the CDSC-Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
TAXATION
FEDERAL INCOME TAXATION
The Fund has elected and qualified, and intends to continue to qualify each
year, to be treated as a regulated investment company under Subchapter M of the
Code. To qualify as a regulated investment company, the Fund must comply with
certain requirements of the Code relating to, among other things, the source of
its income and diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its net investment income (including taxable income and net
short-term capital gain, but not net capital gains, which is 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.
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In order to avoid a 4% excise tax, the Fund will be required to distribute,
by December 31st of each year, at least an amount equal to the sum of (i) 98% of
its ordinary income for such year and (ii) 98% of its capital gain net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31st of such year), plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain net income retained by, and subject to federal income tax in the
hands of, the Fund will be treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the Fund would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. To qualify again as a
regulated investment company in a subsequent year, the Fund may be required to
pay an interest charge on 50% of its earnings and profits attributable to
non-regulated investment company years and would be required to distribute such
earnings and profits to shareholders (less any interest charge). In addition, if
the Fund failed to qualify as a regulated investment company for its first
taxable year or, if immediately after qualifying as a regulated investment
company for any taxable year, it failed to qualify for a period greater than one
taxable year, the Fund would be required to recognize any net built-in gains
(the excess of aggregate gains, including items of income, over aggregate losses
that would have been realized if it had been liquidated) in order to qualify as
a regulated investment company in a subsequent year.
Some of the Fund's investment practices are subject to special provisions
of the Code that, among other things, may defer the use of certain losses of the
Fund and affect the holding period of the securities held by the Fund and the
character of the gains or losses realized by the Fund. These provisions may also
require the Fund to recognize income or gain without receiving cash with which
to make distributions in amounts necessary to satisfy the 90% distribution
requirement and the distribution requirements for avoiding income and excise
taxes. The Fund will monitor its transactions and may make certain tax elections
in order to mitigate the effect of these rules and prevent disqualification of
the Fund as a regulated investment company.
Investments of the Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
shareholders. For example, with respect to securities issued at a discount, the
Fund will be required to accrue as income each year a 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.
PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (i) at least
75% of its gross income is passive income or (ii) an average of at least 50% of
its assets produce, or are held for the production of, passive income. Under
certain circumstances, a regulated investment company that holds stock of a PFIC
will be subject to federal income tax on (i) a portion
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of any "excess distribution" received on such stock or (ii) any gain from a sale
or disposition of such stock (collectively, "PFIC income"), plus interest on
such amounts, even if the regulated investment company distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
will be included in the regulated investment company's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders. If the Fund invests in a PFIC and
elects to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain, which most likely would have to be
distributed to satisfy the 90% distribution requirement and the distribution
requirement for avoiding income and excise taxes. In most instances it will be
very difficult to make this election due to certain requirements imposed with
respect to the election.
As an alternative to making the above-described election to treat the PFIC
as a qualified electing fund, the Fund may make an election to annually
mark-to-market PFIC stock that it owns (a "PFIC Mark-to-Market Election").
"Marking-to-market," in this context, means recognizing as ordinary income or
loss each year an amount equal to the difference between the Fund's adjusted tax
basis in such PFIC stock and its fair market value. Losses will be allowed only
to the extent of net mark-to-market gain previously included by the Fund
pursuant to the election for prior taxable years. The Fund may be required to
include in its taxable income for the first taxable year in which it makes a
PFIC Mark-to-Market Election an amount equal to the interest charge that would
otherwise accrue with respect to distributions on, or dispositions of, the PFIC
stock. This amount would not be deductible from the Fund's taxable income. The
PFIC Mark-to-Market Election applies to the taxable year for which made and to
all subsequent taxable years, unless the Internal Revenue Service ("IRS")
consents to revocation of the election. By making the PFIC Mark-to-Market
Election, the Fund could ameliorate the adverse tax consequences arising from
its ownership of PFIC stock, but in any particular year may be required to
recognize income in excess of the distributions it receives from the PFIC and
proceeds from the dispositions of PFIC stock.
DISTRIBUTIONS
Distributions of the Fund's net investment income are taxable to
shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gains ("capital gain dividends"), if any, are taxable
to shareholders as long-term capital gains regardless of the length of time
shares of the Fund have been held by such shareholders. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming such shares are held as a
capital asset). For a summary of the tax rates applicable to capital gains
(including capital gain dividends), see "Capital Gains Rates" below. Tax-exempt
shareholders not subject to federal income tax on their income generally will
not be taxed on distributions from the Fund.
Shareholders receiving distributions in the form of additional shares
issued by the Fund will be treated for federal income tax purposes as receiving
a distribution in an amount equal to the fair market value of the shares
received, determined as of the
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distribution date. The basis of such shares will equal the fair market value on
the distribution date.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Some portion of
the distributions from the Fund may be eligible for the dividends received
deduction for corporations if the Fund receives qualifying dividends during the
year and if certain other requirements of the Code are satisfied.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31st prior to the date of payment.
In addition, certain other distributions made after the close of a taxable year
of the Fund may be "spilled back" and treated as paid by the Fund (except for
purposes of the 4% excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distribution was actually made.
Income from investments in foreign securities received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Such taxes will not be deductible or creditable by
shareholders. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes.
Under Code Section 988, foreign currency gains or losses from certain
forward contracts not traded in the interbank market as well as certain other
gains or losses attributable to currency exchange rate fluctuations are
typically treated as ordinary income or loss. Such income or loss may increase
or decrease (or possibly eliminate) the Fund's income available for
distribution. If, under the rules governing the tax treatment of foreign
currency gains and losses, the Fund's income available for distribution is
decreased or eliminated, all or a portion of the dividends declared by the Fund
may be treated for federal income tax purposes as a return of capital or, in
some circumstances, as capital gain. Generally, a shareholder's tax basis in
Fund shares will be reduced to the extent that an amount distributed to such
shareholder is treated as a return of capital.
SALE OF SHARES
The sale of shares (including transfers in connection with a redemption or
repurchase of shares) will be a taxable transaction for federal income tax
purposes. Selling shareholders will generally recognize gain or loss in an
amount equal to the difference between their adjusted tax basis in the shares
and the amount received. If such shares are held as a capital asset, the gain or
loss will be a capital gain or loss. For a summary of the tax rates applicable
to capital gains, see "Capital Gains Rates" below. Any loss recognized upon a
taxable disposition of shares held for six months or less will be treated as a
long-term capital loss to the extent of any capital gain dividends received with
respect to such shares. For purposes of determining whether shares have been
held for six months or less, the holding period is suspended for any periods
during which the shareholder's risk of loss is diminished as a result of holding
one or more other positions in substantially similar or related property or
through certain options or short sales.
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CAPITAL GAINS RATES
The maximum tax rate applicable to net capital gains recognized by
individuals and other non-corporate taxpayers is (i) the same as the maximum
ordinary income tax rate for capital assets held for one year or less or (ii)
20% for capital assets held for more than one year. The maximum long-term
capital gains rate for corporations is 35%.
Non-U.S. Shareholders. A shareholder who is not (i) a citizen or resident
of the United States, (ii) a corporation or partnership created or organized
under the laws of the United States or any state thereof, (iii) an estate, the
income of which is subject to United States federal income taxation regardless
of its source or (iv) a trust whose administration is subject to the primary
supervision of a United States court and which has one or more United States
fiduciaries who have the authority to control all substantial decisions of the
trust (a "Non-U.S. Shareholder") generally will be subject to withholding of
United States federal income tax at a 30% rate (or lower applicable treaty rate)
on dividends from the Fund (other than capital gain dividends) that are not
"effectively connected" with a United States trade or business carried on by
such shareholder.
Non-effectively connected capital gain dividends and gains realized from
the sale of shares will not be subject to United States federal income tax in
the case of (i) a Non-U.S. Shareholder that is a corporation and (ii) a Non-U.S.
Shareholder that is not present in the United States for more than 182 days
during the taxable year (assuming that certain other conditions are met).
However, certain Non-U.S. Shareholders may nonetheless be subject to backup
withholding on capital gain dividends and gross proceeds paid to them upon the
sale of their shares. See "Backup Withholding" below.
If income from the Fund or gains realized from the sale of shares is
effectively connected with a Non-U.S. Shareholder's United States trade or
business, then such amounts will be subject to United States federal income tax
on a net basis at the tax rates applicable to United States citizens or domestic
corporations. Non-U.S. Shareholders that are corporations may also be subject to
an additional "branch profits tax" with respect to income from the Fund that is
effectively connected with a United States trade or business.
Final United States Treasury regulations, effective for payments made after
December 31, 2000, may affect the procedures to be followed by Non-U.S.
Shareholders in establishing foreign status for purposes of the withholding,
backup withholding and information reporting rules. Prospective investors should
consult their tax advisors concerning the applicability and effect of such
Treasury Regulations on an investment in shares of the Fund.
The tax consequences to a Non-U.S. Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Non-U.S. Shareholders may be required to provide appropriate
documentation to establish their entitlement to the benefits of such a treaty.
Foreign investors are advised to consult their tax advisers with respect to the
tax implications of purchasing, holding and disposing of shares of the Fund.
Backup Withholding. The Fund may be required to withhold federal income tax
at a rate of 31% ("backup withholding") from dividends and redemption proceeds
paid to non-corporate shareholders. This tax may be withheld from dividends if
(i) the shareholder fails to furnish the Fund with its correct taxpayer
identification number, (ii) the IRS
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notifies the Fund that the shareholder has failed to properly report certain
interest and dividend income to the IRS and to respond to notices to that effect
or (iii) when required to do so, the shareholder fails to certify that he or she
is not subject to backup withholding. Redemption proceeds may be subject to
withholding under the circumstances described in (i) above.
The Fund must report annually to the IRS and to each Non-U.S. Shareholder
the amount of dividends paid to such shareholder and the amount, if any, of tax
withheld pursuant to backup withholding rules with respect to such dividends.
This information may also be made available to the tax authorities in the
Non-U.S. Shareholder's country of residence.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from payments made to a Shareholder may be refunded or
credited against such shareholder's United States federal income tax liability,
if any, provided that the required information is furnished to the IRS.
GENERAL
The federal income tax discussion set forth above is for general
information only. Prospective investors should consult their advisors regarding
the specific federal tax consequences of purchasing, holding and disposing of
shares, as well as the effects of state, local and foreign tax law and any
proposed tax law changes.
FUND PERFORMANCE
From time to time the Fund may advertise its total return for prior
periods. Any such advertisement would include at least average annual total
return quotations for one-year, five-year and ten-year periods. Other total
return quotations, aggregate or average, over other time periods may also be
included.
The total return of the Fund for a particular period represents the
increase (or decrease) in the value of a hypothetical investment in the Fund
from the beginning to the end of the period. Total return is calculated by
subtracting the value of the initial investment from the ending value and
showing the difference as a percentage of the initial investment; the
calculation assumes the initial investment is made at the current maximum public
offering price (which includes the maximum sales charge for Class A Shares);
that all income dividends or capital gains distributions during the period are
reinvested in Fund shares at net asset value; and that any applicable contingent
deferred sales charge has been paid. The Fund's total return will vary depending
on market conditions, the securities comprising the Fund's portfolio, the Fund's
operating expenses and unrealized net capital gains or losses during the period.
Total return is based on historical earnings and asset value fluctuations and is
not intended to indicate future performance. No adjustments are made to reflect
any income taxes payable by shareholders on dividends and distributions paid by
the Fund.
Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equate the initial amount invested to the ending redeemable value.
The Fund may, in supplemental sales literature, advertise non-standardized
total return figures representing the cumulative, non-annualized total return of
each class of
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shares of the Fund from a given date to a subsequent given date. Cumulative non-
standardized total return is calculated by measuring the value of an initial
investment in a given class of shares of the Fund at a given time, deducting the
maximum initial sales charge, if any, determining the value of all subsequent
reinvested distributions, and dividing the net change in the value of the
investment as of the end of the period by the amount of the initial investment
and expressing the result as a percentage. Non-standardized total return will be
calculated separately for each class of shares. Non-standardized total return
calculations do not reflect the imposition of a contingent deferred sales
charge, and if any such contingent deferred sales charge imposed at the time of
redemption were reflected, it would reduce the performance quoted.
In addition to total return information, the Fund may also advertise its
current "yield." Yield figures are based on historical earnings and are not
intended to indicate future performance. Yield is determined by analyzing the
Fund's net income per share for a 30-day (or one-month) period (which period
will be stated in the advertisement) and dividing by the maximum offering price
per share on the last day of the period. A "bond equivalent" annualization
method is used to reflect a semiannual compounding.
For purposes of calculating yield quotations, net income is determined by a
standard formula prescribed by the SEC to facilitate comparison with yields
quoted by other investment companies. Net income computed for this formula
differs from net income reported by the Fund in accordance with generally
accepted accounting principles and from net income computed for federal income
tax reporting purposes. Thus the yield computed for a period may be greater or
less than the Fund's then current dividend rate.
The Fund's yield is not fixed and will fluctuate in response to prevailing
interest rates and the market value of portfolio securities, and as a function
of the type of securities owned by the Fund, portfolio maturity and the Fund's
expenses.
Yield quotations should be considered relative to changes in the net asset
value of the Fund's shares, the Fund's investment policies, and the risks of
investing in shares of the Fund. The investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
Yield and total return are calculated separately for Class A Shares, Class
B Shares and Class C Shares. Total return figures for Class A shares include the
maximum sales charge; total return figures for Class B Shares and Class C Shares
include any applicable contingent deferred sales charge. Because of the
differences in sales charges and distribution fees, the total returns for each
class of shares will differ.
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 gains dividends, if any, distributed for a
specified period. Distribution rate 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 the Fund's investments 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
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premiums, and may include non-recurring short-term capital gains and premiums
from 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 marketing materials may provide a portfolio manager
update, an Adviser update or discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top five sectors, ten largest holdings and other Fund asset
structures, such as duration, maturity, coupon, NAV, rating breakdown, AMT
exposure and number of issues in the portfolio. Materials may also mention how
the Distributor believes the Fund compares relative to other Van Kampen funds.
Materials may also discuss the Dalbar Financial Services study from 1984 to 1994
which studied investor cash flow into and out of all types of mutual funds. The
ten year study found that investors who bought mutual fund shares and held such
shares outperformed investors who bought and sold. The Dalbar study conclusions
were consistent regardless of if shareholders purchased their funds in direct or
sales force distribution channels. The study showed that investors working with
a professional representative have tended over time to earn higher returns than
those who invested directly. The Fund will also be marketed on the internet.
In reports or other communications to shareholders or in advertising
material, the Fund may compare its performance with that of other mutual funds
as listed in the rankings or ratings prepared by Lipper Analytical Services,
Inc., CDA, Morningstar Mutual Funds or similar independent services which
monitor the performance of mutual funds with the Consumer Price Index, the Dow
Jones Industrial Average, Standard & Poor's indices, NASDAQ Composite Index,
other appropriate indices of investment securities, or with investment or
savings vehicles. The performance information may also include evaluations of
the Fund published by nationally recognized ranking services and by nationally
recognized financial publications. Such comparative performance information will
be stated in the same terms in which the comparative data or indices are stated.
Such advertisements and sales material may 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. For these purposes, the
performance of the Fund, as well as the performance of other mutual funds or
indices, do not reflect sales charges, the inclusion of which would reduce the
Fund's performance. The Fund will include performance data for each class of
shares of the Fund in any advertisement or information including performance
data of the Fund.
The Fund may also utilize performance information in hypothetical
illustrations. For example, the Fund may, from time to time: (1) illustrate the
benefits of tax-deferral by comparing taxable investments to investments made
through tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar cost averaging by comparing investments made
pursuant to a systematic investment plan to investments made in a rising market;
(3) illustrate allocations among different types of mutual funds for investors
at different stages of their lives; and (4) in reports or other communications
to shareholders or in advertising material, illustrate the benefits of
compounding at various assumed rates of return.
The Fund's Annual Report and Semiannual Report contain additional
performance information. A copy of the Annual Report or Semiannual Report may be
obtained without
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charge by calling or writing the Fund at the telephone number and address
printed on the back cover of the Prospectus.
OTHER INFORMATION
CUSTODY OF ASSETS
All securities owned by the Fund and all cash, including proceeds from the
sale of shares of the Fund and of securities in the Fund's investment portfolio,
are held by State Street Bank and Trust Company, 225 West Franklin Street,
Boston, Massachusetts 02110, as Custodian.
SHAREHOLDER REPORTS
Semiannual statements are furnished to shareholders, and annually such
statements are audited by the independent accountants.
INDEPENDENT ACCOUNTANTS
KPMG LLP, 303 East Wacker Drive, Chicago, Illinois 60601, the independent
accountants for the Fund, performs an annual audit of the Fund's financial
statements.
LEGAL COUNSEL
Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom (Illinois).
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PART C: OTHER INFORMATION
ITEM 23. EXHIBITS:
(a)(1) Agreement and Declaration of Trust(4)
(2) Second Certificate of Amendment(7)
(3) Certificate of Designation for:
(i) Van Kampen High Yield Fund(7)
(ii) Van Kampen Short-Term Global Income Fund(7)
(iii) Van Kampen Strategic Income Fund(7)
(iv) Van Kampen Managed Short Term Income Fund+
(b) By-Laws(4)
(c) Specimen Share Certificates for:
(i) Van Kampen High Yield Fund
(1) Class A Shares(5)
(2) Class B Shares(5)
(3) Class C Shares(5)
(ii) Van Kampen Short-Term Global Income Fund
(1) Class A Shares(4)
(2) Class B Shares(4)
(3) Class C Shares(4)
(iii) Van Kampen Strategic Income Fund
(1) Class A Shares(5)
(2) Class B Shares(5)
(3) Class C Shares(5)
(iv) Van Kampen Managed Short Term Income Fund
(1) Class A Shares+
(2) Class B Shares+
(3) Class C Shares+
(d) Investment Advisory Agreement for:
(i) Van Kampen High Yield Fund(6)
(ii) Van Kampen Short-Term Global Income Fund(6)
(iii) Van Kampen Strategic Income Fund(6)
(iv) Van Kampen Managed Short Term Income Fund+
(e)(1) Distribution and Service Agreement for:
(i) Van Kampen High Yield Fund(6)
(ii) Van Kampen Short-Term Global Income Fund(6)
(iii) Van Kampen Strategic Income Fund(6)
(iv) Van Kampen Managed Short Term Income Fund+
(2) Form of Dealer Agreement+
(3) Form of Broker Fully Disclosed Clearing Agreement+
(4) Form of Bank Fully Disclosed Clearing Agreement+
(f)(1) Form of Trustee Deferred Compensation Plan(8)
(2) Form of Trustee Retirement Plan(8)
(g)(1) Custodian Contract+
(2) Transfer Agency and Service Agreement(6)
(h)(1) Fund Accounting Agreement+
(2) Amended and Restated Legal Services Agreement+
(i) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois):
(i) Van Kampen High Yield Fund(3)
(ii) Van Kampen Short-Term Global Income Fund(2)
(iii) Van Kampen Strategic Income Fund(3)
(iv) Van Kampen Managed Short Term Income Fund++
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(j) Consent of KPMG LLP:
(i) Van Kampen High Yield Fund++
(ii) Van Kampen Short-Term Global Income Fund++
(iii) Van Kampen Strategic Income Fund++
(iv) Van Kampen Managed Short Term Income Fund++
(k) Not Applicable
(l) Letter of Understanding relating to initial capital(5)
(m)(1) Distribution Plan Pursuant to Rule 12b-1 for:
(i) Van Kampen High Yield Fund(5)
(ii) Van Kampen Short-Term Global Income Fund(4)
(iii) Van Kampen Strategic Income Fund(5)
(iv) Van Kampen Managed Short Term Income Fund+
(2) Form of Shareholder Assistance Agreement+
(3) Form of Administrative Services Agreement+
(4) Service Plan for:
(i) Van Kampen High Yield Fund(5)
(ii) Van Kampen Short-Term Global Income Fund(4)
(iii) Van Kampen Strategic Income Fund(5)
(iv) Van Kampen Managed Short Term Income Fund+
(n) Financial Data Schedules++
(o)(1) Amended Multi-Class Plan(6)
(2) Van Kampen Managed Short Term Income Fund Multi-Class Plan+
(p) Power of Attorney+
(z)(1) List of certain investment companies in response to Item
27(a)+
(2) List of officers and directors of Van Kampen Funds Inc. in
response to Item 27(b)+
- ---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 32 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410 as
filed on August 1, 1995.
(2) Incorporated herein by reference to Post-Effective Amendment No. 35 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410 as
filed on August 22, 1995.
(3) Incorporated herein by reference to Post-Effective Amendment No. 36 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410 as
filed on August 30, 1995.
(4) Incorporated herein by reference to Post-Effective Amendment No. 39 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410 as
filed on April 26, 1996.
(5) Incorporated herein by reference to Post-Effective Amendment No. 41 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410 as
filed on October 28, 1996.
(6) Incorporated herein by reference to Post-Effective Amendment No. 42 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410 as
filed on October 28, 1997.
(7) Incorporated herein by reference to Post-Effective Amendment No. 43 to
Registrant's Registration Statement on Form N-1A, File Number 33-4410 as
filed on October 28, 1998.
(8) Incorporated herein by reference to Post-Effective Amendment No. 81 to Van
Kampen Harbor Fund's Registration Statement on Form N-1A, File Numbers
2-12685 and 811-734, filed April 29, 1999.
+ Filed herewith.
++ To be filed by further amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See the Statement of Additional Information.
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ITEM 25. INDEMNIFICATION.
Pursuant to Del. Code Ann. Title 12 Section 3817, a Delaware business trust
may provide in its governing instrument for the indemnification of its officers
and trustees from and against any and all claims and demands whatsoever.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust. Article 8, Section 8.4 of the Agreement and
Declaration of Trust provides that each officer and trustee of the Registrant
shall be indemnified by the Registrant against all liabilities incurred in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which the officer or trustee may be or
may have been involved by reason of being or having been an officer or trustee,
except that such indemnity shall not protect any such person against a liability
to the Registrant or any shareholder thereof to which such person would
otherwise be subject by reason of (i) not acting in good faith in the reasonable
belief that such person's actions were not in the best interests of the Trust,
(ii) willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office or (iii) for a criminal
proceeding, not having a reasonable cause to believe that such conduct was
unlawful (collectively, "Disabling Conduct"). Absent a court determination that
an officer or trustee seeking indemnification was not liable on the merits or
guilty of Disabling Conduct in the conduct of his or her office, the decision by
the Registrant to indemnify such person must be based upon the reasonable
determination of independent counsel or non-party independent trustees, after
review of the facts, that such officer or trustee is not guilty of Disabling
Conduct, in the conduct of his or her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officers or trustees would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
Conditional advancing of indemnification monies may be made if the trustee
or officer undertakes to repay the advance unless it is ultimately determined
that he or she is entitled to the indemnification and only if the following
conditions are met: (1) the trustee or officer provides a security for the
undertaking; (2) the Registrant is insured against losses arising from lawful
advances; or (3) a majority of a quorum of the Registrant's disinterested,
non-party trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that a recipient of
the advance ultimately will be found entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by the trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
Pursuant to Section 7 of the Distribution and Service Agreement, the
Registrant agrees to indemnify and hold harmless Van Kampen Funds Inc. (the
"Distributor") and each of its trustees and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damages or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damages,
or expense and reasonable counsel fees) arising by reason of any person
acquiring any shares, based upon the ground that the Registration Statement,
prospectus, shareholder reports or other information filed or made public by the
Registrant (as from time to time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be stated or
necessary in
C-3
<PAGE> 99
order to make the statements not misleading under the 1933 Act, or any other
statute or the common law. The Registrant does not agree to indemnify the
Distributor or hold it harmless to the extent that the statement or omission was
made in reliance upon, and in conformity with, information furnished to the
Registrant by or on behalf of the Distributor. In no case is the indemnity of
the Registrant in favor of the Distributor or any person indemnified to be
deemed to protect the Distributor or any person against any liability to the
Fund or its security holders to which the Distributor or such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the agreement.
See also "Investment Advisory Agreement" in the Statement of Additional
Information.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:
See "Investment Advisory Services" in each Prospectus and "Investment
Advisory Agreement," "Other Agreements" and "Trustees and Officers" in the
Statement of Additional Information for information regarding the business of
Van Kampen Investment Advisory Corp. (the "Adviser"). For information as to the
business, profession, vocation or employment of a substantial nature of each of
the officers and directors of the Adviser, reference is made to the Adviser's
current Form ADV (File No. 801-18161) filed under the Investment Advisers Act of
1940, as amended, incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) The sole principal underwriter is Van Kampen Funds Inc. which acts as
principal underwriter for certain investment companies and unit investment
trusts. See Exhibit (z)(1) incorporated by reference herein.
(b) Van Kampen Funds Inc. is an affiliated person of the Registrant and is
the only principal underwriter for the Registrant. The name, principal business
address and positions and offices with Van Kampen Funds Inc. of each of the
trustees and officers of the Registrant are disclosed in Exhibit (z)(2). Except
as disclosed under the heading, "Trustees and Officers" in Part B of this
Registration Statement, none of such persons has any position or office with the
Registrant.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder to be maintained (i) by
the Registrant will be maintained at its offices located at 1 Parkview Plaza,
P.O. Box 5555, Oakbrook Terrace, Illinois 60181-5555; Van Kampen Investor
Services Inc., 7501 Tiffany Springs Parkway, Kansas City, Missouri, 64153; or at
State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts, 02171, (ii) by the Adviser will be maintained at its offices,
located at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, Illinois
60181-5555, and (iii) by Van Kampen Funds Inc., the principal underwriter, will
be maintained at its offices located at 1 Parkview Plaza, P.O. Box 5555,
Oakbrook Terrace, Illinois 60181-5555.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-4
<PAGE> 100
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant,
VAN KAMPEN TRUST, has duly caused this amendment to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Oakbrook Terrace, and State of Illinois on the 21st day of July, 1999.
VAN KAMPEN TRUST
By: /s/ A. THOMAS SMITH III
-------------------------------------
A. Thomas Smith III, Vice President
and Secretary
Pursuant to the requirements of the 1933 Act, this amendment to the
Registration Statement has been signed on July 21, 1999, by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
Principal Executive Officer:
/s/ RICHARD F. POWERS, III President
- ------------------------------------------------
Richard F. Powers, III
Principal Financial Officer:
/s/ JOHN L. SULLIVAN* Vice President, Chief Financial Officer and Treasurer
- ------------------------------------------------
John L. Sullivan
Trustees:
/s/ J. MILES BRANAGAN* Trustee
- ------------------------------------------------
J. Miles Branagan
/s/ JERRY D. CHOATE* Trustee
- ------------------------------------------------
Jerry D. Choate
/s/ RICHARD M. DeMARTINI* Trustee
- ------------------------------------------------
Richard M. DeMartini
/s/ LINDA H. HEAGY* Trustee
- ------------------------------------------------
Linda H. Heagy
/s/ R. CRAIG KENNEDY* Trustee
- ------------------------------------------------
R. Craig Kennedy
/s/ JACK E. NELSON* Trustee
- ------------------------------------------------
Jack E. Nelson
/s/ DON G. POWELL* Trustee
- ------------------------------------------------
Don G. Powell
/s/ PHILLIP B. ROONEY* Trustee
- ------------------------------------------------
Phillip B. Rooney
/s/ FERNANDO SISTO* Trustee
- ------------------------------------------------
Fernando Sisto
/s/ WAYNE W. WHALEN* Trustee
- ------------------------------------------------
Wayne W. Whalen
/s/ SUZANNE H. WOOLSEY* Trustee
- ------------------------------------------------
Suzanne H. Woolsey
/s/ PAUL G. YOVOVICH* Trustee
- ------------------------------------------------
Paul G. Yovovich
- ---------------
* Signed by A. Thomas Smith III pursuant to a power of attorney filed herewith.
/s/ A. THOMAS SMITH III July 21, 1999
- ------------------------------------------------
A. Thomas Smith III
Attorney-in-Fact
</TABLE>
C-5
<PAGE> 101
SCHEDULE OF EXHIBITS TO
POST-EFFECTIVE AMENDMENT 45 TO FORM N-1A AS
SUBMITTED TO THE SECURITIES AND EXCHANGE
COMMISSION ON JULY 21, 1999
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<S> <C>
(a)(3)(iv) Certificate of Designation
(c)(iv)(1) Specimen Share Certificate -- Class A Shares
(c)(iv)(2) Specimen Share Certificate -- Class B Shares
(c)(iv)(3) Specimen Share Certificate -- Class C Shares
(d)(iv) Investment Advisory Agreement
(e)(1)(iv) Distribution and Service Agreement
(e)(2) Form of Dealer Agreement
(e)(3) Form of Broker Fully Disclosed Clearing Agreement
(e)(4) Form of Bank Fully Disclosed Clearing Agreement
(g)(1) Custodian Contract
(h)(1) Fund Accounting Agreement
(h)(2) Amended and Restated Legal Services Agreement
(m)(1)(iv) Distribution Plan & Pursuant to Rule 12b-1
(m)(2) Form of Shareholder Assistance Agreement
(m)(3) Form of Administrative Services Agreement
(m)(4)(iv) Service Plan
(o)(2) Van Kampen Managed Short Term Income Fund Multi-Class Plan
(p) Power of Attorney
(z)(1) List of certain investment companies in response to Item
27(a)
(z)(2) List of officers and directors of Van Kampen Funds Inc. in
response to Item 27(b)
</TABLE>
<PAGE> 1
Exhibit (a)(3)(iv)
VAN KAMPEN TRUST
Certificate of Designation
of
Van Kampen Managed Short Term Income Fund
The undersigned, being the Assistant Secretary of Van Kampen Trust, a Delaware
business trust (the "Trust"), pursuant to the authority conferred upon the
Trustees of the Trust by Section 6.1 of the Trust's Agreement and Declaration of
Trust ("Declaration"), and by the affirmative vote of a Majority of the Trustees
does hereby establish and designate as a Series of the Trust the Van Kampen
Managed Short Term Income Fund (the "Fund") with following the rights,
preferences and characteristics:
1. Shares. The beneficial interest in the Fund shall be divided into Shares
having a nominal or par value of $0.01 per Share, of which an unlimited number
may be issued, which Shares shall represent interests only in the Fund. The
Trustees shall have the authority from time to time to authorize separate Series
of Shares for the Trust as they deem necessary or desirable.
2. Classes of Shares. The Shares of the Fund shall be initially divided into
three classes--Class A, Class B and Class C. The Trustees shall have the
authority from time to time to authorize additional Classes of Shares of the
Fund.
3. Sales Charges. Each Class A, Class B and Class C Share shall be subject to
such sales charges, if any, as may be established from time to time by the
Trustees in accordance with the Investment Company Act of 1940 (the "1940 Act")
and applicable rules and regulations of the National Association of Securities
Dealers, Inc., all as set forth in the Fund's prospectus.
4. Conversion. Each Class B Share of the Fund shall be converted automatically,
and without any action or choice on the part of the Shareholder thereof, into
Class A Shares of the Fund at such times and pursuant to such terms, conditions
and restrictions as may be established by the Trustees and as set forth in the
Fund's Prospectus.
5. Allocation of Expenses Among Classes. Expenses related solely to a particular
Class (including, without limitation, distribution expenses under an
administrative or service agreement, plan or other arrangement, however
designated) shall be borne by that Class and shall be appropriately reflected
(in a manner determined by the Trustees) in the net asset value, dividends,
distribution and liquidation rights of the Shares of that Class.
<PAGE> 2
6. Special Meetings. A special meeting of Shareholders of a Class of the Fund
may be called with respect to the Rule 12b-1 distribution plan applicable to
such Class or with respect to any other proper purpose affecting only holders of
shares of such Class at any time by a Majority of the Trustees.
7. Other Rights Governed by Declaration. All other rights, preferences,
qualifications, limitations and restrictions with respect to Shares of any
Series of the Trust or with respect to any Class of Shares set forth in the
Declaration shall apply to Shares of the Fund unless otherwise specified in this
Certificate of Designation, in which case this Certificate of Designation shall
govern.
8. Amendments, etc. Subject to the provisions and limitations of Section 9.5 of
the Declaration and applicable law, this Certificate of Designation may be
amended by an instrument signed in writing by a Majority of the Trustees (or by
and officer of the Trust pursuant to the vote of a Majority of the Trustees) or
when authorized to do so by the vote in accordance with the Declaration of the
holders of a majority of all the Shares of the Fund outstanding and entitled to
vote or, if such amendment affects the Shares of one or more but not all of the
Classes of the Fund, the holders of a majority of all the Shares of the affected
Classes outstanding and entitled to vote.
9. Incorporation of Defined Terms. All capitalized terms which are not defined
herein shall have the same meaning as ascribed to those terms in the
Declaration.
February 4, 1999
/s/ Weston B. Wetherell
----------------------------------------
Weston B. Wetherell, Assistant Secretary
<PAGE> 1
EXHIBIT (c)(iv)(1)
I. FACE OF CERTIFICATE
CERTIFICATE NO. SHARES
__________ __________
CLASS A SHARES
VAN KAMPEN MANAGED SHORT TERM INCOME FUND, a series of
VAN KAMPEN TRUST
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP
_________________
FULLY PAID AND NONASSESSABLE CLASS A SHARES OF BENEFICIAL INTEREST WITH THE PAR
VALUE OF $0.01 PER SHARE OF VAN KAMPEN MANAGED SHORT TERM INCOME FUND,
transferable on the books of the Fund by the holder hereof, in person or by duly
authorized attorney, upon surrender of this Certificate properly endorsed. The
Certificate and the shares represented hereby are issued and shall be subject to
all the provisions of the Agreement and Declaration of Trust of the Van Kampen
Trust and all amendments thereof, to all of which the holder by acceptance
hereof assents. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the fund and the facsimile signatures of its duly
authorized officers.
Dated
[VAN KAMPEN MANAGED SHORT TERM INCOME
FUND
DELAWARE SEAL]
SECRETARY PRESIDENT
_________________________________________________
COUNTERSIGNED by VAN KAMPEN INVESTOR SERVICES INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By ____________________________________________________
AUTHORIZED OFFICER
_________________________________________________
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN MANAGED SHORT TERM INCOME FUND
NUMBER CLASS A SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
VAN KAMPEN INVESTOR SERVICES INC.
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
________________________________________
________________________________________
________________________________________
<PAGE> 2
II. BACK OF CERTIFICATE
_________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
(Text printed in Signatures must be guaranteed by a financial box to left of
institution of the type described in the current signature(s)) prospectus of
the Fund.
The Fund will furnish to any stockholder, on request and without charge, a full
statement of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of the shares of each class of beneficial
interest which the Trust, on behalf of the Fund, is authorized to issue.
_________________________________________________
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said shares on the books of the within-named Trust with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
_________________________________________________
*The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants UNIF GIFT TRANSFERS MIN. ACT - ________ Custodian _______
in common (Cust) (Minor)
under UGMA/UTMA
TEN ENT - as tenants by
the entirety
___________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list
_________________________________________________
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT (c)(iv)(2)
I. FACE OF CERTIFICATE
CERTIFICATE NO. SHARES
__________ __________
CLASS B SHARES
VAN KAMPEN MANAGED SHORT TERM INCOME FUND, a series of
VAN KAMPEN TRUST
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP
_________________
FULLY PAID AND NONASSESSABLE CLASS B SHARES OF BENEFICIAL INTEREST WITH THE PAR
VALUE OF $0.01 PER SHARE OF VAN KAMPEN MANAGED SHORT TERM INCOME FUND,
transferable on the books of the Fund by the holder hereof, in person or by duly
authorized attorney, upon surrender of this Certificate properly endorsed. The
Certificate and the shares represented hereby are issued and shall be subject to
all the provisions of the Agreement and Declaration of Trust of the Van Kampen
Trust and all amendments thereof, to all of which the holder by acceptance
hereof assents. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the fund and the facsimile signatures of its duly
authorized officers.
Dated
[VAN KAMPEN MANAGED SHORT TERM INCOME
FUND
DELAWARE SEAL]
SECRETARY PRESIDENT
_________________________________________________
COUNTERSIGNED by VAN KAMPEN INVESTOR SERVICES INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By ____________________________________________________
AUTHORIZED OFFICER
_________________________________________________
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN MANAGED SHORT TERM INCOME FUND
NUMBER CLASS B SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
VAN KAMPEN INVESTOR SERVICES INC.
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
________________________________________
________________________________________
________________________________________
<PAGE> 2
II. BACK OF CERTIFICATE
_________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
(Text printed in Signatures must be guaranteed by a financial box to left of
institution of the type described in the current signature(s)) prospectus of
the Fund.
The Fund will furnish to any stockholder, on request and without charge, a full
statement of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of the shares of each class of beneficial
interest which the Trust, on behalf of the Fund, is authorized to issue.
