0000950137-01-503739.txt : 20011009
0000950137-01-503739.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950137-01-503739
CONFORMED SUBMISSION TYPE: 485BPOS
PUBLIC DOCUMENT COUNT: 8
FILED AS OF DATE: 20010926
EFFECTIVENESS DATE: 20010926
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: VAN KAMPEN RESERVE FUND
CENTRAL INDEX KEY: 0000005114
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 741794065
FISCAL YEAR END: 0531
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 002-50870
FILM NUMBER: 1745273
BUSINESS ADDRESS:
STREET 1: ONE PARKVIEW PLAZA
STREET 2: VAN KAMPEN INVESTMENTS INC
CITY: OAKBROOK TERRACE
STATE: IL
ZIP: 60181
BUSINESS PHONE: 6306846774
MAIL ADDRESS:
STREET 1: ONE PARKVIEW PLAZA
STREET 2: VAN KAMPEN INVESTMENTS INC
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
FORMER COMPANY:
FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
DATE OF NAME CHANGE: 19951219
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: VAN KAMPEN RESERVE FUND
CENTRAL INDEX KEY: 0000005114
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 741794065
FISCAL YEAR END: 0531
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-02482
FILM NUMBER: 1745274
BUSINESS ADDRESS:
STREET 1: ONE PARKVIEW PLAZA
STREET 2: VAN KAMPEN INVESTMENTS INC
CITY: OAKBROOK TERRACE
STATE: IL
ZIP: 60181
BUSINESS PHONE: 6306846774
MAIL ADDRESS:
STREET 1: ONE PARKVIEW PLAZA
STREET 2: VAN KAMPEN INVESTMENTS INC
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
FORMER COMPANY:
FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL RESERVE FUND
DATE OF NAME CHANGE: 19951219
485BPOS
1
c62223bpe485bpos.txt
POST-EFFECTIVE AMENDMENT #43 TO FORM N-1A
1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 2001
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. 43 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 28 [X]
VAN KAMPEN RESERVE FUND
(Exact Name of Registrant as Specified in Declaration of Trust)
1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555
(Address of Principal Executive Offices) (Zip Code)
(630) 684-6000
Registrant's Telephone Number, Including Area Code
SARA L. BADLER
Executive Director,
General Counsel and Assistant Secretary
Van Kampen Investments Inc.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, Illinois 60181-5555
(Name and Address of Agent for Service)
------------------------
Copies to:
WAYNE W. WHALEN, ESQ.
THOMAS A. HALE, ESQ.
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
(312) 407-0700
------------------------
Approximate Date of Proposed Public Offering: As soon as practicable
following effectiveness of this Registration Statement.
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on September 28, 2001 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest, par value
$0.01 per share
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2
Van Kampen Reserve Fund
-------------------------------------------------------------------------------
Van Kampen Reserve Fund's investment objective is to seek protection of capital
and high current income. The Fund's investment adviser seeks to achieve the
Fund's investment objective by investing in a portfolio of U.S.
dollar-denominated money-market securities.
Shares of the Fund have not been approved or disapproved by the Securities and
Exchange Commission (SEC) or any state regulator, and neither the SEC nor any
state regulator has passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
This Prospectus is dated SEPTEMBER 28, 2001
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
PROSPECTUS
[VAN KAMPEN INVESTMENTS LOGO]
3
Risk/Return Summary......................................... 3
Fees and Expenses of the Fund............................... 4
Investment Objective, Policies and Risks.................... 5
Investment Advisory Services................................ 7
Purchase of Shares.......................................... 8
Redemption of Shares........................................ 13
Distributions from the Fund................................. 15
Shareholder Services........................................ 15
Federal Income Taxation..................................... 17
Financial Highlights........................................ 19
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund, the Fund's investment adviser or the
Fund's distributor. This Prospectus does not constitute an offer by the Fund or
by the Fund's distributor to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful for the Fund to make such an offer in such jurisdiction.
Table of Contents
4
Risk/Return Summary
-------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek protection of capital and high
current income.
PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment adviser seeks to achieve the Fund's investment objective
by investing in a portfolio of U.S. dollar-denominated money-market securities,
including U.S. government securities, domestic and foreign bank obligations,
commercial paper and repurchase agreements secured by such obligations. The Fund
seeks to maintain a constant net asset value of $1.00 per share by investing in
money-market securities with remaining maturities of 13 months or less and with
a dollar-weighted average maturity of 90 days or less. The Fund's investments
are limited to those securities that meet maturity, quality and diversification
standards with which money market funds must comply. In selecting securities for
investment, the Fund's investment adviser seeks to invest in those securities
that it believes entail reasonable risk considered in relation to the Fund's
investment policies and may sell such securities in order to increase the yield
or to adjust the average maturity or credit quality of the Fund's investment
portfolio.
PRINCIPAL INVESTMENT RISKS
An investment in the Fund is subject to risks. An investment in the Fund is not
a deposit of any bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund. There can be no assurance that the Fund will
achieve its investment objective.
INCOME RISK. The income you receive from the Fund is based primarily on
short-term interest rates, which can vary widely over time. If short-term
interest rates drop, your income from the Fund may drop as well.
CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments
of interest and principal. While credit risk should be low for the Fund because
it invests in high-quality money-market instruments, an investment in the Fund
is not risk free. The Fund is still subject to the risk that the issuers of such
securities may experience financial difficulties and, as a result, fail to pay
on their obligations.
MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline and adversely affect the Fund's net asset value.
The prices of debt securities tend to fall as interest rates rise but market
risk should be low for the Fund because it invests in high-quality, short-term
securities.
MANAGER RISK. As with any managed fund, the Fund's investment adviser may not be
successful in selecting the best-performing securities or investment techniques,
and the Fund's performance may lag behind that of similar funds.
INVESTOR PROFILE
In light of the Fund's investment objective and strategies, the Fund may be
appropriate for investors who:
- Seek protection of capital and high current income through investments in
money-market instruments
ANNUAL PERFORMANCE
One way to measure the risks of investing in the Fund is to look at how its
performance has varied from year to year. The following chart shows the annual
returns of the Fund's Class A Shares over the ten calendar years prior to the
date of this Prospectus. Remember that the past performance of the Fund is not
indicative of its future performance.
ANNUAL RETURN
-------------
1991 5.33
1992 2.91
1993 2.16
1994 3.38
1995 5.00
1996 4.46
1997 4.68
1998 4.85
1999 4.48
2000 5.60
3
5
The Fund's return for the six-month period ended June 30, 2001 for Class A
Shares was 2.19%. As a result of market activity, current performance may vary
from the figures shown.
The annual return variability of the Fund's Class B Shares and Class C Shares
would be substantially similar to that shown for the Class A Shares because all
of the Fund's shares are invested in the same portfolio of securities; however,
the actual annual returns of the Class B Shares and Class C Shares would be
lower than the annual returns shown for the Fund's Class A Shares because of
differences in the expenses borne by each class of shares.
During the ten-year period shown in the bar chart, the highest quarterly return
for Class A Shares was 1.53% (for the quarter ended March 31, 1991) and the
lowest quarterly return for Class A Shares was 0.52% (for the quarter ended June
30, 1993).
COMPARATIVE PERFORMANCE
As a basis for evaluating the Fund's performance and risks, the table below
shows the Fund's average annual total returns for the periods ended December 31,
2000 (the most recently completed calendar year prior to the date of this
Prospectus). The Fund's performance figures for Class B Shares and Class C
Shares include the maximum contingent deferred sales charges paid by investors.
Remember that past performance of the Fund is not indicative of its future
performance.
AVERAGE ANNUAL
TOTAL RETURNS PAST 10
FOR THE YEARS OR
PERIODS ENDED PAST PAST SINCE
DECEMBER 31, 2000 1 YEAR 5 YEARS INCEPTION
--------------------------------------------------------
Van Kampen Reserve
Fund -- Class A
Shares 5.60% 4.81% 4.28%
........................................................
Van Kampen Reserve
Fund -- Class B
Shares 0.83% 3.77% 4.04%(1)
........................................................
Van Kampen Reserve
Fund -- Class C
Shares 3.81% 4.02% 4.04%(1)
........................................................
Inception date: (1) 4/18/95.
Investors can obtain the current 7-day yield for each class of shares of the
Fund by calling (800) 341-2911.
Fees and Expenses
of the Fund
-------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
----------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
----------------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases None None None
................................................................
Maximum deferred sales
charge (load) (as a
percentage of the lesser
of original purchase
price or redemption
proceeds) None 4.00%(1)(2) 1.00%(1)(3)
................................................................
Maximum sales charge
(load) imposed on
reinvested dividends None None None
................................................................
Redemption fee None None None
................................................................
Exchange fee None None None
................................................................
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
----------------------------------------------------------------
Management fees 0.40% 0.40% 0.40%
................................................................
Distribution and/or
service (12b-1) fees(4) 0.15% 0.90%(5 0.90%(5
................................................................
Other expenses 0.40% 0.40% 0.40%
................................................................
Total annual fund
operating expenses 0.95% 1.70% 1.70%
................................................................
(1) Class B Shares and Class C Shares of the Fund generally are made available
to shareholders for temporary investment purposes in connection with
exchanges to or from other Van Kampen funds. Unless investors intend to
exchange their Fund shares to or from Class B Shares or Class C Shares of
other Van Kampen funds, they should purchase the Fund's Class A Shares
because Class A Shares are not subject to any sales charges and are subject
to less ongoing distribution/service fees and or related expenses. Even
investors who do intend to exchange their Fund shares for Class B Shares or
Class C Shares of other Van Kampen funds may prefer to purchase Class A
Shares of the Fund and then redeem those shares and use the proceeds to
purchase Class B Shares or Class C Shares of other Van Kampen funds. See
"Purchase of Shares."
4
6
(2) The maximum deferred sales charge is 4.00% in the first and second year
after purchase, declining thereafter as follows:
Year 1-4.00%
Year 2-4.00%
Year 3-3.00%
Year 4-2.50%
Year 5-1.50%
After-None
See "Purchase of Shares -- Class B Shares."
(3) The maximum deferred sales charge is 1.00% in the first year after purchase
and 0.00% thereafter. See "Purchase of Shares -- Class C Shares."
(4) 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 "Purchase of Shares."
(5) Because distribution and/or service (12b-1) fees are paid out of the Fund's
assets on an ongoing basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales
charges.
Example:
The following example is intended to help you compare the cost of investing in
the Fund with the costs of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same each year (except for the ten-year
amounts for Class B Shares which reflect the conversion of Class B Shares to
Class A Shares eight years after the end of the calendar month in which the
shares were purchased). Although your actual costs may be higher or lower, based
on these assumptions your costs would be:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
--------------------------------------------------------------------
Class A Shares $ 97 $303 $ 525 $1,166
....................................................................
Class B Shares $561 $799 $1,010 $1,709*
....................................................................
Class C Shares $272 $533 $ 918 $1,998
....................................................................
You would pay the following expenses if you did not redeem your shares:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
--------------------------------------------------------------------
Class A Shares $ 97 $303 $ 525 $1,166
....................................................................
Class B Shares $161 $499 $ 860 $1,709*
....................................................................
Class C Shares $172 $533 $ 918 $1,998
....................................................................
* Based on conversion to Class A Shares eight years after the end of the
calendar month in which the shares were purchased.
Investment Objective,
Policies and Risks
-------------------------------------------------------------------------------
The Fund's investment objective is to seek protection of capital and high
current income. The Fund's investment objective is a fundamental policy and may
not be changed without shareholder approval of a majority of the Fund's
outstanding voting securities, as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"). The Fund seeks to maintain a constant net asset
value of $1.00 per share. There are risks inherent in all investments in
securities; accordingly, there can be no assurance that the Fund's net asset
value will not vary or that the Fund will achieve its investment objective.
The Fund's investment adviser seeks to achieve the investment objective by
investing in a diversified portfolio of U.S. dollar-denominated money-market
securities, including U.S. government securities, domestic and foreign bank
obligations, commercial paper and repurchase agreements secured by such
obligations. The Fund seeks to maintain a constant net asset value of $1.00 per
share by investing in high-quality money-market securities with remaining
maturities of 13 months or less and with a dollar-weighted average maturity of
90 days or less. To be considered high quality, a security generally must be
rated in one of the two highest short-term ratings categories by the ratings
services such as Standard & Poor's ("S&P") or Moody's Investors Service, Inc.
("Moody's").
The Fund's investment adviser seeks to invest in those securities that meet the
maturity, quality and diversification standards established by the Fund's Board
of
5
7
Trustees and special rules for money market funds under the 1940 Act. These
include requirements for maintaining high credit quality in the Fund's
portfolio, a short average portfolio maturity to reduce the effects of changes
in interest rates on the value of portfolio securities and diversifying
investments among issuers to reduce the effects of a default by any one issuer
on the value of the Fund's shares. In addition, the Fund's Board of Trustees has
adopted procedures to evaluate potential investments and the Fund's investment
adviser has the responsibility to implement those procedures in making
investments for the Fund's portfolio. In selecting securities for investment,
the Fund's investment adviser focuses on identifying what it believes are the
best relative values among potential investments based upon an analysis of the
yield, price, interest rate sensitivity and credit quality of such securities.
The Fund's investment adviser seeks to add value and limit risk through careful
security selection and by actively managing the Fund's portfolio. On an ongoing
basis, the Fund's investment adviser analyzes the economic and financial outlook
of the money markets to anticipate and respond to changing developments that may
affect the Fund's existing and prospective investments. While the Fund intends
to hold investments until maturity, it may sell portfolio securities prior to
maturity to increase the yield or to adjust the average maturity or credit
quality of the Fund's investment portfolio.
The Fund's dividend and yield are expected to change daily based upon changes in
interest rates and other market conditions. Although the Fund is managed to
maintain a stable $1.00 share price, there is no guarantee that the Fund will be
able to do so.
The following is a brief description of the types of money-market instruments in
which the Fund may invest, all of which will be U.S. dollar-denominated
obligations:
U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued or
guaranteed as to principal and interest by the U.S. government, its agencies or
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. government which include U.S. Treasury bills
(maturing within one year of issuance) and U.S. Treasury notes and bonds (which
have longer maturities), (b) the right of the issuer to borrow from the U.S.
Treasury, (c) the discretionary authority of the U.S. government agencies or
instrumentalities or (d) the credit of the instrumentality issuing the
securities. If the securities are not backed by the full faith and credit of the
U.S. government, the owners of such securities must look to the agency or
instrumentality issuing the obligation for repayment and will not be able to
assert a claim against the U.S. government in the event of nonpayment.
Governmental agencies or instrumentalities in which the Fund may invest include,
but are not limited to, the Federal National Mortgage Association, the
Government National Mortgage Association, Federal Land Banks, and the Farmer's
Home Administration.
BANK OBLIGATIONS. The Fund may invest in high-quality obligations issued by
domestic and foreign banks or their subsidiaries or overseas branches. Bank
obligations include time deposits, certificates of deposit and bankers'
acceptances, as well as securities secured by such obligations. Certificates of
deposit are instruments representing the obligation of a bank to repay funds
deposited with it for a specified period of time. Time deposits are
interest-bearing deposits maintained in a bank for a specified period of time
(not longer than seven days) at a specific rate of interest. Time deposits held
by the Fund generally will not benefit from insurance provided by the Federal
Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation. Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity.
The Fund only invests in "high-quality" bank obligations which are securities
rated in one of the two highest short-term ratings categories by any two
nationally recognized statistical rating organizations ("NRSROs"), such as S&P
(e.g., A-1 or A-2) or Moody's (e.g., P-1 or P-2) (or any one NRSRO if the
instrument was rated by only one such organization). Credit quality at the time
of purchase determines which securities may be acquired. Subsequent downgrades
in ratings may require reassessment of the credit risks presented by such
securities and may even require their sale. NRSROs assign ratings based upon
their opinions as to the quality of the debt securities they undertake to rate,
but they do not base their assessment on the market value risk of such
securities. It should be
6
8
emphasized that ratings are general and are not absolute standards of quality.
The Fund's current policy is to limit investments in bank obligations to those
rated A-1 or P-1.
The purchase of obligations of foreign banks may subject the Fund to additional
investment risks that are different in some respects 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.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually 1 to 270
days) unsecured promissory notes issued by corporations in order to finance
their current operations. The Fund may invest in a commercial paper obligation
that (a) is rated in one of the two highest short-term ratings categories by any
two NRSROs (e.g., A-1 or A-2 by S&P and P-1 or P-2 by Moody's) (or any one NRSRO
if the instrument was rated by only one such organization) or (b) is unrated, if
such security is of comparable quality as determined in accordance with
procedures established by the Fund's Board of Trustees or if such security was a
long-term security at the time of issuance but has a remaining life of 397 days
or less and has received a long-term rating in one of the three highest
long-term ratings categories by any two NRSROs (e.g., A or higher by S&P and
Moody's) (or any one NRSRO if the instrument was rated by only one such
organization). Credit quality at the time of purchase determines which
securities may be acquired. The Fund's current policy is to limit investments in
commercial paper to obligations rated A-1 or P-1.
REPURCHASE AGREEMENTS. A repurchase agreement is a short-term investment in
which the purchaser (e.g., the Fund) acquires ownership of a debt security and
the seller agrees to repurchase the obligation at a future time and at a set
price, thereby determining the yield during the holding period. The Fund may
enter into repurchase agreements with U.S. banks, their subsidiaries or overseas
branches, and with primary dealers of U.S. government securities that report to
the Federal Reserve Bank of New York.
The Fund only enters into repurchase agreements that are (a) rated at the time
of investment in one of the two highest ratings categories by at least two
NRSROs (e.g. A-1 or A-2 by S&P and P-1 or P-2 by Moody's) (or one NRSRO if the
instrument was rated by only one such organization) and (b) collateralized by
the underlying securities of the same type and quality in which the Fund
otherwise may invest. The Fund will not invest in repurchase agreements maturing
in more than seven days if any such investment, together with any other illiquid
securities held by the Fund, would exceed 10% of the Fund's net assets.
Repurchase agreements are subject to the risk of default by the other party.
Further information about these types of investments and other investment
practices that may be used by the Fund is contained in the Fund's Statement of
Additional Information.
Investment
Advisory Services
-------------------------------------------------------------------------------
THE ADVISER. Van Kampen Asset Management Inc. is the Fund's investment adviser
(the "Adviser" or "Asset Management"). The Adviser is a wholly owned subsidiary
of Van Kampen Investments Inc. ("Van Kampen Investments"). Van Kampen
Investments is a diversified asset management that administers more than three
million retail investor accounts, has extensive capabilities for managing
institutional
7
9
portfolios and has more than $83 billion under management or supervision as of
June 30, 2001. Van Kampen Investments has more than 50 open-end funds, more than
and 30 closed-end funds and more than 2,700 unit investment trusts that are
distributed by authorized dealers nationwide. Van Kampen Funds Inc., the
distributor of the Fund (the "Distributor") and the sponsor of the funds
mentioned above, is also a wholly owned subsidiary of Van Kampen Investments.
Van Kampen Investments is an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co. The Adviser's principal office is located at 1 Parkview Plaza,
Oakbrook Terrace, Illinois 60181-5555.
ADVISORY AGREEMENT. The Fund retains the Adviser to manage the investment of its
assets and to place orders for the purchase and sale of its portfolio
securities. Under an investment advisory agreement between the Adviser and the
Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee
computed based upon an annual rate applied to the average daily net assets of
the Fund as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM
---------------------------------------------------------
First $150 million 0.50%
.........................................................
Next $100 million 0.45%
.........................................................
Next $100 million 0.40%
.........................................................
Over $350 million or thereafter 0.35%
.........................................................
Applying this fee schedule, the effective advisory fee rate was 0.40% of the
Fund's average daily net assets for the Fund's fiscal year ended May 31, 2001.
The Fund's average daily net assets are determined by taking the average of all
of the determinations of the net assets during a given calendar month. Such fee
is payable for each calendar month as soon as practicable after the end of that
month.
Under the Advisory Agreement, the Adviser furnishes offices, necessary
facilities and equipment, and provides administrative services to the Fund. The
Fund pays all charges and expenses of its day-to-day operations, including
service fees, distribution fees, custodian fees, legal and independent
accountant fees, the costs of reports and proxies to shareholders, compensation
of trustees of the Fund (other than those who are affiliated persons of the
Adviser, Distributor or Van Kampen Investments) and all other ordinary business
expenses not specifically assumed by the Adviser.
From time to time, the Adviser or the Distributor may voluntarily undertake to
reduce the Fund's expenses by reducing the fees payable to them or by reducing
other expenses of the Fund in accordance with such limitations as the Adviser or
Distributor may establish.
The Adviser may utilize, at its own expense, credit analysis, research and
trading support services provided by its affiliate, Van Kampen Investment
Advisory Corp. ("Advisory Corp.").
PERSONAL INVESTMENT POLICIES. The Fund, the Adviser and the Distributor have
adopted a Code of Ethics designed to recognize the fiduciary relationships among
the Fund, the Adviser, the Distributor and their respective employees. The Code
of Ethics permits directors, trustees, officers and employees to buy and sell
securities for their personal accounts subject to certain restrictions. Persons
with access to certain sensitive information are subject to pre-clearance and
other procedures designed to prevent conflicts of interest.
Purchase of Shares
-------------------------------------------------------------------------------
GENERAL
This Prospectus offers three classes of shares of the Fund designated as Class A
Shares, Class B Shares and Class C Shares. Other classes of shares of the Fund
may be offered through one or more separate prospectuses of the Fund. By
offering multiple classes of shares, the Fund permits each investor to choose
the class of shares that is most beneficial given the type of investor, the
amount to be invested and the length of time the investor expects to hold the
shares.
Each class of shares represents an interest in the same portfolio of investments
of the Fund and has the same rights except that (i) Class A Shares are sold
without a sales charge, while Class B Shares and Class C Shares generally bear
sales charge expenses at the time of redemption and any expenses (including
higher distribution fees and transfer agency costs) resulting from such deferred
sales charge arrangement, (ii) each class of shares has exclusive voting rights
with respect to approvals of the Rule 12b-1 distribution plan and the service
plan (each as described below) under which the
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class's distribution fee and/or the service fee is paid, (iii) each class of
shares has different exchange privileges, (iv) certain classes of shares are
subject to a conversion feature and (v) certain classes of shares have different
shareholder service options available.
The offering price of the Fund's shares is based upon the Fund's net asset value
per share. The net asset values per share of the Class A Shares, Class B Shares
and Class C Shares are generally expected to be substantially the same. In
certain circumstances, however, the per share net asset values of the classes of
shares may differ from one another, reflecting the daily expense accruals of the
higher distribution fees and transfer agency costs applicable to the Class B
Shares and Class C Shares and the differential in the dividends that may be paid
on each class of shares.
The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day on which no purchase or redemption orders are
received or there is not a sufficient degree of trading in the Fund's portfolio
securities such that the Fund's net asset value per share might be materially
affected. The Fund's Board of Trustees reserves the right to calculate the net
asset value per share and adjust the offering price more frequently than once
daily if deemed desirable. Net asset value per share for each class is
determined by dividing the value of the Fund's portfolio securities, cash and
other assets (including accrued interest) attributable to such class, less all
liabilities (including accrued expenses) attributable to such class, by the
total number of shares of the class outstanding. The securities held by the Fund
are valued on the basis of amortized cost, which does not take into account
unrealized capital gains or losses. Amortized cost valuation involves initially
valuing a security at its cost and thereafter, applying a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the security. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price that the Fund
would receive if it sold the security.
The Fund has adopted a distribution plan (the "Distribution Plan") with respect
to each class of its Class A Shares, Class B Shares and Class C Shares pursuant
to Rule 12b-1 under the 1940 Act. The Fund also adopted a service plan (the
"Service Plan") with respect to each class of its shares. Under the Distribution
Plan and the Service Plan, the Fund pays distribution fees in connection with
the sale and distribution of its shares and service fees in connection with the
provision of ongoing services to shareholders of each class and the maintenance
of shareholder accounts.
The amount of distribution fees and service fees varies among the classes
offered by the Fund. Because these fees are paid out of the Fund's assets on an
ongoing basis, these fees will increase the cost of your investment in the Fund.
By purchasing a class of shares subject to higher distribution fees and service
fees, you may pay more over time than on a class of shares with other types of
sales charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). The net income
attributable to a class of shares will be reduced by the amount of the
distribution fees and service fees and other expenses of the Fund associated
with that class of shares. To assist investors in comparing classes of shares,
the tables under the Prospectus heading "Fees and Expenses of the Fund" provide
a summary of sales charges and expenses and an example of the sales charges and
expenses of the Fund applicable to each class of shares offered herein.
The shares are offered on a continuous basis through the Distributor as
principal underwriter, which is located at 1 Parkview Plaza, Oakbrook Terrace,
Illinois 60181-5555. Shares may be purchased through members of the NASD who are
acting as securities dealers ("dealers") and NASD members or eligible non-NASD
members who are acting as brokers or agents for investors ("brokers"). "Dealers"
and "brokers" are sometimes referred to herein as "authorized dealers."
Shares may be purchased on any business day by following the wire transfer
instructions described below or by completing the account application form and
forwarding the account application form, directly or
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through an authorized dealer, to the Fund's shareholder service agent, Van
Kampen Investor Services Inc. ("Investor Services"), a wholly owned subsidiary
of Van Kampen Investments. When purchasing shares of the Fund through this
Prospectus, investors must specify whether the purchase is for Class A Shares,
Class B Shares or Class C Shares by selecting the correct Fund number on the
account application form. Sales personnel of authorized dealers distributing the
Fund's shares are entitled to receive compensation for selling Class B Shares
and Class C Shares and may receive differing compensation for selling Class B
Shares or Class C Shares. Sales personnel of authorized dealers are not entitled
to receive compensation for selling Class A Shares.
The offering price for shares is based upon the next calculation of net asset
value per share after an order becomes effective, which is upon receipt by
Investor Services of federal funds. Payment by check generally will be converted
into federal funds on the second business day following receipt of payment for
the order by Investor Services.
The Fund and the Distributor reserve the right to refuse any order for the
purchase of shares. The Fund also reserves the right to suspend the sale of the
Fund's shares in response to conditions in the securities markets or for other
reasons. Shares of the Fund may be sold in foreign countries where permissible.
Investor accounts will automatically be credited with additional shares of the
Fund after any Fund distributions, such as dividends and capital gain dividends,
unless the investor instructs the Fund otherwise. Investors wishing to receive
cash instead of additional shares should contact the Fund by telephone at (800)
341-2911 or by writing to the Fund, c/o Van Kampen Investor Services Inc., PO
Box 218256, Kansas City, MO 64121-8256.
