-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LJqRsnWyLSWmpVa7cn05TKEBkwEJ81KyktLyQdRGBShRnn59Em1HVwwbQBMbPdI2 mz5wVbBcaSJy/Iu9eKC7JQ== 0000950124-97-004938.txt : 19970929 0000950124-97-004938.hdr.sgml : 19970929 ACCESSION NUMBER: 0000950124-97-004938 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 19970926 EFFECTIVENESS DATE: 19970926 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL RESERVE FUND CENTRAL INDEX KEY: 0000005114 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 741794065 FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 002-50870 FILM NUMBER: 97686564 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-02482 FILM NUMBER: 97686565 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLAZA CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 7139934495 MAIL ADDRESS: STREET 1: ONE PARKVIEW PLAZA CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN CAPITAL RESERVE FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GENERAL RESERVE FUND INC DATE OF NAME CHANGE: 19830912 485BPOS 1 FORM N-1A 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1997 REGISTRATION NO. 2-50870 NO. 811-2482 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] POST-EFFECTIVE AMENDMENT NO. 38 [X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] AMENDMENT NO. 23 [X]
VAN KAMPEN AMERICAN CAPITAL RESERVE FUND (EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST) ONE PARKVIEW PLAZA, OAKBROOK TERRACE, ILLINOIS 60181 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE) (630) 684-6000 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE RONALD A. NYBERG, ESQ. EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY VAN KAMPEN AMERICAN CAPITAL, INC. ONE PARKVIEW PLAZA OAKBROOK TERRACE, ILLINOIS 60181 (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) [X] on September 28, 1997 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(i) [ ] on (date) pursuant to paragraph (a)(i) [ ] 75 days after filing pursuant to paragraph (a)(ii) [ ] on (date) pursuant to paragraph (a)(ii) 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. DECLARATION PURSUANT TO RULE 24F-2. REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940 AND INTENDS TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION A FORM 24F-2 FOR ITS FISCAL YEAR ENDING MAY 31, 1998 ON OR BEFORE AUGUST 29, 1998. ================================================================================ 2 VAN KAMPEN AMERICAN CAPITAL RESERVE FUND CROSS REFERENCE SHEET
LOCATION IN PROSPECTUS FORM N-1A ITEM ---------------------- PART A 1. Cover Page................................. Cover Page 2. Synopsis................................... Prospectus Summary; Shareholder Transaction Expenses; Annual Fund Operating Expenses and Example 3. Condensed Financial Information............ Financial Highlights; Fund Performance 4. General Description of Registrant.......... The Fund; Investment Objective and Policies; Investment Practices; Description of Shares of the Fund 5. Management of the Fund..................... Annual Fund Operating Expenses and Example; The Fund; Investment Practices; Investment Advisory Services; Inside Back Cover 6. Capital Stock and Other Securities......... The Fund; Alternative Sales Arrangements; Purchase of Shares; Shareholder Services; Distribution and Service Plans; Redemption of Shares; Distributions from the Fund; Tax Status; Description of Shares of the Fund; Additional Information; Inside Back Cover 7. Purchase of Securities Being Offered....... Alternative Sales Arrangements; Purchase of Shares; Shareholder Services; Distribution and Service Plans 8. Redemption or Repurchase................... Shareholder Services; Redemption of Shares 9. Pending Legal Proceedings.................. Inapplicable
STATEMENT OF ADDITIONAL INFORMATION PART B ----------------------------------- 10. Cover Page................................. Cover Page 11. Table of Contents.......................... Table of Contents 12. General Information and History............ General Information 13. Investment Objectives and Policies......... Investment Policies; Investment Restrictions 14. Management of the Fund..................... General Information; Trustees and Officers; Investment Advisory Agreement 15. Control Persons and Principal Holders of Securities............................... General Information; Trustees and Officers 16. Investment Advisory and Other Services..... General Information; Trustees and Officers; Investment Advisory Agreement; Distributor; Distribution and Service Plans; Transfer Agent; Portfolio Transactions and Brokerage; Other Information 17. Brokerage Allocation and Other Practices... Portfolio Transactions and Brokerage 18. Capital Stock and Other Securities......... Purchase and Redemption of Shares 19. Purchase, Redemption and Pricing of Securities Being Offered................. Determination of Net Asset Value; Purchase and Redemption of Shares; Exchange Privilege; Check Writing Privilege 20. Tax Status................................. Dividends, Distributions and Taxes 21. Underwriters............................... Distributor 22. Calculation of Performance Data............ Yield Information 23. Financial Statements....................... Report of Independent Accountants; Financial Statements; Notes to Financial Statements
PART C Information required to be included in Part C is set forth under the appropriate item in Part C of the Registration Statement. 3 - -------------------------------------------------------------------------------- VAN KAMPEN AMERICAN CAPITAL RESERVE FUND - -------------------------------------------------------------------------------- Van Kampen American Capital Reserve Fund (the "Fund") is a diversified mutual fund. The investment objective of the Fund is to seek protection of capital and high current income. The Fund seeks to achieve its investment objective by investing in U.S. dollar denominated money market securities. INVESTMENTS IN THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. ALTHOUGH THE FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO. The Fund's investment adviser is Van Kampen American Capital Asset Management, Inc. This Prospectus sets forth certain information that a prospective investor should know before investing in the Fund. Please read it carefully and retain it for future reference. The address of the Fund is One Parkview Plaza, Oakbrook Terrace, Illinois 60181, and its telephone number is (800)421-5666. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE REGULATORS NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE REGULATORS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. A Statement of Additional Information, dated September 28, 1997, containing additional information about the Fund is hereby incorporated in its entirety into this Prospectus. A copy of the Statement of Additional Information may be obtained without charge by calling (800)421-5666 or for Telecommunications Device For the Deaf by calling (800)421-2833. The Statement of Additional Information has been filed with the Securities and Exchange Commission (the "SEC") and is available along with other related materials of the Fund at the SEC's internet web site (http://www.sec.gov). ------------------ VAN KAMPEN AMERICAN CAPITAL SM ------------------ THIS PROSPECTUS IS DATED SEPTEMBER 28, 1997. 4 - ------------------------------------------------------------------------------ TABLE OF CONTENTS - ------------------------------------------------------------------------------
PAGE ---- Prospectus Summary.......................................... 3 Shareholder Transaction Expenses............................ 5 Annual Fund Operating Expenses and Example.................. 6 Financial Highlights........................................ 8 The Fund.................................................... 10 Investment Objective and Policies........................... 10 Investment Practices........................................ 13 Investment Advisory Services................................ 13 Alternative Sales Arrangements.............................. 15 Purchase of Shares.......................................... 17 Shareholder Services........................................ 21 Redemption of Shares........................................ 26 Distribution and Service Plans.............................. 29 Distributions from the Fund................................. 31 Tax Status.................................................. 32 Fund Performance............................................ 33 Description of Shares of the Fund........................... 34 Additional Information...................................... 35
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. 2 5 - ------------------------------------------------------------------------------ PROSPECTUS SUMMARY - ------------------------------------------------------------------------------ THE FUND. Van Kampen American Capital Reserve Fund (the "Fund) is a diversified, open-end management investment company organized as a Delaware business trust. MINIMUM PURCHASE. $500 minimum initial investment for each class of shares and $25 minimum for each subsequent investment for each class of shares (or less as described under "Purchase of Shares"). INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek protection of capital and high current income. There is no assurance the Fund will achieve its investment objective. See "Investment Objective and Policies." INVESTMENT POLICY. The Fund seeks to maintain a constant net asset value of $1.00 per share by investing in a diversified portfolio of U.S. dollar denominated money market securities. It seeks high current income from these short-term investments to the extent consistent with protection of capital. RISK FACTORS. Investments in the Fund are neither insured nor guaranteed by the U.S. Government. Although the Fund seeks to maintain a stable net asset value of $1.00 per share, there can be no assurance that the Fund will be able to do so. INVESTMENT RESULTS. The investment results of the Fund are shown in the table of "Financial Highlights." ALTERNATIVE SALES ARRANGEMENTS. The Fund offers three classes of shares to the public, each with its own sales charge structure: Class A shares, Class B shares and Class C shares. Unless investors intend to exchange their Fund shares for Class B shares or Class C shares of other Van Kampen American Capital funds, they should purchase the Fund's Class A shares because there is no distribution fee. Even investors who do intend to exchange their Fund shares for Class B shares or Class C shares of other Van Kampen American Capital funds may prefer to purchase Class A shares of the Fund and then redeem those shares and use the proceeds to purchase Class B shares or Class C shares of other Van Kampen American Capital funds. See "Alternative Sales Arrangements -- Factors for Consideration." Each class of shares represents an interest in the same portfolio of investments of the Fund. The per share dividends on Class B shares and Class C shares will be lower than the per share dividends on Class A shares. See "Alternative Sales Arrangements." For information on redeeming shares see "Redemption of Shares." 3 6 Class A Shares. Class A shares are offered at net asset value per share. The Fund pays an annual service fee of up to 0.15% of its average daily net assets attributable to such class of shares. See "Purchase of Shares -- Class A Shares" and "Distribution and Service Plans." Class B Shares. Class B shares are offered at net asset value per share and are subject to a maximum contingent deferred sales charge ("CDSC") of 4.00% on redemptions made within the first year after purchase and declining thereafter to 0.00% after the fifth year. See "Redemption of Shares." Class B shares are subject to a combined annual distribution fee and service fee of up to 0.90% of its average daily net assets attributable to such class of shares. See "Purchase of Shares -- Class B Shares" and "Distribution and Service Plans." Class B shares convert automatically to Class A shares eight years after the end of the calendar month in which the shareholder's order to purchase was accepted. See "Alternative Sales Arrangements -- Conversion Feature." Class C Shares. Class C shares are offered at net asset value per share and are subject to a CDSC of 1.00% on redemptions made within one year of purchase. See "Redemption of Shares." Class C shares are subject to a combined annual distribution fee and service fee of up to 0.90% of its average daily net assets attributable to such class of shares. See "Purchase of Shares -- Class C Shares" and "Distribution and Service Plans." INVESTMENT ADVISER. Van Kampen American Capital Asset Management, Inc. (the "Adviser") is the Fund's investment adviser. DISTRIBUTOR. Van Kampen American Capital Distributors, Inc. (the "Distributor") distributes the Fund's shares. DISTRIBUTIONS FROM THE FUND. Dividends from net investment income and capital gains, if any, are declared and paid daily. All dividends and distributions are automatically reinvested in shares of the Fund at net asset value per share (without sales charge) unless payment in cash is requested. See "Distributions from the Fund." The foregoing is qualified in its entirety by reference to the more detailed information appearing elsewhere in this Prospectus. 4 7 - ------------------------------------------------------------------------------ SHAREHOLDER TRANSACTION EXPENSES - ------------------------------------------------------------------------------
CLASS A CLASS B CLASS C SHARES SHARES SHARES ------- ------- ------- Maximum sales charge imposed on purchases (as a percentage of offering price)............... None None None Maximum sales charge imposed on reinvested dividends (as a percentage of offering price)........................ None None None Deferred sales charge (as a percentage of the lesser of original purchase price or Year redemption proceeds).......... None Year 1--4.00% 1--1.00% Year 2--4.00% After -- None Year 3--3.00% Year 4--2.50% Year 5--1.50% After--None Redemption fees (as a percentage of amount redeemed)........... None None None Exchange fee.................... None None None
5 8 - ------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES AND EXAMPLE - ------------------------------------------------------------------------------
CLASS A CLASS B CLASS C SHARES SHARES SHARES ------- ------- ------- Management Fees (as a percentage of average daily net assets)............... 0.42% 0.42% 0.42% 12b-1 Fees (as a percentage of average daily net assets)(1).................... 0.15% 0.90%(2) 0.90%(2) Other Expenses (as a percentage of average daily net assets)....................... 0.45% 0.45% 0.46% Total Fund Operating Expenses (as a percentage of average daily net assets)................................. 1.02% 1.77% 1.78%
- ------------------------------------------------------------------------------ (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 0.90% of the average daily net assets attributable to such class of shares. See "Distribution and Service Plans." (2) Long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted as a Fund-level expense by NASD Rules. 6 9
ONE THREE FIVE TEN YEAR YEARS YEARS YEARS EXAMPLE: ---- ----- ----- ----- You would pay the following expenses on a $1,000 investment, assuming (i) an operating expense ratio of 1.02% for Class A shares, 1.77% for Class B shares and 1.78% for Class C shares, (ii) a 5.00% annual return and (iii) redemption at the end of each time period: Class A............................... $10 $32 $ 56 $125 Class B............................... $58 $86 $111 $189* Class C............................... $28 $56 $ 96 $209 You would pay the following expenses on the same $1,000 investment assuming no redemption at the end of each time period: Class A............................... $10 $32 $ 56 $125 Class B............................... $18 $56 $ 96 $189* Class C............................... $18 $56 $ 96 $209
- ------------------------------------------------------------------------------ *Based on conversion to Class A shares after eight years. The purpose of the foregoing table is to assist an investor in understanding the various costs and expenses that an investor in the Fund will bear directly or indirectly. The "Example" reflects expenses based on the "Annual Fund Operating Expenses" table as shown above carried out to future years and is included to provide a means for the investor to compare expense levels of funds with different fee structures over varying investment periods. To facilitate such comparison, all funds are required by the SEC to utilize a 5.00% annual return assumption. The ten year amount with respect to Class B shares of the Fund reflects the lower aggregate 12b-1 and service fees applicable to such shares after conversion to Class A shares. Class B shares acquired through the exchange privilege are subject to the deferred sales charge schedule relating to the Class B shares of the fund from which the purchase of Class B shares was originally made. Accordingly, future expenses as projected could be higher than those determined in the above table if the investor's Class B shares were exchanged from a fund with a higher CDSC. THE INFORMATION CONTAINED IN THE ABOVE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete description of such costs and expenses, see "Purchase of Shares," "Investment Advisory Services," "Redemption of Shares" and "Distribution and Service Plans." 7 10 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH OF THE PERIODS INDICATED) - -------------------------------------------------------------------------------- The following financial highlights have been audited by Price Waterhouse LLP, independent accountants, whose report thereon was unqualified. The most recent annual report (which contains financial highlights for the last five years) is included in the Statement of Additional Information and may be obtained by shareholders without charge by calling the telephone number on the cover of this Prospectus. This information should be read in conjunction with the financial statements and notes thereto included in the Statement of Additional Information.
CLASS A SHARES --------------------------------------------------------------------------------------- YEAR ENDED MAY 31 --------------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Net Asset Value, Beginning of the Period................................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Net Investment Income................... .0440 .0465 .0434 .0229 .0244 .0415 .0664 .0801 .0815 .0651 Less Distributions from Net Investment Income................................. (.0440) (.0465) (.0434) (.0229) (.0244) (.0415) (.0664) (.0801) (.0815) (.0651) Net Asset Value, End of the Period...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== Total Return............................ 4.52% 4.75% 4.43% 2.32% 2.44% 4.20% 6.80% 8.33% 8.49% 6.71% Net Assets at End of the Period (in millions).............................. $451.3 $440.3 $319.7 $463.8 $279.3 $329.2 $402.3 $426.1 $474.2 $500.7 Ratio of Expenses to Average Net Assets*................................ 1.02% 1.07% 1.00% 1.03% 1.09% 1.05% .94% .91% .76% .78% Ratio of Net Investment Income to Average Net Assets*.................... 4.38% 4.62% 4.28% 2.36% 2.44% 4.19% 6.68% 7.99% 8.19% 6.56%
- --------------- * The impact on the Ratios of Expenses and Net Investment Income to Average Net Assets due to the Adviser's reimbursement of expenses was less than 0.01%. (Table continued on following page) 8 11 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS -- (CONTINUED) - --------------------------------------------------------------------------------
CLASS B SHARES CLASS C SHARES ---------------------------------- ---------------------------------- APRIL 18, 1995 APRIL 18, 1995 YEAR ENDED (COMMENCEMENT YEAR ENDED (COMMENCEMENT MAY 31, OF DISTRIBUTION) MAY 31, OF DISTRIBUTION) --------------- TO MAY 31, --------------- TO MAY 31, 1997 1996 1995 1997 1996 1995 ---- ---- ---------------- ---- ---- ---------------- Net Asset Value, Beginning of the Period................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ------ ------ ----- ------ ------ ----- Net Investment Income................................... .0363 .0388 .0047 .0362 .0387 .0049 Less Distributions from Net Investment Income........... (.0363) (.0388) (.0047) (.0362) (.0387) (.0049) ------ ------ ----- ------ ------ ----- Net Asset Value, End of the Period...................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ====== ====== ===== ====== ====== ===== Total Return(a)......................................... 3.71% 3.95% .47%* 3.72% 3.94% .49%* Net Assets at End of the Period (in millions)........... $103.0 $81.5 $4.2 $8.4 $9.7 $0.6 Ratio of Expenses to Average Net Assets**............... 1.77% 1.86% 1.76% 1.78% 1.87% 1.76% Ratio of Net Investment Income to Average Net Assets**............................................... 3.70% 3.75% 3.52% 3.64% 3.81% 3.52%
- --------------- * Non-Annualized ** The impact on the Ratios of Expenses and Net Investment Income to Average Net Assets due to the Adviser's reimbursement of expenses was less than 0.01%. (a) Total return is based upon net asset value which does not include payment of the contingent deferred sales charge. 9 12 - ------------------------------------------------------------------------------ THE FUND - ------------------------------------------------------------------------------ The Fund is an open-end, diversified management investment company, commonly known as a mutual fund. A mutual fund provides, for those who have similar investment goals, a practical and convenient way to invest in a diversified portfolio of securities by combining their resources in an effort to achieve such goals. Van Kampen American Capital Asset Management, Inc. (the "Adviser") provides investment advisory and administrative services to the Fund. The Adviser and its affiliates also manage other mutual funds distributed by Van Kampen American Capital Distributors, Inc. (the "Distributor"). To obtain prospectuses and other information on any of these other funds, please call the telephone number on the cover page of the Prospectus. - ------------------------------------------------------------------------------ INVESTMENT OBJECTIVE AND POLICIES - ------------------------------------------------------------------------------ The investment objective of the Fund is to seek protection of capital and high current income. The Fund seeks to achieve its investment objective by investing in U.S. dollar denominated money market securities. These securities may include obligations of the U.S. Government and its agencies, bank obligations, commercial paper and repurchase agreements secured by such obligations. Such securities are described below. The Fund seeks to maintain a constant net asset value of $1.00 per share by investing in a diversified portfolio of money market instruments with remaining maturities of 13 months or less and with a dollar-weighted average maturity of 90 days or less as required by rules promulgated by the SEC. There can be no guarantee that the Fund will achieve its investment objective or be able at all times to maintain its net asset value per share at $1.00. The daily dividend rate paid by the Fund may be expected to fluctuate. The Fund uses the amortized cost method for valuing portfolio securities purchased at a discount. See "Determination of Net Asset Value." OBLIGATIONS OF THE U.S. GOVERNMENT AND ITS AGENCIES. The Fund may invest in obligations issued or guaranteed as to principal and interest by the U.S. Government, its agencies and instrumentalities which are supported by any of the following: (a) the full faith and credit of the U.S. Government, (b) the right of the issuer to borrow an amount limited to a specific line of credit from the U.S. Government, (c) discretionary authority of the U.S. Government agency or instrumentality, or (d) the credit of the instrumentality. Such agencies or instrumentalities include, but are not limited to, the Federal National Mortgage 10 13 Association, the Government National Mortgage Association, Federal Land Banks, and the Farmer's Home Administration. BANK OBLIGATIONS. The Fund may invest in certificates of deposit, time deposits and bankers' acceptances issued by domestic banks, foreign branches or subsidiaries of domestic banks, and domestic or foreign branches of foreign banks which at the time of investment are rated in the two highest categories by Standard & Poor's Ratings Group ("S&P") (A-1 and A-2) or by Moody's Investors Service ("Moody's") (Prime-1 and Prime-2). The ratings of Moody's and S&P represent their opinions of the quality of the bank obligations they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. The Fund's current policy is to limit investments in bank obligations to obligations rated A-1 or Prime-1. Certificates of deposit are certificates representing the obligation of a bank to repay funds deposited with it for a specified period of time. Time deposits are non-negotiable deposits maintained in a bank for a specified period of time (in no event longer than seven days) at a stated interest rate. Time deposits which may be held by the Fund will not benefit from insurance from the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation. Bankers' acceptances are credit instruments evidencing the obligation of a bank to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the face amount of the instrument upon maturity. The purchase of obligations of foreign banks may subject the Fund to additional investment risks that are different in some respect from those incurred in investing in obligations of domestic banks. Foreign banks and foreign branches or subsidiaries of domestic banks are not necessarily subject to the same or similar regulatory requirements that apply to domestic banks, such as mandatory reserve requirements, loan limitations and accounting, audit and financial record keeping requirements. In addition, less information may be publicly available about a foreign bank or about a foreign branch of a domestic bank. Because evidences of ownership of obligations of foreign branches or subsidiaries of foreign banks usually are held outside the United States, the Fund will be subject to additional risks which include possible adverse political and economic developments, possible seizure or nationalization of foreign deposits and possible adopting of governmental restrictions which might adversely affect the payment of principal and interest on the foreign obligations or might restrict the payment of principal and interest to investors located outside the country of the issuer, whether from currency blockage or otherwise. Income earned or received by the Fund from sources within foreign countries may be reduced by withholding and other taxes imposed by such countries. 11 14 COMMERCIAL PAPER. The Fund may invest in short-term obligations of companies which at the time of investment are (a) rated in the two highest categories by S&P (A-1 and A-2) or by Moody's (Prime-1 and Prime-2), or (b) if not rated, issued by a company which at the date of investment has any outstanding long-term debt securities rated at least A by S&P or by Moody's. Commercial paper consists of short-term (usually from 1 to 270 days) unsecured promissory notes issued by corporations in order to finance their current operations. The Fund's current policy is to limit investments in commercial paper to obligations rated A-1 or Prime-1. REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with domestic banks (or a foreign branch or subsidiary thereof) which have a short-term debt rating of high quality (in one of the two highest categories) by either Moody's or S&P and with primary government securities dealers reporting to the Federal Reserve Bank of New York. 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, usually not more than seven days from the date of purchase, thereby determining the yield during the purchaser's holding period. No repurchase agreement may exceed one year. Repurchase agreements involve certain risks in the event of a default by the other party. The Fund will not invest in repurchase agreements maturing in more than seven days if such investment, together with any other illiquid securities held by the Fund, exceeds 10% of the value of the net assets. In the event of a bankruptcy or other default of a seller of a repurchase agreement, the Fund could experience both delays in liquidating the underlying securities and loss 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 aggregates 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 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 greater 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 that 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 SEC exemption order authorizing this practice, which conditions are designed to ensure the fair administration of the joint account and to protect the amounts in that account. 12 15 - ------------------------------------------------------------------------------ INVESTMENT PRACTICES - ------------------------------------------------------------------------------ BROKERAGE PRACTICES. The Adviser is responsible for the placement of orders for the purchase and sale of portfolio securities for the Fund. Most transactions made by the Fund are principal transactions at net prices which incur little or no brokerage costs. Dealers are selected on the basis of their professional capability for the type of transaction and the value and quality of execution services rendered on a continuing basis. The Adviser is authorized to place portfolio transactions, to the extent permitted by law, with brokerage firms affiliated with the Fund and with brokerage firms participating in the distribution of shares of the Fund and other Van Kampen American Capital mutual funds if it reasonably believes that the quality of the execution and the commission are comparable to that available from other qualified firms. INVESTMENT RESTRICTIONS. The Fund has adopted certain fundamental investment restrictions which, like the investment objective, may not be changed without approval by a vote of a majority of the outstanding voting securities of the Fund (as defined in the Investment Company Act of 1940, as amended ("1940 Act")). The Fund may not borrow money, except from banks for temporary or emergency purposes, such as to accommodate heavy redemption requests, and then in amounts not exceeding 10% of the value of the Fund's total net assets. The Fund may not mortgage, pledge or hypothecate any assets except in connection with any such borrowing and in amounts not exceeding the lesser of the dollar amount borrowed or 5% of the value of the Fund's assets at the time of such borrowing. The Fund may not lend money, except through the purchase or holding of the types of debt securities in which the Fund may invest. Other fundamental investment restrictions are described in the Statement of Additional Information. Except to the extent governed by the Fund's fundamental investment restrictions, the investment policies described under "Investment Objective and Policies" can be changed by the Trustees. - ------------------------------------------------------------------------------ INVESTMENT ADVISORY SERVICES - ------------------------------------------------------------------------------ THE ADVISER. The Adviser is a wholly-owned subsidiary of Van Kampen American Capital, Inc. ("Van Kampen American Capital"). Van Kampen American Capital is a diversified asset management company with more than two million retail investor accounts, extensive capabilities for managing institutional portfolios, and more than $60 billion under management or supervision. Van Kampen American Capital's more than 50 open-end and 37 closed-end funds and more than 2,800 unit investment trusts are professionally distributed by leading financial advisers nationwide. Van Kampen American Capital Distributors, Inc., the distributor of the Fund and its sponsor of the funds mentioned above, is also a 13 16 wholly-owned subsidiary of Van Kampen American Capital. Van Kampen American Capital is an indirect wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover & Co. The Adviser's principal office is located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. Morgan Stanley, Dean Witter, Discover & Co. and various of its directly or indirectly owned subsidiaries, including Morgan Stanley Asset Management Inc., an investment adviser ("MSAM" or the "Subadviser"), 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 global custody, securities clearance services and securities lending. 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 on an annual rate applied to average daily net assets of the Fund as follows:
% PER AVERAGE DAILY NET ASSETS ANNUM ------------------------ ----------- First $150 million........................................ 0.50% Next $100 million......................................... 0.45% Next $100 million......................................... 0.40% Over $350 million......................................... 0.35%
Under the Advisory Agreement, the Fund also reimburses the Adviser for the cost of the Fund's accounting services, which include maintaining its financial books and records and calculating its daily net asset value. Operating expenses paid by the Fund include shareholder service agency fees, service fees, distribution fees, custodian fees, legal and accounting fees, the costs of reports and proxies to shareholders, trustees' fees (other than those who are affiliated persons as defined in the 1940 Act of the Adviser, Distributor or Van Kampen American Capital), and all other business expenses not specifically assumed by the Adviser. From time to time as the Adviser or the Distributor may deem appropriate, they may voluntarily undertake to reduce the Fund's expenses by reducing the fees payable to them to the extent of, or bearing expenses in excess of, such limitations as they may establish. 14 17 PERSONAL INVESTMENT POLICIES. The Fund and the Adviser have adopted Codes of Ethics designed to recognize the fiduciary relationship between the Fund and the Adviser and its employees. The Codes permit directors, trustees, officers and employees to buy and sell securities for their personal accounts subject to certain restrictions. Persons with access to certain sensitive information are subject to preclearance and other procedures designed to prevent conflicts of interest. - ------------------------------------------------------------------------------ ALTERNATIVE SALES ARRANGEMENTS - ------------------------------------------------------------------------------ The Alternative Sales Arrangements permit an investor to choose the method of purchasing shares of the Fund that is most beneficial given the amount of the purchase and the length of time the investor expects to hold the shares. CLASS A SHARES. Class A shares are sold at net asset value. Class A shares are subject to an ongoing service fee at an annual rate of up to 0.15% of the Fund's aggregate average daily net assets attributable to the Class A shares. See "Purchase of Shares -- Class A Shares." CLASS B SHARES. Class B shares are sold at net asset value and are subject to a deferred sales charge if redeemed within five years of purchase. Class B shares are subject to an ongoing service fee at an annual rate of up to 0.15% of the Fund's aggregate average daily net assets attributable to the Class B shares and an ongoing distribution fee at an annual rate of up to 0.75% of the Fund's aggregate average daily net assets attributable to the Class B shares. The ongoing distribution fee paid by Class B shares will cause such shares to have a higher expense ratio and to pay lower dividends than those related to Class A shares. Class B shares convert automatically to Class A shares eight years after the end of the calendar month in which the shareholder's order to purchase was accepted. See "Purchase of Shares -- Class B Shares." CLASS C SHARES. Class C shares are sold at net asset value and are subject to a deferred sales charge if redeemed within one year of purchase. Class C shares are subject to an ongoing service fee at an annual rate of up to 0.15% of the Fund's aggregate average daily net assets attributable to the Class C shares and an ongoing distribution fee at an annual rate of up to 0.75% of the Fund's aggregate average daily net assets attributable to the Class C shares. The ongoing distribution fee paid by Class C shares will cause such shares to have a higher expense ratio and to pay lower dividends than those related to Class A shares. See "Purchase of Shares -- Class C Shares." CONVERSION FEATURE. Class B shares purchased on or after June 1, 1996, and any dividend reinvestment plan shares received thereon, automatically convert to Class A shares eight years after the end of the calendar month in which the shares were purchased. Class B shares purchased before June 1, 1996, and any dividend 15 18 reinvestment plan shares received thereon, automatically convert to Class A shares six years after the end of the calendar month in which the shares were purchased. Class C shares purchased before January 1, 1997, and any dividend reinvestment plan shares received thereon, automatically convert to Class A shares ten years after the end of the calendar month in which such shares were purchased. Such conversion will be on the basis of the relative net asset values per share, without the imposition of any sales load, fee or other charge. The conversion 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 Internal Revenue Code, as amended (the "Code"), and (ii) the conversion of shares does not constitute a taxable event under federal income tax law. The conversion may be suspended for an indefinite period if an opinion is no longer available and such shares might continue to be subject to the higher aggregate fees applicable to such shares. FACTORS FOR CONSIDERATION. Class B shares and Class C shares of the Fund are made available primarily to allow investors to directly purchase Class B shares and Class C shares and later exchange such shares directly into Class B shares and Class C shares of the other funds advised by the Adviser or its affiliates and distributed by the Distributor that offer an exchange privilege. Investors purchasing shares of the Fund without regard to the availability of exchanges should purchase Class A shares because there is no distribution fee and, therefore, Class A shares will have a higher yield than Class B shares and Class C shares. Investors who wish to have the ability to exchange their shares for Class B shares or Class C shares of other Van Kampen American Capital funds should consider purchasing Class A shares of the Fund and then redeeming those shares when they wish to invest in Class B shares or Class C shares of other Van Kampen American Capital funds. Since Class A shares are not subject to an ongoing distribution fee, purchasing Class A shares and then redeeming them to purchase Class B shares or Class C shares of another Van Kampen American Capital fund is likely to result in a higher return to the investor than purchasing Class B shares or Class C shares of the Fund and then exchanging them for Class B shares or Class C shares of another Van Kampen American Capital fund. It is presently the policy of the Distributor not to accept any order of $500,000 or more for Class B shares or any order of $1 million or more for Class C shares as it ordinarily would be more beneficial for such an investor to purchase Class A shares. The distribution expenses incurred by the Distributor in connection with the sale of Class B shares and Class C shares will be reimbursed from the proceeds of the ongoing distribution fee and any CDSC incurred upon redemption within five years or one year, respectively, of purchase. Distribution expenses by the Distributor in 16 19 connection with the sale of Class A shares are not reimbursed by the Fund. Sales personnel of broker-dealers distributing the Fund's shares and other persons entitled to receive compensation for selling such shares may receive differing compensation for selling Class B shares and Class C shares. Sales personnel are not entitled to receive compensation for selling Class A shares. GENERAL. Dividends paid by the Fund with respect to Class A shares, Class B shares and Class C shares will be calculated in the same manner at the same time on the same day except that the higher distribution fees and transfer agency costs relating to Class B shares or Class C shares will be borne by the respective class. See "Distributions from the Fund." Shares of the Fund may be exchanged, subject to certain limitations, for shares of the same class of certain other mutual funds advised by the Adviser and its affiliates and distributed by the Distributor. See "Shareholder Services -- Exchange Privilege." - ------------------------------------------------------------------------------ PURCHASE OF SHARES - ------------------------------------------------------------------------------ GENERAL The Fund offers three classes of shares to the public on a continuous basis through the Distributor as principal underwriter, which is located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. Shares also are offered through members of the National Association of Securities Dealers, Inc. ("NASD") who are acting as securities dealers ("dealers") and NASD members or eligible non-NASD members who are acting as brokers or agents for investors ("brokers"). The term "dealers" and "brokers" are sometimes referred to herein as "authorized dealers." Initial investments must be at least $500 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. Shares of the Fund may be sold in foreign countries where permissible. 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 purchased on any business day through authorized dealers. Shares also may be purchased by completing the application accompanying this Prospectus and forwarding the application through the authorized dealer, to the shareholder service agent, ACCESS Investor Services, Inc. ("ACCESS"), a wholly-owned subsidiary of the Van Kampen American Capital. When purchasing shares of this Fund, investors must specify whether the purchase is Class A shares, Class B shares or Class C shares. 17 20 Purchases of shares are priced at the next determined net asset value after a purchase order becomes effective, which is upon receipt by the Fund of federal funds. Net asset value per share for each class 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. Net asset value per share for each class is determined by adding the total market value of all portfolio securities owned by the Fund, cash and other assets, including accrued interest and dividends attributable to such class. All liabilities attributable to such class, including accrued expenses, are subtracted. The resulting amount is divided by the total number of shares of the class outstanding to arrive at the net asset value of each share of the class. The Fund's assets are valued on the basis of amortized cost, which involves valuing a portfolio security at its cost and, thereafter, assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the security. While this method provides for certainty in valuation it may result in periods in which value as determined by amortized cost is higher or lower than the price the Fund would receive if it sold the security. Each class of shares represents an interest in the same portfolio of investments of the Fund, has the same rights and is identical in all respects, except that (i) Class B shares and Class C shares bear the expenses of the deferred sales arrangement and any expenses (including the higher distribution fee and transfer agency costs) resulting from such sales arrangement, (ii) generally, each class has exclusive voting rights with respect to approvals of the Rule 12b-1 distribution plan pursuant to which its distribution fee or service fee is paid, (iii) each class has different exchange privileges, (iv) certain shares are subject to a conversion feature and (v) certain shares have different shareholder service options available. The net income attributable to Class B shares and Class C shares and the dividends payable on Class B shares and Class C shares will be reduced by the amount of the distribution fee and other expenses associated with such shares. Sales personnel of authorized dealers distributing the Fund's shares and other persons entitled to receive compensation for selling such shares may receive differing compensation for selling Class A shares, Class B shares or Class C shares. 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 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 18 21 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. Fees may include payment for travel expenses, including lodging, incurred in connection with trips taken by invited registered representatives and members of their families to locations within or outside of the United States for meetings or seminars of a business nature. In some instances additional compensation or promotional incentives may be offered to brokers, dealers or financial intermediaries that have sold or may sell significant amounts of shares during specified periods of time. 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. CLASS A SHARES Class A shares are offered at net asset value without sales charge. The Fund permits unitholders of unit investment trusts to reinvest distributions from such trusts in Class A shares of the Fund with no minimum or subsequent investment requirement. In order to qualify for this privilege, 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 ACCESS with appropriate backup data for each participating investor in a computerized format fully compatible with ACCESS's processing system. In addition, 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. Persons desiring more information with respect to this program, including the applicable terms and conditions thereof, should contact their securities broker or dealer or the Distributor. The Fund reserves the right to modify or terminate this program at any time. CLASS B SHARES Class B shares are offered at net asset value. Class B shares which are redeemed within five years of purchase are subject to a CDSC at the rates set forth in the following table charged as a percentage of the dollar amount subject thereto. The 19 22 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 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 CDSC, 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 purchases of shares, all payments during a month are aggregated and deemed to have been made on the last day of the month.