_________________________________________________
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said shares on the books of the within-named Trust with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
_________________________________________________
*The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants UNIF GIFT TRANSFERS MIN. ACT - ________ Custodian _______
in common (Cust) (Minor)
under UGMA/UTMA
TEN ENT - as tenants by
the entirety
___________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list
_________________________________________________
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT (c)(iv)(3)
I. FACE OF CERTIFICATE
CERTIFICATE NO. SHARES
__________ __________
CLASS C SHARES
VAN KAMPEN MANAGED SHORT TERM INCOME FUND, a series of
VAN KAMPEN TRUST
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
*SEE REVERSE FOR CERTAIN DEFINITIONS
_________________
CUSIP
_________________
FULLY PAID AND NONASSESSABLE CLASS C SHARES OF BENEFICIAL INTEREST WITH THE PAR
VALUE OF $0.01 PER SHARE OF VAN KAMPEN MANAGED SHORT TERM INCOME FUND,
transferable on the books of the Fund by the holder hereof, in person or by duly
authorized attorney, upon surrender of this Certificate properly endorsed. The
Certificate and the shares represented hereby are issued and shall be subject to
all the provisions of the Agreement and Declaration of Trust of the Van Kampen
Trust and all amendments thereof, to all of which the holder by acceptance
hereof assents. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the fund and the facsimile signatures of its duly
authorized officers.
Dated
[VAN KAMPEN MANAGED SHORT TERM INCOME
FUND
DELAWARE SEAL]
SECRETARY PRESIDENT
_________________________________________________
COUNTERSIGNED by VAN KAMPEN INVESTOR SERVICES INC.
P.O. BOX 418256, KANSAS CITY, MO 64141-9256
TRANSFER AGENT
By ____________________________________________________
AUTHORIZED OFFICER
_________________________________________________
PLEASE DETACH AND DISCARD UNLESS CHANGES ARE REQUIRED
VAN KAMPEN MANAGED SHORT TERM INCOME FUND
NUMBER CLASS C SHARES
KC
ACCOUNT NO. ALPHA CODE DEALER NO. CONFIRM NO.
TRADE DATE CONFIRM DATE BATCH I.D. NO.
CHANGE NOTICE: IF THE ABOVE INFORMATION
IS INCORRECT OR MISSING, PLEASE PRINT
THE CORRECT INFORMATION BELOW, AND RETURN
TO:
VAN KAMPEN INVESTOR SERVICES INC.
P.O. BOX 418256
KANSAS CITY, MISSOURI 64141-9256
________________________________________
________________________________________
________________________________________
<PAGE> 2
II. BACK OF CERTIFICATE
_________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
(Text printed in Signatures must be guaranteed by a financial box to left of
institution of the type described in the current signature(s)) prospectus of
the Fund.
The Fund will furnish to any stockholder, on request and without charge, a full
statement of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of the shares of each class of beneficial
interest which the Trust, on behalf of the Fund, is authorized to issue.
_________________________________________________
For value received, hereby sell, assign and transfer unto
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________ Shares
of Beneficial Interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said shares on the books of the within-named Trust with
full power of substitution in the premises.
Dated, _________________________________________ 19 ______
__________________________________________________________________
Owner
__________________________________________________________________
Signature of Co-Owner, if any
IMPORTANT { BEFORE SIGNING, READ AND COMPLY CAREFULLY
{ WITH REQUIREMENTS PRINTED ABOVE.
SIGNATURE(S) guaranteed by:
________________________________________________________________________________
_________________________________________________
*The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants UNIF GIFT TRANSFERS MIN. ACT - ________ Custodian _______
in common (Cust) (Minor)
under UGMA/UTMA
TEN ENT - as tenants by
the entirety
___________________________
JT TEN - as joint tenants (State)
with right of sur-
vivorship and not
as tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list
_________________________________________________
________________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE> 1
Exhibit (d)(iv)
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT, dated as of February 4, 1999 (the
"Agreement"), by and between VAN KAMPEN TRUST, a Delaware business trust (the
"Trust"), on behalf of its series, VAN KAMPEN MANAGED SHORT TERM INCOME FUND
(the "Fund") and VAN KAMPEN INVESTMENT ADVISORY CORP. (the "Adviser"), a
Delaware corporation.
1. (a) RETENTION OF ADVISER BY FUND. Subject to the terms and conditions
set forth herein, the Fund hereby employs the Adviser to act as the investment
adviser for and to manage the investment and reinvestment of the assets of the
Fund in accordance with the Fund's investment objectives and policies and
limitations, and to administer its affairs to the extent requested by, and
subject to the review and supervision of, the Board of Trustees of the Fund for
the period and upon the terms herein set forth. The investment of funds shall be
subject to all applicable restrictions of applicable law and of the Declaration
of Trust and By-Laws of the Trust, and resolutions of the Board of Trustees of
the Fund as may from time to time be in force and delivered or made available to
the Adviser.
(b) ADVISER'S ACCEPTANCE OF EMPLOYMENT. The Adviser accepts such employment
and agrees during such period to render such services, to supply investment
research and portfolio management (including without limitation the selection of
securities for the Fund to purchase, hold or sell and the selection of brokers
through whom the Fund's portfolio transactions are executed, in accordance with
the policies adopted by the Fund and its Board of Trustees), to administer the
business affairs of the Fund, to furnish offices and necessary facilities and
equipment to the Fund, to provide administrative services for the Fund, to
render periodic reports to the Board of Trustees of the Fund, and to permit any
of its officers or employees to serve without compensation as trustees or
officers of the Fund if elected to such positions.
(c) INDEPENDENT CONTRACTOR. The Adviser shall be deemed to be an
independent contractor under this Agreement and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent the Fund
in any way or otherwise be deemed as agent of the Fund.
(d) NON-EXCLUSIVE AGREEMENT. The services of the Adviser to the Fund under
this Agreement are not to be deemed exclusive, and the Adviser shall be free to
render similar services or other services to others so long as its services
hereunder are not impaired thereby.
2. (a) FEE. For the services and facilities described in Section 1, the
Fund will accrue daily and pay to the Adviser at the end of each calendar month
an investment management fee computed based on a fee rate (expressed as a
percentage per annum) applied to the average daily net assets of the Fund as
follows:
FEE PERCENT
PER ANNUM OF
AVERAGE DAILY AVERAGE DAILY
NET ASSETS NET ASSETS
--------------------- ----------
First $500 million 0.40 of 1.00%
Next $500 million 0.35 of 1.00%
Over $1 billion 0.30 of 1.00%
<PAGE> 2
(b) EXPENSE LIMITATION. The adviser's compensation for any fiscal year of
the Fund shall be reduced by the amount, if any, by which the Fund's expense for
such fiscal year exceeds the most restrictive applicable expense limitation in
any jurisdiction in which the Fund's shares are qualified for offer and sale, as
such limitations set forth in the most recent notice thereof furnished by the
Adviser to the Fund. For purposes of this paragraph there shall be excluded from
computation of the Fund's expenses any amount borne directly or indirectly by
the Fund which is permitted to be excluded from the computation of such
limitation by such statue or regulatory authority. If for any month expenses of
the Fund properly included in such calculation exceed 1/12 of the amount
permitted annually by the most restrictive applicable expense limitation, the
payment to the Adviser for that month shall be reduced, and, if necessary, the
Adviser shall make a refund payment to the Fund, so that the total net expense
for the month will not exceed 1/12 of such amount. As of the end of the Fund's
fiscal year, however, the computations and payments shall be readjusted so that
the aggregate compensation payable to the Adviser for the year is equal to the
fee set forth in subsection (a) of this Section 2, diminished to the extent
necessary so that the expenses for the year do not exceed those permitted by the
applicable expense limitation.
(c) DETERMINATION OF NET ASSET VALUE. The net asset value of the Fund shall
be calculated as of the close of the New York Stock Exchange on each day the
Exchange is open for trading or such other time or times as the trustees may
determine in accordance with the provisions of applicable law and the
Declaration of Trust and By-Laws of the Trust, and resolutions of the Board of
Trustees of the Fund as from time to time in force. For the purpose of the
foregoing computations, on each such day when net asset value is not calculated,
the net asset value of a share of beneficial interest of the Fund shall be
deemed to be the net asset value of such share as of the close of business of
the last day on which such calculation was made.
(d) PRORATION. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the
Adviser's fee on the basis of the number of days that the Agreement is in effect
during such month and year, respectively.
3. EXPENSES. In addition to the fee of the Adviser, the Fund shall assume
and pay any expenses for services rendered by a custodian for the safekeeping of
the Fund's securities or other property, for keeping its books of account, for
any other changes of the custodian and for calculating the net asset value of
the Fund as provided above. The adviser shall not be required to pay, and the
Fund shall assume and pay, the charges and expenses of its operations, including
compensation of the trustees (other than those who are interested persons of the
Adviser and other than those who are interested persons of the distributor of
the Fund but not of the Adviser, if the distributor has agreed to pay such
compensation), charges and expenses of independent accountants, of legal counsel
and of any transfer or dividend disbursing agent, costs of acquiring and
disposing of portfolio securities, cost of listing shares on the New York Stock
Exchange or other exchange, interest (if any) on obligations incurred by the
Fund, costs of shares certificates, membership dues in the Investment Company
Institute or any similar organization, costs of reports and notices to
shareholders, cost 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 on account of the registration of securities
issued by the Fund, filing of corporate documents or otherwise. The Fund shall
not pay or incur any obligation for any management or administrative expenses
for which the Fund intends to seek reimbursement from the Adviser without first
obtaining the written approval of the Adviser. The Adviser shall arrange, if
desired by the Fund, for officers or employees of the Adviser to serve, without
compensation from the Fund, as trustees, officers or agents of the Fund if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by the law.
4. INTERESTED PERSONS. Subject to applicable statutes and regulations, it
is understood that trustees, officers, shareholders and agents of the Fund are
or may be interested in the Adviser as directors,
<PAGE> 3
officers, shareholders, agents or otherwise and that the directors, officers,
shareholders and agents of the Adviser may be interested in the Fund as
trustees, officers, shareholders, agents or otherwise.
5. LIABILITY. The Adviser shall not be liable for any error of judgment or
of law, or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Adviser in the performance of
its obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
6. (a) TERM. This Agreement shall become effective on the date hereof and
shall remain in full force until February 4, 2001 unless sooner terminated as
hereinafter provided. This Agreement shall continue in force from year to year
thereafter, but only for so long as such continuance is specifically approved as
least annually, in the manner required by the 1940 Act.
(b) TERMINATION. This Agreement shall automatically terminate in the event
of its assignment. This Agreement may be terminated at any time without the
payment of any penalty by the Fund or by the Adviser on sixty (60) days written
notice to the other party. The Fund may effect termination by action of the
Board of Trustees or by vote of a majority of the outstanding shares of stock of
the Fund, accompanied by appropriate notice. This Agreement may be terminated at
any time without the payment of any penalty and without advance notice by the
Board of Trustees or by vote of a majority of the outstanding shares of the Fund
in the event that it shall have been established by a court of competent
jurisdiction that the Adviser or any officer or director of the Adviser has
taken any action which results in a breach of the covenants of the Adviser set
forth herein.
(c) PAYMENT UPON TERMINATION. Termination of this Agreement shall not
affect the right of the Adviser to receive payment on any unpaid balance of the
compensation described in Section 2 earned prior to such termination.
7. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statue, rule or otherwise, the remainder shall not
thereby be affected.
8. NOTICES. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
9. DISCLAIMER. The Adviser acknowledges and agrees that, as provided by
Section 8.1 of the Declaration of Trust of the Trust, (i) this Agreement has
been executed by officers of the Trust in their capacity as officers, and not
individually, and (ii) the shareholders, trustees, officers, employees and other
agents of the Trust and the Fund shall not personally be bound by or liable
hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder and that any such resort may
only be had upon the assets and property of the Fund.
10. GOVERNING LAW. All questions concerning the validity, meaning and
effect of this Agreement shall be determined in accordance with the laws
(without giving effect to the conflict-of-law principles thereof) of the State
of Delaware applicable to contracts made and to be performed in that state.
11. NAME. In connection with its employment hereunder, the Adviser hereby
agrees and covenants not to change its name without the prior consent of the
Board of Trustees of the Fund.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below on the day and year first above
written.
VAN KAMPEN INVESTMENT VAN KAMPEN TRUST,
ADVISORY CORP. on behalf of its series, VAN
KAMPEN MANAGED SHORT TERM INCOME FUND
By: /s/ Dennis J. McDonnell By: /s/ Dennis J. McDonnell
----------------------- -----------------------
Name: Dennis J. McDonnell Name: Dennis J. McDonnell
Title: President Title: President
<PAGE> 1
Exhibit (e)(1)(iv)
DISTRIBUTION AND SERVICE AGREEMENT
THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of February 4, 1999,
(the "Agreement") by and between VAN KAMPEN TRUST, a Delaware business trust
(the "Trust"), on behalf of its series, VAN KAMPEN MANAGED SHORT TERM INCOME
FUND (the "Fund"), and VAN KAMPEN FUNDS INC., a Delaware corporation (the
"Distributor").
1. Appointment of Distributor. The Fund appoints the Distributor as a
principal underwriter and exclusive distributor of each class of its shares of
beneficial interest (the "Shares") offered for sale from time to time pursuant
to the then current prospectus of the Fund, subject to different combinations of
front-end sales charges, distribution fees, service fees and contingent deferred
sales charges. Classes of shares, if any, subject to a front-end sales charge
and a distribution and/or service fee are referred to herein as "FESC Classes"
and the Shares of such classes are referred to herein as "FESC Shares." Classes
of shares, if any, subject to a contingent-deferred sales charge and a
distribution and/or a service fee are referred to herein as "CDSC Classes" and
Shares of such classes are referred to herein as "CDSC Shares." Classes of
shares, if any, subject to a front-end sales charge, a contingent-deferred sales
charge and a distribution and/or service fee are referred to herein as
"Combination Classes" and Shares of such class are referred to herein as
"Combination Shares." The Fund reserves the right to refuse at any time or times
to sell Shares hereunder for any reason deemed adequate by the Board of Trustees
of the Fund.
The Distributor will use its best efforts to sell, through its
organization and through other dealers and agents, the Shares which the
Distributor has the right to purchase under Section 2 hereof, but the
Distributor does not undertake to sell any specific number of Shares.
The Distributor agrees that it will not take any long or short
positions in the Shares, except for long positions in those Shares purchased by
the Distributor in accordance with any systematic sales plan described in the
then current Prospectus of the Fund and except as permitted by Section 2 hereof,
and that so far as it can control the situation, it will prevent any of its
trustees, officers or shareholders from taking any long or short positions in
the Shares, except for legitimate investment purposes.
2. Sale of Shares to Distributor. The Fund hereby grants to the
Distributor the exclusive right, except as herein otherwise provided, to
purchase Shares directly from the Fund upon the terms herein set forth. Such
exclusive right hereby granted shall not apply to Shares issued or transferred
or sold at net asset value: (a) in connection with the merger or consolidation
of the Fund with any other investment company or the acquisition by the Fund of
all or substantially all of the assets of or the outstanding Shares of any
investment company; (b) in connection with a pro rata distribution directly to
the holders of Fund Shares in the nature of a stock dividend or stock split or
in connection with any other recapitalization approved by the Board of Trustees;
(c) upon the exercise of purchase or subscription rights granted to the holders
of Shares on a pro rata basis; (d) in connection with the automatic reinvestment
of dividends and distributions from the Fund; or (e) in connection with the
issue and sale of Shares to trustees, officers and employees of the Fund; to
directors, officers and employees of the investment adviser of the Fund or any
principal underwriter (including the Distributor) of the Fund; to retirees of
the Distributor that purchased shares of any mutual fund distributed by the
Distributor prior to retirement; to directors, officers and employees of Van
Kampen Investments Inc. (formerly The Van Kampen American Capital, Inc.) (the
parent of the Distributor) and to the subsidiaries of Van Kampen Investments
Inc.; and to any trust, pension, profit-sharing or other benefit plan for any of
the aforesaid persons as permitted by Rule 22d-1 under the Investment Company
Act of 1940 (the "1940 Act").
1
<PAGE> 2
The Distributor shall have the right to buy from the Fund the Shares
needed, but not more than the Shares needed (except for reasonable allowances
for clerical errors, delays and errors of transmission and cancellation of
orders) to fill unconditional orders for Shares received by the Distributor from
dealers, agents and investors during each period when particular net asset
values and public offering prices are in effect as provided in Section 3 hereof;
and the price which the Distributor shall pay for the Shares so purchased shall
be the respective net asset value used in determining the public offering price
on which such orders were based. The Distributor shall notify the Fund at the
end of each such period, or as soon thereafter on that business day as the
orders received in such period have been compiled, of the number of Shares of
each class that the Distributor elects to purchase hereunder.
3. Public Offering Price. The public offering price per Share shall be
determined in accordance with the then current Prospectus of the Fund. In no
event shall the public offering price exceed the net asset value per Share,
plus, with respect to the FESC Shares, a front-end sales charge not in excess of
the applicable maximum sales charge permitted under the Rules of Fair Practice
of the National Association of Securities Dealers, Inc., as in effect from time
to time. The net asset value per share for each class of Shares, respectively,
shall be determined in the manner provided in the Declaration of Trust and
By-Laws of the Trust as then amended, the Certificate of Designation with
respect to the Fund, as amended, and in accordance with the then current
Prospectus of the Fund consistent with the terms and conditions of the exemptive
order with respect to the Fund (Release No. IC-19600) issued by the Securities
and Exchange Commission on July 28, 1993, as it may be amended from time to time
or succeeded by other exemptive orders or rules promulgated by the Securities
and Exchange Commission under the 1940 Act. The Fund will cause immediate notice
to be given to the Distributor of each change in net asset value as soon as it
is determined. Discounts to dealers purchasing FESC Shares from the Distributor
for resale and to brokers and other eligible agents making sales of FESC Shares
to investors and compensation payable from the Distributor to dealers, brokers
and other eligible agents making sales of CDSC Shares and Combination Shares
shall be set forth in the selling agreements between the Distributor and such
dealers or agents, respectively, as from time to time amended, and, if such
discounts and compensation are described in the then current Prospectus for the
Fund, shall be as so set forth.
4. Compliance with NASD Rules, SEC Orders, etc. In selling Fund Shares,
the Distributor will in all respects duly comply with all state and federal laws
relating to the sale of such securities and with all applicable rules and
regulations of all regulatory bodies, including without limitation the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., and all
applicable rules and regulations of the Securities and Exchange Commission under
the 1940 Act, and will indemnify and save the Fund harmless from any damage or
expense on account of any unlawful act by the Distributor or its agents or
employees. The Distributor is not, however, to be responsible for the acts of
other dealers or agents, except to the extent that they shall be acting for the
Distributor or under its direction or authority. None of the Distributor, any
dealer, any agent or any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus heretofore or hereafter filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "1933 Act") (as any such Registration Statement and Prospectus may have
been or may be amended from time to time), covering the Shares, and in any
supplemental information to any such Prospectus approved by the Fund in
connection with the offer or sale of Shares. None of the Distributor, any
dealer, any broker or any other person is authorized to act as agent for the
Fund in connection with the offering or sale of Shares to the public or
otherwise. All such sales shall be made by the Distributor as principal for its
own account.
In selling Shares to investors, the Distributor will adopt and comply
with certain standards, as set forth in Exhibit III attached hereto as to when
each respective class of Shares may appropriately be sold to particular
investors. The Distributor will require every broker, dealer and other eligible
agent participating in the offering of the Shares to agree to adopt and comply
with such standards as a condition precedent to their participation in the
offering.
2
<PAGE> 3
5. Expenses.
(a) The Fund will pay or cause to be paid:
(i) all expenses in connection with the registration of
Shares under the federal securities laws, and the
Fund will exercise its best efforts to obtain said
registration and qualification;
(ii) all expenses in connection with the printing of any
notices of shareholders' meetings, proxy and proxy
statements and enclosures therewith, as well as any
other notice or communication sent to shareholders
in connection with any meeting of the shareholders
or otherwise, any annual, semiannual or other
reports or communications sent to the shareholders,
and the expenses of sending prospectuses relating
to the Shares to existing shareholders;
(iii) all expenses of any federal or state original-issue
tax or transfer tax payable upon the issuance,
transfer or delivery of Shares from the Fund to the
Distributor; and
(iv) the cost of preparing and issuing any Share
certificates which may be issued to represent
Shares.
(b) The Distributor will also permit its officers and
employees to serve without compensation as trustees and officers of the Fund if
duly elected to such positions.
(c) The Fund shall reimburse the Distributor for out-of-pocket
costs and expenses actually incurred by it in connection with distribution of
each class of Shares respectively in accordance with the terms of a plan (the
"12b-1 Plan") adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act as
such 12b-1 Plan may be in effect from time to time; provided, however, that no
payments shall be due or paid to the Distributor hereunder with respect to a
class of Shares unless and until this Agreement shall have been approved for
each such class by a majority of the Board of Trustees of the Fund and by a
majority of the "Disinterested Trustees" (as such term is defined in such 12b-1
Plan) by vote cast in person at a meeting called for the purpose of voting on
this Agreement. A copy of such 12b-1 Plan as in effect on the date of this
Agreement is attached as Exhibit I hereto. The Fund reserves the right to
terminate such 12b-1 Plan with respect to a class of Shares at any time, as
specified in the Plan. The persons authorized to direct the payment of funds
pursuant to this Agreement and the 12b-1 Plan shall provide to the Fund's Board
of Trustees, and the Trustees shall review, at least quarterly, a written report
with respect to each of the classes of Shares of the amounts so paid and the
purposes for which such expenditures were made for each such class of Shares.
(d) The Fund shall compensate the Distributor for providing
services to, and the maintenance of, shareholder accounts in the Fund (including
prepaying service fees to eligible brokers, dealers and financial intermediaries
and expenses incurred in connection therewith) and the Distributor may pay as
agent for and on behalf of the Fund a service fee with respect to each class of
Shares to brokers, dealers and financial intermediaries for the provision of
shareholder services and the maintenance of shareholder accounts in the Fund in
the amount with respect to each class of Shares set forth from time to time in
the Fund's prospectus. The Fund shall compensate the Distributor for such
expenses in accordance with the terms of a service plan (the "Service Plan"), as
such Service Plan may be in effect from time to time; provided, however, that no
service fee payments shall be due or paid to the Distributor hereunder with
respect to a class of Shares unless and until this Agreement shall have been
approved for each such class by a majority of the Board of Trustees of the Fund
and by a majority of the Disinterested Trustees by vote cast in person at a
meeting called for the purpose of voting on this Agreement. A copy of such
Service Plan as in effect on the date of this Agreement is attached as Exhibit
II hereto. The Fund reserves the right to terminate such Service Plan with
respect to a class of Shares at any time, as specified in the Plan. The persons
authorized to direct the payment of funds pursuant to this Agreement and the
Service Plan shall provide to the Fund's Board of Trustees, and the Trustees
shall review, at least quarterly, a written report with respect to each of the
classes of Shares of the amounts paid as service fees for each such class of
Shares.
3
<PAGE> 4
6. Redemption of Shares. In connection with the Fund's redemption of
its Shares, the Fund hereby authorizes the Distributor to repurchase, upon the
terms and conditions hereinafter set forth, as the Fund's agent and for the
Fund's account, such Shares as may be offered for sale to the Fund from time to
time by holders of such Shares or their agents.
(a) Subject to and in conformity with all applicable federal
and state legislation, any applicable rules of the National Association of
Securities Dealers, Inc., and any applicable rules and regulations of the
Securities and Exchange Commission under the 1940 Act, the Distributor may
accept offers of holders of Shares to resell such Shares to the Fund on such
terms and conditions and at such prices as described and provided for in the
then current Prospectus of the Fund.
(b) The Distributor agrees to notify the Fund at such times as
the Fund may specify of the number of each class of Shares, respectively,
repurchased for the Fund's account and the time or times of such repurchases,
and the Fund shall notify the Distributor of the prices and, in the case of a
class of CDSC Shares or Combination Shares, of the deferred sales charge as
described below, if any, applicable to repurchases of Shares of such class.
(c) The Fund shall have the right to suspend or revoke the
foregoing authorization at any time; unless otherwise stated, any such
suspension or revocation shall be effective forthwith upon receipt of notice
thereof by telegraph or by written instrument from any of the Fund's officers.
In the event that the Distributor's authorization is, by the terms of such
notice, suspended for more than twenty-four hours or until further notice, the
authorization given by this Section 6 shall not be revived except by vote of the
Board of Trustees of the Fund.
(d) The Distributor agrees that all repurchases of Shares made
by the Distributor shall be made only as agent for the Fund's account and
pursuant to the terms and conditions herein set forth.
(e) The Fund agrees to authorize and direct its Custodian to
pay, for the Fund's account, the repurchase price (together with any applicable
contingent deferred sales charge) of any Shares so repurchased for the Fund
against the authorized transfer of book shares from an open account and against
delivery of any other documentation required by the Board of Trustees of the
Fund or, in the case of certificated Shares, against delivery of the
certificates representing such Shares in proper form for transfer to the Fund.
(f) The Distributor shall receive no commissions or other
compensation in respect of any repurchases of FESC Shares for the Fund under the
foregoing authorization and appointment as agent. With respect to any repurchase
of CDSC Shares or Combination Shares, the Distributor shall receive the deferred
sales charge, if any, applicable to the respective class of Shares that have
been held for less than a specified period of time with respect to such class as
set forth from time to time in the Fund's Prospectus. The Distributor shall
receive no other commission or other compensation in respect of any repurchases
of CDSC Shares or Combination Shares for the Fund under the foregoing
authorization and appointment as agent.
(g) If any FESC Shares sold to the Distributor under the terms
of this Agreement are redeemed or repurchased by the Fund or by the Distributor
as agent or are tendered for redemption within seven business days after the
date of the Distributor's confirmation of the original purchase by the
Distributor, the Distributor shall forfeit the amount above the net asset value
received by it in respect of such Shares, provided that the portion, if any, of
such amount re-allowed by the Distributor to dealers or agents shall be
repayable to the Fund only to the extent recovered by the Distributor from the
dealer or agent concerned. The Distributor shall include in agreements with such
dealers and agents a corresponding provision for the forfeiture by them of their
concession with respect to FESC Shares purchased by them or their principals and
redeemed or repurchased by the Fund or by the Distributor as agent within seven
business days after the date of the Distributor's confirmation of such initial
purchases.
4
<PAGE> 5
7. Indemnification. The Fund agrees to indemnify and hold harmless the
Distributor and each of its trustees and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damage or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damage,
or expense and reasonable counsel fees incurred in connection therewith),
arising by reason of any person acquiring any Shares, based upon the ground that
the registration statement, Prospectus, shareholder reports or other information
filed or made public by the Fund (as from time to time amended) included an
untrue statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading under the 1933 Act
or any other statute or the common law. However, the Fund does not agree to
indemnify the Distributor or hold it harmless to the extent that the statement
or omission was made in reliance upon, and in conformity with, information
furnished to the Fund by or on behalf of the Distributor. In no case (i) is the
indemnity of the Fund in favor of the Distributor or any person indemnified to
be deemed to protect the Distributor or any person against any liability to the
Fund or its securityholders to which the Distributor or such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Fund to be liable under its indemnity agreement contained in this Section with
respect to any claim made against the Distributor or any person indemnified
unless the Distributor or any such person shall have notified the Fund in
writing of the claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim shall have
been served upon the Distributor or any such person (or after the Distributor or
the person shall have received notice of service on any designated agent).
However, failure to notify the Fund of any claim shall not relieve the Fund from
any liability which it may have to the Distributor or any person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Fund shall be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the defense, of any
suit brought to enforce any claims, but if the Fund elects to assume the
defense, the defense shall be conducted by counsel chosen by it and satisfactory
to the Distributor or person or persons, defendant or defendants in the suit. In
the event the Fund elects to assume the defense of any suit and retain counsel,
the Distributor, officers or trustees or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them. If the Fund does not elect to assume the
defense of any suit, it will reimburse the Distributor, officers or trustees or
controlling person or persons, defendant or defendants in the suit for the
reasonable fees and expenses of any counsel retained by them. The Fund agrees to
notify the Distributor promptly of the commencement of any litigation or
proceedings against it or any of its officers or directors in connection with
the issuance or sale of any of the Shares.
The Distributor also covenants and agrees that it will indemnify and
hold harmless the Fund and each of its trustees and officers and each person, if
any, who controls the Fund within the meaning of Section 15 of the 1933 Act
against any loss, liability, damage, claim or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, damage, claim or
expense and reasonable counsel fees incurred in connection therewith) arising by
reason of any person acquiring any Shares, based upon the 1933 Act or any other
statute or common law, alleging any wrongful act of the Distributor or any of
its employees or alleging that the registration statement, Prospectus,
shareholder reports or other information filed or made public by the Fund (as
from time to time amended) included an untrue statement of a material fact or
omitted to state a material fact required to be stated or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, insofar as the statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund by or on behalf
of the Distributor. In no case (i) is the indemnity of the Distributor in favor
of the Fund or any person indemnified to be deemed to protect the Fund or any
such person against any liability to which the Fund or such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligation and duties under this Amended Agreement, or (ii) is
the Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Fund or any person
indemnified unless the Fund or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Fund or
5
<PAGE> 6
person (or after the Fund or such person shall have received notice of service
on any designated agent). However, failure to notify the Distributor of any
claim shall not relieve the Distributor from any liability which it may have to
the Fund or any person against whom the action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. In the case of
any notice to the Distributor, it shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense, of any suit
brought to enforce the claim, but if the Distributor elects to assume the
defense, the defense shall be conducted by counsel chosen by it and satisfactory
to the Fund, to its officers and trustees and to any controlling person or
persons, defendant or defendants in the suit. In the event that the Distributor
elects to assume the defense of any suit and retain counsel, the Fund or
controlling persons, defendants in the suit, shall bear the fees and expenses of
any additional counsel retained by them. If the Distributor does not elect to
assume the defense of any suit, it will reimburse the Fund, officers and
trustees or controlling person or persons, defendant or defendants in the suit,
for the reasonable fees and expenses of any counsel retained by them. The
Distributor agrees to notify the Fund promptly of the commencement of any
litigation or proceedings against it in connection with the issue and sale of
any of the Shares.
8. Continuation, Amendment or Termination of This Agreement. This
Agreement shall become effective on the Effective Date and thereafter shall
continue in full force and effect year to year with respect to each class of
Shares so long as such continuance is approved at least annually (i) by the
Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the respective class of Shares of the Fund, and (ii) by
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons in any such party (the "Independent Trustee") cast in person
at a meeting called for the purpose of voting on such approval, provided,
however, that (a) this Agreement may at any time be terminated with respect to
either class of Shares of the Fund without the payment of any penalty either by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the outstanding voting securities of the respective class of Shares of the Fund,
on written notice to the Distributor; (b) this Agreement shall immediately
terminate in the event of its assignment; and (c) this Agreement may be
terminated by the Distributor on ninety (90) days' written notice to the Fund.
Upon termination of this Agreement with respect to either class of Shares of the
Fund, the obligations of the parties hereunder shall cease and terminate with
respect to such class of Shares as of the date of such termination, except for
any obligation to respond for a breach of this Agreement committed prior to such
termination.
This Agreement may be amended with respect to either class of Shares at
any time by mutual consent of the parties, provided that such consent on the
part of the Fund shall have been approved (i) by the Board of Trustees of the
Fund, or by a vote of the majority of the outstanding voting securities of the
respective class of Shares of the Fund, and (ii) by vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such amendment.
For the purpose of this section, the terms "vote of a majority of the
outstanding voting securities", "interested persons" and "assignment" shall have
the meanings defined in the 1940 Act, as amended.
9. Limited Liability of Shareholder. Notwithstanding anything to the
contrary contained in this Agreement, you acknowledge and agree that, as
provided by Section 8.1 of the Agreement and Declaration of Trust of the Trust,
this Agreement is executed by the Trustees of the Trust and/or Officers of the
Fund by them not individually but as such Trustees and/or Officers, and the
obligations of the Fund hereunder are not binding upon any of the Trustees,
Officers or Shareholders individually, but bind only the trust estate.
10. Notice. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office of
such party or at such other address as such party shall have designated in
writing.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY, THE
LAW OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF
LAWS.
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
VAN KAMPEN TRUST, on behalf of its
series, VAN KAMPEN MANAGED SHORT TERM INCOME FUND
By: /s/ Dennis J. McDonnell
---------------------------------------------
Name: Dennis J. McDonnell
Title: President
VAN KAMPEN FUNDS INC.
By: /s/ John H. Zimmermann
---------------------------------------------
Name: John H. Zimmermann
Title: President
7
<PAGE> 1
EXHIBIT (e)(2)
FORM OF
DEALER AGREEMENT
WITH VAN KAMPEN FUNDS INC.
REGARDING VAN KAMPEN
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
Ladies and Gentlemen:
As dealer for our own account, we offer to sell to you shares of any of
the Van Kampen open-end investment companies (the "Open-End Funds" or,
individually, an "Open-End Fund") and Van Kampen closed-end investment
companies (the "Closed-End Funds" or, individually, a "Closed-End Fund")
distributed by Van Kampen Funds Inc. ("VK Funds") pursuant to the terms and
conditions contained herein. Collectively, the Open-End Funds and Closed-End
Funds sometimes are referred to herein as the "Funds" or, individually,
as a "Fund".
VK Funds acts as the principal underwriter (as such term is defined in the
Investment Company Act of 1940, as amended) for each Fund with respect to its
offering of one or more classes of shares as described in each Fund's
Prospectus. Pursuant to this Agreement, VK Funds offers to sell to you shares
of each Open-End Fund and each Closed-End Fund prior to the Effective Date (as
defined herein) of each Fund's Registration Statement (as defined herein) (the
"Initial Offering Period") and after the Effective Date of each Fund's
Registration Statement (the "Continuous Offering Period") (if any) as described
in each respective Fund's Prospectus.
As used herein unless otherwise indicated, the term "Prospectus" means the
final prospectus and Statement of Additional Information included in the
registration statement for the fund on the effective date and as from time to
time thereafter amended or supplemented. As used herein unless otherwise
indicated, the term "Preliminary Prospectus" means any preliminary prospectus
and any preliminary Statement of Additional Information included at any time as
a part of the registration statement for any Fund prior to the effective date
and which is authorized by VK Funds for use in connection with the offering
of shares.
In consideration of the mutual obligations contained herein, the
sufficiency of which is hereby acknowledged by you, the terms of the Agreement
are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a representation that
you are a broker-dealer registered with the Securities and Exchange Commission
(the "SEC") and a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD") or, in the alternative, that you are a
foreign dealer or bank, not required to be registered as a broker-dealer with
the SEC and not required or eligible for membership in the NASD. If you are
such an NASD member, you agree that in making sales of shares of the one or
more classes of shares of each Fund you will comply with all applicable rules
of the NASD, including without limitation rules pertaining to the opening,
approval, supervision and monitoring of customer accounts, the NASD's
Interpretation with Respect to Free-Riding and Withholding and Sections 8, 24
and 36 of Article III of the NASD's Rules of Fair Practice. If you are such an
unregistered foreign dealer or bank, you agree not to offer or sell, or to
agree to offer or sell, directly or indirectly, except through VK Funds,
any shares to any party to whom such shares may not be sold unless you are
so registered and a member of the NASD, and in making sales of such shares
you agree to comply with the NASD's Interpretation with Respect to Free-Riding
and Withholding and Sections 8, 24 and 36 of Article III of the NASD's Rules
of Fair Practice as though you were a member in
1
<PAGE> 2
good standing of the NASD and to comply with Section 25 of such Article III as
it applies to a nonmember broker or dealer in a foreign country. You and we
agree to abide by all other Rules and Regulations of the NASD, including
Section 26 of its Rules of Fair Practice, and all applicable state and Federal
laws, rules and regulations. Your acceptance also constitutes a representation
that you have been duly authorized by proper corporate or partnership action to
enter into this Agreement and to perform your obligations hereunder. You will
not accept any orders from any broker, dealer or financial institution who is
purchasing from you with a view toward distribution unless you have obtained
such person's or entity's written consent to be bound by the terms of this
Agreement.
2. In all sales of shares of the Funds to the public you shall act as
dealer for your own account, and you shall have no authority in any transaction
to act as agent for the Fund or for VK Funds.
3. Each Fund has filed with the SEC and the securities commissions of one
or more states a Registration Statement (the "Registration Statement") on the
SEC Form applicable to the respective Fund. The date on which the Registration
Statement is declared effective by the SEC is referred to herein as the
"Effective Date". Prior to the Effective Date of the Registration Statement
with respect to a particular Fund, you expressly acknowledge and understand
that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may offers to buy be
accepted, (i) in any state prior to the Effective Date of the Registration
Statement with respect thereto or (ii) in any state in which such offer or sale
would be unlawful prior to registration or qualification under the securities
laws of such state.
(b) The Fund's Preliminary Prospectus, together with any sales material
distributed for use in connection with the offering of shares of such Fund,
does not constitute an offer to sell or the solicitation of an offer to buy
shares of such Fund and is subject to completion and modification by the
Prospectus. You agree that you will distribute to the public only (a) the
Preliminary Prospectus, the Prospectus and any amendment or supplement thereto
and (b) sales literature or other documents expressly authorized for such
distribution by VK Funds.
(c) In the event that you transmit indications of interest to VK Funds
for accumulation prior to the Effective Date, you will be responsible for
confirming such indications of interest with your customers following the
Effective Date. Indications of interest with respect to shares of a class of a
Fund's shares transmitted to VK Funds prior to the Effective Date will be
conditioned upon the occurrence of the Effective Date and the registration or
qualification of the respective class of shares in the respective state.
(d) Indications of interest with respect to shares of a class of a Fund's
shares which are not canceled by you prior to the latter of the Effective Date
and the registration or qualification of the respective class of the Fund's
shares in the respective state, and accepted by VK Funds will be deemed by
VK Funds to be orders for shares of such class of shares of the Fund.