There is no minimum investment amount when establishing an account with the
Fund. However, the Fund may redeem any shareholder account (other than
retirement accounts and accounts established through a broker for which the
transfer agent does not have discretion to initiate transactions) that has been
open for one year or more and has a balance of less than $1,000. Shareholders
will receive written notice at least 60 days in advance of any involuntary
redemption and will be given the opportunity to purchase at net asset value
without sales charge the number of additional shares needed to bring the account
value to $1,000. There will be no involuntary redemption if the value of the
account is less than $1,000 due to market depreciation.
INITIAL INVESTMENT BY BANK WIRE. To open an account by wire an investor should
telephone Investor Services at (800) 421-6714 and provide the account
registration, the address, tax identification number, the amount being wired and
the name of the wiring bank. Investor Services furnishes the investor with an
account number. The investor's bank should wire the specified amount along with
the account number and registration to the Fund's custodian: State Street Bank
and Trust Company ("State Street Bank"), 225 Franklin Street, Boston,
Massachusetts 02110, ABA-011000028, attention Van Kampen Investor Services Inc./
Van Kampen Fund Account No. 9900-446-7. The investor should then immediately
complete and mail the account application form accompanying this Prospectus to
Investor Services. To receive same day credit to an account, the investor must
call Investor Services, at the telephone number listed above, by 11:00 a.m.
Kansas City time with the intent to wire funds and State Street Bank must then
receive such funds by 4:00 p.m. Boston time.
INITIAL INVESTMENT BY MAIL. To open an account by mail an investor should send a
check payable to the Fund along with a completed account application form to
Investor Services.
SUBSEQUENT INVESTMENTS BY BANK WIRE. The investor's bank should wire the
specified amount along with the account number and registration to State Street
Bank. To receive same day credit to an account, the investor must call Investor
Services at (800) 421-6714 by 11:00 a.m. Kansas City time with the intent to
wire funds and State Street Bank must then receive such funds by 4:00 p.m.
Boston time.
SUBSEQUENT INVESTMENTS BY MAIL. Subsequent investments may be sent by mail to
Investor Services, indicating the account registration and account number.
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CLASS A SHARES
Class A Shares of the Fund are sold at net asset value without a sales charge
and no sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.
Under the Distribution Plan and the Service Plan, the Fund may spend up to a
total of 0.15% per year of the Fund's average daily net assets with respect to
Class A Shares of the Fund. From such amount, under the Service Plan, the Fund
may spend up to 0.15% per year of the Fund's average daily net assets with
respect to Class A Shares of the Fund.
UNIT INVESTMENT TRUST REINVESTMENT PROGRAM. The Fund permits unitholders of unit
investment trusts to reinvest distributions from such trusts in Class A Shares
of the Fund at net asset value without charge if the administrator of an
investor's unit investment trust program meets certain uniform criteria relating
to cost savings by the Fund and the Distributor. The administrator of such a
unit investment trust must have an agreement with the Distributor pursuant to
which the administrator will (1) submit a single bulk order and make payment
with a single remittance for all investments in the Fund during each
distribution period by all investors who choose to invest in the Fund through
the program and (2) provide Investor Services with appropriate backup data for
each investor participating in the program in a computerized format fully
compatible with Investor Services' processing system. As further requirements
for obtaining these special benefits, the Fund also requires that all dividends
and other distributions by the Fund be reinvested in additional shares without
any systematic withdrawal program. There will be no minimum for reinvestments
from unit investment trusts. The Fund will send account activity statements to
such participants on a quarterly basis only, even if their investments are made
more frequently. The Fund reserves the right to modify or terminate this program
at any time.
CLASS B SHARES
Class B Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge if redeemed within five years of purchase as
shown in the table as follows:
CLASS B SHARES
SALES CHARGE SCHEDULE
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
--------------------------------------------------------------
First 4.00%
..............................................................
Second 4.00%
..............................................................
Third 3.00%
..............................................................
Fourth 2.50%
..............................................................
Fifth 1.50%
..............................................................
Sixth and After None
..............................................................
The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. The
Fund will generally not accept a purchase order for Class B Shares in the amount
of $100,000 or more.
The amount of the contingent deferred sales charge, if any, varies depending on
the number of years from the time of payment for each purchase of Class B Shares
until the time of redemption of such shares.
In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed that the shares being redeemed first are any shares in
the shareholder's Fund account that are not subject to a contingent deferred
sales charge, followed by shares held the longest in the shareholder's account.
Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to Class B Shares of the Fund. In
addition, under the Service Plan, the Fund may spend up to
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0.15% per year of the Fund's average daily net assets with respect to Class B
Shares of the Fund.
CLASS C SHARES
Class C Shares of the Fund are sold at net asset value and are subject to a
contingent deferred sales charge of 1.00% of the dollar amount subject to charge
if redeemed within one year of purchase.
The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital gain dividends. The
Fund will not accept a purchase order for Class C Shares in the amount of $1
million or more.
In determining whether a contingent deferred sales charge applies to a
redemption, it is assumed that the shares being redeemed first are any shares in
the shareholder's Fund account that are not subject to a contingent deferred
sales charge, followed by shares held the longest in the shareholder's account.
Under the Distribution Plan, the Fund may spend up to 0.75% per year of the
Fund's average daily net assets with respect to Class C Shares of the Fund. In
addition, under the Service Plan, the Fund may spend up to 0.15% per year of the
Fund's average daily net assets with respect to Class C Shares of the Fund.
CONVERSION FEATURE
Class B Shares purchased on or after June 1, 1996, including Class B Shares
received from reinvestment of distributions through the dividend reinvestment
plan, 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, including Class B Shares received from reinvestment of
distributions through the dividend reinvestment plan, 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, including Class
C Shares received from reinvestment of distributions through the dividend
reinvestment plan, automatically convert to Class A Shares ten years after the
end of the calendar month in which the shares were purchased. Such conversion
will be on the basis of the relative net asset values per share, without the
imposition of any sales load, fee or other charge. The conversion schedule
applicable to a share of the Fund acquired through the exchange privilege from
another Van Kampen fund participating in the exchange program is determined by
reference to the Van Kampen fund from which such share was originally purchased.
The conversion of such shares to Class A Shares is subject to the continuing
availability of an opinion of counsel to the effect that (i) the assessment of
the higher distribution fee and transfer agency costs with respect to such
shares does not result in the Fund's dividends or capital gain dividends
constituting "preferential dividends" under the federal income tax law and (ii)
the conversion of shares does not constitute a taxable event under federal
income tax law. The conversion may be suspended if such an opinion is no longer
available and such shares might continue to be subject to the higher aggregate
fees applicable to such shares for an indefinite period.
FACTORS FOR CONSIDERATION
Class B Shares and Class C Shares of the Fund generally are made available to
shareholders for temporary investment purposes in connection with exchanges to
or from other Van Kampen funds participating in the exchange program. Investors
purchasing shares of the Fund without regard to the availability of exchanges
should purchase Class A Shares because Class A Shares are not subject to any
sales charges and are subject to less ongoing distribution/service fees and
related expenses. Therefore, Class A Shares will have a higher yield than Class
B Shares and Class C Shares. Even investors who do intend to exchange their
shares for Class B Shares or Class C Shares of other Van Kampen funds should
consider purchasing Class A Shares and then redeeming those shares when they
wish to invest in Class B Shares or Class C Shares of other Van Kampen funds.
Since Class A Shares are subject to lower distribution/service fees and related
expenses, purchasing Class A Shares and then redeeming them to purchase Class B
Shares or Class C Shares of other Van Kampen funds is likely to result in a
higher return to the investor than purchasing Class B Shares or Class C Shares
and then exchanging them for Class B Shares or Class C Shares of other Van
Kampen funds.
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The contingent deferred sales charges applicable to Class B Shares and Class C
Shares is not imposed on exchanges among Van Kampen funds participating in the
exchange program for the same class of shares. Instead, Class B Shares or Class
C Shares acquired in an exchange remain subject to the contingent deferred sales
charges schedule of the initial fund from which the Class B Shares or Class C
Shares were purchased. Similarly the holding period for calculating any
contingent deferred sales charge is based upon the date of purchase of such
shares from the initial fund.
WAIVER OF CONTINGENT
DEFERRED SALES CHARGE
The contingent deferred sales charge is waived on redemptions of Class B Shares
and Class C Shares (i) within one year following the death or disability (as
disability is defined by federal income tax law) of a shareholder, (ii) for
required minimum distributions from an individual retirement account ("IRA") or
certain other retirement plan distributions, (iii) for withdrawals under the
Fund's systematic withdrawal plan but limited to 12% annually of the initial
value of the account, (iv) if no commission or transaction fee is paid to
authorized dealers at the time of purchase of such shares and (v) if made by the
Fund's involuntary liquidation of a shareholder's account as described herein.
Subject to certain limitations, a shareholder who has redeemed Class C Shares of
the Fund may reinvest in Class C Shares at net asset value with credit for any
contingent deferred sales charge if the reinvestment is made within 180 days
after the redemption, provided that shares of the Fund are available for sale at
the time of reinvestment. For a more complete description of contingent deferred
sales charge waivers, please refer to the Fund's Statement of Additional
Information or contact your authorized dealer.
Redemption of Shares
-------------------------------------------------------------------------------
Generally, shareholders may redeem for cash some or all of their shares without
charge by the Fund (other than applicable sales charge) at any time. As
described under the Prospectus heading "Purchase of Shares," redemptions of
Class B Shares and Class C Shares may be subject to a contingent deferred sales
charge. Redemptions completed through an authorized dealer or a
custodian/trustee of a retirement plan account may involve additional fees
charged by the dealer or custodian/trustee.
Except as specified below under "Telephone Redemption Requests," payment for
shares redeemed generally will be made by check mailed within seven days after
receipt by Investor Services of the redemption request and any other necessary
documents in proper form as described below. Such payment may be postponed or
the right of redemption suspended as provided by the rules of the SEC. Such
payment may, under certain circumstances, be paid wholly or in part by a
distribution-in-kind of portfolio securities. A distribution-in-kind may result
in recognition by the shareholder of a gain or loss for federal income tax
purposes when such securities are distributed, and the shareholder may have
brokerage costs and a gain or loss for federal income tax purposes upon the
shareholder's disposition of such securities. If the shares to be redeemed have
been recently purchased by check, Investor Services may delay the payment of
redemption proceeds until it confirms that the purchase check has cleared, which
may take up to 15 calendar days from the date of purchase. A taxable gain or
loss may be recognized by the shareholder upon redemption of shares.
WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by
written request in proper form sent directly to Van Kampen Investor Services
Inc., PO Box 218256, Kansas City, MO 64121-8256. The request for redemption
should indicate the number of shares or dollar amount to be redeemed, the Fund
name and class designation of such shares and the shareholder's account number.
The redemption request must be signed by all persons in whose names the shares
are registered. Signatures must conform exactly to the account registration. If
the proceeds of the redemption exceed $100,000, or if the proceeds are not to be
paid to the record owner at the record address, or if the record address has
changed within the previous 15 calendar 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.
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Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption request to be in proper form.
In some cases, however, additional documents may be necessary. Certificated
shares may be redeemed only by written request. The certificates for the shares
being redeemed must be properly endorsed for transfer. Generally, in the event a
redemption is requested by and registered to a corporation, partnership, trust,
fiduciary, estate or other legal entity owning shares of the Fund, a copy of the
corporate resolution or other legal documentation appointing the authorized
signer and certified within the prior 120 calendar days must accompany the
redemption request. Retirement plan distribution requests should be sent to the
plan custodian/trustee to be forwarded to Investor Services. Contact the plan
custodian/trustee for further information.
In the case of written redemption requests sent directly to Investor Services,
the redemption price is the net asset value per share next determined after the
request in proper form is received by Investor Services.
AUTHORIZED DEALER REDEMPTION REQUESTS. Shareholders may place redemption
requests through an authorized dealer following procedures specified by such
authorized dealer. The redemption price for such shares is the net asset value
per share next calculated after an order in proper form is received by an
authorized dealer provided such order is transmitted to the Distributor prior to
the Distributor's close of business on such day. It is the responsibility of
authorized dealers to transmit redemption requests received by them to the
Distributor so they will be received prior to such time. Redemptions completed
through an authorized dealer may involve additional fees charged by the dealer.
TELEPHONE REDEMPTION REQUESTS. The Fund permits redemption of shares by
telephone and for redemption proceeds to be sent to the address of record for
the account or to the bank account of record as described below. A shareholder
automatically has telephone redemption privileges unless the shareholder
indicates otherwise by checking the applicable box on the account application
form. For accounts that are not established with telephone redemption
privileges, a shareholder may call the Fund at (800) 341-2911 to request that a
copy of the Telephone Redemption Authorization form be sent to the shareholder
for completion. Shares may be redeemed by calling (800) 341-2911, our automated
telephone system, which is generally accessible 24 hours a day, seven days a
week. Van Kampen Investments and its subsidiaries, including Investor Services,
and the Fund employ procedures considered by them to be reasonable to confirm
that instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting upon
telephone instructions, tape-recording telephone communications and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, none of Van Kampen Investments, Investor Services or
the Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. Telephone redemptions may not be available if the
shareholder cannot reach Investor Services by telephone, whether because all
telephone lines are busy or for any other reason; in such case, a shareholder
would have to use the Fund's other redemption procedure previously described.
Requests received by Investor Services prior to 4:00 p.m., New York time, will
be processed at the next determined net asset value per share. These privileges
are available for most accounts other than retirement accounts or accounts with
shares represented by certificates. If an account has multiple owners, Investor
Services may rely on the instructions of any one owner.
For redemptions authorized by telephone, amounts of $50,000 or less may be
redeemed daily if the proceeds are to be paid by check and amounts of at least
$1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by
wire. The proceeds must be payable to the shareholder(s) of record and sent to
the address of record for the account or wired directly to their predesignated
bank account. This privilege is not available if the address of record has been
changed within 15 calendar days prior to a telephone redemption request.
Proceeds from redemptions payable by wire transfer are expected to be wired on
the next business day following the date of redemption. The Fund reserves the
right at any time to terminate, limit or otherwise modify this redemption
privilege.
EXPEDITED TELEPHONE REDEMPTION REQUESTS. Shareholders of the Fund who have
completed the appropriate section of the application may request expedited
redemption payment of shares having a value
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of $1,000 or more by calling (800) 421-5684. Redemption proceeds in the form of
federal funds will be wired to the bank designated in the application. Expedited
telephone redemption requests received prior to 10:00 a.m. Kansas City time are
processed and the proceeds are wired on the date of receipt. Redemption requests
received by Investor Services after such hour are subsequently processed and the
proceeds are wired on the next banking day following receipt of such request.
Investor Services reserves the right to deduct the wiring costs from the
proceeds of the redemption. A shareholder may change the bank account previously
designated at any time by written notice to Investor Services with the
signature(s) of the shareholder(s) guaranteed. The Fund reserves the right at
any time to terminate, limit or otherwise modify this expedited redemption
privilege.
Distributions from the Fund
-------------------------------------------------------------------------------
Shareholders may receive distributions from the Fund of dividends and capital
gain dividends.
DIVIDENDS. Interest earned from investments is the Fund's main source of net
investment income. The Fund's present policy, which may be changed at any time
by the Fund's Board of Trustees, is to declare daily and distribute as dividends
to shareholders all, or substantially all, of this net investment income
monthly. All dividends are automatically applied to purchase additional full and
fractional shares of the Fund at the next determined net asset value.
Shareholders may elect to receive monthly payment of dividends in cash by
written instruction to Investor Services. Dividends are paid to shareholders of
record immediately prior to the determination of net asset value for that day.
Since shares are issued and redeemed at the time net asset value is determined,
dividends commence on the day following the date shares are issued and are paid
for. A redeeming shareholder receives all dividends accrued through the date of
redemption.
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/ service expenses and transfer agency expenses applicable to such
classes of shares.
CAPITAL GAIN DIVIDENDS. The Fund may realize capital gains or losses when it
sells securities, depending on whether the sales prices for the securities are
higher or lower than purchase prices. The Fund distributes any net capital gain
to shareholders as capital gain dividends at least annually. As in the case of
dividends, capital gain dividends are automatically reinvested in additional
shares of the Fund at the next determined net asset value unless the shareholder
instructs otherwise.
Shareholder Services
-------------------------------------------------------------------------------
Listed below are some of the shareholder services the Fund offers to investors.
For a more complete description of the Fund's shareholder services, such as
investment accounts, share certificates, retirement plans, automated clearing
house deposits, dividend diversification and the systematic withdrawal plan,
please refer to the Fund's Statement of Additional Information or contact your
authorized dealer.
INTERNET TRANSACTIONS. In addition to performing transactions on your account
through written instruction or by telephone, you may also perform certain
transactions through the internet. Please refer to our web site at
www.vankampen.com for further instruction. Van Kampen Investments and its
subsidiaries, including Investor Services, and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated
through the internet are genuine. Such procedures include requiring use of a
personal identification number prior to acting upon internet instructions and
providing written confirmation of instructions communicated through the
internet. If reasonable procedures are employed, none of Van Kampen Investments,
Investor Services or the Fund will be liable for following instructions received
through the internet which it reasonably believes to be genuine. If an account
has multiple owners, Investor Services may rely on the instructions of any one
owner.
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REINVESTMENT PLAN. A convenient way for investors to accumulate additional
shares is by accepting dividends and capital gain dividends in shares of the
Fund. Such shares are acquired at net asset value per share (without sales
charge) on the applicable payable date of the dividend or capital gain dividend.
Unless the shareholder instructs otherwise, the reinvestment plan is automatic.
This instruction may be made by telephone by calling (800) 341-2911 ((800)
421-2833 for the hearing impaired) or by writing to Investor Services. The
investor may, on the account application form or prior to any declaration,
instruct that dividends and/or capital gain dividends be paid in cash, be
reinvested in the Fund at the next determined net asset value or be reinvested
in another Participating Fund (defined below) at the next determined net asset
value.
AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which
a shareholder can authorize Investor Services to debit a shareholder's bank
account on a regular basis to invest predetermined amounts in the Fund.
Additional information is available from the Distributor or your authorized
dealer.
CHECK WRITING PRIVILEGE. A Class A shareholder holding shares of the Fund for
which certificates have not been issued and which are not in escrow may write
checks against such shareholder's account by completing the Authorization for
Redemption by Check form and the appropriate section of the account application
and returning the form and the account application to Investor Services. Once
the forms are properly completed, signed and returned, a supply of checks
(redemption drafts) will be sent to the Class A shareholder. Checks can be
written to the order of any person in any amount of $100 or more.
When a check is presented to the custodian bank, 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 Share account by Investor Services at
the next determined net asset value per share. Check writing redemptions
represent the sale of Class A Shares. Any gain or loss realized on the
redemption of shares is a taxable event.
Checks will not be honored for redemption of Class A Shares held less than 15
calendar days, unless such Class A Shares have been paid for by bank wire. Any
Class A Shares for which there are outstanding certificates may not be redeemed
by check. If the amount of the check is greater than the proceeds of all
uncertificated shares held in the shareholder's Class A Share account, the check
will be returned and the shareholder may be subject to additional charges. A
Class A shareholder may not liquidate the entire account by means of a check.
The check writing privilege may be terminated or suspended at any time by the
Fund or by State Street Bank and neither shall incur any liability for such
amendment or termination or for effecting redemptions to pay checks reasonably
believed to be genuine or for returning or not paying on checks which have not
been accepted for any reason. Retirement plans and accounts that are subject to
backup withholding are not eligible for the check writing privilege.
EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same
class of any Participating Fund (defined below) based on the next determined net
asset value per share of each fund after requesting the exchange without any
sales charge, subject to certain limitations. Shares of the Fund may be
exchanged for shares of any Participating Fund only if shares of that
Participating Fund are available for sale. Class A shares of the Fund which have
not previously been charged a sales charge (except for Class A Shares issued
under the reinvestment option) or that have been charged a lower sales charge
than the sales charge applicable to the shares of the Participating Fund being
acquired will have any applicable sales charges differential imposed upon an
exchange into a Participating Fund. Shareholders seeking an exchange into a
Participating Fund should obtain and read the current prospectus for such fund
prior to implementing an exchange. A prospectus of any of the Participating
Funds may be obtained from any authorized dealer or the Distributor.
As used herein, "Participating Funds" refers to certain open-end investment
companies advised by Asset Management or Advisory Corp. and distributed by the
Distributor as determined from time to time by the Fund's Board of Trustees.
When shares that are subject to a contingent deferred sales charge are exchanged
among Participating Funds, the holding period for purposes of computing the
16
18
contingent deferred sales charge is based upon the date of the initial purchase
of such shares from a Participating Fund. When such shares are redeemed and not
exchanged for shares of another Participating Fund, the shares are subject to
the contingent deferred sales charge schedule imposed by the Participating Fund
from which such shares were originally purchased.
Exchanges of shares are sales of shares of one Participating Fund and purchases
of shares of another Participating Fund. The sale may result in a gain or loss
for federal income tax purposes. If the shares sold have been held for less than
91 days, the sales charge paid on such shares is carried over and included in
the tax basis of the shares acquired.
A shareholder wishing to make an exchange may do so by sending a written request
to Investor Services, by calling (800) 341-2911, our automated telephone system,
which is generally accessible 24 hours a day, seven days a week, or through the
internet at www.vankampen.com. A shareholder automatically has these exchange
privileges unless the shareholder indicates otherwise by checking the applicable
box on the account application form. Van Kampen Investments and its
subsidiaries, including Investor Services, and the Fund employ procedures
considered by them to be reasonable to confirm that instructions communicated by
telephone are genuine. Such procedures include requiring certain personal
identification information prior to acting upon telephone instructions, tape-
recording telephone communications, and providing written confirmation of
instructions communicated by telephone. If reasonable procedures are employed,
none of Van Kampen Investments, Investor Services or the Fund will be liable for
following telephone instructions which it reasonably believes to be genuine. If
the exchanging shareholder does not have an account in the fund whose shares are
being acquired, a new account will be established with the same registration,
dividend and capital gain dividend options (except dividend diversification) and
authorized dealer of record as the account from which shares are exchanged,
unless otherwise specified by the shareholder. In order to establish a
systematic withdrawal plan for the new account or reinvest dividends from the
new account into another fund, however, an exchanging shareholder must submit a
specific request.
The Fund reserves the right to reject any order to purchase its shares through
exchange or otherwise. Certain patterns of past exchanges and/or purchase or
sale transactions involving the Fund or other Participating Funds may result in
the Fund and other Participating Funds limiting or prohibiting, at its
discretion, additional purchases and/or exchanges. Determinations in this regard
may be made based on the frequency or dollar amount of the previous exchanges or
purchases or sale transactions. Generally, all shareholders are limited to a
maximum of eight exchanges per fund during a rolling 365-day period. Exchange
privileges will be suspended on a particular fund if more than eight exchanges
out of that fund are made by a shareholder during a rolling 365-day period. If
exchange privileges are suspended, subsequent exchange requests during the
stated period will not be processed. Exchange privileges will be restored when
the account history shows fewer than eight exchanges in the rolling 365-day
period. This eight exchange policy does not apply to money market funds,
systematic exchange plans or employer-sponsored retirement plans. The Fund may
modify, restrict or terminate the exchange privilege at any time. Shareholders
will receive 60 days' notice of any termination or material amendment.
Federal Income
Taxation
-------------------------------------------------------------------------------
Distributions of the Fund's investment company taxable income (generally
ordinary income and net short-term capital gain) 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 gain (which is the excess of net long-term capital gain over net
short-term capital loss) as capital gain dividends, if any, are taxable to
shareholders as long-term capital gain, whether paid in cash or reinvested in
additional shares, and regardless of how long the shares of the Fund have been
held by such shareholders. The Fund expects that its distributions will consist
primarily of ordinary income. Distributions in excess of the Fund's earnings and
profits will first reduce the adjusted tax basis of a shareholder's shares and,
after
17
19
such adjusted tax basis is reduced to zero, will constitute capital gain to such
shareholder (assuming such shares are held as a capital asset). Although
distributions generally are treated as taxable in the year they are paid,
distributions declared in October, November or December, payable to shareholders
of record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31st prior to the date of payment.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year.
The sale or exchange of shares may be a taxable transaction for federal income
tax purposes. Shareholders who sell their shares will generally recognize a gain
or loss in an amount equal to the difference between their adjusted tax basis in
the shares sold and the amount received. If the shares are held by the
shareholder as a capital asset, the gain or loss will be a capital gain or loss.
Any recognized capital gains may be taxed at different rates depending on how
long the shareholder held the shares.
Backup withholding rules require the Fund, in certain circumstances, to withhold
a percentage of dividends and certain other payments, including redemption
proceeds, paid to shareholders who do not furnish to the Fund their correct
taxpayer identification number (in the case of individuals, their social
security number) and make certain required certifications (including
certifications as to foreign status, if applicable), or who are otherwise
subject to backup withholding.
Foreign shareholders, including shareholders who are non-resident aliens, may be
subject to U.S. withholding tax on certain distributions (whether received in
cash or in shares) at a rate of 30% or such lower rate as prescribed by an
applicable treaty. Prospective foreign investors should consult their advisers
concerning the tax consequences to them of an investment in shares.
The Fund intends to qualify as a regulated investment company under federal
income tax law. If the Fund so qualifies and distributes each year to its
shareholders at least 90% of its investment company taxable income, the Fund
will not be required to pay federal income taxes on any income it distributes to
shareholders. If the Fund distributes less than an amount equal to the sum of
98% of its ordinary income and 98% of its capital gain net income, then the Fund
will be subject to a 4% excise tax on the undistributed amounts.
The federal income tax discussion set forth above is for general information
only. Shareholders and prospective investors should consult their own advisers
regarding the specific federal tax consequences of purchasing, holding and
disposing of shares of the Fund, as well as the effects of state, local and
foreign tax law and any proposed tax law changes.
18
20
Financial Highlights
---------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance for the periods indicated. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the fiscal years ended May 31, 2001 and
2000 has been audited by Ernst & Young LLP, independent auditors, whose
report, along with the Fund's most recent financial statements, is included
in the Statement of Additional Information and may be obtained without
charge by calling the telephone number on the back cover of this Prospectus.
