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VAN KAMPEN PRIME RATE INCOME TRUST
SUPPLEMENT DATED NOVEMBER 27, 2000
TO THE
STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 2000,
SUPERSEDING ALL PRIOR SUPPLEMENTS
(1) The section of the Statement of Additional Information entitled
"Trustees and Officers" is hereby amended by deleting all information pertaining
to Curtis W. Morell, effective January 31, 2000, Dennis J. McDonnell, effective
March 31, 2000, Edward C. Wood, III, effective May 30, 2000, and Peter W. Hegel,
effective May 31, 2000, and by adding the following:
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Stephen L. Boyd........................... Executive Vice President and Chief Investment Officer of
Date of Birth: 11/16/40 Van Kampen, and President and Chief Operating Officer of
Executive Vice President and the Advisers. Executive Vice President and Chief
Chief Investment Officer Investment Officer of each of the funds in the Fund
Complex and certain other investment companies advised by
the Advisers or their affiliates. Prior to April 2000,
Vice President and Chief Investment Officer of the
Advisers. Prior to October 1998, Vice President and
Senior Portfolio Manager with AIM Capital Management,
Inc. Prior to February 1998, Senior Vice President and
Portfolio Manager of Van Kampen American Capital Asset
Management, Inc., Van Kampen American Capital Investment
Advisory Corp. and Van Kampen American Capital
Management, Inc.
Richard A. Ciccarone...................... Senior Vice President and Co-head of the Fixed Income
Date of Birth: 06/15/52 Department of the Advisers, Van Kampen Management Inc.
Vice President and Van Kampen Advisors Inc. Prior to May 2000, he served
as Co-head of Municipal Investments and Director of
Research of the Advisers, Van Kampen Management Inc. and
Van Kampen Advisors Inc. Mr. Ciccarone first joined the
Adviser in June 1983, and worked for the Adviser until
May 1989, with his last position being a Vice President.
From June 1989 to April 1996, he worked at EVEREN
Securities (formerly known as Kemper Securities), with
his last position at EVEREN being an Executive Vice
President. Since April 1996, Mr. Ciccarone has been a
Senior Vice President of the Advisers, Van Kampen
Management Inc. and Van Kampen Advisors Inc.
John R. Reynoldson........................ Senior Vice President and Co-head of the Fixed Income
Birth Date: 05/15/53 Department of the Advisers, Van Kampen Management Inc.
Vice President and Van Kampen Advisors Inc. Prior to May 2000, he
managed the investment grade taxable group for the
Adviser since July 1999. From July 1988 to June 1999, he
managed the government securities bond group for Asset
Management. Mr. Reynoldson has been with Asset Management
since April 1987, and has been a Senior Vice President of
Asset Management since July 1988. He has been a Senior
Vice President of the Adviser and Van Kampen Management
Inc. since June 1995 and Senior Vice President of Van
Kampen Advisors Inc. since June 2000.
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PRIT SPT SAI
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Howard Tiffen............................. Senior Vice President of the Advisers, Van Kampen
Date of Birth: 04/21/48 Management Inc. and Van Kampen Advisors Inc. Senior Vice
Vice President President and Director of Senior Loans of the Adviser,
and is primarily responsible for the day-to-day
management of the Fund, Van Kampen Senior Floating Rate
Fund and the Van Kampen Senior Income Trust since
December 1999. Prior to December 1999, Mr. Tiffen was
senior portfolio manager for Pilgrim Investments' Senior
Floating Rate Investment Management business from 1995 to
1999, where he managed the Pilgrim Prime Rate Trust and
other structured senior loan portfolios. From 1982 to
1995, Mr. Tiffen held positions in the lending and
capital markets functions at Bank of America and its
predecessor, Continental Bank.
John H. Zimmermann, III................... Senior Vice President and Director of Van Kampen,
Date of Birth: 11/25/57 President and Director of VKF and President of Van Kampen
Vice President Insurance Agency of Illinois Inc. Vice President of each
of the funds in the Fund Complex. From November 1992 to
December 1997, Senior Vice President of VKF.
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(2) The section of the Statement of Additional Information entitled "NET
ASSET VALUE" is hereby deleted and replaced with the following:
NET ASSET VALUE
The net asset value per share of the Fund's Shares is determined by
calculating the total value of the Fund's assets, deducting its total
liabilities, and dividing the result by the number of Shares outstanding. The
net asset value will be computed on each business day as of 5:00 p.m. Eastern
time. The Fund reserves the right to calculate the net asset value more
frequently if deemed desirable.