- ------------------------------------------------------------------------ CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF YEAR SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE - ------------------------------------------------------------------------ First................................ 4.00% Second............................... 4.00% Third................................ 3.00% Fourth............................... 2.50% Fifth................................ 1.50% Sixth and After...................... None - ------------------------------------------------------------------------
In determining whether a CDSC 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 CDSC, second of shares held for over five years or shares acquired pursuant to reinvestment of dividends or distributions and third of shares held longest during the five-year period. A commission or transaction fee of 4.00% of the purchase amount will be paid to authorized dealers and at the time of purchase. Additionally, the Distributor may, from time to time, pay additional promotional incentives, in the form of cash or other compensation, to authorized dealers that sell Class B shares of the Fund. CLASS C SHARES Class C shares are offered at net asset value. Class C shares which are redeemed within the first year of purchase are subject to a CDSC of 1.00%. The charge is assessed on an amount equal to the lower 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 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 in 20 23 an amount of $1 million or more for Class C shares because it ordinarily will be more advantageous for an investor making such an investment to purchase Class A shares. In determining whether a CDSC 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 CDSC and second of shares held for more than one year or shares acquired pursuant to reinvestment of dividends or distributions. A commission or transaction fee of 1.00% of the purchase amount will be paid to authorized dealers at the time of purchase. Authorized dealers also will be paid ongoing commissions and transaction fees of up to 0.75% of the average daily net assets of the Fund's Class C shares annually commencing in the second year after purchase. Additionally, the Distributor may, from time to time, pay additional promotional incentives, in the form of cash or other compensation, to authorized dealers that sell Class C shares of the Fund. WAIVER OF CONTINGENT DEFERRED SALES CHARGE The CDSC may be waived on redemptions of Class B shares and Class C shares (i) following the death or disability (as defined in the Code) of a shareholder, (ii) in connection with required minimum distributions from an IRA or other retirement plan, (iii) pursuant to the Fund's systematic withdrawal plan but limited to 12% annually of the initial value of the account or (iv) effected pursuant to the right of the Fund to liquidate a shareholder's account as described herein under "Redemption of Shares." The CDSC is also waived on redemptions of Class C shares as it relates to the reinvestment of redemption proceeds in shares of the same class of the Fund within 180 days after redemption. See the Statement of Additional Information for further discussion of waiver provisions. - ------------------------------------------------------------------------------ SHAREHOLDER SERVICES - ------------------------------------------------------------------------------ The Fund offers a number of shareholder services designed to facilitate the investment in its shares at little or no extra cost to the investor. The following is a description of such services. INVESTMENT ACCOUNT. Each shareholder has an investment account under which the investor's shares are held by ACCESS, the fund's transfer agent. ACCESS performs bookkeeping, data processing and administrative services relative to the maintenance of shareholder accounts. Except as described in this Prospectus, after each share transaction in an account, the shareholder receives a statement showing the activity in the account. Each shareholder will receive statements quarterly from ACCESS showing any reinvestment of dividends and capital gains distributions and any other activity in the account since the preceding statement. Such shareholders 21 24 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 ACCESS. 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 American Capital Funds, c/o ACCESS, P.O. Box 418256, Kansas City, MO 64141-9256, requesting an "affidavit of loss" and obtain a Surety Bond in a form acceptable to ACCESS. On the date the letter is received ACCESS 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 certificate was mailed. REINVESTMENT PLAN. A convenient way for investors to accumulate additional shares is by accepting dividends and capital gains distributions in shares of the Fund. Such shares are acquired at net asset value (without sales charge) on the record date. Unless the shareholder instructs otherwise, the reinvestment plan is automatic. This instruction may be made by telephone by calling (800) 421-5666 ((800) 421-2833 for the hearing impaired) or in writing to ACCESS. 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 may authorize ACCESS to charge a bank account on a regular basis to invest predetermined amounts in the Fund. Additional information is available from the Distributor or authorized dealers. RETIREMENT PLANS. Eligible investors may establish individual retirement accounts ("IRAs"); SEP, and pension and profit sharing plans; 401(k) plans; or Section 403(b)(7) plans in the case of employees of public school systems and certain non-profit organizations. Documents and forms containing detailed information regarding these plans are available from the Distributor. Van Kampen American Capital 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 22 25 payment. In order to utilize this option, the shareholder's bank must be a member of Automated Clearing House. 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 ACCESS 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 ACCESS. DIVIDEND DIVERSIFICATION. A shareholder may, upon written request or by completing the appropriate section of the application accompanied by this Prospectus or by calling (800) 421-5666, ((800) 421-2833 for the hearing impaired), elect to have all dividends and other distributions paid on a class of shares of the Fund invested into shares of the same class of any Participating Fund so long as the investor has a pre-existing account for such class of shares of the other Fund. Both accounts must be of the same type, either non-retirement or retirement. If the accounts are retirement accounts, they must both be for the same class and of the same type of retirement plan (e.g. IRA, 403(b)(7), 401(k), Keogh) and for the benefit of the same individual. If a qualified, pre-existing account does not exist, the shareholder must establish a new account subject to minimum investment and other requirements of the fund into which distributions would be invested. Distributions are invested into the selected fund at its net asset value as of the payable date of the distribution. EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same class of any other fund advised by the Adviser or Van Kampen American Capital Investment Advisory Corp. and distributed by the Distributor ("Participating Funds") based on the net asset values of each fund on the date of the exchange. Class A shares of the Fund which have not previously been charged a sales load (except for shares purchased via the reinvestment option) or that have been charged a lower sales charge than the sales charge applicable of the fund being acquired will have any applicable sales charges differential imposed upon an exchange into a Participating Fund. When Class B shares and Class C shares are exchanged among Participating Funds, the holding period for purposes of computing the CDSC is based upon the dates of the initial purchase of such shares from a Participating Fund (the "original fund"). Upon redemption from the Participating Funds complex of funds, Class B shares and Class C shares are subject to the CDSC schedule of the original fund. Shares of any Participating Fund may be exchanged for shares of any other Participating Fund only if shares 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 fund. Shares of the fund to be acquired must be registered 23 26 for sale in the investor's state. Exchanges of shares are sales and may result in a gain or loss for federal income tax purposes. Shareholders seeking an exchange into a Participating Fund should obtain and read the current prospectus for such fund. Additional funds may be added from time to time as determined by the Fund's Board of Trustees as Participating Funds. A shareholder wishing to make an exchange may do so by sending a written request to ACCESS 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 accompanied by this Prospectus. Van Kampen American Capital and its subsidiaries, including ACCESS (collectively, "VKAC"), 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 VKAC nor the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. VKAC and the Fund may be liable for any losses due to unauthorized or fraudulent instructions if reasonable procedures are not followed. Exchanges are effected at the net asset value next calculated after the request is received in good order with adjustment for any additional sales charge (if applicable). 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 gain 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 file a specific written request. The Fund reserves the right to reject any order to acquire its shares through exchange. In addition, the Fund may modify, restrict or terminate the exchange privilege at any time on 60 days' notice to its shareholders of any termination or material amendment. A prospectus of any of these mutual funds may be obtained from any 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. SYSTEMATIC WITHDRAWAL PLAN. Any investor whose shares in a single account total $10,000 or more at the next determined net asset value after receipt of instructions may establish a monthly, quarterly, semi-annual or annual withdrawal plan. Any investor whose shares is a single account total $5,000 or more at the offering price next computed after receipt of instructions may establish a quarterly, semi-annual or annual withdrawal plan. This plan provides for the orderly use of the 24 27 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 also may 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 may redeem up to 12% annually of the shareholder's initial account balance without incurring a CDSC. Initial account balance means the amount of the shareholder's investment at the time the election to participate in the plan is made. Under the plan, sufficient shares of the Fund are redeemed to provide the amount of the periodic withdrawal payment. Dividends and capital gains distributions on shares held under the plan are reinvested in additional shares at the next determined net asset value. If periodic withdrawals continuously exceed reinvested dividends and capital gains distributions, the shareholder's original investment will be correspondingly reduced and ultimately exhausted. Withdrawals made concurrently with the purchase of additional shares ordinarily will be disadvantageous to the shareholder because of the duplication of sales charges. Any taxable gain or loss will be recognized by the shareholder upon redemption of shares. 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 ACCESS as agent by completing the Authorization for Redemption by Check form and the appropriate section of the application and returning the form and application to ACCESS. Once the form is properly completed, signed and returned to ACCESS, a supply of checks drawn on State Street Bank will be sent to the Class A shareholder. Those checks may be made payable by the shareholder to the order of any person in any amount of $100 or more. When a check is presented to State Street 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 ACCESS at the next determined net asset value. Check writing redemptions represent the sale of Class A shares. Any gain or loss realized on the sale of shares is a taxable event. See "Redemption of Shares." Checks will not be honored for redemption of Class A shares held less than 15 calendar days, unless such Class A shares have been paid for by bank wire. Any Class A shares for which there are outstanding certificates may not be redeemed by check. If the amount of the check is greater than the proceeds of all uncertificated Class A shares held in the shareholder's 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 25 28 be terminated or suspended at any time by the Fund or State Street Bank. A "stop payment" system is not available on these checks. Retirement Plans and accounts that are subject to backup withholding are not eligible for the privilege. See the Statement of Additional Information for further information regarding the establishment of the privilege. - ------------------------------------------------------------------------------ REDEMPTION OF SHARES - ------------------------------------------------------------------------------ REGULAR REDEMPTIONS. Shareholders may redeem for cash some or all of their shares of the Fund at any time. To do so, a written request in proper form must be sent directly to ACCESS, P.O. Box 418256, Kansas City, Missouri 64141-9256. Shareholders may also place redemption requests through an authorized dealer. Orders received from authorized dealers must be at least $500 unless transmitted via the FUNDSERV network. As described herein under "Purchase of Shares," redemptions of Class B shares and Class C shares are subject to a CDSC. The CDSC incurred upon redemption is paid to the Distributor in reimbursement for distribution-related expenses. A custodian of a retirement plan account may charge fees based on the custodian's fee schedule. The request for redemption 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, 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. For example, although the Fund normally does not issue certificates for shares, it does so if a special request has been made to ACCESS. In the case of shareholders holding certificates, the certificates for the shares being redeemed 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 60 days must accompany the redemption request. IRA redemption requests should be sent to the IRA custodian to be forwarded to ACCESS. Where Van Kampen American Capital Trust Company serves as 26 29 custodian, special IRA, 403(b)(7), or Keogh distribution forms must be obtained from and must be forwarded to Van Kampen American Capital Trust Company, P.O. Box 944, Houston, Texas 77001-0944. Contact the custodian for information. In all cases, the redemption price is the net asset value per share next determined after the request for redemption is received in proper form by ACCESS. Payment for shares redeemed is made by check mailed within seven days after acceptance by ACCESS 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. If the shares to be redeemed have been recently purchased by check, ACCESS may delay mailing a redemption check until it confirms the purchase check has cleared, which may take up to 15 days. Such delay can be avoided if such payment of shares is made by bank wire. Any taxable gain or loss will be recognized by the shareholder upon redemption of shares. The Fund may redeem any shareholder account with a net asset 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 is required and the shareholder is given an opportunity to purchase the required value of additional shares at the next determined net asset value without sales charge. Any applicable CDSC will be deducted from the proceeds of this redemption. Any involuntary redemption may only occur if the shareholder account is less than the minimum initial investment due to shareholder redemptions. TELEPHONE REDEMPTIONS. In addition to the regular redemption procedures set forth above, the Fund permits redemption of shares by telephone and for redemption proceeds to be sent to the address of record of 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 accompanied by this Prospectus or call the Fund at (800) 421-5666 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. VKAC 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 VKAC nor the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. VKAC and the Fund may be liable for any losses due to unauthorized or fraudulent instructions if reasonable procedures are not followed. Telephone redemptions may not be available if the shareholder cannot reach ACCESS by telephone, whether because all telephone lines are busy or for any other reason; in such case, a shareholder would have to use 27 30 the Fund's regular redemption procedure described above. Requests received by ACCESS prior to 4:00 p.m., New York time, on a regular business day will be processed at the net asset value per share determined that day. These privileges are available for all accounts other than retirement accounts. The telephone redemption privilege is not available for shares represented by certificates. If an account has multiple owners, ACCESS 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 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 are expected to be wired on the next business day following the date of redemption. This service is also not available with respect to shares held in an individual retirement account (IRA) for which Van Kampen American Capital Trust Company acts as custodian. The Fund reserves the right at any time to terminate, limit or otherwise modify this redemption privilege. EXPEDITED REDEMPTIONS. Shareholders of the Fund who have completed the appropriate section of the application may request expedited redemption payment of shares having a value of $1,000 or more, by calling (800) 421-5684 (Alaska and Hawaii residents should call collect at (816) 283-3114). Redemption proceeds in the form of federal funds will be wired to the bank designated in the application. Expedited redemption requests received in good order prior to 10:00 a.m. Kansas City time are processed on the date of receipt. Redemption requests received by ACCESS after such hour are priced at the net asset value next determined and the proceeds are wired on the next banking day following receipt of such request. ACCESS reserves the right to deduct the wiring costs from the proceeds of the redemption. A shareholder may change the bank account previously designated at any time by written notice to ACCESS with the signature of the shareholder guaranteed. The Fund reserves the right at any time to terminate, limit or otherwise modify this expedited redemption privilege. REDEMPTION UPON DISABILITY. The Fund will waive the CDSC on redemptions following the disability of a Class B shareholder and Class C shareholder. An individual will be considered disabled for this purpose if he or she meets the definition thereof in Section 72(m)(7) of the Code, which in pertinent part defines a person as disabled if such person "is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration." While the Fund does not specifically adopt the balance of the Code's definition which pertains to furnishing the Secretary of Treasury with such proof as 28 31 he or she may require, the Distributor will require satisfactory proof of disability before it determines to waive the CDSC on Class B shares and Class C shares. In cases of disability, the CDSC on Class B shares and Class C shares will be waived where the 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 initial determination of disability. This waiver of the CDSC on Class B shares and Class C shares applies to a total or partial redemption, but only to redemptions of shares held at the time of the initial determination of disability. REINSTATEMENT PRIVILEGE. 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 proceeds of such redemption in Class C shares of the Fund with credit given for any CDSC paid upon such redemption. Such reinstatement is made at the net asset value (without sales charge except as described under "Shareholder Services -- Exchange Privilege") next determined after the order is received, which must be within 180 days after the date of the redemption. Reinstatement at net asset value is also offered to participants in those eligible retirement plans held or administered by Van Kampen American Capital Trust Company for repayment of principal (and interest) on their borrowings on such plans. - ------------------------------------------------------------------------------ DISTRIBUTION AND SERVICE PLANS - ------------------------------------------------------------------------------ The Fund has adopted a distribution plan (the "Distribution Plan") with respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act. The Fund also has adopted a service plan (the "Service Plan") with respect to each class of its shares. The Distribution Plan and the Service Plan provide that the Fund may spend a portion of the Fund's average daily net assets attributable to each class of shares in connection with distribution of the respective class of shares and in connection with the provision of ongoing services to shareholders of each class. The Distribution Plan and the Service Plan are being implemented through an agreement with the Distributor and sub-agreements between the Distributor and brokers, dealers or financial intermediaries (collectively, "Selling Agreements") that may provide for their customers or clients certain services or assistance. CLASS A SHARES. The Fund may spend an aggregate amount up to 0.15% per year of the average daily net assets attributable to the Class A shares of the Fund pursuant to the Distribution Plan and Service Plan. From such amount, the Fund may spend up to 0.15% per year of the Fund's average daily net assets attributable to the Class A shares pursuant to the Service Plan in connection with the ongoing provision of services to holders of such shares by the Distributor and by brokers, 29 32 dealers or financial intermediaries and in connection with the maintenance of such shareholders' accounts. The Fund pays the Distributor the lesser of the balance of the 0.15% not paid to such brokers, dealers or financial intermediaries or the amount of the Distributor's actual distribution related expense. CLASS B SHARES. The Fund may spend up to 0.75% per year of the average daily net assets attributable to the Class B shares of the Fund pursuant to the Distribution Plan. In addition, the Fund may spend up to 0.15% per year of the Fund's average daily net assets attributable to the Class B shares pursuant to the Service Plan in connection with the ongoing provision of services to holders of such shares by the Distributor and by brokers, dealers or financial intermediaries and in connection with the maintenance of such shareholders' accounts. CLASS C SHARES. The Fund may spend up to 0.75% per year of the average daily net assets attributable to the Class C shares of the Fund pursuant to the Distribution Plan. From such amount, the Fund, or the Distributor as agent for the Fund, pays brokers, dealers or financial intermediaries in connection with the distribution of the Class C shares up to 0.75% of the Fund's average daily net assets attributable to Class C shares maintained in the Fund more than one year by such broker's, dealer's or financial intermediary's customers. The Fund pays the Distributor the lesser of the balance of 0.75% not paid to such brokers, dealers or financial intermediaries or the amount of the Distributor's actual distribution related expense attributable to the Class C shares. In addition, the Fund may spend up to 0.15% per year of the Fund's average daily net assets attributable to the Class C shares pursuant to the Service Plan in connection with the ongoing provision of services to holders of such shares by the Distributor and by brokers, dealers or financial intermediaries and in connection with the maintenance of such shareholders' accounts. OTHER INFORMATION. Amounts payable to the Distributor with respect to the Class A Shares under the Distribution Plan in a given year may not fully reimburse the Distributor for its actual distribution-related expenses during such year. In such event, with respect to the Class A shares, there is no carryover of such reimbursement obligations to succeeding years. The Distributor's actual expenses with respect to Class B shares or Class C shares for any given year may exceed the amounts payable to the Distributor with respect to such class of shares under the Distribution Plan, the Service Plan and payments received pursuant to the CDSC. In such event, with respect to any such class of shares, any unreimbursed expenses will be carried forward and paid by the Fund (up to the amount of the actual expenses incurred) in future years so long as such Distribution Plan is in effect. Except as mandated by applicable law, the Fund does not impose any limit with respect to the number of years into the future that such unreimbursed expenses may be carried forward (on a Fund level basis). Because such expenses are accounted on a Fund level basis, in periods of extreme 30 33 net asset value fluctuation such amounts with respect to a particular Class B share or Class C share may be greater or less than the amount of the initial commission (including carrying cost) paid by the Distributor with respect to such share. In such circumstances, a shareholder of a share may be deemed to incur expenses attributable to other shareholders of such class. As of May 31, 1997, there were $1,612,417 and $127,810 of unreimbursed distribution expenses with respect to Class B shares and Class C shares, respectively, representing approximately 1.57% and 1.52% of the Fund's average net assets attributable to Class B shares and Class C shares, respectively. If the Distribution Plan was terminated or not continued, the Fund would not be contractually obligated to pay the Distributor for any expenses not previously reimbursed by the Fund or recovered through CDSCs. The Distributor will not use the proceeds from the CDSC applicable to a particular class of shares to defray distribution-related expenses attributable to any other class of shares. Various federal and state laws prohibit national banks and some state-chartered commercial banks from underwriting or dealing in the Fund's shares. In addition, state securities laws on this issue may differ from the interpretations of federal law, and banks and financial institutions may be required to register as dealers pursuant to state law. In the unlikely event that a court were to find that these laws prevent such banks from providing such services described above, the Fund would seek alternate providers and expects that shareholders would not experience any disadvantage. - ------------------------------------------------------------------------------ DISTRIBUTIONS FROM THE FUND - ------------------------------------------------------------------------------ The Fund's net income is declared and paid as a dividend on a daily basis. Dividends are paid to shareholders of record immediately prior to the determination of net asset value for that day. Since shares are issued and redeemed at the time net asset value is determined, dividends commence on the day following the date shares are issued and are paid for the day shares are redeemed. All dividends are automatically invested in additional full and fractional shares of the Fund at net asset value. Shareholders may elect to receive monthly payment of dividends in cash by written instruction to ACCESS. Shares purchased by daily reinvestments are liquidated at the net asset value on the last business day of the month and the proceeds of such redemption mailed to the shareholder electing cash payment. A redeeming shareholder receives all dividends accrued through the date of redemption. The per share dividends on Class B shares and Class C shares may be lower than the per share dividends on Class A shares as a result of the higher distribution fees and transfer agency costs applicable to such classes of shares. 31 34 The Fund's net income for dividend purposes is calculated daily and consists of interest accrued or discount earned, plus or minus any net realized gains or losses on portfolio securities, less any amortization of premium and the expenses of the Fund. - ------------------------------------------------------------------------------ TAX STATUS - ------------------------------------------------------------------------------ The Fund has qualified and intends to continue to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (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 the diversification of its assets. By qualifying as a regulated investment company, the Fund generally is not subject to federal income taxes to the extent it distributes at least 90% of its net investment income (which includes for this purpose net short-term capital gains, but not net capital gains, which are the excess of net long-term capital gains over net short-term capital losses) and net capital gains. The Fund intends to distribute substantially all of its net investment income and net capital gains, if any, at least annually. Distributions in excess of the Fund's earnings and profits will first reduce the adjusted tax basis of the shares held by a shareholder and, after such adjusted tax basis is reduced to zero, will constitute capital gains to such shareholder (assuming such shares are held as a capital asset). Dividends from net investment income are taxable to shareholders as ordinary income. Distributions of the Fund's net capital gains, if any, are taxable to shareholders as long-term capital gains regardless of the length of time the shares of the Fund have been held by such shareholders. However, shareholders not subject to tax on their income will not be required to pay tax on amounts distributed to them. Information as to the federal tax status of dividends and distributions will be provided by the Fund to shareholders for each year that such amounts are $10.00 or more. Under the Taxpayer Relief Act of 1997 (the "1997 Tax Act"), the maximum tax rates applicable to net capital gains recognized by individuals and other non- corporate taxpayers are (i) the same as ordinary income rates for capital assets held for one year or less, (ii) 28% for capital assets held for more than one year but not more than 18 months and (iii) 20% for capital assets held for more than 18 months. Under the 1997 Tax Act, the Treasury is authorized to issue regulations that address the application of the new capital gains rates to sales and exchanges by regulated investment companies and to sales and exchanges of interests in regulated investment companies, but no such regulations have been issued as of the date hereof. It is expected that the new tax rates for capital gains under the 1997 Tax Act described above will apply to distributions of capital gains dividends by the Fund as well as to sales and exchanges of shares in the Fund. Shareholders should 32 35 consult their own tax advisers as to the application of the new capital gains rates to their particular circumstances. To avoid being subject to a 31% federal backup withholding tax on dividends, distributions and redemption payments, a shareholder must, among other things, furnish the Fund with a certification of his correct taxpayer identification number. The foregoing is a brief summary of some of the federal income tax considerations affecting the Fund and its shareholders who are U.S. residents or U.S. corporations. Investors should consult their tax advisers for more detailed tax advice, including advice regarding state and local tax considerations. Foreign investors should consult their own tax advisers for further information as to the tax consequences in the U.S. or their country of residence or citizenship of an investment in the Fund. See "Dividends, Distributions and Taxes" in the Statement of Additional Information. - ------------------------------------------------------------------------------ FUND PERFORMANCE - ------------------------------------------------------------------------------ From time to time, the Fund may advertise its "yield" and "effective yield." Both yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of the Fund refers to the income generated by an investment in the Fund over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in the Fund is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. The current and effective yields for the seven-day period ending May 31, 1997, and a description of the method by which the yield was calculated is contained in the Statement of Additional Information. Since yield fluctuates, yield data cannot necessarily be used to compare an investment in the Fund's shares with bank deposits, savings accounts and similar investment alternatives which often provide an agreed or guaranteed fixed yield for a stated period of time. Shareholders should remember that yield is generally a function of the type and quality of the securities held in a portfolio, portfolio maturity, operating expenses and market conditions. Yield is calculated separately for Class A shares, Class B shares and Class C shares. Because of the differences in distribution fees, the yields for each of the classes will differ with Class B shares and Class C shares having a lower yield than Class A shares. 