The information for the fiscal years ended May 31, 1999, 1998 and 1997 has
been audited by PricewaterhouseCoopers LLP. 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,
2001 2000 1999 1998 1997
---------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................ $1.00 $1.00 $1.00 $1.00 $1.00
------- ------ ------ ------ ------
Net Investment Income............... .05 .05 .04 .05 .04
Less Distributions from Net
Investment Income................. (.05) (.05) (.04) (.05) (.04)
------- ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD............................ $1.00 $1.00 $1.00 $1.00 $1.00
======= ====== ====== ====== ======
Total Return........................ $5.35%(b)* 4.92%(b) 4.55%(b) 4.78%(b) 4.52%(b)
Net Assets at End of the Period (In
millions)......................... $451.7 $573.3 $529.6 $634.1 $451.3
Ratio of Expenses to Average Net
Assets**(a)....................... .95% 0.82% 0.84% 1.02% 1.02%
Ratio of Net Investment Income to
Average Net Assets**.............. 5.22% 4.71% 4.38% 4.60% 4.38%
CLASS B SHARES
YEAR ENDED MAY 31,
2001 2000 1999 1998 1997
------------------------------------ ----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................ $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
Net Investment Income............... .05 .04 .04 .04 .04
Less Distributions from Net
Investment Income................. (.05) (.04) (.04) (.04) (.04)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD............................ $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
Total Return........................ 4.66%(c)* 4.14%(c) 3.78%(c) 3.99%(c) 3.71%(c)
Net Assets at End of the Period (In
millions)......................... $338.7 $238.8 $129.8 $123.0 $103.0
Ratio of Expenses to Average Net
Assets**(a)....................... 1.58% 1.57% 1.63% 1.79% 1.77%
Ratio of Net Investment Income to
Average Net Assets**.............. 4.43% 3.96% 3.71% 3.91% 3.70%
CLASS C SHARES
YEAR ENDED MAY 31,
2001 2000 1999 1998 1997
------------------------------------ --------------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................ $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
Net Investment Income............... .05 .04 .04 .04 .04
Less Distributions from Net
Investment Income................. (.05) (.04) (.04) (.04) (.04)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE
PERIOD............................ $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
Total Return........................ 4.57%(d)* 4.14%(d) 3.77%(d) 3.99%(d) 3.72%(d)
Net Assets at End of the Period (In
millions)......................... $63.0 $54.7 $26.9 $16.1 $8.4
Ratio of Expenses to Average Net
Assets**(a)....................... 1.69% 1.57% 1.63% 1.78% 1.78%
Ratio of Net Investment Income to
Average Net Assets**.............. 4.40% 3.96% 3.73% 3.91% 3.64%
* If certain losses had not been assumed by the Adviser, total return would
have been lower by less than .01%.
**For the year ended May 31, 1997, the impact on the Ratios of Expenses and
Net Investment Income to Average Net Assets due to the Adviser's
reimbursement of certain expenses was less than .01%.
(a)The Ratio of Expenses to Average Net Assets does not reflect credits
earned on cash balances. If these credits were reflected as a reduction
of expenses, the ratio would decrease by .01% for the year ended May 31,
1999.
(b) Assumes reinvestment of all distributions for the period and includes
combined Rule 12b-1 fees and service fees of up to .15%.
(c) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 4%,
charged on certain redemptions made within the first and second year of
purchase and declining thereafter to 0% after the fifth year. If the
sales charge was included, total returns would be lower. These returns
include combined Rule 12b-1 fees and service fees of up to .90%.
(d)Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 1%,
charged on certain redemptions made within one year of purchase. If the
sales charge was included, total returns would be lower. These returns
include Rule 12b-1 fees of up to 90%.
See Financial Statements and Notes thereto.
19
21
Board of Trustees
-------------------------------------------------------------------------------
J. Miles Branagan Jack E. Nelson
Jerry D. Choate Richard F. Powers, III*
Linda Hutton Heagy Phillip B. Rooney
R. Craig Kennedy Wayne W. Whalen*
Mitchell M. Merin* Suzanne H. Woolsey
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
For More Information
-------------------------------------------------------------------------------
EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS
Call your broker or (800) 341-2911,
our Secure Account Manager system
DEALERS
For dealer information, selling agreements, wire orders, or redemptions, call
the Distributor at (800) 421-5666
TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call (800) 421-2833
WEB SITE
www.vankampen.com
VAN KAMPEN RESERVE FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Investment Adviser
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Distributor
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Reserve Fund
Custodian
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street, PO Box 1713
Boston, MA 02110
Attn: Van Kampen Reserve Fund
Legal Counsel
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Auditors
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
22
A Statement of Additional Information, which
contains more details about the Fund, is
incorporated by reference in its entirety into
this Prospectus.
You will find additional information about the Fund
in its annual and semiannual reports to shareholders.
You can ask questions or obtain a free copy of the Fund's
reports or its Statement of Additional Information by calling (800) 341-2911.
Telecommunications Device for the Deaf users may call (800) 421-2833. A free
copy of the Fund's reports can also be ordered from our web site at
www.vankampen.com.
Information about the Fund, including its reports and Statement of Additional
Information, has been filed with the Securities and Exchange Commission (SEC).
It can be reviewed and copied at the SEC's Public Reference Room in Washington,
DC or on the EDGAR database on the SEC's internet site (http://www.sec.gov).
Information on the operation of the SEC's Public Reference Room may be obtained
by calling the SEC at 1-202-942-8090. You can also request copies of these
materials upon payment of a duplicating fee, by electronic request at the SEC's
e-mail address (publicinfo@sec.gov) or by writing the Public Reference section
of the SEC, Washington, DC 20549-0102.
SEPTEMBER 28, 2001
PROSPECTUS
Van Kampen
Reserve Fund
[VAN KAMPEN INVESTMENTS LOGO]
RES PRO 9/01
65138
The Fund's Investment Company
Act File No. is 811-2482.
23
STATEMENT OF ADDITIONAL INFORMATION
VAN KAMPEN RESERVE FUND
Van Kampen Reserve Fund's (the "Fund") investment objective is to seek
protection of capital and high current income. The Fund's investment adviser
seeks to achieve the Fund's investment objective by investing in a portfolio of
U.S. dollar-denominated money-market securities.
The Fund is organized as a diversified series of the Van Kampen Reserve
Fund, an open-end, management investment company (the "Trust").
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information should be read in conjunction with the
Fund's prospectus (the "Prospectus") dated as of the same date as this Statement
of Additional Information. This Statement of Additional Information does not
include all the information that a prospective investor should consider before
purchasing shares of the Fund. Investors should obtain and read the Prospectus
prior to purchasing shares of the Fund. A Prospectus may be obtained without
charge by writing or calling Van Kampen Funds Inc. at 1 Parkview Plaza, PO Box
5555, Oakbrook Terrace, Illinois 60181-5555 or (800) 341-2911 (or (800) 421-2833
for the hearing impaired).
---------------------------------------------
TABLE OF CONTENTS
---------------------------------------------
Page
----
General Information......................................... B-2
Investment Objective, Policies and Risks.................... B-4
Investment Restrictions..................................... B-7
Description of Securities Ratings........................... B-10
Trustees and Officers....................................... B-14
Investment Advisory Agreement............................... B-25
Other Agreements............................................ B-26
Distribution and Service.................................... B-26
Transfer Agent.............................................. B-29
Portfolio Transactions and Brokerage Allocation............. B-29
Shareholder Services........................................ B-31
Redemption of Shares........................................ B-33
Waiver of Class B and Class C Contingent Deferred Sales
Charges................................................... B-34
Taxation.................................................... B-36
Yield Information........................................... B-40
Other Information........................................... B-42
Report of Independent Auditors.............................. F-1
Financial Statements........................................ F-2
Notes to Financial Statements............................... F-11
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED SEPTEMBER 28, 2001.
RES SAI 9/01
24
GENERAL INFORMATION
The Fund was originally incorporated in Maryland on March 28, 1974 under
the name American Capital Reserve Fund, Inc. As of July 31, 1995, the Fund was
reorganized as a series of the Trust under the name Van Kampen American Capital
Reserve Fund. The Trust is a business trust organized under the laws of the
State of Delaware. On July 14, 1998, the Fund and the Trust adopted their
present names.
Van Kampen Asset Management Inc. (the "Adviser" or "Asset Management"), Van
Kampen Funds Inc. (the "Distributor") and Van Kampen Investor Services Inc.
("Investor Services") are wholly owned subsidiaries of Van Kampen Investments
Inc. ("Van Kampen Investments"), which is an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co. ("Morgan Stanley"). The principal office of the
Trust, the Fund, the Adviser, the Distributor and Van Kampen Investments is
located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555. The
principal office of Investor Services is located at 7501 Tiffany Springs
Parkway, Kansas City, Missouri 64153.
Morgan Stanley is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
The authorized capitalization of the Trust consists of an unlimited number
of shares of beneficial interest, par value $0.01 per share, which can be
divided into series, such as the Fund, and further subdivided into classes of
each series. Each share represents an equal proportionate interest in the assets
of the series with each other share in such series and no interest in any other
series. No series is subject to the liabilities of any other series. The
Declaration of Trust provides that shareholders are not liable for any
liabilities of the Trust or any of its series, requires inclusion of a clause to
that effect in every agreement entered into by the Trust or any of its series
and indemnifies shareholders against any such liability.
The Fund currently offers three classes of shares, designated as Class A
Shares, Class B Shares and Class C Shares. Other classes may be established from
time to time in accordance with the provisions of the Declaration of Trust. Each
class of shares of the Fund generally is identical in all respects except that
each class of shares is subject to its own sales charge schedule and its own
distribution expenses. Each class of shares also has exclusive voting rights
with respect to its distribution fee.
Shares of the Trust entitle their holders to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series and separate votes are taken by each class of a series on matters
affecting an individual class of such series. For example, a change in
investment policy for a series would be voted upon by shareholders of only the
series involved and a change in the distribution fee for a class of a series
would be voted upon by shareholders of only the class of such series involved.
Except as otherwise described in the Prospectus or herein, shares do not have
cumulative voting rights, preemptive rights or any conversion, subscription or
exchange rights.
The Fund does not contemplate holding regular meetings of shareholders to
elect Trustees or otherwise. However, the holders of 10% or more of the
outstanding shares may by written request require a meeting to consider the
removal of Trustees by a vote of a majority of the shares then outstanding cast
in person or by proxy at such meeting. The
B-2
25
Fund will assist such holders in communicating with other shareholders of the
Fund to the extent required by the Investment Company Act of 1940, as amended
(the "1940 Act"), or rules or regulations promulgated by the Securities and
Exchange Commission ("SEC").
In the event of liquidation, each of the shares of the Fund is entitled to
its portion of all of the Fund's net assets after all debts and expenses of the
Fund have been paid. Since Class B Shares and Class C Shares have higher
distribution fees and transfer agency costs, the liquidation proceeds to holders
of Class B Shares and Class C Shares are likely to be less than the liquidation
proceeds to holders of Class A Shares.
The Trustees may amend the Declaration of Trust (including with respect to
any series) in any manner without shareholder approval, except that the Trustees
may not adopt any amendment adversely affecting the rights of shareholders of
any series without approval by a majority of the shares of each affected series
outstanding and entitled to vote (or such higher vote as may be required by the
1940 Act or other applicable law) and except that the Trustees cannot amend the
Declaration of Trust to impose any liability on shareholders, make any
assessment on shares or impose liabilities on the Trustees without approval from
each affected shareholder or Trustee, as the case may be.
Statements contained in this Statement of Additional Information as to the
contents of any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
this Statement of Additional Information forms a part, each such statement being
qualified in all respects by such reference.
B-3
26
As of September 10, 2001, no person was known by the Fund to own
beneficially or to hold of record 5% or more of the outstanding Class A Shares,
Class B Shares or Class C Shares of the Fund except as follows:
NAME AND ADDRESS NUMBER OF
OF RECORD HOLDER CLASS OF SHARES SHARES HELD PERCENT OF CLASS
---------------- --------------- ----------- ----------------
Bear Stearns Securities Corp. B 68,699 7%
1 Metrotech Center North
Brooklyn, NY 11201
Emma Ericson Trust B 63,101 6%
2280 S. Via Mariposa W
Laguna Hills, CA 92653
Salomon Smith Barney Inc. B 51,943 5%
333 West 34th St -- 3rd Floor
New York, NY 10001-2483
Dean Witter Reynolds B 46,995,460 13%
5 World Trade Center -- FL 6
New York, NY 10048-0205
Carol N. Carvalho C 42,102 57%
33 Primrose Lane
Roosevelt, NY 11575-1008
Dean Witter Reynolds C 28,790 39%
5 World Trade Center -- FL 6
New York, NY 10048-0205
Dean Witter Reynolds C 5,953,017 10%
5 World Trade Center -- FL 6
New York, NY 10048-0205
Van Kampen Trust Company acts as custodian for certain employee benefit
plans and individual retirement accounts.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The following disclosure supplements the disclosure set forth under the
same caption in the Prospectus and does not, standing alone, present a complete
or accurate explanation of the matters disclosed. Readers must refer also to
this caption in the Prospectus for a complete presentation of the matters
disclosed below.
MONEY-MARKET SECURITIES
The Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Fund uses the amortized cost method of
valuing the Fund's securities pursuant to Rule 2a-7 under the 1940 Act, certain
requirements of which are summarized below.
In accordance with Rule 2a-7, the Fund is required to (i) maintain a
dollar-weighted average portfolio maturity of 90 days or less, (ii) purchase
only instruments having remaining maturities of 13 months or less and (iii)
invest only in U.S. dollar denominated securities determined in accordance with
procedures established by the Trustees to present
B-4
27
minimal credit risks. Additionally, securities purchased for investment must be
rated in one of the two highest short-term rating categories for debt
obligations by any two nationally recognized statistical rating organizations
("NRSROs") (or any one NRSRO if the instrument was rated by only one such
organization) or, if unrated, are of comparable quality as determined in
accordance with procedures established by the Trustees.
In addition, the Fund will not invest more than 5% of its total assets in
the securities (including the securities collateralizing a repurchase agreement)
of a single issuer, except that (i) the Fund may invest up to 25% of its total
assets in the "first tier securities" of a single issuer for a period of up to
three business days in certain limited circumstances, (ii) the Fund may invest
in obligations issued or guaranteed by the U.S. government without any such
limitation, and (iii) the Fund may invest, with limitations, more than 5% of its
total assets in securities subject to a guarantee issued by a non-controlled
person. First tier securities are those that have been rated in the highest
rating category for short-term obligations by at least two NRSROs (or one NRSRO
if the instrument was rated by only one such organization), and unrated
securities determined by the Fund's Board of Trustees to be comparable to those
rated in the highest category. The Fund will be limited to 5% of the Fund's
total assets for other permitted investments not in the first tier ("second tier
securities"), with the investment in any one such issuer being limited to no
more than the greater of 1% of the Fund's total assets or $1,000,000. As to each
security, these percentages are measured at the time the Fund purchases the
security.
If a security's rating is downgraded, the Adviser and/or the Fund's Board
of Trustees may have to reassess the security's credit risk. If a security has
ceased to be a first tier security, the Adviser will promptly reassess whether
the security continues to present minimal credit risk. If the Adviser becomes
aware that any NRSRO has downgraded its rating of a second tier security or
rated previously unrated security below its second highest rating category, the
Fund's Board of Trustees shall promptly reassess whether the security presents
minimal credit risk and whether it is in the best interests of the Fund to
dispose of it. If the Fund disposes of the security within five days of the
Adviser learning of the downgrade, the Adviser will provide the Board with
subsequent notice of such downgrade. If a security is in default, ceases to be a
security permitted for investment, is determined no longer to present minimal
credit risks or if an event of insolvency as defined in Rule 2a-7 occurs, the
Fund must dispose of the security as soon as practicable unless the Fund's Board
of Trustees determines it would be in the best interests of the Fund not to
dispose of 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 fully collateralized by the underlying securities
and may be considered to be loans under the 1940 Act. The Fund makes payment for
such securities only upon physical delivery or evidence of book entry transfer
to the account of a custodian or bank acting as agent. The seller under a
repurchase agreement is required to maintain the value of the underlying
securities marked-to-market daily at not less than the repurchase price. The
underlying securities must be of a type in which the Fund may invest (normally
securities of the U.S. government, or its agencies and instrumentalities),
except that the underlying securities may have maturity dates exceeding one
year. The Fund may enter into repurchase agreements with broker-dealers, banks
and other financial
B-5
28
institutions deemed to be creditworthy by the Adviser under guidelines approved
by the Fund's Board of Trustees. The Fund will not invest in repurchase
agreements maturing in more than seven days if any such investment, together
with any other illiquid securities held by the Fund, would exceed the Fund's
limitation on illiquid securities described herein. The Fund does not bear the
risk of a decline in value of the underlying security unless the seller defaults
under its repurchase obligation. In the event of the bankruptcy or other default
of a seller of a repurchase agreement, the Fund could experience both delays in
liquidating the underlying securities and losses including: (a) possible decline
in the value of the underlying security during the period while the Fund seeks
to enforce its rights thereto; (b) possible lack of access to income on the
underlying security during this period; and (c) expenses of enforcing its
rights.
For the purpose of investing in repurchase agreements, the Adviser may
aggregate the cash that certain funds advised or subadvised by the Adviser or
certain of its affiliates would otherwise invest separately into a joint
account. The cash in the joint account is then invested in repurchase agreements
and the funds that contributed to the joint account share pro rata in the net
revenue generated. The Adviser believes that the joint account produces
efficiencies and economies of scale that may contribute to reduced transaction
costs, higher returns, higher quality investments and greater diversity of
investments for the Fund than would be available to the Fund investing
separately. The manner in which the joint account is managed is subject to
conditions set forth in an exemptive order from the SEC permitting this
practice, which conditions are designed to ensure the fair administration of the
joint account and to protect the amounts in that account.
ILLIQUID SECURITIES
The Fund may invest up to 10% of its net assets in illiquid securities,
which includes securities that are not readily marketable, repurchase agreements
which have a maturity of longer than seven days, and generally includes
securities that are restricted from sale to the public without registration
under the Securities Act of 1933, as amended (the "1933 Act"). The sale of such
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of liquid
securities trading on national securities exchanges or in the over-the-counter
markets. Restricted securities are often purchased at a discount from the market
price of unrestricted securities of the same issuer reflecting the fact that
such securities may not be readily marketable without some time delay.
Investments in securities for which market quotations are not readily available
are valued at fair value as determined in good faith by the Adviser in
accordance with procedures approved by the Fund's Board of Trustees. Ordinarily,
the Fund would invest in restricted securities only when it receives the
issuer's commitment to register the securities without expense to the Fund.
However, registration and underwriting expenses (which typically range from 7%
to 15% of the gross proceeds of the securities sold) may be paid by the Fund.
Restricted securities which can be offered and sold to qualified institutional
buyers under Rule 144A under the 1933 Act ("144A Securities") and are determined
to be liquid under guidelines adopted by and subject to the supervision of the
Fund's Board of Trustees are not subject to the limitation on illiquid
securities. Such 144A Securities are subject to monitoring and may become
illiquid to the extent qualified institutional buyers become, for a time,
uninterested in purchasing such securities. Factors used to determine whether
144A Securities are liquid include, among other things, a security's trading
history, the availability of reliable pricing
B-6
29
information, the number of dealers making quotes or making a market in such
security and the number of potential purchasers in the market for such security.
For purposes hereof, investments by the Fund in securities of other investment
companies will not be considered investments in restricted securities to the
extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the
rules and regulations promulgated by the SEC under the 1940 Act, as amended from
time to time, or (iii) an exemption or other relief (such as "no action" letters
issued by the staff of the SEC interpreting or providing guidance on the 1940
Act or regulations thereunder) from the provisions of the 1940 Act, as amended
from time to time.
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 not be changed without shareholder approval by the vote of a majority
of its outstanding voting securities, which is defined by the 1940 Act as the
lesser of (i) 67% or more of the Fund's voting securities present at a meeting,
if the holders of more than 50% of the Fund's outstanding voting securities are
present or represented by proxy; or (ii) more than 50% of the Fund's outstanding
voting securities. The percentage limitations contained in the restrictions and
policies set forth herein apply at the time of purchase of securities. With
respect to the limitations on illiquid securities and borrowings, the percentage
limitations apply at the time of purchase and on an ongoing basis. These
restrictions provide that the Fund shall not:
1. Purchase any security which matures more than two years from the date
of purchase. As set forth under "Investment Objective, Policies and
Risks" in the Prospectus, the Fund's operating policy is not to
purchase any security having a remaining maturity of more than 13
months.
2. Purchase any security other than (a) obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities; (b) bank
time deposits,
B-7
30
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 S & P or
Prime-1 and Prime-2 by Moody's; (c) instruments secured by a bank
obligation described in item 2(b); (d) commercial paper if rated A by
S & P's or Prime by Moody's, or if not rated, issued by a company
having an outstanding debt issue rated at least A by S & P's or Moody's
(see "Description of Securities Ratings" for an explanation of these
ratings); and (e) repurchase agreements collateralized by the debt
securities described above.
3. Issue any senior security, although the Fund may borrow as set forth
under item 14 below.
4. Purchase or sell real estate; although the Fund may purchase securities
issued by companies, including real estate investment trusts, which
invest in real estate or interest therein.
5. Purchase securities on margin, make short sales of securities or
maintain a short position.
6. Purchase or sell commodities or commodity contracts, or invest in oil,
gas or mineral exploration or development programs.
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, as
amended from time to time.
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, as amended from
time to time.
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 "Investment Objective, Policies
and Risks -- 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, as amended from time to time.
B-8
31
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, as amended (the "1933
Act").
12. Invest in warrants, or write, purchase or sell puts, calls, straddles,
spreads or combinations thereof.
13. Purchase or retain securities of any issuer if those officers and
directors of the Fund or its investment adviser who own beneficially
more than 0.50% of the securities of such issuer, together own more
than 5% of the securities of such issuer.
14. Borrow money, except from banks for temporary or emergency purposes and
then in amounts not exceeding 10% of the value of the Fund's total net
assets; or mortgage, pledge, or hypothecate any assets except in
connection with any such borrowing and in amounts not exceeding the
lesser of the dollar amount borrowed or 5% of the value of the Fund's
assets at the time of such borrowing (the Fund will not borrow for
leveraging or investment but only to meet redemption requests which
might otherwise require undue dispositions of portfolio securities).
15. Lend money, except through the purchase or holding of the types of debt
securities in which the Fund may invest.
16. With respect to 75% of its assets, purchase securities if the purchase
would cause the Fund, at that time, to have more than 5% of the value
of its total assets invested in the securities of any one issuer
(except obligations of the U.S. government, its agencies or
instrumentalities and repurchase agreements fully collateralized
thereby).
17. Invest in the securities of any issuer, if immediately thereafter, the
Fund would own more than 10% of the total value of all outstanding
securities of such issuer, except that the Fund may purchase securities
of other investment companies to the extent permitted by (i) the 1940
Act, as amended from time to time, (ii) the rules and regulations
promulgated by the SEC under the 1940 Act, as amended from time to
time, or (iii) an exemption or other relief from the provisions of the
1940 Act, as amended from time to time.
18. Invest more than 5% of its assets in companies having a record together
with predecessors, of less than three years continuous operation.
19. Invest more than 25% of the value of its total assets in securities of
issuers in any particular industry (except obligations of the U.S.
government and of domestic branches of U.S. banks).
B-9
32
DESCRIPTION OF SECURITIES RATINGS
Below is a description of the two highest rating categories for short-term
debt obligations and long-term debt obligations by the "nationally recognized
statistical rating organizations." The ratings descriptions are based on
information supplied by the ratings organizations to subscribers.
SHORT-TERM DEBT RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's"): The following rating
designations for commercial paper (defined by Moody's as promissory obligations
not having original maturity in excess of one year), are judged by Moody's to be
investment grade, to indicate the relative repayment activity of rated issuers:
PRIME-1: Superior ability for repayment. Ability will often be
evidenced by many of the following characteristics: (a)
leading market positions in well-established industries;
(b) high rates of return on funds employed; (c)
conservative capitalization structure with moderate
reliance on debt and ample asset protection; (d) broad
margins in earnings coverage of fixed financial charges
and high internal cash generation; and (e)
well-established access to a range of financial markets
and assured sources of alternate liquidity.
PRIME-2: Strong ability for repayment. This will normally be
evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios,
while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample
alternate liquidity is maintained.
PRIME-3: Acceptable ability for repayment. The effect of industry
characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may
result in changes in the level of debt-protection
measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
The following rating designations for state and municipal notes, are judged
by Moody's to be investment grade, and indicate the relative repayment capacity
of rated issuers:
MIG-1/
VMIG-1: This designation denotes superior credit quality.
Excellent protection is afforded by established cash
flows, highly reliable liquidity support, or demonstrated
broad-based access to the market for refinancing.
MIG-2/
VMIG-2: This designation denotes strong credit quality. Margins
of protection are ample, although not so large as in the
preceding group.
B-10
33
MIG-3/
VMIG-3: This designation denotes acceptable credit quality.
Liquidity and cash-flow protection may be narrow, and
market access for refinancing is likely to be less
well-established.
STANDARD & POOR'S ("S&P"): The following ratings by S&P for commercial
paper (defined by S&P as debt having an original maturity of no more than 365
days) assess the likelihood of payment:
A-1: A short-term obligation rated "A-1" is rated in the
highest category by Standard & Poor's. The obligor's
capacity to meet its financial commitment on the
obligation is strong. Within this category, certain
obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely
strong.
A-2: A short-term obligation rated "A-2" is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity
to meet its financial commitment on the obligation is
satisfactory.
A-3: A short-term obligation rated "A-3" exhibits adequate
protection parameters. However, adverse economic
conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
The following ratings by S&P for state and municipal notes assess the
likelihood of payment:
SP-1: Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt
service is given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with
some vulnerability to adverse financial and economic
changes over the term of the notes.
FITCH IBCA, DUFF & PHELPS. Fitch's short-term debt credit ratings are
applied to the spectrum of corporate, structured, and public finance. They cover
sovereign (including supranational and subnational), financial, bank, insurance,
and other corporate entities and the securities they issue, as well as municipal
and other public finance entities, and securities backed by receivables or other
financial assets, and counterparties. When applied to an entity, these
short-term ratings assess its general creditworthiness on a senior basis. When
applied to specific issues and programs, these ratings take into account the
relative preferential position of the holder of the security and reflect the
terms, conditions, and covenants attaching to that security.
Short-term debt credit ratings assess the capacity to meet foreign currency
or local currency commitments. Both "foreign currency" and "local currency"
ratings are internationally comparable assessments. The local currency rating
measures the probability of payment within the relevant sovereign state's
currency and jurisdiction and therefore, unlike the foreign currency rating,
does not take account of the possibility of foreign exchange controls limiting
transfer into foreign currency.