Senior Loans will be valued by the Fund following valuation guidelines
established and periodically reviewed by the Fund's Board of Trustees. Under the
valuation guidelines, Senior Loans and securities for which reliable market
quotes are readily available are valued at the mean of such bid and ask quotes
and all other Senior Loans securities and assets of the Fund are valued at fair
value in good faith following procedures established by the Board of Trustees.
Subject to criteria established by the Fund's Board of Trustees about the
availability and reliability of market indicators obtained from independent
pricing sources approved by the Board, certain Senior Loans will be valued on
the basis of such indicators. Other Senior Loans will be valued by independent
pricing sources approved by the Fund's Board of Trustees based upon pricing
models developed, maintained and operated by those pricing sources or valued by
the Adviser by considering a number of factors including consideration of market
indicators, transactions in instruments which the Adviser believes may be
comparable (including comparable credit quality, interest rate, interest rate
redetermination period and maturity), the credit worthiness of the Borrower, the
current interest rate, the period until next interest rate redetermination and
the maturity of such Senior Loan interests. Consideration of comparable
instruments may include commercial paper, negotiable certificates of deposit and
short-term variable rate securities which have adjustment periods comparable to
the Senior Loan interests in the Fund's portfolio. The fair value of Senior
Loans are reviewed and approved by the Fund's Valuation Committee consistent
with a methodology established by the Fund's Trustees. The Fund and Trustees
will continue to monitor developments in the Senior Loan market and will make
modifications to the current valuation methodology as deemed appropriate.
It is expected that the Fund's net asset value will fluctuate as a function
of interest rate and credit factors. Because of the short-term, adjustable rate
nature of such instruments held by the Fund, however, the Fund's net asset value
is expected to fluctuate less in response to changes in interest rates than the
net asset values of investment companies with portfolios consisting primarily of
traditional longer-term, fixed-income securities. In light of the senior nature
of Senior Loan interests that may be included in the Fund's portfolio and taking
into account the Fund's access to non-public information with respect to
Borrowers relating to such Senior
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Loans interests, the Fund does not currently believe that consideration on a
systematic basis of ratings provided by any nationally recognized statistical
rating organization or price fluctuations with respect to long-or short-term
debt of such Borrowers subordinate to the Senior Loans of such Borrowers is
necessary for a determination of the value of such Senior Loan interests.
Accordingly, the Fund generally will not systematically consider (but may
consider in certain instances) and, in any event, will not rely upon such
ratings or price fluctuations in determining the value of Senior Loan interests
in the Fund's portfolio.
Securities other than Senior Loans held in the Fund's portfolio (other than
short-term obligations, but including listed issues) may be valued on the basis
of prices furnished by one or more pricing services that determine prices for
normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities that are generally recognized by institutional traders. In
certain circumstances, portfolio securities will be valued at the last sale
price on the exchange that is the primary market for the securities, or the last
quoted bid price for those securities for which the over-the-counter market is
the primary market or for listed securities in which there were no sales during
the day. The value of interest rate swaps will be determined in accordance with
a discounted present value formula and then confirmed by obtaining a bank
quotation.
Short-term obligations held by the Fund that mature in 60 days or less are
valued at amortized cost, if their original term to maturity when acquired by
the Fund was 60 days or less, or are valued at amortized cost using their value
on the 61st day prior to maturity, if their original term to maturity when
acquired by the Fund was more than 60 days, unless in each case this is
determined not to represent fair value. Repurchase agreements will be valued at
cost plus accrued interest. Securities for which there exist no price quotations
or valuations and all other assets are valued at fair value as determined in
good faith by or on behalf of the Trustees.
Through October 31, 2000, the Fund's net asset value has ranged from a high
of $10.07 to a low of $9.20 since its commencement of investment operations on
October 4, 1989.
(3) The Statement of Additional Information is hereby supplemented as
follows:
INDEPENDENT AUDITORS
Independent auditors for the Fund perform an annual audit of the Fund's
financial statements. The Fund's Board of Trustees has engaged Deloitte & Touche
LLP, located at Two Prudential Plaza, 180 North Stetson, Chicago, Illinois
60601-6710, to be the Fund's independent auditors.
KPMG LLP, located at 303 West Wacker Drive, Chicago, Illinois 60601
("KPMG"), ceased being the Fund's independent auditors effective April 14, 2000.
The cessation of the client-auditor relationship between the Fund and KPMG was
based solely on a possible future business relationship by KPMG with an
affiliate of the Fund's investment adviser.
RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