(e) All indications of interest and orders transmitted to VK Funds are
subject to the terms and conditions of the Prospectus and this Agreement.
4. After the Effective Date, you will not offer shares of a class of the
Fund's shares for sale in any state where they are not qualified for sale under
the "blue sky" laws and regulations of such state or where you are not
qualified to act as a dealer, except for states in which they are exempt from
qualification.
5. In the event that you offer shares of the Fund for sale outside the
United States, you agree to comply with the applicable laws, rules and
regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
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<PAGE> 3
6. Upon application to VK Funds, VK Funds will inform you as to the
jurisdictions in which VK Funds believes shares of a Fund have been qualified
for sale under the respective securities or "blue sky" laws of such
jurisdictions. VK Funds understands and agrees that qualification of any shares
of a Fund for sale in such jurisdictions shall be solely VK Funds'
responsibility and that you assume no responsibility or obligation with respect
to such eligibility. You understand and agree that your compliance with the
requirements of the securities or "blue sky" laws in each jurisdiction with
respect to your right to sell the shares in such jurisdiction shall be solely
your responsibility.
7. No person is authorized to make any representations concerning any
class of shares of a Fund except those contained in the Fund's current
Preliminary Prospectus or Prospectus, as the case may be. In purchasing shares
from us you shall rely solely on the representations contained in such
Prospectus. VK Funds will furnish additional copies of a Fund's current
Prospectus and sales literature issued by VK Funds in reasonable quantities upon
request.
8. Orders received from you will be accepted by VK Funds only at the
public offering price applicable to each order as specified in the then-current
Fund Prospectus. The minimum dollar purchase of any shares of each Fund by any
person shall be the applicable minimum dollar amount described in the
then-current Fund Prospectus for that class of shares, and no order for less
than such amount will be accepted hereunder. The procedures relating to the
handling of orders shall be subject to instructions that VK Funds shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VKAC in its sole discretion.
9. Payment for Fund shares shall be made on or before the settlement date
specified in the VK Funds confirmation at the office of VK Funds' clearing
agent, or wire to the order of the Fund which reserves VK Funds' right to delay
issuance or transfer of shares until such check has cleared. If such payment is
not received by VK Funds, VK Funds reserves the right, without notice, forthwith
either to cancel the sale or, at its option, to sell the shares ordered back to
the Fund, and in either case, VK Funds may hold you responsible for any loss
suffered by the Fund. You agree that in transmitting investors' funds, you will
comply with Rule 15c2-4 under the Securities Exchange Act of 1934, as amended.
10. You shall not withhold placing orders with VK Funds from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
11. VK Funds will not accept from you any conditioned orders for shares,
except at a definite, specified price.
12. You represent that you are familiar with Release No. 4968 under the
Securities Act of 1933, as amended, and Rule 15c2-8 under the Securities
Exchange Act of 1934, as amended, as it relates to the distribution of
Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive a Statement of
Additional Information, you will (i) provide such person with a Statement of
Additional Information without charge and notify the Fund that you have done so,
(ii) notify the Fund of the request so that the Fund can fulfill the request or
(iii) tell such person to request a Statement of Additional Information by
telephoning the Fund at the number set forth on the cover of the current
Prospectus or Preliminary Prospectus. You also agree to keep an accurate record
of your distribution (including dates, number of copies and persons to whom
sent) of copies of any Preliminary Prospectus (and any Statement of Additional
Information) and/or Prospectus (and any Statement of Additional Information) for
each Fund (or any amendment or supplement to either) and, promptly upon request
by VK Funds, to bring all subsequent changes to such Preliminary Prospectus or
Prospectus to the attention of anyone to whom such material shall have been
distributed. You further agree to furnish to persons who receive a confirmation
of sale of shares of any Fund a copy of the Prospectus (and not the Statement of
Additional Information) for such Fund filed pursuant to Rule 497 under the
Securities Act of 1933, as amended.
3
<PAGE> 4
13. Unless otherwise indicated in a Fund's Prospectus, stock certificates
for shares of Funds sold to you shall be issued only if specifically requested.
14. VK Funds will have no liability to you, except for lack of good faith
and for obligations expressly assumed by VK Funds in this Agreement.
15. All communications to VK Funds shall be sent to 1 Parkview Plaza,
PO Box 5555 Oakbrook Terrace, Illinois 60181-5555, Attention: Mutual Fund
Department. Any notice to you shall be duly given if sent to you at the address
specified by you below or such other address as you may designate to VK Funds in
writing.
16. Neither this Agreement nor the performance of the services hereunder
shall be considered to create a joint venture or partnership between VK Funds
and you.
17. This Agreement shall be construed in accordance with the laws of the
State of Illinois without reference to the choice-of-law principles thereof.
18. The Fund reserves the right in its discretion and VK Funds reserves
the right in its discretion, without notice, to suspend or withdraw the offering
of any shares of a Fund entirely. VK Funds reserves the right, without notice,
to amend, modify or cancel the Agreement. The Agreement may not be assigned by
either party without prior written consent of the other party.
19. This Agreement may be terminated at any time by either party.
TERMS AND CONDITIONS APPLICABLE ONLY TO OPEN-END FUNDS
20. Each of the Open-End Fund's is subject to an alternative distribution
plan (the "Alternative Distribution Plan") as described in such Fund's
then-current Prospectus pursuant to which the Open-End Fund may sell multiple
classes of its shares with varying combinations of front-end service charges
(each a "FESC"), distributions fees, service fees, contingent deferred sales
charges (each a "CDSC"), exchange features, conversion rights, voting rights,
expenses allocations and investment requirements. As used herein, classes of
shares of a Fund subject to a FESC will be referred to as FESC Shares, and
classes of shares of a Fund subject to a CDSC will be referred to as CDSC
Shares.
+
21.(a) With respect to any shares of a class of FESC Shares of an
Open-End Fund, the public offering price for such shares shall be the net asset
value per share plus a FESC, expressed as a percentage of the applicable public
offering price, as determined and effective as of the time specified in the
then-current Prospectus of such Open-End Fund. The dealer discount applicable
to any sale of shares of a class of FESC Shares of an Open-End Fund shall be a
percentage of the applicable public offering price for such shares as provided
for in the then-current Prospectus of such Open-End Fund or, if not so
provided, as provided to you from time to time in writing by VK Funds.
(b) With respect to any shares of a class of CDSC Shares of an Open-End
Fund, the public offering price for such shares shall be the net asset value per
share as determined and effective as of the time specified in the then-current
Prospectus of such Open-End Fund. The dealer sales compensation payable by VK
Funds applicable to any sale of shares of a class of CDSC Shares of an Open-End
Fund shall be the percentage of the applicable public offering price for such
shares as provided for in the then-current Prospectus of such Open-End Funds or,
if not so provided, as provided to you from time to time in writing by VK Funds.
22. Should you wish to participate in the Distribution Plan with respect
to a class of shares adopted by an Open-End Fund pursuant to Rule 12b-1 ("Rule
12b-1 Plan") under the Investment Company Act of 1940, as amended, or the
Service Plan with respect to a class of shares, it is understood that you must
be approved by the Board of Directors of such Open-End Fund and execute a
Distribution Assistance Agreement.
4
<PAGE> 5
23. With respect to the Open-End Funds, your acceptance of this Agreement
constitutes a representation that you will adopt policies and procedures to
comply with Rule 18f-3 under the Investment Company Act of 1940, with respect to
when you may appropriately sell the various classes of shares of the Open-End
Funds to investors and that you will sell such shares only in accordance
therewith.
24.(a) You agree to purchase shares of an Open-End Fund only from VK Funds
or from your customers. If you purchase shares of an Open-End Fund from VK
Funds, you agree that all such purchases shall be made only: (i) to cover
orders already received by you from your customers or (ii) for your own bona
fide investment. If you purchase shares of an Open-End Fund from your customers,
you agree to pay such customers not less than the applicable repurchase price
for such shares as established by the then-current Prospectus for such Open-End
Fund. VK Funds in turn agrees that it will not purchase any shares from an
Open-End Fund except for the purpose of covering purchase orders that it has
already received.
(b) With respect to shares of a class of CDSC Shares of an
Open-End Fund purchased from your customers, you additionally agree to resell
such shares only to VK Funds as agent for the Fund at the repurchase price for
such shares as established by the then-current Prospectus of such Open-End Fund.
You acknowledge and understand that shares of a class of CDSC Shares of an
Open-End Fund may be subject to a CDSC payable to VK Funds as set forth in the
Prospectus for such Open-End Fund in effect at the time of the original purchase
of such shares from the Open-End Fund and that the repurchase price for such
shares that will be paid by VK Funds will reflect the imposition of any
applicable CDSC.
25.(a) You shall sell shares of a class of shares of an Open-End Fund
only: (i) to customers at the applicable public offering price or (ii) to VK
Funds as agent for the Open-End Fund at the repurchase price in the then-current
Prospectus of such Open-End Fund. In such a sale to VK Funds, you may act
either as principal for your own account or as agent for your customer. If you
act as principal for your own account in purchasing shares of a class of shares
of an Open-End Fund for resale to VK Funds, you agree to pay your customer not
less than the price that you receive from VK Funds. If you act as agent for
your customer in selling shares of a class of shares of an Open-End Fund to VK
Funds, you agree not to charge your customer more than a fair commission for
handling the transaction. You acknowledge and understand that CDSC Shares of an
Open-End Fund may be subject to a CDSC payable to VK Funds as set forth in the
Prospectus of such Open-End Fund in effect at the time of the original purchase
of such CDSC Shares and that the repurchase price that will be paid by VK Funds
for such CDSC Shares will reflect the imposition of any such CDSC.
26. If any shares of a class of FESC Shares of an Open-End Fund sold to or
by you under the terms of this Agreement are repurchased by the Fund or by VK
Funds as agent for the Fund or are tendered for redemption within seven business
days after the date of VK Funds' confirmation of the original purchase, it is
agreed that you shall forfeit your right to any dealer discount received by you
on such FESC Shares. VK Funds will notify you of any such repurchase or
redemption within ten business days from the date on which the repurchase or
redemption order in proper form is delivered to VK Funds or to the Fund, and you
shall forthwith refund to VK Funds the full dealer discount allowed to you on
such sale. VK Funds agrees, in the event of any such repurchase or redemption,
to refund to the Fund its share of any discount allowed to VK Funds and, upon
receipt from you of the refund of the discount allowed to you, to pay such
refund forthwith to the Fund.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
27. No Closed-End Fund will issue fractional shares.
28. VK Funds may, in its sole discretion, allocate shares of a Closed-End
Fund among brokers and dealers participating in the Initial Offering Period or
among brokers, dealers and banks in the Continuous Offering Period, as the case
may be, on other than a pro rata basis, which may result in
5
<PAGE> 6
certain brokers, dealers and banks not being allocated the full amount of
shares of such fund sold by them while certain other brokers, dealers and banks
may receive their full allocation.
29. You agree that with respect to orders for shares of a Closed-End Fund,
you will transmit such orders received during the Initial Offering Period to VK
Funds within the time period as specified in such Closed-End Fund's Prospectus
(or in the time period as extended by VK Funds in writing). You also agree to
transmit any customer order received during the Continuous Offering Period to VK
Funds prior to the time that the public offering price for such Closed-End Fund
is next determined after your receipt of such order as set forth in the
Closed-End Fund's Prospectus. There is no assurance that each Closed-End Fund
will engage in a continuous offering of shares.
30. On each order accepted by VK Funds for shares of a Closed-End Fund,
you will be entitled to receive a concession paid out of VK Funds' own assets
as set forth in the then-current Prospectus of such Closed-End Fund (exclusive
of additional compensation that may be payable pursuant to sales programs, if
any, that may be established from time to time as described in the Prospectus
for such Closed-End Fund, which will be payable only as and to the extent the
requirements of such programs are satisfied). In no event will any Closed-End
Fund reimburse VK Funds for any such sales concessions or other additional
compensation or pay any such concession or other additional compensation or
allowance directly to you. VK Funds will specify for each Closed-End Fund a
period after the date that the shares of such Closed-End Fund are listed on the
New York Stock Exchange, the American Stock Exchange or another national
securities market system (which period will end no later that the first dividend
payment date with respect to such Closed-End Fund) during which sales
concessions and other additional compensation are subject to forfeiture as
provided in the following sentence (the "Forfeiture Period"). During the
Forfeiture Period for any Closed-End Fund, physical delivery of certificates
representing shares will be required to transfer ownership of such shares. In
the event that any shares of a Closed-End Fund sold through an order received
from you in the Initial Offering Period or the Continuous Offering Period are
resold in the open market or otherwise during the Forfeiture Period, VK Funds
reserves the right to require you to forfeit any sales concessions and other
additional compensation with respect to such shares. In the event of a
forfeiture, VK Funds may withhold any forfeited sales concessions and other
additional compensation that has not yet been paid or from other amounts yet to
be paid to you (whether or not payable with respect to such shares) and you
agree to repay to VK Funds, promptly upon demand, any forfeited sales
concessions and other compensation that has been paid. Determinations of the
amounts to be paid to you or by you to VK Funds shall be made by VK Funds and
shall be conclusive.
31. During the Initial Offering Period and any Continuous Offering Period
for any Closed-End Fund, you agree to supply VK Funds, not less frequently than
once a week by Friday, 5:00 p.m. Eastern Time, during such Closed-End Fund's
Initial Offering Period, a list setting forth by state and in the aggregate all
indications of interest and, during any Continuous Offering Period, all shares
sold by you of such Closed-End Fund during such week (or lesser period of time),
and a list setting forth by name and location each registered representative
making said sales and indicating the amount of all sales per Closed-End Fund to
date.
32. You expressly acknowledge and understand that there is no Rule 12b-1
Plan for the Closed-End Funds.
33. You expressly acknowledge and understand that shares of the Closed-End
Funds will not be repurchased by either the Closed-End Funds (other than through
tender offers from time to time, if any) or by VK Funds and that no secondary
market for such shares is expected to develop until the shares have begun
trading on a national exchange or national market system. You hereby covenant
that, until notified by VK Funds that the distribution of such shares has been
completed or that the Forfeiture Period has ended, you (a) will not make a
secondary market in any shares of such a Closed-End Fund, (b) will not purchase
or hold shares of such Closed-End Fund in inventory for the purpose of resale in
the open market or to your customers and (c) without VK Funds' consent, will
not repurchase shares of such Closed-End Fund in the open market or from your
customers for any account in which you have a beneficial interest.
6
<PAGE> 7
34. Unlike the other Closed-End Funds, the Continuous Offering period with
respect to the Van Kampen Prime Rate Income Trust (the "Prime Rate Fund") may
continue indefinitely. The offer to sell shares of the Prime Rate Fund is
subject to further terms and conditions in addition to those set forth above as
follows:
(a) You expressly acknowledge and understand that shares of the
Prime Rate Fund will not be repurchased by either the Prime Rate Fund (other
than through tender offers from time to time, if any) or VK Funds, and that no
secondary market for the shares of the Prime Rate Fund exists currently, or is
expected to develop. You also expressly acknowledge and agree that, in the
event your customer cancels their order for shares after confirmation, such
shares may not be repurchased, remarketed or otherwise disposed of by or
through VK Funds.
(b) You acknowledge and understand that, while the Board of
Trustees of the Prime Rate Fund intends to consider tendering for all or a
portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VK Funds will be imposed on most shares accepted for tender by the
Prime Rate Fund which have been held for less than five years, as set forth in
the Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY
THE PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE FUND'S
CURRENT PROSPECTUS IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Dealer Agreement, keeping a
copy for your files and returning the original to us.
Accepted and Agreed to:
(PRINT OR TYPE)
Dated:_______________________________ By:
Its:
_______________________________
Broker-Dealer Name
________________________________
Broker-Dealer Taxpayer ID Number
_________________________________
Address VAN KAMPEN FUNDS INC.
__________________________________
City, State, Zip
By: __________________________________
Signature
__________________________________
Name
__________________________________
Title
__________________________________
Phone
7
<PAGE> 1
EXHIBIT (e)(3)
FORM OF
BROKER FULLY DISCLOSED CLEARING AGREEMENT
WITH VAN KAMPEN FUNDS INC.
REGARDING VAN KAMPEN
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
Ladies and Gentlemen:
As dealer for our own account, we offer to make available to you shares of
any of the Van Kampen open-end investment companies (the "Open-End Funds" or,
individually, an "Open-End Fund") and Van Kampen closed-end investment companies
(the "Closed-End Funds" or, individually, a "Closed-End Fund") distributed by
Van Kampen Funds Inc. ("VK Funds") pursuant to the terms and conditions
contained herein. Collectively, the Open-End Funds and Closed-End Funds
sometimes are referred to herein as the "Funds" or, individually, as a "Fund".
You are a broker-dealer that desires to make available shares of such Funds to
your customers on a fully disclosed basis wherein VK Funds would confirm
transactions of your customers in a Fund directly to them.
VK Funds acts as the principal underwriter (as such term is defined in the
Investment Company Act of 1940, as amended) for each Fund with respect to its
offering of one or more classes of shares as described in each Fund's
Prospectus. Pursuant to this Agreement, VK Funds offers to make available to
you shares of each Open-End Fund and each Closed-End Fund, prior to the
Effective Date (as defined herein) of each Fund's Registration Statement (the
"Initial Offering Period") and after the Effective Date of each Fund's
Registration Statement (as defined herein) (the "Continuous Offering Period")
(if any) as described in each respective Fund's Prospectus.
As used herein unless otherwise indicated, the term "Prospectus" means the
final prospectus and Statement of Additional Information included in the
registration statement for the fund on the effective date and as from time to
time thereafter amended or supplemented. As used herein unless otherwise
indicated, the term "Preliminary Prospectus" means any preliminary prospectus
and any preliminary Statement of Additional Information included at any time as
a part of the registration statement for any Fund prior to the effective date
and that is authorized by VK Funds for use in connection with the offering of
shares.
In consideration of the mutual obligations contained herein, the
sufficiency of which is hereby acknowledged by you, the terms of the Agreement
are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a representation that
you are a securities broker-dealer registered with the Securities and Exchange
Commission (the "SEC") and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"). You agree to abide by
the laws, rules and regulations of the SEC and NASD, including without
limitation rules pertaining to the opening, approval, supervision and
monitoring of customer accounts, the NASD's Interpretation with Respect to
Free-Riding and Withholding and Sections 8, 24 and 36 of Article III of the
NASD's Rules of Fair Practice. You and we agree to abide by all other Rules
and Regulations of the NASD, including Section 26 of its Rules of Fair
Practice. Your acceptance also constitutes a representation that you have been
duly authorized by proper corporate or partnership action to enter into this
Agreement and to perform your obligations hereunder. You will not accept any
orders from any broker, dealer or financial institution who is purchasing from
you with a view toward distribution unless you have obtained such person's or
entity's written consent to be bound by the terms of this Agreement.
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2. For the purposes of the Securities and Exchange Commission's Financial
Responsibility Rules and the Securities Investor's Protection Act, your
customers will be considered customers of VK Funds and not of your firm. VK
Funds has been granted an exemption from the NASD rules of Fair Practice,
Article III Section 45 requirements to send customer statements and thus will
not do so. Customer statements showing account activity and balances will be
mailed to the customer by the Funds each time a financial transaction occurs in
their account and on a monthly or quarterly basis. Nothing herein shall cause
your firm's customers to be interpreted as customers of VK Funds for any other
purpose, or to negate the intent of any other section of this agreement,
including, but not limited to, the delineation of responsibilities as set forth
elsewhere in this agreement.
3. In transactions where you make available shares of the Funds to the
public, you shall have no authority to act as agent for the Fund or for VK
Funds.
4. Each Fund has filed with the SEC and the securities commissions of one
or more states a Registration Statement (the "Registration Statement") on the
SEC form applicable to the respective Fund. The date on which the Registration
Statement is declared effective by the SEC is referred to herein as the
"Effective Date". Prior to the Effective Date of the Registration Statement
with respect to a particular Fund, you expressly acknowledge and understand
that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may offers to buy be
accepted, (i) prior to the Effective Date of the Registration Statement or (ii)
in any state in which such offer or sale would be unlawful prior to
registration or qualification under the securities laws of such state.
(b) The Fund's Preliminary Prospectus, together with any sales material
distributed for use in connection with the offering of shares of such Fund,
does not constitute an offer to sell or the solicitation of an offer to buy
shares of such Fund and is subject to completion and modification by the
Prospectus.
(c) In the event that you transmit indications of interest to VK Funds for
accumulation prior to the Effective Date, upon your instruction VK Funds will
send confirmation of such indications of interest directly to your customers in
writing, together with copies of the Preliminary Prospectus for the Fund, and
send copies of the confirmations to you. Indications of interest with respect
to shares of a class of a Fund's shares transmitted to VK Funds prior to the
Effective Date are subject to acceptance or rejection by VK Funds in its sole
discretion and are conditioned upon the occurrence of (i) the Effective Date and
(ii) the registration or qualification of the respective class of shares in the
respective state.
(d) Indications of interest with respect to shares of a class of a Fund's
shares not cancelled by you prior to or on the later of (i) the Effective Date
and (ii) the registration or qualification of the respective class of shares in
the respective state, and accepted by VK Funds will be deemed by VK Funds to be
orders for Shares.
(e) Upon your instruction, VK Funds will send confirmations of orders
accepted by VK Funds (including indications of interest deemed orders) directly
to your customers in writing, together with copies of the Prospectus for the
Fund, and send copies of the confirmations to you.
(f) Upon receipt of duplicate confirmations you will examine the same and
promptly notify VK Funds of any errors or discrepancies that you discover and
will promptly bring to VK Funds' attention any errors in such confirmations
claimed by your customers. All confirmations to your customers will indicate
that orders were placed on a fully disclosed basis.
(g) All indications of interest and orders transmitted to VK Funds are
subject to the terms and conditions of the Fund's Prospectus and this Agreement
and are subject to acceptance or rejection by VK Funds in its sole discretion.
5. After the Effective Date, you will not make shares of a class of the
Fund's shares available in any state where they are not qualified for sale
under the "blue sky" laws and regulations of such state, except for states in
which they are exempt from qualification.
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6. In the event that you make shares of the Funds available outside the
United States, you agree to comply with the applicable laws, rules and
regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
7. Upon application to VK Funds, VK Funds will inform you as to the
jurisdictions in which VK Funds believes shares of a Fund have been qualified
for sale under the respective securities or "blue sky" laws of such
jurisdictions. VK Funds understands and agrees that qualification of any shares
of a Fund for sale in such jurisdictions shall be solely VK Funds'
responsibility and that you assume no responsibility or obligation with respect
to such eligibility. You understand and agree that your compliance with the
requirements of the securities or "blue sky" laws in each jurisdiction with
respect to your right to make the shares available in such jurisdiction shall be
solely your responsibility.
8. No person is authorized to make any representations concerning any
class of shares of a Fund except those contained in the Funds' current
Preliminary Prospectus or Prospectus, as the case may be. In purchasing shares
from us you shall rely solely on the representations contained in such
Prospectus. VK Funds will furnish additional copies of a Funds' current
Prospectus and sales literature issued by VK Funds in reasonable quantities upon
request.
9. You agree that you will distribute to the public only (a) the
Preliminary Prospectus, the Prospectus and any amendment or supplement thereto
and (b) sales literature or other documents expressly authorized for such
distribution by VK Funds.
10. Orders received from you will be accepted by VK Funds only at the
public offering price applicable to each order as specified in the then-current
Fund Prospectus. The minimum dollar purchase of any shares of each Fund by any
person shall be the applicable minimum dollar amount described in the
then-current Fund Prospectus for that class of shares, and no order for less
than such amount will be accepted hereunder. The procedures relating to the
handling of orders shall be subject to instructions that VK Funds shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VK Funds in its sole discretion. Upon acceptance of an order, we
shall confirm directly to the customer in writing upon your instruction and send
a copy of the confirmation to you. In addition, we will send a Fund Prospectus
with the confirmation. You agree that upon receipt of duplicate confirmations
you will examine the same and promptly notify VK Funds of any errors or
discrepancies that you discover and shall promptly bring to VK Funds' attention
any errors in such confirmations claimed by your customers. All confirmations
to your customers will indicate that orders were placed on a fully disclosed
basis.
11. Payment for Fund shares shall be made on or before the settlement date
specified in the VK Funds confirmation at the office of VK Funds' clearing
agent, or wire to the order of the Fund which reserves VK Funds' right to delay
issuance of transfer of shares until such check has cleared. If such payment is
not received by VK Funds, VK Funds reserves the right, without notice, forthwith
either to cancel the trade at our option or as required by the provisions of
Regulation T, and in either case, VK Funds may hold you responsible for any loss
suffered by the Fund. You agree that in transmitting investors' funds, you will
comply with Rule 15c2-4 under the Securities Exchange Act of 1934, as amended.
12. You shall not withhold placing orders with VK Funds from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
13. VK Funds will not accept from you any conditioned orders for shares,
except at a definite, specified price.
14. You represent that you are familiar with Release No. 4968 under the
Securities Act of 1933, as amended, and Rule 15c2-8 under the Securities
Exchange Act of 1934, as amended, as it relates to the distribution of
Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive a Statement of
Additional Information, you will (i) provide such person with a Statement of
Additional Information without charge and notify the Fund that you have done so,
(ii) notify the Fund of the request so that the Fund can fulfill the request or
(iii) tell such person to request a Statement of Additional Information by
telephoning the Fund at the number set forth on the cover of the current
Prospectus or Preliminary Prospectus. You also agree to keep an accurate record
of your distribution (including dates,
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<PAGE> 4
number of copies and persons to whom sent) of copies of any Preliminary
Prospectus (and any Statement of Additional Information) and/or Prospectus (and
any Statement of Additional Information) for each Fund (or any amendment or
supplement to either) and, promptly upon request by VK Funds, to bring all
subsequent changes to such Preliminary Prospectus or Prospectus to the
attention of anyone to whom such material shall have been distributed. You
further agree to furnish to persons who receive a confirmation of sale of
shares of any Fund a copy of the Prospectus for such Fund filed pursuant to
Rule 497 under the Securities Act of 1933, as amended. Upon your request,
VK Funds will furnish to such persons a copy of the Prospectus for such Fund
filed pursuant to Rule 497 Under the Securities Act of 1993, as amended.
15. The names of your customers shall remain your sole property and shall
not be used by VK Funds for any purpose except for servicing and informational
mailings in the normal course of business to Fund shareholders.
16. Unless otherwise indicated in a Fund's Prospectus, stock certificates
for shares sold will be issued to your customers only if specifically
requested.
17. VK Funds will have no liability to you, except for lack of good faith
and for obligations expressly assumed by VK Funds in this Agreement.
18. All communications to VK Funds shall be sent to 1 Parkview Plaza, P.O.
Box 5555, Oakbrook Terrace, Illinois 60181-5555, Attention: Mutual Fund
Department. Any notice to you shall be duly given if sent to you at the address
specified by you below or such other address as you may designate to VK Funds in
writing.
19. Neither this Agreement nor the performance of the services hereunder
shall be considered to create a joint venture or partnership between VK Funds
and you.
20. This Agreement shall be construed in accordance with the laws of the
State of Illinois without reference to the choice-of-law principles thereof.
21. The Fund reserves the right in its discretion and VK Funds reserves
the right in its discretion, without notice, to suspend or withdraw the offering
of any shares of a Fund entirely. VK Funds reserves the right, without notice,
to amend, modify or cancel the Agreement. The Agreement may not be assigned by
either party without prior written consent of the other party.
22. This Agreement may be terminated at any time by either party.
TERMS AND CONDITIONS APPLICABLE TO OPEN-END FUNDS
23. Each of the Open-End Funds is subject to an alternative distribution
plan (the "Alternative Distribution Plan") as described in such Fund's
then-current Prospectus pursuant to which the Open-End Fund may sell multiple
classes of its shares with varying combinations of front-end service charges
(each a "FESC"), distributions fees, service fees, contingent deferred sales
charges (each a "CDSC"), exchange features, conversion rights, voting rights,
expenses allocations and investment requirements. As used herein, classes of
shares of a Fund subject to a FESC will be referred to as FESC Shares, and
classes of shares of a Fund subject to a CDSC will be referred to as CDSC
Shares.
24.(a) With respect to any shares of a class of FESC Shares of an
Open-End Fund, the public offering price for such shares shall be the net asset
value per share plus a FESC, expressed as a percentage of the applicable public
offering price, as determined and effective as of the time specified in the
then-current Prospectus of such Open-End Fund. On each order for shares of a
class of FESC Shares of an Open-End Fund accepted by us, you will be entitled
to receive the applicable agency commission for such shares as provided for in
the then-current Prospectus of such Open-End Fund or, if not so provided, as
provided to you from time to time in writing by VK Funds.
(b) With respect to any shares of a class of CDSC Shares of an Open-End Fund,
the public offering price for such shares shall be the net asset value per
share as determined and effective as of the time specified in the then-current
Prospectus of such Open-End Fund. You will remit payment of the aggregate
public offering price to VK Funds for the CDSC Shares sold, and on each order
accepted by us, you will be entitled to receive the applicable selling
compensation for such shares as
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<PAGE> 5
provided for in the then-current Prospectus of such Open-End Fund or,
if not so provided, as provided to you from time to time in writing by VK Funds.
25. Should you wish to participate in the Distribution Plan with respect
to a class of shares adopted by an Open-End Fund pursuant to Rule 12b-1 ("Rule
12b-1 Plan") under the Investment Company Act of 1940, as amended, or the
Service Plan with respect to a class of shares, it is understood that you must
be approved by the Board of Directors of such Open-End Fund and execute a
Distribution Assistance Agreement.
26. With respect to the Open-End Funds, your acceptance of this Agreement
constitutes a representation that you will adopt policies and procedures to
comply with Rule 18f-3 under the Investment Company Act of 1940, with respect
to when you may appropriately make available the various classes of shares of
the Open-End Funds to investors and that you will make available such shares
only in accordance therewith.
27. You agree to make shares of an Open-End Fund available to your
customers only: (i) at the applicable public offering price, (ii) from VK Funds
and (iii) to cover orders already received by you from your customers. VK Funds
in turn agrees that it will not purchase any shares from an Open-End Fund except
for the purpose of covering purchase orders that it has already received.
28.(a) If any shares of a class of FESC Shares of an Open-End Fund sold
to your customers under the terms of this Agreement are repurchased by the Fund
or by VK Funds as agent for the Fund or are tendered for redemption within seven
business days after the date of VK Funds' confirmation of the original purchase,
it is agreed that you shall forfeit your right to any agency commission
received by you on such FESC Shares. VK Funds will notify you of any such
repurchase or redemption within ten business days from the date on which the
repurchase or redemption order in proper form is delivered to VK Funds or to the
Fund, and you shall forthwith refund to VK Funds the full agency commission
allowed to you on such sale. VK Funds agrees, in the event of any such
repurchase or redemption, to refund to the Fund its share of any discount
allowed to VK Funds and, upon receipt from you of the refund of the agency
commission allowed to you, to pay such refund forthwith to the Fund.
(b) If any shares of a class of CDSC Shares sold to your customers under
the terms of this Agreement are repurchased by the Fund or by VK Funds as agent
for the Fund or are tendered for redemption within seven business days after the
date of VK Funds' confirmation of the original purchase, it is agreed that you
shall forfeit your right to any sales compensation received by you on such CDSC
Shares. We will notify you of any such repurchase or redemption within ten
business days from the date on which the repurchase or redemption order in
proper form is delivered to VK Funds or to the Fund, and you shall forthwith
refund to VK Funds the full sales compensation paid to you.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
29. No Closed-End Fund will issue fractional shares.
30. VK Funds may, in its sole discretion, allocate shares of a Closed-End
Fund among brokers, dealers and, if permitted by applicable laws, banks
participating in the Initial Offering Period or among brokers, dealers and
banks in the Continuous Offering Period, as the case may be, on other than a
pro rata basis, which may result in certain brokers, dealers and banks not
being allocated the full amount of shares of such Fund sold by them while
certain other brokers, dealers and banks may receive their full allocation.
31. You agree that with respect to orders for shares of a Closed-End
Fund, you will transmit such orders received during the Initial Offering Period
to VK Funds within the time period as specified in such Closed-End Fund's
Prospectus (or in the time period as extended by VK Funds in writing). You also
agree to transmit any customer order received during the Continuous Offering
Period to VK Funds prior to the time that the public offering price for such
Closed-End Fund is next determined after your receipt of such order, as set
forth in the Closed-End Fund's Prospectus. There is no assurance that each
Closed-End Fund will engage in a continuous offering of shares.
32. On each order accepted by VK Funds for shares of a Closed-End Fund, you
will be entitled to receive a concession paid out of VK Funds' own assets as
set forth in the then-current Prospectus of such Closed-End Fund (exclusive of
additional compensation that may be payable pursuant to sales programs, if any,
that may be established from time to time as described in the Prospectus for
such Closed-End Fund, which will be payable only as and to the extent the
requirements
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<PAGE> 6
of such programs are satisfied). In no event will any Closed-End Fund reimburse
VK Funds for any such sales concessions or other additional compensation or pay
any such concession or other additional compensation or allowance directly to
you. VK Funds will specify for each Closed-End Fund a period after the date
that the shares of such Closed-End Fund are listed on the New York Stock
Exchange, the American Stock Exchange or another national securities market
system (which period will end no later than the first dividend payment date with
respect to such Closed-End Fund) during which sales concessions and other
additional compensation are subject to forfeiture as provided in the following
sentence (the "Forfeiture Period"). During the Forfeiture Period for any
Closed-End Fund, physical delivery of certificates representing shares will be
required to transfer ownership of such shares. In the event that any shares of
a Closed-End Fund sold through an order received from you in the Initial
Offering Period or the Continuous Offering Period are resold in the open market
or otherwise during the Forfeiture Period, VK Funds reserves the right to
require you to forfeit any sales concessions and other additional compensation
with respect to such shares. In the event of a forfeiture, VK Funds may
withhold any forfeited sales concessions and other additional compensation that
has not yet been paid or from other amounts yet to be paid to you (whether or
not payable with respect to such shares), and you agree to repay to VK Funds,
promptly upon demand, any forfeited sales concessions and other compensation
that has been paid. Determinations of the amounts to be paid to you or by you to
VK Funds shall be made by VK Funds and shall be conclusive.
33. During the Initial Offering Period and any Continuous Offering Period
for any Closed-End Fund, you agree to supply VK Funds, not less frequently than
once a week by Friday, 5:00 p.m. Eastern Time, during such Closed-End Fund's
Initial Offering Period, a list setting forth by state and in the aggregate all
indications of interest and, during any Continuous Offering Period, all shares
sold by you of such Closed-End Fund during such week (or lesser period of time)
and a list setting forth by name and location each registered representative
making said sales and indicating the amount of all sales per Closed-End Fund to
date.
34. You expressly acknowledge and understand that there is no Rule 12b-1
Plan for the Closed-End Funds.
35. You expressly acknowledge and understand that shares of the Closed-End
Funds will not be repurchased by either the Closed-End Funds (other than through
tender offers from time to time, if any) or by VK Funds and that no secondary
market for such shares is expected to develop until the shares have begun
trading on a national exchange or national market system. You hereby covenant
that, until notified by VK Funds that the distribution of such shares has been
completed or that the Forfeiture Period has ended, you (a) will not make a
secondary market in any shares of such a Closed-End Fund, (b) will not purchase
or hold shares of such Closed-End Fund in inventory for the purpose of resale in
the open market or to your customers and, (c) without VK Funds' consent, will
not repurchase shares of such Closed-End Fund in the open market or from your
customers for any account in which you have a beneficial interest.
36. Unlike the other Closed-End Funds, the Continuous Offering period with
respect to the Van Kampen Prime Rate Income Trust (the "Prime Rate Fund") may
continue indefinitely. The offer to make available to you shares of the Prime
Rate Fund is subject to further terms and conditions in addition to those set
out above, as follows:
(a) You expressly acknowledge and understand that shares of the Prime Rate
Fund will not be repurchased by either the Prime Rate Fund (other than through
tender offers from time to time, if any) or VK Funds and that no secondary
market for the shares of the Prime Rate Fund exists currently or is expected to
develop. You also expressly acknowledge and agree that, in the event your
customer cancels their order for shares after confirmation, such shares may not
be repurchased, remarketed or otherwise disposed of by or through VK Funds.
(b) You acknowledge and understand that, while the Board of Trustees of
the Prime Rate Fund intends to consider tendering for all or a portion of the
Prime Rate Fund's shares on a quarterly basis, there is no assurance the Prime
Rate Fund will tender for shares at any time or, following such a tender offer,
that shares so tendered will be repurchased by the Prime Rate Fund. You
acknowledge and understand that an early withdrawal charge payable to VK Funds
will be imposed on most shares accepted for tender by the Prime Rate Fund that
have been held for less than five years, as set forth in the Prime Rate Fund's
Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY
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THE PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE FUND'S
CURRENT PROSPECTUS, IS EXTREMELY PROHIBITED.
Please accept the foregoing by signing this Broker Fully Disclosed Clearing
Agreement, keeping a copy for your files and returning the original to us.
Accepted and Agreed to: (PRINT OR TYPE)
Dated:_______________________ By:
Its:
_______________________
Bank Name VAN KAMPEN FUNDS INC.