B-11
34
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for US public finance securities, and thus
places greater emphasis on the liquidity necessary to meet the financial
commitments in a timely manner.
F-1: Highest credit quality, indicates the strongest capacity
for timely payment of financial commitments; may have an
added "+" to denote any exceptionally strong credit
feature.
F-2: Good credit quality. A satisfactory capacity for timely
payment of financial commitments, but the margin of
safety is not as great as in the case of the higher
ratings.
F-3: Fair credit quality. The capacity for timely payment of
financial commitments is adequate; however, near-term
adverse changes could result in a reduction to
non-investment grade.
Notes: "+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to short-term
ratings other than "F1".
LONG-TERM DEBT RATINGS
These ratings are relevant for securities purchased by the Fund with a
remaining maturity of 397 days or less, or for rating issuers of short-term
obligations. Bonds (including municipal bonds) are rated as follows:
MOODY'S INVESTORS SERVICE, INC.:
AAA: Judged to be the best quality. They carry the smallest
degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin, and principal
is secure. While the various protective elements are
likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong
positions of such issues.
AA: Judged to be of high quality by all standards. Together
with "Aaa" group they comprise what are generally known
as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large
as in "Aaa" securities or fluctuations of protective
elements may be of greater amplitude or there may be
other elements present which make the long-term risks
appear somewhat larger than in "Aaa" securities.
A: Possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered
adequate, but elements may be present which suggest a
susceptibility to impairment some time in the future.
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" and "A"
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its
B-12
35
generic rating category; the modifier "2" indicates a mid-range ranking; and the
modifier "3" indicates a ranking in the lower end of its generic rating
category.
STANDARD & POOR'S:
AAA: The highest rating assigned by S&P. Capacity to meet its
financial commitment on the obligation is extremely
strong.
AA: Differs from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A: Somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than
obligations in higher rated categories. Capacity to meet
its financial commitment on the obligation is still
strong.
FITCH IBCA, DUFF & PHELPS
AAA: Highest credit quality. "AAA" ratings denote the lowest
expectation of credit risk. They are assigned only in case
of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very high credit quality. "AA" ratings denote a very low
expectation of credit risk. They indicate very strong
capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable
events.
A: High credit quality. "A" ratings denote a low expectation
of credit risk. The capacity for timely payment of
financial commitments is considered strong. This capacity
may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case
for higher ratings.
BBB: Good credit quality. "BBB" ratings indicate that there is
currently a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered
adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this
capacity. This is the lowest investment-grade category.
B-13
36
TRUSTEES AND OFFICERS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees and the Fund's officers appointed by the Board of
Trustees. The tables below list the trustees and officers of the Fund and
executive officers of the Fund's investment adviser and their principal
occupations for the last five years and their affiliations, if any, with Van
Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment
Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset
Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Management
Inc., Van Kampen Advisors Inc., Van Kampen System Inc., Van Kampen Trust
Company, Van Kampen Exchange Corp. and Van Kampen Investor Services Inc.
("Investor Services"). Advisory Corp. and Asset Management sometimes are
referred to herein collectively as the "Advisers." For purposes hereof, the term
"Fund Complex" includes each of the open-end investment companies advised by the
Advisers (excluding Van Kampen Exchange Fund).
TRUSTEES
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
J. Miles Branagan......................... Private investor. Trustee/Director of each of
1632 Morning Mountain Road the funds in the Fund Complex. Co-founder,
Raleigh, NC 27614 and prior to August 1996, Chairman, Chief
Date of Birth: 07/14/32 Executive Officer and President, MDT
Age: 69 Corporation (now known as Getinge/Castle,
Inc., a subsidiary of Getinge Industrier AB),
a company which develops, manufactures,
markets and services medical and scientific
equipment.
Jerry D. Choate........................... Director of Amgen Inc., a biotechnological
53 Monarch Bay Drive company, and Director of Valero Energy
Dana Point, CA 92629 Corporation, an independent refining company.
Date of Birth: 09/16/38 Trustee/Director of each of the funds in the
Age: 63 Fund Complex. Prior to January 1999, Chairman
and Chief Executive Officer of the Allstate
Corporation ("Allstate") and Allstate
Insurance Company. Prior to January 1995,
President and Chief Executive Officer of
Allstate. Prior to August 1994, various
management positions at Allstate.
B-14
37
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
Linda Hutton Heagy........................ Managing Partner of Heidrick & Struggles, an
Sears Tower executive search firm. Trustee/Director of
233 South Wacker Drive each of the funds in the Fund Complex. Prior
Suite 7000 to 1997, Partner, Ray & Berndtson, Inc., an
Chicago, IL 60606 executive recruiting and management
Date of Birth: 06/03/48 consulting firm. Formerly, Executive Vice
Age: 53 President of ABN AMRO, N.A., a Dutch bank
holding company. Prior to 1992, Executive
Vice President of La Salle National Bank.
Trustee on the University of Chicago
Hospitals Board, Vice Chair of the Board of
The YMCA of Metropolitan Chicago and a member
of the Women's Board of the University of
Chicago. Prior to 1996, Trustee of The
International House Board, a fellowship and
housing organization for international
graduate students.
R. Craig Kennedy.......................... President and Director, German Marshall Fund
11 DuPont Circle, N.W of the United States, an independent U.S.
Washington, D.C. 20016 foundation created to deepen understanding,
Date of Birth: 02/29/52 promote collaboration and stimulate exchanges
Age: 49 of practical experience between Americans and
Europeans. Trustee/Director of each of the
funds in the Fund Complex. Formerly, advisor
to the Dennis Trading Group Inc., a managed
futures and option company that invests money
for individuals and institutions. Prior to
1992, President and Chief Executive Officer,
Director and member of the Investment
Committee of the Joyce Foundation, a private
foundation.
B-15
38
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
Mitchell M. Merin*........................ President and Chief Operating Officer of
1221 Avenue of the Americas Morgan Stanley Investment Management since
21st Floor December 1998. President and Director since
New York, NY 10020 April 1997 and Chief Executive Officer since
Date of Birth: 08/13/53 June 1998 of Morgan Stanley Dean Witter
Age: 48 Advisors Inc. and Morgan Stanley Dean Witter
Services Company Inc. Chairman, Chief
Executive Officer and Director of Morgan
Stanley Dean Witter Distributors Inc. since
June 1998. Chairman and Chief Executive
Officer since June 1998, and Director since
January 1998, of Morgan Stanley Dean Witter
Trust FSB. Director of various Morgan Stanley
subsidiaries. President of the Morgan Stanley
Funds since May 1999. Trustee/Director of
each of the funds in the Fund Complex.
Previously Chief Strategic Officer of Morgan
Stanley Dean Witter Advisors Inc. and Morgan
Stanley Dean Witter Services Company Inc. and
Executive Vice President of Morgan Stanley
Dean Witter Distributors Inc. April 1997-June
1998, Vice President of the Morgan Stanley
Dean Witter Funds May 1997-April 1999, and
Executive Vice President of Dean Witter,
Discover & Co. prior to May 1997.
Jack E. Nelson............................ President and owner, Nelson Investment
423 Country Club Drive Planning Services, Inc., a financial planning
Winter Park, FL 32789 company and registered investment adviser in
Date of Birth: 02/13/36 the State of Florida. President and owner,
Age: 65 Nelson Ivest Brokerage Services Inc., a
member of the National Association of
Securities Dealers, Inc. and Securities
Investors Protection Corp. Trustee/ Director
of each of the funds in the Fund Complex.
B-16
39
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
Richard F. Powers, III*................... Chairman, President, Chief Executive Officer,
1 Parkview Plaza Director and Managing Director of Van Kampen
P.O. Box 5555 Investments. Chairman, Director and Chief
Oakbrook Terrace, IL 60181-5555 Executive Officer of the Advisers, the
Date of Birth: 02/02/46 Distributor, Van Kampen Advisors Inc. and Van
Age: 55 Kampen Management Inc., since 1998. Managing
Director of the Advisers, the Distributor,
Van Kampen Advisors Inc. and Van Kampen
Management Inc., since July 2001. Director
and officer of certain other subsidiaries of
Van Kampen Investments. Chief Sales and
Marketing Officer of Morgan Stanley Dean
Witter Asset Management Inc. Trustee/
Director and President of each of the funds
in the Fund Complex. Trustee, President and
Chairman of the Board of other investment
companies advised by the Advisers and their
affiliates, and Chief Executive Officer of
Van Kampen Exchange Fund. Prior to May 1998,
Executive Vice President and Director of
Marketing at Morgan Stanley Dean Witter and
Director of Dean Witter Discover & Co. and
Dean Witter Realty. Prior to 1996, Director
of Dean Witter Reynolds Inc.
Phillip B. Rooney......................... President of ServiceMaster Management
One ServiceMaster Way Services, a network of quality service
Downers Grove, IL 60515 companies, since January 2001. Director of
Date of Birth: 07/08/44 Illinois Tool Works, Inc., a manufacturing
Age: 57 company, since 1990. Trustee of the
University of Notre Dame since 1993. Trustee/
Director of each of the funds in the Fund
Complex. Prior to 2001, Director of the Urban
Shopping Centers Inc., a retail management
company. Vice Chairman from April 1997 to
April 2000 and Director from 1994 to 2000 of
The ServiceMaster Company, a business and
consumer services Company. Prior to 1998,
Director of Stone Container Corp., a paper
manufacturing company. President and Chief
Executive Officer of Waste Management Inc.,
an environmental services company, from June
1996 through February 1997, and from November
1984 through June 1996 Mr. Rooney was
President and Chief Operating Officer of
Waste Management Inc.
B-17
40
PRINCIPAL OCCUPATIONS OR
NAME, ADDRESS AND AGE EMPLOYMENT IN PAST 5 YEARS
--------------------- --------------------------
Wayne W. Whalen*.......................... Partner in the law firm of Skadden, Arps,
333 West Wacker Drive Slate, Meagher & Flom (Illinois), legal
Chicago, IL 60606 counsel to the funds in the Fund Complex and
Date of Birth: 08/22/39 other investment companies advised by the
Age: 62 Advisers. Trustee/ Director of each of the
funds in the Fund Complex, and
Trustee/Managing General Partner of other
investment companies advised by the Advisers.
Suzanne H. Woolsey........................ Chief Operating Officer of the National
2101 Constitution Ave., N.W Academy of Sciences/National Research
Room 206 Council, an independent, federally chartered
Washington, D.C. 20418 policy institution, since 1993. Director of
Date of Birth: 12/27/41 Neurogen Corporation, a pharmaceutical
Age: 59 company, since January 1998. Director of the
German Marshall Fund of the United States,
Trustee of Colorado College, and Vice Chair
of the Board of the Council for Excellence in
Government. Trustee/Director of each of the
funds in the Fund Complex. Prior to 1993,
Executive Director of the Commission on
Behavioral and Social Sciences and Education
at the National Academy of Sciences/National
Research Council. From 1980 through 1989,
Partner of Coopers & Lybrand.
------------------------------------
*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 each of the funds in
the Fund Complex by reason of his firm currently acting as legal counsel to
each of the funds in the Fund Complex. Messrs. Merin and Powers are interested
persons of each of the funds in the Fund Complex and the Advisers by reason of
their positions with Morgan Stanley or its affiliates.
B-18
41
OFFICERS
Messrs. Santo, Reynoldson, Sullivan and Zimmerman are located at 1 Parkview
Plaza, Oakbrook Terrace, IL 60181-5555. Mr. Boyd is located at 2800 Post Oak
Blvd., Houston, TX 77056. Mr. Smith is located at Plaza Two, Jersey City, NJ
07311.
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
Stephen L. Boyd...................... Managing Director and Chief Investment Officer of
Date of Birth: 11/16/40 Van Kampen Investments, and Managing Director,
Executive Vice President and Chief President and Chief Operating Officer of the
Investment Officer Advisers, Van Kampen Management Inc. and Van
Age: 60 Kampen Advisors Inc. Executive Vice President and
Chief Investment Officer of each of the funds in
the Fund Complex and certain other investment
companies advised by the Advisers or their
affiliates. Prior to December 2000, Executive
Vice President and Chief Investment Officer of
Van Kampen Investments, and President and Chief
Operating Officer of the Advisers. Prior to April
2000, Executive Vice President and Chief
Investment Officer for Equity Investments of the
Advisers. Prior to October 1998, Vice President
and Senior Portfolio Manager with AIM Capital
Management, Inc. Prior to February 1998, Senior
Vice President and Portfolio Manager of Van
Kampen American Capital Asset Management, Inc.,
Van Kampen American Capital Investment Advisory
Corp. and Van Kampen American Capital Management,
Inc.
B-19
42
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
A. Thomas Smith III.................. Managing Director and Director of Van Kampen
Date of Birth: 12/14/56 Investments, Director of the Advisers, Van Kampen
Vice President and Secretary Advisors Inc., Van Kampen Management Inc., the
Age: 44 Distributor, Investor Services and certain other
subsidiaries of Van Kampen Investments. Managing
Director and General Counsel -- Mutual Funds of
Morgan Stanley Investment Advisors, Inc. Vice
President and Secretary of each of the funds in
the Fund Complex and Vice President and
Secretary/Vice President, Principal Legal Officer
and Secretary of other investment companies
advised by the Advisers or their affiliates.
Prior to July 2001, Managing Director, General
Counsel, Secretary and Director of Van Kampen
Investments, the Advisers, Van Kampen Management
Inc., the Distributor, Investor Services, and
certain other subsidiaries of Van Kampen
Investments. Prior to December 2000, Executive
Vice President, General Counsel, Secretary and
Director of Van Kampen Investments, the Advisers,
Van Kampen Advisors Inc., Van Kampen Management
Inc., the Distributor, Investor Services and
certain other subsidiaries of Van Kampen
Investments. Prior to January 1999, Vice
President and Associate General Counsel to New
York Life Insurance Company ("New York Life"),
and prior to March 1997, Associate General
Counsel of New York Life. Prior to December 1993,
Assistant General Counsel of The Dreyfus
Corporation. Prior to August 1991, Senior
Associate, Willkie Farr & Gallagher. Prior to
January 1989, Staff Attorney at the Securities
and Exchange Commission, Division of Investment
Management, Office of Chief Counsel.
B-20
43
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
Michael H. Santo..................... Managing Director, Chief Operations Officer and
Date of Birth: 10/22/55 Director of Van Kampen Investments, Managing
Vice President Director, Chief Executive Officer and Director of
Age: 45 Investor Services, Managing Director, Chief
Operations and Technology Officer and Director of
the Advisers, the Distributor, Van Kampen
Advisors Inc. and Van Kampen Management Inc., and
serves as a Director or Officer of certain other
subsidiaries of Van Kampen Investments. Vice
President of each of the funds in the Fund
Complex and certain other investment companies
advised by the Advisers and their affiliates.
Prior to December 2000, Executive Vice President,
Chief Administrative Officer and Director of Van
Kampen Investments, the Advisers, the
Distributor, Van Kampen Advisors Inc., Van Kampen
Management Inc. and Investor Services. Prior to
1998, Senior Vice President and Senior Planning
Officer for Individual Asset Management of Morgan
Stanley Dean Witter and its predecessor since
1994.
John R. Reynoldson................... Executive Director of the Advisers, Van Kampen
Date of Birth: 05/15/53 Management Inc. and Van Kampen Advisors Inc. Vice
Vice President President of each of the funds in the Fund
Age: 48 Complex. Prior to July 2001, Principal and
Co-head of the Fixed Income Department of the
Advisers, Van Kampen Management Inc. and Van
Kampen Advisors Inc. Prior to December 2000,
Senior Vice President of the Advisers, Van Kampen
Management Inc. and Van Kampen Advisors Inc.
Prior to May 2000, he managed the investment
grade taxable group for the Advisers since July
1999. From July 1988 to June 1999, he managed the
government securities bond group for Asset
Management. Mr. Reynoldson has been with Asset
Management since April 1987.
John L. Sullivan..................... Executive Director of Van Kampen Investments, the
Date of Birth: 08/20/55 Advisers, Van Kampen Management Inc. and Van
Vice President, Chief Financial Kampen Advisors Inc. Vice President, Chief
Officer and Treasurer Financial Officer and Treasurer of each of the
Age: 46 funds in the Fund Complex and certain other
investment companies advised by the Advisers or
their affiliates.
B-21
44
NAME, AGE, POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES WITH FUND DURING PAST 5 YEARS
------------------------ ---------------------
John H. Zimmermann, III.............. Managing Director and Director of Van Kampen
Date of Birth: 11/25/57 Investments, and Managing Director, President and
Vice President Director of the Distributor. Vice President of
Age: 43 each of the funds in the Fund Complex. Prior to
December 2000, President of Van Kampen Insurance
Agency of Illinois Inc., and Senior Vice
President and Director of Van Kampen Investments.
From November 1992 to December 1997, Mr.
Zimmermann was Senior Vice President of the
Distributor.
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 63 operating funds in the Fund Complex. Each trustee/director who is not an
affiliated person of the Van Kampen Investments, the Advisers or the Distributor
(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 return on such deferred amounts. Deferring compensation has the
economic effect as if the Non-Affiliated Trustee reinvested his or her
compensation into the funds. Each fund in the Fund Complex provides a retirement
plan to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with
compensation after retirement, provided that certain eligibility requirements
are met as more fully described below.
The compensation of each Non-Affiliated Trustee includes an annual retainer
in an amount equal to $50,000 per calendar year, due in four quarterly
installments on the first business day of each quarter. Payment of the annual
retainer is allocated among the funds in the Fund Complex on the basis of the
relative net assets of each fund as of the last business day of the preceding
calendar quarter. The compensation of each Non-Affiliated Trustee includes a per
meeting fee from each fund in the Fund Complex in the amount of $200 per
quarterly or special meeting attended by the Non-Affiliated Trustee, due on the
date of the meeting, plus reasonable expenses incurred by the Non-Affiliated
Trustee in connection with his or her services as a trustee/director, provided
that no compensation will be paid in connection with certain telephonic special
meetings.
Under the deferred compensation plan, each Non-Affiliated Trustee generally
can elect to defer receipt of all or a portion of the compensation earned by
such Non-Affiliated Trustee until retirement. Amounts deferred are retained by
the Fund and earn a rate of return determined by reference to the return on the
common shares of such Fund or other funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund Complex. To
the extent permitted by the 1940 Act, the Fund may invest in securities of those
funds selected by the Non-Affiliated Trustees in order to match the deferred
compensation obligation. The deferred compensation plan is not funded and
obligations thereunder represent general unsecured claims against the general
assets of the Fund.
B-22
45
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.
Additional information regarding compensation and benefits for trustees is
set forth below for the periods described in the notes accompanying the table.
COMPENSATION TABLE
Fund Complex
-----------------------------------------------------------
Aggregate
Estimated
Aggregate Maximum
Pension or Annual Total
Aggregate Retirement Benefits from Compensation
Year First Compensation Benefits the Fund before
Appointed or before Accrued as Complex Deferral from
Elected to Deferral from Part of Upon Fund
Name(1) the Board the Trust(2) Expenses(3) Retirement(4) Complex(5)
------- ------------ ------------- ----------- ------------- -------------
J. Miles Branagan 1991 $2,149 $48,349 $60,000 $123,400
Jerry D. Choate 1999 2,149 17,925 60,000 123,400
Linda Hutton Heagy 1995 2,149 5,242 60,000 123,400
R. Craig Kennedy 1995 2,149 3,556 60,000 123,400
Jack E. Nelson 1995 2,149 24,881 60,000 123,400
Phillip B. Rooney 1997 2,149 8,458 60,000 123,400
Wayne W. Whalen 1995 2,149 17,005 60,000 123,400
Suzanne H. Woolsey 1999 2,149 11,238 60,000 123,400
------------------------------------
(1)Trustees not eligible for compensation are not included in the Compensation
Table. Fernando Sisto retired as a member of the Board of Trustees for the
Trust and other funds in the Fund Complex on December 31, 2000.
(2) The amounts shown in this column represent the aggregate compensation before
deferral with respect to the Fund's fiscal year ended May 31, 2001. The
following trustees deferred compensation from the Fund during the fiscal
year ended May 31, 2001: Mr. Branagan, $2,149; Mr. Choate, $2,149; Ms.
Heagy, $2,149; Mr. Kennedy, $1,612; Mr. Nelson, $2,149; Mr. Rooney, $2,149;
and Mr. Whalen, $2,149. Amounts deferred are retained by the Fund and earn a
rate of return determined by reference to either the return on the common
shares of the Fund or other funds in the Fund Complex as selected by the
respective Non-Affiliated Trustee, with the same economic effect as if such
Non-Affiliated Trustee had invested in one or more funds in the Fund
Complex. To the extent permitted by the 1940 Act, each fund may invest in
securities of those funds selected by the Non-Affiliated Trustees in order
to match the deferred compensation obligation. The cumulative deferred
compensation
B-23
46
(including interest) accrued with respect to each trustee, including former
trustees, from the Fund as of the Fund's fiscal year ended May 31, 2001 is
as follows: Mr. Branagan, $12,737; Mr. Choate, $3,737; Ms. Heagy, $7,899;
Mr. Kennedy, $15,732; Mr. Miller, $6,159; Mr. Nelson, $26,660; Mr. Rees,
$29,338; Mr. Robinson, $8,936; Mr. Rooney, $9,181; Mr. Sisto, $18,327 and
Mr. Whalen, $16,740. The deferred compensation plan is described above the
Compensation Table.
(3) The amounts shown in this column represent the sum of the retirement
benefits accrued by the operating investment companies in the Fund Complex
for each of the trustees for the funds' respective fiscal years ended in
2000. The retirement plan is described above the Compensation Table.
(4) For each trustee, this is the sum of the estimated maximum annual benefits
payable by the funds in the Fund Complex for each year of the 10-year period
commencing in the year of such trustee's anticipated retirement. The
retirement plan is described above the Compensation Table.
(5) The amounts shown in this column represent the aggregate compensation paid
by all of the funds in the Fund Complex as of December 31, 2000 before
deferral by the trustees under the deferred compensation plan. Because the
funds in the Fund Complex have different fiscal year ends, the amounts shown
in this column are presented on a calendar year basis. Certain trustees
deferred all or a portion of their aggregate compensation from the Fund
Complex during the calendar year ended December 31, 2000. The deferred
compensation earns a rate of return determined by reference to the return on
the shares of the funds in the Fund Complex as selected by the respective
Non-Affiliated Trustee, with the same economic effect as if such Non-
Affiliated Trustee had invested in one or more funds in the Fund Complex. To
the extent permitted by the 1940 Act, the Fund may invest in securities of
those investment companies selected by the Non-Affiliated Trustees in order
to match the deferred compensation obligation. The Advisers and their
affiliates also serve as investment adviser for other investment companies;
however, with the exception of Mr. Whalen, the Non-Affiliated Trustees were
not trustees of such investment companies. Combining the Fund Complex with
other investment companies advised by the Advisers and their affiliates, Mr.
Whalen earned Total Compensation of $283,900 during the calendar year ended
December 31, 2000.
The Fund, the Adviser and the Distributor have adopted a Code of Ethics
(collectively, the "Code of Ethics") that sets forth general and specific
standards relating to the securities trading activities of their employees. The
Code of Ethics does not prohibit employees from acquiring securities that may be
purchased or held by the Fund, but is intended to ensure that all employees
conduct their personal transactions in a manner that does not interfere with the
portfolio transactions of the Fund or other Van Kampen funds, or that such
employees take unfair advantage of their relationship with the Fund. Among other
things, the Code of Ethics prohibits certain types of transactions absent prior
approval, imposes various trading restrictions (such as time periods during
which personal transactions may or may not be made) and requires quarterly
reporting of securities transactions and other matters. All reportable
securities transactions and other required reports are to be reviewed by
appropriate personnel for compliance with the Code of Ethics. Additional
restrictions apply to portfolio managers, traders, research analysts and others
who may have access to nonpublic information about the trading activities of the
B-24
47
Fund or other Van Kampen funds or who otherwise are involved in the investment
advisory process. Exceptions to these and other provisions of the Code of Ethics
may be granted in particular circumstances after review by appropriate
personnel.
As of September 10, 2001, the trustees and officers of the Fund as a group
owned less than 1% of the shares of the Fund.
INVESTMENT ADVISORY AGREEMENT
The Fund and the Adviser are parties to an investment advisory agreement
(the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the
Adviser to manage the investment of the Fund's assets, including the placing of
orders for the purchase and sale of portfolio securities. The Adviser obtains
and evaluates economic, statistical and financial information to formulate
strategy and implement the Fund's investment objective. The Adviser also
furnishes offices, necessary facilities and equipment, provides administrative
services to the Fund, renders periodic reports to the Fund's Board of Trustees
and permits its officers and employees to serve without compensation as trustees
of the Trust or officers of the Fund if elected to such positions. The Fund,
however, bears the costs of its day-to-day operations, including service fees,
distribution fees, custodian fees, legal and independent accountant fees, the
costs of reports and proxies to shareholders, compensation of trustees of the
Trust (other than those who are affiliated persons of the Adviser, Distributor
or Van Kampen Investments) and all other ordinary business expenses not
specifically assumed by the Adviser. The Advisory Agreement also provides that
the Adviser shall not be liable to the Fund for any actions or omissions if it
acted without willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations.
The Advisory Agreement also provides that, in the event the expenses of the
Fund for any fiscal year exceed 1% of the Fund's average daily net assets, the
compensation due the Adviser will be reduced by the amount of such excess and
that, if a reduction in and refund of the advisory fee is insufficient, the
Adviser will pay the Fund monthly an amount sufficient to make up the
deficiency, subject to readjustment during the fiscal year. Ordinary business
expenses include the investment advisory fee and other operating costs paid by
the Fund 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 may be continued from year to year if specifically
approved at least annually (a)(i) by the Fund's Board of Trustees or (ii) by a
vote of a majority of the Fund's outstanding voting securities and (b) by a 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, 2001, 2000 and 1999, the Adviser
received approximately $3,088,600, $3,651,500 and $3,246,800, respectively, in
advisory fees from the Fund.
B-25
48
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 pays all costs and expenses related to such services, including all
salary and related benefits of accounting personnel, as well as the overhead and
expenses of office space and the equipment necessary to render such services.
The Fund shares together with the other Van Kampen funds in the cost of
providing such services with 25% of such costs shared proportionately based on
the respective number of classes of securities issued per fund and the remaining
75% of such costs based proportionately on the respective net assets per fund.
During the fiscal years ended May 31, 2001, 2000 and 1999, Advisory Corp.
received approximately $74,700, $38,200 and $227,500, respectively, in
accounting services fees from the Fund.