33 36 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 ratings or rankings prepared by Lipper Analytical Services, Inc., Donoghue's Money Market Report or similar independent services which monitor the performance of mutual funds, with other appropriate indexes 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. 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 provided in narrative form. These hypotheticals will be accompanied by the standard performance information required by the SEC as described above. The Fund's Annual Report and Semi-Annual Report contains additional information. A copy of the Annual Report or Semi-Annual Report may be obtained without charge by calling or writing the Fund at the telephone number and address printed on the cover page of this Prospectus. - ------------------------------------------------------------------------------ DESCRIPTION OF SHARES OF THE FUND - ------------------------------------------------------------------------------ The Fund originally was incorporated in Maryland on March 28, 1974. The Fund was reorganized as a business trust under the laws of the state of Delaware on July 31, 1995, and adopted its current name as of that time. The authorized capitalization of the Fund consists of an unlimited number of shares of beneficial interest, par value $0.01 per share. 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. Shares issued by the Fund are fully paid, non-assessable and, except as described herein, have no preemptive or conversion rights. Each class of shares represents an interest in the same assets of the Fund and 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. There are no conversion, preemptive or other subscription rights, except with respect to the conversion of certain shares into Class A shares as described herein. In the event of liquidation, each of the shares of the Fund is entitled to its portion of all of the Fund's net assets after all debt and expenses of the Fund have been paid. Since Class B shares and Class C shares pay higher distribution fees and transfer agency costs, the liquidation proceeds to Class B shareholders and Class C shareholders are likely to be lower than to other shareholders. The Fund does not contemplate holding regular meetings of shareholders to elect Trustees or otherwise. However, the holders of 10% or more of the outstanding 34 37 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 1940 Act. More detailed information concerning the Fund is set forth in the Statement of Additional Information. The Fund's Declaration of Trust provides that no Trustee, officer or shareholder of the Fund shall be held to any personal liability, nor shall resort be had to their private property for the satisfaction of any obligation or liability of the Fund but the assets of the Fund only shall be liable. - ------------------------------------------------------------------------------ ADDITIONAL INFORMATION - ------------------------------------------------------------------------------ This Prospectus and the Statement of Additional Information do not contain all the information set forth in the Registration Statement filed by the Fund with the SEC under the Securities Act of 1933. Copies of the Registration Statement may be obtained at a reasonable charge from the SEC or may be examined, without charge, at the office of the SEC in Washington, D.C. The fiscal year end of the Fund is May 31. The Fund sends to its shareholders at least semi-annually reports showing the Fund's portfolio and other information. An Annual Report, containing financial statements audited by the Fund's independent accountants, is sent to shareholders each year. After the end of each year, shareholders will receive federal tax information regarding dividends and capital gains distributions. For Automated Telephone Service which provides 24-hour direct dial access to fund facts and shareholder account information, dial (800) 847-2424. For inquiries through Telecommunications Device for the Deaf (TDD) dial (800) 421-2833. 35 38 EXISTING SHAREHOLDERS-- FOR INFORMATION ON YOUR EXISTING ACCOUNT PLEASE CALL THE FUND'S TOLL-FREE NUMBER--(800) 341-2911 PROSPECTIVE INVESTORS--CALL YOUR BROKER OR (800) 421-5666 DEALERS--FOR DEALER INFORMATION, SELLING AGREEMENTS, WIRE ORDERS, OR REDEMPTIONS CALL THE DISTRIBUTOR'S TOLL-FREE NUMBER--(800) 421-5666 FOR SHAREHOLDER AND DEALER INQUIRIES THROUGH TELECOMMUNICATIONS DEVICE FOR THE DEAF (TDD) DIAL (800) 421-2833 FOR AUTOMATED TELEPHONE SERVICES DIAL (800) 847-2424 VAN KAMPEN AMERICAN CAPITAL RESERVE FUND One Parkview Plaza Oakbrook Terrace, IL 60181 Investment Adviser VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC. One Parkview Plaza Oakbrook Terrace, IL 60181 Distributor VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC. One Parkview Plaza Oakbrook Terrace, IL 60181 Transfer Agent ACCESS INVESTOR SERVICES, INC. P.O. Box 418256 Kansas City, MO 64141-9256 Attn: Van Kampen American Capital Reserve Fund Custodian STATE STREET BANK AND TRUST COMPANY 225 West Franklin Street P.O. Box 1713 Boston, MA 02105-1713 Attn: Van Kampen American Capital Reserve Fund Legal Counsel SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive Chicago, IL 60606 Independent Accountants PRICE WATERHOUSE LLP 1201 Louisiana Suite 2900 Houston, TX 77002 39 ------------------------------------------------------------------------------ RESERVE FUND ------------------------------------------------------------------------------ P R O S P E C T U S SEPTEMBER 28, 1997 ------ A WEALTH OF KNOWLEDGE - A KNOWLEDGE OF WEALTH ------ VAN KAMPEN AMERICAN CAPITAL ------------------------------------------------------------------------ 40 STATEMENT OF ADDITIONAL INFORMATION VAN KAMPEN AMERICAN CAPITAL RESERVE FUND Van Kampen American Capital Reserve Fund (the "Fund") is a diversified, open-end management investment company. 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 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 American Capital Distributors, Inc. at One Parkview Plaza, Oakbrook Terrace, Illinois 60181 or (800) 421-5666. TABLE OF CONTENTS
PAGE ---- General Information......................................... B-2 Investment Policies......................................... B-2 Investment Restrictions..................................... B-3 Trustees and Officers....................................... B-5 Legal Counsel............................................... B-12 Investment Advisory Agreement............................... B-12 Distributor................................................. B-14 Distribution and Service Plans.............................. B-14 Transfer Agent.............................................. B-15 Portfolio Transactions and Brokerage........................ B-15 Determination of Net Asset Value............................ B-15 Purchase and Redemption of Shares........................... B-16 Exchange Privilege.......................................... B-18 Check Writing Privilege..................................... B-18 Dividends, Distributions and Taxes.......................... B-19 Yield Information........................................... B-21 Other Information........................................... B-22 Rating Categories........................................... B-22 Report of Independent Accountants........................... B-25 Financial Statements........................................ B-26 Notes to Financial Statements............................... B-34
This Statement of Additional Information is dated September 28, 1997. B-1 41 GENERAL INFORMATION Van Kampen American Capital Reserve Fund, formerly known as American Capital Reserve Fund, Inc. (the "Fund"), originally was incorporated in Maryland on March 28, 1974, and reorganized as a business trust under the laws of Delaware and adopted its current name on July 31, 1995. Van Kampen American Capital Asset Management, Inc. (the "Adviser"), Van Kampen American Capital Distributors, Inc. (the "Distributor"), and ACCESS Investor Services, Inc. ("ACCESS") are wholly-owned subsidiaries of Van Kampen American Capital, Inc. ("VKAC"), which is an indirect wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover & Co. The principal office of the Fund, the Adviser, the Distributor and VKAC is located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. Morgan Stanley, Dean Witter, Discover & Co. and various of its directly or indirectly owned subsidiaries, including Morgan Stanley Asset Management Inc., an investment adviser, Morgan Stanley & Co. Incorporated, a registered broker-dealer and investment adviser, and Morgan Stanley International, are engaged in a wide range of financial services. Their principal businesses include securities underwriting, distribution and trading; merger, acquisition, restructuring and other corporate finance advisory activities; merchant banking; stock brokerage and research services; credit services; asset management; trading of futures, options, foreign exchange, commodities and swaps (involving foreign exchange, commodities, indices and interest rates); real estate advice, financing and investing; and global custody, securities clearance services and securities lending. As of September 15, 1997, no one person was known to own beneficially or hold of record 5% or more of the outstanding shares of any class of the Fund, except for those listed below:
NAME AND ADDRESS NUMBER OF OF RECORD HOLDER CLASS OF SHARES SHARES HELD PERCENT OF CLASS ---------------- --------------- ----------- ---------------- Van Kampen American Capital A 81,808,506 18.00% Trust Company B 20,030,188 28.17% 2800 Post Oak Blvd. C 2,462,668 21.68% Houston, TX 77056
Van Kampen American Capital Trust Company acts as custodian for certain employee benefit plans and independent retirement accounts. INVESTMENT POLICIES The Fund seeks to maintain a net asset value of $1.00 per share for purchases and redemptions. To do so, the Fund uses the amortized cost method of valuing the Fund's securities pursuant to Rule 2a-7 under the Investment Company Act of 1940, as amended (the "1940 Act"), certain requirements of which are summarized below. In accordance with Rule 2a-7, the Fund is required to maintain a dollar-weighted average portfolio maturity of 90 days or less, purchase only instruments having remaining maturities of 13 months or less and invest only in U.S. dollar denominated securities determined in accordance with procedures established by the Trustees to present minimal credit risks and which are rated in one of the two highest rating categories for debt obligations by at least two nationally recognized statistical rating organizations (or one rating organization if the instrument was rated by only one such organization) or, if unrated, are of comparable quality as determined in accordance with procedures established by the Trustees. The nationally recognized statistical rating organizations currently rating instruments of the type the Fund may purchase are Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S & P"), Fitch Investors Services, Inc., Duff and Phelps, Inc. and IBCA Limited and IBCA Inc. See Ratings Categories. In addition, the Fund will not invest more than 5% of its total assets in the securities (including the securities collateralizing a repurchase agreement) of, or subject to puts issued by, a single issuer, except that (i) the Fund may invest more than 5% of its total assets in a single issuer for a period of up to three business B-2 42 days in certain limited circumstances, (ii) the Fund may invest in obligations issued or guaranteed by the U.S. Government without any such limitation, and (iii) the limitation with respect to puts does not apply to unconditional puts if no more than 10% of the Fund's total assets is invested in securities issued or guaranteed by the issuer of the unconditional put. Investments in rated securities not rated in the highest category by at least two rating organizations (or one rating organization if the instrument was rated by only one such organization), and unrated securities not determined by the Trustees to be comparable to those rated in the highest category, will be limited to 5% of the Fund's total assets, with the investment in any one such issuer being limited to no more than the greater of 1% of the Fund's total assets or $1,000,000. As to each security, these percentages are measured at the time the Fund purchases the security. There can be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. REPURCHASE AGREEMENTS. Repurchase agreements are collateralized by the underlying debt securities and may be considered to be loans under the 1940 Act. The Fund makes payment for such securities only upon physical delivery or evidence of book entry transfer to the account of a custodian or bank acting as agent. The seller under a repurchase agreement is required to maintain the value of the underlying securities marked-to-market daily at not less than the repurchase price. The underlying securities must be of a type in which the Fund may invest (normally securities of the U.S. Government, or its agencies and instrumentalities), except that the underlying securities may have maturity dates exceeding one year. LOANS OF PORTFOLIO SECURITIES. The Fund may lend portfolio securities to brokers, dealers and financial institutions provided that cash equal to 100% of the market value of the securities loaned is deposited by the borrower with the Fund and is maintained each business day. While such securities are on loan, the borrower is required to pay the Fund any income accruing thereon. Furthermore, the Fund may invest the cash collateral in portfolio securities thereby increasing the return to the Fund as well as increasing the market risk to the Fund. The Fund does not presently intend to lend its portfolio securities in excess of 5% of its total assets. Loans would be made for short-term purposes and subject to termination by the Fund in the normal settlement time, currently three business days after notice, or by the borrower on one day's notice. Borrowed securities must be returned when the loan is terminated. Any gain or loss in the market price of the borrowed securities which occurs during the term of the loan inures to the Fund and its shareholders, but any gain can be realized only if the borrower does not default. The Fund may pay reasonable finders', administrative and custodial fees in connection with a loan. INVESTMENT RESTRICTIONS The Fund has adopted the following fundamental investment restrictions which may be less restrictive than the investment policies stated in the Prospectus and may not be changed without approval by the vote of a majority of its outstanding voting shares 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 outstanding voting securities. In addition to the fundamental investment limitations set forth in the Fund's Prospectus, the Fund may not: 1. Purchase any security which matures more than two years from the date of purchase. As set forth under "Investment Objective and Policies" in the Prospectus, the Fund's operating policy is not to purchase any security having a remaining maturity of more than 13 months; 2. Purchase any security other than (a) obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities; (b) bank time deposits, certificates of deposit and bankers' acceptances which are obligations of a domestic bank (or a foreign branch or subsidiary thereof), or of a foreign bank, rated at the time of investment A-1 and A-2 by Moody's or Prime-1 and Prime-2 by S & P; (c) instruments secured by a bank obligation described in item 2(b); (d) commercial paper if rated A by S & P's or Prime by Moody's, or if not rated, issued by a company having an outstanding debt issue rated at least A by S & P's or Moody's (see Appendix for an explanation of these ratings); and (e) repurchase agreements collateralized by the debt securities described above; B-3 43 3. Issue any senior security, although the Fund may borrow as set forth under item 14 below; 4. Purchase or sell real estate; although the Fund may purchase securities issued by companies, including real estate investment trusts, which invest in real estate or interest therein; 5. Purchase securities on margin, make short sales of securities or maintain a short position; 6. Purchase or sell commodities or commodity contracts, or invest in oil, gas or mineral exploration or development programs; 7. The Fund may not invest in securities issued by other investment companies except as part of a merger, reorganization or other acquisition and except to the extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief from the provisions of the 1940 Act; 8. Make investments for the purpose of exercising control or management, except that the Fund may purchase securities of other investment companies to the extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief from the provisions of the 1940 Act; 9. Lend its portfolio securities in excess of 10% of its total assets, both taken at market value provided that any loans shall be in accordance with the guidelines established for such loans by the Trustees of the Fund as described under "Loans of Portfolio Securities," including the maintenance of collateral from the borrower equal at all times to the current market value of the securities loaned; 10. Invest in securities, except repurchase agreements, for which there are legal or contractual restrictions on resale, except that the Fund may purchase securities of other investment companies to the extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief from the provisions of the 1940 Act; 11. Underwrite securities of other issuers except that the Fund may sell an investment position even though it may be deemed an underwriter as that term is defined under the Securities Act of 1933; 12. Invest in warrants, or write, purchase or sell puts, calls, straddles, spreads or combinations thereof; 13. Purchase or retain securities of any issuer if those officers and directors of the Fund or its investment adviser who own beneficially more than 0.50% of the securities of such issuer, together own more than 5% of the securities of such issuer; 14. Borrow money, except from banks for temporary or emergency purposes and then in amounts not exceeding 10% of the value of the Fund's total net assets; or mortgage, pledge, or hypothecate any assets except in connection with any such borrowing and in amounts not exceeding the lesser of the dollar amount borrowed or 5% of the value of the Fund's assets at the time of such borrowing (the Fund will not borrow for leveraging or investment but only to meet redemption requests which might otherwise require undue dispositions of portfolio securities); 15. Lend money, except through the purchase or holding of the types of debt securities in which the Fund may invest; 16. With respect to 75% of its assets, purchase securities if the purchase would cause the Fund, at that time, to have more than 5% of the value of its total assets invested in the securities of any one issuer (except obligations of the U.S. government, its agencies or instrumentalities and repurchase agreements fully collateralized thereby); 17. Invest in the securities of any issuer, if immediately thereafter, the Fund would own more than 10% of the total value of all outstanding securities of such issuer, except that the Fund may purchase securities of other investment companies to the extent permitted by (i) the 1940 Act, as amended B-4 44 from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief from the provisions of the 1940 Act; 18. Invest more than 5% of its assets in companies having a record together with predecessors, of less than three years continuous operation; and 19. Invest more than 25% of the value of its total assets in securities of issuers in any particular industry (except obligations of the U.S. Government and of domestic branches of U.S. banks). TRUSTEES AND OFFICERS The tables below list the trustees and officers of the Trust (of which the Fund is a separate series) and other executive officers of the Fund's investment adviser and their principal occupations for the last five years and their affiliations, if any, with VK/AC Holding, Inc. ("VKAC Holding"), Van Kampen American Capital, Inc. ("Van Kampen American Capital" or "VKAC"), Van Kampen American Capital Investment Advisory Corp. ("Advisory Corp."), Van Kampen American Capital Asset Management, Inc. ("Asset Management"), Van Kampen American Capital Distributors, Inc., the distributor of the Fund's shares (the "Distributor") and ACCESS Investors Services Inc., the Fund's transfer agent ("ACCESS"). 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 the Van Kampen American Capital Exchange Fund and the Common Sense Trust). TRUSTEES
PRINCIPAL OCCUPATIONS OR NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS --------------------- -------------------------- J. Miles Branagan......................... Private investor. Co-founder, and prior to August 1996, 1632 Morning Mountain Road Chairman, Chief Executive Officer and President, MDT Raleigh, NC 27614 Corporation (now known as Getinge/Castle, Inc., a Date of Birth: 07/14/32 subsidiary of Getinge Industrier AB), a company which develops, manufactures, markets and services medical and scientific equipment. Trustee/Director of each of the funds in the Fund Complex. Richard M. DeMartini*..................... President and Chief Operating Officer, Dean Witter Two World Trade Center Capital, a division of Dean Witter Reynolds Inc. Mr. 66th Floor DeMartini is a Director of InterCapital Funds, Dean New York, NY 10048 Witter Distributors, Inc. and Dean Witter Trust Company. Date of Birth: 10/12/52 Trustee of the TCW/DW Funds. Director of the National Healthcare Resources, Inc. 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. Trustee/Director of each of the funds in the Fund Complex.
B-5 45
PRINCIPAL OCCUPATIONS OR NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS - --------------------- -------------------------- Linda Hutton Heagy........................ Co-Managing Partner of Heidrick & Stuggles, an executive Sears Tower search firm. Prior to 1997, Partner, Ray & Berndtson, 233 South Wacker Drive Inc. An executive recruiting and management consulting Suite 7000 firm. Formerly, Executive Vice President of ABN AMRO, Chicago, IL 60606 N.A., a Dutch bank holding company. Prior to 1992, Date of Birth: 06/03/48 Executive Vice President of La Salle National Bank. Trustee on the University of Chicago Hospitals Board, The International House Board and the Women's Board of the University of Chicago. Trustee/Director of each of the funds in the Fund Complex. R. Craig Kennedy.......................... President and Director, German Marshall Fund of the 11 DuPont Circle, N.W. United States. Formerly, advisor to the Dennis Trading Washington, D.C. 20036 Group Inc. Prior to 1992, President and Chief Executive Date of Birth: 02/29/52 Officer, Director and Member of the Investment Committee of the Joyce Foundation, a private foundation. Trustee/Director of each of the funds in the Fund Complex. Jack E. Nelson............................ President, Nelson Investment Planning Services, Inc., a 423 Country Club Drive financial planning company and registered investment Winter Park, FL 32789 adviser. President, Nelson Ivest Brokerage Services Inc., Date of Birth: 02/13/36 a member of the National Association of Securities Dealers, Inc. ("NASD") and Securities Investors Protection Corp. ("SIPC"). Trustee/Director of each of the funds in the Fund Complex. Jerome L. Robinson........................ President, Robinson Technical Products Corporation, a 115 River Road manufacturer and processor of welding alloys, supplies Edgewater, NJ 07020 and equipment. Director, Pacesetter Software, a software Date of Birth: 10/10/22 programming company specializing in white collar productivity. Director, Panasia Bank. Trustee/Director of each of the funds in the Fund Complex. Phillip B. Rooney......................... Vice Chairman and Director of The ServiceMaster Company, One ServiceMaster Way a business and consumer services company. Director of Downers Grove, IL 60515 Illinois Tool Works, Inc., a manufacturing company; the Date of Birth: 07/08/44 Urban Shopping Centers Inc., a retail mall management company; and Stone Container Corp., a paper manufacturing company. Trustee, University of Notre Dame. Formerly, President and Chief Executive Officer, Waste Management Inc., an environmental services company, and prior to that President and Chief Operating Officer, Waste Management Inc. Trustee/Director of each of the funds in the Fund Complex. Fernando Sisto............................ Professor Emeritus and, prior to 1995, Dean of the 155 Hickory Lane Graduate School, Stevens Institute of Technology. Closter, NJ 07624 Director, Dynalysis of Princeton, a firm engaged in Date of Birth: 08/02/24 engineering research. Trustee/Director of each of the funds in the Fund Complex. Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps, Slate, Meagher 333 West Wacker Drive & Flom (Illinois), legal counsel to the funds in the Fund Chicago, IL 60606 Complex, open-end funds advised by Van Kampen American Date of Birth: 08/22/39 Capital Management, Inc. and closed-end funds advised by Advisory Corp. Trustee/Director of each of the funds in the Fund Complex, open-end funds advised by Van Kampen American Capital Management, Inc. and closed-end funds advised by Advisory Corp.
- --------------- * 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 B-6 46 Fund and is an interested person of Asset Management with respect to certain funds advised by Asset Management by reason of his firm in the past acting as legal counsel to Asset Management. Mr. DeMartini is an interested person of the Fund and the Adviser by reason of this position with Dean Witter Capital and its affiliates. OFFICERS Messrs. McDonnell, Hegel, Nyberg, Wood, Sullivan, Dalmaso, Martin, Wetherell and Hill are located at One Parkview Plaza, Oakbrook Terrace, IL 60181. The Fund's other officers are located at 2800 Post Oak Blvd., Houston, TX 77056.
POSITIONS AND PRINCIPAL OCCUPATIONS NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS ------------ ----------------- --------------------- Dennis J. McDonnell......... President President and a Director of VKAC. Date of Birth: 05/20/42 President, Chief Operating Officer and a Director of the Advisers. Director or officer of certain other subsidiaries of VKAC. Prior to November 1996, Executive Vice President and a Director of VKAC Holding. President of each of the funds in the Fund Complex. President, Chairman of the Board and Trustee of other investment companies advised by the Advisers or their affiliates. Peter W. Hegel.............. Vice President Executive Vice President of the Advisers. Date of Birth: 06/25/56 Director of Asset Management. Officer of certain other subsidiaries of VKAC. Vice President of each of the funds in the Fund Complex and certain other investment companies advised by the Advisers or their affiliates. Curtis W. Morell............ Vice President and Chief Senior Vice President of the Advisers, Vice Date of Birth: 08/04/46 Accounting Officer President and Chief Accounting Officer of each of the funds in the Fund Complex and certain other investment companies advised by the Advisers or their affiliates. Ronald A. Nyberg............ Vice President and Secretary Executive Vice President, General Counsel Date of Birth: 07/29/53 and Secretary of VKAC. Executive Vice President, General Counsel, Assistant Secretary and a Director of the Advisers and the Distributor. Executive Vice President, General Counsel and Assistant Secretary of ACCESS. Director or officer of certain other subsidiaries of VKAC. Director of ICI Mutual Insurance Co., a provider of insurance to members of the Investment Company Institute. Prior to November 1996, Executive Vice President, General Counsel and Secretary of VKAC Holding. 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.
B-7 47
POSITIONS AND PRINCIPAL OCCUPATIONS NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS ------------ ----------------- --------------------- Don G. Powell Chairman, President, Chief Executive 2800 Post Oak Blvd. Officer and a Director of VKAC. Chairman, Houston, TX 77056 Chief Executive Officer and a Director of Date of Birth: 10/19/39 the Advisers and the Distributor. Chairman and a Director of ACCESS. Director or officer of certain other subsidiaries of VKAC. Chairman of the Board of Governors and the Executive Committee of the Investment Company Institute. Prior to November, 1996, President, Chief Executive Officer and a Director of VKAC Holding. President, Chief Executive Officer and a Trustee/Director of certain investment companies advised by Asset Management and prior to July 1996, President, Chief Executive Officer and a Trustee of the funds in the Fund Complex and closed-end investment companies advised by Advisory Corp. Alan T. Sachtleben.......... Vice President Executive Vice President of the Advisers. Date of Birth: 04/20/42 Director of Asset Management. Director or officer of certain other subsidiaries of VKAC. Vice President of each of the funds in the Fund Complex and certain other investment companies advised by the Advisers or their affiliates. Paul R. Wolkenberg.......... Vice President Executive Vice President of the VKAC, the Date of Birth: 11/10/44 Advisers and the Distributor. President, Chief Executive Officer and a Director of ACCESS. Director or officer of certain other subsidiaries of VKAC. Vice President of each of the funds in the Fund Complex and certain other investment companies advised by the Advisers or their affiliates. Edward C. Wood III.......... Vice President and Chief Senior Vice President of the Advisers. Vice Date of Birth: 01/11/56 Financial Officer President and Chief Financial Officer of each of the funds in the Fund Complex and certain other investment companies advised by the Advisers or their affiliates. John L. Sullivan............ Treasurer First Vice President of the Advisers. Date of Birth: 08/20/55 Treasurer of each of the funds in the Fund Complex and certain other investment companies advised by the Advisers or their affiliates. Tanya M. Loden.............. Controller Vice President of the Advisers. Controller Date of Birth: 11/19/59 of each of the funds in the Fund Complex and other investment companies advised by the Advisers or the affiliates.
B-8 48
POSITIONS AND PRINCIPAL OCCUPATIONS NAME AND AGE OFFICES WITH FUND DURING PAST 5 YEARS ------------ ----------------- --------------------- Nicholas Dalmaso............ Assistant Secretary Vice President and Senior Attorney of VKAC. Date of Birth: 03/01/65 Assistant Vice President and Assistant Secretary of the Advisers and the Distributor. Officer of certain other subsidiaries of VKAC. Assistant Secretary of each of the funds in the Fund Complex and other investment companies advised by the Advisers or the affiliates. Huey P. Falgout, Jr......... Assistant Secretary Assistant Vice President and Senior Date of Birth: 11/15/63 Attorney of VKAC. Assistant Vice President and Assistant Secretary of the Advisers, the Distributor and ACCESS. Officer of certain other subsidiaries of VKAC. Assistant Secretary of each of the funds in the Fund Complex and other investment companies advised by the Advisers or the affiliates. Scott E. Martin............. Assistant Secretary Senior Vice President, Deputy General Date of Birth: 08/20/56 Counsel and Assistant Secretary of VKAC. Senior Vice President, Deputy General Counsel and Secretary of the Advisers, the Distributor and ACCESS. Officer of certain other subsidiaries of VKAC. Prior to November 1996, Senior Vice President, Deputy General Counsel and Assistant Secretary of VKAC Holding. Assistant Secretary of each of the funds in the Fund Complex and other investment companies advised by the Advisers or the affiliates. Weston B. Wetherell......... Assistant Secretary Vice President, Associate General Counsel Date of Birth: 06/15/56 and Assistant Secretary of VKAC, the Advisers and the Distributor. Officer of certain other subsidiaries of VKAC. Assistant Secretary of each of the funds in the Fund Complex and other investment companies advised by the Advisers or the affiliates. Steven M. Hill.............. Assistant Treasurer Assistant Vice President of the Advisers. Date of Birth: 10/16/64 Assistant Treasurer of each of the funds in the Fund Complex and other investment companies advised by the Advisers or the affiliates. M. Robert Sullivan.......... Assistant Controller Assistant Vice President of the Advisers. Date of Birth: 03/30/33 Assistant Controller of each of the funds in the Fund Complex and other investment companies advised by the Advisers or the affiliates.