_______________________
Bank Taxpayer ID Number
_______________________
Address
_______________________
City, State, Zip
_______________________
Phone
_______________________
Signature
_______________________
Name
_______________________
Title
7
<PAGE> 1
EXHIBIT(e)(4)
FORM OF
BANK FULLY DISCLOSED CLEARING AGREEMENT
WITH VAN KAMPEN FUNDS INC.
REGARDING VAN KAMPEN
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
Ladies and Gentlemen:
As dealer for our own account, we offer to make available to you shares of
any of the Van Kampen open-end investment companies (the "Open-End Funds" or,
individually, an "Open-End Fund") and Van Kampen Funds closed-end investment
companies (the "Closed-End Funds" or, individually, a "Closed-End Fund")
distributed by Van Kampen Funds, Inc. ("VK Funds") pursuant to the terms and
conditions contained herein. Collectively, the Open-End Funds and Closed-End
Funds sometimes are referred to herein as the "Funds" or, individually, as a
"Fund". You are a bank that desires to make available shares of such Funds to
your customers on a fully disclosed basis wherein VK Funds would confirm
transactions of your customers in a Fund directly to them. You agree not to
make available shares of such Funds during any fixed price offering of such
shares.
VK Funds acts as the principal underwriter (as such term is defined in the
Investment Company Act of 1940, as amended) for each Fund with respect to its
offering of one or more classes of shares as described in each Fund's
Prospectus. Pursuant to this Agreement, VK Funds offers to make available to
you shares of each Open-End Fund and each Closed-End Fund prior to the Effective
Date (as defined herein) of each Fund's Registration Statement (as defined
herein) (the "Initial Offering Period"), to the extent permitted by applicable
law, and after the Effective Date of each Fund's Registration Statement (the
"Continuous Offering Period") (if any) as described in such Closed-End Fund's
Prospectus.
As used herein unless otherwise indicated, the term "Prospectus" means the
final prospectus and Statement of Additional Information included in the
Registration Statement for the Fund on the Effective Date and as from time to
time thereafter amended or supplemented. As used herein unless otherwise
indicated, the term "Preliminary Prospectus" means any preliminary prospectus
and any Statement of Additional Information included at any time as a part of
the Registration Statement for any Fund prior to the Effective Date and that is
authorized by VK Funds for use in connection with the offering of shares.
In consideration of the mutual obligations contained herein, the
sufficiency of which is hereby acknowledged by you, the terms of the Agreement
are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a representation that you
are a bank as defined in Section 3(a)(6) of the Securities Exchange Act of 1934,
as amended, and have been duly authorized to enter into this Agreement and
perform your obligations hereunder. This Agreement as well as your authority to
make shares available to your customers will automatically terminate if you
shall cease to be a bank as defined above. You agree not to offer or sell
shares of any Fund except through VK Funds. You will not accept any orders from
any broker, dealer or financial institution who is purchasing from you with a
view toward distribution unless you have obtained such person's or entity's
written consent to be bound by the terms of this Agreement.
2. For the purposes of the Securities and Exchange Commission's Financial
Responsibility Rules and the Securities Investor's Protection Act, your
customers will be considered customers of VK Funds and not of your firm. VK
Funds has been granted an exemption from the NASD rules of Fair Practice,
Article III Section 45 requirements to send customer statements and thus will
not do so. Customer statements showing account activity and balances will be
mailed to the customer by the Funds each time a financial transaction occurs in
their account and on a monthly or quarterly basis. Nothing
1
<PAGE> 2
herein shall cause your firm's customers to be interpreted as customers of VK
Funds for any other purpose, or to negate the intent of any other section of
this agreement, including, but not limited to, the delineation of
responsibilities as set forth elsewhere in this agreement.
3. In transactions where you make available shares of the Funds to the
public, you shall have no authority to act as agent for the Fund or for VK
Funds. The customers in question are for all purposes your customers and not
customers of VK Funds. We will clear transactions for each of your customers
only upon your authorization, it being understood in all cases that (a) you are
acting as the agent for the customer; (b) the transactions are without recourse
against you by the customer except to the extent that your failure to transmit
orders in a timely fashion results in a loss to your customer; (c) as between
you and the customer, the customer will have full beneficial ownership of the
Fund shares; (d) each transaction is initiated solely upon the order of the
customer; and (e) each transaction is for the account of the customer and not
for your account.
4. Each Fund has filed with the Securities and Exchange Commission (the
"SEC") and the securities commissions of one or more states a Registration
Statement (the "Registration Statement") on the SEC form applicable to the
respective Fund. The date on which the Registration Statement is declared
effective by the SEC is hereinafter referred to as the "Effective Date". Prior
to the Effective Date of the Registration Statement with respect to a particular
Fund, you expressly acknowledge and understand that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may offers to buy be
accepted, (i) prior to the Effective Date of the Registration Statement or (ii)
in any state in which such offer or sale would be unlawful prior to registration
or qualification under the securities laws of such state.
(b) Except to the extent permitted by law, you will not solicit or
transmit to VK Funds any indications of interest to purchase shares during any
fixed-price offering.
(c) The Fund's Preliminary Prospectus, together with any sales
material distributed for use in connection with the offering of shares of such
Fund, does not constitute an offer to sell or the solicitation of an offer to
buy shares of such Fund and is subject to completion and modification by the
Prospectus.
(d) In the event and to the extent permitted by applicable law you
transmit indications of interest to VK Funds for accumulation prior to the
Effective Date, upon your instruction VK Funds will send confirmation of such
indications of interest directly to your customers in writing, together with
copies of the Preliminary Prospectus for the Fund, and send copies of the
confirmations to you. Indications of interest with respect to shares of a class
of a Fund's shares transmitted to VK Funds prior to the Effective Date are
subject to acceptance or rejection by VK Funds in its sole discretion and are
conditioned upon the occurrence of (i) the Effective Date and (ii) the
registration or qualification of the respective class of shares in the
respective state.
(e) Indications of interest with respect to shares of a class of a
Fund's shares not canceled by you prior to or on the later of (i) the Effective
Date and (ii) the registration or qualification of the respective class of
shares in the respective state, and accepted by VK Funds will be deemed by VK
Funds to be orders for Shares solely to the extent permitted by applicable law.
(f) Upon your instruction, VK Funds will send confirmations of
orders accepted by VK Funds (including indications of interest deemed orders)
directly to your customers in writing, together with copies of the Prospectus
for the Fund, and send copies of the confirmations to you.
(g) Upon receipt of duplicate confirmations you will examine the
same and promptly notify VK Funds of any errors or discrepancies that you
discover and will promptly bring to VK Funds' attention any errors in such
confirmations claimed by your customers. All confirmations to your customers
will indicate that orders were placed on a fully disclosed basis.
(h) All indications of interest and orders transmitted to VK Funds
are subject to the terms and conditions of the Fund's Prospectus and this
Agreement and are subject to acceptance or rejection by VK Funds in its sole
discretion.
2
<PAGE> 3
5. After the Effective Date, you will not make shares of a class of the
Fund's shares available in any state where they are not qualified for sale
under the "blue sky" laws and regulations of such state, except for states in
which they are exempt from qualification.
6. In the event that you make shares of the Fund available outside the
United States, you agree to comply with the applicable laws, rules and
regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
7. Upon application to VK Funds, VK Funds will inform you as to the
jurisdictions in which VK Funds believes shares of a Fund have been qualified
for sale under the respective securities or "blue sky" laws of such
jurisdictions. VK Funds understands and agrees that qualification of any shares
of a Fund for sale in such jurisdictions shall be solely VK Funds'
responsibility and that you assume no responsibility or obligation with respect
to such eligibility. You understand and agree that your compliance with the
requirements of the securities or "blue sky" laws in each jurisdiction with
respect to your right to make the shares available in such jurisdiction shall be
solely your responsibility.
8. No person is authorized to make any representations concerning any
class of shares of a Fund except those contained in the Fund's current
Preliminary Prospectus or Prospectus, as the case may be. In purchasing shares
from us you shall rely solely on the representations contained in such
Prospectus. VK Funds will furnish additional copies of a Fund's current
Prospectus and sales literature issued by VK Funds in reasonable quantities
upon request.
9. You agree that you will distribute to the public only (i) the
Prospectus and any amendment or supplement thereto and (ii) sales literature or
other documents expressly authorized for such distribution by VK Funds.
10. Orders received from you will be accepted by VK Funds only at the
public offering price applicable to each order as specified in the then-current
Fund Prospectus. The minimum dollar purchase of any shares of each Fund by any
person shall be the applicable minimum dollar amount described in the
then-current Fund Prospectus for that class of shares, and no order for less
than such amount will be accepted hereunder. The procedures relating to the
handling of orders shall be subject to instructions that VK Funds shall
communicate from time to time to you. All orders are subject to acceptance
or rejection by VK Funds in its sole discretion. Upon acceptance of an order,
we shall confirm directly to the customer in writing upon your instruction and
send a copy of the confirmation to you. In addition, we will send a Fund
Prospectus with the confirmation. You agree that upon receipt of duplicate
confirmations you will examine the same and promptly notify VK Funds of any
errors or discrepancies that you discover and shall promptly bring to VK Funds'
attention any errors in such confirmations claimed by your customers. All
confirmations to your customers will indicate that orders were placed on a fully
disclosed basis.
11. Payment for Fund shares shall be made on or before the settlement
date specified in the VK Funds confirmation at the office of VK Funds' clearing
agent, or wire to the order of the Fund which reserves VK Funds' right to delay
issuance or transfer of shares until such check has cleared. If such payment
is not received by VK Funds, VK Funds reserves the right, without notice,
forthwith either to cancel the trade at our option or as required by the
provisions of Regulation T, and in either case, VK Funds may hold you
responsible for any loss suffered by the Fund. You agree that in transmitting
investors' funds, you will comply with Rule 15c2-4 under the Securities Exchange
Act of 1934, as amended.
12. You shall not withhold placing orders with VK Funds from your
customers so as to profit yourself as a result of such withholding; e.g., by
a change in the net asset value from that used in determining the public
offering price to your customers.
13. VK Funds will not accept from you any conditioned orders for shares,
except at a definite, specified price.
14. You represent that you are familiar with Release No. 4968 under the
Securities Act of 1933, as amended, and Rule 15c2-8 under the Securities
Exchange Act of 1934, as amended, as it relates to the distribution of
Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive
3
<PAGE> 4
a Statement of Additional Information, you will (i) provide such person with a
Statement of Additional Information without charge and notify the Fund that you
have done so, (ii) notify the Fund of the request so that the Fund can fulfill
the request or (iii) tell such person to request a Statement of Additional
Information by telephoning the Fund at the number set forth on the cover of the
current Prospectus or Preliminary Prospectus. You also agree to keep an
accurate record of your distribution (including dates, number of copies and
persons to whom sent) of copies of any Preliminary Prospectus (and any
Statement of Additional Information) and/or Prospectus (and any Statement of
Additional Information) for each Fund (or any amendment or supplement to
either) and, promptly upon request by VK Funds, to bring all subsequent changes
to such Preliminary Prospectus or Prospectus to the attention of anyone to whom
such material shall have been distributed. You further agree to furnish to
persons who receive a confirmation of sale of shares of any Fund a copy of the
Prospectus for such Fund filed pursuant to Rule 497 under the Securities Act of
1933, as amended. Upon your request, VK Funds will furnish to such persons
a copy of the Prospectus for such Fund filed pursuant to Rule 497 Under the
Securities Act of 1993, as amended.
15. The names of your customers shall remain your sole property and shall
not be used by VK Funds for any purpose except for servicing and informational
mailings in the normal course of business to Fund shareholders.
16. Unless otherwise indicated in a Fund's Prospectus, stock certificates
for shares sold will be issued to your customers only if specifically
requested.
17. VK Funds will have no liability to you, except for lack of good faith
and for obligations expressly assumed by VK Funds in this Agreement.
18. All communications to VK Funds shall be sent to 1 Parkview Plaza, P.O.
Box 5555, Oakbrook Terrace, Illinois 60181-5555, Attention: Mutual Fund
Department. Any notice to you shall be duly given if sent to you at the address
specified by you below or such other address as you may designate to VK Funds in
writing.
19. Neither this Agreement nor the performance of the services hereunder
shall be considered to create a joint venture or partnership between VK Funds
and you.
20. This Agreement shall be construed in accordance with the laws of the
State of Illinois without reference to the choice-of-law principles thereof.
21. The Fund reserves the right in its discretion and VK Funds reserves
the right in its discretion, without notice, to suspend or withdraw the offering
of any shares of a Fund entirely. VK Funds reserves the right, without notice,
to amend, modify or cancel the Agreement. The Agreement may not be assigned by
either party without prior written consent of the other party.
22. This Agreement may be terminated at any time by either party.
TERMS AND CONDITIONS APPLICABLE TO OPEN-END FUNDS
23. Each of the Open-End Funds is subject to an alternative distribution
plan (the "Alternative Distribution Plan") as described in such Fund's
then-current Prospectus pursuant to which the Open-End Fund may sell multiple
classes of its shares with varying combinations of front-end service charges
(each a "FESC"), distributions fees, service fees, contingent deferred sales
charges (each a "CDSC"), exchange features, conversion rights, voting rights,
expenses allocations and investment requirements. As used herein, classes of
shares of a Fund subject to a FESC will be referred to as FESC Shares, and
classes of shares of a Fund subject to a CDSC will be referred to as CDSC
Shares.
24. (a) With respect to any shares of a class of FESC Shares of an
Open-End Fund, the public offering price for such shares shall be the net asset
value per share plus a FESC, expressed as a percentage of the applicable public
offering price, as determined and effective as of the time specified in the
then-current Prospectus of such Open-End Fund. On each order for shares of a
class of FESC Shares of an Open-End Fund accepted by us, you will be entitled
to receive the applicable agency commission for such shares as provided for in
the then-current Prospectus of such Open-End Fund or, if not so provided, as
provided to you from time to time in writing by VK Funds.
4
<PAGE> 5
(b) With respect to any shares of a class of CDSC Shares of an Open-End
Fund, the public offering price for such shares shall be the net asset value per
share as determined and effective as of the time specified in the then-current
Prospectus of such Open-End Fund. You will remit payment of the aggregate
public offering price to VK Funds for the CDSC Shares sold, and on each order
accepted by us, you will be entitled to receive the applicable selling
compensation for such shares as provided for in the then-current Prospectus of
such Open-End Fund or, if not so provided, as provided to you from time to time
in writing by VK Funds.
25. Should you wish to participate in the Distribution Plan with respect
to a class of shares adopted by an Open-End Fund pursuant to Rule 12b-1 ("Rule
12b-1 Plan") under the Investment Company Act of 1940, as amended, or the
Service Plan with respect to a class of shares, it is understood that you must
be approved by the Board of Directors of such Open-End Fund and execute an
Administrative Service Agreement.
26. With respect to the Open-End Funds, your acceptance of this Agreement
constitutes a representation that you will adopt policies and procedures to
comply with Rule 18f-3 under the Investment Company Act of 1940, with respect
to when you may appropriately make available the various classes of shares of
the Open-End Funds to investors and that you will make available such shares
only in accordance therewith.
27. You agree to make shares of an Open-End Fund available to your
customers only: (i) at the applicable public offering price, (ii) from VK Funds
and (iii) to cover orders already received by you from your customers. VK Funds
in turn agrees that it will not purchase any shares from an Open-End Fund except
for the purpose of covering purchase orders that it has already received.
28. (a) If any shares of a class of FESC Shares of an Open-End Fund sold
to your customers under the terms of this Agreement are repurchased by the Fund
or by VK Funds as agent for the Fund or are tendered for redemption within seven
business days after the date of VK Funds' confirmation of the original purchase,
it is agreed that you shall forfeit your right to any agency commission received
by you on such FESC Shares. VK Funds will notify you of any such repurchase or
redemption within ten business days from the date on which the repurchase or
redemption order in proper form is delivered to VK Funds or to the Fund, and you
shall forthwith refund to VK Funds the full agency commission allowed to you on
such sale. VK Funds agrees, in the event of any such repurchase or redemption,
to refund to the Fund its share of any discount allowed to VK Funds and, upon
receipt from you of the refund of the agency commission allowed to you, to pay
such refund forthwith to the Fund.
(b) If any shares of a class of CDSC Shares sold to your customers
under the terms of this Agreement are repurchased by the Fund or by VK Funds as
agent for the Fund or are tendered for redemption within seven business days
after the date of VK Funds' confirmation of the original purchase, it is agreed
that you shall forfeit your right to any sales compensation received by you on
such CDSC Shares. We will notify you of any such repurchase or redemption
within ten business days from the date on which the repurchase or redemption
order in proper form is delivered to VK Funds or to the Fund, and you shall
forthwith refund to VK Funds the full sales compensation paid to you.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
29. No Closed-End Fund will issue fractional shares.
30. VK Funds may, in its sole discretion, allocate shares of a Closed-End
Fund among brokers, dealers and, to the extent permitted by applicable law,
banks participating in the Initial Offering Period or among brokers, dealers and
banks participating in the Continuous Offering Period, as the case may be, on
other than a pro rata basis, which may result in certain brokers, dealers and
banks not being allocated the full amount of shares of such Fund sold by them
while certain other brokers, dealers and banks may receive their full
allocation.
31. You agree that with respect to orders for shares of a Closed-End Fund,
you will transmit such orders received, to the extent permitted by applicable
law, during the Initial Offering Period to VK Funds within the time period as
specified in such Closed-End Fund's Prospectus (or in the time period as
extended by VK Funds in writing). You also agree to transmit any customer order
received during the
5
<PAGE> 6
Continuous Offering Period to VK Funds prior to the time that the public
offering price for such Closed-End Fund is next determined after your receipt
of such order, as set forth in the Closed-End Fund's Prospectus. There is
no assurance that each Closed-End Fund will engage in a continuous offering of
shares.
32. On each order accepted by VK Funds for shares of a Closed-End
Fund, you will be entitled to receive a concession paid out of VK Funds' own
assets as set forth in the then-current Prospectus of such Closed-End Fund
(exclusive of additional compensation that may be payable pursuant to sales
programs, if any, that may be established from time to time as described in the
Prospectus for such Closed-End Fund, which will be payable only as and to the
extent the requirements of such programs are satisfied). In no event will any
Closed-End Fund reimburse VK Funds for any such sales concessions or other
additional compensation or pay any such concession or other additional
compensation or allowance directly to you. VK Funds will specify for each
Closed-End Fund a period after the date that the shares of such Closed-End Fund
are listed on the New York Stock Exchange, the American Stock Exchange or
another national securities market system (which period will end no later than
the first dividend payment date with respect to such Closed-End Fund) during
which sales concessions and other additional compensation are subject to
forfeiture as provided in the following sentence (the "Forfeiture Period").
During the Forfeiture Period for any Closed-End Fund, physical delivery of
certificates representing shares will be required to transfer ownership of such
shares. In the event that any shares of a Closed-End Fund sold through an
order received from you, to the extent permitted by applicable law, in the
Initial Offering Period or the Continuous Offering Period are resold in the
open market or otherwise during the Forfeiture Period, VK Funds reserves the
right to require you to forfeit any sales concessions and other additional
compensation with respect to such shares. In the event of a forfeiture, VK
Funds may withhold any forfeited sales concessions and other additional
compensation that has not yet been paid or from other amounts yet to be paid to
you (whether or not payable with respect to such shares), and you agree to
repay to VK Funds, promptly upon demand, any forfeited sales concessions and
other compensation that has been paid. Determinations of the amounts to be
paid to you or by you to VK Funds shall be made by VK Funds and shall be
conclusive.
33. During the Initial Offering Period or any Continuous Offering Period
for any Closed-End Fund, you agree to supply VK Funds, not less frequently than
once a week by Friday, 5:00 p.m. Eastern Time, during such Closed-End Fund's
Initial Offering Period, a list setting forth by state and in the aggregate all
indications of interest and, during any Continuous Offering Period, all shares
sold by you of such Closed-End Fund during such week (or lesser period of time)
and a list setting forth by name and location each registered representative
making said sales and indicating the amount of all sales per Closed-End Fund to
date.
34. You expressly acknowledge and understand that there is no Rule 12b-1
Plan for the Closed-End Funds.
35. You expressly acknowledge and understand that shares of the Closed-End
Funds will not be repurchased by either the Closed-End Funds (other than through
tender offers from time to time, if any) or by VK Funds and that no secondary
market for such shares is expected to develop until the shares have begun
trading on a national exchange or national market system. You hereby covenant
that, until notified by VK Funds that the distribution of such shares has been
completed or that the Forfeiture Period has ended, you (a) will not make a
secondary market in any shares of such a Closed-End Fund, (b) will not purchase
or hold shares of such Closed-End Fund in inventory for the purpose of resale in
the open market or to your customers and, (c) without VK Funds' consent, will
not repurchase shares of such Closed-End Fund in the open market or from your
customers for any account in which you have a beneficial interest.
36. Unlike the other Closed-End Funds, the Continuous Offering period with
respect to the Van Kampen Prime Rate Income Trust (the "Prime
Rate Fund") may continue indefinitely. The offer to make available to you
shares of the Prime Rate Fund is subject to further terms and conditions in
addition to those set out above, as follows:
(a) You expressly acknowledge and understand that shares of the
Prime Rate Fund will not be repurchased by either the Prime Rate Fund (other
than through tender offers from time to time, if any) or VK Funds and that no
secondary market for the shares of the Prime Rate Fund exists currently or is
expected to develop. You also expressly acknowledge and agree that, in the
event your
6
<PAGE> 7
customer cancels their order for shares after confirmation, such
shares may not be repurchased, remarketed or otherwise disposed of by or
through VK Funds.
(b) You acknowledge and understand that, while the Board of
Trustees of the Prime Rate Fund intends to consider tendering for all or a
portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VK Funds will be imposed on most shares accepted for tender by the
Prime Rate Fund that have been held for less than five years, as set forth in
the Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY
THE PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE FUND'S
CURRENT PROSPECTUS, IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Bank Fully Disclosed Clearing
Agreement, keeping a copy for your files and returning the original to us.
Accepted and Agreed to: (PRINT OR TYPE)
Dated:_______________________ By:
Its:
_______________________
Bank Name VAN KAMPEN FUNDS INC.
_______________________
Bank Taxpayer ID Number
_______________________
Address
_______________________
City, State, Zip
_______________________
Phone
_______________________
Signature
_______________________
Name
_______________________
Title
7
<PAGE> 1
EXHIBIT (g)(1)
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES LISTED ON APPENDIX A
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment of Custodian and Property to be Held By
It . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States . . . . . . 2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . . . . . . . . 2
2.3 Registration of Securities . . . . . . . . . . . . . . . . 4
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Availability of Federal Funds . . . . . . . . . . . . . . 5
2.6 Collection of Income . . . . . . . . . . . . . . . . . . . 5
2.7 Payment of Fund Moneys . . . . . . . . . . . . . . . . . . 6
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . . . . . 7
2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . 7
2.10 Deposit of Fund Assets in Securities System . . . . . . . 8
2.11 Fund Assets Held in the Custodian's Direct
Paper System . . . . . . . . . . . . . . . . . . . . . . . 9
2.12 Segregated Account . . . . . . . . . . . . . . . . . . . . 10
2.13 Ownership Certificates for Tax Purposes . . . . . . . . . 10
2.14 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.15 Communications Relating to Fund Securities . . . . . . . . 11
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States . . . . . . . . . . . . 11
3.1 Appointment of Foreign Sub-Custodians . . . . . . . . . . 11
3.2 Assets to be Held . . . . . . . . . . . . . . . . . . . . 11
3.3 Foreign Securities Systems . . . . . . . . . . . . . . . . 12
3.4 Agreements with Foreign Banking Institutions . . . . . . . 12
3.5 Access of Independent Accountants of the Fund . . . . . . 12
3.6 Reports by Custodian . . . . . . . . . . . . . . . . . . . 12
3.7 Transactions in Foreign Custody Account . . . . . . . . . 13
3.8 Liability of Foreign Sub-Custodians . . . . . . . . . . . 13
3.9 Liability of Custodian . . . . . . . . . . . . . . . . . . 13
3.10 Reimbursement for Advances . . . . . . . . . . . . . . . . 14
3.11 Monitoring Responsibilities . . . . . . . . . . . . . . . 14
3.12 Branches of U.S. Banks . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.13 Tax Law . . . . . . . . . . . . . . . . . . . . . . . . . 15
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund . . . . . . . . . . . . . . . . . . . . . . 15
5. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . 16
6. Actions Permitted Without Express Authority . . . . . . . . . . . 16
7. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . 17
8. Duties of Custodian With Respect to the Books
of Account and Calculation of Net Asset Value
and Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10. Opinion of Fund's Independent Accountants . . . . . . . . . . . . 18
11. Reports to Fund by Independent Public Accountants . . . . . . . . 18
12. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . 18
13. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . 18
14. Effective Period, Termination and Amendment . . . . . . . . . . . 19
15. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . 20
16. Interpretive and Additional Provisions . . . . . . . . . . . . . . 21
17. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . . . 21
18. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . . 22
19. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 22
20. Shareholder Communications . . . . . . . . . . . . . . . . . . . . 22
21. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 4
CUSTODIAN CONTRACT
This Contract between each fund or series of a fund listed on
Appendix A which evidences its agreement to be bound hereby by executing a copy
of this Contract (each such fund is individually hereafter referred to as
the "Fund"), and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WITNESSETH THAT, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets
of the Fund, including securities which the Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to
be held outside the United States ("foreign securities") pursuant to the
provisions of the Fund's governing documents. The Fund agrees to deliver to
the Custodian all securities and cash of the Fund, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Fund from time to time, and the cash consideration
received by it for such new or treasury shares of capital stock, beneficial
interest or partnership interest, as applicable, of the Fund, ("Shares") as
may be issued or sold from time to time. The Custodian shall not be
responsible for any property of a Fund held or received by the Fund and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Fund from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of the Fund, and provided
that the Custodian shall have no more or less responsibility or liability to
the Fund on account of any actions or omissions of any sub-custodian so
employed than any such sub-custodian has to the Custodian. The Custodian may
employ as sub-custodian for the Fund's foreign securities the foreign banking
institutions and foreign securities depositories designated in Schedule A
hereto but only in accordance with the provisions of Article 3.
1
<PAGE> 5
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property, to be held by it
in the United States including all domestic securities owned by such
Fund, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S. Department
of the Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian (the "Direct Paper System") pursuant to
Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions from the Fund, which may be
continuing instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee
2
<PAGE> 6
name of any agent appointed pursuant to Section 2.9 or into
the name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of the Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, but only
against receipt of amounts borrowed;
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<PAGE> 7
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account
deposits in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund ("Prospectus"), in
satisfaction of requests by holders of Shares for repurchase
or redemption; and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund, a
certified copy of a resolution of the Board or of the
Executive Committee of the Fund signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Fund to be delivered, setting
forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of
the Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee
name of any agent appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to
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<PAGE> 8
Article 1. All securities accepted by the Custodian under the terms
of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Fund ,
subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940. Funds held by the Custodian for a
Fund may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies
as it may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of 1940 and that
each such bank or trust company and the funds to be deposited with
each such bank or trust company shall on behalf of each applicable
Fund be approved by vote of a majority of the Board of the Fund.
Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions from the Fund, make federal funds available to such Fund
as of specified times agreed upon from time to time by the Fund and
the Custodian in the amount of checks received in payment for Shares
of such Fund which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder
to which each Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when
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<PAGE> 9
due on securities held hereunder. Income due each Fund on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund
in arranging for the timely delivery to the Custodian of the income to
which the Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper Instructions from the
Fund, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out moneys of a Fund in the
following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Fund but only (a) against the delivery of such securities
or evidence of title to such options, futures contracts or
options on futures contracts to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in the name of
a nominee of the Custodian referred to in Section 2.3 hereof
or in proper form for transfer; (b) in the case of a purchase
effected through a Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the case
of a purchase involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.11; (d) in the case
of repurchase agreements entered into between the Fund and
the Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Fund or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund
as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
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<PAGE> 10
3) For the redemption or repurchase of Shares issued by the Fund
as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Fund
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund, a certified
copy of a resolution of the Board or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
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<PAGE> 11
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon (i) receipt of advice
from the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of all
advices from the Securities System of transfers of securities
for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be provided to
the Fund at its request. Upon request, the Custodian shall
furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice
and shall furnish to the Fund copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of the Fund.
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
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<PAGE> 12
5) The Custodian shall have received from the Fund the initial or
annual certificate, as the case may be, required by Article 14
hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Fund for any loss or damage to the Fund resulting from use of
the Securities System by reason of any negligence, misfeasance
or misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian or
any such agent to enforce effectively such rights as it may
have against the Securities System; at the election of the
Fund, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the Securities
System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss or
damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by a Fund in
the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund ;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the records
of the Custodian to reflect such payment and transfer of
securities to the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of the
Fund;
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<PAGE> 13
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund establish and maintain a segregated account
or accounts for and on behalf of each such Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund , the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by
the Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or
any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund , a certified copy of a
resolution of the Board or of the Executive Committee of the Fund
signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Fund held by it
and in connection with transfers of securities.
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<PAGE> 14
2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Fund Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls
and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased
or sold by the Fund) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Fund desires
to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Fund shall notify the Custodian at
least three business days prior to the date on which the Custodian is
to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 5 of this
Contract, together with a certified resolution of the Fund's Board,
the Custodian and the Fund may agree to amend Schedule A hereto from
time to time to designate additional foreign banking institutions and
foreign securities depositories to act as sub-custodian. Upon receipt
of Proper Instructions, the Fund may instruct the Custodian to cease
the employment of any one or more such sub-custodians for maintaining
custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to:
(a) "foreign securities", as defined in
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<PAGE> 15
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
1940, and (b) cash and cash equivalents in such amounts as the
Custodian or the Fund may determine to be reasonably necessary to
effect the Fund's foreign securities transactions. The Custodian
shall identify on its books as belonging to the Fund, the foreign
securities of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Funds shall be
maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and shall provide that: (a) the assets of
the Fund will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership for the assets of
the Fund will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the Fund;
(d) officers of or auditors employed by, or other representatives of
the Custodian, including to the extent permitted under applicable law
the independent public accountants for the Fund, will be given access
to the books and records of the foreign banking institution relating
to its actions under its agreement with the Custodian; and (e) assets
of the Fund held by the foreign sub-custodian will be subject only to
the instructions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Fund securities and other assets and
advices or notifications of any transfers of securities to or from
each custodial account maintained by a foreign banking
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<PAGE> 16
institution for the Custodian on behalf of the Fund indicating, as to
securities acquired for a Fund, the identity of the entity having
physical possession of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.7, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to
the foreign securities of the Fund held outside the United States by
foreign sub-custodians. (b) Notwithstanding any provision of this
Contract to the contrary, settlement and payment for securities
received for the account of the Fund and delivery of securities
maintained for the account of the Fund may be effected in accordance
with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a
foreign sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such nominee harmless from
any liability as a holder of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable
care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and each Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or
claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where
the sub-custodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this
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<PAGE> 17
paragraph 3.9, in delegating custody duties to State Street London
Ltd., the Custodian shall not be relieved of any responsibility to the
Fund for any loss due to such delegation, except such loss as may
result from (a) political risk (including, but not limited to,
exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a Fund
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the applicable Fund shall
be security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash
and to dispose of such Fund's assets to the extent necessary to obtain
reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the
Custodian will promptly inform the Fund in the event that the
Custodian learns of a material adverse change in the financial
condition of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-custodian not the
subject of an exemptive order from the Securities and Exchange
Commission is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the equivalent
thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Fund's assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of
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<PAGE> 18
said Act. The appointment of any such branch as a sub-custodian shall
be governed by paragraph 1 of this Contract. (b) Cash held for each
Fund in the United Kingdom shall be maintained in an interest bearing
account established for the Fund with the Custodian's London branch,
which account shall be subject to the direction of the Custodian,
State Street London Ltd. or both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of
America or any state or political subdivision thereof. It shall be
the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist
the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such
information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
The Custodian shall receive from the distributor for the Shares or
from the Transfer Agent of the Fund and deposit into the account of the
appropriate Fund such payments as are received for Shares of that Fund issued
or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund and the Transfer Agent of any receipt by it of
payments for Shares of such Fund.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board
of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of Shares
who have delivered to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or repurchase of Shares of
a Fund, the Custodian is authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by
a holder of Shares, which checks have been furnished by the Fund to the holder
of Shares, when presented to the Custodian in accordance with such procedures
and controls as are mutually agreed upon from time to time between the Fund and
the Custodian.
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<PAGE> 19
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of the Fund
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by the Board of the
Fund accompanied by a detailed description of procedures approved by the Board,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board and the
Custodian are satisfied that such procedures afford adequate safeguards for the
Funds' assets. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from
the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund ;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Board of the
Fund.
16
<PAGE> 20
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of the
Board of the Fund as conclusive evidence (a) of the authority of any person to
act in accordance with such vote or (b) of any determination or of any action
by the Board pursuant to the governing documents of the Fund as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Fund to keep the books of
account of each Fund and/or compute the net asset value per share of the
outstanding shares of each Fund or, if the Custodian and the Fund execute the
applicable Price Source Authorization (the "Authorization"), the Custodian
shall keep such books of account and/or compute such net asset value per share
pursuant to the terms of the Authorization and the attachments thereto. If so
directed, the Custodian shall also calculate daily the net income of the Fund
as described in the Fund's currently effective Prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such net income and,
if instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Fund shall be made at the time or times described from
time to time in the Fund's currently effective Prospectus.
9. Records
The Custodian shall with respect to each Fund create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder. All such records shall be the property of the Fund and
shall at all times during the regular business hours of the Custodian be open
for inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Fund and held by the Custodian and shall, when requested to
17
<PAGE> 21
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or
other annual reports to the Securities and Exchange Commission and with respect
to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in
18
<PAGE> 22
good faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United states (except as specifically provided in Article 3.9)
and regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S.
bank, as contemplated by paragraph 3.12 hereof, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim resulting from
or caused by, the direction or authorization by the Fund to maintain custody of
any securities or cash of the Fund in a foreign country including, but not
limited to, losses resulting from nationalization, expropriation, currency
restrictions or acts of war or terrorism.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned
to the Fund being liable for the payment of money or incurring liability of
some other form, the Fund, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of the
Fund assets to the extent necessary to obtain reimbursement.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30)
19
<PAGE> 23
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to a Fund act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of the Fund has approved the initial use of a
particular Securities System by such Fund and the receipt of a certificate of
the Secretary or an Assistant Secretary that the Board has reviewed any
subsequent change regarding the use by such Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of 1940,
as amended and that the Custodian shall not with respect to a Fund act under
Section 2.11 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board has approved the initial use
of the Direct Paper System by such Fund and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of the
Fund has reviewed the use by such Fund of the Direct Paper System; provided
further, however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Declaration of Trust, and further provided, that the Fund may at any
time by action of its Board (i) substitute another bank or trust company for
the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund shall be appointed by the Board
of the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities of the Fund then held by it hereunder and shall
transfer to an account of the successor custodian all of the securities of the
Fund held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered to the
Custodian on or before the date when such
20
<PAGE> 24
termination shall become effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, doing business in Boston, Massachusetts, of its
own selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of the
Fund and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of the Fund and to transfer
to an account of such successor custodian all of the securities of the Fund
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund, may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the governing documents of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
17. Additional Funds
In the event that Van Kampen American Capital Distributors , Inc.
establishes any funds in addition to the Funds listed on Appendix A with
respect to which it desires to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such fund shall become a
Fund hereunder, subject to the delivery by the new Fund of resolutions
authorizing the appointment of the Custodian and such other supporting or
related documentation as the Custodian may request. All references herein to
the "Fund" are to each of the Funds listed on Appendix A individually, as if
21
<PAGE> 25
this Contract were between each such individual Fund and the Custodian. With
respect to any Fund which issues shares in separate classes or series, each
class or series of such Fund shall be treated as a separate Fund hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Funds and the Custodian relating to the custody of
the Fund's assets.
20. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires banks which
hold securities for the account of customers to respond to requests by issuers
of securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether the Fund authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose stock the Fund owns. If the Fund tells the
Custodian "no", the Custodian will not provide this information to requesting
companies. If the Fund tells the Custodian "yes" or does not check either
"yes" or "no" below, the Custodian is required by the rule to treat the Fund as
consenting to disclosure of this information for all securities owned by the
Fund. For the Fund's protection, the Rule prohibits the requesting company
from using the Fund's name and address for any purpose other than corporate
communications. Please indicate below whether the Fund consent or object by
checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the name,
address, and share positions of each Fund listed on
Exhibit A.
NO [X] The Custodian is not authorized to release the name,
address, and share positions of each Fund listed on
Exhibit A.
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<PAGE> 26
21. Limitation of Liability.
The execution of this Contract has been authorized by each Fund's
Board. This Contract is executed on behalf of each Fund or the trustees of
such Fund as trustees and not individually and the obligations of the Fund
under this Contract are not binding upon any of the Fund's trustees, officers
or shareholders individually but are binding only upon the assets and property
of the Fund. A Certificate of Trust in respect of each Fund is on file with
the Secretary of State of Delaware.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the 21st day of June, 1995.