DISTRIBUTION AND SERVICE
The Distributor acts as the principal underwriter of the Fund's shares
pursuant to a written agreement (the "Distribution and Service Agreement"). The
Distributor has the exclusive right to distribute shares of the Fund through
authorized dealers on a continuous basis. The Distributor's obligation is an
agency or "best efforts" arrangement under which the Distributor is required to
take and pay for only such shares of the Fund as may be sold to the public. The
Distributor is not obligated to sell any stated number of shares. The
Distributor bears the cost of printing (but not typesetting) prospectuses used
in connection with this offering and certain other costs including the cost of
supplemental sales literature and advertising. The Distribution and Service
Agreement is renewable from year to year if approved (a)(i) by the Fund's Board
of Trustees or (ii) by a vote of a majority of the Fund's outstanding voting
securities and (b) by a vote of a majority of Trustees who are not parties to
the Distribution and Service Agreement or interested persons of any party, by
votes cast in person at a meeting called for such purpose. The Distribution and
Service Agreement provides that it will terminate if assigned, and that it may
be terminated without penalty by either party on 90 days' written notice.
With respect to sales of Class B Shares and Class C Shares of the Fund, a
commission or transaction fee generally will be paid by the Distributor at the
time of purchase directly out of the Distributor's assets (and not out of the
Fund's assets) to authorized dealers who initiate and are responsible for such
purchases computed based on a percentage of the dollar value of such shares sold
of 4.00% on Class B Shares and 1.00% on Class C Shares.
Proceeds from any contingent deferred sales charge and any distribution
fees on Class B Shares and Class C Shares of the Fund are paid to the
Distributor and are used by the Distributor to defray its distribution related
expenses in connection with the sale of the Fund's shares, such as the payment
to authorized dealers for selling such shares. With respect to Class C Shares,
the authorized dealers generally are paid the ongoing commission and transaction
fees of up to 0.75% of the average daily net assets of the Fund's Class C Shares
annually commencing in the second year after purchase.
B-26
49
In addition to reallowances or commissions described above, the Distributor
may from time to time implement programs under which an authorized dealer's
sales force may be eligible to win nominal awards for certain sales efforts or
under which the Distributor will reallow to any authorized dealer that sponsors
sales contests or recognition programs conforming to criteria established by the
Distributor, or participates in sales programs sponsored by the Distributor, an
amount not exceeding the total applicable sales charges on the sales generated
by the authorized dealer at the public offering price during such programs.
Also, the Distributor in its discretion may from time to time, pursuant to
objective criteria established by the Distributor, pay fees to, and sponsor
business seminars for, qualifying authorized dealers for certain services or
activities which are primarily intended to result in sales of shares of the Fund
or other Van Kampen funds. Fees may include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited registered
representatives for meetings or seminars of a business nature. In some instances
additional compensation or promotional incentives may be offered to brokers,
dealers or financial intermediaries that have sold or may sell significant
amounts of shares during specified periods of time. The Distributor may provide
additional compensation to Edward D. Jones & Co. or an affiliate thereof based
on a combination of its quarterly sales of shares of the Fund and other Van
Kampen Funds and increases in net assets of the Fund and other Van Kampen Funds
over specified thresholds. 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.
The Fund has adopted a distribution plan (the "Distribution Plan") with
respect to each of its Class A Shares, Class B Shares and Class C Shares
pursuant to Rule 12b-1 under the 1940 Act. The Fund also adopted a service plan
(the "Service Plan") with respect to each such class of its shares. The
Distribution Plan and the Service Plan sometimes are referred to herein as the
"Plans". The Plans provide that the Fund may spend a portion of the Fund's
average daily net assets attributable to each class of shares in connection with
distribution of the respective class of shares and in connection with the
provision of ongoing services to shareholders of such class, respectively. The
Distribution Plan and the Service Plan are being implemented through the
Distribution and Service Agreement with the Distributor of each class of the
Fund's shares, sub-agreements between the Distributor and members of the NASD
who are acting as securities dealers and NASD members or eligible non-members
who are acting as brokers or agents and similar agreements between the Fund and
financial intermediaries who are acting as brokers (collectively, "Selling
Agreements") that may provide for their customers or clients certain services or
assistance, which may include, but not be limited to, processing purchase and
redemption transactions, establishing and maintaining shareholder accounts
regarding the Fund, and such other services as may be agreed to from time to
time and as may be permitted by applicable statute, rule or regulation. Brokers,
dealers and financial intermediaries that have entered into sub-agreements with
the Distributor and sell shares of the Fund are referred to herein as "financial
intermediaries."
Certain financial intermediaries may be prohibited under law from providing
certain underwriting or distribution services. If a financial intermediary were
prohibited from acting in any capacity or providing any of the described
services, the Distributor would
B-27
50
consider what action, if any, would be appropriate. The Distributor does not
believe that termination of a relationship with a financial intermediary would
result in any material adverse consequences to the Fund.
The Distributor must submit quarterly reports to the Board of Trustees of
the Trust, of which the Fund is a series, setting forth separately by class of
shares all amounts paid under the Distribution Plan and the purposes for which
such expenditures were made, together with such other information as from time
to time is reasonably requested by the Trustees. The Plans provide that they
will continue in full force and effect from year to year so long as such
continuance is specifically approved by a vote of the Trustees, and also by a
vote of the disinterested Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each of the Plans may not be amended to increase
materially the amount to be spent for the services described therein with
respect to any class of shares without approval by a vote of a majority of the
outstanding voting shares of such class, and all material amendments to either
of the Plans must be approved by the Trustees and also by the disinterested
Trustees. Each of the Plans may be terminated with respect to any class of
shares at any time by a vote of a majority of the disinterested Trustees or by a
vote of a majority of the outstanding voting shares of such class.
For Class A Shares in any given year in which the Plans are in effect, the
Plans generally provide for the Fund to pay the Distributor the lesser of (i)
the amount of the Distributor's actual expenses incurred during such year less
any deferred sales charges (if any) it received during such year (the "actual
net expenses") or (ii) the distribution and service fees at the rates specified
in the Prospectus (the "plan fees"). Therefore, to the extent the Distributor's
actual net expenses in a given year are less than the plan fees for such year,
the Fund only pays the actual net expenses. Alternatively, to the extent the
Distributor's actual net expenses in a given year exceed the plan fees for such
year, the Fund only pays the plan fees for such year. For Class A Shares, there
is no carryover of any unreimbursed actual net expenses to succeeding years.
The Plans for Class B Shares and Class C Shares are similar to the Plans
for Class A Shares, except that any actual net expenses which exceed plan fees
for a given year are carried forward and are eligible for payment in future
years by the Fund so long as the Plans remain in effect. Thus, for each of the
Class B Shares and Class C Shares, in any given year in which the Plans are in
effect, the Plans generally provide for the Fund to pay the Distributor the
lesser of (i) the applicable amount of the Distributor's actual net expenses
incurred during such year for such class of shares plus any actual net expenses
from prior years that are still unpaid by the Fund for such class of shares or
(ii) the applicable plan fees for such class of shares. Except as may be
mandated by applicable law, the Fund does not impose any limit with respect to
the number of years into the future that such unreimbursed actual net expenses
may be carried forward (on a Fund level basis). These unreimbursed actual net
expenses may or may not be recovered through plan fees or contingent deferred
sales charges in future years.
Because of fluctuations in net asset value, the plan fees 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.
B-28
51
As of May 31, 2001, there were $3,256,945 and $93,468 of unreimbursed
distribution-related expenses with respect to Class B Shares and Class C Shares,
respectively, representing 0.96% and 0.15% of the Fund's net assets attributable
to Class B Shares and Class C Shares, respectively. If the Plans were terminated
or not continued, the Fund would not be contractually obligated to pay the
Distributor for any expenses not previously reimbursed by the Fund or recovered
through contingent deferred sales charges.
For the fiscal year ended May 31, 2001, the Fund's aggregate expenses paid
under the Plans for Class A Shares were $707,944 or 0.15% of the Class A Shares'
average daily net assets. For the fiscal year ended May 31, 2001, the Fund's
aggregate expenses paid under the Plans for Class B Shares were $1,900,810 or
0.90% of the Class B Shares' average daily net assets. Such expenses were paid
to reimburse the Distributor for the following payments: $1,529,200 for
commissions and transaction fees paid to financial intermediaries in respect of
sales of Class B Shares of the Fund and $371,610 for fees paid to financial
intermediaries for servicing Class B shareholders and administering the Class B
Share Plans. For the fiscal year ended May 31, 2001, the Fund's aggregate
expenses paid under the Plans for Class C Shares were $425,400 or 0.90% of the
Class C Shares' average daily net assets. Such expenses were paid to reimburse
the Distributor for the following payments: $191,055 for commissions and
transaction fees paid to financial intermediaries in respect of sales of Class C
Shares of the Fund and $234,345 for fees paid to financial intermediaries for
servicing Class C shareholders and administering the Class C Share Plans.
TRANSFER AGENT
The Fund's transfer agent, shareholder service agent and dividend
disbursing agent is Van Kampen Investor Services Inc. The transfer agency prices
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive benchmarks.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
The Adviser is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of prices and any brokerage commissions on such transactions. While
the Adviser will be primarily responsible for the placement of the Fund's
portfolio business, the policies and practices in this regard will at all times
be subject to review by the Board of Trustees of the Fund.
As most transactions made by the Fund are principal transactions at net
prices, the Fund generally incurs little or no brokerage costs. The portfolio
securities in which the Fund invests are normally purchased directly from the
issuer or in the over-the-counter market from an underwriter or market maker for
the securities. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers include a spread or markup to the dealer
between the bid and asked price. Sales to dealers are effected at bid prices.
The Fund may also purchase certain money-market instruments directly from an
issuer, in which case no commissions or discounts are paid, or may purchase and
sell listed securities on an exchange, which are effected through brokers who
charge a commission for their shares.
B-29
52
The Adviser is responsible for placing portfolio transactions and does so
in a manner deemed fair and reasonable to the Fund and not according to any
formula. The primary consideration in all portfolio transactions is prompt
execution of orders in an effective manner at the most favorable price. In
selecting broker-dealers and in negotiating prices and any brokerage commissions
on such transactions, the Adviser considers the firm's reliability, integrity
and financial condition and the firm's execution capability, the size and
breadth of the market for the security, the size of and difficulty in executing
the order, and the best net price. There are many instances when, in the
judgment of the Adviser, more than one firm can offer comparable execution
services. In selecting among such firms, consideration may be given to those
firms which supply research and other services in addition to execution
services. The Adviser is authorized to pay higher commissions to brokerage firms
that provide it with investment and research information than to firms which do
not provide such services if the Adviser determines that such commissions are
reasonable in relation to the overall services provided. No specific value can
be assigned to such research services which are furnished without cost to the
Adviser. Since statistical and other research information is only supplementary
to the research efforts of the Adviser to the Fund and still must be analyzed
and reviewed by its staff, the receipt of research information is not expected
to reduce its expenses materially. The investment advisory fee is not reduced as
a result of the Adviser's receipt of such research services. Services provided
may include (a) furnishing advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody). Research
services furnished by firms through which the Fund effects its securities
transactions may be used by the Adviser in servicing all of its advisory
accounts; not all of such services may be used by the Adviser in connection with
the Fund. The Adviser also may place portfolio transactions, to the extent
permitted by law, with brokerage firms affiliated with the Fund, the Adviser or
the Distributor and with brokerage firms participating in the distribution of
the Fund's shares if it reasonably believes that the quality of execution and
the commission are comparable to that available from other qualified firms.
Similarly, to the extent permitted by law and subject to the same considerations
on quality of execution and comparable commission rates, the Adviser may direct
an executing broker to pay a portion or all of any commissions, concessions or
discounts to a firm supplying research or other services or to a firm
participating in the distribution of the Fund's shares.
The Adviser may place portfolio transactions at or about the same time for
other advisory accounts, including other investment companies. The Adviser seeks
to allocate portfolio transactions equitably whenever concurrent decisions are
made to purchase or sell securities for the Fund and another advisory account.
In some cases, this procedure could have an adverse effect on the price or the
amount of securities available to the Fund. In making such allocations among the
Fund and other advisory accounts, the main factors considered by the Adviser are
the respective sizes of the Fund and other advisory accounts, the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and opinions of the persons responsible
for recommending the investment.
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During the past three years, the Fund paid no commissions to brokers on the
purchase or sale of portfolio securities.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services designed to facilitate
investment in its shares at little or no extra cost to the investor. Below is a
description of such services. The following information supplements the section
in the Fund's Prospectus captioned "Shareholder Services."
INVESTMENT ACCOUNT
Each shareholder has an investment account under which the investor's
shares of the Fund are held by Investor Services, the Fund's transfer agent.
Investor Services performs bookkeeping, data processing and administrative
services related to the maintenance of shareholder accounts. Except as described
in the Prospectus and this Statement of Additional Information, after each share
transaction in an account, the shareholder receives a statement showing the
activity in the account. Each shareholder who has an account in any of the
Participating Funds (as defined in the Prospectus) will receive statements
quarterly from Investor Services showing any reinvestments of dividends and
capital gain dividends and any other activity in the account since the preceding
statement. Such shareholders also will receive separate confirmations for each
purchase or sale transaction other than reinvestment of dividends and capital
gain dividends and systematic purchases or redemptions. Additional shares may be
purchased at any time through authorized dealers, by bank wire or by mailing a
check and detailed instructions directly to Investor Services.
SHARE CERTIFICATES
Generally, the Fund will not issue share certificates. However, upon
written or telephone request to the Fund, a share certificate will be issued
representing shares (with the exception of fractional shares) of the Fund. A
shareholder will be required to surrender such certificates upon an exchange or
redemption of the shares represented by the certificate. In addition, if such
certificates are lost the shareholder must write to Van Kampen Funds Inc., c/o
Investor Services, PO Box 218256, Kansas City, MO 64121-8256, requesting an
"Affidavit of Loss" and obtain a Surety Bond in a form acceptable to Investor
Services. On the date the letter is received, Investor Services will calculate
the fee for replacing the lost certificate equal to no more than 1.50% of the
net asset value of the issued shares, and bill the party to whom the replacement
certificate was mailed.
RETIREMENT PLANS
Eligible investors may establish individual retirement accounts ("IRAs");
SEP; 401(k) plans; 403(b)(7) plans in the case of employees of public school
systems and certain non-profit organizations; or other pension or profit sharing
plans. Documents and forms containing detailed information regarding these plans
are available from the Distributor. Van Kampen Trust Company serves as custodian
under the IRA, 403(b)(7) and Money Purchase and Profit Sharing Keogh plans.
B-31
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AUTOMATED CLEARING HOUSE("ACH") DEPOSITS
Shareholders can use ACH to have redemption proceeds deposited
electronically into their bank accounts. Redemption proceeds transferred to a
bank account via the ACH plan are available to be credited to the account on the
second business day following normal payment. To utilize this option, the
shareholder's bank must be a member of ACH. In addition, the shareholder must
fill out the appropriate section of the account application form. The
shareholder must also include a voided check or deposit slip from the bank
account into which redemption proceeds are to be deposited together with the
completed application. Once Investor Services has received the application and
the voided check or deposit slip, such shareholder's designated bank account,
following any redemption, will be credited with the proceeds of such redemption.
Once enrolled in the ACH plan, a shareholder may terminate participation at any
time by writing Investor Services or by calling (800) 341-2911 ((800) 421-2833
for the hearing impaired).
DIVIDEND DIVERSIFICATION
A shareholder may elect, by completing the appropriate section of the
account application form or by calling (800) 341-2911 ((800) 421-2833 for the
hearing impaired), to have all dividends and capital gain dividends paid on a
class of shares of the Fund invested into shares of the same class of any of the
Participating Funds (as defined in the Prospectus) 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), Money Purchase and Profit
Sharing 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 any requirements of the Participating Fund into which distributions
will be invested. Distributions are invested into the selected Participating
Fund, provided that shares of such Participating Fund are available for sale, at
its net asset value per share as of the payable date of the distribution from
the Fund.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a monthly, quarterly, semiannual or annual
withdrawal plan if the shareholder owns shares in a single account valued at
$10,000 or more at the next determined net asset value per share at the time the
plan is established. If a shareholder owns shares in a single account valued at
$5,000 or more at the next determined net asset value per share at the time the
plan is established, the shareholder may establish a quarterly, semiannual or
annual withdrawal plan. This plan provides for the orderly use of the entire
account, not only the income but also the capital, if necessary. Each payment
represents the proceeds of a redemption of shares on which any capital gain or
loss will be recognized. The planholder may arrange for periodic checks in any
amount, not less than $25. Such a systematic withdrawal plan may also be
maintained by an investor purchasing shares for a retirement plan and can be
established on a form made available by the Fund when Van Kampen Trust company
serves as the plan custodian. See "Shareholder Services--Retirement Plans."
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Class B Shareholders and Class C Shareholders who establish a systematic
withdrawal plan may redeem up to 12% annually of the shareholder's initial
account balance without incurring a contingent deferred sales charge. Initial
account balance means the amount of the shareholder's investment at the time the
election to participate in the plan is made.
Under the plan, sufficient shares of the Fund are redeemed to provide the
amount of the periodic withdrawal payment. Dividends and capital gain dividends
on shares held in accounts with systematic withdrawal plans are reinvested in
additional shares at the next determined net asset value per share. If periodic
withdrawals continuously exceed reinvested dividends and capital gain dividends,
the shareholder's original investment will be correspondingly reduced and
ultimately exhausted. Redemptions made concurrently with the purchase of
additional shares ordinarily will be disadvantageous to the shareholder because
of the duplication of sales charges. Any gain or loss realized by the
shareholder upon redemption of shares is a taxable event. The Fund reserves the
right to amend or terminate the systematic withdrawal program upon 30 days'
notice to its shareholders.
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
(and may include that amount necessary to acquire a fractional share to round
off his or her purchase to the next full share) in Class A Shares of the Fund. A
Class C Shareholder who has redeemed shares of the Fund may reinstate any
portion or all of the net proceeds of such redemption (and may include that
amount necessary to acquire a fractional share to round off his or her purchase
to the next full share) in Class C Shares of the Fund with credit given for any
contingent deferred sales charge paid upon such redemption, provided that such
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 (defined below) to subsequent redemptions.
Such reinstatement is made at the net asset value per share (without sales
charge) next determined after the order is received, which must be made within
180 days after the date of the redemption, provided that shares of the Fund are
available for sale. Reinstatement at net asset value per share is also offered
to participants in those eligible retirement plans held or administered by Van
Kampen Trust Company for repayment of principal (and interest) on their
borrowings on such plans, provided that shares of the Fund are available for
sale.
REDEMPTION OF SHARES
Redemptions are not made on days during which the New York Stock Exchange
(the "Exchange") is closed. The right of redemption may be suspended and the
payment therefor may be postponed for more than seven days during any period
when (a) the Exchange is closed for other than customary weekends or holidays;
(b) the SEC determines trading on the Exchange is restricted; (c) the SEC
determines an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund to fairly determine the value of its net assets; or (d)
the SEC, by order, so permits.
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In addition, if the Fund's Board of Trustees determines that payment wholly
or partly in cash would be detrimental to the best interests of the remaining
shareholders of the Fund, the Fund may pay the redemption proceeds in whole or
in part by a distribution-in-kind of portfolio securities held by the Fund in
lieu of cash in conformity with applicable rules of the SEC. A
distribution-in-kind may result in recognition by the shareholder of a gain or
loss for federal income tax purposes when such securities are distributed, and
the shareholder may have brokerage costs and a gain or loss for federal income
tax purposes upon the shareholder's disposition of such securities.
WAIVER OF CLASS B AND CLASS C CONTINGENT
DEFERRED SALES CHARGES
As described in the Prospectus under "Redemption of Shares," redemptions of
Class B Shares and Class C Shares will be subject to a contingent deferred sales
charge ("CDSC-Class B and C"). The CDSC-Class B and C is waived on redemptions
of Class B Shares and Class C Shares in the circumstances described below:
REDEMPTION UPON DEATH OR DISABILITY
The Fund will waive the CDSC-Class B and C on redemptions following the
death or disability of a Class B shareholder and Class C shareholder. An
individual will be considered disabled for this purpose if he or she meets the
definition thereof in Section 72(m)(7) of the Internal Revenue Code of 1986, as
amended (the "Code"), which in pertinent part defines a person as disabled if
such person "is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or to be of long-continued and indefinite duration."
While the Fund does not specifically adopt the balance of the Code's definition
which pertains to furnishing the Secretary of Treasury with such proof as he or
she may require, the Distributor will require satisfactory proof of death or
disability before it determines to waive the CDSC-Class B and C.
In cases of death or disability, the CDSC-Class B and C will be waived
where the decedent or disabled person is either an individual shareholder or
owns the shares as a joint tenant with right of survivorship or is the
beneficial owner of a custodial or fiduciary account, and where the redemption
is made within one year of the death or initial determination of disability.
This waiver of the CDSC-Class B and C applies to a total or partial redemption,
but only to redemptions of shares held at the time of the death or initial
determination of disability.
REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS
The Fund will waive the CDSC-Class B and C when a total or partial
redemption is made in connection with certain distributions from retirement
plans. The CDSC-Class B and C will be waived upon the tax-free rollover or
transfer of assets to another retirement plan invested in one or more
Participating Funds; in such event, as described below, the Fund will "tack" the
period for which the original shares were held on to the holding period of the
shares acquired in the transfer or rollover for purposes of determining what, if
any, CDSC-Class B and C is applicable in the event that such acquired shares are
B-34
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redeemed following the transfer or rollover. The charge also will be waived on
any redemption which results from the return of an excess contribution or other
contribution pursuant to Code Section 408(d)(4) or (5), the return of excess
contributions or deferral amounts pursuant to Code Section 401(k)(8) or
402(g)(2), the financial hardship of the employee pursuant to U.S. Treasury
Regulation Section 1.401(k)-1(d)(2) or from the death or disability of the
employee (see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In addition, the
charge will be waived on any minimum distribution required to be distributed in
accordance with Code Section 401(a)(9).
The Fund does not intend to waive the CDSC-Class B and C for any
distributions from IRAs or other retirement plans not specifically described
above.
REDEMPTION PURSUANT TO THE FUND'S SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to participate in a systematic withdrawal plan with
respect to the shareholder's investment in the Fund. Under the systematic
withdrawal 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 sent to the designated payee of record. 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 systematic withdrawal plan.
The amount of the shareholder's investment in the Fund at the time the
election to participate in the systematic withdrawal plan is made with respect
to the Fund is hereinafter referred to as the "initial account balance." The
amount to be systematically redeemed from the Fund without the imposition of a
CDSC-Class B and C may not exceed a maximum of 12% annually of the shareholder's
initial account balance. The Fund reserves the right to change the terms and
conditions of the systematic withdrawal plan and the ability to offer the
systematic withdrawal plan.
NO INITIAL COMMISSION OR TRANSACTION FEE
The Fund will waive the CDSC-Class B and C in circumstances under which no
commission or transaction fee is paid to authorized dealers at the time of
purchase of shares. See "Purchase of Shares -- Waiver of Contingent Deferred
Sales Charge" in the Prospectus.
INVOLUNTARY REDEMPTIONS OF SHARES
The Fund reserves the right to redeem shareholder accounts with balances of
less than a specified dollar amount as set forth in the Prospectus. Prior to
such redemptions, shareholders will be notified in writing and allowed a
specified period of time to purchase additional shares to bring the value of the
account up to the required minimum balance. The Fund will waive the CDSC-Class B
and C upon such involuntary redemption.
REDEMPTION BY ADVISER
The Fund may waive the CDSC-Class B and C when a total or partial
redemption is made by the Adviser with respect to its investments in the Fund.
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TAXATION
FEDERAL INCOME TAXATION OF THE FUND
The Fund has elected and qualified, and intends to continue to qualify each
year, to be treated as a regulated investment company under Subchapter M of the
Code. To qualify as a regulated investment company, the Fund must comply with
certain requirements of the Code relating to, among other things, the sources of
its income and diversification of its assets.
If the Fund so qualifies and distributes each year to its shareholders at
least 90% of its investment company taxable income (generally including ordinary
income and net short-term capital gain, but not net capital gain, which is the
excess of net long-term capital gain over net short-term capital loss) and meets
certain other requirements, it will not be required to pay federal income taxes
on any income it distributes to shareholders. The Fund intends to distribute at
least the minimum amount necessary to satisfy the 90% distribution requirement.
The Fund will not be subject to federal income tax on any net capital gain
distributed to shareholders.
To avoid a 4% excise tax, the Fund will be required to distribute, by
December 31st of each year, at least an amount equal to the sum of (i) 98% of
its ordinary income for such year and (ii) 98% of its capital gain net income
(the latter of which generally is computed on the basis of the one-year period
ending on October 31st of such year) plus any amounts that were not distributed
in previous taxable years. For purposes of the excise tax, any ordinary income
or capital gain net income retained by, and subject to federal income tax in the
hands of, the Fund will be treated as having been distributed.
If the Fund failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the Fund would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its shareholders) and all distributions out of earnings and
profits would be taxed to shareholders as ordinary income. In addition, the Fund
could be required to recognize unrealized gains, pay taxes and make
distributions (which could be subject to interest charges) before requalifying
for taxation as a regulated investment company.
Investments of the Fund in securities issued at a discount or providing for
deferred interest or payment of interest in kind are subject to special tax
rules that will affect the amount, timing and character of distributions to
shareholders. For example, with respect to securities issued at a discount, the
Fund will be required to accrue as income each year a portion of the discount
and to distribute such income each year to maintain its qualification as a
regulated investment company and to avoid income and excise taxes. To generate
sufficient cash to make distributions necessary to satisfy the 90% distribution
requirement and to avoid income and excise taxes, the Fund may have to dispose
of securities that it would otherwise have continued to hold.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions of the Fund's investment company taxable income are taxable
to shareholders as ordinary income to the extent of the Fund's earnings and
profits, whether paid in cash or reinvested in additional shares. Distributions
of the Fund's net capital gain as capital gain dividends, if any, are taxable to
shareholders as long-term capital gain
B-36
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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 shareholder's shares 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). For a summary of
the maximum tax rates applicable to capital gains (including capital gain
dividends), see "Capital Gains Rates" below. Tax-exempt shareholders not subject
to federal income tax on their income generally will not be taxed on
distributions from the Fund.
Shareholders receiving distributions in the form of additional shares
issued by the Fund will be treated for federal income tax purposes as receiving
a distribution in an amount equal to the fair market value of the shares
received, determined as of the distribution date. The basis of such shares will
equal the fair market value on the distribution date.