Each trustee/director holds the same position with each of the funds in the Fund Complex. As of the date of this Statement of Additional Information, there are 65 operating funds in the Fund Complex. For purposes of the following compensation and benefits discussion, the Fund Complex is divided into the following three groups: the funds advised by Asset Management (the "AC Funds"), the funds advised by Advisory Corp. excluding funds organized as series of the Morgan Stanley Fund, Inc. (the "VK Funds") and the funds advised by Advisory Corp. organized as series of the Morgan Stanley Fund, Inc. (the "MS Funds"). Each trustee/director who is not an affiliated person of VKAC, the Advisers, the Distributor, ACCESS or Morgan Stanley (each a "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 provides a deferred compensation plan to its Non-Affiliated Trustees that allows trustees/directors to defer receipt of their compensation and earn a B-9 49 return on such deferred amounts. Each AC Fund and VK Fund 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 from the AC Funds includes an annual retainer in an amount equal to $35,000 per calendar year, due in four quarterly installments on the first business day of each calendar quarter. The AC Funds pay each Non-Affiliated Trustee a per meeting fee in the amount of $2,000 per regular quarterly meeting attended by the Non-Affiliated Trustee, due on the date of such meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee in connection with his or her services as a trustee. Payment of the annual retainer and the regular meeting fee is allocated among the AC Funds (i) 50% on the basis of the relative net assets of each AC Fund to the aggregate net assets of all the AC Funds and (ii) 50% equally to each AC Fund, in each case as of the last business day of the preceding calendar quarter. Each AC Fund which is the subject of a special meeting of the trustees generally pays each Non-Affiliated Trustee a per meeting fee in the amount of $125 per special meeting attended by the Non-Affiliated Trustee, due on the date of such 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. The compensation of each Non-Affiliated Trustee from the VK Funds includes an annual retainer in an amount equal to $2,500 per calendar year, due in four quarterly installments on the first business day of each calendar quarter. Each Non-Affiliated Trustee receives a per meeting fee from each VK Fund in the amount of $125 per regular quarterly meeting attended by the Non-Affiliated Trustee, due on the date of such meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee in connection with his or her services as a trustee. Each Non-Affiliated Trustee receives a per meeting fee from each VK Fund in the amount of $125 per special meeting attended by the Non-Affiliated Trustee, due on the date of such 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. The compensation of each Non-Affiliated Trustee from the MS Funds is intended to be based generally on the compensation amounts and methodology used by such funds prior to their joining the current Fund Complex on July 2, 1997. Each trustee/director was elected as a director of the MS Funds on July 2, 1997. Prior to July 2, 1997, the MS Funds were part of another fund complex (the "Prior Complex") and the former directors of the MS Funds were paid an aggregate fee allocated among the funds in the Prior Complex that resulted in individual directors receiving total compensation between approximately $8,000 to $10,000 from the MS Funds during such funds' last fiscal year. The trustees/directors are currently in the process of reviewing and seeking to standardize compensation and benefits across the Fund Complex. The trustees/directors approved an aggregate compensation cap with respect to funds in the Fund Complex of $84,000 per Non-Affiliated Trustee per year (excluding any retirement benefits) for the period July 22, 1995 through December 31, 1996, subject to the net assets and the number of funds in the Fund Complex as of July 21, 1995 and certain other exceptions. For the calendar year ended December 31, 1996, certain trustees/directors received aggregate compensation from the funds in the Fund Complex over $84,000 due to compensation received but not subject to the cap, including compensation from new funds added to the Fund Complex after July 22, 1995 and certain special meetings in 1996. In addition, each of Advisory Corp. or Asset Management, as the case may be, agreed to reimburse each fund in the Fund Complex through December 31, 1996 for any increase in the aggregate compensation over the aggregate compensation paid by such fund in its 1994 fiscal year, provided that if a fund did not exist for the entire 1994 fiscal year appropriate adjustments will be made. Each Non-Affiliated Trustee generally can elect to defer receipt of all or a portion of the compensation earned by such Non-Affiliated Trustee until retirement. Amounts deferred are retained by the Fund and earn a rate of return determined by reference to the return on the common shares of such Fund or other funds in the Fund Complex as selected by the respective Non-Affiliated Trustee, with the same economic effect as if B-10 50 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. Each AC Fund and VK Fund has adopted a retirement plan. 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. Asset Management has reimbursed each AC Fund for the expenses related to the retirement plan through December 31, 1996. Additional information regarding compensation and benefits for trustees is set forth below. As indicated in the notes accompanying the table, the amounts relate to either the Fund's most recently completed fiscal year or the Fund Complex' most recently completed calendar year ended December 31, 1996. COMPENSATION TABLE
TOTAL COMPENSATION YEAR FIRST PENSION OR ESTIMATED MAXIMUM BEFORE DEFERRAL APPOINTED OR AGGREGATE COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS FROM FUND ELECTED TO THE BEFORE DEFERRAL FROM THE ACCRUED AS PART OF FROM THE FUND UPON COMPLEX PAID NAME(1) BOARD FUND(2) EXPENSES(3) RETIREMENT(4) TO TRUSTEE(5) ------- -------------- ------------------------ ------------------- ------------------ --------------- J. Miles Branagan* 1991 $1,994 $ 691 $2,500 $104,875 Linda Hutton Heagy* 1995 1,994 69 2,500 104,875 Dr. Roger Hilsman 1978 1,004 2,752 2,500 103,750 R. Craig Kennedy* 1995 1,994 45 2,500 104,875 Donald C. Miller 1995 1,004 -0- -0- 104,875 Jack E. Nelson* 1995 1,744 314 2,500 97,875 Jerome L. Robinson* 1995 1,994 -0- -0- 101,625 Phillip B. Rooney* 1997 370 -0- 2,500 -0- Dr. Fernando Sisto* 1978 1,994 1,519 2,500 104,875 Wayne W. Whalen* 1995 1,994 219 2,500 104,875 William S. Woodside 1986 1,004 4,113 2,500 104,875
- --------------- * Currently a member of the Board of Trustees. Mr. Phillip B. Rooney became a member of the Board of Trustees effective April 14, 1997 and thus does not have a full fiscal year of information to report. (1) Persons not designated by an asterisk are not currently members of the Board of Trustees, but were members of the Board of Trustees during the Fund's most recently completed fiscal year. Messrs. Hilsman, Miller and Woodside retired from the Board of Trustees on December 31, 1996. Messrs. DeMartini, McDonnell and Powell, also trustees of the Fund during all or a portion of the Fund's last fiscal year, are not included in the compensation table because they are affiliated persons of the Advisers and are not eligible for compensation or retirement benefits from the Fund. (2) The amounts shown in this column represent the Aggregate Compensation before Deferral with respect to the Fund's fiscal year ended May 31, 1997. The following trustees deferred compensation from the Fund during the fiscal year ended May 31, 1997: Mr. Branagan, $1,242; Ms. Heagy, $1,340; Mr. Kennedy, $4,020; Mr. Miller, $4,522; Mr. Nelson, $5,262; Mr. Robinson, $5,251; Mr. Sisto, $370; and Mr. Whalen, $4,362. Amounts deferred are retained by the Fund and earn a rate of return determined by reference to either the return on the common shares of the Fund or other funds in the Fund Complex as selected by the respective Non-Affiliated Trustee, with the same economic effect as if such Non-Affiliated Trustee had B-11 51 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 from the Fund as of May 31, 1997 is as follows: Mr. Branagan, $1,328; Ms. Heagy, $2,514; Mr. Kennedy, $7,259; Mr. Miller, $6,794; Mr. Nelson, $8,795; Mr. Robinson, $7,774; Mr. Sisto, $7,259; and Mr. Whalen, $7,072. The deferred compensation plan is described above the Compensation Table. (3) The amounts shown in this column represent the Retirement Benefits accrued by the Fund during its fiscal year ended May 31, 1997. The retirement plan is described above the Compensation Table. (4) For Messrs. Hilsman, Miller and Woodside, this is the actual annual benefits payable by the Fund in each year of the 10-year period since such trustee's retirement. For the remaining trustees, this is the estimated maximum annual benefits payable by the Fund in each year of the 10-year period commencing in the year of such trustee's retirement from the Fund assuming: the trustee has 10 or more years of service on the Board of Trustees (including years of service prior to the adoption of the retirement plan) and retires at or after attaining the age of 60. Trustees retiring prior to the age of 60 or with fewer than 10 years of service for the Fund may receive reduced retirement benefits from the Fund. The actual annual benefit may be less if the trustee is subject to the Fund Complex retirement benefit cap or if the trustee is not fully vested at the time of retirement. (5) The amounts shown in this column represent the aggregate compensation paid by all 51 of the investment companies in the Fund Complex as of December 31, 1996 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. As described in the narration preceding the table, the Fund Complex has increased in size since December 31, 1996. It is likely the aggregate compensation for the calendar year ending December 31, 1997 will be higher due to the increase in the size of the Fund Complex. As of the date of this Statement of Additional Information, the trustee/ directors are in the process of reviewing and seeking to standardize compensation and benefits across the Fund Complex. Certain trustees deferred all or a portion of their aggregate compensation from the Fund Complex during the calendar year ended December 31, 1996. 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 trustees' Fund Complex compensation cap covered the period July 22, 1995 through December 31, 1996. For the calendar year ended December 31, 1996, certain trustees received compensation over $84,000 in the aggregate due to compensation received but not subject to the cap, including compensation from new funds added to the Fund Complex after July 22, 1995 and certain special meetings in 1996. The Advisers and their affiliates also serve as investment adviser for other investment companies; however, with the exception of Messrs. McDonnell, Powell and Whalen, the 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 $243,375 during the calendar year ended December 31, 1996. As of September 15, 1997, the trustees and officers of the Fund as a group owned less than 1% of the shares of the Fund. LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom (Illinois). 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 its assets and to B-12 52 place orders for the purchase and sale of its portfolio securities. The Adviser is responsible for obtaining and evaluating economic, statistical, and financial data and for formulating and implementing investment programs in furtherance of the Fund's investment objectives. The Adviser also furnishes at no cost to the Fund (except as noted herein) the services of sufficient executive and clerical personnel for the Fund as are necessary to prepare registration statements, prospectuses, shareholder reports, and notices and proxy solicitation materials. In addition, the Adviser furnishes at no cost to the Fund the services of a President of the Fund, one or more Vice Presidents as needed, and a Secretary. Under the Advisory Agreement, the Fund bears the cost of its accounting services, which includes maintaining its financial books and records and calculating its daily net asset value. The costs of such accounting services include the salaries and overhead expenses of a Treasurer or other principal financial officer and the personnel operating under his direction. The services provided by the Adviser are at cost. The Fund also pays transfer agency fees, distribution fees, service fees, custodian fees, legal and auditing fees, the costs of reports to shareholders and all other ordinary expenses not specifically assumed by the Adviser. Under the Advisory Agreement, the Fund pays to the Adviser as compensation for the services rendered, facilities furnished, and expenses paid by it a fee payable monthly computed on average daily net assets of the Fund at the annual rate of: 0.50% on the first $150 million net assets; 0.45% on the next $100 million of net assets; 0.40% on the next $100 million of net assets; and 0.35% on the net assets over $350 million. The average net asset value for purposes of computing the advisory fee is determined by taking the average of all of the determinations of net asset value for each business day during a given calendar month. Such fee is payable for each calendar month as soon as practicable after the end of that month. The fee payable to the Adviser is reduced by any commissions, tender solicitation and other fees, brokerage or similar payments received by the Adviser, or any other direct or indirect majority-owned subsidiary of VK/AC Holding, Inc. in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses incurred by such subsidiary of VK/AC Holding, Inc. in connection with obtaining such payments. The Adviser agrees to use its best efforts to recapture tender solicitation fees and exchange offer fees for the Fund's benefit and to advise the Trustees of the Fund of any other commissions, fees, brokerage or similar payments which may be possible for the Adviser or any direct or indirect majority-owned subsidiary of VK/AC Holding, Inc., to receive in connection with the Fund's portfolio transactions or other arrangements which may benefit the Fund. The Advisory Agreement also provides that, in the event the ordinary business expenses of the Fund for any fiscal year exceed one percent of the Fund's average net assets, the compensation due the Adviser will be reduced by the amount of such excess and that, if a reduction in and refund of the advisory fee is insufficient, the Adviser will pay the Fund monthly an amount sufficient to make up the deficiency, subject to readjustment during the year. Ordinary business expenses include the investment advisory fee and other operating costs paid by the Trust except (1) interest and taxes, (2) brokerage commissions, (3) certain litigation and indemnification expenses as described in the Advisory Agreement and (4) payments made by the Fund pursuant to its distribution plans. The Advisory Agreement also provides that the Adviser shall not be liable to the Fund for any actions or omissions if it acted in good faith without negligence or misconduct. 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 vote of a majority of the Fund's outstanding voting securities and (b) by the affirmative vote of a majority of the Trustees who are not parties to the agreement or interested persons of any such party by votes cast in person at a meeting called for such purpose. The Advisory Agreement provides that it shall terminate automatically if assigned and that it may be terminated without penalty by either party on 60 days' written notice. During the fiscal years ended May 31, 1997, 1996 and 1995, the Adviser received $2,170,578, $1,842,244 and $1,896,937, respectively in advisory fees from the Fund. A portion of these amounts was paid to the Adviser or its parent in reimbursement of personnel, office space, facilities and equipment costs attributable to the provision of accounting services to the Fund. B-13 53 OTHER AGREEMENTS ACCOUNTING SERVICES AGREEMENT. The Fund has entered into an accounting services agreement pursuant to which Advisory Corp. provides accounting services supplementary to those provided by the Custodian. Such services are expected to enable the Fund to more closely monitor and maintain its accounts and records. The Fund shares with the other mutual funds distributed by the Distributor and advised by the Adviser and its affiliates 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 cost based proportionally on their respective net assets. For the years ended May 31, 1997, 1996 and 1995, the Fund paid expenses of approximately $90,167, $127,090 and $100,666, respectively, representing the VK Adviser's cost of providing accounting services. DISTRIBUTOR 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. 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) by the Fund's Trustees or 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 60 days' written notice. No commissions were paid by the Fund during the past three fiscal years. DISTRIBUTION AND SERVICE PLANS The Fund has adopted a distribution plan (the "Distribution Plan") with respect to each class of its shares pursuant to Rule 12b-1 under the 1940 Act. The Fund also has adopted a service plan (the "Service Plan") with respect to each class of its shares. The Distribution Plan and the Service Plan sometimes are referred to herein as the "Plans". The Plans provide that the Fund may spend a portion of the Fund's average daily net assets attributable to each class of shares in connection with distribution of the respective class of shares and in connection with the provision of ongoing services to shareholders of such class, respectively. The Distribution Plan and the Service Plan are being implemented through an agreement (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 B-14 54 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. For the fiscal year ended May 31, 1997, the Fund's aggregate expenses under the Class B Plan were $713,515 or 0.90% of the Class B shares' average net assets. Such expenses were paid to reimburse the Distributor for the following payments: $116,877 for commissions and transaction fees paid to financial intermediaries in respect of sales of Class B shares of the Fund and $596,638 for fees paid to financial intermediaries for servicing Class B shareholders and administering the Plans. For the fiscal year ended May 31, 1997, the Fund's aggregate expenses under the Class C Plan were $83,878 or 0.90% of the Class C shares' average net assets. Such expenses were paid to reimburse the Distributor for the following payments: $407 for commissions and transaction fees paid to financial intermediaries in respect of sales of Class C shares of the Fund and $83,471 for fees paid to financial intermediaries for servicing Class C shareholders and administering the Plans. TRANSFER AGENT During the fiscal years ending May 31, 1997, 1996 and 1995, ACCESS, shareholder service agent and dividend disbursing agent for the Fund, received fees aggregating $1,374,092, $1,280,376 and $1,266,690, respectively, for these services. These services are provided at cost plus a profit. PORTFOLIO TRANSACTIONS AND BROKERAGE The Adviser is responsible for decisions to buy and sell securities for the Fund and for the placement of its portfolio business and the negotiation of the commissions, if any, on such transactions. As most transactions made by the Fund are principal transactions at net prices, the Fund incurs little or no brokerage cost. During the past three years the Fund paid no commissions to brokers on the purchase or sale of portfolio securities. Portfolio securities are normally purchased directly from the issuer or from an underwriter or market maker for the securities. Purchases from underwriters of portfolio securities include a commission or concession paid by the issuer to the underwriter and purchases from dealers serving as market makers include the spread between the bid and asked price. The Adviser places portfolio transactions 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 a favorable price. The Adviser places portfolio transactions for other advisory accounts including other investment companies, and seeks to allocate portfolio transactions equitably whenever concurrent decisions are made to purchase or sell securities by 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, the main factors considered by the Adviser are 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. DETERMINATION OF NET ASSET VALUE Purchases of shares will be priced at the net asset value next determined after a purchase order becomes effective which is upon receipt by the Fund of federal funds. The net asset value per share is determined as of the close of trading on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m., New York time) on each business day on which the Exchange is open. The net asset value of Fund shares is computed by dividing the value of all securities plus all cash and other assets (including accrued interest) less all liabilities (including accrued expenses) by the number of shares outstanding. The valuation of the Fund's portfolio securities is based upon their amortized cost, which does not take into account unrealized capital gains or losses. Amortized cost valuation involves initially valuing an instrument at its cost and thereafter, assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. While B-15 55 this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price that the Fund would receive if it sold the instrument. The Fund's use of the amortized cost method of valuing its portfolio securities is permitted by a rule adopted by the Securities and Exchange Commission ("SEC"). Under this rule, the Fund must maintain a dollar-weighted average portfolio maturity of 90 days or less, purchase only instruments having remaining maturities of thirteen months or less and invest only in securities determined by the Adviser to be of eligible quality with minimal credit risks. The Fund's Trustees have established procedures reasonably designed, taking into account current market conditions and the Fund's investment objective, to stabilize the net asset value per share for purposes of sales and redemptions at $1.00. These procedures include review by the Trustees, at such intervals as they deem appropriate, to determine the extent, if any, to which the net asset value per share calculated by using available market quotations deviates from $1.00 per share based on amortized cost. In the event such deviation should exceed 4/10 of 1%, the Trustees are required to promptly consider what action, if any, should be initiated. If the Trustees believe that the extent of any deviation from a $1.00 amortized cost price per share may result in material dilution or other unfair results to new or existing shareholders, the Trustees will take such steps as they consider appropriate to eliminate or reduce these consequences to the extent reasonably practicable. Such steps may include selling portfolio securities prior to maturity; shortening the average maturity of the portfolio; withholding or reducing dividends; or utilizing a net asset value per share determined by using available market quotations. The assets belonging to the Class A shares, the Class B shares and the Class C shares will be invested together in a single portfolio. The net asset value of each class will be determined separately by subtracting the expenses and liabilities allocated to that class from the assets belonging to that class. PURCHASE AND REDEMPTION OF SHARES All orders become effective when the wire or check payment is converted into federal funds. A check order will normally be converted into federal funds on the second business day following receipt of payment by ACCESS. When payment is by wire transfer of federal funds, such order becomes effective upon receipt provided that prior notice has been given as described below; other bank wire payments will normally be converted into federal funds on the day following receipt. After each initial and subsequent investment, the shareholder receives a statement of the number of shares owned. Certificates for shares purchased will not normally be issued but shares will be held on deposit by ACCESS. However, the shareholder may request a certificate by writing ACCESS for shares at any time. It is preferred that such request for a certificate be for at least 1,000 shares in order to minimize shareholder service agent costs. Redemptions are not made on days during which 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. WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE ("CDSC -- CLASS B AND C") The CDSC -- Class B and C may be waived on redemptions of Class B shares and Class C shares in the circumstances described below: (a) Redemption Upon Disability or Death 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 B-16 56 (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 disability or death, 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. (b) 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 of Van Kampen American Capital funds; in such event, as described below, the Fund will "tack" the period for which the original shares were held onto 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), 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. (c) Redemption Pursuant to a Fund's Systematic Withdrawal Plan A shareholder may elect to participate in a systematic withdrawal plan ("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 such 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. (d) Involuntary Redemptions of Shares in Accounts that Do Not Have the Required Minimum Balance 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 Class C upon such involuntary redemption. (e) Reinvestment of Redemption Proceeds in Shares of the Same Fund Within 180 Days After Redemption A shareholder who has redeemed Class C shares of a Fund may reinvest, at net asset value, with credit for any CDSC -- Class C paid on the redeemed shares, any portion or all of his or her redemption proceeds (plus that amount necessary to acquire a fractional share to round off his or her purchase to the nearest full B-17 57 share) in Class C shares of the Fund, provided that the reinvestment is effected within 180 days after such redemption and the shareholder has not previously exercised this reinvestment privilege with respect to Class C shares of the Fund. Shares acquired in this manner will be deemed to have the original cost and purchase date of the redeemed shares for purposes of applying the CDSC -- Class C to subsequent redemptions. (f) 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. EXCHANGE PRIVILEGE The following supplements the discussion of "Exchange Privilege" in the Prospectus: By use of the exchange privilege, the investor authorizes ACCESS to act on telephonic, telegraphic or written exchange instructions from any person representing himself to be the investor or the agent of the investor and believed by ACCESS to be genuine. Van Kampen American Capital and its subsidiaries, including ACCESS, 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 American Capital, ACCESS nor the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. Van Kampen American Capital, ACCESS and the Fund may be liable for any losses due to unauthorized or fraudulent instructions if reasonable procedures are not followed. 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 above. A prospectus of any of these mutual 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. CHECK WRITING PRIVILEGE To establish the check writing privilege, a shareholder must complete the appropriate section of the application and the Authorization for Redemption form and return both documents to ACCESS before checks will be issued. All signatures on the authorization card must be guaranteed if any of the signators are persons not referenced in the account registration or if more than 30 days have elapsed since ACCESS established the account on its records. Moreover, if the shareholder is a corporation, partnership, trust, fiduciary, executor or administrator, the appropriate documents appointing authorized signers (corporate resolutions, partnerships or trust agreements) must accompany the authorization card. The documents must be certified in original form, and the certificates must be dated within 60 days of their receipt by ACCESS. The privilege does not carry over to accounts established through exchanges or transfers. It must be requested separately for each fund account. B-18 58 DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS AND DISTRIBUTIONS The Fund's net income is declared and paid as dividend on a daily basis. Dividends are paid to shareholders of record immediately prior to the determination of net asset value for that day. Since shares are issued and redeemed at the time net asset value is determined, dividends commence on the day following the date shares are issued and are received for the day shares are redeemed. The per share dividends on Class B shares and Class C shares will be lower than the per share dividends on Class A shares as a result of the higher distribution fees and transfer agency fees applicable to the Class B and Class C shares. All dividends are automatically invested in additional full and fractional shares of the Fund at net asset value. Shareholders may elect to receive monthly payment of dividends in cash by written instruction to ACCESS. Shares purchased by daily reinvestments are liquidated at the net asset value on the last business day of the month and the proceeds of such redemption less any applicable CDSC mailed to the shareholder electing cash payment. A redeeming shareholder receives all dividends accrued through the date of redemption. The Fund's net income for dividend purposes is calculated daily and consists of interest accrued or discount earned, plus or minus any net realized gains or losses on portfolio securities, less any amortization of premium and the expenses of the Fund. Should the Fund incur or anticipate any unusual expense, or loss or depreciation which would adversely affect its net asset value per share or income for a particular period, the Trustees would at that time consider whether to adhere to the present dividend policy described above or to revise it in the light of the then prevailing circumstances. For example, if the Fund's net asset value per share was reduced below $1.00, the Board may suspend further dividend payments until net asset value returned to $1.00. Thus, such expenses or losses or depreciation may result in an investor receiving no dividends for the period during which he held his shares and in his receiving upon redemption a price per share lower than that which he paid. TAX STATUS OF THE FUND The following discussion reflects applicable federal income tax law, as of the date hereof. Taxation of the Fund. The Fund intends to continue to qualify each year and to elect to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (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 the diversification of its assets. Included among such requirements is the requirement that the Fund must derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans and gains from the sale or other disposition of stocks, securities or foreign currencies or other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business of investing in such stocks, securities or currencies. If the Fund qualifies as a regulated investment company and distributes each year to its shareholders at least 90% of its net investment income (which includes for this purpose net short-term capital gains, but not net capital gains, which are the excess of net long-term capital gains over net short-term capital losses), it will not be required to pay federal income taxes on any income distributed to shareholders. The Fund intends to distribute at least the minimum amount of net investment income necessary to satisfy the 90% distribution requirement. The Fund will not be subject to federal income tax on any net capital gains distributed to its shareholders. If for any taxable year the Fund does not qualify as a regulated investment company, all of its taxable income, including any net capital gains, would be subject to tax at regular corporate rates (without any deduction for distributions to shareholders) and all distributions out of earnings and profits would be taxed to shareholders as ordinary income. The Fund is subject to a 4% excise tax to the extent it does not distribute to its shareholders during any calendar year at least 98% of its ordinary taxable income for the twelve months ended December 31, plus 98% of its capital gain net income for the twelve months ended October 31 of such year. For purposes of the excise B-19 59 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. The Fund intends to distribute sufficient amounts to avoid liability for the excise tax. 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 gains dividends"), if any, are taxable to shareholders as long-term capital gains regardless of the length of time shares of the Fund have been held by such shareholders. 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 gains dividends), see "Capital Gains Rates Under the 1997 Tax Act" below. Tax-exempt shareholders not subject to federal income tax on their income generally will not be taxed on distributions from the Fund. Shareholders receiving distributions in the form of additional shares issued by the Fund will be treated for federal income tax purposes as receiving a distribution in an amount equal to the fair market value of the shares received, determined as of the distribution date. The basis of such shares will equal the fair market value on the distribution date. Fund distributions generally will not qualify for the dividends received deduction for corporations, except to the extent the Fund receives dividends form domestic corporations. Although dividends generally will be treated as distributed when paid, dividends declared in October, November or December, payable to shareholders of record on a specified date in such month and paid during January of the following year will be treated as having been distributed by the Fund and received by the shareholders on the December 31 prior to the date of payment. In addition, certain other distributions made after the close of the 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. Dividends to foreign shareholders, including shareholders who are non-resident aliens, may be subject to a United States withholding tax at a rate of 30% under existing provisions of the Code applicable to foreign individuals and entities unless a reduced rate of withholding or a withholding exemption is provided under an applicable treaty. Foreign and non-resident shareholders are urged to consult their own tax advisers concerning the applicability of the United States withholding tax. Dividends and other distributions may also be subject to state and local taxes. 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. 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 gains dividends received with respect to such shares. For a summary of the tax rates applicable to capital gains, see "Capital Gains Rates Under the 1997 Tax Act" below. 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. If shares of the Fund are sold or exchanged within 90 days of acquisition and shares of the same or related mutual fund are acquired, to the extent the sales charge is reduced or waived on the subsequent acquisition, the sales charge may not be used to determine the basis in the disposed shares for purposes of determining the gain or loss on such shares. To the extent the sales charge is not allowed in determining the gain or loss on the initial shares, it is added to the basis of the subsequent shares. Capital Gains Rates Under the 1997 Tax Act. Under the 1997 Tax Act, the maximum tax rates applicable to net capital gains recognized by individuals and other non-corporate taxpayers are (i) the same as ordinary income rates for capital assets held for one year or less, (ii) 28% for capital assets held for more than B-20 60 one year but not more than 18 months and (iii) 20% for capital assets held for more than 18 months. Under the 1997 Tax Act, the Treasury is authorized to issue regulations that address the application of the new capital gains rates to sales and exchanges by regulated investment companies and to sales and exchanges of interests in regulated investment companies, but no such regulations have been issued as of the date hereof. It is expected that the new tax rates for capital gains under the 1997 Tax Act described above will apply to distributions of capital gains dividends by regulated investment companies such as the Fund as well as to sales and exchanges of shares in regulated investment companies such as the Fund. With respect to capital losses recognized on dispositions of shares held six months or less where such losses are treated as long-term capital losses to the extent of prior capital gains dividends received on such shares (see "Sale of Shares" above), it is unclear how such capital losses offset the capital gains referred to above. Shareholders should consult their own tax advisers as to the application of the new capital gains rates to their particular circumstances. Backup Withholding. The Fund is required to withhold and remit to the United States Treasury 31% of (i) reportable taxable dividends and distributions and (ii) the proceeds of any redemptions of Fund shares with respect to any shareholder who is not exempt from withholding and who fails to furnish the Fund with a correct taxpayer identification number (a social security number in the case of an individual) who fails to report fully dividend or interest income or who fails to certify to the Fund that he has provided a correct taxpayer identification number and that he is not subject to backup withholding. The 31% back-up withholding tax is not an additional tax and may be credited against a taxpayer's regular federal income tax liability. General. The federal income tax discussion set forth above is for general information only. Shareholders and prospective shareholders should consult their own tax advisers regarding the specific federal tax consequences of purchasing, holding and disposing of shares, as well as the effects of state, local and foreign tax law and any proposed tax law changes. YIELD INFORMATION The annualized current yield for Class A shares for the seven day period ending May 31, 1997 was 4.82%. Its compound effective yield for the same period was 4.94%. For Class B shares the annualized yield and compound effective yield for the seven day period was 4.04% and 4.12%, respectively. For Class C shares the annualized yield and compound effective yield for the seven day period was 4.04% and 4.13%, respectively. The yield of the Fund is its net income expressed in annualized terms. The SEC requires by rule that a yield quotation set forth in an advertisement for a "money market" fund be computed by a standardized method based on a historical seven calendar day period. The standardized yield is computed by determining the net change (exclusive of realized gains and losses and unrealized appreciation and depreciation) in the value of an hypothetical pre-existing account having a balance of one share at the beginning of the period, dividing the net change in account value by the value of the account at the beginning of the base period to obtain the base period return, and multiplying the base period return by (365/7). The determination of net change in account value reflects the value of additional shares purchased with dividends from the original share, dividends declared on both the original share and such additional shares, and all fees that are charged to all shareholder accounts, in proportion to the length of the base period and the Fund's average account size. The Fund may also calculate its annualized yield by compounding the unannualized base period return (calculated as described above) by adding 1 to the base period return, raising the sum to a power equal to 365 divided by 7, and subtracting one. The yield quoted at any time represents the amount being earned on a current basis for the indicated period and is a function of the types of instruments in the Fund's portfolio, their quality and length of maturity, and the Fund's operating expenses. At May 31, 1997, 52% of the Fund's portfolio was invested in obligations of U.S. Government Agencies', 30% was invested in commercial paper of which 100% was rated A-1 or Prime-1, and the remaining 18% was invested in repurchase agreements. See "Investment Policies -- Commercial Paper," and the Rating Categories herein. The length of maturity for the portfolio is the average dollar weighted maturity of the portfolio. This means that the portfolio has an average maturity of a stated number of B-21 61 days for all of its issues. The calculation is weighted by the relative value of the investment. At May 31, 1997 the average dollar weighted maturity of the portfolio was 29 days. The yield fluctuates daily as the income earned on the investments of the Fund fluctuates. Accordingly, there is no assurance that the yield quoted on any given occasion will remain in effect for any period of time. It should also be emphasized that the Fund is an open-end investment company and that there is no guarantee that the net asset value will remain constant. A shareholder's investment in the Fund is not insured. Investors comparing results of the Fund with investment results and yields from other sources such as banks or savings and loan associations should understand this distinction. The yield quotation may be of limited use for comparative purposes because it does not reflect charges imposed at the account level which, if included, would decrease the yield. Other funds of the money market type as well as banks and savings and loan associations may calculate their yield on a different basis, and the yield quoted by the Fund could vary upwards or downwards if another method of calculation or base period were used. Yield is calculated separately for Class A shares, Class B shares and Class C shares. Because of the differences in distribution fees, the yield for each of the classes will differ. From time to time marketing materials may provide a portfolio manager update, an adviser update and/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 Van Kampen American Capital believes the Fund compares relative to other Van Kampen American Capital 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. 