ATTEST EACH OF THE FUNDS LISTED ON APPENDIX A
/s/ HUEY P. FALGOUT, JR. By: /s/ NORI L. GABERT
- ------------------------ -----------------------------------
Nori L. Gabert, Vice President
ATTEST STATE STREET BANK AND TRUST COMPANY
[ILLEGIBLE] By: [ILLEGIBLE]
- ------------------------ -----------------------------------
Executive Vice President
23
<PAGE> 27
[Van Kampen Investments Inc. Letterhead]
February 4, 1999
VIA AIRBORNE
Mr. Stephen Brown
State Street Bank and Trust Company
1776 Heritage Drive, A4N
North Quincy, Massachusetts 02171-2197
Dear Mr. Brown,
This letter serves as written notification that Van Kampen Trust (the "Trust")
has established a new series to be known as the Van Kampen Managed Short Term
Income Fund. Pursuant to Section 17 of the Custodian Contract between the Trust
and State Street Bank and Trust Company ("State Street"), the Trust hereby
requests that you act as Custodian for the new series under the terms of the
respective contract.
Please indicate your acceptance of providing custodial services to the above
referenced fund by having two copies of this Letter Agreement executed by the
appropriate person at State Street. Please return one copy to the Fund and
retain one copy for your records.
Very truly yours,
VAN KAMPEN TRUST
on behalf of its series, VAN KAMPEN MANAGED SHORT TERM INCOME FUND
By: /s/ Nicholas Dalmaso
------------------------
Name: Nicholas Dalmaso
----------------------
Its: Assistant Secretary
-------------------
ACKNOWLEDGED:
STATE STREET BANK AND TRUST COMPANY
By: /s/ Stephen F. Brown
--------------------------
Name: Stephen F. Brown
-----------------------
Its: Vice President
------------------------
<PAGE> 1
EXHIBIT (h) (1)
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, dated May 31, 1997, by and between the parties set
forth in Schedule A hereto (designated collectively hereafter as the "Funds")
and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware
corporation ("Advisory Corp.").
W I T N E S S E T H:
-------------------
WHEREAS, each of the Funds is registered as a management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, Advisory Corp. has the capability of providing certain
accounting services to the Funds; and
WHEREAS, each desires to utilized Advisory Corp. in the provision of
such accounting services; and
WHEREAS, Advisory Corp. intends to maintain its staff in order to
accommodate the provision of all such services.
NOW THEREFORE, in consideration of the premises and the mutual
covenants spelled out herein, it is agreed between the parties hereto as
follows:
1. Appointment of Advisory Corp.. As agent, Advisory Corp. shall provide each of
the Funds the accounting services ("Accounting Services") as set forth in
Paragraph 2 of this Agreement. Advisory Corp. accepts such appointment and
agrees to furnish the Accounting Services in return for the compensation
provided in Paragraph 3 of this Agreement.
2. Accounting Services to be Provided. Advisory Corp. will provide to each
respective Fund accounting related services in connection with the maintenance
of the financial records of such Fund, including without limitation: (i)
maintenance of the general ledger and other financial books and records; (ii)
processing of portfolio transactions; (iii) coordination of the valuation of
portfolio securities; (iv) calculation of the Fund's net asset value; (v)
coordination of financial and regulatory reporting; (vi) preparation of
financial reports for each Fund's Board of Trustees; (vii) coordination of tax
and financial compliance issues; (viii) the establishment and maintenance of
accounting policies; (ix) recommendations with respect to dividend policies; (x)
preparation of each Fund's financial reports and other accounting and tax
related notice information to shareholders; and (xi) the assimilation and
interpretation of accounting data for meaningful management review. Advisory
Corp. shall provide accurate maintenance of each Fund's financial books and
records as required by the applicable securities statutes and regulations, and
shall hire persons (collectively the "Accounting Service Group") as needed to
provide such Accounting Services.
1
<PAGE> 2
3. Expenses and Reimbursements. Advisory Corp. shall be reimbursed by the Funds
for all costs and services incurred in connection with the provision of the
aforementioned Accounting Services ("Accounting Service Expenses"), including
but not limited to all salary and related benefits paid to the personnel of the
Accounting Service Group, overhead and expenses related to office space and
related equipment and out-of-pocket expenses.
The Accounting Services Expenses will be paid by Advisory Corp. and
reimbursed by the Funds. Advisory Corp. will tender to each Fund a monthly
invoice as of the last business day of each month which shall certify the total
support service expenses expended. Except as provided herein, Advisory Corp.
will receive no other compensation in connection with Accounting Services
rendered in accordance with this Agreement.
4. Payment for Accounting Service Expenses Among the Funds. As to one quarter
(25%) of the Accounting Service Expenses incurred under the Agreement, the
expense shall be allocated between all Funds based on the number of classes of
shares of beneficial interest that each respective Fund has issued. As to the
remaining three quarters (75%) of the Accounting Service Expenses incurred under
the Agreement, the expense shall be allocated between all Funds based on their
relative net assets. For purposes of determining the percentage of expenses to
be allocated to any Fund, the liquidation preference of any preferred shares
issued by any such Fund shall not be considered a liability of such Fund for the
purposes of calculating relative net assets of such Fund.
5. Maintenance of Records. All records maintained by Advisory Corp. in
connection with the performance of its duties under this Agreement will remain
the property of each respective Fund and will be preserved by Advisory Corp. for
the periods prescribed in Section 31 of the 1940 Act and the rules thereunder or
such other applicable rules that may be adopted from time to time under the act.
In the event of termination of the Agreement, such records will be promptly
delivered to the respective Funds. Such records may be inspected by the
respective Funds at reasonable times.
6. Liability of Advisory Corp. Advisory Corp. shall not be liable to any Fund
for any action taken or thing done by it or its agents or contractors on behalf
of the fund in carrying out the terms and provisions of the Agreement if done in
good faith and without gross negligence or misconduct on the part of Advisory
Corp., its agents or contractors.
7. Indemnification By Funds. Each Fund will indemnify and hold Advisory Corp.
harmless from all lost, cost, damage and expense, including reasonable expenses
for legal counsel, incurred by Advisory Corp. resulting from: (a) any claim,
demand, action or suit in connection with Advisory Corp.'s acceptance of this
Agreement; (b) any action or omission by Advisory Corp. in the performance of
its duties hereunder; (c) Advisory Corp.'s acting upon instructions believed by
it to have been executed by a duly authorized officer of the Fund; or (d)
Advisory Corp.'s acting upon information provided by the Fund in form and under
policies agreed to by Advisory Corp. and the Fund. Advisory Corp. shall not be
entitled to such indemnification in respect of actions or omissions constituting
gross negligence or willful misconduct of Advisory Corp. or its agents or
contractors. Prior to confessing any claim against it which may be subject to
this indemnification, Advisory Corp. shall give the Fund reasonable opportunity
to defend against said claim in its own name or in the name of Advisory Corp.
8. Indemnification By Advisory Corp. Advisory Corp. will indemnify and hold
harmless each Fund from all loss, cost, damage and expense, including reasonable
expenses for legal counsel, incurred by the Fund resulting from any claim,
demand, action or suit arising out of Advisory Corp.'s failure to comply with
the terms of this Agreement or which arises out of the gross negligence or
willful misconduct of Advisory Corp. or its agents or contractors; provided that
such negligence or misconduct is not attributable to the Funds, their agents or
contractors. Prior to confessing any claim against it which may be subject to
this indemnification, the Fund shall give Advisory Corp. reasonable opportunity
to defend against said claim in its own name or in the name of such Fund.
2
<PAGE> 3
9. Further Assurances. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
10. Dual Interests. It is understood that some person or persons may be
directors, trustees, officers or shareholders of both the Funds and Advisory
Corp. (including Advisory Corp.'s affiliates), and that the existence of any
such dual interest shall not affect the validity hereof or of any transactions
hereunder except as otherwise provided by a specific provision of applicable
law.
11. Execution, Amendment and Termination. The term of this Agreement shall begin
as of the date first above written, and unless sooner terminated as herein
provided, this Agreement shall remain in effect through May, 1998, and
thereafter from year to year, if such continuation is specifically approved at
least annually by the Board of Trustees of each Fund, including a majority of
the independent Trustees of each Fund. This Agreement may be modified or amended
from time to time by mutual agreement between the parties hereto and may be
terminated after May, 1998, by at least sixty (60) days' written notice given by
one party to the others. Upon termination hereof, each Fund shall pay to
Advisory Corp. such compensation as may be due as of the date of such
termination and shall likewise reimburse Advisory Corp. for its costs, expenses
and disbursements payable under this Agreement to such date. This Agreement may
be amended in the future to include as additional parties to the Agreement other
investment companies for with Advisory Corp., any subsidiary or affiliate serves
as investment advisor or distributor if such amendment is approved by the
President of each Fund.
12. Assignment. Any interest of Advisory Corp. under this Agreement shall not be
assigned or transferred, either voluntarily or involuntarily, by operation of
law or otherwise, without the prior written consent of the Funds. This Agreement
shall automatically and immediately terminate in the event of its assignment
without the prior written consent of the Funds.
13. Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or sent by registered or certified mail, postage prepaid, to the other
party at such address as such other party may designate for the receipt of such
notices. Until further notice to the other parties, it is agreed that for this
purpose the address of each Fund is One Parkview Plaza, Oakbrook Terrace,
Illinois 60181, Attention: President and that of Advisory Corp. for this purpose
is One Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attention:
President.
14. Personal Liability. As provided for in the Agreement and Declaration of
Trust of the various Funds, under which the Funds are organized as
unincorporated trusts, the shareholders, trustees, officers, employees and other
agents of the Fund shall not personally be found by or liable for the matters
set forth hereto, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder.
15. Interpretative Provisions. In connection with the operation of this
Agreement, Advisory Corp. and the Funds may agree from time to time on such
provisions interpretative of or in addition to the provisions of this Agreement
as may in their joint opinion be consistent with the general tenor of this
Agreement.
16. State Law. This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Illinois.
17. Captions. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this amended and restated
Agreement to be executed as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE A
By: /s/ Ronald A. Nyberg
------------------------------------------------
Ronald A. Nyberg, Vice President
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
By: /s/ Dennis J. McDonnell
------------------------------------------------
Dennis J. McDonnell, President
4
<PAGE> 5
SCHEDULE A
I. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
CLOSED END FUNDS
Van Kampen American Capital Municipal Income Trust
Van Kampen American Capital California Municipal Trust
Van Kampen American Capital High Income Trust
Van Kampen American Capital High Income Trust II
Van Kampen American Capital Investment Grade Municipal Trust
Van Kampen American Capital Municipal Trust
Van Kampen American Capital California Quality Municipal Trust
Van Kampen American Capital Florida Quality Municipal Trust
Van Kampen American Capital New York Quality Municipal Trust
Van Kampen American Capital Ohio Quality Municipal Trust
Van Kampen American Capital Pennsylvania Quality Municipal Trust
Van Kampen American Capital Trust For Insured Municipals
Van Kampen American Capital Trust For Investment Grade Municipals
Van Kampen American Capital Trust For Investment Grade California Municipals
Van Kampen American Capital Trust For Investment Grade Florida Municipals
Van Kampen American Capital Trust For Investment Grade New Jersey Municipals
Van Kampen American Capital Trust For Investment Grade New York Municipals
Van Kampen American Capital Trust For Investment Grade Pennsylvania Municipals
Van Kampen American Capital Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust
Van Kampen American Capital Advantage Pennsylvania Municipal Income Trust
Van Kampen American Capital Strategic Sector Municipal Trust
Van Kampen American Capital Value Municipal Income Trust
Van Kampen American Capital California Value Municipal Income Trust
Van Kampen American Capital Massachusetts Value Municipal Income Trust
Van Kampen American Capital New Jersey Value Municipal Income Trust
Van Kampen American Capital New York Value Municipal Income Trust
Van Kampen American Capital Ohio Value Municipal Income Trust
Van Kampen American Capital Pennsylvania Value Municipal Income Trust
Van Kampen American Capital Municipal Opportunity Trust II
Van Kampen American Capital Florida Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust II
Van Kampen American Capital Select Sector Municipal Trust
INSTITUTIONAL FUNDS
II. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC. ("MANAGEMENT,
INC.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
The Explorer Institutional Trust
on behalf of its Series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 6
OPEN END FUNDS
--------------
III. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT,
INC. ("ASSET MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN
CAPITAL FUNDS"):
Van Kampen American Capital Comstock Fund ("Comstock Fund")
Van Kampen American Capital Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen American Capital Emerging Growth Fund ("Emerging Growth
Fund")
Van Kampen American Capital Enterprise Fund ("Enterprise Fund")
Van Kampen American Capital Equity Income Fund ("Equity Income Fund")
Van Kampen American Capital Global Managed Assets Fund ("Global Managed
Assets Funds")
Van Kampen American Capital Government Securities Fund ("Government
Securities Fund")
Van Kampen American Capital Government Target Fund ("Government Target
Fund")
Van Kampen American Capital Growth and Income Fund ("Growth and Income
Fund")
Van Kampen American Capital Harbor Fund ("Harbor Fund") Van Kampen
American Capital High Income Corporate Bond Fund ("High Income
Corporate Bond Fund")
Van Kampen American Capital Life Investment Trust ("Life Investment
Trust" or "LIT") on behalf of its Series
Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Global Equity Portfolio ("LIT Global Equity Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation
Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Real Estate Securities Portfolio ("LIT Real Estate Securities
Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")
Van Kampen American Capital Limited Maturity Government Fund ("Limited
Maturity Government Fund")
Van Kampen American Capital Pace Fund ("Pace Fund")
Van Kampen American Capital Real Estate Securities Fund ("Real Estate
Securities Fund")
Van Kampen American Capital Reserve Fund ("Reserve Fund")
Van Kampen American Capital Small Capitalization Fund ("Small
Capitalization Fund")
Van Kampen American Capital Tax-Exempt Trust ("Tax-Exempt Trust") on
behalf of its Series
Van Kampen American Capital High Yield Municipal Fund ("High Yield
Municipal Fund")
Van Kampen American Capital U.S. Government Trust for Income ("U.S.
Government Trust for Income")
Van Kampen American Capital World Portfolio Series Trust ("World
Portfolio Series Trust") on behalf of its Series
Van Kampen American Capital Global Government Securities Fund
("Global Government Securities Fund")
Van Kampen American Capital Global Equity Fund ("Global Equity
Fund")
<PAGE> 7
IV. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
Van Kampen American Capital U.S. Government Trust ("U.S. Government Trust")
on behalf of its Series
Van Kampen American Capital U.S. Government Fund ("U.S. Government Fund")
Van Kampen American Capital Tax Free Trust ("Tax Free Trust")
on behalf of its series
Van Kampen American Capital Insured Tax Free Income Fund ("Insured Tax Free
Income Fund")
Van Kampen American Capital Tax Free High Income Fund ("Tax Free High
Income Fund")
Van Kampen American Capital California Insured Tax Free Fund ("California
Insured Tax Free Fund")
Van Kampen American Capital Municipal Income Fund ("Municipal Income Fund")
Van Kampen American Capital Intermediate Term Municipal Income Fund
(Intermediate TermMunicipal Income Fund")
Van Kampen American Capital Florida Insured Tax Free Income Fund ("Florida
Insured Tax Free Income Fund")
Van Kampen American Capital New Jersey Tax Free Income Fund ("New Jersey
Tax Free Income Fund")
Van Kampen American Capital New York Tax Free Income Fund ("New York Tax
Free Income Fund")
Van Kampen American Capital California Tax Free Income Fund ("California
Tax Free Income Fund")
Van Kampen American Capital Michigan Tax Free Income Fund ("Michigan Tax
Free Income Fund")
Van Kampen American Capital Missouri Tax Free Income Fund ("Missouri Tax
Free Income Fund")
Van Kampen American Capital Ohio Tax Free Income Fund ("Ohio Tax Free
Income Fund")
Van Kampen American Capital Trust ("VKAC Trust") on behalf of its Series
Van Kampen American Capital High Yield Fund ("High Yield Fund")
Van Kampen American Capital Short-Term Global Income Fund ("Short-Term
Global Income Fund")
Van Kampen American Capital Strategic Income Fund ("Strategic Income Fund")
Van Kampen American Capital Equity Trust ("Equity Trust") on behalf of its
Series
Van Kampen American Capital Utility Fund ("Utility Fund")
Van Kampen American Capital Growth Fund ("Growth Fund")
Van Kampen American Capital Value Fund ("Value Fund")
Van Kampen American Capital Great American Companies Fund ("Great American
Companies Fund")
Van Kampen American Capital Prospector Fund ("Prospector Fund")
Van Kampen American Capital Aggressive Growth Fund ("Aggressive Growth
Fund")
Van Kampen American Capital Foreign Securities Fund ("Foreign Securities Fund")
Van Kampen American Capital Pennsylvania Tax Free Income Fund ("Pennsylvania Tax
Free Income Fund")
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund")
<PAGE> 8
AMENDMENT NUMBER ONE
--------------------
TO THE
FUND ACCOUNTING AGREEMENT
THIS AMENDMENT NUMBER ONE, dated July 24, 1997, to the Fund Accounting
Agreement dated May 31, 1997 (the "Agreement") by and between the parties set
forth in Schedule A, attached hereto and incorporated herein by reference and
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware corporation
("Advisory Corp.").
W I T N E S S E T H
-------------------
WHEREAS, the following party, being an open-end management investment
company as that term is defined in the Investment Company Act of 1940, as
amended, wishes to become party to the Agreement:
ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC. ("ASSET
MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN CAPITAL FUNDS"):
Van Kampen American Capital Life Investment Trust ("Life Investment
Trust" or "LIT") on behalf of its Series
Strategic Stock Portfolio ("LIT Strategic Stock Portfolio")
WHEREAS, the original parties desire to add the aforementioned
additional entity as party to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule A of
the Agreement be amended to add the party mentioned above as party to the
Agreement.
1
<PAGE> 9
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE A
By: /s/ Ronald A. Nyberg
----------------------------------------------
Ronald A. Nyberg, Vice President
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
By: /s/ Dennis J. McDonnell
----------------------------------------------
Dennis J. McDonnell, President
2
<PAGE> 10
SCHEDULE A
I. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
CLOSED END FUNDS
Van Kampen American Capital Municipal Income Trust
Van Kampen American Capital California Municipal Trust
Van Kampen American Capital High Income Trust
Van Kampen American Capital High Income Trust II
Van Kampen American Capital Investment Grade Municipal Trust
Van Kampen American Capital Municipal Trust
Van Kampen American Capital California Quality Municipal Trust
Van Kampen American Capital Florida Quality Municipal Trust
Van Kampen American Capital New York Quality Municipal Trust
Van Kampen American Capital Ohio Quality Municipal Trust
Van Kampen American Capital Pennsylvania Quality Municipal Trust
Van Kampen American Capital Trust For Insured Municipals
Van Kampen American Capital Trust For Investment Grade Municipals
Van Kampen American Capital Trust For Investment Grade California Municipals
Van Kampen American Capital Trust For Investment Grade Florida Municipals
Van Kampen American Capital Trust For Investment Grade New Jersey Municipals
Van Kampen American Capital Trust For Investment Grade New York Municipals
Van Kampen American Capital Trust For Investment Grade Pennsylvania Municipals
Van Kampen American Capital Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust
Van Kampen American Capital Advantage Pennsylvania Municipal Income Trust
Van Kampen American Capital Strategic Sector Municipal Trust
Van Kampen American Capital Value Municipal Income Trust
Van Kampen American Capital California Value Municipal Income Trust
Van Kampen American Capital Massachusetts Value Municipal Income Trust
Van Kampen American Capital New Jersey Value Municipal Income Trust
Van Kampen American Capital New York Value Municipal Income Trust
Van Kampen American Capital Ohio Value Municipal Income Trust
Van Kampen American Capital Pennsylvania Value Municipal Income Trust
Van Kampen American Capital Municipal Opportunity Trust II
Van Kampen American Capital Florida Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust II
Van Kampen American Capital Select Sector Municipal Trust
INSTITUTIONAL FUNDS
II. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC. ("MANAGEMENT,
INC.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
The Explorer Institutional Trust
on behalf of its Series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 11
OPEN END FUNDS
--------------
III. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT,
INC. ("ASSET MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN
CAPITAL FUNDS"):
Van Kampen American Capital Comstock Fund ("Comstock Fund")
Van Kampen American Capital Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen American Capital Emerging Growth Fund ("Emerging Growth
Fund")
Van Kampen American Capital Enterprise Fund ("Enterprise Fund")
Van Kampen American Capital Equity Income Fund ("Equity Income Fund")
Van Kampen American Capital Global Managed Assets Fund ("Global Managed
Assets Funds")
Van Kampen American Capital Government Securities Fund ("Government
Securities Fund")
Van Kampen American Capital Government Target Fund ("Government Target
Fund")
Van Kampen American Capital Growth and Income Fund ("Growth and Income
Fund")
Van Kampen American Capital Harbor Fund ("Harbor Fund") Van Kampen
American Capital High Income Corporate Bond Fund ("High Income
Corporate Bond Fund")
Van Kampen American Capital Life Investment Trust ("Life Investment
Trust" or "LIT") on behalf of its Series
Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Global Equity Portfolio ("LIT Global Equity Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation
Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Real Estate Securities Portfolio ("LIT Real Estate Securities
Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")
Strategic Stock Portfolio ("LIT Strategic Stock Portfolio")
Van Kampen American Capital Limited Maturity Government Fund ("Limited
Maturity Government Fund")
Van Kampen American Capital Pace Fund ("Pace Fund")
Van Kampen American Capital Real Estate Securities Fund ("Real Estate
Securities Fund")
Van Kampen American Capital Reserve Fund ("Reserve Fund")
Van Kampen American Capital Small Capitalization Fund ("Small
Capitalization Fund")
Van Kampen American Capital Tax-Exempt Trust ("Tax-Exempt Trust") on
behalf of its Series
Van Kampen American Capital High Yield Municipal Fund ("High Yield
Municipal Fund")
Van Kampen American Capital U.S. Government Trust for Income ("U.S.
Government Trust for Income")
Van Kampen American Capital World Portfolio Series Trust ("World
Portfolio Series Trust") on behalf of its Series
Van Kampen American Capital Global Government Securities Fund
("Global Government Securities Fund")
Van Kampen American Capital Global Equity Fund ("Global Equity
Fund")
<PAGE> 12
IV. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
Van Kampen American Capital U.S. Government Trust ("U.S. Government Trust")
on behalf of its Series
Van Kampen American Capital U.S. Government Fund ("U.S. Government Fund")
Van Kampen American Capital Tax Free Trust ("Tax Free Trust")
on behalf of its series
Van Kampen American Capital Insured Tax Free Income Fund ("Insured Tax Free
Income Fund")
Van Kampen American Capital Tax Free High Income Fund ("Tax Free High
Income Fund")
Van Kampen American Capital California Insured Tax Free Fund ("California
Insured Tax Free Fund")
Van Kampen American Capital Municipal Income Fund ("Municipal Income Fund")
Van Kampen American Capital Intermediate Term Municipal Income Fund
(Intermediate TermMunicipal Income Fund")
Van Kampen American Capital Florida Insured Tax Free Income Fund ("Florida
Insured Tax Free Income Fund")
Van Kampen American Capital New Jersey Tax Free Income Fund ("New Jersey
Tax Free Income Fund")
Van Kampen American Capital New York Tax Free Income Fund ("New York Tax
Free Income Fund")
Van Kampen American Capital California Tax Free Income Fund ("California
Tax Free Income Fund")
Van Kampen American Capital Michigan Tax Free Income Fund ("Michigan Tax
Free Income Fund")
Van Kampen American Capital Missouri Tax Free Income Fund ("Missouri Tax
Free Income Fund")
Van Kampen American Capital Ohio Tax Free Income Fund ("Ohio Tax Free
Income Fund")
Van Kampen American Capital Trust ("VKAC Trust") on behalf of its Series
Van Kampen American Capital High Yield Fund ("High Yield Fund")
Van Kampen American Capital Short-Term Global Income Fund ("Short-Term
Global Income Fund")
Van Kampen American Capital Strategic Income Fund ("Strategic Income Fund")
Van Kampen American Capital Equity Trust ("Equity Trust") on behalf of its
Series
Van Kampen American Capital Utility Fund ("Utility Fund")
Van Kampen American Capital Growth Fund ("Growth Fund")
Van Kampen American Capital Value Fund ("Value Fund")
Van Kampen American Capital Great American Companies Fund ("Great American
Companies Fund")
Van Kampen American Capital Prospector Fund ("Prospector Fund")
Van Kampen American Capital Aggressive Growth Fund ("Aggressive Growth
Fund")
Van Kampen American Capital Foreign Securities Fund ("Foreign Securities Fund")
Van Kampen American Capital Pennsylvania Tax Free Income Fund ("Pennsylvania Tax
Free Income Fund")
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund")
<PAGE> 13
AMENDMENT NUMBER TWO
--------------------
TO THE
FUND ACCOUNTING AGREEMENT
THIS AMENDMENT NUMBER TWO, dated April 23, 1998, to the Fund Accounting
Agreement dated May 31, 1997 (the "Agreement") by and between the parties set
forth in Schedule A, attached hereto and incorporated herein by reference and
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware corporation
("Advisory Corp.").
W I T N E S S E T H
-------------------
WHEREAS, the following party, being an open-end management investment
company as that term is defined in the Investment Company Act of 1940, as
amended, wishes to become party to the Agreement:
ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
("ASSET MANAGEMENT, INC."):
Van Kampen American Capital Life Investment Trust ("Life Investment
Trust" or "LIT") on behalf of its Series
Comstock Portfolio ("LIT Comstock Portfolio")
WHEREAS, the original parties desire to add the aforementioned
additional entity as party to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule A of
the Agreement be amended to add the party mentioned above as party to the
Agreement.
1
<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE A
By: /s/ Ronald A. Nyberg
----------------------------------------
Ronald A. Nyberg, Vice President
VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
By: /s/ Dennis J. McDonnell
----------------------------------------
Dennis J. McDonnell, President
2
<PAGE> 15
SCHEDULE A
I. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
CLOSED END FUNDS
Van Kampen American Capital Municipal Income Trust
Van Kampen American Capital California Municipal Trust
Van Kampen American Capital High Income Trust
Van Kampen American Capital High Income Trust II
Van Kampen American Capital Investment Grade Municipal Trust
Van Kampen American Capital Municipal Trust
Van Kampen American Capital California Quality Municipal Trust
Van Kampen American Capital Florida Quality Municipal Trust
Van Kampen American Capital New York Quality Municipal Trust
Van Kampen American Capital Ohio Quality Municipal Trust
Van Kampen American Capital Pennsylvania Quality Municipal Trust
Van Kampen American Capital Trust For Insured Municipals
Van Kampen American Capital Trust For Investment Grade Municipals
Van Kampen American Capital Trust For Investment Grade California Municipals
Van Kampen American Capital Trust For Investment Grade Florida Municipals
Van Kampen American Capital Trust For Investment Grade New Jersey Municipals
Van Kampen American Capital Trust For Investment Grade New York Municipals
Van Kampen American Capital Trust For Investment Grade Pennsylvania Municipals
Van Kampen American Capital Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust
Van Kampen American Capital Advantage Pennsylvania Municipal Income Trust
Van Kampen American Capital Strategic Sector Municipal Trust
Van Kampen American Capital Value Municipal Income Trust
Van Kampen American Capital California Value Municipal Income Trust
Van Kampen American Capital Massachusetts Value Municipal Income Trust
Van Kampen American Capital New Jersey Value Municipal Income Trust
Van Kampen American Capital New York Value Municipal Income Trust
Van Kampen American Capital Ohio Value Municipal Income Trust
Van Kampen American Capital Pennsylvania Value Municipal Income Trust
Van Kampen American Capital Municipal Opportunity Trust II
Van Kampen American Capital Florida Municipal Opportunity Trust
Van Kampen American Capital Advantage Municipal Income Trust II
Van Kampen American Capital Select Sector Municipal Trust
INSTITUTIONAL FUNDS
II. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC. ("MANAGEMENT,
INC.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
The Explorer Institutional Trust
on behalf of its Series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 16
OPEN END FUNDS
--------------
III. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT,
INC. ("ASSET MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN
CAPITAL FUNDS"):
Van Kampen American Capital Comstock Fund ("Comstock Fund")
Van Kampen American Capital Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen American Capital Emerging Growth Fund ("Emerging Growth
Fund")
Van Kampen American Capital Enterprise Fund ("Enterprise Fund")
Van Kampen American Capital Equity Income Fund ("Equity Income Fund")
Van Kampen American Capital Global Managed Assets Fund ("Global Managed
Assets Funds")
Van Kampen American Capital Government Securities Fund ("Government
Securities Fund")
Van Kampen American Capital Growth and Income Fund ("Growth and Income
Fund")
Van Kampen American Capital Harbor Fund ("Harbor Fund") Van Kampen
American Capital High Income Corporate Bond Fund ("High Income
Corporate Bond Fund")
Van Kampen American Capital Life Investment Trust ("Life Investment
Trust" or "LIT") on behalf of its Series
Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Global Equity Portfolio ("LIT Global Equity Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation
Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Real Estate Securities Portfolio ("LIT Real Estate Securities
Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")
Strategic Stock Portfolio ("LIT Strategic Stock Portfolio")
Comstock Portfolio ("LIT Comstock Portfolio")
Van Kampen American Capital Limited Maturity Government Fund ("Limited
Maturity Government Fund")
Van Kampen American Capital Pace Fund ("Pace Fund")
Van Kampen American Capital Real Estate Securities Fund ("Real Estate
Securities Fund")
Van Kampen American Capital Reserve Fund ("Reserve Fund")
Van Kampen American Capital Small Capitalization Fund ("Small
Capitalization Fund")
Van Kampen American Capital Tax-Exempt Trust ("Tax-Exempt Trust") on
behalf of its Series
Van Kampen American Capital High Yield Municipal Fund ("High Yield
Municipal Fund")
Van Kampen American Capital U.S. Government Trust for Income ("U.S.
Government Trust for Income")
Van Kampen American Capital World Portfolio Series Trust ("World
Portfolio Series Trust") on behalf of its Series
Van Kampen American Capital Global Government Securities Fund
("Global Government Securities Fund")
Van Kampen American Capital Global Equity Fund ("Global Equity
Fund")
<PAGE> 17
IV. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
Van Kampen American Capital U.S. Government Trust ("U.S. Government Trust")
on behalf of its Series
Van Kampen American Capital U.S. Government Fund ("U.S. Government Fund")
Van Kampen American Capital Tax Free Trust ("Tax Free Trust")
on behalf of its series
Van Kampen American Capital Insured Tax Free Income Fund ("Insured Tax Free
Income Fund")
Van Kampen American Capital Tax Free High Income Fund ("Tax Free High
Income Fund")
Van Kampen American Capital California Insured Tax Free Fund ("California
Insured Tax Free Fund")
Van Kampen American Capital Municipal Income Fund ("Municipal Income Fund")
Van Kampen American Capital Intermediate Term Municipal Income Fund
(Intermediate TermMunicipal Income Fund")
Van Kampen American Capital Florida Insured Tax Free Income Fund ("Florida
Insured Tax Free Income Fund")
Van Kampen American Capital New York Tax Free Income Fund ("New York Tax
Free Income Fund")
Van Kampen American Capital California Tax Free Income Fund ("California
Tax Free Income Fund")
Van Kampen American Capital Michigan Tax Free Income Fund ("Michigan Tax
Free Income Fund")
Van Kampen American Capital Missouri Tax Free Income Fund ("Missouri Tax
Free Income Fund")
Van Kampen American Capital Ohio Tax Free Income Fund ("Ohio Tax Free
Income Fund")
Van Kampen American Capital Trust ("VKAC Trust") on behalf of its Series
Van Kampen American Capital High Yield Fund ("High Yield Fund")
Van Kampen American Capital Short-Term Global Income Fund ("Short-Term
Global Income Fund")
Van Kampen American Capital Strategic Income Fund ("Strategic Income Fund")
Van Kampen American Capital Equity Trust ("Equity Trust") on behalf of its
Series
Van Kampen American Capital Utility Fund ("Utility Fund")
Van Kampen American Capital Growth Fund ("Growth Fund")
Van Kampen American Capital Value Fund ("Value Fund")
Van Kampen American Capital Great American Companies Fund ("Great American
Companies Fund")
Van Kampen American Capital Prospector Fund ("Prospector Fund")
Van Kampen American Capital Aggressive Growth Fund ("Aggressive Growth
Fund")
Van Kampen American Capital Foreign Securities Fund ("Foreign Securities Fund")
Van Kampen American Capital Pennsylvania Tax Free Income Fund ("Pennsylvania Tax
Free Income Fund")
Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund")
<PAGE> 18
AMENDMENT NUMBER THREE
----------------------
TO THE
FUND ACCOUNTING AGREEMENT
THIS AMENDMENT NUMBER THREE, dated February 4, 1999, to the Fund
Accounting Agreement dated May 31, 1997 (the "Agreement") by and between the
parties set forth in Schedule A, attached hereto and incorporated herein by
reference and Van Kampen Investment Advisory Corp., a Delaware corporation
("Advisory Corp.").
W I T N E S S E T H
-------------------
WHEREAS, the following parties, each being an open-end management
investment company as that term is defined in the Investment Company Act of
1940, as amended, wishes to become party to the Agreement:
ADVISED BY VAN KAMPEN INVESTMENT ADVISORY CORP.
("ADVISORY CORP."):
Van Kampen Equity Trust
on behalf of its Series
Van Kampen Small Cap Value Fund ("Small Cap Value Fund")
Van Kampen Trust
on behalf of its Series
Van Kampen Managed Short Term Income Fund ("Managed Short Term
Income Fund")
WHEREAS, the original parties desire to add the aforementioned
additional entities as parties to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule A of
the Agreement be amended to add the parties mentioned above as parties to the
Agreement.
1
<PAGE> 19
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE A
By: /s/ Dennis J. McDonnell
----------------------------------------
Dennis J. McDonnell, President
VAN KAMPEN INVESTMENT ADVISORY CORP.
By: /s/ Dennis J. McDonnell
----------------------------------------
Dennis J. McDonnell, President
2
<PAGE> 20
SCHEDULE A
----------
I. FUNDS ADVISED BY VAN KAMPEN INVESTMENT ADVISORY CORP. ("INVESTMENT
ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
CLOSED END FUNDS
----------------
Van Kampen Municipal Income Trust
Van Kampen California Municipal Trust
Van Kampen High Income Trust
Van Kampen High Income Trust II
Van Kampen Investment Grade Municipal Trust
Van Kampen Municipal Trust
Van Kampen California Quality Municipal Trust
Van Kampen Florida Quality Municipal Trust
Van Kampen New York Quality Municipal Trust
Van Kampen Ohio Quality Municipal Trust
Van Kampen Pennsylvania Quality Municipal Trust
Van Kampen Trust For Insured Municipals
Van Kampen Trust For Investment Grade Municipals
Van Kampen Trust For Investment Grade California Municipals
Van Kampen Trust For Investment Grade Florida Municipals
Van Kampen Trust For Investment Grade New Jersey Municipals
Van Kampen Trust For Investment Grade New York Municipals
Van Kampen Trust For Investment Grade Pennsylvania Municipals
Van Kampen Municipal Opportunity Trust
Van Kampen Advantage Municipal Income Trust
Van Kampen Advantage Pennsylvania Municipal Income Trust
Van Kampen Strategic Sector Municipal Trust
Van Kampen Value Municipal Income Trust
Van Kampen California Value Municipal Income Trust
Van Kampen Massachusetts Value Municipal Income Trust
Van Kampen New Jersey Value Municipal Income Trust
Van Kampen New York Value Municipal Income Trust
Van Kampen Ohio Value Municipal Income Trust
Van Kampen Pennsylvania Value Municipal Income Trust
Van Kampen Municipal Opportunity Trust II
Van Kampen Florida Municipal Opportunity Trust
Van Kampen Advantage Municipal Income Trust II
Van Kampen Select Sector Municipal Trust
INSTITUTIONAL FUNDS
-------------------
II. FUNDS ADVISED BY VAN KAMPEN MANAGEMENT INC. ("MANAGEMENT INC.")
(COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
The Explorer Institutional Trust on behalf of its Series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 21
OPEN END FUNDS
III. FUNDS ADVISED BY VAN KAMPEN ASSET MANAGEMENT INC.
("ASSET MANAGEMENT INC.") (COLLECTIVELY, THE "FORMER AMERICAN CAPITAL
FUNDS"):
Van Kampen Comstock Fund ("Comstock Fund")
Van Kampen Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen Emerging Growth Fund ("Emerging Growth Fund")
Van Kampen Enterprise Fund ("Enterprise Fund")
Van Kampen Equity Income Fund ("Equity Income Fund")
Van Kampen Global Managed Assets Fund ("Global Managed Assets Funds")
Van Kampen Government Securities Fund ("Government Securities Fund")
Van Kampen Growth and Income Fund ("Growth and Income Fund")
Van Kampen Harbor Fund ("Harbor Fund")
Van Kampen High Income Corporate Bond Fund ("High Income Corporate Bond
Fund")
Van Kampen Life Investment Trust ("Life Investment Trust" or "LIT")
on behalf of its Series
Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Global Equity Portfolio ("LIT Global Equity Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Morgan Stanley Real Estate Securities Portfolio ("LIT Morgan
Stanley Real Estate Securities Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")
Strategic Stock Portfolio ("LIT Strategic Stock Portfolio")
Comstock Portfolio ("LIT Comstock Portfolio")
Van Kampen Limited Maturity Government Fund ("Limited Maturity
Government Fund")
Van Kampen Pace Fund ("Pace Fund")
Van Kampen Real Estate Securities Fund ("Real Estate Securities Fund")
Van Kampen Reserve Fund ("Reserve Fund")
Van Kampen Tax-Exempt Trust ("Tax-Exempt Trust")
on behalf of its Series
Van Kampen High Yield Municipal Fund ("High Yield Municipal Fund")
Van Kampen U.S. Government Trust for Income ("U.S. Government Trust for
Income")
Van Kampen World Portfolio Series Trust ("World Portfolio
Series Trust") on behalf of its Series
Van Kampen Global Government Securities Fund ("Global
Government Securities Fund")
4
<PAGE> 22
IV. FUNDS ADVISED BY VAN KAMPEN INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN
FUNDS"):
Van Kampen U.S. Government Trust ("U.S. Government Trust")
on behalf of its series
Van Kampen U.S. Government Fund ("U.S. Government Fund")
Van Kampen Tax Free Trust ("Tax Free Trust")
on behalf of its series
Van Kampen Insured Tax Free Income Fund ("Insured Tax Free Income Fund")
Van Kampen Tax Free High Income Fund ("Tax Free High Income Fund")
Van Kampen California Insured Tax Free Fund ("California Insured Tax
Free Fund")
Van Kampen Municipal Income Fund ("Municipal Income Fund")
Van Kampen Intermediate Term Municipal Income Fund (Intermediate Term
Municipal Income Fund")
Van Kampen Florida Insured Tax Free Income Fund ("Florida Insured Tax
Free Income Fund")
Van Kampen New York Tax Free Income Fund ("New York Tax Free
Income Fund")
Van Kampen California Tax Free Income Fund ("California Tax Free Income
Fund")
Van Kampen Michigan Tax Free Income Fund ("Michigan Tax Free Income
Fund")
Van Kampen Missouri Tax Free Income Fund ("Missouri Tax Free Income
Fund")
Van Kampen Ohio Tax Free Income Fund ("Ohio Tax Free Income Fund")
Van Kampen Trust ("VK Trust")
on behalf of its series
Van Kampen High Yield Fund ("High Yield Fund")
Van Kampen Short-Term Global Income Fund ("Short-Term Global Income
Fund")
Van Kampen Strategic Income Fund ("Strategic Income Fund")
Van Kampen Managed Short Term Income Fund ("Managed Short Term Income
Fund")
Van Kampen Equity Trust ("Equity Trust")
on behalf of its series
Van Kampen Utility Fund ("Utility Fund")
Van Kampen Growth Fund ("Growth Fund")
Van Kampen Mid Cap Value Fund ("Mid Cap Value Fund")
Van Kampen Great American Companies Fund ("Great American Companies
Fund")
Van Kampen Prospector Fund ("Prospector Fund")
Van Kampen Aggressive Growth Fund ("Aggressive Growth Fund")
Van Kampen Small Cap Value Fund ("Small Cap Value Fund")
Van Kampen Pennsylvania Tax Free Income Fund ("Pennsylvania Tax Free
Income Fund")
Van Kampen Tax Free Money Fund ("Tax Free Money Fund")
5
<PAGE> 23
AMENDMENT NUMBER FOUR
TO THE
FUND ACCOUNTING AGREEMENT
THIS AMENDMENT NUMBER FOUR, dated May 26, 1999, to the Fund Accounting
Agreement dated May 31, 1997 (the "Agreement") by and between the parties set
forth in Schedule A, attached hereto and incorporated herein by reference and
Van Kampen Investment Advisory Corp., a Delaware corporation ("Advisory Corp.").