The Fund will inform shareholders of the source and tax status of all
distributions promptly after the close of each calendar year. Distributions from
the Fund generally will not be eligible for the corporate dividends received
deduction.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in such month and paid during January of the
following year will be treated as having been distributed by the Fund and
received by the shareholders on the December 31st prior to the date of payment.
In addition, certain other distributions made after the close of a taxable year
of the Fund may be "spilled back" and treated as paid by the Fund (except for
purposes of the 4% excise tax) during such taxable year. In such case,
shareholders will be treated as having received such dividends in the taxable
year in which the distribution was actually made.
Income from investments in foreign securities received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions. Such taxes generally will not be deductible or creditable by
shareholders. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes.
SALE OF SHARES
The sale of shares (including transfers in connection with a redemption or
repurchase of shares) may 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
sold and the amount received. If the shares sold are held as a capital asset,
the gain or loss will be a capital gain or loss. For a summary of the maximum
tax rates applicable to capital gains (including capital gain dividends), see
"Capital Gains Rates" below. Any loss recognized upon a taxable disposition of
shares held for six months or less will be treated as a long-term capital loss
to the extent of any capital gain dividends received with respect to such
shares. For purposes of determining whether shares have been held for six months
or less, the holding period is suspended for any periods during which the
shareholder's risk of loss is diminished as a result of holding one or more
other positions in substantially similar or related property or through certain
options or short sales.
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CAPITAL GAINS RATES
The maximum tax rate applicable to net capital gains recognized by
individuals and other non-corporate taxpayers investing in the Fund is (i) the
same as the maximum ordinary income tax rate for capital assets held for one
year or less or (ii) 20% for capital assets held for more than one year. The
maximum long-term capital gains rate for corporations is 35%.
WITHHOLDING ON PAYMENTS TO NON-U.S. SHAREHOLDERS
A shareholder who is not (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized under the laws of the
United States or any state thereof, (iii) an estate, the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States fiduciaries who have
the authority to control all substantial decisions of the trust (a "Non-U.S.
Shareholder") generally will be subject to withholding of United States federal
income tax at a 30% rate (or lower applicable treaty rate) on dividends from the
Fund (other than capital gain dividends) that are not "effectively connected"
with a United States trade or business carried on by such shareholder provided
that the shareholder furnishes to the Fund a properly completed Internal Revenue
Service ("IRS") Form W-8BEN certifying the shareholder's non-U.S. status.
Non-effectively connected capital gain dividends and gains realized from
the sale of shares will not be subject to United States federal income tax in
the case of (i) a Non-U.S. Shareholder that is a corporation and (ii) an
individual Non-U.S. Shareholder who is not present in the United States for more
than 182 days during the taxable year (assuming that certain other conditions
are met). However, certain Non-U.S. Shareholders may nonetheless be subject to
backup withholding and information reporting on capital gain dividends and gross
proceeds paid to them upon the sale of their shares. See "Backup Withholding"
and "Information Reporting" below.
If income from the Fund or gains realized from the sale of shares are
effectively connected with a Non-U.S. Shareholder's United States trade or
business, then such amounts will not be subject to the 30% withholding described
above, but rather will be subject to United States federal income tax on a net
basis at the tax rates applicable to United States citizens or domestic
corporations. To establish that income from the Fund or gains realized from the
sale of shares are effectively connected with a U.S. trade or business, a
Non-U.S. Shareholder must provide the Fund with a properly completed IRS Form
W-8ECI certifying that such amounts are effectively connected with the Non-U.S.
Shareholder's U.S. trade or business. Non-U.S. Shareholders that are
corporations may also be subject to an additional "branch profits tax" with
respect to income from the Fund that is effectively connected with a United
States trade or business.
The tax consequences to a Non-U.S. Shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. To claim tax treaty benefits, Non-U.S. Shareholders will be
required to provide the Fund with a properly completed IRS Form W-8BEN
certifying their entitlement thereto. In addition, in certain cases where
payments are made to a Non-U.S. Shareholder that is a partnership or other
pass-through entity, persons holding an interest in the entity will need to
provide the
B-38
61
required certification. For example, an individual Non-U.S. Shareholder who
holds shares in the Fund through a non-U.S. partnership must provide an IRS Form
W-8BEN to the Fund to claim the benefits of an applicable tax treaty. Non-U.S.
investors are advised to consult their advisers with respect to the tax
implications of purchasing, holding and disposing of shares of the Fund.
BACKUP WITHHOLDING
The Fund may be required to withhold federal income tax ("backup
withholding") from dividends and redemption proceeds paid to non-corporate
shareholders. This tax may be withheld from dividends if (i) the shareholder
fails to properly furnish the Fund with its correct taxpayer identification
number or to certify its non-U.S. status (in the case of a Non-U.S.
Shareholder), (ii) the IRS notifies the Fund that the shareholder has failed to
properly report certain interest and dividend income to the IRS and to respond
to notices to that effect or (iii) when required to do so, the shareholder fails
to certify that he or she is not subject to backup withholding. Redemption
proceeds may be subject to backup withholding under the circumstances described
in (i) above.
Generally, dividends paid to Non-U.S. Shareholders that are subject to the
30% federal income tax withholding described above under "Withholding on
Payments to Non-U.S. Shareholders" are not subject to backup withholding. To
avoid backup withholding on capital gain dividends and gross proceeds from the
sale of shares, Non-U.S. Shareholders must provide a properly completed IRS Form
W-8BEN certifying their non-U.S. status.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from payments made to a shareholder may be refunded or
credited against such shareholder's U.S. federal income tax liability, if any,
provided that the required information is furnished to the IRS.
INFORMATION REPORTING
The Fund must report annually to the IRS and to each shareholder (other
than a Non-U.S. Shareholder) the amount of dividends, capital gain dividends or
gross proceeds paid to such shareholder and the amount, if any, of tax withheld
pursuant to backup withholding rules with respect to such amounts. In the case
of a Non-U.S. Shareholder, the Fund must report to the IRS and such shareholder
the amount of dividends, capital gain dividends or gross proceeds paid that are
subject to withholding (including backup withholding, if any) and the amount of
tax withheld with respect to such amounts. This information may also be made
available to the tax authorities in the Non-U.S. Shareholder's country of
residence.
GENERAL
The federal income tax discussion set forth above is for general
information only. Shareholders and prospective investors should consult their
advisers regarding the specific federal tax consequences of purchasing, holding
and disposing of shares of the Fund, as well as the effects of state, local and
foreign tax law and any proposed tax law changes.
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YIELD INFORMATION
From time to time the Fund may advertise its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund refers to the income
generated by an investment in the Fund over a seven-day period (which period
will be stated in the advertisement). This income is then "annualized." That is,
the amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The yield of the Fund is its net income expressed in annualized terms. The
SEC requires by rule that a yield quotation set forth in an advertisement for a
"money market" fund be computed by a standardized method based on a historical
seven-calendar-day period. The standardized yield is computed by determining the
net change (exclusive of realized gains and losses and unrealized appreciation
and depreciation) in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, dividing the net change in
account value by the value of the account at the beginning of the base period to
obtain the base period return, and multiplying the base period return by 365/7.
The determination of net change in account value reflects the value of
additional shares purchased with dividends from the original share, dividends
declared on both the original share and such additional shares, and all fees
that are charged to all shareholder accounts, in proportion to the length of the
base period and the Fund's average account size. The Fund may also calculate its
effective yield by compounding the unannualized base period return (calculated
as described above) by adding 1 to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one.
Yield and effective yield are calculated separately for Class A Shares,
Class B Shares and Class C Shares. Because of the differences in distribution
fees, the yield and effective yield for each class of shares will differ.
The yield and effective yield quoted at any time represents the amount
being earned on a current basis for the indicated period and is a function of
the types of instruments in the Fund, their quality and length of maturity, and
the Fund's operating expenses. The length of maturity for the Fund is the
average dollar-weighted maturity of the Fund. This means that the Fund has an
average maturity of a stated number of days for all of its issues. The
calculation is weighted by the relative value of the investment.
The yield and effective yield fluctuate daily as the income earned on the
investments of the Fund fluctuates. Accordingly, there is no assurance that the
yield and effective yield quoted on any given occasion will remain in effect for
any period of time. It should also be emphasized 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.
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Other funds of the money market type as well as banks and savings and loan
associations may calculate their yield on a different basis, and the yield
quoted by the Fund could vary upwards or downwards if another method of
calculation or base period were used.
Additionally, since yield and effective yield fluctuate, 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 and effective yield are generally a
function of the kind and quality of the instrument held in a fund's portfolio,
portfolio maturity, operating expenses and market conditions.
From time to time marketing materials may provide a portfolio manager
update, an adviser update and discuss general economic conditions and outlooks.
The Fund's marketing materials may also show the Fund's asset class
diversification, top five sector holdings and ten largest holdings. Materials
may also mention how the Distributor believes the Fund compares relative to
other Van Kampen funds. The Fund may also be marketed on the Internet.
In reports or other communications to shareholders or in advertising
material, the Fund may compare its performance with that of other mutual funds
as listed in the rankings or ratings prepared by Lipper Analytical Services,
Inc., CDA, Morningstar Mutual Funds or similar independent services which
monitor the performance of mutual funds with the Consumer Price Index, the Dow
Jones Industrial Average, Standard & Poor's indices, NASDAQ Composite Index,
other appropriate indices of investment securities, or with investment or
savings vehicles. The performance information may also include evaluations of
the Fund published by nationally recognized ranking services and by nationally
recognized financial publications. Such comparative performance information will
be stated in the same terms in which the comparative data or indices are stated.
Such advertisements and sales material may include the yield quotation as of a
current period. Such yield information will be calculated pursuant to rules
established by the SEC and will be computed separately for each class of the
Fund's shares. For these purposes, the performance of the Fund, as well as the
performance of other mutual funds or indices, do not reflect sales charges, the
inclusion of which would reduce the Fund's performance. The Fund will include
performance data for each class of shares of the Fund in any advertisement or
information including performance data of the Fund.
The Fund may also utilize performance information in hypothetical
illustrations. For example, the Fund may, from time to time: (1) illustrate the
benefits of tax-deferral by comparing taxable investments to investments made
through tax-deferred retirement plans; (2) illustrate in graph or chart form, or
otherwise, the benefits of dollar-cost averaging by comparing investments made
pursuant to a systematic investment plan to investments made in a rising market;
(3) illustrate allocations among different types of mutual funds for investors
at different stages of their lives; and (4) in reports or other communications
to shareholders or in advertising material, illustrate the benefits of
compounding at various assumed yields.
The Fund's Annual Report and Semiannual Report contain additional
performance information. A copy of the Annual Report or Semiannual Report may be
obtained without
B-41
64
charge by calling or writing the Fund at the telephone number and address
printed on the cover of this Statement of Additional Information.
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. The custodian also provides accounting
services to the Fund.
SHAREHOLDER REPORTS
Semiannual statements are furnished to shareholders, and annually such
statements are audited by the independent auditors.
INDEPENDENT AUDITORS
Independent auditors for the Fund perform an annual audit of the Fund's
financial statements. The Fund's Board of Trustees has engaged Ernst & Young
LLP, located at 233 South Wacker Drive, Chicago, Illinois 60606, to be the
Fund's independent auditors.
PricewaterhouseCoopers LLP, located at 200 East Randolph Drive, Chicago,
Illinois 60601 ("PWC"), ceased being the Fund's independent accountants
effective May 18, 2000. The cessation of the client-auditor relationship between
the Fund and PWC was based solely on a possible future business relationship by
PWC with an affiliate of the Fund's investment adviser. The change in
independent accountants was approved by the Fund's audit committee and the
Fund's Board of Trustees, including Trustees who are not "interested persons" of
the Fund (as defined in the 1940 Act).
LEGAL COUNSEL
Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom (Illinois).
B-42
65
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of Van Kampen Reserve Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Van Kampen Reserve Fund (the "Fund"), as of
May 31, 2001, and the related statements of operations for the year then ended,
and the changes in net assets and financial highlights for the two years then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The financial
highlights of the Fund for each of the three years in the period ended May 31,
1999 were audited by other auditors whose report dated July 1, 1999, expressed
an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of May 31, 2001, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund at May 31, 2001, the results of its operations for the year then ended, and
the changes in net assets and financial highlights for each of the two years in
the period then ended, in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
July 6, 2001
F-1
66
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
May 31, 2001
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) DESCRIPTION DATE PURCHASE COST
COMMERCIAL PAPER 62.1%
$30,000 American Express Credit Corp. ............ 08/10/01 3.923% $ 29,776,000
25,000 American General Finance Corp. ........... 08/24/01 4.632 24,736,333
25,000 Bank of Nova Scotia....................... 06/15/01 4.826 24,953,819
30,000 Chevron USA, Inc. ........................ 06/06/01 4.099 29,983,167
25,000 CIT Group Holdings, Inc. ................. 06/28/01 5.140 24,905,313
10,000 CIT Group Holdings, Inc. ................. 06/28/01 4.109 9,969,700
25,000 Citicorp.................................. 06/12/01 4.061 24,969,444
25,000 Coca Cola Co. ............................ 06/22/01 4.891 24,929,854
25,000 Ford Motor Credit Co. .................... 07/09/01 4.718 24,877,819
17,500 General Electric Capital Corp. ........... 06/01/01 4.249 17,500,000
25,000 General Electric Capital Corp. ........... 06/21/01 4.126 24,943,611
15,750 General Motors Acceptance Corp. .......... 08/16/01 4.039 15,618,663
19,250 General Motors Acceptance Corp. .......... 08/16/01 4.318 19,078,504
25,000 Goldman Sachs Group, Inc. ................ 10/10/01 3.939 24,651,576
25,000 Household Finance Corp. .................. 06/20/01 4.747 24,938,382
25,000 Merrill Lynch & Co., Inc. ................ 06/18/01 3.992 24,953,604
30,000 Metropolitan Life, Inc. .................. 06/25/01 4.016 29,921,000
25,000 Prudential Funding Corp. ................. 07/17/01 4.548 24,857,528
25,000 Toronto Dominion Holding.................. 07/16/01 4.020 24,876,719
25,000 UBS, AG................................... 06/29/01 4.967 24,905,111
18,410 Verizon Network Funding................... 07/24/01 4.029 18,302,399
6,590 Verizon Network Funding................... 07/24/01 4.049 6,551,677
30,000 Wells Fargo Financial, Inc. .............. 07/06/01 4.113 29,882,167
------------
TOTAL COMMERCIAL PAPER.................................................... 530,082,390
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 22.7%
15,000 Federal Home Loan Mortgage Association
Discount Note............................. 06/06/01 4.184 15,000,000
16,847 Federal Home Loan Mortgage Association
Discount Note............................. 08/01/01 3.991 16,735,384
25,000 Federal Home Loan Mortgage Association
Discount Note............................. 08/30/01 3.921 24,760,625
See Notes to Financial Statements
F-2
67
YOUR FUND'S INVESTMENTS
May 31, 2001
DISCOUNT
PAR YIELD ON
AMOUNT MATURITY DATE OF AMORTIZED
(000) DESCRIPTION DATE PURCHASE COST
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
$20,000 Federal Home Loan Mortgage Association
Discount Note............................. 09/26/01 4.547% $ 19,712,700
12,250 Federal Home Loan Mortgage Association
Discount Note............................. 04/24/02 4.165 11,809,368
25,000 Federal National Mortgage Association
Discount Note............................. 06/07/01 4.846 24,980,104
25,000 Federal National Mortgage Association
Discount Note............................. 07/12/01 4.699 24,868,743
12,250 Federal National Mortgage Association
Discount Note............................. 11/08/01 4.487 12,013,711
20,000 Federal National Mortgage Association
Discount Note............................. 01/16/02 5.310 20,000,000
25,000 Federal National Mortgage Association
Discount Note............................. 03/05/02 4.401 24,192,083
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS.................................. 194,072,718
------------
CERTIFICATES OF DEPOSIT 14.0%
30,000 BNP Paribas............................... 06/19/01 4.833 30,000,000
14,500 Rabobank Nederland NV..................... 07/26/01 5.179 14,504,639
25,000 Societe Generale North America, Inc. ..... 06/11/01 6.390 25,000,000
25,000 State Street Bank & Trust................. 06/04/01 4.833 25,000,000
25,000 US Bank National Minnesota................ 07/23/01 4.264 25,000,000
------------
TOTAL CERTIFICATES OF DEPOSIT............................................. 119,504,639
------------
NOTE 2.9%
25,000 LaSalle National Bank..................... 09/18/01 4.620 25,000,000
------------
See Notes to Financial Statements
F-3
68
YOUR FUND'S INVESTMENTS
May 31, 2001
AMORTIZED
DESCRIPTION COST
REPURCHASE AGREEMENTS 1.5%
BankAmerica Securities ($12,453,000 par
collateralized by U.S. Government obligations
in a pooled cash account, dated 05/31/01, to
be sold on 06/01/01 at $12,454,425)....................... $ 12,453,000
------------
TOTAL INVESTMENTS 103.2% (a)............................... 881,112,747
LIABILITIES IN EXCESS OF OTHER ASSETS (3.2%)............... (27,672,920)
------------
NET ASSETS 100.0%.......................................... $853,439,827
============
(a) At May 31, 2001, cost is identical for both book and federal income tax
purposes.
See Notes to Financial Statements
F-4
69
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
May 31, 2001
ASSETS:
Total Investments, at amortized cost which approximates
market.................................................... $881,112,747
Receivables:
Fund Shares Sold.......................................... 3,705,458
Interest.................................................. 2,298,623
Other....................................................... 180,845
------------
Total Assets............................................ 887,297,673
------------
LIABILITIES:
Payables:
Fund Shares Repurchased................................... 32,421,659
Distributor and Affiliates................................ 479,488
Investment Advisory Fee................................... 304,826
Income Distributions...................................... 276,519
Custodian Bank............................................ 38,826
Trustees' Deferred Compensation and Retirement Plans........ 210,364
Accrued Expenses............................................ 126,164
------------
Total Liabilities....................................... 33,857,846
------------
NET ASSETS.................................................. $853,439,827
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $853,512,195
Accumulated Distributions in Excess of Net Investment
Income.................................................... (14,254)
Accumulated Net Realized Loss............................... (58,114)
------------
NET ASSETS.................................................. $853,439,827
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value, offering price and redemption price per
share (Based on net assets of $451,721,384 and
451,774,481 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 $338,688,418 and 338,693,617 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 $63,030,025 and 63,055,276 shares of
beneficial interest issued and outstanding)............. $ 1.00
============
See Notes to Financial Statements
F-5
70
Statement of Operations
For the Year Ended May 31, 2001
INVESTMENT INCOME:
Interest.................................................... $47,351,626
-----------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $737,201, $2,123,289 and $451,150,
respectively)............................................. 3,311,640
Investment Advisory Fee..................................... 3,088,560
Shareholder Services........................................ 2,239,472
Custody..................................................... 131,942
Legal....................................................... 20,756
Trustees' Fees and Related Expenses......................... 16,181
Other....................................................... 568,704
-----------
Total Expenses.......................................... 9,377,255
Less Credits Earned on Cash Balances.................... 25,548
-----------
Net Expenses............................................ 9,351,707
-----------
NET INVESTMENT INCOME....................................... $37,999,919
===========
REALIZED GAIN/LOSS:
Investments................................................. $ (12,333)
Net Increase from Payments by Affiliates for Net Losses
Realized on Investments Not Meeting the Investment
Guidelines of the Fund.................................... 12,333
-----------
NET REALIZED GAIN/LOSS...................................... -0-
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $37,999,919
===========
See Notes to Financial Statements
F-6
71
Statements of Changes in Net Assets
For the Years Ended May 31, 2001 and 2000
YEAR ENDED YEAR ENDED
MAY 31, 2001 MAY 31, 2000
-----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 37,999,919 $ 42,474,343
Net Realized Loss................................ -0- (2,832)
--------------- ----------------
Change in Net Assets from Operations............. 37,999,919 42,471,511
--------------- ----------------
Distributions from and in Excess of Net
Investment Income:
Class A Shares................................. (24,360,250) (32,587,988)
Class B Shares................................. (11,451,242) (8,191,882)
Class C Shares................................. (2,205,189) (1,735,136)
--------------- ----------------
Total Distributions.............................. (38,016,681) (42,515,006)
--------------- ----------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... (16,762) (43,495)
--------------- ----------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold........................ 2,505,005,403 20,201,171,990
Net Asset Value of Shares Issued Through Dividend
Reinvestment................................... 38,016,681 42,515,006
Cost of Shares Repurchased....................... (2,556,368,681) (20,063,156,555)
--------------- ----------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................... (13,346,597) 180,530,441
--------------- ----------------
TOTAL INCREASE/DECREASE IN NET ASSETS............ (13,363,359) 180,486,946
NET ASSETS:
Beginning of the Period.......................... 866,803,186 686,316,240
--------------- ----------------
End of the Period (Including accumulated
undistributed net investment income of
$(14,254) and $2,508, respectively)............ $ 853,439,827 $ 866,803,186
=============== ================
See Notes to Financial Statements
F-7
72
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 ----------------------------------------------
2001 2000 1999 1998 1997
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Net Investment Income................ .05 .05 .04 .05 .04
Less Distributions from Net
Investment Income.................. (.05) (.05) (.04) (.05) (.04)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Return (a)....................... 5.35%* 4.92% 4.55% 4.78% 4.52%
Net Assets at End of the Period (In
millions)............................ $451.7 $573.3 $529.6 $634.1 $451.3
Ratio of Expenses to Average Net
Assets** (b)......................... .95% .82% .84% 1.02% 1.02%
Ratio of Net Investment Income to
Average Net Assets**................. 5.22% 4.71% 4.38% 4.60% 4.38%
* If certain losses had not been assumed by Van Kampen, total return would have
been lower by less than .01%.
** For the year ended May 31, 1997, the impact on the Ratios of Expenses and Net
Investment Income to Average Net Assets due to Van Kampen's reimbursement of
certain expenses was less than .01%.
(a) Assumes reinvestment of all distributions for the period and includes Rule
12b-1 fees of up to .15%.
(b) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the year ended May 31, 1999.
See Notes to Financial Statements
F-8
73
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED MAY 31,
CLASS B SHARES ----------------------------------------------
2001 2000 1999 1998 1997
----------------------------------------------
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Net Investment Income................ .05 .04 .04 .04 .04
Less Distributions from Net
Investment Income.................. (.05) (.04) (.04) (.04) (.04)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF THE PERIOD..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Return (a)....................... 4.66%* 4.14% 3.78% 3.99% 3.71%
Net Assets at End of the Period (In
millions)............................ $338.7 $238.8 $129.8 $123.0 $103.0
Ratio of Expenses to Average Net
Assets** (b)......................... 1.58% 1.57% 1.63% 1.79% 1.77%
Ratio of Net Investment Income to
Average Net Assets**................. 4.43% 3.96% 3.71% 3.91% 3.70%
* If certain losses had not been assumed by Van Kampen, total return would have
been lower by less than .01%.
** For the year ended May 31, 1997, the impact on the Ratios of Expenses and Net
Investment Income to Average Net Assets due to Van Kampen's reimbursement of
certain expenses was less than .01%.
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 4%,
charged on certain redemptions made within the first and second year of
purchase and declining thereafter to 0% after the fifth year. If the sales
charge was included, total returns would be lower. These returns include
Rule 12b-1 fees of up to .90%.
(b) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the year ended May 31, 1999.
See Notes to Financial Statements
F-9
74
Financial Highlights
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED MAY 31,
CLASS C SHARES -----------------------------------------
2001 2000 1999 1998 1997
-----------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD.. $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Net Investment Income................... .05 .04 .04 .04 .04
Less Distributions from Net Investment
Income................................ (.05) (.04) (.04) (.04) (.04)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF THE PERIOD........ $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return (a).......................... 4.57%* 4.14% 3.77% 3.99% 3.72%
Net Assets at End of the Period (In
millions)............................... $63.0 $54.7 $26.9 $16.1 $ 8.4
Ratio of Expenses to Average Net Assets**
(b)..................................... 1.69% 1.57% 1.63% 1.78% 1.78%
Ratio of Net Investment Income to Average
Net Assets**............................ 4.40% 3.96% 3.73% 3.91% 3.64%
* If certain losses had not been assumed by Van Kampen, total return would have
been lower by less than .01%.
** For the year ended May 31, 1997, the impact on the Ratios of Expenses and Net
Investment Income to Average Net Assets due to Van Kampen's reimbursement of
certain expenses was less than .01%.
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum contingent deferred sales charge of 1%,
charged on certain redemptions made within one year of purchase. If the
sales charge was included, total returns would be lower. These returns
include Rule 12b-1 fees of up to .90%.
(b) The Ratio of Expenses to Average Net Assets does not reflect credits earned
on cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by .01% for the year ended May 31, 1999.
See Notes to Financial Statements
F-10
75
NOTES TO
FINANCIAL STATEMENTS
May 31, 2001
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen 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 (the "1940 Act"), 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 accounting principles
generally accepted in the United States of America 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 value. Under this valuation method, a portfolio instrument
is valued at cost and any discount or premium is accreted or amortized 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.
The Fund may invest in repurchase agreements, which are short-term
investments whereby 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 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. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Income
and expenses of the Fund are allocated on a pro rata basis to each class of
shares,
F-11
76
NOTES TO
FINANCIAL STATEMENTS
May 31, 2001
except for distribution and service fees and transfer agency costs which are
unique to each class of shares.
D. 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.
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, 2001, the Fund had an accumulated capital loss carryforward
for tax purposes of $58,114 which will expire between May 31, 2002 and May 31,
2009, of this amount $30,479 will expire on May 31, 2002.
Net realized gains or losses may differ for financial and tax reporting
purposes.
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares dividends daily from net
investment income and capital gains, if any, and automatically reinvests such
dividends daily. Shareholders can elect to receive the cash equivalent of their
daily dividends at each month end.
Due to the inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the 2001 fiscal year have been identified and appropriately reclassified.
Permanent differences totaling $6,782 related to the expiration of a portion of
the capital loss carryforward was reclassified from accumulated net realized
gain/loss to capital.
F. EXPENSE REDUCTIONS During the year ended May 31, 2001, the Fund's custody fee
was reduced by $25,548 as a result of credits earned on cash balances.