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 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 -- Price Waterhouse LLP, 1201 Louisiana, Suite 2900, Houston, Texas 77002, the independent accountants for the Fund, performs annual audits of the Fund's financial statements. RATING CATEGORIES Description of the highest commercial paper, bond and other short-term and long-term rating categories assigned by Standard & Poor's Ratings Group ("S&P"), Moody's Investors Service ("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff and Phelps, Inc. ("Duff") and IBCA Limited and IBCA Inc. ("IBCA"). COMMERCIAL PAPER AND SHORT-TERM RATINGS The designation A-1 by S&P indicates that the degree of safety regarding timely payment is either overwhelming or very strong. Those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) designation. Capacity for timely payment on issues with an A-2 designation is strong. However, the relative degree of safety is not as high as for issues designated A-1. B-22 62 The rating Prime-1 (P-1) is the highest commercial paper rating assigned by Moody's. Issuers of P-1 paper must have a superior capacity for repayment of short-term promissory obligations and ordinarily well established industries, high rates of return of funds employed, conservative well established industries, high rates of return of funds employed, conservative capitalization structures with moderate reliance on debt and ample asset protection, broad margins in earnings coverage of fixed financial charges and high internal cash generation, and well established access to a range of financial markets and assured sources of alternate liquidity. Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term promissory obligations. This ordinarily will be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. The rating Fitch-1 (Highest Grade) is the highest commercial paper rating assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second highest commercial paper rating assigned by Fitch which reflects an assurance of timely payment only slightly less in degree than the strongest issues. The rating Duff-1 is the highest commercial paper rating assigned by Duff, Paper rated Duff-1 is regarded as having very high certainty of timely payment with excellent liquidity factors which are supported by ample asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty of timely payment, good access to capital markets and sound liquidity factors and company fundamentals. Risk factors small. The designation A1 by IBCA indicates that the obligation is supported by a very strong capacity for timely repayment. Those obligations rated A1+ are supported by the highest capacity for timely repayment. The designation A2 by IBCA indicates that the obligation is supported by a strong capacity for timely repayment, although such capacity may be susceptible to adverse changes in business, economic, or financial conditions. BOND AND LONG-TERM RATINGS Bonds rated AAA are considered by S&P to be the highest grade obligations and possess an extremely strong capacity to pay principal and interest. Bonds rated AA by S&P are judged by S&P to have a very strong capacity to pay principal and interest and, in the majority of instances, differ only in small degrees from issues rated AAA. Bonds which are rated Aaa by Moody's are judged to be of the best quality. Bonds are rated Aa by Moody's are judged by Moody's 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 Aaa bonds because margins of protection may not be as large or fluctuations of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger. Moody's applies numerical modifiers 1, 2 and 3 in the Aa rating category. The modifier 1 indicates a ranking for the security in the higher end of this rating category, the modifier 2 indicates a mid-range ranking, and the modifier 3 indicates a ranking in the lower end of the rating category. Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly marketable, suitable for investment by trustees and fiduciary institutions and liable to but slight market fluctuation other than through changes in the money rate. The prime feature of an AAA bond is a showing of earnings several times or many times interest requirements, with such stability of applicable earnings that safety is beyond reasonable question whatever changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be of safety virtually beyond question and are readily salable, whose merits are not unlike those of the AAA class, but whose margin of safety is less strikingly broad. The issue may be the obligation of a small company, strongly secured but influenced as to rating by the lesser financial power of the enterprise and more local type of market. Bonds rated Duff-1 are judged by Duff to be of the highest credit quality with negligible risk factors; only slightly more than U.S. Treasury debt. Bonds rated Duff-2, 3 and 4 are judged by Duff to be of high credit B-23 63 quality with strong protection factors. Risk is modest but may vary slightly from time to time because of economic conditions. Obligations rated AAA by IBCA have the lowest expectation of investment risk. Capacity for timely repayment of principal and interest is substantial, such that adverse changes in business, economic or financial conditions are unlikely to increase investment risk significantly. Obligations rated AA have a very low expectation of investment risk. Capacity for timely repayment of principal and interest is substantial. Adverse changes in business, economic or financial conditions may increase investment risk albeit not very significantly. IBCA also assigns a rating to certain international and U.S. banks. An IBCA bank rating represents IBCA's current assessment of the strength of the bank and whether such bank would receive support should it experience difficulties. In its assessment of a bank, IBCA uses a dual rating system comprised of Legal Rating and Individual Ratings. In addition, IBCA assigns banks Long- and Short-Term Ratings as used in the corporate ratings discussed above. Legal Ratings, which range in gradation from 1 through 5, address the question of whether the bank would receive support by central banks or shareholders if it experienced difficulties, and such ratings are considered by IBCA to be a prime factor in its assessment of credit risk. Individual Ratings, which range in gradations from A through E, represent IBCA's assessment of a bank's economic merits and address the question of how the bank would be viewed if it were entirely independent and could not rely on support from state authorities or its owners. B-24 64 Report of Independent Accountants To the Shareholders and Board of Trustees of Van Kampen American Capital Reserve Fund In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Van Kampen American Capital Reserve Fund (the "Fund") at May 31, 1997, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at May 31, 1997 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Houston, Texas July 14, 1997 B-25 65 Portfolio of Investments May 31, 1997
- ----------------------------------------------------------------------------------------------------- Par Discount Yield Amount on Date of Amortized (000) Description Purchase Maturity Cost - ----------------------------------------------------------------------------------------------------- U.S. Agency Obligations 62.6% $ 10,000 Federal Farm Credit Bank .............. 5.385% 06/03/97 $ 9,995,516 10,000 Federal Farm Credit Bank .............. 5.481 06/03/97 9,995,466 5,000 Federal Farm Credit Bank .............. 5.402 07/29/97 4,956,897 10,000 Federal Home Loan Bank ................ 5.446 06/19/97 9,971,500 10,000 Federal Home Loan Bank ................ 5.451 06/23/97 9,965,500 10,000 Federal Home Loan Bank ................ 5.577 07/03/97 9,949,583 10,000 Federal Home Loan Bank ................ 5.326 07/11/97 9,940,664 10,295 Federal Home Loan Bank ................ 5.377 08/21/97 10,172,123 10,000 Federal Home Loan Bank ................ 5.701 09/23/97 9,822,708 75,000 Federal Home Loan Mortgage Corp. ...... 5.553 06/02/97 74,965,313 20,000 Federal Home Loan Mortgage Corp. ...... 5.576 07/01/97 19,905,278 21,000 Federal Home Loan Mortgage Corp. ...... 5.589 07/02/97 20,897,147 15,000 Federal Home Loan Mortgage Corp. ...... 5.614 08/15/97 14,824,725 12,000 Federal National Mortgage Assn. ....... 5.281 06/10/97 11,982,867 13,000 Federal National Mortgage Assn. ....... 5.310 06/12/97 12,977,597 3,000 Federal National Mortgage Assn. ....... 5.373 06/16/97 2,992,987 10,000 Federal National Mortgage Assn. ....... 5.462 06/24/97 9,963,933 3,000 Federal National Mortgage Assn. ....... 5.373 07/08/97 2,983,438 5,000 Federal National Mortgage Assn. ....... 5.390 07/18/97 4,964,733 7,000 Federal National Mortgage Assn. ....... 5.422 08/07/97 6,929,922 15,000 Federal National Mortgage Assn. ....... 5.629 08/08/97 14,841,300 10,000 Federal National Mortgage Assn. ....... 5.495 08/15/97 9,885,367 10,000 Federal National Mortgage Assn. ....... 5.518 08/18/97 9,880,403 15,000 Federal National Mortgage Assn. ....... 5.618 08/22/97 14,809,446 10,000 Federal National Mortgage Assn. ....... 5.418 08/25/97 9,873,867 7,000 Federal National Mortgage Assn. ....... 5.535 08/26/97 6,907,635 3,000 Federal National Mortgage Assn. ....... 5.479 09/24/97 2,949,057 15,000 Tennessee Valley Authority ............ 5.487 06/26/97 14,941,175 ------------ Total U.S. Agency Obligations ................................... 352,246,147 ------------ Commercial Paper 36.3% 29,000 Associates Corp. of North America ..... 5.573 06/04/97 28,982,117 24,000 Bank of Nova Scotia ................... 5.423 06/03/97 23,989,300 22,000 Chevron Oil Finance Co. ............... 5.493 06/06/97 21,979,907
See Notes to Financial Statements B-26 66
Portfolio of Investments (Continued) May 31, 1997 ================================================================================================== Par Amount Discount Yield (000) Description on Date of Purchase Maturity Amortized Cost - -------------------------------------------------------------------------------------------------- Commercial Paper (Continued) $23,000 Ford Motor Credit Co. ....................... 5.654% 07/07/97 $ 22,867,622 22,000 General Electric Capital Corp. .............. 5.524 06/12/97 21,960,400 34,000 General Electric Co. ........................ 5.680 07/21/97 33,730,267 22,000 MetLife Funding Inc. ........................ 5.577 07/16/97 21,844,545 29,000 Toronto Dominion Holdings.................... 5.567 06/09/97 28,959,835 ------------- Total Commercial Paper............................................. 204,313,993 ------------- Repurchase Agreements 21.8% BankAmerica Securities ($60,350,000 par collateralized by U.S. Government obligations in a pooled cash account, dated 05/30/97, to be sold on 06/02/97 at $60,377,962)......................................... 60,350,000 Prudential Securities Inc. ($62,000,000 par collateralized by U.S. Government obligations in a pooled cash account, dated 05/30/97, to be sold on 06/02/97 at $62,028,778)......................................... 62,000,000 ------------- Total Repurchase Agreements........................................ 122,350,000 ------------- Total Investments 120.7% (a)................................................... 678,910,140 ------------- Liabilities in Excess of Other Assets (20.7%).................................. (116,234,809) ------------- Net Assets 100.0%.............................................................. $ 562,675,331 ============= (a) At May 31, 1997, cost is identical for both book and federal income tax purposes. See Notes to Financial Statements
B-27 67
Statement of Assets and Liabilities May 31, 1997 ====================================================================================== Assets: Investments, at Amortized Cost which Approximates Market............. $556,560,140 Repurchase Agreements, at Amortized Cost............................. 122,350,000 Cash................................................................. 349,772 Receivable for Fund Shares Sold...................................... 1,323,985 Other................................................................ 33,989 ------------ Total Assets....................................................... 680,617,886 ------------ Liabilities: Payables: Fund Shares Repurchased............................................ 117,127,578 Distributor and Affiliates......................................... 252,904 Investment Advisory Fee............................................ 195,718 Income Distributions............................................... 101,666 Accrued Expenses..................................................... 152,887 Deferred Compensation and Retirement Plans........................... 111,802 ------------ Total Liabilities.................................................. 117,942,555 ------------ Net Assets........................................................... $562,675,331 ============ Net Assets Consist of: Capital.............................................................. $562,718,838 Accumulated Undistributed Net Investment Income...................... 26,309 Accumulated Net Realized Loss on Securities.......................... (69,816) ------------ Net Assets........................................................... $562,675,331 ============ Maximum Offering Price Per Share: Class A Shares: Net Asset Value, Offering Price and Redemption Price per share (Based on net assets of $451,260,769 and 451,309,332 shares of beneficial interest issued and outstanding)........... $ 1.00 ============ Class B Shares: Net Asset Value and Offering Price per share (Based on net assets of $103,031,346 and 103,028,995 shares of beneficial interest issued and outstanding)........... $ 1.00 ============ Class C Shares: Net Asset Value and Offering Price per share (Based on net assets of $8,383,216 and 8,382,947 shares of beneficial interest issued and outstanding)........... $ 1.00 ============ See Notes to Financial Statements
B-28 68 Statement of Operations For the Year Ended May 31, 1997 - ----------------------------------------------------------------------------------------- Investment Income: Interest................................................................. $27,897,844 ----------- Expenses: Investment Advisory Fee.................................................. 2,170,578 Shareholder Services..................................................... 1,701,438 Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $616,795, $713,515 and $83,878, respectively)........................ 1,414,188 Legal.................................................................... 48,195 Trustees Fees and Expenses............................................... 24,010 Custody.................................................................. 301 Other.................................................................... 578,052 ----------- Total Expenses......................................................... 5,936,762 Less Expenses Reimbursed............................................... 11,000 ----------- Net Expenses........................................................... 5,925,762 ----------- Net Investment Income.................................................... $21,972,082 =========== Net Realized Loss on Securities.......................................... $ (7,692) =========== Net Increase in Net Assets from Operations............................... $21,964,390 ===========
See Notes to Financial Statements B-29 69
Statement of Changes in Net Assets For the Years Ended May 31, 1997 and 1996 ============================================================================================================= Year Ended Year Ended May 31, 1997 May 31, 1996 - ------------------------------------------------------------------------------------------------------------- From Investment Activities: Operations: Net Investment Income............................................ $ 21,972,082 $ 19,032,684 Net Realized Loss on Securities.................................. (7,692) --- --------------- --------------- Change in Net Assets from Operations............................. 21,964,390 19,032,684 --------------- --------------- Distributions from Net Investment Income: Class A Shares.............................................. (18,710,328) (17,616,820) Class B Shares.............................................. (2,925,963) (1,250,566) Class C Shares.............................................. (339,500) (188,995) --------------- --------------- Total Distributions......................................... (21,975,791) (19,056,381) --------------- --------------- Net Change in Net Assets from Investment Activities.................................. (11,401) (23,697) --------------- --------------- From Capital Transactions: Proceeds from Shares Sold: Class A Shares.............................................. 7,336,713,031 5,916,701,540 Class B Shares.............................................. 648,076,384 402,157,689 Class C Shares.............................................. 141,950,181 99,265,824 --------------- --------------- 8,126,739,596 6,418,125,053 --------------- --------------- Value Received for Shares Issued in Business Combination: Class A Shares.............................................. --- 20,714,880 Class B Shares.............................................. --- 5,651,573 Class C Shares.............................................. --- --- --------------- --------------- --- 26,366,453 --------------- --------------- Net Asset Value of Shares Issued Through Dividend Reinvestment: Class A Shares.............................................. 18,710,328 17,616,820 Class B Shares.............................................. 2,925,963 1,250,566 Class C Shares.............................................. 339,500 188,995 --------------- --------------- 21,975,791 19,056,381 --------------- --------------- Cost of Shares Repurchased: Class A Shares.............................................. (7,344,457,086) (5,834,380,999) Class B Shares.............................................. (629,443,280) (331,779,955) Class C Shares.............................................. (143,617,542) (90,332,522) --------------- --------------- (8,117,517,908) (6,256,493,476) --------------- --------------- Net Change in Net Assets from Capital Transactions............... 31,197,479 207,054,411 --------------- --------------- Total Increase in Net Assets..................................... 31,186,078 207,030,714 Net Assets: Beginning of the Period.......................................... 531,489,253 324,458,539 --------------- --------------- End of the Period (Including accumulated undistributed net investment income of $26,309 and $11,822, respectively)..... $ 562,675,331 $ 531,489,253 =============== ===============
See Notes to Financial Statements B-30 70 Financial Highlights The following schedule presents financial highlights for one share of the Fund outstanding throughout the periods indicated.
- -------------------------------------------------------------------------------------------------- Year Ended May 31 ------------------------------------------------- Class A Shares 1997 1996 1995 1994 1993 - -------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of the Period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- ------- ------- Net Investment Income.......................... .0440 .0465 .0434 .0229 .0244 Less Distributions from Net Investment Income.. (.0440) (.0465) (.0434) (.0229) (.0244) ------- ------- ------- ------- ------- Net Asset Value, End of the Period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= Total Return................................... 4.52% 4.75% 4.43% 2.32% 2.44% Net Assets at End of the Period (in millions).. $ 451.3 $ 440.3 $ 319.7 $ 463.8 $ 279.3 Ratio of Expenses to Average Net Assets*....... 1.02% 1.07% 1.00% 1.03% 1.09% Ratio of Net Investment Income to Average Net Assets*.................................... 4.38% 4.62% 4.28% 2.36% 2.44%
* The impact on the Ratios of Expenses and Net Investment Income to Average Net Assets due to VKAC reimbursement of expenses was less than 0.01%. See Notes to Financial Statements B-31 71 Financial Highlights (Continued) The following schedule presents financial highlights for one share of the Fund outstanding throughout the periods indicated.
- ------------------------------------------------------------------------------------------------------- April 18, 1995 Year Ended May 31, (Commencement of ------------------ Distribution) to Class B Shares 1997 1996 May 31, 1995 - ------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of the Period ................. $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- Net Investment Income .................................... .0363 .0388 .0047 Less Distributions from Net Investment Income ............ (.0363) (.0388) (.0047) ------- ------- ------- Net Asset Value, End of the Period ....................... $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= Total Return (a) ......................................... 3.71% 3.95% .47%* Net Assets at End of the Period (in millions) ............ $ 103.0 $ 81.5 $ 4.2 Ratio of Expenses to Average Net Assets** ................ 1.77% 1.86% 1.76% Ratio of Net Investment Income to Average Net Assets** ... 3.70% 3.75% 3.52%
* Non-Annualized ** The impact on the Ratios of Expenses and Net Investment Income to Average Net Assets due to VKAC reimbursement of expenses was less than 0.01%. (a) Total return is based upon net asset value which does not include payment of the contingent deferred sales charge. See Notes to Financial Statements B-32 72 Financial Highlights (Continued) The following schedule presents financial highlights for one share of the Fund outstanding throughout the periods indicated.
- ------------------------------------------------------------------------------------------------- April 18, 1995 Year Ended May 31, (Commencement ---------------------- of Distribution) to Class C Shares 1997 1996 May 31, 1995 - ------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of the Period....... $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- Net Investment Income.......................... .0362 .0387 .0049 Less Distributions from Net Investment Income......................... (.0362) (.0387) (.0049) ------- ------- ------- Net Asset Value, End of the Period............. $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= Total Return (a)............................... 3.72% 3.94% .49%* Net Assets at End of the Period (in millions).. $ 8.4 $ 9.7 $ 0.6 Ratio of Expenses to Average Net Assets**...... 1.78% 1.87% 1.76% Ratio of Net Investment Income to Average Net Assets**.............................. 3.64% 3.81% 3.52%
* Non-Annualized ** The impact on the Ratios of Expenses and Net Investment Income to Average Net Assets due to VKAC reimbursement of expenses was less than 0.01%. (a) Total return is based upon net asset value which does not include payment of the contingent deferred sales charge. See Notes to Financial Statements B-33 73 Notes to Financial Statements May 31, 1997 - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Van Kampen American Capital Reserve Fund ( the "Fund") is organized as a Delaware business trust. The Fund is an open-end diversified management investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek protection of capital and high current income through investments in U.S. dollar denominated money market securities. The Fund commenced investment operations on July 12, 1974. The distribution of the Fund's Class B and Class C shares commenced on April 18, 1995. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. Security Valuation-Investments are valued at amortized cost, which approximates market. Under this valuation method, a portfolio instrument is valued at cost and any discount or premium is amortized on a straight-line basis to the maturity of the instrument. B. Security Transactions-Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. Interest income is recorded on an accrual basis. The Fund invests in repurchase agreements, which are short-term investments in which the Fund acquires ownership of a debt security and the seller agrees to repurchase the security at a future time and specified price. The Fund may invest independently in repurchase agreements, or transfer uninvested cash balances into a pooled cash account along with other investment companies advised by Van Kampen American Capital Asset Management, Inc. (the "Adviser") or its affiliates, the daily aggregate of which is invested in repurchase agreements. Repurchase agreements are fully collateralized by the underlying debt security. The Fund will make payment for such securities only upon physical delivery or evidence of book entry transfer to the account of the custodian bank. The seller is required to maintain the value of the underlying security at not less than the repurchase proceeds due the Fund. C. Federal Income Taxes-It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income, if any, to its shareholders. Therefore, no provision for federal income taxes is required. B-34 74 Notes to Financial Statements (Continued) - ------------------------------------------------------------------------------- May 31, 1997 =============================================================================== The Fund intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset such losses against any future realized capital gains. At May 31, 1997, the Trust had an accumulated capital loss carryforward for tax purposes of $62,624 which will expire between May 31, 1998 and May 31, 2005. Of this amount, $2,038 will expire in 1998. Permanent book and tax differences of $9,915 relating to the expiration of capital loss carryforward during fiscal 1997 was reclassified from accumulated net realized loss to capital. Net realized gains or losses may differ for financial and tax reporting purposes primarily as a result of post October 31 losses which may not be recognized for tax purposes until the first day of the following fiscal year. D. Distribution of Income and Gains-The Fund declares dividends from net investment income daily and automatically reinvests such dividends daily. Net realized gains, if any, are distributed annually. Shareholders can elect to receive the cash equivalent of their daily dividends at each month end. 2. Investment Advisory Fees and Other Transactions with Affiliates Under the terms of the Fund's Investment Advisory Agreement, Van Kampen American Capital Asset Management, Inc. ( the "Adviser") will provide facilities and investment advice to the Fund for an annual fee payable monthly as follows: Average Net Assets % Per Annum - ---------------------------------------------------------- First $150 million............................. .50 of 1% Next $100 million.............................. .45 of 1% Next $100 million.............................. .40 of 1% Over $350 million.............................. .35 of 1% The Adviser agreed to reimburse the Fund for certain trustees' compensation in connection with the July, 1995 increase in the number of trustees of the Fund. This reimbursement was effective through December 31, 1996. Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated person. For the year ended May 31, 1997, the Fund recognized expenses of approximately $90,200 representing Van Kampen American Capital Distributors, Inc.'s, or its affiliates' (collectively "VKAC") cost of providing accounting services to the Fund. These services are provided by VKAC at cost. B-35 75 Notes to Financial Statements (Continued) May 31, 1997 - -------------------------------------------------------------------------------- ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the year ended May 31, 1997, the Fund recognized expenses of approximately $1,374,100, representing ACCESS' cost of providing transfer agency and shareholder services plus a profit. Certain officers and trustees of the Fund are also officers and directors of VKAC. The Fund does not compensate its officers or trustees who are officers of VKAC. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of VKAC. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation to a later date. Benefits under the retirement plan are payable for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit under the plan is $2,500. At May 31, 1997, VKAC owned 4,074 Class A shares of the Fund. 3. Capital Transactions The Fund has outstanding three classes of shares of beneficial interest, Classes A, B and C. There are an unlimited number of shares of each class with a par value of $0.01 per share. B-36 76 Notes to Financial Statements (Continued) May 31, 1997 - -------------------------------------------------------------------------------- Transactions in shares and ending capital were as follows:
Year Ended Year Ended May 31, 1997 May 31, 1996 - -------------------------------------------------------------------------------- Shares Sold: Class A.................................. 7,336,711,667 5,916,698,879 Class B.................................. 648,076,624 402,157,689 Class C.................................. 141,950,203 99,265,826 ------------- ------------- Total Sold.................................... 8,126,738,494 6,418,122,394 ============= ============= Shares Issued in Business Combination Class A.................................. - 20,714,880 Class B.................................. - 5,651,573 Class C.................................. - - ------------- ------------- Total Business Combination.................... - 26,366,453 ============= ============= Shares Issued Through Dividend Reinvestment: Class A.................................. 18,710,328 17,616,820 Class B.................................. 2,926,008 1,250,566 Class C.................................. 339,500 188,995 ------------- ------------- Total Dividend Reinvestment................... 21,975,836 19,056,381 ============= ============= Shares Repurchased: Class A.................................. (7,344,457,086) (5,834,380,999) Class B.................................. (629,443,316) (331,779,955) Class C.................................. (143,617,542) (90,332,522) ------------- ------------- Total Repurchased............................. (8,117,517,944) (6,256,493,476) ============= ============= Capital: Class A.................................. $ 451,297,333 $ 440,339,270 Class B.................................. 103,038,760 81,481,218 Class C.................................. 8,382,745 9,710,786 ------------- ------------- Total Capital................................. $ 562,718,838 $ 531,531,274 ============= =============
Class B and C shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed on most redemptions made within five years of the purchase for Class B and one year of the purchase for Class C as detailed in the following schedule. The Class B and C shares bear the expense of their respective deferred sales arrangements, including higher distribution and service fees and incremental transfer agency costs. B-37 77 Notes to Financial Statements (Continued) May 31, 1997 ================================================================================ Contingent Deferred Sales Charge -------------------- Year of Redemption Class B Class C ================================================================================ First................................................... 4.00% 1.00% Second.................................................. 4.00% None Third................................................... 3.00% None Fourth.................................................. 2.50% None Fifth................................................... 1.50% None Sixth and Thereafter.................................... None None For the year ended May 31, 1997, VKAC, as Distributor for the Fund, received commissions on CDSC redeemed shares of approximately $414,900. Sales charges do not represent expenses of the Fund. 4. Distribution and Service Plans The Fund and its shareholders have adopted a distribution plan pursuant to Rule 12B-1 under the Investment Company Act of 1940 and a service plan (collectively the "Plans"). The Plans govern payments for the distribution of the Fund's shares, ongoing shareholder services and maintenance of shareholder accounts. Annual fees under the Plans of up to .15% of average daily net assets of Class A shares and .90% each of Class B and Class C shares are accrued daily. Included in these fees for the year ended May 31, 1997, are payments to VKAC of approximately $684,300. 5. Business Combination On September 22, 1995, the Fund acquired the net assets of Van Kampen American Capital Money Market Fund ("VKMM") pursuant to a plan of reorganization approved by VKMM shareholders on September 21, 1995. The acquisition resulted in a tax-free exchange of 26,366,453 shares of the Fund for the 26,366,453 shares of VKMM outstanding on September 22, 1995. VKMM's net assets at that date were $26,366,453; the Fund's net assets were $422,227,929. After the acquisition, the combined net assets of the Fund were $448,594,382. B-38 78 PART C. OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS. (A) FINANCIAL STATEMENTS:
Included in Part A of Registration Statement: Financial Highlights Included in Part B of Registration Statement: Report of Independent Accountants Financial Statements Notes to Financial Statements
(B) EXHIBITS: (1)(a) -- First Amended and Restated Agreement and Declaration of Trust(8) (b) -- Certificate of Amendment(8) (c) -- Amended and Restated Certificate of Designation+ (2) -- Amended and Restated Bylaws(8) (4)(a) -- Specimen Class A Share Certificate(8) (b) -- Specimen Class B Share Certificate(8) (c) -- Specimen Class C Share Certificate(8) (5) -- Investment Advisory Agreement+ (6)(a) -- Distribution and Service Agreement+ (b) -- Form of Dealer Agreement(8) (c) -- Form of Broker Agreement(8) (d) -- Form of Bank Agreement(8) (8)(a) -- Custodian Contract+ (b) -- Transfer Agency and Service Agreement+ (9)(a) -- Data Access Services Agreement(7) (b) -- Fund Accounting Agreement+ (10) -- Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)(8) (11) -- Consent of Price Waterhouse LLP+ (14)(a) -- Individual Retirement Account Brochure with Application(4) (b) -- 403(b)(7) Custodial Account(3) (c) -- ORP 403(b)(7) Custodial Account(3) (d) -- Retirement Plans for the Small Business-Forms Package and Plan Documents(1) (e) -- Prototype Profit Sharing/Money Purchase Plan and Trust(2) (f) -- Prototype 401(k) Plan and Trust(2) (g) -- Salary Reduction Simplified Employee Pension Plan(5) (h) -- Simplified Employee Pension Plan Brochure with Application(6) (15)(a) -- Plan of Distribution pursuant to Rule 12b-1+ (b) -- Form of Shareholder Assistance Agreement+ (c) -- Form of Administrative Services Agreement+ (16) -- Computation of Performance Quotations+
C-1 79 (17)(a) -- List of certain investment companies in response to Item 29(a)+ (b) -- List of officers and directors of Van Kampen American Capital Distributors, Inc. in response to Item 29(b)+ (18) -- Amended Multi-Class Plan+ (24) -- Power of Attorney+ (27) -- Financial Data Schedules+
- ------------------------- (1) Incorporated herein by reference to Post-Effective Amendment No. 44 to Van Kampen American Capital Emerging Growth Fund's Registration Statement on Form N-1A, File No. 2-33214, filed December 21, 1990. (2) Incorporated herein by reference to Post-Effective Amendment No. 61 to Van Kampen American Capital Growth and Income Fund's Registration Statement on Form N-1A, File No. 2-21657, filed March 26, 1991. (3) Incorporated herein by reference to Post-Effective Amendment No. 30 to Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed September 24, 1992. (4) Incorporated herein by reference to Post-Effective Amendment No. 31 to Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed September 24, 1993. (5) Incorporated herein by reference to Post-Effective Amendment No. 9 to Van Kampen American Capital World Portfolio Series Trust's Registration Statement on Form N-1A, File No. 33-37879, filed September 24, 1993. (6) Incorporated herein by reference to Post-Effective Amendment No. 69 to Van Kampen American Capital Growth and Income Fund's Registration Statement on Form N-1A, File No. 2-21657, filed March 24, 1994. (7) Incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed May 19, 1994. (8) Incorporated herein by reference to Post-Effective Amendment No. 37 to Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed September 27, 1996. * Filed herewith. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. See the Statement of Additional Information. C-2 80 ITEM 26. NUMBER OF HOLDERS OF SECURITIES. As of September 15, 1997
(2) NUMBER OF RECORD HOLDERS (1) --------------------------- TITLE OF CLASS CLASS A CLASS B CLASS C -------------- ------- ------- ------- Shares of Beneficial Interest, $0.01 par value 42,700 4,804 1,047
ITEM 27. INDEMNIFICATION. Reference is made to Article 8, Section 8.4 of the Registrant's Agreement and Declaration of Trust. Article 8; Section 8.4 of the Agreement and Declaration of Trust provides that each officer and trustee of the Registrant shall be indemnified by the Registrant against all liabilities incurred in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which the officer or trustee may be or may have been involved by reason of being or having been an officer or trustee, except that such indemnity shall not protect any such person against a liability to the Registrant or any shareholder thereof to which such person would otherwise be subject by reason of (i) not acting in good faith in the reasonable belief that such person's actions were not in the best interest of the Trust, (ii) willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, or (iii) for a criminal proceeding not having a reasonable cause to believe that such conduct was unlawful (collectively "Disabling Conduct"). Absent a court determination that an officer or trustee seeking indemnification was not liable on the merits or guilty of Disabling Conduct in the conduct of his or her office, the decision by the Registrant to indemnify such person must be based upon the reasonable determination of independent counsel or non-party independent trustees, after review of the facts, that such officer or trustee is not guilty of Disabling Conduct in the conduct of his or her office. The Registrant has purchased insurance on behalf of its officers and trustees protecting such persons from liability arising from their activities as officers or trustees of the Registrant. The insurance does not protect or purport to protect such persons from liability to the Registrant or to its shareholders to which such officers or trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of their office. Conditional advancing of indemnification monies may be made if the trustee or officer undertakes to repay the advance unless it is ultimately determined that he or she is entitled to the indemnification and only if the following conditions are met: (1) the trustee or officer provides a security for the undertaking; (2) the Registrant is insured against losses arising from lawful advances; or (3) a majority of a quorum of the Registrant's disinterested, non-party trustees, or an independent legal counsel in a written opinion, shall determine, based upon a review of readily available facts, that a recipient of the advance ultimately will be found entitled to indemnification. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "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 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 Act and will be governed by the final adjudication of such issue. C-3 81 ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER. See "Investment Advisory Services" in the Prospectus and "Trustees and Officers" in the Statement of Additional Information for information regarding the business of the Adviser. For information as to the business, profession, vocation and employment of a substantial nature of directors and officers of the Adviser, reference is made to the Adviser's current Form ADV (File No. 801-1669) filed under the Investment Advisers Act of 1940, as amended, incorporated herein by reference. ITEM 29. PRINCIPAL UNDERWRITERS. (a) The sole principal underwriter is Van Kampen American Capital Distributors, Inc., which acts as principal underwriter for certain investment companies and unit investment trusts set forth in Exhibit 17(a) incorporated by reference herein. (b) Van Kampen American Capital Distributors, Inc. is an affiliated person of an affiliated person of Registrant and is the only principal underwriter for Registrant. The name, principal business address and positions and offices with Van Kampen American Capital Distributors, Inc. of each of the directors and officers thereof are set forth in Exhibit 17(b). 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 Registrant. (c) Not applicable. ITEM 30. LOCATION OF BOOKS 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 Registrant will be maintained at its offices, located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181, ACCESS Investor Services, Inc., 7501 Tiffany Springs Parkway, Kansas City, Missouri 64153, or at the State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy, MA; (ii) by the Adviser, will be maintained at its offices, located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181; and (iii) by the Distributor, the principal underwriter, will be maintained at its offices located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181. ITEM 31. MANAGEMENT SERVICES. Not applicable. ITEM 32. UNDERTAKINGS. Registrant hereby undertakes, if requested to do so by the holders of at least 10% of the Registrant's outstanding shares, to call a meeting of shareholders for the purpose of voting upon the question of removal of a trustee or trustees and to assist in communications with other shareholders as required by Section 16(c) of the Investment Company Act of 1940. C-4 82 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, VAN KAMPEN AMERICAN CAPITAL RESERVE FUND, certifies that it meets all of the requirements for effectiveness of this Amendment to the Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Oakbrook Terrace and State of Illinois, on the 26th day of September, 1997. VAN KAMPEN AMERICAN CAPITAL RESERVE FUND By: /s/ RONALD A. NYBERG ------------------------------------ Ronald A. Nyberg, Vice President and Secretary Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed on September 26, 1997 by the following persons in the capacities indicated:
SIGNATURES TITLE ---------- ----- Principal Executive Officer: /s/ DENNIS J. MCDONNELL* President - ----------------------------------------------------- Dennis J. McDonnell Principal Financial Officer: /s/ EDWARD C. WOOD III* Vice President and Chief Financial - ----------------------------------------------------- Officer Edward C. Wood III Trustees: /s/ J. MILES BRANAGAN* Trustee - ----------------------------------------------------- J. Miles Branagan /s/ RICHARD M. DEMARTINI* Trustee - ----------------------------------------------------- Richard M. DeMartini /s/ LINDA H. HEAGY* Trustee - ----------------------------------------------------- Linda Hutton Heagy /s/ R. CRAIG KENNEDY* Trustee - ----------------------------------------------------- R. Craig Kennedy /s/ JACK E. NELSON* Trustee - ----------------------------------------------------- Jack E. Nelson /s/ JEROME L. ROBINSON* Trustee - ----------------------------------------------------- Jerome L. Robinson /s/ PHILLIP B. ROONEY* Trustee - ----------------------------------------------------- Phillip B. Rooney /s/ FERNANDO SISTO* Trustee - ----------------------------------------------------- Fernando Sisto /s/ WAYNE W. WHALEN* Trustee - ----------------------------------------------------- Wayne W. Whalen
- --------------- * Signed by Ronald A. Nyberg pursuant to a power of attorney. /s/ RONALD A. NYBERG - ------------------------------------ Ronald A. Nyberg Attorney-in-Fact September 26, 1997 83 SCHEDULE OF EXHIBITS TO POST-EFFECTIVE AMENDMENT 38 TO FORM N-1A AS SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1997
EXHIBIT NUMBER EXHIBIT ------- ------- (1)(c) -- Amended and Restated Certificate of Designation (5) -- Investment Advisory Agreement (6)(a) -- Distribution and Service Agreement (8)(a) -- Custodian Contract (b) -- Transfer Agency and Service Agreement (9)(b) -- Fund Accounting Agreement (11) -- Consent of Price Waterhouse LLP (15)(a) -- Plan of Distribution pursuant to Rule 12b-1 (b) -- Form of Shareholder Assistance Agreement (c) -- Form of Administrative Services Agreement (16) -- Computation of Performance Quotations (17)(a) -- List of certain investment companies in response to Item 29(a) (b) -- List of officers and directors of Van Kampen American Capital Distributors, Inc. in response to Item 29(b) (18) -- Amended Multi-Class Plan (24) -- Power of Attorney (27) -- Financial Data Schedules
EX-99.B(1)(C) 2 CERT. OF DESIGNATION 1 EXHIBIT (1)(c) VAN KAMPEN AMERICAN CAPITAL RESERVE FUND Amended and Restated Certificate of Designation of Van Kampen American Capital Reserve Fund The undersigned, being the Secretary of Van Kampen American Capital Reserve Fund, 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 First Amended and Restated Agreement and Declaration of Trust ("Declaration"), and by the affirmative vote of a Majority of the Trustees does hereby amend and restate in its entirety the Certificate of Designation of the Van Kampen American Capital Reserve Fund Series of the Trust dated June 21, 1995 by redesignating the following classes of Shares of the Trust with the following rights, preferences and characteristics: 1. Shares. The beneficial interest in the Trust 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 Trust. 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 Trust 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 Trust. 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 Trust's prospectus. 4. Conversion. Each Class B and certain Class C Shares of the Trust shall be converted automatically, and without any action or choice on the part of the Shareholder thereof, into Class A Shares of the Trust at such times and pursuant to such terms, conditions and restrictions as may be established by the Trustees and as set forth in the Trust'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. 6. Special Meetings. A special meeting of Shareholders of a Class of the Trust 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 Trust 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 any 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 Trust outstanding and entitled to vote or, if such amendment affects the Shares of one or more but not all of the Classes of the Trust, 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. December 12, 1996 /s/ RONALD A. NYBERG - --------------------------- Ronald A. Nyberg, Secretary 1 EX-99.B(5) 3 INVESTMENT ADVISORY AGREEMENT 1 EXHIBIT 5 INVESTMENT ADVISORY AGREEMENT AGREEMENT (herein so called) made this May 31, 1997, by and between VAN KAMPEN AMERICAN CAPITAL RESERVE FUND, a Delaware business trust (hereinafter referred to as the "FUND"), and VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC., a Delaware corporation (hereinafter referred to as the "ADVISER"). The FUND and the ADVISER agree as follows: (1) Services Rendered and Expenses Paid by ADVISER The ADVISER, subject to the control, direction and supervision of the FUND's Trustees and in conformity with applicable laws, the FUND's Agreement and Declaration of Trust ("Declaration of Trust"), By-laws, registration statements, prospectus and stated investment objectives, policies and restrictions, shall: a. manage the investment and reinvestment of the FUND's assets including, by way of illustration, the evaluation of pertinent economic, statistical, financial and other data, determination of the industries and companies to be represented in the FUND's portfolio, and formulation and implementation of investment programs; b. maintain a trading desk and place all orders for the purchase and sale of portfolio investments for the FUND's account with brokers or dealers selected by the ADVISER; c. conduct and manage the day-to-day operations of the FUND including, by way of illustration, the preparation of registration statements, prospectuses, reports, proxy solicitation materials and amendments thereto, the furnishing of routine legal services except for services provided by outside counsel to the FUND selected by the Trustees, and the supervision of the FUND's Treasurer and the personnel working under his direction; and d. furnish to the FUND office space, facilities, equipment and personnel adequate to provide the services described in paragraphs a., b., and c. above and pay the compensation of each FUND trustee and FUND officer who is an affiliated person of the ADVISER, except the compensation of the FUND's Treasurer and related expenses as provided below. In performing the services described in paragraph b. above, the ADVISER shall use its best efforts to obtain for the FUND the most favorable price and execution available and shall maintain records adequate to demonstrate compliance with this requirement. Subject to prior authorization by the FUND's Trustees of appropriate policies and procedures, the ADVISER may, to the extent authorized by law, cause the FUND to pay a broker or dealer that provides brokerage and research services to the ADVISER an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction. In the event of such authorization and to the extent authorized by law, the ADVISER shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of such action. 2 Except as otherwise agreed, or as otherwise provided herein, the FUND shall pay, or arrange for others to pay, all its expenses other than those expressly stated to be payable by the ADVISER hereunder, which expenses payable by the FUND shall include (i) interest and taxes; (ii) brokerage commissions and other costs in connection with the purchase and sale of portfolio investments; (iii) compensation of its trustees and officers other than those who are affiliated persons of the ADVISER; (iv) compensation of its Treasurer, compensation of personnel working under the Treasurer's direction, and expenses of office space, facilities, and equipment used by the Treasurer and such personnel in the performance of their normal duties for the FUND which consist of maintenance of the accounts, books and other documents which constitute the record forming the basis for the FUND's financial statements, preparation of such financial statements and other FUND documents and reports of a financial nature required by federal and state laws, and participation in the production of the FUND's registration statement, prospectuses, proxy solicitation materials and reports to shareholders; (v) fees of outside counsel to and of independent accountants of the FUND selected by the Trustees; (vi) custodian, registrar and shareholder service agent fees and expenses; (vii) expenses related to the repurchase or redemption of its shares including expenses related to a program of periodic repurchases or redemptions; (viii) expenses related to the issuance of its shares against payment therefor by or on behalf of the subscribers thereto; (ix) fees and related expenses of registering and qualifying the FUND and its shares for distribution under state and federal securities laws; (x) expenses of printing and mailing of registration statements, prospectuses, reports, notices and proxy solicitation materials of the FUND; (xi) all other expenses incidental to holding meetings of the FUND's shareholders including proxy solicitations therefor; (xii) expenses for servicing shareholder accounts; (xiii) insurance premiums for fidelity coverage and errors and omissions insurance; (xiv) dues for the FUND's membership in trade associations approved by the Trustees; and (xv) such nonrecurring expenses as may arise, including those associated with actions, suits or proceedings to which the FUND is a party and the legal obligation which the FUND may have to indemnify its officers and trustees with respect thereto. To the extent that any of the foregoing expenses are allocated between the FUND and any other party, such allocations shall be pursuant to methods approved by the Trustees. For a period of one year commencing on the effective date of this Agreement, the ADVISER and the FUND agree that the retention of (i) the chief executive officer, president, chief financial officer and secretary of the ADVISER and (ii) each director, officer and employee of the ADVISER or any of its Affiliates (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) who serves as an officer of the FUND (each person referred to in (i) or (ii) hereinafter being referred to as an "Essential Person"), in his or her current capacities, is in the best interest of the FUND and the FUND's shareholders. In connection with the ADVISER's acceptance of employment hereunder, the ADVISER hereby agrees and covenants for itself and on behalf of its Affiliates that neither the ADVISER nor any of its Affiliates shall make any material or significant personnel changes or replace or seek to replace any Essential Person or cause to be replaced any Essential Person, in each case without first informing the Board of Trustees of the FUND in a timely manner. In addition, neither the ADVISER nor any Affiliate of the ADVISER shall change or seek to change or cause to be changed, in any material respect, the duties and responsibilities of any Essential Person, in each case without first informing the Board of Trustees of the FUND in a timely manner. (2) Role of ADVISER The ADVISER, and any person controlled by or under common control with the ADVISER, shall be free to render similar services to others and engage in other activities, so long as the services rendered to the FUND are not impaired. 2 3 Except as otherwise required by the Investment Company Act of 1940 (the "1940 Act"), any of the shareholders, trustees, officers and employees of the FUND may be a shareholder, trustee, director, officer or employee of, or be otherwise interested in, the ADVISER, and in any person controlled by or under common control with the ADVISER, and the ADVISER, and any person controlled by or under common control with the ADVISER, may have an interest in the FUND. Except as otherwise agreed, in the absence of willful misfeasance, bad faith, negligence or reckless disregard of obligations or duties hereunder on the part of the ADVISER, the ADVISER shall not be subject to liability to the FUND, or to any shareholder of the FUND, for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. (3) Compensation Payable to ADVISER The FUND shall pay to the ADVISER, as compensation for the services rendered, facilities furnished and expenses paid by the ADVISER, a monthly fee computed at the following annual rate: .50% on the first $150 million of the Fund's average daily net assets, .45% on the next $100 million of the FUND's average daily net assets; .40% on the next $100 million of the FUND's average daily net assets; and .35% of any excess over $350 million Average daily net assets shall be determined by taking the average of the net assets for each business day during a given calendar month calculated in the manner provided in the FUND's Declaration of Trust. Such fee shall be payable for each calendar month as soon as practicable after the end of that month. The fees payable to the ADVISER by the FUND pursuant to this Section 3 shall be reduced by any commissions, tender solicitation and other fees, brokerage or similar payments received by the ADVISER, or any other direct or indirect majority owned subsidiary of VK/AC Holding, Inc., in connection with the purchase and sale of portfolio investments of the FUND, less any direct expenses incurred by such person, in connection with obtaining such commissions, fees, brokerage or similar payments. The ADVISER shall use its best efforts to recapture all available tender offer solicitation fees and exchange offer fees in connection with the FUND's portfolio transactions and shall advise the Trustees of any other commissions, fees, brokerage or similar payments which may be possible for the ADVISER or any other direct or indirect majority owned subsidiary of VK/AC Holding, Inc. to receive in connection with the FUND's portfolio transactions or other arrangements which may benefit the FUND. In the event that the ordinary business expenses of the FUND for any fiscal year should exceed 1% of average daily net assets, the compensation due the ADVISER for such fiscal year shall be reduced by the amount of such excess. The ADVISER's compensation shall be so reduced by a reduction or a refund thereof, at the time such compensation is payable after the end of each calendar month during such fiscal year of the FUND, and if such amount should exceed such monthly compensation, the ADVISER shall pay the FUND an amount sufficient to make up the deficiency, subject to readjustment during the FUND's fiscal year. For purposes of this paragraph, all ordinary business expenses of the FUND shall include the investment advisory fee and other operating expenses paid by the FUND except (i) for interest and taxes; (ii) brokerage commissions; (iii) as a result of litigation in connection with a suit involving a claim for recovery by the FUND; (iv) as a result of litigation involving a defense against a liability asserted against the FUND, provided that, if the ADVISER made the decision or took the actions which resulted in such claim, it acted in good faith without negligence or misconduct; (v) any indemnification paid by the FUND to its officers and trustees and the ADVISER in accordance with applicable state and federal laws as a result of such litigation; and (vi) amounts paid to Van Kampen American Capital Distributors, Inc., the distributor of the FUND's shares, in connection with a distribution plan adopted by the FUND's Trustees pursuant to Rule 12b-1 under the Investment Company Act of 1940. 3 4 If the ADVISER shall serve for less than the whole of any month, the foregoing compensation shall be prorated. (4) Books and Records In compliance with the requirements of Rule 31a-3 under the 1940 Act, the ADVISER hereby agrees that all records which it maintains for the FUND are the property of the FUND and further agrees to surrender promptly to the FUND any of such records upon the FUND's request. The ADVISER further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the Act. (5) Duration of Agreement This Agreement shall become effective on the date hereof, and shall remain in full force until May 31, 1999 unless sooner terminated as hereinafter provided. This Agreement shall continue in force from year to year thereafter, but only so long as such continuance is approved at least annually by the vote of a majority of the FUND's Trustees who are not parties to this Agreement or interested persons of any such parties, cast in person at a meeting called for the purpose of voting on such approval, and by a vote of a majority of the FUND's Trustees or a majority of the FUND's outstanding voting securities. This Agreement shall terminate automatically in the event of its assignment. The Agreement may be terminated at any time by the FUND's Trustees, by vote of a majority of the FUND's outstanding voting securities, or by the ADVISER, on 60 days' written notice, or upon such shorter notice as may be mutually agreed upon. Such termination shall be without payment of any penalty. 4 5 (6) Miscellaneous Provisions For the purposes of this Agreement, the terms "affiliated person,"assignment," "interested person," and "majority of the outstanding voting securities" shall have their respective meanings defined in the 1940 Act and the Rules and Regulations thereunder, subject, however, to such exemptions as may be granted to either the ADVISER or the FUND by the Securities and Exchange Commission (the "Commission"), or such interpretive positions as may be taken by the Commission or its staff, under the 1940 Act, and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. The execution of this Agreement has been authorized by the FUND's Trustees and by the sole shareholder. This Agreement is executed on behalf of the FUND or the Trustees of the FUND as Trustees and not individually and that the obligations of this Agreement are not binding upon any of the Trustees, officers or shareholders of the FUND individually but are binding only upon the assets and property of the FUND. A Certificate of Trust in respect of the FUND is on file with the Secretary of State of Delaware. 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. 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. The parties hereto each have caused this Agreement to be signed in duplicate on its behalf by its duly authorized officer on the above date. VAN KAMPEN AMERICAN CAPITAL VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC. RESERVE FUND By: /s/ DENNIS J. MCDONNELL By: /s/ PETER W. HEGEL ---------------------------- ---------------------------- Name: Dennis J. McDonnell Name: Peter W. Hegel ---------------------------- ---------------------------- Its: President Its: Executive Vice President ---------------------------- ---------------------------- 5 EX-99.B(6)(A) 4 DISTRIBUTION & SERVICE AGREEMENT 1 EXHIBIT (6)(a) DISTRIBUTION AND SERVICE AGREEMENT THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of May 31, 1997 (the "Agreement") by and between VAN KAMPEN AMERICAN CAPITAL RESERVE FUND (the "Fund"), and VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC., a Delaware corporation (the "Distributor"). 1. (a) 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. (b) Best Efforts. The Distributor shall 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. Without the prior approval of the Board of Trustees, the Distributor shall not, directly or indirectly, distribute, sell or market, through its organization or other brokers, dealers or agents, shares of any investment companies unless the Board of Trustees of the Fund determines that such companies do not compete, or potentially compete, with the fund. (c) Positions in the 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. (d) Essential Personnel. The Distributor and the Fund agree that the retention of (i) the chief executive officer, president, treasurer and secretary of the Distributor, and (ii) each director, officer and employee of the Distributor or any of its affiliates (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) who serves as an officer of the Fund (each person referred to in (i) or (ii) hereinafter being referred to as an "Essential Person"), in his or her current capacities, is in the best interest of the Fund and the Fund's shareholders. In connection with the Distributor's acceptance of employment hereunder, the Distributor hereby agrees and covenants for itself and on behalf of its Affiliates that neither the Distributor nor any of its Affiliates shall replace or seek to replace any Essential Person or cause to be replaced any Essential Person, in each case without first consulting with the Board of Trustees of the Fund in a timely manner. In addition, neither the Distributor nor any Affiliate of the Distributor shall change or seek to change or cause to be changed, in any material respect, the duties and responsibilities of any Essential Person, in each case without first consulting with the Board of Trustees of the Fund in a timely manner. 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 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 American Capital, Inc. (the parent of the Distributor), VK/AC Holding, Inc. (the parent of The Van Kampen American Capital, Inc.), Morgan Stanley, Dean Witter, Discover & Co. (the parent company of VK/AC Holding, Inc.) and to the subsidiaries of Van Kampen American Capital, Inc.; (f) to any trust, pension, profit-sharing or other benefit plan for any of the aforesaid persons; and (g) to any group of persons as permitted by Rule 22d-1 under the 1940 Act approved from time to time by the Board of Trustees and set forth in the then current Prospectus of the Fund. 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 1 2 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. (a) 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 Fund's Multiple Class Plan adopted by the Board of Trustees in accordance with Section 18 of the 1940 Act and Rule 18f-3 thereunder. 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. (b) Discounts to Dealers. 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. In connection with the Distributor's employment hereunder, the Distributor hereby agrees to distribute the Shares through brokers, dealers and other agents of Dean Witter Distributors, Inc. on a "proprietary basis" substantially identical to the distribution of shares of proprietary open-end investment companies distributed by Dean Witter Distributors, Inc. 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 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 pay the costs and expenses of qualifying and maintaining qualification of the Shares for sale under the securities laws of the various states. 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 and subject to 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, comparing the amounts paid by such class of Shares with amounts paid by classes of shares issued by investment companies not governed by the Board of Trustees and distributed by the Distributor or by direct or indirect Affiliates of the Distributor and such other information as the Board of Trustees may from time to time request. (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 3 4 review, at least quarterly, a written report with respect to each class of Shares setting forth the amounts paid as service fees for each such class of Shares, comparing the amounts paid as service fees by such class of Shares with amounts paid by classes of shares issued by investment companies not governed by the Board of Trustees and distributed by the Distributor or by direct or indirect Affiliates of the Distributor and such other information as the Board of Trustees may from time to time request. 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 4 5 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. 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 5 6 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 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. Name. In connection with its employment hereunder, the Distributor hereby agrees and covenants not to change its name without the prior consent of the Board of Trustees. 6 7 12. 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. 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 AMERICAN CAPITAL RESERVE FUND By: /s/ Dennis J. McDonnell -------------------------------- Name: Dennis J. McDonnell Title: President VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC. By: /s/ Ronald A. Nyberg -------------------------------- Name: Ronald A. Nyberg Title: Executive Vice President 7 EX-99.B(8)(A) 5 CUSTODIAN CONTRACT 1 EXHIBIT 8(a) CUSTODIAN CONTRACT Between EACH OF THE PARTIES LISTED ON APPENDIX A and STATE STREET BANK AND TRUST COMPANY 2 TABLE OF CONTENTS
Page ---- 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
3 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
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(s) 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 Trustees 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 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 (and certain federal agencies 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 U.S. 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 U.S. 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 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; 3 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; 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 of Trustees, 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; and 16) Upon termination of the Contract. 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 4 8 Article 1. All securities accepted by the Custodian on behalf of the Fund 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 Trustees 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 5 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 U.S. 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; 6 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 of Trustees, 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; and 8) Upon termination of this Contract. 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. 7 11 2.10 Deposit of Fund Assets in U.S. 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 "U.S. 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 U.S. Securities System provided that such securities are represented in an account ("Account") of the Custodian in the U.S. 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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 U.S. Securities System for the account of the Fund. 4) The Custodian shall provide the Fund with any report obtained by the Custodian on the U.S. Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the U.S. Securities System; 8 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 any loss or damage to the Fund resulting from use of the U.S. 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 U.S. 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 U.S. 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 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; 9 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 transaction in the U.S. 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 of Trustees 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. 10 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 of Trustees, 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 11 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 a clearing agency which acts as a securities depository or in a book-entry system for the central handling of securities located outside of the United States (each a "Foreign Securities System") only through arrangements implemented by the foreign banking institutions serving as sub-custodians pursuant to the terms hereof (Foreign Securities Systems and U.S. Securities Systems are collectively referred to herein as the "Securities Systems"). Where possible, such arrangements shall include entry into agreements containing the provisions set forth in Section 3.5 hereof. 3.4 Holding Securities. The Custodian may hold cash, securities and other non-cash property for all of its customers, including the Fund, with a foreign sub-custodian in a single account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (1) the records of the Custodian with respect to cash, securities and other non-cash property of the Fund which are maintained in such account shall identify by book-entry the cash, securities and other non-cash property belonging to the Fund and (ii) the Custodian shall require that cash, securities and other non-cash property so held by the foreign sub-custodian be held separately from any assets of the Custodian, the foreign sub-custodian or of others. 3.5 Agreements with Foreign Banking Institutions. Each agreement with a foreign banking institution shall provide that: (a) the assets of each 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 each 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 each applicable 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(s) held by the foreign sub-custodian will be subject only to the instructions of the Custodian or its agents. 3.6 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. 3.7 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(s) held by foreign sub-custodians, including but not limited to an identification of entities having possession of the Fund(s) securities and other assets and advices or notifications of any transfers of securities to or from each custodial account maintained by a foreign banking 12 16 institution for the Custodian on behalf of each applicable Fund indicating, as to securities acquired for a Fund, the identity of the entity having physical possession of such securities. 3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided in paragraph (b) of this Section 3.8, 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 each applicable Fund and delivery of securities maintained for the account of each applicable 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. In addition, and whether or not such practice is a customary established trading practice in the relevany jurisdictions, the Custodian will, upon Proper Instructions from the Fund, deliver cash to securities brokers in foreign jurisdictions who will effect securities trades for the Fund and cause the securities purchased to be delivered to the applicable foreign sub-custodian at some later date. (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. 3.9 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. 3.10 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 3.13 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 13 17 paragraph 3.10, 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. 3.11 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. 3.12 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). 3.13 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 14 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. 3.14 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 on behalf of each such 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 applicable Fund's governing documents and any applicable votes of the Board of Trustees 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. 15 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 Trustees 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 Trustees of the Fund accompanied by a detailed description of procedures approved by the Board of Trustees, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Board of Trustees 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 Trustees of the Fund. 16 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 Trustees 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 of Trustees 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 Trustees 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 related to such Fund. 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 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 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. Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a sub-custodian or agent, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by: (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, nationalization or expropriation, imposition of currency controls or restrictions, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, acts of war or terrorism, riots, revolutions, work stoppages, natural disasters or other similar events or acts; (ii) errors by the Fund or its investment adviser in their instructions to the Custodian provided such instructions have been in accordance with this Contract; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodian's sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (v) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vi) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (vii) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction. 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. 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 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. 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 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 an annual certificate of the Secretary or an Assistant Secretary that the Board of the Fund 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 Fund's governing documents, and further provided, that the Fund on behalf of one or more of the Funds 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 a Fund shall be appointed by the Board of Trustees of such 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, Funds and other properties of each applicable Fund then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each 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 Trustees 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 of Trustees shall have been delivered to the Custodian on or before the date when such 20 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 each applicable Fund and all instruments held by the Custodian relative thereto and all other property held by it under this Contract on behalf of each applicable Fund and to transfer to an account of such successor custodian all of the securities of each such 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 of Trustees 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 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. Reproduction of Documents This Contract and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. 21. 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 or any funds or accounts established 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 Fund's name, address, and share positions of each Fund listed on Exhibit A. NO [X] The Custodian is not authorized to release the Fund's name, address, and share positions of each Fund listed on Exhibit A. 22 26 22. Limitation of Liability. The execution of this Contract has been authorized by each Fund's Board of Trustees. 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. 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 1st day of August, 1997. ATTEST EACH OF THE FUNDS LISTED ON APPENDIX A /s/ Nicholas Dalmaso By: /s/ Ronald A. Nyberg - ------------------------ ----------------------------------- Ronald A. Nyberg, Vice President and Secretary ATTEST STATE STREET BANK AND TRUST COMPANY /s/ Francine Hayes By: [ILLEGIBLE] - ------------------------ ----------------------------------- Executive Vice President 23 27 APPENDIX A FUND NAMES VAN KAMPEN AMERICAN CAPITAL COMSTOCK FUND VAN KAMPEN AMERICAN CAPITAL CORPORATE BOND FUND VAN KAMPEN AMERICAN CAPITAL EMERGING GROWTH FUND VAN KAMPEN AMERICAN CAPITAL ENTERPRISE FUND VAN KAMPEN AMERICAN CAPITAL EQUITY INCOME FUND VAN KAMPEN AMERICAN CAPITAL GLOBAL MANAGED ASSETS FUND VAN KAMPEN AMERICAN CAPITAL GOVERNMENT SECURITIES FUND VAN KAMPEN AMERICAN CAPITAL GOVERNMENT TARGET FUND VAN KAMPEN AMERICAN CAPITAL GROWTH AND INCOME FUND VAN KAMPEN AMERICAN CAPITAL HARBOR FUND VAN KAMPEN AMERICAN CAPITAL HIGH INCOME CORPORATE BOND FUND VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST Asset Allocation Portfolio Domestic Income Portfolio Emerging Growth Portfolio Enterprise Portfolio Global Equity Portfolio Government Portfolio Growth and Income Portfolio Money Market Portfolio Morgan Stanley Real Estate Securities Portfolio VAN KAMPEN AMERICAN CAPITAL LIMITED MATURITY GOVERNMENT FUND VAN KAMPEN AMERICAN CAPITAL PACE FUND VAN KAMPEN AMERICAN CAPITAL REAL ESTATE SECURITIES FUND VAN KAMPEN AMERICAN CAPITAL RESERVE FUND VAN KAMPEN AMERICAN CAPITAL SMALL CAPITALIZATION FUND VAN KAMPEN AMERICAN CAPITAL TAX-EXEMPT TRUST Van Kampen American Capital High Yield Municipal Fund VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST FOR INCOME VAN KAMPEN AMERICAN CAPITAL UTILITIES INCOME FUND VAN KAMPEN AMERICAN CAPITAL WORLD PORTFOLIO SERIES TRUST Van Kampen American Capital Global Equity Fund Van Kampen American Capital Global Government Securities Fund VAN KAMPEN AMERICAN CAPITAL U.S. GOVERNMENT TRUST Van Kampen American Capital U.S. Government Fund VAN KAMPEN AMERICAN CAPITAL TAX FREE TRUST 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 Florida Insured Tax Free Income Fund Van Kampen American Capital New Jersey Tax Free Income Fund Van Kampen American Capital New York Tax Free Income Fund VAN KAMPEN AMERICAN CAPITAL TRUST Van Kampen American Capital High Yield Fund Van Kampen American Capital Short-Term Global Income Fund Van Kampen American Capital Strategic Income Fund VAN KAMPEN AMERICAN CAPITAL EQUITY TRUST Van Kampen American Capital Utility Fund Van Kampen American Capital Value Fund Van Kampen American Capital Great American Companies Fund Van Kampen American Capital Growth Fund Van Kampen American Capital Prospector Fund Van Kampen American Capital Aggressive Growth Fund VAN KAMPEN AMERICAN CAPITAL PENNSYLVANIA TAX FREE INCOME FUND VAN KAMPEN AMERICAN CAPITAL TAX FREE MONEY FUND VAN KAMPEN AMERICAN CAPITAL FOREIGN SECURITIES FUND 24 28 THE EXPLORER INSTITUTIONAL TRUST Explorer Institutional Active Core Fund Explorer Institutional Limited Duration Fund VAN KAMPEN AMERICAN CAPITAL NAVIGATOR FUNDS Emerging Markets Equity Portfolio Emerging Markets Fixed Income Portfolio U.S. Quality Funds VAN KAMPEN AMERICAN CAPITAL EXCHANGE FUND 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 PRIME RATE INCOME 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 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 VAN KAMPEN AMERICAN CAPITAL BOND FUND VAN KAMPEN AMERICAN CAPITAL CONVERTIBLE SECURITIES FUND VAN KAMPEN AMERICAN CAPITAL INCOME TRUST 25 EX-99.B(8)(B) 6 TRANSFER AGENCY & SERVICE AGREEMENT 1 EXHIBIT (8)(b) TRANSFER AGENCY AND SERVICE AGREEMENT AGREEMENT made as of the 31st day of May, 1997 by and between each of the VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS set forth on Schedule "A" hereto, which are organized under the laws of the state and as the entities set forth in Schedule "A" hereto (collectively, the "Funds"), and ACCESS INVESTOR SERVICES, INC., a Delaware corporation ("ACCESS"). R E C I T A L: ------------- WHEREAS, each of the Funds desires to appoint ACCESS as its transfer agent, dividend disbursing agent and shareholder service agent and ACCESS desires to accept such appointments; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: Article 1. Terms of Appointment; Duties of ACCESS. --------------------------------------- 1.01 Subject to the terms and conditions set forth in this Agreement, each of the Funds hereby employs and appoints ACCESS as its transfer agent, dividend disbursing agent and shareholder service agent. 1.02 ACCESS hereby accepts such employment and appointments and agrees that on and after the effective date of this Agreement it will act as the transfer agent, dividend disbursing agent and shareholder service agent for each of the Funds on the terms and conditions set forth herein. 1.03 ACCESS agrees that its duties and obligations hereunder will be performed in a competent, efficient and workmanlike manner with due diligence in accordance with reasonable industry practice, and that the necessary facilities, equipment and personnel for such performance will be provided. 1.04 For a period of one year commencing on the effective date of this Agreement, ACCESS and each of the Funds agree that the retention of (i) the chief executive officer, president, chief financial officer, chief operating officer and secretary of ACCESS and (ii) each director, officer and employee of ACCESS or any of its Affiliates (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) who serves as an officer of the Funds (each person referred to in (i) or (ii) hereinafter being referred to as an "Essential Person"), in his or her current capacities, is in the best interest 2 of the Funds and the Funds' shareholders. In connection with ACCESS's acceptance of employment hereunder, ACCESS hereby agrees and covenants for itself and on behalf of its Affiliates that neither ACCESS nor any of its Affiliates shall make any material or significant personnel changes or replace or seek to replace any Essential Person or cause to be replaced any Essential Person, in each case without first informing the Board of Trustees of the Funds in a timely manner. In addition, neither ACCESS nor any Affiliate of ACCESS shall change or seek to change or cause to be changed, in any material respect, the duties and responsibilities of any Essential Person, in each case without first informing the Board of Trustees of the Funds in a timely manner. 1.05 In order to assure compliance with section 1.03 and to implement a cooperative effort to improve and maintain the quality of transfer agency, dividend disbursing and shareholder services received by each of the Funds and their shareholders, ACCESS agrees to provide and maintain quantitative performance objectives, including maximum target turn-around times and maximum target error rates, for the various services provided hereunder. ACCESS also agrees to provide a reporting system designed to provide the Board of Trustees of each of the Funds (the "Board") on a quarterly basis with quantitative data comparing actual performance for the period with the performance objectives. The foregoing procedures are designed to provide a basis for continuing monitoring by the Board of the quality of services rendered hereunder. Article 2. Fees and Expenses. ------------------ 2.01 For the services to be performed by ACCESS pursuant to this Agreement, each of the Funds agrees to pay ACCESS the fees provided in the fee schedules agreed upon from time to time by each of the Funds and ACCESS. 