W I T N E S S E T H
WHEREAS, the following party, being an open-end management investment
company as that term is defined in the Investment Company Act of 1940, as
amended, wishes to become a party to the Agreement:
Van Kampen Equity Trust II ("Equity Trust II")
on behalf of its Series
Van Kampen Technology Fund ("Technology Fund")
WHEREAS, the original parties desire to add the aforementioned
additional entity as party to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule A of
the Agreement be amended to add the parties mentioned above as party to the
Agreement.
1
<PAGE> 24
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE A
By: /s/ John L. Sullivan
----------------------------------------------
John L. Sullivan
Treasurer, Vice President
and Chief Financial Officer
VAN KAMPEN INVESTMENT ADVISORY CORP.
By: /s/ Dennis J. McDonnell
----------------------------------------------
Dennis J. McDonnell
President
2
<PAGE> 25
SCHEDULE A
----------
I. FUNDS ADVISED BY VAN KAMPEN INVESTMENT ADVISORY CORP. ("INVESTMENT
ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
CLOSED END FUNDS
----------------
Van Kampen Municipal Income Trust
Van Kampen California Municipal Trust
Van Kampen High Income Trust
Van Kampen High Income Trust II
Van Kampen Investment Grade Municipal Trust
Van Kampen Municipal Trust
Van Kampen California Quality Municipal Trust
Van Kampen Florida Quality Municipal Trust
Van Kampen New York Quality Municipal Trust
Van Kampen Ohio Quality Municipal Trust
Van Kampen Pennsylvania Quality Municipal Trust
Van Kampen Trust For Insured Municipals
Van Kampen Trust For Investment Grade Municipals
Van Kampen Trust For Investment Grade California Municipals
Van Kampen Trust For Investment Grade Florida Municipals
Van Kampen Trust For Investment Grade New Jersey Municipals
Van Kampen Trust For Investment Grade New York Municipals
Van Kampen Trust For Investment Grade Pennsylvania Municipals
Van Kampen Municipal Opportunity Trust
Van Kampen Advantage Municipal Income Trust
Van Kampen Advantage Pennsylvania Municipal Income Trust
Van Kampen Strategic Sector Municipal Trust
Van Kampen Value Municipal Income Trust
Van Kampen California Value Municipal Income Trust
Van Kampen Massachusetts Value Municipal Income Trust
Van Kampen New Jersey Value Municipal Income Trust
Van Kampen New York Value Municipal Income Trust
Van Kampen Ohio Value Municipal Income Trust
Van Kampen Pennsylvania Value Municipal Income Trust
Van Kampen Municipal Opportunity Trust II
Van Kampen Florida Municipal Opportunity Trust
Van Kampen Advantage Municipal Income Trust II
Van Kampen Select Sector Municipal Trust
INSTITUTIONAL FUNDS
-------------------
II. FUNDS ADVISED BY VAN KAMPEN MANAGEMENT INC. ("MANAGEMENT INC.")
(COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"):
The Explorer Institutional Trust on behalf of its Series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 26
OPEN END FUNDS
III. FUNDS ADVISED BY VAN KAMPEN ASSET MANAGEMENT INC.
("ASSET MANAGEMENT INC.") (COLLECTIVELY, THE "FORMER AMERICAN CAPITAL
FUNDS"):
Van Kampen Comstock Fund ("Comstock Fund")
Van Kampen Corporate Bond Fund ("Corporate Bond Fund")
Van Kampen Emerging Growth Fund ("Emerging Growth Fund")
Van Kampen Enterprise Fund ("Enterprise Fund")
Van Kampen Equity Income Fund ("Equity Income Fund")
Van Kampen Global Managed Assets Fund ("Global Managed Assets Funds")
Van Kampen Government Securities Fund ("Government Securities Fund")
Van Kampen Growth and Income Fund ("Growth and Income Fund")
Van Kampen Harbor Fund ("Harbor Fund")
Van Kampen High Income Corporate Bond Fund ("High Income Corporate Bond
Fund")
Van Kampen Life Investment Trust ("Life Investment Trust" or "LIT")
on behalf of its Series
Enterprise Portfolio ("LIT Enterprise Portfolio")
Domestic Income Portfolio ("LIT Domestic Income Portfolio")
Emerging Growth Portfolio ("LIT Emerging Growth Portfolio")
Global Equity Portfolio ("LIT Global Equity Portfolio")
Government Portfolio ("LIT Government Portfolio")
Asset Allocation Portfolio ("LIT Asset Allocation Portfolio")
Money Market Portfolio ("LIT Money Market Portfolio")
Morgan Stanley Real Estate Securities Portfolio ("LIT Morgan
Stanley Real Estate Securities Portfolio")
Growth and Income Portfolio ("LIT Growth and Income Portfolio")
Strategic Stock Portfolio ("LIT Strategic Stock Portfolio")
Comstock Portfolio ("LIT Comstock Portfolio")
Van Kampen Limited Maturity Government Fund ("Limited Maturity
Government Fund")
Van Kampen Pace Fund ("Pace Fund")
Van Kampen Real Estate Securities Fund ("Real Estate Securities Fund")
Van Kampen Reserve Fund ("Reserve Fund")
Van Kampen Tax-Exempt Trust ("Tax-Exempt Trust")
on behalf of its Series
Van Kampen High Yield Municipal Fund ("High Yield Municipal Fund")
Van Kampen U.S. Government Trust for Income ("U.S. Government Trust for
Income")
Van Kampen World Portfolio Series Trust ("World Portfolio
Series Trust") on behalf of its Series
Van Kampen Global Government Securities Fund ("Global
Government Securities Fund")
Van Kampen Equity Trust II ("Equity Trust II") on behalf of its series
Van Kampen Technology Fund ("Technology Fund")
4
<PAGE> 27
IV. FUNDS ADVISED BY VAN KAMPEN INVESTMENT ADVISORY CORP.
("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN
FUNDS"):
Van Kampen U.S. Government Trust ("U.S. Government Trust")
on behalf of its series
Van Kampen U.S. Government Fund ("U.S. Government Fund")
Van Kampen Tax Free Trust ("Tax Free Trust")
on behalf of its series
Van Kampen Insured Tax Free Income Fund ("Insured Tax Free Income Fund")
Van Kampen Tax Free High Income Fund ("Tax Free High Income Fund")
Van Kampen California Insured Tax Free Fund ("California Insured Tax
Free Fund")
Van Kampen Municipal Income Fund ("Municipal Income Fund")
Van Kampen Intermediate Term Municipal Income Fund (Intermediate Term
Municipal Income Fund")
Van Kampen Florida Insured Tax Free Income Fund ("Florida Insured Tax
Free Income Fund")
Van Kampen New York Tax Free Income Fund ("New York Tax Free
Income Fund")
Van Kampen California Tax Free Income Fund ("California Tax Free Income
Fund")
Van Kampen Michigan Tax Free Income Fund ("Michigan Tax Free Income
Fund")
Van Kampen Missouri Tax Free Income Fund ("Missouri Tax Free Income
Fund")
Van Kampen Ohio Tax Free Income Fund ("Ohio Tax Free Income Fund")
Van Kampen Trust ("VK Trust")
on behalf of its series
Van Kampen High Yield Fund ("High Yield Fund")
Van Kampen Short-Term Global Income Fund ("Short-Term Global Income
Fund")
Van Kampen Strategic Income Fund ("Strategic Income Fund")
Van Kampen Managed Short Term Income Fund ("Managed Short Term Income
Fund")
Van Kampen Equity Trust ("Equity Trust")
on behalf of its series
Van Kampen Utility Fund ("Utility Fund")
Van Kampen Growth Fund ("Growth Fund")
Van Kampen Mid Cap Value Fund ("Mid Cap Value Fund")
Van Kampen Great American Companies Fund ("Great American Companies
Fund")
Van Kampen Prospector Fund ("Prospector Fund")
Van Kampen Aggressive Growth Fund ("Aggressive Growth Fund")
Van Kampen Small Cap Value Fund ("Small Cap Value Fund")
Van Kampen Pennsylvania Tax Free Income Fund ("Pennsylvania Tax Free
Income Fund")
Van Kampen Tax Free Money Fund ("Tax Free Money Fund")
5
<PAGE> 1
EXHIBIT (h)(2)
AMENDED AND RESTATED
LEGAL SERVICES AGREEMENT
THIS AGREEMENT, dated as of May 31, 1997, by and between the parties as
set forth in Schedule 1, attached hereto and incorporated by reference
(designated collectively hereafter as the "Funds"), and VAN KAMPEN AMERICAN
CAPITAL, INC., a Delaware corporation ("Van Kampen").
W I T N E S S E T H :
WHEREAS, each of the Funds is registered as a management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, Van Kampen has the capability of providing certain legal services
to the Funds; and
WHEREAS, each Fund desires to utilize Van Kampen in the provision of such
legal services; and
WHEREAS, Van Kampen intends to increase its staff in order to accommodate
the provision of all such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
spelled out herein, it is agreed between the parties hereto as follows:
1. Appointment of Van Kampen. As agent, Van Kampen shall provide each of the
Funds the legal services (the "Legal Services") as set forth in Paragraph 2 of
this Agreement. Van Kampen accepts such appointments and agrees to furnish the
Legal Services in return for the compensation provided in Paragraph 3 of this
Agreement.
2. Legal Services to be Provided. Van Kampen will provide to the Funds the
following legal services, including without limitation: accurate maintenance of
the Funds' Corporate Minute books and records, preparation and oversight of
each Fund's regulatory reports and other information provided to shareholders
as well as responding to day-to-day legal issues on behalf of the Funds. Van
Kampen shall hire persons (collectively the "Legal Services Group") as needed
to provide such Legal Services and in such numbers as may be agreed from time
to time.
3. Expenses and Reimbursement. The Legal Services expenses (the "Legal
Services Expenses") for which Van Kampen may be reimbursed are salary and
salary related benefits, including but not limited to bonuses, group insurance
and other regular
<PAGE> 2
wages paid to the personnel of the Legal Services Group, as well as overhead
and expenses related to office space and necessary equipment. The Legal
Services Expenses will be paid by Van Kampen and reimbursed by the Funds. Van
Kampen will tender to each Fund a monthly invoice as of the last business day
of each month which shall certify the total Legal Service Expenses expended.
Except as provided herein, Van Kampen will receive no other compensation in
connection with Legal Services rendered in accordance with this Agreement, and
Van Kampen will be responsible for all other expenses relating to the providing
of Legal Services.
4. Payment for Legal Services Expense Among the Funds. One half (50%) of the
Legal Services Expenses incurred under the Agreement shall be attributable
equally to each respective Fund and all other funds to whom Van Kampen provides
Legal Services, including all other Funds for which Van Kampen serves as
investment adviser and distributor and the Govett Funds (the "Non-Participating
Funds"). Van Kampen shall assume the costs of Legal Services for the
Non-Participating Funds for which reimbursement is not received. The remaining
one half (50%) of the Legal Services Expenses shall be in allocated (a) in the
event services are attributable to specific funds (including the
Non-Participating Funds) based on such specific time allocations; and (b) in the
event services are attributable only to types of funds (i.e. closed-end and
open-end funds), the relative amount of time spent on each type of fund and
then further allocated between funds of that type on the basis of relative net
assets at the end of the period.
5. Maintenance of Records. All records maintained by Van Kampen in connection
with the performance of its duties under this Agreement will remain the
property of each respective Fund and will be preserved by Van Kampen for the
periods prescribed in Section 31 of the 1940 Act and the rules thereunder or
such other applicable rules that may be adopted from time to time under the
Act. In the event of termination of the Agreement, such records will be
promptly delivered to the respective Funds. Such records may be inspected by
the respective Funds at reasonable times.
6. Liability of Van Kampen. Van Kampen shall not be liable to any Fund for
any action taken or thing done by it or its agents or contractors on behalf of
the Fund in carrying out the terms and provisions of the Agreement if done in
good faith and without negligence or misconduct on the part of Van Kampen, its
agents or contractors.
7. Indemnification By Funds. Each Fund will indemnify and hold Van Kampen
harmless from all loss, cost, damage and expense, including reasonable expenses
for legal counsel, incurred by Van Kampen resulting from (a) any claim, demand,
action or suit in connection with Van Kampen's acceptance of this Agreement;
(b) an action or omission by Van Kampen in the performance of its duties
hereunder; (c) Van Kampen's acting upon instructions believed by it to have
been executed by a duly authorized officer of the Fund; or (d) Van Kampen's
acting upon information provided by the Fund in form and under policies agreed
to by Van Kampen and the Fund. Van Kampen shall not be entitled to such
indemnification in respect of action or
<PAGE> 3
omissions constituting negligence or willful misconduct of Van Kampen or its
agents or contractors. Prior to admitting any claim against it which may be
subject to this indemnification, Van Kampen shall give the Fund reasonable
opportunity to defend against said claim on its own name or in the name of Van
Kampen.
8. Indemnification By Van Kampen. Van Kampen will indemnify and hold harmless
each Fund from all loss, cost, damage and expense, including reasonable
expenses for legal counsel, incurred by the Fund resulting from any claim,
demand, action or suit arising out of Van Kampen's failure to comply with the
terms of this Agreement or which arises out of the negligence or willful
misconduct of Van Kampen or its agents or contractors; provided, that such
negligence or misconduct is not attributable to the Funds, their agents or
contractors. Prior to admitting any claim against it which may be subject to
this indemnification, the Fund shall give Van Kampen reasonable opportunity to
defend against said claim in its own name or in the name of such Fund.
9. Further Assurances. Each party agrees to perform such further acts and
execute such further documents as necessary to effectuate the purposes hereof.
10. Dual Interests. It is understood that some person or persons may be
directors, trustees, officers, or shareholders of both the Funds and Van Kampen
(including Van Kampen's affiliates), and that the existence of any such dual
interest shall not affect the validity hereof or of any transactions hereunder
except as otherwise provided by a specific provision of applicable law.
11. Execution, Amendment and Termination. The term of this Agreement shall
begin as of the date first above written, and unless sooner terminated as
herein provided, this Agreement shall remain in effect through May 31, 1997,
and thereafter from year to year if such continuation is specifically approved
at least annually by the Board of Trustees of each Fund, including a majority
of the independent Trustees of each Fund. The Agreement may be modified or
amended from time to time by mutual agreement between the and shall likewise
reimburse Van Kampen for its costs, expenses and disbursements payable under
this Agreement to such date. This Agreement may be amended in the future to
include as additional parties to the Agreement other investment companies for
which Van Kampen, any subsidiary or affiliate serves as investment advisor or
distributor.
12. Assignment. Any interest of Van Kampen under this Agreement shall not be
assigned or transferred, either voluntarily or involuntarily, by operation of
law or otherwise, without the prior written consent of the Fund. This Agreement
shall automatically and immediately terminate in the event of its assignment
without the prior written consent of the Fund.
13. Notice. Any notice under this agreement shall be in writing, addressed and
delivered or sent by registered or certified mail, postage prepaid, to the
other party at such address as such other party may designate for the receipt
of such notices. Until
<PAGE> 4
further notice to the other parties, it is agreed that for this purpose the
address of each Fund is One Parkview Plaza, Oakbrook Terrace, Illinois 60181,
Attention: President and the address of Van Kampen, for this purpose is One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attention: General Counsel.
14. Personal Liability. As provided for in the Declaration of Trust of the
various Funds, under which the Funds are organized as unincorporated trusts
under the laws of the State of Delaware or Pennsylvania, as the case may be,
the shareholders, trustees, officers, employees and other agents of the Fund
shall not personally be bound by or liable for the matters set forth hereunder,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim hereunder.
15. Interpretative Provisions. In connection with the operations of this
agreement, Van Kampen and the Funds may agree from time to time on such
provisions interpretative of or in addition to the provisions of this Agreement
as may in their opinion be consistent with the general tenor of this Agreement.
16. State Law. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Illinois.
17. Captions. The captions in the Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction effect.
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
ALL OF THE PARTIES SET FORTH IN SCHEDULE 1
ATTACHED HERETO
By: /s/ Ronald A. Nyberg
---------------------------------
Ronald A. Nyberg
Vice President & Secretary
VAN KAMPEN AMERICAN CAPITAL, INC.
By: /s/ Dennis J. McDonnell
---------------------------------
Dennis J. McDonnell
Executive Vice President
<PAGE> 6
SCHEDULE 1
1. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST, on behalf of its series
Van Kampen American Capital U.S. Government Fund
2. VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST, on behalf of its series
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital California Tax Free Income Fund
Van Kampen American Capital Michigan Tax Free Income Fund
Van Kampen American Capital Missouri Tax Free Income Fund and
Van Kampen American Capital Ohio Tax Free Income Fund
3. VAN KAMPEN AMERICAN CAPITAL TRUST, on behalf of its series
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund and
Van Kampen American Capital Strategic Income Fund
4. VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST, on behalf of its series
Van Kampen American Capital Utility Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Prospector Fund and
Van Kampen American Capital Aggressive Growth Fund
5. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
6. VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
7. VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
8. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST
9. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
10. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST
11. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST II
12. VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
13. VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
14. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST
15. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNICIPAL TRUST
16. VAN KAMPEN AMERICAN CAPITAL FLORIDA QUALITY MUNICIPAL TRUST
17. VAN KAMPEN AMERICAN CAPITAL NEW YORK QUALITY MUNICIPAL TRUST
18. VAN KAMPEN AMERICAN CAPITAL OHIO QUALITY MUNICIPAL TRUST
19. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA QUALITY MUNICIPAL TRUST
<PAGE> 7
20. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS
21. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE MUNICIPALS
22. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE CALIFORNIA
MUNICIPALS
23. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE FLORIDA
MUNICIPALS
24. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW JERSEY
MUNICIPALS
25. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW YORK
MUNICIPALS
26. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE PENNSYLVANIA
MUNICIPALS
27. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST
28. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST
29. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME
TRUST
30. VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST
31. VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST
32. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA VALUE MUNICIPAL INCOME TRUST
33. VAN KAMPEN AMERICAN CAPITAL MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
34. VAN KAMPEN AMERICAN CAPITAL NEW JERSEY VALUE MUNICIPAL INCOME TRUST
35. VAN KAMPEN AMERICAN CAPITAL NEW YORK VALUE MUNICIPAL INCOME TRUST
36. VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME TRUST
37. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
38. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST II
39. VAN KAMPEN AMERICAN CAPITAL FLORIDA MUNICIPAL OPPORTUNITY TRUST
40. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST II
41. VAN KAMPEN AMERICAN CAPITAL SELECT SECTOR MUNICIPAL TRUST
42. THE EXPLORER INSTITUTIONAL TRUST, on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 8
AMENDMENT ONE
TO THE
AMENDED AND RESTATED LEGAL SERVICES AGREEMENT
DATED MAY 31, 1997
THIS AMENDMENT ONE to the Amended and Restated Legal Services Agreement
dated May 31, 1997 by and between the parties as set forth in Schedule 1,
attached hereto and incorporated herein by reference and VAN KAMPEN AMERICAN
CAPITAL, INC.
W I T N E S S E T H
WHEREAS, Morgan Stanley Fund, Inc. being an open-end management
investment company as that term is defined in the Investment Company Act of
1940, as amended, wishes to become a party to the Agreement; and
WHEREAS, the original parties desire to add the aforementioned
additional entity as a party to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule 1 of
the Agreement be amended to add Morgan Stanley Fund, Inc.
1
<PAGE> 9
IN WITNESS WHEREOF, the parties have caused this Amendment One to be
executed this 31st day of May, 1997.
ALL OF THE PARTIES SET FORTH IN SCHEDULE 1
ATTACHED HERETO
By: /s/ Ronald A. Nyberg
-------------------------------------
Ronald A. Nyberg
Executive Vice President
VAN KAMPEN AMERICAN CAPITAL, INC.
By: /s/ Dennis J. McDonnell
--------------------------------------
Dennis J. McDonnell
Executive Vice President
MORGAN STANLEY FUND, INC.
By:
--------------------------------------
Ronald A. Nyberg
Vice President, Secretary
2
<PAGE> 10
SCHEDULE 1
1. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST, on behalf of its series
Van Kampen American Capital U.S. Government Fund
2. VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST, on behalf of its series
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital California Tax Free Income Fund
Van Kampen American Capital Michigan Tax Free Income Fund
Van Kampen American Capital Missouri Tax Free Income Fund and
Van Kampen American Capital Ohio Tax Free Income Fund
3. VAN KAMPEN AMERICAN CAPITAL TRUST, on behalf of its series
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund and
Van Kampen American Capital Strategic Income Fund
4. VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST, on behalf of its series
Van Kampen American Capital Utility Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Prospector Fund and
Van Kampen American Capital Aggressive Growth Fund
5. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
6. VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
7. VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
8. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST
9. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
10. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST
11. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST II
12. VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
13. VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
14. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST
15. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNICIPAL TRUST
16. VAN KAMPEN AMERICAN CAPITAL FLORIDA QUALITY MUNICIPAL TRUST
17. VAN KAMPEN AMERICAN CAPITAL NEW YORK QUALITY MUNICIPAL TRUST
18. VAN KAMPEN AMERICAN CAPITAL OHIO QUALITY MUNICIPAL TRUST
19. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA QUALITY MUNICIPAL TRUST
<PAGE> 11
20. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS
21. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE MUNICIPALS
22. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE CALIFORNIA
MUNICIPALS
23. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE FLORIDA
MUNICIPALS
24. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW JERSEY
MUNICIPALS
25. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW YORK
MUNICIPALS
26. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE PENNSYLVANIA
MUNICIPALS
27. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST
28. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST
29. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME
TRUST
30. VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST
31. VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST
32. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA VALUE MUNICIPAL INCOME TRUST
33. VAN KAMPEN AMERICAN CAPITAL MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
34. VAN KAMPEN AMERICAN CAPITAL NEW JERSEY VALUE MUNICIPAL INCOME TRUST
35. VAN KAMPEN AMERICAN CAPITAL NEW YORK VALUE MUNICIPAL INCOME TRUST
36. VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME TRUST
37. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
38. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST II
39. VAN KAMPEN AMERICAN CAPITAL FLORIDA MUNICIPAL OPPORTUNITY TRUST
40. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST II
41. VAN KAMPEN AMERICAN CAPITAL SELECT SECTOR MUNICIPAL TRUST
42. THE EXPLORER INSTITUTIONAL TRUST, on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 12
43. MORGAN STANLEY FUND INC., on behalf of its series
Morgan Stanley Global Fixed Income Fund
Morgan Stanley High Yield Fund
Morgan Stanley Worldwide High Income Fund
Morgan Stanley American Value Fund
Morgan Stanley Aggressive Equity Fund
Morgan Stanley U.S. Real Estate Fund
Morgan Stanley Equity Growth Fund
Morgan Stanley Value Fund
Morgan Stanley Global Equity Allocation Fund
Morgan Stanley Global Equity Fund
Morgan Stanley Asian Growth Fund
Morgan Stanley Emerging Markets Fund
Morgan Stanley Latin American Fund
Morgan Stanley International Magnum Fund
Morgan Stanley Money Market Fund
Morgan Stanley Government Obligations Money Market Fund.
<PAGE> 13
AMENDMENT TWO
TO THE
AMENDED AND RESTATED LEGAL SERVICES AGREEMENT
DATED MAY 31, 1997
THIS AMENDMENT TWO to the Amended and Restated Legal Services Agreement
dated May 31, 1997 by and between the parties as set forth in Schedule 1,
attached hereto and incorporated herein by reference and VAN KAMPEN AMERICAN
CAPITAL, INC.
W I T N E S S E T H
WHEREAS, Van Kampen American Capital Senior Floating Rate Fund, being a
closed-end registered investment company as that term is defined in the
Investment Company Act of 1940, as amended, wishes to become a party to the
Agreement; and
WHEREAS, the original parties desire to add the aforementioned
additional entity as a party to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule 1 of
the Agreement be amended to add Van Kampen American Capital Senior Floating Rate
Fund
1
<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Amendment Two to be
executed this 19th day of December, 1997.
ALL OF THE PARTIES SET FORTH IN SCHEDULE 1
ATTACHED HERETO
By: /s/ Ronald A. Nyberg
---------------------------------
Ronald A. Nyberg
Executive Vice President
VAN KAMPEN AMERICAN CAPITAL, INC.
By: /s/ Dennis J. McDonnell
---------------------------------
Dennis J. McDonnell
Executive Vice President
2
<PAGE> 15
SCHEDULE 1
1. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST, on behalf of its series
Van Kampen American Capital U.S. Government Fund
2. VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST, on behalf of its series
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital New Jersey Tax Free Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital California Tax Free Income Fund
Van Kampen American Capital Michigan Tax Free Income Fund
Van Kampen American Capital Missouri Tax Free Income Fund and
Van Kampen American Capital Ohio Tax Free Income Fund
3. VAN KAMPEN AMERICAN CAPITAL TRUST, on behalf of its series
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund and
Van Kampen American Capital Strategic Income Fund
4. VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST, on behalf of its series
Van Kampen American Capital Utility Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Prospector Fund and
Van Kampen American Capital Aggressive Growth Fund
5. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
6. VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
7. VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
8. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST
9. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
10. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST
11. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST II
12. VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
13. VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
14. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST
15. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNICIPAL TRUST
16. VAN KAMPEN AMERICAN CAPITAL FLORIDA QUALITY MUNICIPAL TRUST
17. VAN KAMPEN AMERICAN CAPITAL NEW YORK QUALITY MUNICIPAL TRUST
18. VAN KAMPEN AMERICAN CAPITAL OHIO QUALITY MUNICIPAL TRUST
19. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA QUALITY MUNICIPAL TRUST
<PAGE> 16
20. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS
21. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE MUNICIPALS
22. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE CALIFORNIA
MUNICIPALS
23. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE FLORIDA
MUNICIPALS
24. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW JERSEY
MUNICIPALS
25. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW YORK
MUNICIPALS
26. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE PENNSYLVANIA
MUNICIPALS
27. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST
28. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST
29. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME
TRUST
30. VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST
31. VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST
32. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA VALUE MUNICIPAL INCOME TRUST
33. VAN KAMPEN AMERICAN CAPITAL MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
34. VAN KAMPEN AMERICAN CAPITAL NEW JERSEY VALUE MUNICIPAL INCOME TRUST
35. VAN KAMPEN AMERICAN CAPITAL NEW YORK VALUE MUNICIPAL INCOME TRUST
36. VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME TRUST
37. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
38. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST II
39. VAN KAMPEN AMERICAN CAPITAL FLORIDA MUNICIPAL OPPORTUNITY TRUST
40. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST II
41. VAN KAMPEN AMERICAN CAPITAL SELECT SECTOR MUNICIPAL TRUST
42. THE EXPLORER INSTITUTIONAL TRUST, on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
43. VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND
<PAGE> 17
44. MORGAN STANLEY FUND INC., on behalf of its series
Morgan Stanley Emerging Markets Debt Fund
Morgan Stanley Global Fixed Income Fund
Morgan Stanley High Yield Fund
Morgan Stanley Worldwide High Income Fund
Morgan Stanley American Value Fund
Morgan Stanley Aggressive Equity Fund
Morgan Stanley U.S. Real Estate Fund
Morgan Stanley Equity Growth Fund
Morgan Stanley Midcap Growth Fund
Morgan Stanley Value Fund
Morgan Stanley Global Equity Allocation Fund
Morgan Stanley Global Equity Fund
Morgan Stanley Asian Growth Fund
Morgan Stanley Emerging Markets Fund
Morgan Stanley Latin American Fund
Morgan Stanley International Magnum Fund
Morgan Stanley Japanese Equity Fund
Morgan Stanley Money Market Fund
Morgan Stanley Tax-Free Money Market Fund
Morgan Stanley Government Obligations Money Market Fund.
<PAGE> 18
AMENDMENT THREE
TO THE
AMENDED AND RESTATED LEGAL SERVICES AGREEMENT
DATED MAY 31, 1997
THIS AMENDMENT THREE to the Amended and Restated Legal Services
Agreement dated May 31, 1997 by and between the parties as set forth in Schedule
1, attached hereto and incorporated herein by reference and VAN KAMPEN AMERICAN
CAPITAL, INC.
W I T N E S S E T H
WHEREAS, Van Kampen American Capital Senior Income Trust, being a
closed-end registered investment company as that term is defined in the
Investment Company Act of 1940, as amended, wishes to become a party to the
Agreement; and
WHEREAS, the original parties desire to add the aforementioned
additional entity as a party to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule 1 of
the Agreement be amended to add Van Kampen American Capital Senior Income Trust.
1
<PAGE> 19
IN WITNESS WHEREOF, the parties have caused this Amendment Three to be
executed this 22nd day of April, 1998.
ALL OF THE PARTIES SET FORTH IN SCHEDULE 1
ATTACHED HERETO
By: /s/ Ronald A. Nyberg
----------------------------------
Ronald A. Nyberg
Executive Vice President
VAN KAMPEN AMERICAN CAPITAL, INC.
By: /s/ Dennis J. McDonnell
----------------------------------
Dennis J. McDonnell
Executive Vice President
2
<PAGE> 20
SCHEDULE 1
1. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST, on behalf of its series
Van Kampen American Capital U.S. Government Fund
2. VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST, on behalf of its series
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital California Tax Free Income Fund
Van Kampen American Capital Michigan Tax Free Income Fund
Van Kampen American Capital Missouri Tax Free Income Fund and
Van Kampen American Capital Ohio Tax Free Income Fund
3. VAN KAMPEN AMERICAN CAPITAL TRUST, on behalf of its series
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund and
Van Kampen American Capital Strategic Income Fund
4. VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST, on behalf of its series
Van Kampen American Capital Utility Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Prospector Fund and
Van Kampen American Capital Aggressive Growth Fund
5. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
6. VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
7. VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
8. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST
9. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
10. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST
11. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST II
12. VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
13. VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND
14. VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
15. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST
16. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNICIPAL TRUST
17. VAN KAMPEN AMERICAN CAPITAL FLORIDA QUALITY MUNICIPAL TRUST
18. VAN KAMPEN AMERICAN CAPITAL NEW YORK QUALITY MUNICIPAL TRUST
19. VAN KAMPEN AMERICAN CAPITAL OHIO QUALITY MUNICIPAL TRUST
20. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA QUALITY MUNICIPAL TRUST
<PAGE> 21
21. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS
22. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE MUNICIPALS
23. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE CALIFORNIA
MUNICIPALS
24. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE FLORIDA
MUNICIPALS
25. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW JERSEY
MUNICIPALS
26. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW YORK
MUNICIPALS
27. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE PENNSYLVANIA
MUNICIPALS
28. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST
29. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST
30. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME
TRUST
31. VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST
32. VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST
33. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA VALUE MUNICIPAL INCOME TRUST
34. VAN KAMPEN AMERICAN CAPITAL MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
35. VAN KAMPEN AMERICAN CAPITAL NEW JERSEY VALUE MUNICIPAL INCOME TRUST
36. VAN KAMPEN AMERICAN CAPITAL NEW YORK VALUE MUNICIPAL INCOME TRUST
37. VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME TRUST
38. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
39. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST II
40. VAN KAMPEN AMERICAN CAPITAL FLORIDA MUNICIPAL OPPORTUNITY TRUST
41. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST II
42. VAN KAMPEN AMERICAN CAPITAL SELECT SECTOR MUNICIPAL TRUST
43. THE EXPLORER INSTITUTIONAL TRUST, on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
44. VAN KAMPEN AMERICAN CAPITAL SENIOR INCOME TRUST
<PAGE> 22
45. MORGAN STANLEY FUND INC., on behalf of its series
Morgan Stanley Emerging Markets Debt Fund
Morgan Stanley Global Fixed Income Fund
Morgan Stanley High Yield Fund
Morgan Stanley Worldwide High Income Fund
Morgan Stanley American Value Fund
Morgan Stanley Aggressive Equity Fund
Morgan Stanley U.S. Real Estate Fund
Morgan Stanley Equity Growth Fund
Morgan Stanley Midcap Growth Fund
Morgan Stanley Value Fund
Morgan Stanley Global Equity Allocation Fund
Morgan Stanley Global Equity Fund
Morgan Stanley Asian Growth Fund
Morgan Stanley Emerging Markets Fund
Morgan Stanley Latin American Fund
Morgan Stanley International Magnum Fund
Morgan Stanley Japanese Equity Fund
Morgan Stanley Money Market Fund
Morgan Stanley Tax-Free Money Market Fund
Morgan Stanley Government Obligations Money Market Fund.
<PAGE> 23
AMENDMENT FOUR
TO THE
AMENDED AND RESTATED LEGAL SERVICES AGREEMENT
DATED MAY 31, 1997
THIS AMENDMENT FOUR to the Amended and Restated Legal Services Agreement
dated May 31, 1997 by and between the parties as set forth in Schedule 1,
attached hereto and incorporated herein by reference and VAN KAMPEN INVESTMENTS
INC.
W I T N E S S E T H
WHEREAS, Van Kampen Global Franchise Fund, being an open-end management
investment company as that term is defined in the Investment Company Act of
1940, as amended, wishes to become a party to the Agreement; and
WHEREAS, the original parties desire to add the aforementioned
additional entity as a party to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule 1 of
the Agreement be amended to add Van Kampen Global Franchise Fund.
1
<PAGE> 24
IN WITNESS WHEREOF, the parties have caused this Amendment Four to be
executed this 30th day of July, 1998.
ALL OF THE PARTIES SET FORTH IN SCHEDULE 1
ATTACHED HERETO
By: /s/ Ronald A. Nyberg
--------------------------------
Ronald A. Nyberg
Executive Vice President
VAN KAMPEN INVESTMENTS INC.