F-12
77
NOTES TO
FINANCIAL STATEMENTS
May 31, 2001
2. INVESTMENT ADVISORY AGREEMENT AND
OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM
First $150 million.......................................... .50%
Next $100 million........................................... .45%
Next $100 million........................................... .40%
Over $350 million........................................... .35%
For the year ended May 31, 2001, the Fund recognized expenses of
approximately $20,800 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
Under an Accounting Services agreement, the Adviser provides accounting
services to the Fund. The Adviser allocates the cost of such services to each
fund. For the year ended May 31, 2001, the Fund recognized expenses of
approximately $74,700 representing Van Kampen Investments Inc. or its
affiliates' (collectively "Van Kampen") cost of providing accounting services to
the Fund, which are reported as part of other expenses in the Statement of
Operations.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the year ended May 31, 2001,
the Fund recognized expenses of approximately $1,669,200. Transfer agency fees
are determined through negotiations with the Fund's Board of Trustees and are
based on competitive market benchmarks.
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation.
Amounts deferred are retained by the Fund and, to the extent permitted by the
1940 Act, as amended, may be invested in the common shares of those funds
selected by the trustees. Investments in such funds of approximately $122,700
are included in "Other Assets" on the Statement of Assets and Liabilities at May
31, 2001. Appreciation/depreciation and distributions received from these
investments are recorded with an offsetting increase/decrease in the deferred
compensation obligation and do not affect the net asset value of the Fund.
Benefits under the
F-13
78
NOTES TO
FINANCIAL STATEMENTS
May 31, 2001
retirement plan are payable upon retirement for a ten-year period and are based
upon each trustee's years of service to the Fund. The maximum annual benefit per
trustee under the plan is $2,500.
During the period, the Adviser reimbursed the Fund $12,333 for losses
incurred due to the purchase and sale of two securities with a duration longer
than prospectus guidelines allowed.
3. CAPITAL TRANSACTIONS
At May 31, 2001, capital aggregated $451,757,308, $338,700,357 and $63,054,530
for Classes A, B, and C, respectively. For the year ended May 31, 2001,
transactions were as follows:
SHARES VALUE
Sales:
Class A.......................................... 1,646,318,049 $ 1,646,318,049
Class B.......................................... 687,547,727 687,547,727
Class C.......................................... 171,139,627 171,139,627
-------------- ---------------
Total Sales........................................ 2,505,005,403 $ 2,505,005,403
============== ===============
Dividend Reinvestment:
Class A.......................................... 24,360,250 $ 24,360,250
Class B.......................................... 11,451,242 11,451,242
Class C.......................................... 2,205,189 2,205,189
-------------- ---------------
Total Dividend Reinvestment........................ 38,016,681 $ 38,016,681
============== ===============
Repurchases:
Class A.......................................... (1,792,234,974) $(1,792,234,973)
Class B.......................................... (599,148,102) (599,148,112)
Class C.......................................... (164,985,596) (164,985,596)
-------------- ---------------
Total Repurchases.................................. (2,556,368,672) $(2,556,368,681)
============== ===============
F-14
79
NOTES TO
FINANCIAL STATEMENTS
May 31, 2001
At May 31, 2000, capital aggregated $573,317,572, $238,852,191, and
$54,695,811 for Classes A, B, and C, respectively. For the year ended May 31,
2000, transactions were as follows:
SHARES VALUE
Sales:
Class A........................................ 18,409,830,894 $ 18,409,830,894
Class B........................................ 1,333,924,471 1,333,924,471
Class C........................................ 457,416,625 457,416,625
--------------- ----------------
Total Sales...................................... 20,201,171,990 $ 20,201,171,990
=============== ================
Dividend Reinvestment:
Class A........................................ 32,587,988 $ 32,587,988
Class B........................................ 8,191,882 8,191,882
Class C........................................ 1,735,136 1,735,136
--------------- ----------------
Total Dividend Reinvestment...................... 42,515,006 $ 42,515,006
=============== ================
Repurchases:
Class A........................................ (18,398,714,725) $(18,398,714,725)
Class B........................................ (1,233,062,546) (1,233,062,546)
Class C........................................ (431,379,284) (431,379,284)
--------------- ----------------
Total Repurchases................................ (20,063,156,555) $(20,063,156,555)
=============== ================
Class B Shares purchased on or after June 1, 1996, and any dividend
reinvestment plan Class B Shares received on such shares, automatically convert
to Class A Shares eight years after the end of the calendar month in which the
shares were purchased. Class B Shares purchased before June 1, 1996, and any
dividend reinvestment plan Class B Shares received on such shares, automatically
convert to Class A Shares six years after the end of the calendar month in which
the shares were purchased. For the years ended May 31, 2001 and 2000, 12,687,988
and 12,487,923 Class B Shares automatically converted to Class A Shares,
respectively. Class C Shares purchased before January 1, 1997, and any dividend
reinvestment plan C Shares received on such shares, automatically convert to
Class A Shares ten years after the end of the calendar month in which such
shares were purchased. Class C Shares purchased on or after January 1, 1997 do
not possess a conversion feature. For the years ended May 31, 2001 and 2000, no
Class C Shares converted to Class A Shares. Class B and C Shares are offered
without a front end sales charge, but are subject to a CDSC. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
and on year of the purchase for Class C as detailed in the following schedule.
The Class B and C
F-15
80
NOTES TO
FINANCIAL STATEMENTS
May 31, 2001
Shares bear the expense of their respective deferred sales arrangements,
including higher distribution on service fees and incremental transfer agency
costs.
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE
OF DOLLAR AMOUNT
SUBJECT TO 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, 2001, Van Kampen, as Distributor for the Fund,
received net commissions on redeemed shares which were subject to a CDSC of
approximately $2,386,400. Sales charges do not represent expenses to the Fund.
4. DISTRIBUTION AND SERVICE PLANS
With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund
and its shareholders have adopted a distribution plan pursuant to Rule 12b-1
under the 1940 Act, as amended, and a service plan (collectively, the "Plans").
The Plans govern payments for: the distribution of the Fund's Class A Shares,
Class B Shares and Class C Shares; the provision of ongoing shareholder services
with respect to such classes of shares; and the maintenance of shareholder
accounts with respect to such classes of shares.
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, 2001, are payments retained by
Van Kampen of approximately $1,786,200.
F-16
81
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
(a)(1) First Amended and Restated Agreement and Declaration of
Trust(1)
(2) Second Certificate of Amendment(3)
(3) Second Amended and Restated Certificate of Designation(3)
(b) Amended and Restated Bylaws(1)
(c)(1) Specimen Class A Share Certificate(3)
(2) Specimen Class B Share Certificate(3)
(3) Specimen Class C Share Certificate(3)
(d) Investment Advisory Agreement(2)
(e)(1) Distribution and Service Agreement(2)
(2) Form of Dealer Agreement(1)
(3) Form of Broker Fully Disclosed Clearing Agreement(1)
(4) Form of Bank Fully Disclosed Clearing Agreement(1)
(f)(1) Form of Trustee Deferred Compensation Plan(4)
(2) Form of Trustee Retirement Plan(4)
(g)(1) Custodian Contract(2)
(2) Transfer Agency and Service Agreement(2)
(h)(1) Fund Accounting Agreement(2)
(i)(1) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois)(1)
(2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)+
(j)(1) Consent of Ernst & Young LLP+
(2) Consent of PricewaterhouseCoopers LLP+
(k) Audit Report and Financial Statements for the fiscal year
ended May 31, 1999(5)
(l) Not Applicable
(m)(1) Plan of Distribution pursuant to Rule 12b-1(2)
(2) Form of Shareholder Assistance Agreement(2)
(3) Form of Administrative Services Agreement(2)
(n) Amended Multi-Class Plan(2)
(p)(1) Code of Ethics of the Adviser and the Distributor+
(2) Code of Ethics of the Funds(6)
(q) Power of Attorney+
(z)(1) List of certain investment companies in response to Item
27(a)+
(2) List of officers and directors of Van Kampen Funds Inc. in
response to Item 27(b)+
(1) Incorporated herein by reference to Post-Effective Amendment No. 37 to
Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed
September 27, 1996.
(2) Incorporated herein by reference to Post-Effective Amendment No. 38 to the
Registrant's Registration Statement on Form N1-A, File No. 2-50870, filed
September 26, 1997.
(3) Incorporated herein by reference to Post-Effective Amendment No. 39 to the
Registrant's Registration Statement on Form N1-A, File No. 2-50870, filed
September 15, 1998.
(4) Incorporated herein by reference to Post-Effective Amendment No. 81 to Van
Kampen Harbor Fund's Registration Statement on Form N-1A, File No. 2-12685,
and 811-734, filed April 29, 1999.
C-1
82
(5) Incorporated herein by reference to Post-Effective Amendment No. 41 to the
Registrant's Registration Statement on Form N-1A, File No. 2-50870 and
811-2482, filed September 28, 1999.
(6) Incorporated herein by reference to Post-Effective Amendment No. 42 to the
Registrant's Registration Statement on Form N-1A, File No. 2-50870, and
811-2482, filed September 28, 2000.
+ Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
See the Statement of Additional Information.
ITEM 25. INDEMNIFICATION.
Pursuant to Del. Code Ann. Title 12 Section 3817, a Delaware business trust
may provide in its governing instrument for the indemnification of its officers
and trustees from and against any and all claims and demands whatsoever.
Reference is made to Article 8, Section 8.4 of the Registrant's Agreement
and Declaration of Trust. Article 8, Section 8.4 of the Agreement and
Declaration of Trust provides that each officer and trustee of the Registrant
shall be indemnified by the Registrant against all liabilities incurred in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which the officer or trustee may be or
may have been involved by reason of being or having been an officer or trustee,
except that such indemnity shall not protect any such person against a liability
to the Registrant or any shareholder thereof to which such person would
otherwise be subject by reason of (i) not acting in good faith in the reasonable
belief that such person's actions were not in the best interests of the Trust,
(ii) willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office, or (iii) for a criminal
proceeding not having a reasonable cause to believe that such conduct was
unlawful (collectively "Disabling Conduct"). Absent a court determination that
an officer or trustee seeking indemnification was not liable on the merits or
guilty of Disabling Conduct in the conduct of his or her office, the decision by
the Registrant to indemnify such person must be based upon the reasonable
determination of independent counsel or non-party independent trustees, after
review of the facts, that such officer or trustee is not guilty of Disabling
Conduct in the conduct of his or her office.
The Registrant has purchased insurance on behalf of its officers and
trustees protecting such persons from liability arising from their activities as
officers or trustees of the Registrant. The insurance does not protect or
purport to protect such persons from liability to the Registrant or to its
shareholders to which such officers or 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 "1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by the trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
C-2
83
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
Pursuant to Section 7 of the Distribution and Service Agreement, the
Registrant agrees to indemnify and hold harmless Van Kampen Funds Inc. (the
"Distributor") and each of its trustees and officers and each person, if any,
who controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damages or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damages,
or expense and reasonable counsel fees) arising by reason of any person
acquiring any shares, based upon the ground that the Registration Statement,
prospectus, shareholder reports or other information filed or made public by the
Registrant (as from time to time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements not misleading under the 1933 Act, or
any other statute or the common law. The Registrant does not agree to indemnify
the Distributor or hold it harmless to the extent that the statement or omission
was made in reliance upon, and in conformity with, information furnished to the
Registrant by or on behalf of the Distributor. In no case is the indemnity of
the Registrant in favor of the Distributor or any person indemnified to be
deemed to protect the Distributor or any person against any liability to the
Fund or its security holders to which the Distributor or such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the agreement.
Pursuant to the agreement by which Van Kampen Investor Services Inc.
("Investor Services") is appointed transfer agent of the Fund, the Registrant
agrees to indemnify and hold Investor Services harmless against any losses,
damages, costs, charges, payments, liabilities and expenses (including
reasonable counsel fees) arising out of or attributable to:
(1) the performance of Investor Services under the agreement provided that
Investor Services acted in good faith with due diligence and without negligence
or willful misconduct.
(2) reliance by Investor Services on, or reasonable use by, Investor
Services of information, records and documents which have been prepared on
behalf of, or have been furnished by, the Fund, or the carrying out by Investor
Services of any instructions or requests of the Fund.
(3) the offer or sale of the Fund's shares in violation of any federal or
state law or regulation or ruling by any federal agency unless such violation
results from any failure by Investor Services to comply with written
instructions from the Fund that such offers or sales were not permitted under
such law, rule or regulation.
(4) the refusal of the Fund to comply with terms of the agreement, or the
Fund's lack of good faith, negligence or willful misconduct or breach of any
representation or warranty made by the Fund under the agreement provided that if
the reason for such failure is attributable to any action of the Fund's
investment adviser or distributor or any person providing accounting or legal
services to the Fund, Investor Services only will be entitled to indemnification
if such entity is otherwise entitled to the indemnification from the Fund.
See also "Investment Advisory Agreement" in the Statement of Additional
Information.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Investment Advisory Services" in the Prospectus and "Investment
Advisory Agreement," "Other Agreements" and "Trustees and Officers" in the
Statement of Additional Information for information regarding the business of
Van Kampen Asset Management Inc. (the "Adviser"). For information as to the
business, profession, vocation and employment of a substantial nature of each of
the officers and directors of the Adviser, reference is made to the Adviser's
current Form ADV (File No. 801-1669) filed under the Investment Advisers Act of
1940, as amended, incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) The sole principal underwriter is Van Kampen Funds Inc. (the
"Distributor") which acts as principal underwriter for certain investment
companies and unit investment trusts. See Exhibit (z)(1).
C-3
84
(b) Van Kampen Funds Inc. is an affiliated person of the Registrant and is
the only principal underwriter for the Registrant. The name, principal business
address and positions and offices with Van Kampen Funds Inc. of each of the
trustees and officers are disclosed in Exhibit (z)(2). Except as disclosed under
the heading, "Trustees and Officers" in Part B of this Registration Statement,
none of such persons has any position or office with the Registrant.
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents of the Registrant required by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
promulgated thereunder to be maintained (i) by the Registrant will be maintained
at its offices located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-
5555; Van Kampen Investor Services Inc., 7501 Tiffany Springs Parkway, Kansas
City, Missouri 64153; or at State Street Bank and Trust Company, 1776 Heritage
Drive, North Quincy, Massachusetts 02171, (ii) by the Adviser, will be
maintained at its offices located at 1 Parkview Plaza, PO Box 5555, Oakbrook
Terrace, Illinois 60181-5555 and (iii) by Van Kampen Funds Inc., the principal
underwriter, will be maintained at its offices located at 1 Parkview Plaza,
Oakbrook Terrace, Illinois 60181-5555.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-4
85
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant,
VAN KAMPEN RESERVE FUND, certifies that it meets all of the requirements for
effectiveness of this Amendment to the Registration Statement pursuant to Rule
485(b) under the 1933 Act 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 the State of Illinois, on the
26th day of September, 2001.
VAN KAMPEN RESERVE FUND
By: /s/ SARA L. BADLER
-------------------------------------
Sara L. Badler, Assistant Secretary
Pursuant to the requirements of the 1933 Act, this Amendment to the
Registration Statement has been signed on September 26, 2001, by the following
persons in the capacities indicated.
SIGNATURES TITLE
---------- -----
Principal Executive Officer:
/s/ RICHARD F. POWERS, III* Trustee and President
------------------------------------------------
Richard F. Powers, III
Principal Financial Officer:
/s/ JOHN L. SULLIVAN* Vice President, Chief Financial Officer and Treasurer
------------------------------------------------
John L. Sullivan
Trustees:
/s/ J. MILES BRANAGAN* Trustee
------------------------------------------------
J. Miles Branagan
/s/ JERRY D. CHOATE* Trustee
------------------------------------------------
Jerry D. Choate
/s/ LINDA HUTTON HEAGY* Trustee
------------------------------------------------
Linda Hutton Heagy
/s/ R. CRAIG KENNEDY* Trustee
------------------------------------------------
R. Craig Kennedy
/s/ MITCHELL M. MERIN* Trustee
------------------------------------------------
Mitchell M. Merin
/s/ JACK E. NELSON* Trustee
------------------------------------------------
Jack E. Nelson
/s/ PHILLIP B. ROONEY* Trustee
------------------------------------------------
Phillip B. Rooney
/s/ WAYNE W. WHALEN* Trustee
------------------------------------------------
Wayne W. Whalen
/s/ SUZANNE H. WOOLSEY* Trustee
------------------------------------------------
Suzanne H. Woolsey
---------------
* Signed by Sara L. Badler pursuant to a power of attorney filed herewith.
/s/ SARA L. BADLER September 26, 2001
------------------------------------------------
Sara L. Badler
Attorney-in-Fact
C-5
86
SCHEDULE OF EXHIBITS TO
POST-EFFECTIVE AMENDMENT 43 TO FORM N-1A
EXHIBIT
NUMBER EXHIBIT
------- -------
(i)(2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)
(j)(1) Consent of Ernst & Young LLP
(2) Consent of PricewaterhouseCoopers LLP
(p)(1) Code of Ethics of the Adviser and the Distributor
(q) Power of Attorney
(z)(1) List of certain investment companies in response to Item
27(a)
(2) List of officers and directors of Van Kampen Funds Inc. in
response to Item 27(b)
EX-99.(I)(2)
3
c62223bpex99-i2.txt
CONSENT OF SKADDEN,ARPS,SLATE,MEAGHER & FLOM (IL)
1
EXHIBIT (i)(2)
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)]
September 26, 2001
Van Kampen Reserve Fund
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Re: Post-Effective Amendment No. 43 to the
Registration Statement on Form N-1A
for the Van Kampen Reserve Fund
(the "Registration Statement")
(File Nos. 2-50870 and 811-2482)
--------------------------------
We hereby consent to the reference to our firm under the heading
"Legal Counsel" in the Registration Statement. In giving this consent, we do not
hereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
EX-99.(J)(1)
4
c62223bpex99-j1.txt
CONSENT OF ERNST & YOUNG LLP
1
EXHIBIT (j)(1)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors" and to the incorporation by reference of
our report dated July 6, 2001 in the Registration Statement (Form N-1A) and
related Prospectus and Statement of Additional Information of the Van Kampen
Reserve Fund filed with the Securities and Exchange Commission in this
Post-Effective Amendment No. 43 to the Registration Statement under the
Securities Act of 1933 (Registration No. 2-50870) and in this Amendment No. 28
to the Registration Statement under the Investment Company Act of 1940
(Registration No. 811-2482).
ERNST & YOUNG LLP
Chicago, Illinois
September 25, 2001
EX-99.(J)(2)
5
c62223bpex99-j2.txt
CONSENT OF PRICEWATERHOUSECOOPERS LLP
1
EXHIBIT (j)(2)
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our reports dated July 1, 1999, relating to the
financial statements and financial highlights, which appears in the May 31, 1999
Annual Report to Shareholders of Van Kampen Reserve Fund, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and "Independent
Auditors" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
September 26, 2001
EX-99.(P)(1)
6
c62223bpex99-p1.txt
CODE OF ETHICS
1
EXHIBIT (p)(1)
MORGAN STANLEY DEAN WITTER ASSET MANAGEMENT
CODE OF ETHICS
----------------------------
(Print Name)
MORGAN STANLEY DEAN WITTER ADVISORS INC.
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
MORGAN STANLEY DEAN WITTER INVESTMENT GROUP INC.
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT LIMITED
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT COMPANY
MORGAN STANLEY ASSET & INVESTMENT TRUST MANAGEMENT CO., LIMITED
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT PRIVATE LIMITED
MORGAN STANLEY DEAN WITTER DISTRIBUTORS INC.
MILLER ANDERSON & SHERRERD, LLP
MORGAN STANLEY & CO. INCORPORATED
MAS FUND DISTRIBUTION, INC.
MORGAN STANLEY DEAN WITTER SERVICES COMPANY INC.
Effective January 29, 2001
I. Introduction
Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"), Morgan Stanley Dean
Witter Investment Management Inc. ("MSDWIM"), Morgan Stanley Dean Witter
Investment Group Inc. ("MSDWIG"), Morgan Stanley Dean Witter Investment
Management Limited ("MSDWIM-Ltd"), Morgan Stanley Dean Witter Investment
Management Company ("MSDWIM-Singapore"), Morgan Stanley Asset & Investment Trust
Management Co., Limited ("MSAITM-Tokyo"), Morgan Stanley Dean Witter Investment
Management Private Limited ("MSDWIM-Mumbai") and Miller Anderson & Sherrerd, LLP
("MAS") (each, an "MSDW Affiliated Adviser" and collectively, the "MSDW
Affiliated Advisers") are subsidiaries of Morgan Stanley Dean Witter & Co.
("MSDW"). Each MSDW Affiliated Adviser, except for MSDWIG, is an investment
adviser or manager of certain registered investment companies (each a "Fund",
and collectively, the "Funds"). The MSDW Affiliated Advisers also serve as
investment advisers to other clients, including institutional clients and
individuals (each, a "Managed Account" and collectively, the "Managed
Accounts").
This Code of Ethics (the "Code") is adopted by each MSDW Affiliated Adviser in
keeping with the general principles and objectives set forth in Sections II. and
III. below, and to enforce the highest legal and ethical standards in light of
their fiduciary obligations to the shareholders of the Funds and the Managed
Accounts. It has also been adopted by: (i) Morgan Stanley Dean Witter Services
Company Inc. ("Services"), a wholly owned subsidiary of MSDW Advisors; and (ii)
Morgan Stanley Dean Witter Distributors Inc., and Morgan Stanley & Co.
Incorporated, each
1
2
a wholly-owned subsidiary of MSDW, and MAS Fund Distribution, Inc., a
wholly-owned subsidiary of MAS (each, a "Distributor" and collectively, the
"Distributors"), to apply to their directors, officers and employees who are
Access Persons or Covered Employees (as those terms are defined in Section IV.
below).
The directors, officers and employees of each MSDW Affiliated Adviser, Services
and the Distributors are also referred to the "Morgan Stanley Dean Witter Code
of Conduct - Securities and Asset Management Businesses" (the "Code of
Conduct"), the requirements of which they are subject to.
II. General Principles
A. Shareholder and Client Interests Come First
Every Employee (as defined in Section IV. below) of an MSDW
Affiliated Adviser, Services and the Distributors owes a
fiduciary duty to the shareholders of the Funds and to the
Managed Accounts. This means that in every decision relating
to investments, every Employee must recognize the needs and
interests of the Fund shareholders and the Managed Accounts,
and be certain that at all times the interests of the
shareholders and other clients are placed ahead of any
personal interest.
B. Avoid Actual and Potential Conflicts of Interest
The restrictions and requirements of this Code are designed to
prevent behavior which actually or potentially conflicts, or
raises the appearance of actual or potential conflict, with
the interests of the Fund shareholders or the Managed
Accounts. It is of the utmost importance that the Personal
Securities Transactions (as defined in Section VI.,
sub-section A., below) of Employees of each MSDW Affiliated
Adviser, Services and the Distributors be conducted in a
manner consistent with both the letter and spirit of this
Code, including these principles, to ensure the avoidance of
any such conflict of interest, or abuse of an individual's
position of trust and responsibility.
C. Avoid Undue Personal Benefit
Employees of each MSDW Affiliated Adviser, Services and the
Distributors must ensure that they do not acquire undue
personal benefit or advantage as a result of the performance
of their duties as they relate to the Funds or the Managed
Accounts.
III. Objective
Rule 17j-1 under the Investment Company Act of 1940, as amended (the
"1940 Act"), makes it unlawful for certain persons associated with
investment advisers or principal underwriters of investment companies
to engage in conduct which is deceitful,
2
3
fraudulent, or manipulative, or which involves false or misleading
statements or omissions of material facts, in connection with the
purchase or sale of a security held or proposed to be acquired by a
registered investment company. In addition, Section 204A of the
Investment Advisers Act of 1940, as amended (the "Advisers Act"),
requires investment advisers to establish, maintain and enforce written
policies and procedures designed to prevent misuse of material
non-public information. The objective of this Code is to maintain the
behavior of Employees within the general principles set forth above, as
well as to prevent such persons from engaging in conduct proscribed by
Rule 17j-1 under the 1940 Act and Section 204A of the Advisers Act. The
designated Compliance Group for each MSDW Affiliated Adviser (each, a
"Local Compliance Group") will identify all Access Persons and Covered
Employees and notify them of their pre-clearance and reporting
obligations at the time they become an Access Person or a Covered
Employee.
IV. Access Persons and Covered Employees
"Access Persons" shall include all persons falling within such
definition under Rule 17j-1 and, such other persons that may be so
deemed by the Local Compliance Group including: (a) all directors,
officers and employees of an MSDW Affiliated Adviser, Services or the
Distributors (b) any employee of a company in a control (as defined in
Section2(a)(9) of the 1940 Act) relationship to MSDW Affiliated Adviser
who, in connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale
of Covered Securities (as defined herein) by a Fund, or whose functions
related to the making of any recommendations with respect to the
purchases or sales; and (c) any natural person in a control
relationship to an MSDW Affiliated Adviser who obtains information
concerning recommendations made to a Fund with regard to the purchase
or sale of Covered Securities by the Fund. However, Individuals who
meet the following criteria shall not be deemed access persons: (i)
directors and officers of the Distributors that do not devote
substantially all of their working time to the activities of an MSDW
Affiliated Adviser or Services; (ii) directors and officers of the
Distributors that do not, in connection with their regular functions
and duties, participate in, obtain information with respect to, or make
recommendations as to, or make the purchase and sale of securities on
behalf of a Fund or Managed Account; and (iii) directors and officers
of Distributors that do not have access to information regarding the
day-to-day investment activities of an MSDW Affiliated Adviser; such
persons are, however, subject to the Code of Conduct. In addition, any
Employee of MSDWIM, MSDWIG, MSDWIM-Ltd., MSDWIM-Singapore,
MSAITM-Tokyo, MSDWIM-Mumbai or MAS who is not an officer and does not
in connection with their regular functions and duties, participate in,
obtain information with respect to, make recommendations as to, or make
the purchase and sale of securities on behalf of a Fund or Managed
Account (a "Covered Employee") shall be exempt from the requirements
contained in Section VI., sub-section D.2.(a) (Initial Listing of
Securities Holdings and Brokerage Accounts Report), but shall otherwise
remain subject to all other provisions contained herein pertaining to
Access Persons. Access Persons and Covered Employees of each MSDW
Affiliated Adviser, Services or the Distributors on leave of absence
will not be subject to the pre-clearance and reporting provisions of
the Code,
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provided that during the leave period the Access Person or Covered
Employee does not engage in activities of the nature described in (ii)
and (iii) above. Access Persons and Covered Employees will be referred
to collectively as "Employees" throughout this Code to the extent they
are subject to the same requirements or restrictions.