2.02 In addition to the amounts paid under section 2.01 above, each of the Funds agrees to reimburse ACCESS promptly for such Fund's reasonable out-of-pocket expenses or advances paid on its behalf by ACCESS in connection with its performance under this Agreement for postage, freight, envelopes, checks, drafts, continuous forms, reports and statements, telephone, telegraph, costs of outside mailing firms, necessary outside record storage costs, media for storage of records (e.g., microfilm, microfiche and computer tapes) and printing costs incurred due to special requirements of such Fund. In addition, any other special out-of-pocket expenses paid by ACCESS at the specific request of any of the Funds will be promptly reimbursed by the requesting Fund. Postage for mailings of dividends, proxies, Fund reports and other mailings Page 2 3 to all shareholder accounts shall be advanced to ACCESS by the concerned Fund three business days prior to the mailing date of such materials. Article 3. Representations and Warranties of Access. ----------------------------------------- ACCESS represents and warrants to each of the Funds that: 3.01 It is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.02 It is duly qualified to carry on its business in each jurisdiction in which the nature of its business requires it to be so qualified. 3.03 It is empowered under applicable laws and regulations and by its charter and bylaws to enter into and perform this Agreement. 3.04 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement. 3.05 It has and will continue to have during the term of this Agreement access to the necessary facilities, equipment and personnel to perform its duties and obligations hereunder. 3.06 It will maintain a system regarding "as of" transactions as follows: (a) Each "as of" transaction effected at a price other than that in effect on the day of processing for which an estimate has not been given to any of the affected Funds and which is necessitated by ACCESS' error, or delay for which ACCESS is responsible or which could have been avoided through the exercise of reasonable care, will be identified, and the net effect of such transactions determined, on a daily basis for each such Fund. (b) The cumulative net effect of the transactions included in paragraph (a) above will be determined each day throughout each month. If, on any day during the month, the cumulative net effect upon any Fund is negative and exceeds an amount equivalent to 1/2 of 1 cent per share of such Fund, ACCESS shall promptly make a payment to such Fund (in cash or through use of a credit as described in paragraph (c) below) in such amount as necessary to reduce the negative cumulative net effect to less than 1/2 of 1 cent per share of such Fund. If on the last business day of the month the cumulative net effect (adjusted by the amount of any payments or credits used pursuant to the preceding sentence) upon any Fund is negative, such Fund shall be entitled to a reduction in the monthly transfer agency fee next payable by an equivalent amount, except as provided in paragraph (c) below. If on the last Page 3 4 business day of the month the cumulative net effect (similarly adjusted) upon any Fund is positive, ACCESS shall be entitled to recover certain past payments, credits used and reductions in fees, and to a credit against all future payments and fee reductions made under this paragraph to such Fund, as described in paragraph (c) below. (c) At the end of each month, any positive cumulative net effect upon any Fund shall be deemed to be a credit to ACCESS which shall first be applied to recover any payments, credits used and fee reductions made by ACCESS to such Fund under paragraph (b) above during the calendar year by increasing the amount of the monthly transfer agency fee next payable in an amount equal to prior payments, credits used and fee reductions made during such year, but not exceeding the sum of that month's credit and credits arising in prior months during such year to the extent such prior credits have not previously been utilized as contemplated by this paragraph (c). Any portion of a credit to ACCESS not so used shall remain as a credit to be used as payment against the amount of any future negative cumulative net effects which would otherwise require a payment, use of a credit or fee reduction to such Fund pursuant to paragraph (b) above. Article 4. Representations and Warranties of the Funds. -------------------------------------------- Each of the Funds hereby represents and warrants on behalf of itself only and not on behalf of any other Funds which are a party to this Agreement that: 4.01 It is duly organized and existing and in good standing under the laws of the commonwealth or state set forth in Schedule "A" hereto. 4.02 It is empowered under applicable laws and regulations and by its Declaration of Trust and by-laws to enter into and perform this Agreement. 4.03 All requisite proceedings have been taken by its Board to authorize it to enter into and perform this Agreement. 4.04 It is an open-end, management investment company registered under the Investment Company Act of 1940, as amended. Page 4 5 4.05 A registration statement under the Securities Act of 1933, as amended, is currently effective and will remain effective, and appropriate state securities laws filings have been made and will continue to be made, with respect to all of its shares being offered for sale. Article 5. Indemnification. --------------- 5.01 ACCESS shall not be responsible for and each of the Funds shall indemnify and hold ACCESS harmless from and against any and all losses, damages, costs, charges, reasonable counsel fees, payments, expenses and liabilities (collectively, "Losses") arising out of or attributable to: (a) All actions of ACCESS required to be taken by ACCESS for the benefit of such Fund pursuant to this Agreement, provided that ACCESS has acted in good faith with due diligence and without negligence or willful misconduct. (b) The reasonable reliance by ACCESS on, or reasonable use by ACCESS of, information, records and documents which have been prepared or maintained by or on behalf of such Fund or have been furnished to ACCESS by or on behalf of such Fund. (c) The reasonable reliance by ACCESS on, or the carrying out by ACCESS of, any instructions or requests of such Fund. (d) The offer or sale of such Fund's shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such shares in such state unless such violation results from any failure by ACCESS to comply with written instructions of such Fund that no offers or sales of such Fund's shares be made in general or to the residents of a particular state. (e) Such Fund's refusal or failure to comply with the terms of this Agreement, or such Fund's lack of good faith, negligence or willful misconduct or the breach of any representation or warranty of such Fund hereunder. Notwithstanding the foregoing, no Fund shall be required to indemnify or hold ACCESS harmless from and against any Losses arising out of or attributable to any action or failure to take action, or any information, records or Page 5 6 documents prepared or maintained, on behalf of the Fund by the Fund's investment adviser or distributor, or any person providing fund accounting or legal services to the Fund that is also an officer or employee of Van Kampen American Capital, Inc. or its subsidiaries unless such person or entity is otherwise entitled to indemnification from the Fund. 5.02 ACCESS shall indemnify and hold harmless each of the Funds from and against any and all Losses arising out of or attributable to ACCESS' refusal or failure to comply with the terms of this Agreement, or ACCESS' lack of good faith, or its negligence or willful misconduct, or the breach of any representation or warranty of ACCESS hereunder. 5.03 At any time ACCESS may apply to any authorized officer of any of the Funds for instructions, and may consult with any of the Funds' legal counsel, at the expense of such concerned Fund, with respect to any matter arising in connection with the services to be performed by ACCESS under this Agreement, and ACCESS shall not be liable and shall be indemnified by such concerned Fund for any action taken or omitted by it in good faith in reasonable reliance upon such instructions or upon the opinion of such counsel. ACCESS shall be protected and indemnified in acting upon any paper or document reasonably believed by ACCESS to be genuine and to have been signed by the proper person or persons and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the concerned Fund. ACCESS shall also be protected and indemnified in recognizing stock certificates which ACCESS reasonably believes to bear the proper manual or facsimile signatures of the officers of the concerned Fund, and the proper countersignature of any former transfer agent or registrar, or of a co-transfer agent or co-registrar. 5.04 In the event that any party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage, or other causes reasonably beyond its control, such party shall not be liable to the other for any damages resulting from such failure to perform or otherwise from such causes. 5.05 In no event and under no circumstances shall any party to this Agreement be liable to another party for consequential damages under any provision of this Agreement or for any act or failure to act hereunder. 5.06 In order that the indemnification provisions contained in this Article 5 shall apply, upon the assertion of a claim for which one party may be required to indemnify another, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. Page 6 7 The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent. Article 6. Covenants of Each of the Funds and ACCESS. ------------------------------------------ 6.01 Each of the Funds shall promptly furnish to ACCESS the following: (a) Certified copies of the resolution of its Board authorizing the appointment of ACCESS and the execution and delivery of this Agreement. (b) Certified copies of its Declaration of Trust or Articles of Incorporation and by-laws and all amendments thereto. 6.02 ACCESS hereby agrees to maintain facilities and procedures reasonably acceptable to each of the Funds for safekeeping of share certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices. 6.03 ACCESS shall keep records relating to the services to be performed hereunder in the form and manner as it may deem advisable; provided, however, that all accounts, books and other records of each of the Funds (hereinafter referred to as "Fund Records") prepared or maintained by ACCESS hereunder shall be maintained and kept current in compliance with Section 31 of the Investment Company Act of 1940 and the Rules thereunder (such Section and Rules being hereinafter referred to as the "1940 Act Requirements"). To the extent required by the 1940 Act Requirements, ACCESS agrees that all Fund Records prepared or maintained by ACCESS hereunder are the property of the concerned Fund and shall be preserved and made available in accordance with the 1940 Act Requirements, and shall be surrendered promptly to the concerned Fund on its request. ACCESS agrees at such reasonable times as may be requested by the Board and at least quarterly to provide (i) written confirmation to the Board that all Fund Records are maintained and kept current in accordance with the 1940 Act Requirements, and (ii) such other reports regarding its performance hereunder as may be reasonably requested by the Board. Page 7 8 6.04 ACCESS and each of the Funds agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law. 6.05 In case of any requests or demands for the inspection of any of the Fund Records, ACCESS will endeavor to notify each of the concerned Funds and to secure instructions from an authorized officer of each of the concerned Funds as to such inspection. ACCESS reserves the right, however, to exhibit such Fund Records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit such Fund records to such person. Article 7. Term and Termination Of Agreement. ---------------------------------- 7.01 The initial term of this Agreement shall expire May 31, 1999, and thereafter this Agreement shall automatically be renewed for successive one year periods to begin on June 1 of each year unless any party provides notice to the other party at least 120 days in advance of that date that this Agreement is not to be renewed. 7.02 Notwithstanding the foregoing, any party may terminate this Agreement for good and reasonable cause at any time by giving written notice to the other party at least 60 days prior to the date on which such termination is to be effective or such shorter period as may be required by law. 7.03 Any unpaid fees or reimbursable expenses payable to ACCESS at the termination date of this Agreement shall be due on that termination date. ACCESS agrees to use its best efforts to cooperate with the Funds and the successor transfer, dividend disbursement, or shareholder servicing agent or agents in accomplishing an orderly transition. Article 8. Miscellaneous. -------------- 8.01 Except as provided in section 8.03 below, neither this Agreement nor any rights or obligations hereunder may be assigned by any party without the written consent of ACCESS or the concerned Fund, as the case may be; provided, however, that no consent shall be required for any merger of any of the Funds with, or any sale of all or substantially all the assets of any of the Funds to, another investment company. 8.02 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. Page 8 9 8.03 ACCESS may, without further consent on the part of any of the Funds, subcontract with DST, Inc., a Missouri corporation, or any other qualified servicer, for the performance of data processing activities; provided, however, that ACCESS shall be as fully responsible to each of the Funds for the acts and omissions of DST, Inc. or other qualified servicer as it is for its own acts and omissions. 8.04 Without the prior approval of the Boards of Trustees of the Funds, ACCESS shall not, directly or indirectly, provide services, including services such as transfer agent, dividend disbursing agent or shareholder service agent, to any investment companies. 8.05 This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes any prior agreement with respect thereto, whether oral or written, and this Agreement may not be modified except by written instrument executed by the affected parties. 8.06 The execution of this Agreement has been authorized by the Funds' Trustees. This Plan is executed on behalf of the Funds or the Trustees of the Funds as Trustees and not individually and the obligations of this Agreement are not binding upon any of the Trustees, officers or shareholders of the Funds individually but are binding only upon the assets and property of the Funds. A Certificate of Trust in respect of each of the Funds is on file with the appropriate state agency. 8.07 For each of those Funds which have one or more portfolios as set forth in Schedule "A" hereto, all obligations of those Funds under this Agreement shall apply only on a portfolio-by-portfolio basis and the assets of one portfolio shall not be liable for the obligations of any other. 8.08 In the event of a change in the business or regulatory environment affecting all or any portion of this Agreement, the parties hereto agree to renegotiate such affected portions in good faith. 8.09 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. 8.10 (a) Any dispute, controversy, or claim arising out of or relating to this Agreement, or the breach, termination or validity thereof, shall be finally settled by arbitration in accordance with the Expedited Procedures Page 9 10 of the commercial arbitration Rules of the American Arbitration Association (the "AAA") then in effect (the "Rules"). The arbitration shall be held in Chicago, Illinois. (b) There shall be one arbitrator who shall be selected jointly by the parties. If the parties are unable to agree on an arbitrator within 15 days after a demand for arbitration is made by a party, the arbitrator shall be appointed by the AAA in accordance with the Rules. The hearing shall be held within 90 days of the appointment of the arbitrator. Notwithstanding the Expedited Procedures of the Rules, the arbitrator, at his discretion, may schedule additional days of hearings. (c) Either party may, without inconsistency with this Agreement, seek from a court any interim or provisional relief in aid of arbitration, pending the establishment of the arbitral tribunal. The parties hereby submit to the exclusive jurisdiction of the federal and state courts located in the northern district of the state of Illinois for any such relief in aid of arbitration, or for any relief relating to arbitration, except for the enforcement of an arbitral award which may be enforced in any court having jurisdiction. (d) Any arbitration proceedings or award rendered hereunder and the validity, effect and interpretation of Section 8.10 shall be governed by the Federal Arbitration Act (9 U.S.C. Sections 1 et -- seq.) The award shall be final and binding upon the parties. --- Judgment upon any award may be entered in any court having jurisdiction. (e) This Agreement and the rights and obligations of the Parties shall remain in full force and effect pending the award in any arbitration proceeding hereunder. Page 10 11 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf and through their duly authorized officers, as of the date first above written. EACH OF THE VAN KAMPEN AMERICAN CAPITAL OPEN END FUNDS LISTED ON SCHEDULE "A" HERETO BY: /s/ Ronald A. Nyberg ---------------------------------- Vice President ATTEST: /s/ Nicholas Dalmaso - ---------------------------------- Assistant Secretary ACCESS INVESTOR SERVICES, INC. BY: /s/ Paul R. Wolkenberg --------------------------------- President and Chief Executive Officer ATTEST: /s/ Huey P. Falgout - --------------------------------- Assistant Secretary Page 11 12 SCHEDULE "A" ------------ VAN KAMPEN AMERICAN CAPITAL OPEN-END FUNDS
Organization Type Fund Name State of [Business Trust (including Portfolios) Organization "T"] ===================================================================================================== Van Kampen American Capital Aggressive Growth Fund DE T Van Kampen American Capital California Insured Tax Free Fund DE T Van Kampen American Capital Comstock Fund DE T Van Kampen American Capital Corporate Bond Fund DE T Van Kampen American Capital Emerging Growth Fund DE T Van Kampen American Capital Enterprise Fund DE T Van Kampen American Capital Equity Income Fund DE T Van Kampen American Capital Florida Insured Tax Free Income Fund DE T Van Kampen American Capital Foreign Securities Fund DE T Van Kampen American Capital Global Managed Assets Fund DE T Van Kampen American Capital Government Securities Fund DE T Van Kampen American Capital Government Target Fund DE T Van Kampen American Capital Great American Companies Fund DE T Van Kampen American Capital Growth Fund DE T Van Kampen American Capital Growth and Income Fund DE T Van Kampen American Capital Harbor Fund DE T Van Kampen American Capital High Income Corporate Bond Fund DE T Van Kampen American Capital High Yield Fund DE T Van Kampen American Capital Insured Tax Free Income Fund DE T Van Kampen American Capital Intermediate Term Municipal Income Fund DE T
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Organization Type Fund Name State of [Business Trust (including Portfolios) Organization "T"] ===================================================================================================== Van Kampen American Capital Life Investment Trust DE T Asset Allocation Portfolio Domestic Income Portfolio Emerging Growth Portfolio Enterprise Portfolio Global Equity Portfolio Government Portfolio Growth and Income Portfolio Money Market Portfolio Morgan Stanley Real Estate Securities Portfolio Van Kampen American Capital Limited Maturity Government Fund DE T Van Kampen American Capital Municipal Income Fund DE T Van Kampen American Capital New Jersey Tax Free Income Fund DE T Van Kampen American Capital New York Tax Free Income Fund DE T Van Kampen American Capital Pace Fund DE T Van Kampen American Capital Pennsylvania Tax Free Income Fund PA T Van Kampen American Capital Prospector Fund DE T Van Kampen American Capital Real Estate Securities Fund DE T Van Kampen American Capital Reserve Fund DE T Van Kampen American Capital Short-Term Global Income Fund DE T Van Kampen American Capital Small Capitalization Fund DE T Van Kampen American Capital Strategic Income Fund DE T Van Kampen American Capital Tax-Exempt Trust DE T Van Kampen American Capital High Yield Municipal Fund Van Kampen American Capital Tax Free High Income Fund DE T Van Kampen American Capital Tax Free Money Fund DE T Van Kampen American Capital U.S. Government Fund DE T Van Kampen American Capital U.S. Government Trust for Income DE T Van Kampen American Capital Utility Fund DE T Van Kampen American Capital Value Fund DE T
PAGE 13 14
Organization Type Fund Name State of [Business Trust (including Portfolios) Organization "T"] ===================================================================================================== Van Kampen American Capital World Portfolio Series Trust DE T Van Kampen American Capital Global Equity Fund Van Kampen American Capital Global Government Securities Fund
PAGE 14 EX-99.B(9)(B) 7 FUND ACCOUNTING AGREEMENT 1 Exhibit 9(b) 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 utilize 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. 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 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 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 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 5 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") 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") Global Equity Portfolio ("LIT Global Equity 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") 6 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 Term Municipal 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") 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") 7 EX-99.B(11) 8 CONSENT 1 EXHIBIT (11) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Statement of Additional Information constituting part of this Post-Effective Amendment No. 38, Amendment No. 23, to the Registration Statement on Form N-1A (the "Registration Statement") of our report dated July 14, 1997, relating to the financial statements and financial highlights of Van Kampen American Capital Reserve Fund, which appears in such Statement of Additional Information, and to the incorporation by reference of our report into the Prospectus which constitutes part of this Registration Statement. We also consent to the references to us under the headings "Financial Highlights" and "Independent Accountants" in such Prospectus and to the reference to us under the heading "Independent Accountants" in such Statement of Additional Information. /s/ PRICE WATERHOUSE LLP PRICE WATERHOUSE LLP Houston, Texas September 26, 1997 EX-99.B(15)(A) 9 PLAN OF DISTRIBUTION 1 EXHIBIT (15)(a) PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1 VAN KAMPEN AMERICAN CAPITAL RESERVE 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 AMERICAN CAPITAL RESERVE FUND (the "Fund"). 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 American Capital 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 ____________________ (1) The Fund is authorized to offer multiple classes of shares pursuant to a Rule 18f-3 Plan adopted under the 1940 Act. 1 2 shareholder accounts of all classes of Shares, including paying interest on and incurring other carrying 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) 0.75% 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) 0.75% 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. 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 2 3 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 (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 3 4 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 16 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 EX-99.B(15)(B) 10 SHAREHOLDER ASSISTANCE AGREEMENT 1 EXHIBIT (15)(b) FORM OF VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC. SHAREHOLDER ASSISTANCE AGREEMENT This Agreement is entered into as of the _____day of _____, 199__, by and between Van Kampen American Capital Distributors, 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 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 AMERICAN CAPITAL - -------------------------- DISTRIBUTORS, INC. Broker-dealer Firm Name - -------------------------- By: Firm Address ------------------------- Senior Vice President By: ----------------------- Title: -------------------- 2 EX-99.B(15)(C) 11 ADMINISTRATIVE SERVICE AGREEMENT 1 EXHIBIT (15)(c) FORM OF VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC. ADMINISTRATIVE SERVICES AGREEMENT This Agreement is entered into as of the ____ day of ____, 19__, by and between Van Kampen American Capital Distributors, 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 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 AMERICAN CAPITAL DISTRIBUTORS, INC. By: - ------------------------ ---------------------- Intermediary Senior Vice President - ------------------------ Address By: --------------------- Title 2 EX-99.B(16) 12 CALCULATION OF YIELD 1 EXHIBIT (16) CALCULATION OF YIELD The Fund calculates its annualized current yield quotations based on the seven days ended on the date of the most recent balance sheet included in the registration statement, computed by determining the net change, exclusive of capital charges, in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, subtracting a hypothetical charge reflecting deductions from shareholder accounts, and dividing the difference by the value of the account at the beginning of the base period to obtain the base period return, and then multiplying the base period by (365/7). The Fund calculates its effective yield based on the seven days ended on the date of the most recent balance sheet included in the registration statement, computed by determining the net change, exclusive of capital charges, in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, according to the following formula: Effective Yield = [(Base Period Return + 1) 365/7]-1 EX-99.B(17)(A) 13 INVESTMENT COMPANIES 1 EXHIBIT 17(a) INVESTMENT COMPANIES FOR WHICH VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC. ACTS AS PRINCIPAL UNDERWRITER OR DEPOSITOR SEPTEMBER 15, 1997 Van Kampen American Capital U.S. Government Trust Van Kampen American Capital U.S. Government Fund Van Kampen American Capital Tax Free Trust 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 Florida Insured Tax Free Income Fund Van Kampen American Capital New Jersey Tax Free Income Fund Van Kampen American Capital New York Tax Free Income Fund Van Kampen American Capital Trust Van Kampen American Capital High Yield Fund Van Kampen American Capital Short-Term Global Income Fund Van Kampen American Capital Strategic Income Fund Van Kampen American Capital Equity Trust Van Kampen American Capital Utility Fund Van Kampen American Capital Value Fund Van Kampen American Capital Great American Companies Fund Van Kampen American Capital Growth Fund Van Kampen American Capital Prospector Fund Van Kampen American Capital Aggressive Growth Fund Van Kampen American Capital Foreign Securities Fund Van Kampen American Capital Pennsylvania Tax Free Income Fund Van Kampen American Capital Tax Free Money Fund Van Kampen American Capital Prime Rate Income Trust Van Kampen American Capital Comstock Fund Van Kampen American Capital Corporate Bond Fund Van Kampen American Capital Emerging Growth Fund Van Kampen American Capital Enterprise Fund Van Kampen American Capital Equity Income Fund Van Kampen American Capital Limited Maturity Government Fund Van Kampen American Capital Global Managed Assets Fund Van Kampen American Capital Government Securities Fund Van Kampen American Capital Government Target Fund Van Kampen American Capital Growth and Income Fund Van Kampen American Capital Harbor Fund Van Kampen American Capital High Income Corporate Bond Fund Van Kampen American Capital Life Investment Trust Van Kampen American Capital Asset Allocation Portfolio Van Kampen American Capital Domestic Income Portfolio Van Kampen American Capital Emerging Growth Portfolio Van Kampen American Capital Enterprise Portfolio Van Kampen American Capital Global Equity Portfolio Van Kampen American Capital Government Portfolio Van Kampen American Capital Growth and Income Portfolio Van Kampen American Capital Money Market Portfolio Van Kampen American Capital Strategic Stock Portfolio Morgan Stanley Real Estate Securities Portfolio 2 Van Kampen American Capital Pace Fund Van Kampen American Capital Real Estate Securities Fund Van Kampen American Capital Reserve Fund Van Kampen American Capital Tax -Exempt Trust Van Kampen American Capital High Yield Municipal Fund Van Kampen American Capital U.S. Government Trust for Income Van Kampen American Capital World Portfolio Series Trust Van Kampen American Capital Global Equity Fund Van Kampen American Capital Global Government Securities Fund Morgan Stanley Aggressive Equity Fund Morgan Stanley American Value Fund Morgan Stanley Asian Growth Fund Morgan Stanley Emerging Markets Fund Morgan Stanley Global Equity Allocation Fund Morgan Stanley Global Fixed Income Fund Morgan Stanley Government Obligations Money Market Fund Morgan Stanley High Yield Fund Morgan Stanley International Magnum Fund Morgan Stanley Latin American Fund Morgan Stanley Money Market Fund Morgan Stanley Stable Value Fund (SVFRX) Morgan Stanley Stable Value Fund II (SVFIX) Morgan Stanley U.S. Real Estate Fund Morgan Stanley Value Fund Morgan Stanley Worldwide High Income Fund 3
Emerging Markets Municipal Income Trust................................................................. Series 1 Insured Municipals Income Trust......................................................................... Series 1 through 378 Insured Municipals Income Trust (Discount).............................................................. Series 5 through 13 Insured Municipals Income Trust (Short Intermediate Term)............................................... Series 1 through 104 Insured Municipals Income Trust (Intermediate Term)..................................................... Series 5 through 88 Insured Municipals Income Trust (Limited Term).......................................................... Series 9 through 85 Insured Municipals Income Trust (Premium Bond Series)................................................... Series 1 through 3 Insured Municipals Income Trust (Intermediate Laddered Maturity)........................................ Series 1 and 2 Insured Tax Free Bond Trust............................................................................. Series 1 through 6 Insured Tax Free Bond Trust (Limited Term).............................................................. Series 1 Investors' Quality Tax-Exempt Trust..................................................................... Series 1 through 93 Investors' Quality Tax-Exempt Trust-Intermediate........................................................ Series 1 Investors' Corporate Income Trust....................................................................... Series 1 through 12 Investors' Governmental Securities Income Trust......................................................... Series 1 through 7 Van Kampen Merritt International Bond Income Trust...................................................... Series 1 through 21 Alabama Investors' Quality Tax-Exempt Trust............................................................. Series 1 Alabama Insured Municipals Income Trust................................................................. Series 1 through 9 Arizona Investors' Quality Tax-Exempt Trust............................................................. Series 1 through 16 Arizona Insured Municipals Income Trust................................................................. Series 1 through 17 Arkansas Insured Municipals Income Trust................................................................ Series 1 through 2 Arkansas Investors' Quality Tax-Exempt Trust............................................................ Series 1 California Insured Municipals Income Trust.............................................................. Series 1 through 158 California Insured Municipals Income Trust (Premium Bond Series)........................................ Series 1 California Insured Municipals Income Trust (1st Intermediate Series).................................... Series 1 through 3 California Investors' Quality Tax-Exempt Trust.......................................................... Series 1 through 21 California Insured Municipals Income Trust (Intermediate Laddered)...................................... Series 1 through 22 Colorado Insured Municipals Income Trust................................................................ Series 1 through 81 Colorado Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 18 Connecticut Insured Municipals Income Trust ............................................................ Series 1 through 31 Connecticut Investors' Quality Tax-Exempt Trust......................................................... Series 1 Delaware Investor's Quality Tax-Exempt Trust............................................................ Series 1 and 2 Florida Insured Municipal Income Trust - Intermediate................................................... Series 1 and 2 Florida Insured Municipals Income Trust................................................................. Series 1 through 107 Florida Investors' Quality Tax-Exempt Trust............................................................. Series 1 and 2 Florida Insured Municipals Income Trust (Intermediate Laddered)......................................... Series 1 through 13 Georgia Insured Municipals Income Trust................................................................. Series 1 through 80 Georgia Investors' Quality Tax-Exempt Trust............................................................. Series 1 through 16 Hawaii Investors' Quality Tax-Exempt Trust.............................................................. Series 1 Indiana Insured Municipals Income Trust................................................................. Series 1 Investors' Quality Municipals Trust (AMT)............................................................... Series 1 through 9 Kansas Investors'Quality Tax-Exempt Trust .............................................................. Series 1 through 11 Kentucky Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 58 Louisiana Insured Municipals Income Trust............................................................... Series 1 through 17 Maine Investor's Quality Tax-Exempt Trust............................................................... Series 1 Maryland Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 79 Massachusetts Insured Municipals Income Trust........................................................... Series 1 through 34 Massachusetts Insured Municipals Income Trust (Premium Bond Series)..................................... Series 1 Michigan Financial Institutions Trust................................................................... Series 1 Michigan Insured Municipals Income Trust................................................................ Series 1 through 140 Michigan Insured Municipals Income Trust (Premium Bond Series).......................................... Series 1 Michigan Insured Municipals Income Trust (1st Intermediate Series)...................................... Series 1 through 3 Michigan Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 30 Michigan Select Trust................................................................................... Series 1 Minnesota Insured Municipals Income Trust............................................................... Series 1 through 59 Minnesota Investors' Quality Tax-Exempt Trust........................................................... Series 1 through 21 Mississippi Insured Municipals Income Trust............................................................. Series 1 Missouri Insured Municipals Income Trust................................................................ Series 1 through 98 Missouri Insured Municipals Income Trust (Premium Bond Series).......................................... Series 1 Missouri Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 15 Missouri Insured Municipals Income Trust
4
(Intermediate Laddered Maturity)....................................................................... Series 1 Nebraska Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 9 New Mexico Insured Municipals Income Trust.............................................................. Series 1 through 18 New Jersey Insured Municipals Income Trust.............................................................. Series 1 through 114 New Jersey Investors' Quality Tax-Exempt Trust.......................................................... Series 1 through 22 New Jersey Insured Municipals Income Trust (Intermediate Laddered Maturity)....................................................................... Series 1 and 4 New York Insured Municipals Income Trust-Intermediate................................................... Series 1 through 6 New York Insured Municipals Income Trust (Limited Term)................................................. Series 1 New York Insured Municipals Income Trust................................................................ Series 1 through 136 New York Insured Tax-Free Bond Trust.................................................................... Series 1 New York Insured Municipals Income Trust (Intermediate Laddered Maturity)....................................................................... Series 1 through 17 New York Investors' Quality Tax-Exempt Trust............................................................ Series 1 North Carolina Investors' Quality Tax-Exempt Trust...................................................... Series 1 through 88 Ohio Insured Municipals Income Trust.................................................................... Series 1 through 104 Ohio Insured Municipals Income Trust (Premium Bond Series).............................................. Series 1 and 2 Ohio Insured Municipals Income Trust (Intermediate Term)................................................ Series 1 Ohio Insured Municipals Income Trust (Intermediate Laddered Maturity)....................................................................... Series 3 through 6 Ohio Investors' Quality Tax-Exempt Trust................................................................ Series 1 through 16 Oklahoma Insured Municipal Income Trust................................................................. Series 1 through 17 Oregon Investors' Quality Tax-Exempt Trust.............................................................. Series 1 through 53 Pennsylvania Insured Municipals Income Trust - Intermediate............................................. Series 1 through 6 Pennsylvania Insured Municipals Income Trust............................................................ Series 1 through 223 Pennsylvania Insured Municipals Income Trust (Premium Bond Series)...................................... Series 1 Pennsylvania Investors' Quality Tax-Exempt Trust........................................................ Series 1 through 14 South Carolina Investors' Quality Tax-Exempt Trust...................................................... Series 1 through 84 Stepstone Growth Equity and Treasury Securities Trust................................................... Series 1 Tennessee Insured Municipals Income Trust............................................................... Series 1-3 and 5-37 Texas Insured Municipals Income Trust................................................................... Series 1 through 40 Texas Insured Municipal Income Trust (Intermediate Ladder).............................................. Series 1 Virginia Investors' Quality Tax-Exempt Trust............................................................ Series 1 through 73 Van Kampen American Capital Equity Opportunity Trust.................................................... Series 1 through 41 Van Kampen American Capital Utility Income Trust........................................................ Series 1 through 8 Van Kampen American Capital Insured Income Trust........................................................ Series 1 through 61 Van Kampen American Capital Insured Income Trust (Intermediate Term).................................... Series 1 through 60 Van Kampen Merritt Select Equity Trust.................................................................. Series 1 Van Kampen Merritt Select Equity and Treasury Trust..................................................... Series 1 Washington Insured Municipals Income Trust.............................................................. Series 1 West Virginia Insured Municipals Income Trust........................................................... Series 1 through 7 Principal Financial Institutions Trust.................................................................. Series 1 Internet Trust.......................................................................................... Series 1 through 3 Michigan Real Estate Income and Growth Trust............................................................ Series 1 Strategic Ten Trust, United States...................................................................... Series 1 through 10 Strategic Ten Trust, United Kingdom..................................................................... Series 1 through 10 Strategic Ten Trust, Hong Kong ......................................................................... Series 1 through 10 Strategic Five Trust, United States..................................................................... Series 1 through 4 Global Fifteen Trust.................................................................................... Series 1 through 2 Global Thirty Trust..................................................................................... Series 1 through 3 Great International Firms Trust......................................................................... Series 1 Undervalued Growth Opportunities Trust.................................................................. Series 1 Emerging Growth and Treasury............................................................................ Series 1 Global Blue Chip Trust.................................................................................. Series 1 Renaissance Trust....................................................................................... Series 1 Blue Chip Opportunity and Treasury Trust................................................................ Series 1 through 4 Wheat First Strategic Opportunity Unit Trust............................................................ Series 1 Baby Boomer Opportunity Trust........................................................................... Series 1
EX-99.B(17)(B) 14 OFFICERS 1 EXHIBIT 17 (b) Officers Van Kampen American Capital Distributors, Inc.