By: /s/ Dennis J. McDonnell
--------------------------------
Dennis J. McDonnell
Executive Vice President
2
<PAGE> 25
SCHEDULE 1
1. VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST, on behalf of its series
Van Kampen American Capital U.S. Government Fund
2. VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST, on behalf of its series
Van Kampen American Capital Insured Tax Free Income Fund
Van Kampen American Capital Tax Free High Income Fund
Van Kampen American Capital California Insured Tax Free Fund
Van Kampen American Capital Municipal Income Fund
Van Kampen American Capital Intermediate Term Municipal Income Fund
Van Kampen American Capital New York Tax Free Income Fund
Van Kampen American Capital Florida Insured Tax Free Income Fund
Van Kampen American Capital California Tax Free Income Fund
Van Kampen American Capital Michigan Tax Free Income Fund
Van Kampen American Capital Missouri Tax Free Income Fund and
Van Kampen American Capital Ohio Tax Free Income Fund
3. VAN KAMPEN AMERICAN CAPITAL TRUST, on behalf of its series
Van Kampen American Capital High Yield Fund
Van Kampen American Capital Short-Term Global Income Fund and
Van Kampen American Capital Strategic Income Fund
4. VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST, on behalf of its series
Van Kampen American Capital Utility Fund
Van Kampen American Capital Value Fund
Van Kampen American Capital Growth Fund
Van Kampen American Capital Great American Companies Fund
Van Kampen American Capital Prospector Fund and
Van Kampen American Capital Aggressive Growth Fund
5. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND
6. VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND
7. VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND
8. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL INCOME TRUST
9. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA MUNICIPAL TRUST
10. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST
11. VAN KAMPEN AMERICAN CAPITAL HIGH INCOME TRUST II
12. VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
13. VAN KAMPEN AMERICAN CAPITAL SENIOR FLOATING RATE FUND
14. VAN KAMPEN AMERICAN CAPITAL INVESTMENT GRADE MUNICIPAL TRUST
15. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST
16. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA QUALITY MUNICIPAL TRUST
17. VAN KAMPEN AMERICAN CAPITAL FLORIDA QUALITY MUNICIPAL TRUST
18. VAN KAMPEN AMERICAN CAPITAL NEW YORK QUALITY MUNICIPAL TRUST
19. VAN KAMPEN AMERICAN CAPITAL OHIO QUALITY MUNICIPAL TRUST
20. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA QUALITY MUNICIPAL TRUST
<PAGE> 26
21. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INSURED MUNICIPALS
22. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE MUNICIPALS
23. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE CALIFORNIA
MUNICIPALS
24. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE FLORIDA
MUNICIPALS
25. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW JERSEY
MUNICIPALS
26. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE NEW YORK
MUNICIPALS
27. VAN KAMPEN AMERICAN CAPITAL TRUST FOR INVESTMENT GRADE PENNSYLVANIA
MUNICIPALS
28. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST
29. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST
30. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME
TRUST
31. VAN KAMPEN AMERICAN CAPITAL STRATEGIC SECTOR MUNICIPAL TRUST
32. VAN KAMPEN AMERICAN CAPITAL VALUE MUNICIPAL INCOME TRUST
33. VAN KAMPEN AMERICAN CAPITAL CALIFORNIA VALUE MUNICIPAL INCOME TRUST
34. VAN KAMPEN AMERICAN CAPITAL MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
35. VAN KAMPEN AMERICAN CAPITAL NEW JERSEY VALUE MUNICIPAL INCOME TRUST
36. VAN KAMPEN AMERICAN CAPITAL NEW YORK VALUE MUNICIPAL INCOME TRUST
37. VAN KAMPEN AMERICAN CAPITAL OHIO VALUE MUNICIPAL INCOME TRUST
38. VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
39. VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST II
40. VAN KAMPEN AMERICAN CAPITAL FLORIDA MUNICIPAL OPPORTUNITY TRUST
41. VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST II
42. VAN KAMPEN AMERICAN CAPITAL SELECT SECTOR MUNICIPAL TRUST
43. THE EXPLORER INSTITUTIONAL TRUST, on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
44. VAN KAMPEN AMERICAN CAPITAL SENIOR INCOME TRUST
<PAGE> 27
45. VAN KAMPEN SERIES FUND, INC., on behalf of its series
Van Kampen Emerging Markets Debt Fund
Van Kampen Global Fixed Income Fund
Van Kampen High Yield & Total Return Fund
Van Kampen Worldwide High Income Fund
Van Kampen American Value Fund
Van Kampen Aggressive Equity Fund
Van Kampen U.S. Real Estate Fund
Van Kampen Equity Growth Fund
Van Kampen Mid Cap Growth Fund
Van Kampen Value Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Equity Fund
Van Kampen Asian Growth Fund
Van Kampen Emerging Markets Fund
Van Kampen Latin American Fund
Van Kampen International Magnum Fund
Van Kampen Japanese Equity Fund
Morgan Stanley Money Market Fund
Morgan Stanley Tax-Free Money Market Fund
Morgan Stanley Government Obligations Money Market Fund
Van Kampen Growth & Income Fund II
Van Kampen Global Franchise Fund
Van Kampen European Equity Fund
<PAGE> 28
AMENDMENT FIVE
TO THE
AMENDED AND RESTATED LEGAL SERVICES AGREEMENT
DATED MAY 31, 1997
THIS AMENDMENT FIVE to the Amended and Restated Legal Services
Agreement dated May 31, 1997 by and between the parties as set forth in Schedule
1, attached hereto and incorporated by reference and VAN KAMPEN INVESTMENTS INC.
W I T N E S S E T H
WHEREAS, Van Kampen Small Cap Value Fund, a series of Van
Kampen Equity Trust and Van Kampen Managed Short Term Income Fund, a series of
Van Kampen Trust, each being an open-end management investment company as that
term is defined in the Investment Company Act of 1940, as amended, wish to
become a party to the Agreement; and
WHEREAS, the original parties desire to add the aforementioned
additional entities as parties to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule 1 of
the Agreement be amended to add Van Kampen Small Cap Value Fund and Van Kampen
Managed Short Term Income Fund.
1
<PAGE> 29
IN WITNESS WHEREOF, the parties have caused this Amendment Five to be
executed this 4th day of February, 1999.
ALL OF THE PARTIES SET FORTH IN SCHEDULE 1
ATTACHED HERETO
By: /s/ Dennis J. McDonnell
-----------------------------------
Dennis J. McDonnell
President
VAN KAMPEN INVESTMENTS INC.
By: /s/ Dennis J. McDonnell
-----------------------------------
Dennis J. McDonnell
Executive Vice President
2
<PAGE> 30
SCHEDULE 1
1. VAN KAMPEN U.S. GOVERNMENT TRUST, on behalf of its series
Van Kampen U.S. Government Fund
2. VAN KAMPEN TAX FREE TRUST, on behalf of its series
Van Kampen Insured Tax Free Income Fund
Van Kampen Tax Free High Income Fund
Van Kampen California Insured Tax Free Fund
Van Kampen Municipal Income Fund
Van Kampen Intermediate Term Municipal Income Fund
Van Kampen New York Tax Free Income Fund
Van Kampen Florida Insured Tax Free Income Fund
Van Kampen California Tax Free Income Fund
Van Kampen Michigan Tax Free Income Fund,
Van Kampen Missouri Tax Free Income Fund
Van Kampen Ohio Tax Free Income Fund
3. VAN KAMPEN TRUST, on behalf of its series
Van Kampen High Yield Fund
Van Kampen Short-Term Global Income Fund
Van Kampen Strategic Income Fund
Van Kampen Managed Short Term Income Fund
4. VAN KAMPEN EQUITY TRUST, on behalf of its series
Van Kampen Utility Fund
Van Kampen Mid Cap Value Fund
Van Kampen Growth Fund
Van Kampen Great American Companies Fund
Van Kampen Prospector Fund
Van Kampen Aggressive Growth Fund
Van Kampen Small Cap Value Fund
5. VAN KAMPEN PENNSYLVANIA TAX FREE INCOME FUND
6. VAN KAMPEN TAX FREE MONEY FUND
7. VAN KAMPEN MUNICIPAL INCOME TRUST
8. VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
9. VAN KAMPEN HIGH INCOME TRUST
10. VAN KAMPEN HIGH INCOME TRUST II
11. VAN KAMPEN PRIME RATE INCOME TRUST
12. VAN KAMPEN SENIOR FLOATING RATE FUND
13. VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
14. VAN KAMPEN MUNICIPAL TRUST
15. VAN KAMPEN CALIFORNIA QUALITY MUNICIPAL TRUST
16. VAN KAMPEN FLORIDA QUALITY MUNICIPAL TRUST
17. VAN KAMPEN NEW YORK QUALITY MUNICIPAL TRUST
18. VAN KAMPEN OHIO QUALITY MUNICIPAL TRUST
19. VAN KAMPEN PENNSYLVANIA QUALITY MUNICIPAL TRUST
20. VAN KAMPEN TRUST FOR INSURED MUNICIPALS
21. VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
3
<PAGE> 31
22. VAN KAMPEN TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS
23. VAN KAMPEN TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS
24. VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW JERSEY MUNICIPALS
25. VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW YORK MUNICIPALS
26. VAN KAMPEN TRUST FOR INVESTMENT GRADE PENNSYLVANIA MUNICIPALS
27. VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
28. VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST
29. VAN KAMPEN ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
30. VAN KAMPEN STRATEGIC SECTOR MUNICIPAL TRUST
31. VAN KAMPEN VALUE MUNICIPAL INCOME TRUST
32. VAN KAMPEN CALIFORNIA VALUE MUNICIPAL INCOME TRUST
33. VAN KAMPEN MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
34. VAN KAMPEN NEW JERSEY VALUE MUNICIPAL INCOME TRUST
35. VAN KAMPEN NEW YORK VALUE MUNICIPAL INCOME TRUST
36. VAN KAMPEN OHIO VALUE MUNICIPAL INCOME TRUST
37. VAN KAMPEN PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
38. VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
39. VAN KAMPEN FLORIDA MUNICIPAL OPPORTUNITY TRUST
40. VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST II
41. VAN KAMPEN SELECT SECTOR MUNICIPAL TRUST
42. THE EXPLORER INSTITUTIONAL TRUST, on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
43. VAN KAMPEN SENIOR INCOME TRUST
<PAGE> 32
44. VAN KAMPEN SERIES FUND, INC., on behalf of its series
Van Kampen Emerging Markets Debt Fund
Van Kampen Global Fixed Income Fund
Van Kampen High Yield & Total Return Fund
Van Kampen Worldwide High Income Fund
Van Kampen American Value Fund
Van Kampen Aggressive Equity Fund
Van Kampen U.S. Real Estate Fund
Van Kampen Equity Growth Fund
Van Kampen Mid Cap Growth Fund
Van Kampen Value Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Equity Fund
Van Kampen Asian Growth Fund
Van Kampen Emerging Markets Fund
Van Kampen Latin American Fund
Van Kampen International Magnum Fund
Van Kampen Japanese Equity Fund
Morgan Stanley Money Market Fund
Morgan Stanley Tax-Free Money Market Fund
Morgan Stanley Government Obligations Money Market Fund
Van Kampen Growth & Income Fund II
Van Kampen Global Franchise Fund
Van Kampen European Equity Fund
<PAGE> 33
AMENDMENT SIX
TO THE
AMENDED AND RESTATED LEGAL SERVICES AGREEMENT
DATED MAY 31, 1997
THIS AMENDMENT SIX to the Amended and Restated Legal Services Agreement
dated May 31, 1997 by and between the parties as set forth in Schedule 1,
attached hereto and incorporated herein by reference and VAN KAMPEN INVESTMENTS
INC.
W I T N E S S E T H
WHEREAS, Van Kampen Technology Fund, a series of Van Kampen Equity
Trust II, an open-end management investment company as that term is defined in
the Investment Company Act of 1940, as amended, wishes to become party to the
Agreement; and
WHEREAS, the original parties desire to add the aforementioned
additional entity as party to the Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
spelled out in the Agreement and herein, it is hereby agreed that Schedule 1 of
the Agreement be amended to add Van Kampen Technology Fund.
<PAGE> 34
IN WITNESS WHEREOF, the parties have caused this Amendment Six to be
executed this 26th day of May, 1999.
ALL OF THE PARTIES SET FORTH IN SCHEDULE 1
ATTACHED HERETO
By: /s/ A. Thomas Smith III
---------------------------------
A. Thomas Smith III
Vice President and Secretary
VAN KAMPEN INVESTMENTS INC.
By: /s/ Richard F. Powers, III
---------------------------------
Richard F. Powers, III
President and Chief Executive Officer
<PAGE> 35
SCHEDULE 1
1. VAN KAMPEN U.S. GOVERNMENT TRUST, on behalf of its series
Van Kampen U.S. Government Fund
2. VAN KAMPEN TAX FREE TRUST, on behalf of its series
Van Kampen Insured Tax Free Income Fund
Van Kampen Tax Free High Income Fund
Van Kampen California Insured Tax Free Fund
Van Kampen Municipal Income Fund
Van Kampen Intermediate Term Municipal Income Fund
Van Kampen New York Tax Free Income Fund
Van Kampen Florida Insured Tax Free Income Fund
Van Kampen California Tax Free Income Fund
Van Kampen Michigan Tax Free Income Fund,
Van Kampen Missouri Tax Free Income Fund
Van Kampen Ohio Tax Free Income Fund
3. VAN KAMPEN TRUST, on behalf of its series
Van Kampen High Yield Fund
Van Kampen Short-Term Global Income Fund
Van Kampen Strategic Income Fund
Van Kampen Managed Short Term Income Fund
4. VAN KAMPEN EQUITY TRUST, on behalf of its series
Van Kampen Utility Fund
Van Kampen Mid Cap Value Fund
Van Kampen Growth Fund
Van Kampen Great American Companies Fund
Van Kampen Prospector Fund
Van Kampen Aggressive Growth Fund
Van Kampen Small Cap Value Fund
5. VAN KAMPEN PENNSYLVANIA TAX FREE INCOME FUND
6. VAN KAMPEN TAX FREE MONEY FUND
7. VAN KAMPEN MUNICIPAL INCOME TRUST
8. VAN KAMPEN CALIFORNIA MUNICIPAL TRUST
9. VAN KAMPEN HIGH INCOME TRUST
10. VAN KAMPEN HIGH INCOME TRUST II
11. VAN KAMPEN PRIME RATE INCOME TRUST
12. VAN KAMPEN SENIOR FLOATING RATE FUND
13. VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
14. VAN KAMPEN MUNICIPAL TRUST
15. VAN KAMPEN CALIFORNIA QUALITY MUNICIPAL TRUST
16. VAN KAMPEN FLORIDA QUALITY MUNICIPAL TRUST
17. VAN KAMPEN NEW YORK QUALITY MUNICIPAL TRUST
18. VAN KAMPEN OHIO QUALITY MUNICIPAL TRUST
19. VAN KAMPEN PENNSYLVANIA QUALITY MUNICIPAL TRUST
20. VAN KAMPEN TRUST FOR INSURED MUNICIPALS
21. VAN KAMPEN TRUST FOR INVESTMENT GRADE MUNICIPALS
3
<PAGE> 36
22. VAN KAMPEN TRUST FOR INVESTMENT GRADE CALIFORNIA MUNICIPALS
23. VAN KAMPEN TRUST FOR INVESTMENT GRADE FLORIDA MUNICIPALS
24. VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW JERSEY MUNICIPALS
25. VAN KAMPEN TRUST FOR INVESTMENT GRADE NEW YORK MUNICIPALS
26. VAN KAMPEN TRUST FOR INVESTMENT GRADE PENNSYLVANIA MUNICIPALS
27. VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
28. VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST
29. VAN KAMPEN ADVANTAGE PENNSYLVANIA MUNICIPAL INCOME TRUST
30. VAN KAMPEN STRATEGIC SECTOR MUNICIPAL TRUST
31. VAN KAMPEN VALUE MUNICIPAL INCOME TRUST
32. VAN KAMPEN CALIFORNIA VALUE MUNICIPAL INCOME TRUST
33. VAN KAMPEN MASSACHUSETTS VALUE MUNICIPAL INCOME TRUST
34. VAN KAMPEN NEW JERSEY VALUE MUNICIPAL INCOME TRUST
35. VAN KAMPEN NEW YORK VALUE MUNICIPAL INCOME TRUST
36. VAN KAMPEN OHIO VALUE MUNICIPAL INCOME TRUST
37. VAN KAMPEN PENNSYLVANIA VALUE MUNICIPAL INCOME TRUST
38. VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
39. VAN KAMPEN FLORIDA MUNICIPAL OPPORTUNITY TRUST
40. VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST II
41. VAN KAMPEN SELECT SECTOR MUNICIPAL TRUST
42. THE EXPLORER INSTITUTIONAL TRUST, on behalf of its series
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
43. VAN KAMPEN SENIOR INCOME TRUST
<PAGE> 37
44. VAN KAMPEN SERIES FUND, INC., on behalf of its series
Van Kampen Emerging Markets Debt Fund
Van Kampen Global Fixed Income Fund
Van Kampen High Yield & Total Return Fund
Van Kampen Worldwide High Income Fund
Van Kampen American Value Fund
Van Kampen Aggressive Equity Fund
Van Kampen Equity Growth Fund
Van Kampen Mid Cap Growth Fund
Van Kampen Value Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Equity Fund
Van Kampen Asian Growth Fund
Van Kampen Emerging Markets Fund
Van Kampen Latin American Fund
Van Kampen International Magnum Fund
Van Kampen Japanese Equity Fund
Morgan Stanley Money Market Fund
Morgan Stanley Tax-Free Money Market Fund
Morgan Stanley Government Obligations Money Market Fund
Van Kampen Growth & Income Fund II
Van Kampen Global Franchise Fund
Van Kampen European Equity Fund
45. VAN KAMPEN EQUITY TRUST II, on behalf of its series
Van Kampen Technology Fund
<PAGE> 1
Exhibit (m)(1)(iv)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
VAN KAMPEN MANAGED SHORT TERM INCOME FUND
The plan set forth below (the "Distribution Plan") is the written plan
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), for the VAN KAMPEN MANAGED SHORT TERM INCOME
FUND (the "Fund"), a series of the VAN KAMPEN TRUST (the "Trust"). This
Distribution Plan describes the material terms and conditions under which assets
of the Fund may be used in connection with financing distribution related
activities with respect to each of its classes of shares of beneficial interest
(the "Shares"), each of which is offered and sold subject to a different
combination of front-end sales charges, distribution fees, service fees and
contingent deferred sales charges.1 Classes of shares, if any, subject to a
front-end sales charge and a distribution and/or service fee are referred to
herein as "Front-End Classes" and the Shares of such classes are referred to
herein as "Front-End Shares." Classes of shares, if any, subject to a
contingent-deferred sales charge and a distribution and/or a service fee are
referred to herein as "CDSC Classes" and Shares of such classes are referred to
herein as "CDSC Shares." Classes of shares, if any, subject to a front-end sales
charge, a contingent-deferred sales charge and a distribution and/or service fee
are referred to herein as "Combination Classes" and Shares of such class are
referred to herein as "Combination Shares."
The Fund has adopted a service plan (the "Service Plan") pursuant to
which the Fund is authorized to expend on an annual basis a portion of its
average net assets attributable to any or each class of Shares in connection
with the provision by the principal underwriter (within the meaning of the 1940
Act) of the Shares and by brokers, dealers and other financial intermediaries
(collectively, "Financial Intermediaries") of personal services to holders of
Shares and/or the maintenance of shareholder accounts. The Fund also has entered
into a distribution and services agreement (the "Distribution and Services
Agreement") with Van Kampen Funds Inc. (the "Distributor"), pursuant to which
the Distributor acts as the principal underwriter with respect to each class of
Shares and provides services to the Fund and acts as agent on behalf of the Fund
in connection with the implementation of the Service Plan. The Distributor may
enter into selling agreements (the "Selling Agreements") with Financial
Intermediaries in order to implement the Distribution and Services Agreement,
the Service Plan and this Distribution Plan.
1. The Fund hereby is authorized to pay the Distributor a distribution fee
with respect to each class of its Shares to compensate the Distributor for
activities which are primarily intended to result in the sale of such Shares
("distribution related activities") performed by the Distributor with respect to
the respective class of Shares of the Fund. Such distribution related activities
include without limitation: (a) printing and distributing copies of any
prospectuses and annual and interim reports of the Fund (after the Fund has
prepared and set in type such materials) that are used by such Distributor in
connection with the offering of Shares; (b) preparing, printing or otherwise
manufacturing and distributing any other literature or materials of any nature
used by such Distributor in connection with promoting, distributing or offering
the Shares; (c) advertising, promoting and selling Shares to broker-dealers,
banks and the public; (d) distribution related overhead and the provision of
information programs and shareholder services intended to enhance the
attractiveness of investing in the Fund; (e) incurring initial outlay expenses
in connection with compensating Financial Intermediaries for (i) selling CDSC
Shares and Combination Shares and (ii) providing personal services to
shareholders and the maintenance of shareholder accounts of all classes of
Shares, including paying interest on and incurring other carrying
- --------------------
(1) The Fund is authorized to offer multiple classes of shares pursuant to a
Rule 18f-3 Plan adopted under the 1940 Act.
1
<PAGE> 2
costs on funds borrowed to pay such initial outlays; and (f) acting as agent for
the Fund in connection with implementing this Distribution Plan pursuant to the
Selling Agreements.
2. The amount of the distribution fee hereby authorized with respect to
each class of Shares of the Fund shall be as follows:
3. With respect to Class A Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 0.25% of the Fund's average daily net assets
attributable to Class A Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to Class A Shares. The Fund
may pay a distribution fee as determined from time to time by its Board of
Trustees in an annual amount not to exceed the lesser of (i) (A) 0.25% of the
Fund's average daily net asset value during such year attributable to Class A
Shares sold on or after the date on which this Distribution Plan was first
implemented with respect to Class A Shares minus (B) the amount of the service
fee with respect to the Class A Shares actually expended during such year by the
Fund pursuant to the Service Plan and (ii) the actual amount of distribution
related expenses incurred by the Distributor with respect to Class A Shares.
4. With respect to Class B Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 1.00% of the Fund's average daily net assets
attributable to Class B Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class B Shares. The
Fund may pay a distribution fee with respect to the Class B Shares as determined
from time to time by its Board of Trustees in an annual amount not to exceed the
lesser of (A) 0.65% of the Fund's average daily net asset value during such year
attributable to Class B Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class B Shares and
(B) the actual amount of distribution related expenses incurred by the
Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class B Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class B Shares.
5. With respect to Class C Shares, the distribution fee authorized hereby
and the service fee authorized pursuant to the Service Plan, in the aggregate,
shall not exceed on an annual basis 1.00% of the Fund's average daily net assets
attributable to Class C Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class C Shares. The
Fund may pay a distribution fee with respect to the Class C Shares as determined
from time to time by its Board of Trustees in an annual amount not to exceed the
lesser of (A) 0.65% of the Fund's average daily net asset value during such year
attributable to Class C Shares sold on or after the date on which this
Distribution Plan is first implemented with respect to the Class C Shares and
(B) the actual amount of distribution related expenses incurred by the
Distributor during such year plus prior unreimbursed distribution related
expenses less the amount of any contingent deferred sales charge paid to the
Distributor, in each case with respect to the Class C Shares sold on or after
the date on which this Distribution Plan is first implemented with respect to
the Class C Shares.
6. Payments pursuant to this Distribution Plan shall not be made more
often than monthly upon receipt by the Fund of a separate written expense report
with respect to each class of Shares setting forth the expenses qualifying for
such reimbursement allocated to each class of Shares and the purposes thereof.
2
<PAGE> 3
7. In the event that amounts payable hereunder with respect to shares of a
Front-End Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of such class, there is
no carryforward of reimbursement obligations to succeeding years. In the event
the amounts payable hereunder with respect to shares of a CDSC Class or a
Combination Class do not fully reimburse the Distributor for its actual
distribution related expenses with respect to the Shares of the respective
class, such unreimbursed distribution expenses will be carried forward and paid
by the Fund hereunder in future years so long as this Distribution Plan remains
in effect, subject to applicable laws and regulations. Reimbursements for
distribution related expenses payable hereunder with respect to a particular
class of Shares may not be used to subsidize the sale of Shares of any other
class of Shares.
8. The Fund shall not compensate the Distributor, and neither the Fund nor
the Distributor shall compensate any Financial Intermediary, for any
distribution related expenses incurred with respect to a class of Shares prior
to the later of (a) the implementation of this Distribution Plan with respect to
such class of Shares or (b) the date that such Financial Intermediary enters
into a Selling Agreement with the Distributor.
9. The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to such
Financial Intermediaries for activities and services of the type referred to in
Paragraph 1 hereof. Prior to the implementation of a Selling Agreement, such
agreement shall be approved by a majority of the Board of Trustees of the Trust
and a majority of the Disinterested Trustees (within the meaning of the 1940
Act) by a vote cast in person at a meeting called for the purpose of voting on
such Selling Agreements. The Distributor may reallocate all or a portion of its
distribution fee to such Financial Intermediaries as compensation for the
above-mentioned activities and services. Such reallocation shall be in an amount
as set forth from time to time in the Fund's prospectus. Such Selling Agreements
shall provide that the Financial Intermediaries shall provide the Distributor
with such information as is reasonably necessary to permit the Distributor to
comply with the reporting requirements set forth in Paragraphs 3 and 8 hereof.
10. Subject to the provisions of this Distribution Agreement, the Fund is
hereby authorized to pay a distribution fee to any person that is not an
"affiliated person" or "interested person" of the Fund or its "investment
adviser" or "principal underwriter" (as such terms are defined in the 1940 Act)
who provides any of the foregoing services for the Fund. Such fee shall be paid
only pursuant to written agreements between the Fund and such other person the
terms of which permit payments to such person only in accordance with the
provisions of this Distribution Agreement and which have the approval of a
majority of the Disinterested Trustees by vote cast separately with respect to
each class of Shares and cast in person at a meeting called for the purpose of
voting on such written agreement.
11. The Fund and the Distributor shall prepare separate written reports for
each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with respect
to each class of Shares pursuant to this Distribution Plan, the Service Plan and
the agreements contemplated hereby, the purposes for which such payments were
made and such other information as the Board of Trustees or the Disinterested
Trustees may reasonably request from time to time, and the Board of Trustees
shall review such reports and other information.
12. This Distribution Plan shall become effective upon its approval by (a)
a majority of the Board of Trustees and a majority of the Disinterested Trustees
by vote cast separately with respect to each class of Shares cast in person at a
meeting called for the purpose of voting on this Distribution Plan, and (b) with
respect to each class of Shares, a "majority of the outstanding voting
securities" (as such phrase is defined in the 1940 Act) of such class of Shares
voting separately as a class.
13. This Distribution Plan and any agreement contemplated hereby shall
continue in effect beyond the first anniversary of its adoption by the Board of
Trustees of the Fund only so long as (a) its continuation is approved at least
annually in the manner set forth in clause (a) of paragraph 9 above and
3
<PAGE> 4
(b) the selection and nomination of those trustees of the Fund who are not
"interested persons" of the Fund are committed to the discretion of such
trustees.
14. This Distribution Plan may be terminated with respect to a class of
Shares without penalty at any time by a majority of the Disinterested Trustees
or by a "majority of the outstanding voting securities" of the respective class
of Shares of the Fund.
15. This Distribution Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with the approval of a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund and may not be amended in any other material respect except
with the approval of a majority of the Disinterested Trustees. Amendments
required to conform this Distribution Plan to changes in the Rule or to other
changes in the 1940 Act or the rules and regulations thereunder shall not be
deemed to be material amendments.
16. To the extent any service fees paid by the Fund pursuant to the Service
Plan are deemed to be payments for the financing of any activity primarily
intended to result in the sale of Shares issued by the Fund within the meaning
of the Rule, the terms and provisions of such plan and any payments made
pursuant to such plan hereby are authorized pursuant to this Distribution Plan
in the amounts and for the purposes authorized in the Service Plan without any
further action by the Board of Trustees or the shareholders of the Fund. To the
extent the terms and provisions of the Service Plan conflict with the terms and
provisions of this Distribution Plan, the terms and provisions of the Service
Plan shall prevail with respect to amounts payable pursuant thereto. This
paragraph 13 is adopted solely due to the uncertainty that may exist with
respect to whether payments to be made by the Fund pursuant to the Service Plan
constitute payments primarily intended to result in the sale of Shares issued by
the Fund within the meaning of the Rule.
17. The Trustees of the Trust have adopted this Distribution Plan as
trustees under the Declaration of Trust of the Trust and the policies of the
Trust adopted hereby are not binding upon any of the Trustees or shareholders of
the Trust individually, but bind only the trust estate.
4
<PAGE> 1
EXHIBIT (m)(2)
FORM OF
VAN KAMPEN FUNDS INC.
SHAREHOLDER ASSISTANCE AGREEMENT
This Agreement is entered into as of the _____day of _____, 199__, by and
between Van Kampen FUNDS Inc. (the "Company") and the undersigned (the
"Broker-Dealer").
WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and
WHEREAS, the Broker-Dealer is registered as a broker-dealer with the
National Association of Securities Dealers, Inc.; and
WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") and a service plan (the "Service Plan") pursuant to Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), relating to such Fund, the Distribution Plans being described in
the Fund's Prospectus and Statement of Additional Information; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution assistance agreements such as this Agreement with
broker-dealers selected by the Company, and the Broker-Dealer has been so
selected; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such broker-dealer on or after the effective date
of this Agreement, as determined pursuant to Section 4 hereof, and held at the
close of each day in accounts of clients or customers of a particular
broker-dealer, such amount being referred to herein as the "Holding Level"; for
purposes of calculating the Holding Level, shares of such Fund which are
redeemed or otherwise disposed of from any account existing prior to such
effective date shall be deemed to have been shares sold prior to such effective
date to the extent of the number of shares held in such account immediately
after the close of business on the day prior to such effective date; and
WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;
NOW, THEREFORE, the Company and the Broker-Dealer agree as follows:
1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Broker-Dealer shall be entitled distribution fee and
service fee to payments, if any, to be paid by the Company at the annual
percentage rate of the Holding Level set forth from time to time in the then
current Prospectus of the Fund on a quarterly basis (prorated for any portion
of such period during which this Agreement is in effect for less than the full
amount of such period); it is understood and agreed that the Company may make
final and binding determinations as to whether such continuing compliance and
as to whether or not any Fund shares are to be considered in determining the
Holding Level of any particular broker-dealer and what Fund shares, if any, are
to be attributed to such purpose to a particular broker-dealer, to a different
broker-dealer or to no broker-dealer. Payments shall be made to the
Broker-Dealer named above and portions of the payments may be, in the
discretion of the Broker-Dealer,
1
<PAGE> 2
paid over to individual registered representatives of said Broker-Dealer to
whom there have been assigned accounts of clients or customers of the
Broker-Dealer with respect to which the respective Holding Level was determined.
2. The distribution fee payments with respect to a class of the Fund's
shares to be made in accordance with Section 1 hereof, if any, shall be paid to
the Broker-Dealer as compensation for selling shares of the respective class.
3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Broker-Dealer shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Broker-dealer may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the fund, assisting
in selected dividend payment options, account designations and addresses and
maintaining the investment of such customer or client in the Fund.
4. The Company shall have the right at any time and from time to time
without notice to the Broker-Dealer to amend its Prospectus with respect to the
amount of the service free and the amount of the distribution fee to be paid
pursuant hereto. Such amendments shall be effective as of the date of the
amended Prospectus.
5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be), and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act), of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Broker-dealer, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
VAN KAMPEN FUNDS INC.
- --------------------------
Broker-dealer Firm Name
- -------------------------- By:
Firm Address -------------------------
Senior Vice President
By:
-----------------------
Title:
--------------------
2
<PAGE> 1
EXHIBIT (m)(3)
FORM OF
VAN KAMPEN FUNDS INC.
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is entered into as of the ____ day of ____, 19__, by and
between Van Kampen Funds Inc. (the "Company") and the
undersigned (the "Intermediary").
WHEREAS, the Company is the principal underwriter of the open-end
investment companies listed on Schedule 1 to this Agreement (hereinafter
individually the "Fund" or collectively the "Funds"); and
WHEREAS, each respective Fund has adopted a Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"), and a Service Plan (the
"Service Plan") relating to such Fund, the Distribution Plans being described
in the Fund's Prospectus and Statement of Additional Information; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to enter into distribution services agreements such as this Agreement with
certain financial intermediaries selected by the Company, and the Intermediary
has been so selected; and
WHEREAS, each respective Fund's Distribution Plans authorize the Company
to make payments at a rate specified in an agreement such as this Agreement
varying directly with the aggregate average daily net asset value of shares of
each respective Fund sold by such financial intermediary on or after the
effective date of this Agreement, as determined pursuant to Section 4 hereof,
and held at the close of each day in accounts of clients or customers of
particular intermediary, such amount being referred to herein as the "Holding
Level"; for purposes of calculating the Holding Level, shares of such Fund
which are redeemed or otherwise disposed of from any account existing prior to
such effective date shall be deemed to have been shares sold prior to such
effective date to the extent of the number of shares held in such account
immediately after the close of business on the day prior to such effective
date; and
WHEREAS, this Agreement is a "related agreement" to the Distribution Plan
as that term is used in the Rule and is subject to all of the provisions of the
Rule as to such agreements;
NOW, THEREFORE, the Company and the Intermediary agree as follows:
1. Subject to continuing compliance with its obligations pursuant to
Section 2 hereof, the Intermediary shall be entitled to distribution fee and
service fee payments, if any, to be paid by the Company with respect to each
class of the Fund's shares at the annual percentage rate of the Holding Level
set forth from time to time in the then current Prospect of the Fund on a
quarterly basis (prorated for any portion of such period during which this
Agreement is in effect for less than the full amount of such period); it is
understood and agreed that the Company may make final and binding
determinations as to whether such continuing compliance and as to whether or
not any Fund shares are to be considered in determining the Holding Level of
any particular financial intermediary and what Fund shares, if any, are to be
attributed to such purpose to a particular financial intermediary, to a
different financial intermediary or to no financial intermediary.
1
<PAGE> 2
2. The distribution fee payments with respect to a class of the Fund's
shares to be made in accordance with Section 1 hereof, if any, shall be paid to
the Broker-Dealer as compensation for selling shares of the respective class.
3. In consideration for the service fee payments to be made in accordance
with Section 1 hereof, the Intermediary shall provide to its clients or
customers who hold shares of each respective Fund with respect to which
payments to the Intermediary may be made under such Fund's Distribution Plan
such services and other assistance as may from time to time be reasonably
requested by the Company, including but not limited to answering inquiries
regarding the Fund, providing information programs regarding the Fund,
assisting in selected dividend payment options, account designations and
addresses and maintaining the investment of such customer or client in the
Fund.
4. The Company shall have the right at any time and from time to time
without notice to the Broker-Dealer to amend its Prospectus with respect to the
amount of the service free and the amount of the distribution fee to be paid
pursuant hereto. Such amendments shall be effective as of the date of the
amended Prospectus.
5. This Agreement shall go into effect on the later of the date set forth
above or the date on which it is approved by a vote of each Fund's Board of
Directors (or Trustees, as the case may be) and of those Directors/Trustees
(the "Qualified Directors/Trustees") who are not interested persons (as defined
in the 1940 Act) of the Fund and have no direct or indirect financial interest
in the operations of the Distribution Plan or any agreement related to the
Distribution Plan cast in person at a meeting called for the purpose of voting
on this Agreement and shall continue in effect (unless terminated) until the
June 30th next succeeding such effective date and will continue thereafter only
if such continuance is specifically approved at least annually in the manner
heretofore specified for initial approval. This agreement will terminate
automatically in the event of its assignment (as that term is used in the Rule)
or if the Distribution Plan is terminated. This Agreement may also be
terminated at any time, without the payment of any penalty, on sixty (60) days
written notice to the Intermediary, by vote of a majority of the Qualified
Directors/Trustees or by vote of a majority (as that term is used in the Rule)
of the outstanding voting securities of the Fund.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
VAN KAMPEN FUNDS INC.
By:
- ------------------------ ----------------------
Intermediary Senior Vice President
- ------------------------
Address
By:
---------------------
Title
2
<PAGE> 1
Exhibit (m)(4)(iv)
VAN KAMPEN MANAGED SHORT TERM INCOME FUND
SERVICE PLAN
The plan set forth below (the "Service Plan") for the VAN KAMPEN
MANAGED SHORT TERM INCOME FUND (the "Fund"), a series of the VAN KAMPEN
TRUST (the "Trust") describes the material terms and conditions under which
assets of the Fund may be used to compensate the Fund's principal underwriter,
within the meaning of the Investment Company Act of 1940, as amended (the "1940
Act"), brokers, dealers and other financial intermediaries (collectively
"Financial Intermediaries") for providing personal services to shareholders
and/or the maintenance of shareholder accounts with respect to each of its Class
A Shares of beneficial interest (the "Class A Shares"), its Class B Shares of
beneficial interest (the "Class B Shares"), and its Class C Shares of beneficial
interest (the "Class C Shares") The Class A Shares, Class B Shares and Class C
Shares sometimes are referred to herein collectively as the "Shares." Each class
of Shares is offered and sold subject to a different combination of front-end
sales charges, distribution fees, service fees and contingent deferred sales
charges.1 Classes of shares, if any, subject to a front-end sales charge and a
distribution and/or service fee are referred to herein as "Front-End Classes"
and the Shares of such classes are referred to herein as "Front-End Shares."