NAME OFFICE LOCATION - ---- ------ -------- Don G. Powell Chairman Houston, TX Philip N. Duff Chief Executive Officer Oakbrook Terrace, IL William R. Molinari President & Chief Operating Oakbrook Terrace, IL Officer Ronald A. Nyberg Executive Vice President, General Oakbrook Terrace, IL Counsel & Assistant Secretary William R. Rybak Executive Vice President & Chief Oakbrook Terrace, IL Financial Officer Paul R. Wolkenberg Executive Vice President Houston, TX Robert A. Broman Sr. Vice President Oakbrook Terrace, IL Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL Keith K. Furlong Sr. Vice President Oakbrook Terrace, IL Douglas B. Gehrman Sr. Vice President Houston, TX Richard D. Humphrey Sr. Vice President Houston, TX Scott E. Martin Sr. Vice President, Deputy General Oakbrook Terrace, IL Counsel & Secretary Mark T. McGannon Sr. Vice President Oakbrook Terrace, IL Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL Michael L. Stallard Sr. Vice President Oakbrook Terrace, IL Robert S. West Sr. Vice President Oakbrook Terrace, IL John H. Zimmermann, III Sr. Vice President Oakbrook Terrace, IL Dominic C. Martellaro 1st Vice President Danville, CA Mark R. McClure 1st Vice President Oakbrook Terrace, IL James J. Ryan 1st Vice President Oakbrook Terrace, IL George J. Vogel 1st Vice President Oakbrook Terrace, IL Patrick J. Woelfel 1st Vice President Oakbrook Terrace, IL Laurence J. Althoff Vice President & Controller Oakbrook Terrace, IL James K. Ambrosio Vice President Massapequa, NY Brian P. Arcara Vice President Buffalo, NY Sheldon Barker Vice President Moon, PA Patricia A. Bettlach Vice President Chesterfield, MO Carol S. Biegel Vice President Oakbrook Terrace, IL Christopher M. Bisaillon Vice President Oakbrook Terrace, IL James J. Boyne Vice President, Associate General Oakbrook Terrace, IL Counsel & Assistant Secretary Michael P. Boos Vice President Oakbrook Terrace, IL Robert C. Brooks Vice President Oakbrook Terrace, IL Brooksley Burke Vice President Marina Del Ray, CA William F Burke, Jr. Vice President Mendham, NJ Loren Burket Vice President Plymouth, MN Christine Cleary Byrum Vice President Tampa, FL Glenn M. Cackovic Vice President Laguna Niguel, CA Joseph N. Caggiano Vice President New York, NY
2 Daniel R. Chambers Vice President Austin, TX Richard J. Charlino Vice President Houston, TX Deanna Margaret Chiaro Vice President Oakbrook Terrace, IL Scott A. Chriske Vice President Plano, TX German Clavijo Vice President Atlanta, GA Eleanor M. Cloud Vice President Oakbrook Terrace, IL Dominick Cogliandro Vice President & Asst. Treasurer New York, NY Michael Colston Vice President Louisville, KY Suzanne Cummings Vice President Oakbrook Terrace, IL Nicholas Dalmaso Vice President & Asst. Secretary Oakbrook Terrace, IL Ken DiFrancesca Vice President Oakbrook Terrace, IL Daniel R. DeJong Vice President Oakbrook Terrace, IL Tracey M. DeLusant Vice President New York, NY Mark B. Doremus Vice President Houston, TX Michael E. Eccleston Vice President Oakbrook Terrace, IL Jonathan Eckard Vice President Tampa, FL Charles Edward Fisher Vice President Naperville, IL William J. Fow Vice President Redding, CT Nicholas J. Foxhoven Vice President Englewood, CO Charles Friday Vice President Gibsonia, PA Erich P. Gerth Vice President Piedmont, CA Richard G. Golod Vice President Annapolis, MD Timothy D. Griffith Vice President Kirkland, WA Kyle D. Haas Vice President Oakbrook Terrace, IL Daniel Hamilton Vice President Austin, TX John A. Hanhauser Vice President Philadelphia, PA John G. Hansen Vice President Oakbrook Terrace, IL Eric J. Hargens Vice President Orlando, FL Calvin B. Hays Vice President Richmond, VA Joseph Hays Vice President Cherry Hill, NJ Gregory Heffington Vice President Ft. Collins, CO Susan J. Hill Vice President Oakbrook Terrace, IL Thomas R. Hindelang Vice President Gilbert, AZ David S. Hogaboom Vice President Oakbrook Terrace, IL Bryn M. Hoggard Vice President Houston, TX Robert S. Hunt Vice President Phoenix, MD Lowell Jackson Vice President Norcross, GA Kevin G. Jajuga Vice President Baltimore, MD Jeffrey S. Kinney Vice President Overland Park, KS Dana R. Klein Vice President Oakbrook Terrace, IL Ann Marie Klingenhagen Vice President Oakbrook Terrace, IL Frederick Kohly Vice President Miami, FL David R. Kowalski Vice President & Director Oakbrook Terrace, IL of Compliance Richard D. Kozlowski Vice President Atlanta, GA Patricia D. Lathrop Vice President Tampa, FL Brian Laux Vice President Staten Island, NY S. William Lehew III Vice President Charlotte, NC Tony E. Leal Vice President Daphne, AL Eric Levinson Vice President San Francisco, CA Jonathan Linstra Vice President Oakbrook Terrace, IL Walter Lynn Vice President Flower Mound, TX Richard M. Lundgren Vice President Oakbrook Terrace, IL Kevin S. Marsh Vice President Bellevue, WA Carl Mayfield Vice President Lakewood, CO Brooks D. McCartney Vice President Puyallup, WA Anne Therese McGrath Vice President Los Gatos, CA John Mills Vice President Kenner, LA
3 Ted Morrow Vice President Dallas, TX Robert Muller, Jr. Vice President Cypress, TX Peter Nicholas Vice President Beverly, MA Michael D. Ossmen Vice President Oakbrook Terrace, IL Todd W. Page Vice President Oakbrook Terrace, IL Christopher Petrungaro Vice President Oakbrook Terrace, IL Anthony Piazza Vice President Old Bridge, NJ Ronald E. Pratt Vice President Marietta, GA Craig S. Prichard Vice President Fairlawn, OH Daniel D. Reams Vice President Royal Oak, MI Walter E. Rein Vice President Oakbrook Terrace, IL Michael W. Rohr Vice President Oakbrook Terrace, IL Suzette N. Rothberg Vice President Plymouth, MN Jeffrey Rourke Vice President Oakbrook Terrace, IL Thomas Rowley Vice President St. Louis, MO Heather R. Sabo Vice President Richmond, VA Stephanie Scarlata Vice President Bedford Corners, NY Andrew J. Scherer Vice President Oakbrook Terrace, IL Ronald J. Schuster Vice President Tampa, FL Jeffrey C. Shirk Vice President Swampscott, MA Traci T. Sorensen Vice President Oakbrook Terrace, IL Kimberly M. Spangler Vice President Fairfax, VA Darren D. Stabler Vice President Phoenix, AZ Christopher J. Staniforth Vice President Leawood, KS Gary R. Steele Vice President Philadelphia, PA Richard Stefanec Vice President Los Angeles, CA James D. Stevens Vice President North Andover, MA James M. Stilwell Vice President San Diego, CA William C. Strafford Vice President Granger, IN David A. Tabone Vice President Scottsdale, AZ James C. Taylor Vice President Naperville, IL John F. Tierney Vice President Oakbrook Terrace, IL Curtis L. Ulvestad Vice President Red Wing, MN Todd Volkman Vice President Austin, TX Daniel B. Waldron Vice President Oakbrook Terrace, IL Christopher Walsh Vice President Oakbrook Terrace, IL Jeff Warland Vice President Oakbrook Terrace, IL Robert A. Watson Vice President Oakbrook Terrace, IL Weston B. Wetherell Vice President, Assoc. General Oakbrook Terrace, IL Counsel & Asst. Secretary Harold Whitworth, III Vice President Oakbrook Terrace, IL Kirk Wiggins Vice President Arlington, TX David M. Wynn Vice President Phoenix, AZ James R. Yount Vice President Mercer Island, WA Patrick M. Zacchea Vice President Oakbrook Terrace, IL Billie J. Bronaugh Asst. Vice President Houston, TX Huey P. Falgout, Jr. Asst. Vice President & Asst. Secretary Houston, TX Walter C. Gray Asst. Vice President Houston, TX Laurie L. Jones Asst. Vice President Houston, TX Michael B. Kollins Asst. Vice President Oakbrook Terrace, IL Ivan R. Lowe Asst. Vice President Houston, TX Linda S. MacAyaal Asst. Vice President Oakbrook Terrace, IL Stuart R. Moehlman Asst. Vice President Houston, TX Steven R. Norvid Asst. Vice President Oakbrook Terrace, IL Gregory S. Parker Asst. Vice President Houston, TX David B. Partain Asst. Vice President Oakbrook Terrace, IL Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL Michael Quinn Asst. Vice President Oakbrook Terrace, IL David P. Robbins Asst. Vice President Oakbrook Terrace, IL
4 Thomas J. Sauerborn Asst. Vice President New York, NY Bruce Saxon Asst. Vice President Oakbrook Terrace, IL David H. Villarreal Asst. Vice President Oakbrook Terrace, IL Natalie Wilson Asst. Vice President New York, NY Barbara A. Withers Asst. Vice President Oakbrook Terrace, IL Gina M. Costello Asst. Secretary Oakbrook Terrace, IL Cathy Napoli Asst. Secretary Oakbrook Terrace, IL Elizabeth M. Brown Officer Houston, TX John Browning Officer Oakbrook Terrace. IL Leticia George Officer Houston, TX Sarah Kessler Officer Oakbrook Terrace, IL William D. McLaughlin Officer Houston, TX Becky Newman Officer Houston, TX Rosemary Pretty Officer Houston, TX Colette Saucedo Officer Houston, TX Frederick Shepherd Officer Houston, TX Larry Vickrey Officer Houston, TX John Yovanovic Officer Houston, TX
5 DIRECTORS VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
NAME OFFICE LOCATION - ------------------- ------------------------ --------------------------------- Don G. Powell Chairman & CEO 2800 Post Oak Blvd.Houston, TX 77056 William R. Molinari President & COO One Parkview Plaza Oakbrook Terrace, IL 60181 Ronald A. Nyberg Executive Vice President One Parkview Plaza & General Counsel Oakbrook Terrace, IL 60181 William R. Rybak Executive Vice President One Parkview Plaza & CFO Oakbrook Terrace, IL 60181
EX-99.B(18) 15 MULTI-CLASS PLAN 1 EXHIBIT 18 AMENDED MULTI-CLASS PLAN FOR VAN KAMPEN AMERICAN CAPITAL FAMILY OF FUNDS 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 each of the Funds in accordance with the terms, procedures and conditions set forth below. A majority of the Trustees of the Funds, including a majority of the Trustees who are not interested persons of the Funds within the meaning of the Act, found this Multi-Class Plan, including the expense allocations, to be in the best interest of each Fund and each Class of Shares of each Fund. The Fund adopted this Plan on January 26, 1996 and amended the Plan as of January 1, 1997. 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 acquisition during which Shares are assessed a CDSC upon redemption. 4. Class - a class of Shares of a 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. 1. 7. Class C Shares - shall have the meaning ascribed in Section B. 1. 8. Distribution Expenses - expenses incurred in activities which are primarily intended to result in the distribution and sale of Shares as defined in a Plan of Distribution and/or board resolutions. 9. Distribution Fee - a fee paid by a Fund to the Distributor in reimbursement of Distribution Expenses. 10. Distributor - Van Kampen American Capital Distributors, Inc. 11. Fund - an investment company listed on Exhibit A hereto and each series thereof. 12. Money Market Fund - Van Kampen American Capital Reserve Fund or Van Kampen American Capital Tax Free Money Fund. 2 13. Plan of Distribution - Any plan adopted under Rule 12b-1 under the Act with respect to payment of a Distribution Fee. 14. Service Fee - a fee paid to financial intermediaries for the ongoing provision of personal services to Fund shareholders and/or the maintenance of shareholder accounts. 15. Share - a share of beneficial interest in a Fund. 16. Trustees - the trustees of a Fund. B. Classes. Each Fund may offer three Classes as follows: 1. Class A Shares. Class A Shares shall be 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 Funds' prospectus, which may be reduced or eliminated for Money Market Funds, 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 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. Class A Shares shall be subject to ongoing Service Fees approved from time to time by the Trustees and set forth in the Funds' prospectus. Although shares of Van Kampen American Capital Tax Free Money Market Fund are not designated as "Class A" they are substantially similar to Class A Shares as defined herein and shall be treated as Class A shares for the purposes of this Plan. 2. Class B Shares. Class B Shares shall be (1) offered at net asset value, (2) subject to a CDSC for the CDSC Period set forth in Section D. 1, (3) subject to ongoing Service Fees and Distribution Fees approved from time to time by the Trustees and set forth in the Funds' prospectus and (4) converted to Class A Shares three to ten years after the calendar month in which the shareholder's order to purchase was accepted, which number of years shall be as approved from time to time by the Trustees and set forth in the respective Fund's prospectus. 3. Class C Shares. Class C Shares shall be (1) offered at net asset value, (2) subject to a CDSC for the CDSC Period set forth in Section D. 1. , (3) subject to ongoing Service Fees and Distribution Fees approved from time to time by the Trustees and set forth in the Funds' prospectus and (4) prior to January 1, 1997, converted to Class A Shares eight to fifteen years after the calendar month in which the shareholder's order to purchase was accepted, which number of years shall be as approved from time to time by the Trustees and set forth in the respective Fund's prospectus. 3 C. Rights and Privileges of Classes. Each Class of each Fund will represent an interest in the same portfolio of investments of that Fund and will have identical voting, dividend, liquidation and other rights, preferences, powers, restrictions, limitations, qualifications, designations and terms and conditions except as described otherwise 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 for 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 approved 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 (a) the CDSC rate is less in the last year of the CDSC Period than in the first and (b) 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 a 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 under 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 under 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 a Fund may be retained by the Distributor to reimburse the Distributor for commissions paid by it in 4 connection with the sale of Shares subject to a CDSC and Distribution Expenses to the extent of such commissions and Distribution Expenses eligible for reimbursement and approved by the Trustees. E. Service and Distribution Fees. Class A Shares shall be subject to a Service Fee and Class B and Class C Shares shall be subject to a Service Fee and a Distribution Fee. The Service Fee applicable to any class shall not exceed 0.25% per annum of the average daily net assets of the Class and the Distribution Fee shall not exceed 0.75% per annum of the average daily net assets of the Class. All other terms and conditions with respect to Service Fees and Distribution Fees shall be governed by the plans adopted by the Fund with respect to such fees and Rule 12b-1 of the Act. F. Conversion. Shares purchased through the reinvestment of dividends and distributions paid on Shares subject to conversion shall be treated as if held in a separate sub-account. Each time any Shares in a Shareholder's account (other than Shares held in the sub- account) convert to Class A Shares, a proportionate number of Shares held in the sub-account shall also convert to Class A Shares. All conversions shall be effected on the basis of the relative net asset values of the two Classes without the imposition of any sales load or other charge. So long as any Class of Shares converts into Class A Shares, the Distributor shall waive or reimburse each 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 a Plan of Distribution, applicable to the Class A Shares are not higher than the expenses, including payments authorized under the Plan of Distribution, applicable to the class of 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 each 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 between Classes in different amounts if they are actually incurred in different amounts by the Classes or the Classes receive services of a different kind or to a different degree than other Classes. 2. Distribution Expenses. Distribution Expenses actually attributable to the sale of all Classes shall be allocated to each Class based upon the ratio which sales of each Class bears to the sales of all Shares of the Fund. For this purpose, Shares issued upon reinvestment of dividends or distributions, upon conversion from Class B Shares or Class C Shares to Class A Shares or upon stock splits will not be considered sales. 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 on the basis of the net asset value of that Class in relation to the net asset value of the Fund. 5 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 Class or all Classes. H. Exchange Privilege. Exchanges of Shares shall be permitted between Funds as follows. 1. General. Shares of one Fund may be exchanged for Shares of the same Class of another Fund at net asset value and without sales charge, provided that a. The Distributor may specify that certain Funds may not be exchanged within a designated period, which shall not exceed 90 days, after acquisition without prior Distributor approval. b. Class A Shares of a Money Market Fund that were not acquired in exchange for Class B or Class C Shares of a Fund may be exchanged for Class A Shares of another Fund only upon payment of the excess, if any, of the sales charge rate applicable to the Shares being acquired over the sales charge rate previously paid. c. Shares of a Money Market Fund acquired through an exchange of Class B Shares or Class C Shares may be exchanged only for the same Class of another Fund as the Class they were acquired in exchange for or any Class into which those shares were converted. 2. Target Fund. Shares of Van Kampen American Capital Government Target Fund may be exchanged for Class A Shares of a Fund. 3. CDSC Computation. The acquired Shares will remain subject to the CDSC rate schedule and CDSC Period for the original Fund upon the redemption of the Shares from the Van Kampen American Capital complex of funds. For purposes of computing the CDSC payable on a disposition of the new Shares, the holding period for the original Shares shall be added to the holding period of the new 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 d. If any amendment is proposed to the plan under which Service Fees are paid with respect to Class A Shares of a Fund that would increase materially the amount to be borne by Class A Shares under that plan, then no Class B Shares or Class C Shares shall convert into Class A Shares of that Fund until the holders of Class B Shares and Class C Shares of that Fund have also approved the proposed amendment. 6 e. If the holders of either the Class B Shares and/or Class C 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 voting against the amendment shall convert into another Class identical in all material respects to Class A Shares of the Fund as constituted prior to the 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 a Fund with respect to each Class, to 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 the same amount, except 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 to the Trustees of each Fund quarterly and annual statements concerning distribution and Shareholder servicing expenditures complying 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 such information as the Trustees may from time to time deem to be reasonably necessary to evaluate this Plan. L. Amendment. Any material amendment to this Plan shall be approved by the affirmative vote of a majority of the Trustees of a Fund, including the affirmative vote of the trustees of the Fund who are not interested persons of the Fund, except that any amendment that increases the CDSC rate schedule or CDSC Period must also be approved by the affirmative vote of a majority of the Shares of the affected Class. The Distributor shall provide the Trustees such information as may be reasonably necessary to evaluate any amendment to this Plan. EX-99.B(24) 16 POWER OF ATTORNEY 1 EXHIBIT 24 POWER OF ATTORNEY The undersigned, being officers and trustees of each of the Van Kampen American Capital Open End Trusts (with the exception of Don G. Powell), as indicated on Schedule 1 attached hereto and incorporated by reference, each a Delaware business trust, except for the Van Kampen American Capital Pennsylvania Tax Free Income Fund, being a Pennsylvania business trust (individually, a "Trust"), do hereby, in the capacities shown below, individually appoint Dennis J. McDonnell and Ronald A. Nyberg, each of Oakbrook Terrace, Illinois, and each of them, as the 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 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: July 24, 1997 Signature Title --------- ----- /s/ J. Miles Branagan Trustee - --------------------------- J. Miles Branagan /s/ Richard M. DeMartini Trustee - --------------------------- Richard M. DeMartini /s/ Linda Hutton Heagy Trustee - --------------------------- Linda Hutton Heagy /s/ R. Craig Kennedy Trustee - --------------------------- R. Craig Kennedy /s/ Jack E. Nelson Trustee - --------------------------- Jack E. Nelson /s/ Don G. Powell Trustee (For Former Van - --------------------------- Kampen Funds only) Don G. Powell /s/ Jerome L. Robinson Trustee - --------------------------- Jerome L. Robinson /s/ Phillip B. Rooney Trustee - --------------------------- Phillip B. Rooney /s/ Fernando Sisto, Sc.D. Trustee - --------------------------- Fernando Sisto, Sc.D. /s/ Wayne W. Whalen Trustee and Chairman - --------------------------- Wayne W. Whalen /s/ Edward C. Wood III Vice President and - --------------------------- Chief Financial Officer Edward C. Wood III /s/ Dennis J. McDonnell President - --------------------------- Dennis J. McDonnell 2 SCHEDULE 1 I. 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 Term Municipal Income Fund") (f/k/a Limited Term Municipal 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 ("VKAC 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 Value Fund ("Value Fund") Van Kampen American Capital Great American Companies Fund ("Great American Companies Fund") Van Kampen American Capital Growth Fund ("Growth Fund") Van Kampen American Capital Prospector Fund ("Prospector 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") 3 II. 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 Limited Maturity Government Fund ("Limited Maturity Government Fund") Van Kampen American Capital Global Managed Assets Fund ("Global Managed Assets Fund") 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") 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") 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 Equity Fund ("Global Equity Fund") Van Kampen American Capital Global Government Securities Fund ("Global Government Securities Fund") EX-27.A 17 FDS
6 001 RESERVE FUND CLASS A YEAR MAY-31-1997 JUN-01-1996 MAY-31-1997 678910140 678910140 1323985 0 383761 680617886 0 0 117942555 117942555 0 451297333 451309332 440344423 26309 0 (69816) 0 0 451260769 0 27897844 0 (5925762) 21972082 (7692) 0 21964390 0 (18710328) 0 0 7336711667 (7344457086) 18710328 10946807 11822 (53843) 0 0 2170578 0 5936762 426573846 1.000 0.044 0.000 (0.044) 0.000 0.000 1.000 1.02 0 0 This item relates to the Fund on a composite basis and not on a class basis.
EX-27.B 18 FDS
6 002 RESERVE FUND CLASS B YEAR MAY-31-1997 JUN-01-1996 MAY-31-1997 678910140 678910140 1323985 0 383761 680617886 0 0 117942555 117942555 0 103038760 103028995 81469679 26309 0 (69816) 0 0 103031346 0 27897844 0 (5925762) 21972082 (7692) 0 21964390 0 (2925963) 0 0 648076624 (629443316) 2926008 21566312 11822 (53843) 0 0 2170578 0 5936762 79265861 1.000 0.036 0.000 (0.036) 0.000 0.000 1.000 1.77 0 0 This item relates to the Fund on a composite basis and not on a class basis.
EX-27.C 19 FDS
6 003 RESERVE FUND CLASS C YEAR MAY-31-1997 JUN-01-1996 MAY-31-1997 678910140 678910140 1323985 0 383761 680617886 0 0 117942555 117942555 0 8382745 8382947 9710786 26309 0 (69816) 0 0 8383216 0 27897844 0 (5925762) 21972082 (7692) 0 21964390 0 (339500) 0 0 141950203 (143617542) 339500 (1327041) 11822 (53843) 0 0 2170578 0 5936762 9333024 1.000 0.036 0.000 (0.036) 0.000 0.000 1.000 1.78 0 0 This item relates to the Fund on a composite basis and not on a class basis.
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