Classes of shares, if any, subject to a contingent-deferred sales charge and a
distribution and or a service fee are referred to herein as "CDSC Classes" and
Shares of such classes are referred to herein as "CDSC Shares." Classes of
shares, if any, subject to a front-end sales charge, a contingent-deferred sales
charge and a distribution and/or service fee are referred to herein as
"Combination Classes" and Shares of such class are referred to herein as
"Combination Shares."
The Fund has adopted a distribution plan (the "Distribution Plan")
pursuant to which the Fund is authorized to expend on an annual basis a portion
of its average net assets attributable to each class of Shares in connection
with financing distribution related activities. The Fund also has entered into a
distribution and services agreement (the "Distribution and Services Agreement")
with Van Kampen American Capital Distributors, Inc. (the "Distributor"),
pursuant to which the Distributor acts as agent on behalf of the Fund in
connection with the implementation of the Service Plan and acts as the principal
underwriter with respect to each class of Shares. The Distributor may enter into
selling agreements (the "Selling Agreements") with brokers, dealers and other
financial intermediaries ("Financial Intermediaries") in order to implement the
Distribution Agreement, the Distribution Plan and this Service Plan.
1. The Fund hereby is authorized to pay a service fee with respect to its
Class A Shares, Class B Shares and Class C Shares to any person who sells such
Shares and provides personal services to shareholders and/or maintains
shareholder accounts in an annual amount not to exceed 0.25% of the average
annual net asset value of the Shares maintained in the Fund by such person that
were sold on or after the date on which this Service Plan was first implemented.
The aggregate annual amount of all such payments with respect to each such class
of Shares may not exceed 0.25% of the Fund's average annual net assets
attributable to the respective class of Shares sold on or after the date on
which this Service Plan was first implemented and maintained in the Fund more
than one year.
2. Payments pursuant to this Service Plan may be paid or prepaid on behalf
of the Fund by the Distributor acting as the Fund's agent.
- -----------------------
(1) The Fund is authorized to offer multiple classes of shares pursuant to a
Rule 18f-3 Plan adopted under the 1940 Act.
1
<PAGE> 2
3. Payments by the Fund to the Distributor pursuant to this Service Plan
shall not be made more often than monthly upon receipt by the Fund of a separate
written expense report with respect to each class of Shares setting forth the
expenses qualifying for such reimbursement allocated to each class of Shares and
the purposes thereof.
4. In the event that amounts payable hereunder with respect to a class of
Shares do not fully reimburse the Distributor for pre-paid service fees, such
unreimbursed service fee expenses will be carried forward and paid by the Fund
hereunder in future years so long as this Service Plan remains in effect,
subject to applicable laws and regulations. Reimbursements for service fee
related expenses payable hereunder with respect to a particular class of Shares
may not be used to subsidize services provided with respect to any other class
of Shares.
5. The Fund shall not compensate the Distributor, and neither the Fund nor
the Distributor shall compensate any Financial Intermediary, for any service
related expenses incurred with respect to a class of Shares prior to the later
of (a) the implementation of this Service Plan with respect to such class of
Shares or (b) the date that such Financial Intermediary enters into a Selling
Agreement with the Distributor.
6. The Fund hereby authorizes the Distributor to enter into Selling
Agreements with certain Financial Intermediaries to provide compensation to such
Financial Intermediaries for activities and services of the type referred to in
Paragraph 1 hereof. Prior to the implementation of a Selling Agreement, such
agreement shall be approved by a majority of the Board of Trustees of the Trust
and a majority of the Disinterested Trustees (within the meaning of the 1940
Act) by a vote cast in person at a meeting called for the purpose of voting on
such Selling Agreements. Such Selling Agreements shall provide that the
Financial Intermediaries shall provide the Distributor with such information as
is reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Paragraphs 3 and 8 hereof.
7. Subject to the provisions of this Service Agreement, the Fund is hereby
authorized to pay a service fee to any person that is not an "affiliated person"
or "interested person" of the Fund or its "investment adviser" or "principal
underwriter" (as such terms are defined in the 1940 Act) who provides any of the
foregoing services for the Fund. Such fee shall be paid only pursuant to written
agreements between the Fund and such other person the terms of which permit
payments to such person only in accordance with the provisions of this Service
Agreement and which have the approval of a majority of the Disinterested
Trustees by vote cast separately with respect to each class of Shares and cast
in person at a meeting called for the purpose of voting on such written
agreement.
8. The Fund and the Distributor shall prepare separate written reports for
each class of Shares and shall submit such reports to the Fund's Board of
Trustees on a quarterly basis summarizing all payments made by them with respect
to each class of Shares pursuant to this Service Plan and the agreements
contemplated hereby, the purposes for which such payments were made and such
other information as the Board of Trustees or the Disinterested Trustees may
reasonably request from time to time, and the Board of Trustees shall review
such reports and other information.
9. This Service Plan may be terminated with respect to a class of Shares
without penalty at any time by a majority of the Disinterested Trustees or by a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund.
10. This Service Plan shall become effective upon its approval by (a) a
majority of the Board of Trustees and a majority of the Disinterested Trustees
by vote cast separately with respect to each class of Shares cast in person at a
meeting called for the purpose of voting on this Distribution Plan, and (b) with
respect to each class of Shares, a "majority of the outstanding voting
securities" (as such phrase is defined in the 1940 Act) of such class of Shares
voting separately as a class.
2
<PAGE> 3
11. This Service Plan and any agreement contemplated hereby shall continue
in effect beyond the first anniversary of its adoption by the Board of Trustees
of the Fund only so long as (a) its continuation is approved at least annually
in the manner set forth in clause (a) of paragraph 10 above and (b) the
selection and nomination of those trustees of the Fund who are not "interested
persons" of the Fund are committed to the discretion of such trustees.
12. This Service Plan may not be amended to increase materially the maximum
amounts permitted to be expended hereunder except with the approval of a
"majority of the outstanding voting securities" of the respective class of
Shares of the Fund. This Service Plan may not be amended in any material respect
except with the approval of a majority of the Disinterested Trustees. Amendments
required to conform this Service Plan to changes in Rule 12b-1 under the 1940
Act, the rules and regulations thereunder or the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. shall not be deemed to be
material amendments.
The Trustees of the Trust have adopted this Service Plan as trustees
under the Declaration of Trust of the Trust and the policies of the Trust
adopted hereby are not binding upon any of the Trustees or shareholders of the
Trust individually, but bind only the trust estate.
3
<PAGE> 1
EXHIBIT (O)(2)
MULTI-CLASS PLAN
FOR
VAN KAMPEN MANAGED SHORT TERM INCOME FUND
This Plan is adopted pursuant to Rule 18f-3 under the Act to provide for
the issuance and distribution of multiple classes of Shares by the Trust, on
behalf of its series, the Fund, in accordance with the terms, procedures and
conditions set forth below. A majority of the Trustees of the Trust, including
a majority of the Trustees who are not interested persons of the Fund within the
meaning of the Act, find the Plan, including the expense allocations, to be in
the best interests of the Fund and each class of Shares of the Fund.
A. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
1. the Act - Investment company Act of 1940, as amended.
2. CDSC - contingent deferred sales charge.
3. CDSC Period - the period of years following purchase of Shares
during which Shares are assessed a CDSC upon redemption.
4. Class - a class of Shares of the Fund.
5. Class A Shares - shall have the meaning ascribed in Section B. 1.
6. Class B Shares - shall have the meaning ascribed in Section B. 2.
<PAGE> 2
7. Class C Shares - shall have the meaning ascribed in Section B. 3.
8. Distribution Expenses - expenses incurred in activities which are
primarily intended to result in the distribution and sale of
Shares as defined in the Plan of Distribution and/or board
resolutions.
9. Distribution Fee - a fee paid by the Fund to the Distributor in
reimbursement of Distribution Expenses.
10. Distributor - Van Kampen Funds Inc.
11. Fund - Van Kampen Managed Short Term Income Fund, a series of the
Trust.
11. Plan of Distribution - The plan adopted by the Fund under Rule
12b-1 of the Act with respect to payment of a Distribution Fee.
12. Service Fee - a fee paid to financial intermediaries for the
ongoing provision of services to Fund shareholders and/or the
maintenance of shareholder accounts.
13. Share - a share of beneficial interest, par value $.01 per share,
of the Fund.
14. Trust - Van Kampen Trust.
15. Trustee - the trustees of the Trust.
B. Classes. The Fund may offer three Classes as follows:
1. Class A Shares. Class A Shares shall be (i) offered at net asset
value plus a front-end sales charge, as approved from time to
time by the Trustees and set forth in the Fund's prospectus and
(ii) subject to ongoing Service Fees and Distribution Fees
approved from time to time by the Trustees and set forth in the
Fund's prospectus. The Class A Shares front-end sales charge may
be reduced or eliminated for larger purchases, under a combined
purchase privilege, under a right of accumulation, under a letter
of intent or for certain categories of purchasers as permitted by
Rule 22(d) of the Act and as set forth in the Fund's prospectus.
Class A Shares that are not subject to a front-end sales charge
as a result of the foregoing, may be subject to a CDSC for the
CDSC Period set forth in Section D.1. The offering price of
Class A Shares subject to a front-end sales charge shall be
computed in accordance with Rule 22c-1 and Section 22(d) of the
Act and the rules and regulations thereunder.
2. Class B Shares. Class B Shares shall be (i) offered at net asset
value, (ii) subject to a CDSC for the CDSC Period set forth in
Section D. 1, (iii) subject to ongoing Service Fees and
Distribution Fees, approved from time to time by the Trustees and
set forth in the Fund's prospectus and (iv) automatically
converted to Class A Shares three to ten years after the calendar
month in which the Class B Shares were purchased, as approved
from time to time by the Trustees and set forth in the Fund's
prospectus.
3. Class C Shares. Class C Shares shall be (i) offered at net
asset value, (ii) subject to a CDSC for the CDSC Period set forth
in Section D. 1, and (iii) subject to ongoing Service Fees and
Distribution Fees, approved from time to time by the Trustees and
set forth in the Fund's prospectus.
<PAGE> 3
C. Rights and Privileges of Classes. Each Class of the Fund will represent an
interest in the same portfolio of investments of the Fund and will have
identical voting, dividend, liquidation and other rights, preferences,
powers, that restrictions, limitations, qualifications, designations and
terms and conditions except that each Class (i) bears certain Distribution
Expenses, (ii) has exclusive voting rights with respect to its Distribution
Fee, (iii) has different exchange privileges, (iv) has different service
options available and (v) as otherwise described herein.
D. CDSC. A CDSC may be imposed upon redemption of Class A Shares, Class B
Shares and Class C Shares that do not incur a front-end sales charge subject
to the following conditions:
1. CDSC Period. The CDSC Period of Class A Shares and Class C Shares
shall be one year. The CDSC Period for Class B Shares shall be
at least three but not more than ten years as recommended by the
Distributor and which number of years shall be approved from time to
time by the Trustees.
2. CDSC Rate. The CDSC Rate shall be recommended by the Distributor and
approved by the Trustees. If a CDSC is imposed for a period greater
than one year the CDSC Rate must decline during the CDSC Period such
that (i) the CDSC Rate is less in the last year of the CDSC Period than
in the first and (ii) in each succeeding year the CDSC Rate shall be
less than or equal to the CDSC Rate in the preceding year.
3. Disclosure and Changes. The CDSC Rates and CDSC Period shall be
disclosed in the Fund's prospectus and may be decreased at the
discretion of the Distributor but may not be increased unless
approved as set forth in Section L.
4. Method of Calculation. The CDSC shall be assessed on an amount
equal to the lesser of the then current market value or the
cost of the Shares being redeemed. No sales charge shall be
imposed on increases in the net asset value of the Shares being
redeemed above the initial purchase price. No CDSC shall be assessed
on Shares derived from reinvestment of dividends or capital gains
distributions. The order in which Class B Shares and Class C
Shares are to be redeemed when not all of such Shares would be
subject to a CDSC shall be as determined by the Distributor in
accordance with the provisions of Rule 6c-10 of the Act.
5. Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares under circumstances
previously approved by the Trustees and disclosed in the Fund's
prospectus or statement of additional information and as allowed
under Rule 6c-10 of the Act.
6. Calculation of Offering Price. The offering price of Shares subject
to a CDSC shall be computed in accordance with Rule 22c-1 and
Section 22(d) of the Act and the rules and regulations thereunder.
7. Retention by Distributor. The CDSC paid with respect to Shares of
the Fund may be retained by the Distributor to reimburse the
Distributor for commissions paid by it in
<PAGE> 4
connection with the sale of Shares subject to a CDSC and for
Distribution Expenses to the extent such commissions and Distribution
Expenses are eligible for reimbursement and approved by the Trustees.
E. Service and Distribution Fees. Class A Shares shall be subject to a Service
Fee and Distribution Fee not to exceed in the aggregate 0.25% per annum of
the average daily net assets attributable to Class A Shares. Class B
Shares and Class C Shares shall be subject to (i) a Service Fee not to
exceed 0.25% per annum of the average daily net assets attributable to the
Class and (ii) a Distribution Fee not to exceed 0.75% per annum of the
average daily net assets attributable to the Class. All other terms and
conditions with respect to Service Fees and Distribution Fees shall be
governed by the Distribution Plan and the Service Plan adopted by the Fund
with respect to such fees and in accordance with Rule 12b-1 of the Act.
F. Conversion. Class B Shares purchased through the reinvestment of dividends
and capital gains distributions paid on Class B Shares shall be treated as
if held in a separate subaccount. Each time any Class B Shares in a
shareholder's account (other than Shares held in the subaccount) convert to
Class A Shares, a proportionate number of Class B Shares held in the
subaccount shall also convert to Class A Shares. All conversions shall be
effected on the basis of the relative net asset values of the Class A and
Class B Shares without the imposition of any sales load or other charge. So
long as any Class B Shares convert into Class A Shares, the Distributor
shall waive or reimburse the Fund, or take such other actions with the
approval of the Trustees as may be reasonably necessary, to ensure the
expenses, including payments authorized under the Distribution and Service
Plans, applicable to the Class A Shares are not higher than the expenses,
including payments authorized under the Distribution and Service Plans,
applicable to the Class B Shares converting into Class A Shares.
G. Allocation of Expenses, Income and Gains Among Classes.
1. Expenses Applicable to a Particular Class. Each Class of the Fund
shall pay any Service Fee, Distribution Fee and CDSC applicable to
that Class. Other expenses applicable to a particular Class such as
incremental transfer agency fees, but not including advisory or
custodial fees or other expenses related to the management of the
Fund's assets, shall be allocated among Classes in different amounts
if (i) they are actually incurred in different amounts by the Classes,
(ii) the Classes receive different services than other Classes or
(iii) the Classes receive services to a different degree than other
Classes.
2. Distribution Expenses. Distribution Expenses actually attributable to
the sales of all Classes shall be allocated to each Class upon the
basis of the sales of that Class in relation to the sales of all
Shares of the Fund. For this purpose, Shares issued upon reinvestment
of dividends or capital gains distributions or upon conversion of
Class B Shares to Class A Shares, will not be considered sales of
Shares.
3. Income, Capital Gains and Losses, and Other Expenses Applicable to
all Classes. Income, realized and unrealized capital gains and losses,
and expenses such as advisory fees applicable to all Classes shall be
allocated to each Class upon the basis of the net asset value of that
Class in relation to the total net asset value of the Fund.
4. Determination of Nature of Expenses. The Trustees shall determine in
their sole discretion whether any expense other than those listed
herein is properly treated as attributed to a particular
<PAGE> 5
Class or to all Classes of Shares.
H. Exchange Privilege. Exchanges of Shares shall be permitted between Van
Kampen funds as follows:
1. Shares of one Van Kampen fund may be exchanged for shares of the same
class of another Van Kampen fund at net asset value and without sales
charge, provided that the Distributor may require that shares of
certain funds not be exchanged for a designated period, which shall not
exceed 90 days, after purchase of such shares without prior approval by
the Distributor.
2. The shares acquired in the exchange will remain subject to the CDSC
Rate Schedule and CDSC Period of the original shares until the
redemption of the shares acquired in the exchange from the Van Kampen
funds. For purposes of computing the CDSC payable on a disposition the
shares, the holding period for the original shares shall be added to
the holding period of the newly acquired shares.
I. Voting Rights of Classes.
1. Shareholders of each Class shall have exclusive voting rights on any
matter submitted to them that relates solely to the Plan of
Distribution related to that Class, provided that
a. If any amendment is proposed to the Plan under which Service Fees
and Distribution Fees are paid with respect to Class A Shares of
the Fund that would increase materially the amount to be borne by
Class A Shares under the Plans, then no Class B Shares shall
convert into Class A Shares of the Fund until the holders of Class
B Shares have also approved the proposed amendment.
b. If the holders of the Class B Shares referred to in subparagraph a
do not approve the proposed amendment, the Trustees of the Fund
and the Distributor shall take such action as is necessary to
ensure that the Class B Shares voting against the amendment shall
convert into another class of Shares identical in all material
respects to Class A Shares as provided for prior to such amendment.
2. Shareholders shall have separate voting rights on any matter submitted
to shareholders in which the interest of one Class differs from the
interests of any other Class.
J. Dividends. Dividends paid by the Fund with respect to each Class, to
<PAGE> 6
the extent any dividends are paid, will be calculated in the same manner at
the same time on the same day and will be in substantially in the same
amount, except that any Distribution Fees, Service Fees or incremental
expenses relating to a particular Class will be borne exclusively by that
Class.
K. Reports to Trustees. The Distributor shall provide the Trustees of the
Fund with quarterly and annual statements concerning distribution and
shareholder servicing expenditures in compliance with paragraph (b)(3)(ii)
of Rule 12b-1 of the Act, as it may be amended from time to time. The
Distributors also shall provide the Trustees with such information as the
Trustees may from time to time deem to be reasonably necessary to evaluate
the Plan.
L. Amendment. Any material amendment to this Plan shall be approved by the
affirmative vote of a majority of the Trustees, including the affirmative
vote of the Trustees of the Trust who are not interested persons of the
Fund, except that any amendment that increases the CDSC Rate or CDSC Period
of a Class must also be approved by the affirmative vote of a majority
of the Shares of the affected Class. The Distributor shall provide the
Trustees with such information as may be reasonably necessary for the
Trustees to evaluate any amendment to the Plan.
<PAGE> 1
EXHIBIT (p)
POWER OF ATTORNEY
The undersigned, being officers and trustees of each of the Van Kampen
Open End Trusts (individually, a "Trust") as indicated on Schedule 1 attached
hereto and incorporated by reference, each a Delaware business trust, except for
the Van Kampen Pennsylvania Tax Free Income Fund being a Pennsylvania trust, and
being Officers and Directors of Van Kampen Series Fund, Inc.
(the "Corporation"), a Maryland corporation, do hereby, in the capacities shown
below, appoint Richard F. Powers, III, Dennis J. McDonnell and Thomas A.
Smith III, each of Oakbrook Terrace, Illinois, as agents and attorneys-in-fact
with full power of substitution and resubstitution, for each of the undersigned,
to execute and deliver, for and on behalf of the undersigned, any and all
amendments to the Registration Statement filed by each Trust or the Corporation
with the Securities and Exchange Commission pursuant to the provisions of the
Securities Act of 1933 and the Investment Company Act of 1940.
This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.
Dated: June 23, 1999
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ RICHARD F. POWERS III President
---------------------------
Richard F. Powers III
/s/ JOHN L. SULLIVAN Vice President, Chief Financial Officer
--------------------------- and Treasurer
John L. Sullivan
/s/ J. MILES BRANAGAN Trustee/Director
---------------------------
J. Miles Branagan
/s/ JERRY D. CHOATE Trustee/Director
---------------------------
Jerry D. Choate
/s/ RICHARD M. DeMARTINI Trustee/Director
---------------------------
Richard M. DeMartini
/s/ LINDA HUTTON HEAGY Trustee/Director
---------------------------
Linda Hutton Heagy
/s/ R. CRAIG KENNEDY Trustee/Director
---------------------------
R. Craig Kennedy
/s/ JACK E. NELSON Trustee/Director
---------------------------
Jack E. Nelson
/s/ DON G. POWELL Trustee/Director
---------------------------
Don G. Powell
/s/ PHILLIP B. ROONEY Trustee/Director
---------------------------
Phillip B. Rooney
/s/ FERNANDO SISTO, SC.D. Trustee/Director
---------------------------
Fernando Sisto, Sc. D.
/s/ WAYNE W. WHALEN Trustee/Director
---------------------------
Wayne W. Whalen
/s/ SUZANNE H. WOOLSEY Trustee/Director
----------------------------
Suzanne H. Woolsey
/s/ PAUL G. YOVOVICH Trustee/Director
---------------------------
Paul G. Yovovich
</TABLE>
<PAGE> 2
SCHEDULE 1
VAN KAMPEN U.S. GOVERNMENT TRUST
VAN KAMPEN TAX FREE TRUST
VAN KAMPEN TRUST
VAN KAMPEN EQUITY TRUST
VAN KAMPEN PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN TAX FREE MONEY FUND
VAN KAMPEN COMSTOCK FUND
VAN KAMPEN CORPORATE BOND FUND
VAN KAMPEN EMERGING GROWTH FUND
VAN KAMPEN ENTERPRISE FUND
VAN KAMPEN EQUITY INCOME FUND
VAN KAMPEN GLOBAL MANAGED ASSETS FUND
VAN KAMPEN GOVERNMENT SECURITIES FUND
VAN KAMPEN GROWTH AND INCOME FUND
VAN KAMPEN HARBOR FUND
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN LIFE INVESTMENT TRUST
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN PACE FUND
VAN KAMPEN REAL ESTATE SECURITIES FUND
VAN KAMPEN RESERVE FUND
VAN KAMPEN TAX-EXEMPT TRUST
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
VAN KAMPEN WORLD PORTFOLIO SERIES TRUST
<PAGE> 1
EXHIBIT (z)(1)
Van Kampen U.S. Government Trust
Van Kampen U.S. Government Fund
Van Kampen Tax Free Trust
Van Kampen Insured Tax Free Income Fund
Van Kampen Tax Free High Income Fund
Van Kampen California Insured Tax Free Fund
Van Kampen Municipal Income Fund
Van Kampen Intermediate Term Municipal Income Fund
Van Kampen Florida Insured Tax Free Income Fund
Van Kampen New York Tax Free IncomeFund
Van Kampen California Tax Free Income Fund*
Van Kampen Michigan Tax Free Income Fund*
Van Kampen Missouri Tax Free Income Fund*
Van Kampen Ohio Tax Free Income Fund*
Van Kampen Trust
Van Kampen High Yield Fund
Van Kampen Short-Term Global Income Fund
Van Kampen Strategic Income Fund
Van Kampen Equity Trust
Van Kampen Aggressive Growth Fund
Van Kampen Great American Companies Fund*
Van Kampen Growth Fund
Van Kampen Mid Cap Value Fund*
Van Kampen Prospector Fund*
Van Kampen Small Cap Value Fund*
Van Kampen Utility Fund
Van Kampen Equity Trust II
Van Kampen Technology Fund*
Van Kampen Pennsylvania Tax Free Income Fund
Van Kampen Tax Free Money Fund
Van Kampen Prime Rate Income Trust
Van Kampen Senior Floating Rate Fund
Van Kampen Comstock Fund
Van Kampen Corporate Bond Fund
Van Kampen Emerging Growth Fund
Van Kampen Enterprise Fund
Van Kampen Equity Income Fund
Van Kampen Exchange Fund
The Explorer Institutional Trust
Explorer Institutional Active Core Fund
Explorer Institutional Limited Duration Fund
<PAGE> 2
Van Kampen Limited Maturity Government Fund
Van Kampen Global Managed Assets Fund
Van Kampen Government Securities Fund
Van Kampen Growth and Income Fund
Van Kampen Harbor Fund
Van Kampen High Income Corporate Bond Fund
Van Kampen Life Investment Trust on behalf of its series
Asset Allocation Portfolio
Comstock Portfolio
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Global Equity Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Strategic Stock Portfolio
Morgan Stanley Real Estate Securities Portfolio
Van Kampen Pace Fund
Van Kampen Real Estate Securities Fund
Van Kampen Reserve Fund
Van Kampen Tax - Exempt Trust
Van Kampen High Yield Municipal Fund
Van Kampen U.S. Government Trust for Income
Van Kampen World Portfolio Series Trust on behalf of its Series
Van Kampen Global Government Securities Fund
Van Kampen Series Fund, Inc.
Van Kampen Aggressive Equity Fund
Van Kampen American Value Fund
Van Kampen Asian Growth Fund
Van Kampen Emerging Markets Debt Fund*
Van Kampen Emerging Markets Fund
Van Kampen Equity Growth Fund
Van Kampen European Equity Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Equity Fund
Van Kampen Global Fixed Income Fund
Van Kampen Global Franchise Fund
Morgan Stanley Government Obligations Money Market Fund
Van Kampen Growth and Income Fund II*
Van Kampen High Yield & Total Return Fund
Van Kampen International Magnum Fund
Van Kampen Japanese Equity Fund*
Van Kampen Latin American Fund
Van Kampen Mid Cap Growth Fund*
Morgan Stanley Money Market Fund
Morgan Stanley Tax-Free Money Market Fund*
Van Kampen Value Fund
Van Kampen Worldwide High Income Fund
<PAGE> 3
<TABLE>
<S> <C>
Insured Municipals Income Trust Series 410
Strategic Municipal Trust, Intermediate Series 2
California Insured Municipals Income Trust Series 180
Florida Insured Municipals Income Trust Series 126
Michigan Insured Municipals Income Trust Series 156
Missouri Insured Municipals Income Trust Series 111
New Jersey Insured Municipals Income Trust Series 127
New York Insured Municipals Income Trust Series 148
Pennsylvania Insured Municipals Income Trust Series 242
Tennessee Investors' Quality Tax-Exempt Trust Series 1
Internet Trust Series 14
The Dow(SM)Strategic 10 Trust May 1999
Series
The Dow(SM)Strategic 10 Trust May 1999
Traditional Series
The Dow(SM)Strategic 5 Trust May 1999
Series
The Dow(SM)Strategic 5 Trust May 1999
Traditional Series
EAFE Strategic 20 Trust May 1999
Series
EURO Strategic 20 Trust May 1999
Series
Strategic Picks Opportunity Trust May 1999
Series
Great International Firms Trust Series 8
Dow 30 Index Trust Series 7
Dow 30 Index and Treasury Trust Series 9
Global Energy Trust Series 8
Brand Name Equity Trust Series 9
Edward Jones Select Growth Trust May 1999
Series
Banking Trust Series 6
Morgan Stanley High-Technology 35 Index Trust Series 6
Pharmaceuticals Trust Series 6
Telecommunications and Bandwidth Trust Series 6
Utility Trust Series 6
Financial Services Trust Series 4
Roaring 2000s Trust Series 2
Roaring 2000s Trust Traditional Series 1
Josepthal - Research Series Power Portfolio Series 1
Josepthal - Research Series The Online Portfolio 1 Series 1
NatCity - Great American Equities Trust Series 2
Baird - Financial Institutions Trust 1999 Series
</TABLE>
* Funds that have not commenced investment operations.
<PAGE> 1
EXHIBIT (z) (2)
<TABLE>
<S> <C> <C>
Richard F. Powers III Chairman & Chief Executive Officer Oakbrook Terrace, IL
John H. Zimmerman III President Oakbrook Terrace, IL
A. Thomas Smith III Executive Vice President, General Oakbrook Terrace, IL
Counsel & Secretary;
Vice President and Secretary of the Funds
William R. Rybak Executive Vice President & Chief
Financial Officer Oakbrook Terrace, IL
Michael H. Santo Executive Vice President & Chief
Administrative Officer Oakbrook Terrace, IL
Paul R. Wolkenberg Executive Vice President: Oakbrook Terrace, IL
Vice President of the Funds
Laurence J. Althoff Sr. Vice President & Controller Oakbrook Terrace, IL
James J. Boyne Sr. Vice President, Associate General Oakbrook Terrace, IL
Counsel & Assistant Secretary
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
John E. Doyle Sr. Vice President Oakbrook Terrace, IL
Richard G. Golod, Sr. Vice President Annapolis, MD
Steven T. Johnson Sr. Vice President Oakbrook Terrace, IL
Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Assistant Secretary;
Assistant Secretary of the Funds
Walter E. Rein Sr. Vice President Oakbrook Terrace, IL
James J. Ryan Sr. Vice President Oakbrook Terrace, IL
Colette M. Saucedo Sr. Vice President Houston, TX
Frederick Shepherd Sr. Vice President Houston, TX
Steven P. Sorenson Sr. Vice President Oakbrook Terrace, IL
Robert S. West Sr. Vice President Oakbrook Terrace, IL
Patrick J. Woelfel Sr. Vice President Oakbrook Terrace, IL
Edward G. Wood, III Sr. Vice President and
Chief Operating Officer; Oakbrook Terrace. IL
Vice President of the Funds
Patricia A. Bettlach First Vice President Chesterfield, MO
Glenn M. Cackovic First Vice President Laguna Niguel, CA
Eric J. Hargens First Vice President Orlando, FL
Gregory Heffington First Vice President Ft. Collins, CO
David S. Hogaboom First Vice President Oakbrook Terrace, IL
Robert S. Hunt First Vice President Phoenix, AZ
Dominic C. Martellaro First Vice President Danville, CA
Carl Mayfield First Vice President Lakewood, CO
Mark R. McClure First Vice President Oakbrook Terrace, IL
Maura A. McGrath First Vice President New York, NY
Robert F. Muller First Vice President Houston, TX
Thomas Rowley First Vice President St. Louis, MO
Andrew J. Scherer First Vice President Oakbrook Terrace, IL
</TABLE>
<PAGE> 2
<TABLE>
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James D. Stevens First Vice Presdent North Andover, MA
George J. Vogel First Vice President Oakbrook Terrace, IL
James R. Yount First Vice President Mercer Island, WA
Robert J. Abreu Vice President New York, NY
James K. Ambrosio Vice President Massapequa, NY
Brian P. Arcara Vice President Buffalo, NY
Timothy R. Armstrong Vice President Wellington, FL
Shakeel Anwar Barkat Vice President Wellington, FL
Scott C. Bemstiel Vice President Plainsboro, NJ
Carol S. Biegel Vice President Oakbrook Terrace, IL
Christopher M. Bisaillon Vice President Oakbrook Terrace, IL
Michael P. Boos Vice President Oakbrook Terrace, IL
Robert C. Brooks Vice President Oakbrook Terrace, IL
Elizabeth M. Brown Vice President Houston, TX
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Juanita E. Buss Vice President Kennesaw, GA
Christine Cleary Byrum Vice President Tampa, FL
Daniel R. Chambers Vice President Austin, TX
Richard J. Charlino Vice President Oakbrook Terrace, IL
Deanne Margaret Chiaro Vice President Oakbrook Terrace, IL
Scott A. Chriske Vice President Plano, TX
German Clavijo Vice President Atlanta, GA
Eleanor M. Cloud Vice President Oakbrook Terrace, IL
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Kevin J. Connors Vice President Oakbrook Terrace, IL
Suzanne Cummings Vice President Oakbrook Terrace, IL
Nicholas Dalmaso Vice President, Associate General Oakbrook Terrace, IL
Counsel & Asst. Secretary;
Assistant Secretary of the Funds
Michael E. Eccleston Vice President Oakbrook Terrace, IL
Christopher J. Egan Vice President Oakbrook Terrace, IL
William J. Fow Vice President Redding, CT
Nicholas J. Foxhoven Vice President Englewood, CO
Charles Friday Vice President Gibsonia, PA
Timothy D. Griffith Vice President Kirkland, WA
Kyle D. Haas Vice President Oakbrook Terrace, IL
Daniel Hamilton Vice President Austin, TX
John G. Hansen Vice President Oakbrook Terrace, IL
Joseph Hays Vice President Cherry Hill, NJ
Michael D. Hibsch Vice President Oakbrook Terrace, IL
Susan J. Hill Vice President Oakbrook Terrace, IL
Thomas R. Hindelang Vice President Gilbert, AZ
Bryn M. Hoggard Vice President Houston, TX
Michelle Huber Vice President Oakbrook Terrace, IL
Michael B. Hughes Vice President Oakbrook Terrace, IL
Lowell Jackson Vice President Norcross, GA
Kevin G. Jajuga Vice President Baltimore, MD
Dana R. Klein Vice President Oakbrook Terrace, IL
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Frederick Kohly Vice President Miami, FL
Paul Koleda Vice President Denver, CO
David R. Kowalski Vice President & Director of Compliance Oakbrook Terrace, IL
Patricia D. Lathrop Vice President Tampa, FL
Brian Laux Vice President Staten Island, NY
Tony E. Leal Vice President Daphne, AL
S. William Lehew III Vice President Charlotte, NC
Eric Levinson Vice President San Francisco, CA
Jonathan Linstra Vice President Oakbrook Terrace, IL
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Walter Lynn Vice President Flower Mound, TX
Linda S. MacAyeal Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Brooks D. McCartney Vice President Puyallup, WA
Anne Therese McGrath Vice President Los Gatos, CA
John Mills Vice President Kenner, LA
Stuart R. Moehlman Vice President Houston, TX
Ted Morrow Vice President Dallas, TX
Peter Nicholas Vice President Beverly, MA
Steven R. Norvid Vice President Oakbrook Terrace, IL
Gregory S. Parker Vice President Houston, TX
Christopher Petrungaro Vice President Oakbrook Terrace, IL
Richard J. Poli Vice President Philadelphia, PA
Ronald E. Pratt Vice President Marietta, GA
Daniel D. Reams Vice President Royal Oak, MI
Michael W. Rohr Vice President Oakbrook Terrace. IL
Jeffrey L. Rose Vice President Houston, TX
Suzette N. Rothberg Vice President Plymouth, MN
Jeffrey Rourke Vice President Oakbrook Terrace, IL
Heather R. Sabo Vice President Richmond, VA
Stephanie Scarlata Vice President Bedford Corners, NY
Christina L. Schmieder Vice President Oakbrook Terrace, IL
Timothy M. Scholten Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Gwen L. Shaneyfalt Vice President Oakbrook Terrace, IL
Jeffrey C. Shirk Vice President Swampscott, MA
Traci T. Sorenson Vice President Oakbrook Terrace, IL
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
Richard Stefanec Vice President Los Angles, CA
William C. Strafford Vice President Granger, IN
Mark A. Syswerda Vice President Oakbrook Terrace, IL
Charles S. Thompson Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Daniel B. Waldron Vice President Oakbrook Terrace, IL
David G. Walsh Vice President Exton, PA
Jeff Warland Vice President Oakbrook Terrace, IL
Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL
Counsel & Asst. Secretary;
Assistant Secretary of the Funds
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Frank L. Wheeler Vice President Oakbrook Terrace, IL
Harold Whitworth, III Vice President Oakbrook Terrace, IL
Thomas M. Wilson Vice President Oakbrook Terrace, IL
Barbara A. Withers Vice President Oakbrook Terrace, IL
David M. Wynn Vice President Phoenix, AZ
Patrick M. Zacchea Vice President Oakbrook Terrace, IL
Scott F. Becker Asst. Vice President Oakbrook Terrace, IL
Andree Beckham Asst. Vice President Oakbrook Terrace, IL
Brian E. Binder Asst. Vice President Oakbrook Terrace, IL
Joan E. Blackwood Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Gregory T. Brunk Asst. Vice President Oakbrook Terrace, IL
Lynn Chadderton Asst. Vice President Valrico, FL
Amy Cooper Asst. Vice President Oakbrook Terrace, IL
Gina Costello Asst. Vice President Oakbrook Terrace, IL
Sarah K. Geiser Asst. Vice President Oakbrook Terrace, IL
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Laurie L. Jones Asst. Vice President Houston, TX
Robin R. Jordan Asst. Vice President Oakbrook Terrace, IL
Ivan R. Lowe Asst. Vice President Houston, TX
Barbara Novak Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Andrew Rakowski Asst. Vice President Oakbrook Terrace, IL
Leah Richardson Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Regina Rosen Asst. Vice President Oakbrook Terrace, IL
Pamela S. Salley Asst. Vice President Houston, TX
Vanessa M. Sanchez Asst. Vice President Oakbrook Terrace, IL
Thomas J. Sauerborn Asst. Vice President New York, NY
Bruce Saxon Asst. Vice President Oakbrook Terrace, IL
David T. Saylor Asst. Vice President Oakbrook Terrace, IL
Lisa Schultz Asst. Vice President Oakbrook Terrace, IL
Lauren B. Sinai Asst. Vice President Oakbrook Terrace, IL
Kristen L. Transier Asst. Vice President Houston, TX
Michael Trizil Asst. Vice President Oakbrook Terrace, IL
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Sharon M. C. Wells Asst. Vice President Oakbrook Terrace, IL
Aimee Williams Asst. Vice President Oakbrook Terrace, IL
Cathy Napoli Assistant Secretary Oakbrook Terrace, IL
Diane Saxon Assistant Treasurer Oakbrook Terrace, IL
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Rebecca Newman Officer Houston, TX
Theresa M. Renn Officer Oakbrook Terrace, IL
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX
William R. Rybak Treasurer Oakbrook Terrace, IL
Richard F. Powers III Director Oakbrook Terrace, IL
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
A. Thomas Smith III Director Oakbrook Terrace, IL
William R. Rybak Director Oakbrook Terrace, IL
Michael H. Santo Director Oakbrook Terrace, IL
John H. Zimmerman III Director Oakbrook Terrace, IL
</TABLE>