V. Grounds for Disqualification from Employment
Pursuant to the terms of Section 9 of the 1940 Act, no director,
officer or employee of an MSDW Affiliated Adviser, Services or the
Distributors may become, or continue to remain, an officer, director or
employee without an exemptive order issued by the Securities and
Exchange Commission if such director, officer or employee:
A. within the past ten years has been convicted of any felony or
misdemeanor (i) involving the purchase or sale of any
security; or (ii) arising out of their conduct as an
underwriter, broker, dealer, investment adviser, municipal
securities dealer, government securities broker, government
securities dealer, transfer agent, or entity or person
required to be registered under the Commodity Exchange Act, or
as an affiliated person, salesman or employee of any
investment company, bank, insurance company or entity or
person required to be registered under the Commodity Exchange
Act; or
B. is or becomes permanently or temporarily enjoined by any court
from: (i) acting as an underwriter, broker, dealer, investment
adviser, municipal securities dealer, government securities
broker, government securities dealer, transfer agent, or
entity or person required to be registered under the Commodity
Exchange Act, or as an affiliated person, salesman or employee
of any investment company, bank, insurance company or entity
or person required to be registered under the Commodity
Exchange Act; or (ii) engaging in or continuing any conduct or
practice in connection with any such activity or in connection
with the purchase or sale of any security.
It is your obligation to immediately report any conviction or
injunction falling within the foregoing provisions to the Chief Legal
Officer of MSDW Asset Management.
VI. Personal Securities Transactions
A. Prohibited Conduct
No Employee shall buy or sell any "Covered Security" (defined
as all securities, including any option to purchase or sell,
and any security convertible into or exchangeable for such
securities, with the exception of those described in
sub-section C.3.) for his/her own account or for an account in
which the individual has, or as a result of the transaction
acquires, any direct or indirect "beneficial ownership" (as
defined in sub-section C. 4.) (referred to herein as a
"Personal Securities Transaction") unless:
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1. pre-clearance of the transaction has been obtained;
and
2. the transaction is reported in writing to the Local
Compliance Group in accordance with the requirements
of sub-section D. below.
B. Restrictions and Limitations on Personal Securities
Transactions
Except where otherwise indicated, the following restrictions
and limitations govern investments and personal securities
transactions by Employees:
1. Covered Securities purchased may not be sold until at
least 30 calendar days from the purchase trade date
and may not be sold at a profit until at least 60
calendar days from the purchase trade date. Covered
Securities sold may not be repurchased until at least
30 calendar days from the sale trade date. In
addition, Covered Securities sold may not be
purchased at a lower price until at least 60 calendar
days from the sale trade date. Any violation may
result in disgorgement of all profits from the
transactions as well as other possible sanctions.
2. No short sales are permitted.
3. No transactions in options or futures are permitted,
except that listed options may be purchased, and
covered calls written. No option may be purchased or
written if the expiration date is less than 60
calendar days from the date of purchase. No option
position may be closed at a profit less than 60
calendar days from the date it is established.
4. No Employee may acquire any security in an initial
public offering (IPO) or any other public
underwriting. No Employee shall purchase shares of an
investment company that is managed by an MSDW
Affiliated Adviser if such investment company is not
generally available to the public.
5a. Private placements of any kind may only be acquired
with special permission from the Code of Ethics
Review Committee (described in Section VII. below)
and, if approved, will be subject to continuous
monitoring by the Local Compliance Group for possible
future conflict. Any Employee wishing to request
approval for private placements must complete a
Private Placement Approval Request Form and submit
the form to the Local Compliance Group. A copy of the
Private Placement Approval Request Form, which may be
revised from time to time, is attached as EXHIBIT A.
Where the Code of Ethics Review Committee approves
any acquisition of a private placement, its decision
and reasons for supporting the decision will be
documented in a written report, which is to be kept
for five years by the Local Compliance Group after
the end of the fiscal year in which the approval was
granted.
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5b. Any Employee who has a personal position in an issuer
through a private placement must affirmatively
disclose that interest if such person is involved in
consideration of any subsequent investment decision
by a Fund or Managed Account regarding any security
of that issuer or its affiliate. In such event, the
President or Chief Investment Officer of MSDW Asset
Management shall independently determine the final
investment decision. Written records of any such
circumstance shall be sent to the Local Compliance
Group and maintained for a period of five years after
the end of the fiscal year in which the approval was
granted.
6. U.S. Employees are permitted to trade only between
the hours of 9:30 a.m. and 4:00 p.m. (Eastern
Standard Time). Employees outside the U.S. may
execute trades (i) only during the time markets in
the jurisdiction in which they are located are open
if the trade is being executed in that market, or
another market that has overlapping trading hours or
(ii) in markets which open after the close of the
market in which the Employee is located, by the next
close of trading in that other market.
Restriction 7a. applies only to MSDW Affiliated Advisers' portfolio
managers and research analysts (and all persons reporting to portfolio
managers and research analysts). Restriction 7b. applies only to
personnel in the trading department of each MSDW Affiliated Adviser.
7a. No purchase or sale transaction may be made in any
covered security or related security by any portfolio
manager or research analyst (or person reporting to a
portfolio manager or research analyst) for a period
of seven (7) calendar days before or after that
covered security or related security is bought or
sold by any Fund (other than Morgan Stanley Dean
Witter Value-Added Market Series, Morgan Stanley Dean
Witter Select Dimensions Investment Series -
Value-Added Market Portfolio, and Morgan Stanley Dean
Witter index funds, or Portfolios) or any Managed
Account for which such portfolio manager or research
analyst (or person reporting to a portfolio manager
or research analyst) serves in that capacity.
7b. No purchase or sale transaction may be made in any
covered security or related security traded through
the appropriate MSDW Affiliated Adviser's trading
desk(s) (as determined by the Local Compliance Group)
by any person on that trading desk on the same day
that any Fund (other than Morgan Stanley Dean Witter
Value-Added Market Series, Morgan Stanley Dean Witter
Select Dimensions Investment Series-Value-Added
Market Portfolio, and Morgan Stanley Dean Witter
index funds, or Portfolios) or any Managed Account
has a pending purchase or sale order in that same
covered security or related security.
7c. Any transaction by persons described in sub-sections
7a. and 7b. above within such enumerated period may
be required to be reversed, if
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applicable, and any profits or, at the discretion of
the Code of Ethics Review Committee, any differential
between the sale price of the individual security
transaction and the subsequent purchase or sale price
by a relevant Fund or Managed Account during the
enumerated period, will be subject to disgorgement;
other sanctions may also be applied.
8. No Employee of an MSDW Affiliated Adviser shall
purchase or sell any Covered Security which to their
knowledge at the time of such purchase or sale: (i)
is being considered for purchase or sale by a Fund or
a Managed Account; or (ii) is being purchased or sold
by a Fund or a Managed Account. With respect to MSDW
Affiliated Advisers' portfolio managers and research
analysts (and all persons reporting to portfolio
managers and research analysts), no such persons may
purchase shares of a closed-end investment company
over which such person exercises investment
discretions.
IMPORTANT: Regardless of the limited applicability of
Restrictions 7.a., and 7.b., each MSDW Affiliated Adviser's
Compliance Group monitors all transactions by its Employees in
all locations in order to ascertain any pattern of conduct
that may evidence actual or potential conflicts with the
principles and objectives of this Code, including a pattern of
frontrunning. The Compliance Group for each MSDW Affiliated
Adviser, Services and each Distributor: (i) on a quarterly
basis, will provide the Boards of Directors/Trustees of the
Funds it manages with a written report that describes any
issues that arose during the previous quarter under this Code
and, if applicable, any Funds' Sub-Adviser's Code of Ethics,
including but not limited to, information about material
violations and sanctions imposed in response to the material
violations; and (ii) on an annual basis, will certify that
each MSDW Affiliated Adviser, Services and each Distributor
has adopted procedures reasonably necessary to prevent its
Employees from violating this Code. Also, as stated elsewhere
in this Code, any violation of the foregoing restrictions may
result in disgorgement of all profits from the transactions as
well as other possible sanctions.
C. Pre-Clearance Requirement
1. Procedures
(a) From Whom Obtained
Subject to the limitations and restrictions
set forth in sub-section B. above, all
Employees are required to obtain
pre-clearance of a Personal Securities
Transaction by: (i) confirming that no open
orders exist in the same or related security
with the appropriate trading desk(s) (as
determined by the Local Compliance Group);
and (ii) having the transaction approved by
the Local Compliance Group.
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Portfolio managers and research analysts (or
persons reporting to portfolio managers or
research analysts) seeking approval for a
Personal Securities Transaction must obtain
an additional approval signature from a
designated Senior Portfolio Manager. Trading
desk personnel at any MSDW Affiliated
Adviser seeking approval for a Personal
Securities Transaction must obtain an
additional approval signature from their
immediate supervisor.
A copy of the Personal Securities
Transaction Approval Form, which may be
revised from time to time, is attached as
EXHIBIT B.
Each Local Compliance Group has implemented
procedures reasonably designed to monitor
purchases and sales effected pursuant to the
aforementioned pre-clearance procedures.
(b) Time of Pre-clearance
All approved securities transactions,
whether executed through an MSDW brokerage
account (as defined below) or an MSDW Online
account, must take place: (i) for U.S.
employees, prior to 4:00 p.m. (Eastern
Standard Time) on the same day that the
complete pre-clearance is obtained and (ii)
for Employees located outside the U.S., as
described in Section VI., sub-section B.6.
If the transaction is not completed on such
date, a new pre-clearance must be obtained,
including one for any uncompleted portion of
a transaction. Post-approval is not
permitted under the Code. Any trade that is
determined to have been completed before
approval will be considered a violation of
this Code.
(c) Permitted Brokerage Accounts
ALL SECURITIES TRANSACTIONS MUST BE MADE
THROUGH A MORGAN STANLEY DEAN WITTER
BROKERAGE ACCOUNT(1) (AN "MSDW BROKERAGE
ACCOUNT") OR AN MSDW ONLINE ACCOUNT. NO
OTHER BROKERAGE ACCOUNTS ARE PERMITTED
UNLESS SPECIAL PERMISSION IS OBTAINED FROM
THE LOCAL COMPLIANCE GROUP. If you maintain
accounts outside of MSDW, you must transfer
your accounts to an MSDW brokerage account
or an MSDW Online account as soon as
practical (generally thirty days or less).
Failure to do so will be considered a
significant violation of the Code. In the
event permission to maintain an outside
brokerage account is granted by the Local
Compliance Group, it is the responsibility
of the Employee to arrange for duplicate
confirmations of all securities transactions
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(1) MSDW brokerage account shall mean an account with an affiliated MSDW broker
in the Employee's local jurisdiction.
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and monthly brokerage statements to be sent
to the Local Compliance Group.
Prior to opening an MSDW brokerage account
or an MSDW Online account, Employees must
obtain approval from their Local Compliance
Group. No Employee may open a brokerage
account unless a completed and signed copy
of an MSDW Employee Account Request Form is
submitted to the Local Compliance Group for
approval. No Employee may open an MSDW
Online account unless a completed and signed
copy of an MSDW Employee Account Request
Form is submitted to the Local Compliance
Group for approval. In addition, no Employee
may apply electronically for an MSDW Online
Account. A copy of the MSDW Employee Account
Request Form, which may be revised from time
to time, is attached as EXHIBIT C.
(d) Personal Securities Transaction Approval
Form
Pre-clearance must be obtained by completing
and signing the Personal Securities
Transaction Approval Form provided for that
purpose and obtaining the proper
pre-clearance signatures, as indicated in
sub-section C.1.(a). The form must also
indicate, as applicable, the name of the
individual's Financial Advisor, the Branch
Office Number, or whether the account is an
MSDW Online Account, as well as other
required information.
If you have more than one account under your
control, you must indicate on the approval
sheet for which account the trade is
intended. Additionally, unless your Local
Compliance Group has informed you that it
will obtain information directly from the
MSDW affiliate(s) where you maintain your
account or MSDW Online containing
substantially the same information as trade
confirms and account statements, please
advise the MSDW affiliate(s) where you
maintain your account or MSDW Online to have
duplicate copies of your trade confirms and
account statements sent to the Local
Compliance Group for each account an
Employee has, or as a result of the
transaction acquires, any direct or indirect
beneficial ownership. (as defined in
sub-section C.4.)
(e) Filing
After all required signatures are obtained,
the Personal Securities Transaction Approval
Form must be filed with the Local Compliance
Group by noon of the day following execution
of the trade for filing in the respective
individual's Code of Ethics file. The
Employee should
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retain a copy for his/her records. (The
Local Compliance Group will also retain a
copy of the form if a pre-clearance request
is denied.)
2. Factors Considered in Pre-Clearance of Personal
Securities Transactions
In addition to the requirements set forth under
sub-section C.1.(a) above, the Local Compliance Group
and/or, if applicable, designated Senior Portfolio
Manager/immediate trading room supervisor (as
appropriate), in keeping with the general principles
and objectives of this Code, may refuse to grant
pre-clearance of a Personal Securities Transaction in
their sole discretion without being required to
specify any reason for the refusal. Generally, the
following factors, among others, will be considered
in determining whether or not to clear a proposed
transaction:
(a) Whether the amount or the nature of the
transaction, or the person making it, is
likely to affect the price or market of
security that is held by a Fund or a Managed
Account.
(b) Whether the individual making the proposed
purchase or sale is likely to benefit from
purchases or sales being made or considered
on behalf of any Fund or Managed Account.
(c) Whether the transaction is non-volitional on
the part of the individual.
3. Exempt Securities
(a) The securities listed below are exempt from:
(i) the restrictions of Section VI.,
sub-sections B.1., B.7. and B.8.; (ii) the
pre-clearance requirements of sub-section
C.; and (iii) the initial, quarterly and
annual reporting requirements of sub-section
D. Accordingly, it is not necessary to
obtain pre-clearance for Personal Securities
Transactions in any of the following
securities, nor is it necessary to report
such securities in the quarterly transaction
reports or the initial and annual securities
holdings list:
(i) U.S. Government Securities(2)
(ii) Bank Certificates of Deposit;
(iii) Bankers' Acceptances;
(iv) Commercial Paper;
(v) High Quality Short-Term Debt
Instruments (including repurchase
agreements);
(vi) U.S. Government Agency Securities(2);
and
(vii) Open-end investment companies (mutual
funds.)
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(2) For foreign offices, the equivalent shares in fixed income securities issued
by the government of their respective jurisdiction; however, such securities are
subject to the initial and annual reporting requirements of sub-section D.
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(Closed-end funds must be pre-cleared and
are subject to all other reporting
requirements.)
(b) Transactions in redeemable Unit Investment
Trusts and purchases under an issuer's
direct stock purchase plan or automatic
dividend reinvestment plan are exempt from
the restrictions contained in sub-sections
B.1., B.7. and B.8 and the pre-clearance
requirement of sub-section C., but are
subject to the initial, quarterly and annual
reporting requirements of sub-section D.
(All Employees wishing to utilize these
types of plans must submit a memorandum to
the Local Compliance Group stating the name
and the amount to be invested in the plan.
Any sale transactions from an automatic
dividend reinvestment plan must be
pre-approved.)
(c) Due to the fact that Morgan Stanley Dean
Witter & Co. stock ("MWD") may not be
purchased by any actively managed Fund
(other than index-type funds) or any Managed
Account, transactions in such stock
(including exercise of stock option grants)
are exempt from the restrictions of
sub-section B.7. However, MWD stock holdings
and transactions in MWD stock(3) remain
subject to the quarterly and annual
reporting requirements of sub-section D. as
well as the 30-day holding period
restriction and the 60-day short swing
profit restriction in Section B.1. (except
in connection with the sale of MWD stock
acquired through the exercise of employee
stock options) and the pre-clearance
requirements of sub-section C. The
restrictions imposed by MSDW on Senior
Management and other persons in connection
with transactions in MWD stock are in
addition to this Code, and must be observed
to the extent applicable.
4. Accounts Covered
An Employee must obtain pre-clearance for any
Personal Securities Transaction if such Employee has,
or as a result of the transaction acquires, any
direct or indirect beneficial ownership in the
security.
The term "beneficial ownership" shall be interpreted
with reference to the definition contained in the
provisions of Section 16 of the Securities Exchange
Act of 1934. Generally, a person is regarded as
having beneficial ownership of securities held in the
name of:
(a) the individual; or
(b) a husband, wife or a minor child; or
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(3) In connection with the sale of MWD stock, periodic purchases through
employer sponsored equity purchase plans shall not be looked to in calculating
the 30-day holding period restriction or the 60-day short swing profit
restriction, provided that stock in an amount greater than or equal to the
amount being sold was held prior to the beginning of the applicable
30-day/60-day period.
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(c) a relative sharing the same house; or
(d) other person if the Employee:
(i) obtains benefits substantially
equivalent to ownership of the
securities;
(ii) can obtain ownership of the
securities immediately or at some
future time; or
(iii) can have investment discretion or
otherwise can exercise control.
The final determination of beneficial ownership is a
question to be determined in light of the facts of
each particular case and the above is not an
exclusive list of examples. If there are any
questions as to beneficial ownership, please contact
your Local Compliance Group.
5. Exemption from Pre-clearance Requirement
Pre-clearance is not required for any account where
the Employee does not have direct or indirect
beneficial ownership. In case of doubt as to whether
an account is covered by this Code, Employees must
consult with their Local Compliance Group.
D. Report of Transactions
1. Transactions and Accounts Covered
(a) All Personal Securities Transactions in
Covered Securities must be reported in the
next quarterly transaction report after the
transaction is effected. The quarterly
report shall contain the following
information:
(i) The date of the transaction, the
title, interest rate and maturity
date (if applicable), number of
shares and principal amount of each
security involved;
(ii) The nature of the transaction
(i.e., purchase, sale, or any other
type of acquisition or
disposition);
(iii) The price at which the purchase or
sale was effected;
(iv) The name of the broker, dealer, or
bank with, or through which, the
purchase or sale was effected; and
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(v) The date the report was submitted
to the Local Compliance Group by
such person.
In addition, any new brokerage account(s)
opened during the quarter without approval
from the Local Compliance Group as well as
the date(s) the account(s) was (were) opened
must be reported. The report must contain
the following information:
(i) The name of the broker, dealer, or
bank with whom the account was
established;
(ii) The date the account was
established; and
(iii) The date the report was submitted
to the Local Compliance Group.
(b) An Employee need not make a quarterly
transaction report if he/she: (i) maintains
only an MSDW brokerage account or an MSDW
Online Account and the report would
duplicate information contained in the
broker trade confirms, system generated
reports or account statements received by
the Local Compliance Group; and (ii) has not
opened any new brokerage accounts or mutual
fund accounts with brokerage facilities
without obtaining approval from their Local
Compliance Group during the quarter.
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2. Time of Reporting
(a) Initial Listing of Securities Holdings and
Brokerage Accounts Report
Each Access Person must provide an Initial
Listing of Securities Holdings and Brokerage
Accounts Report to their Local Compliance
Group disclosing: (i) all Covered
Securities, including private placement
securities, beneficially owned by the Access
Person listing the title of the security,
number of shares held, and principal amount
of the security; (ii) the name of the broker
dealer or financial institution where the
Access Person maintains a personal account;
and (iii) the date the report is submitted
by the Access Person. New Access Persons
will be required to provide a listing as of
the date such person becomes an Access
Person of all holdings in Covered Securities
and all outside brokerage accounts and
mutual fund accounts with brokerage
facilities. This report must be provided no
later than 10 calendar days after a person
becomes an Access Person.
(b) Quarterly Securities Transactions and New
Brokerage Account(s) Reports
Quarterly Securities Transactions and New
Brokerage Account(s) Reports must be
submitted by Employees within 10 calendar
days after the end of each calendar quarter.
Any new brokerage account(s) opened during
the quarter without their Local Compliance
Group's prior approval, as well as the
date(s) the account(s) was (were) opened,
must be reported within 10 calendar days
after the end of each calendar quarter.
(c) Annual Listing of Securities Holdings
Reports and Certification of Compliance
The Annual Listing of Securities Holdings
Report and Certification of Compliance
requires all Employees to provide an annual
listing of holdings of: (i) all Covered
Securities beneficially owned, listing the
title of the security, number of shares
held, and principal amount of the security
as of December 31 of the preceding year,
(ii) the name of any broker dealer or
financial institution where the account(s)
in which Covered Securities were maintained,
as of December 31 of the preceding year;
and (iii) the date the report is submitted.
This report must be provided no later than
30 calendar days after December 31 each
year. In the case of Employees maintaining
MSDW brokerage accounts or MSDW Online
Accounts for which broker trade confirms,
system generated reports or account
statements are already received on a
quarterly basis by the Local Compliance
Group, an annual certification
(Certification of
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Compliance) that the holdings information
already provided to the Local Compliance
Group accurately reflects all such holdings
will satisfy the aforementioned requirement.
3. Form of Reporting
The Initial Listing of Securities Holdings and
Brokerage Accounts Report, Quarterly Securities
Transactions and New Brokerage Account(s) Reports,
and the Annual Listing of Securities Holdings Report
and Certification of Compliance must be completed on
the appropriate forms provided by each Local
Compliance Group. By not submitting a quarterly
transaction report form, an Employee will be deemed
to have represented, that such person has: (i) only
executed reportable transactions in an account as
defined in Section VI., sub-section D.1. (b) above;
or (ii) only traded securities exempt from the
reporting requirements defined in Section VI.,
sub-section C.3.(a) above. Copies of the Initial
Holdings Report and Brokerage Accounts Report,
Quarterly Securities Transactions and New Brokerage
Account(s) Reports, and the Annual Listing of
Securities Holdings Report and Certification of
Compliance, which may be revised from time to time,
are attached as EXHIBITS D, E, AND F, respectively.
4. Responsibility to Report
The responsibility for reporting is imposed on each
individual required to make a report. Any effort by
an MSDW Affiliated Adviser, Services and/or the
Distributors to facilitate the reporting process does
not change or alter that individual's responsibility.
5. Leave of Absence
Employees of each MSDW Affiliated Adviser, Services
or the Distributors on leave of absence may not be
subject to the pre-clearance and reporting provisions
of the Code, provided they meet the requirements for
such exception specified in Section IV. above.
6. Where to File Report
All reports must be filed by Employees with their
Local Compliance Group.
7. Responsibility to Review
Each Local Compliance Group will review all Initial
Listing of Securities Holdings and Brokerage Accounts
Reports, Quarterly Securities Transactions and New
Brokerage Account(s) Reports, and Annual Listing of
Securities Holdings Reports and Certification of
Compliance, filed by
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Employees, as well as broker confirmations, system
generated reports, and account statements.
VII. Review Committee
A Code of Ethics Review Committee, consisting of the President/Chief
Operating Officer, Chief Investment Officer, Chief Legal Officer, Chief
Operations Officer, Chief Strategic Officer, Chief Sales and Marketing
Officer, and the Chief Administrative Officer - Investments of MSDW
Asset Management will review and consider any proper request of an
Employee for relief or exemption from any restriction, limitation or
procedure contained herein consistent with the principles and
objectives outlined in Sections II. and III. of this Code. The
Committee shall meet on an ad hoc basis, as it deems necessary upon
written request by an Employee stating the basis for the requested
relief. The Committee's decision is within its sole discretion.
VIII. Service as a Director
No Employee may serve on the board of any company without prior
approval of the Code of Ethics Review Committee. If such approval is
granted, it will be subject to the implementation of information
barrier procedures to isolate any such person from making investment
decisions for Funds or Managed Accounts concerning the company in
question.
IX. Gifts
No Employee shall accept directly or indirectly anything of value,
including gifts and gratuities, in excess of $100 per year from any
person or entity that does business with any Fund or Managed Account,
not including occasional meals or tickets to theater or sporting events
or other similar entertainment.(4)
X. Sanctions
Upon discovering a violation of this Code, any of MSDW Affiliated
Advisers, Services or the Distributors may impose such sanctions as
they deem appropriate, including a reprimand (orally or in writing),
demotion, suspension or termination of employment and/or other possible
sanctions. The President/Chief Operating Officer of MSDW Asset
Management, in his sole discretion, is authorized to determine the
choice of sanctions to be imposed in specific cases, including
termination of employment.
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(4) For MSAITM-Tokyo, the receipt of gifts shall not be in excess of (Y)20,000
per year.
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XI. Employee Certification
All Employees of each MSDW Affiliated Adviser, Services and the
Distributors are required to sign a copy of this Code indicating their
understanding of, and their agreement to abide by the terms of this
Code.
In addition, all Employees of each MSDW Affiliated Adviser, Services
and the Distributors will be required to certify annually that: (i)
they have read and understand the terms of this Code and recognize the
responsibilities and obligations incurred by their being subject to
this Code; and (ii) they are in compliance with the requirements of
this Code, including but not limited to the reporting of all brokerage
accounts, and the pre-clearance of all non-exempt Personal Securities
Transactions in accordance with this Code.
17
18
I have read and understand the terms of the above Code. I recognize the
responsibilities and obligations, including but not limited to my quarterly
transaction, annual listing of holdings, and initial holdings reporting
obligations (as applicable), incurred by me as a result of my being subject to
this Code. I hereby agree to abide by the above Code.
---------------------------------- -------------------------------------
(Signature) (Date)
----------------------------------
(Print name)
MORGAN STANLEY DEAN WITTER ASSET MANAGEMENT CODE OF ETHICS
Dated: January 29, 2001
18
19
ADDENDUM TO THE MORGAN STANLEY ASSET MANAGEMENT CODE OF ETHICS
Except as provided below, all directors, officers, and employees of VAN KAMPEN
INVESTMENTS INC. and its subsidiaries (collectively, the Van Kampen Entities)
shall be deemed to be "Access Persons" subject to all the provisions set forth
in the Morgan Stanley Investment Management Code of Ethics (the "Code"). Each
Van Kampen Entity shall be deemed to be a "Morgan Stanley Affiliated Adviser"
and subject to all the provisions set forth in the Code for Morgan Stanley
Affiliated Advisors. All such persons are also referred to the Code of Conduct;
the requirements of which they are hereby subject to.
Any employee of a Van Kampen Entity who is an investor services representative
or employee of Van Kampen Investor Services Inc. (the "Transfer Agent") provided
such representative or employee does not, in connection with his or her regular
functions or duties, make; participate in, or obtain information regarding the
purchase or sale of a Covered Security by a Fund, or whose functions do not
relate to the making of any recommendations with respect to the purchases or
sales; and (ii) are not "natural persons" in a control relationship to the Fund
or the Fund's adviser who obtains information concerning recommendations to the
Fund with regard to the purchase or sale of Covered Securities by the Fund
(collectively "Excluded Van Kampen Employees") ARE NOT REQUIRED TO:
(i) File the Initial Listing of Securities Holdings and Brokerage Accounts
Report, the Annual Listing of Securities Holdings Report and
Certification of Compliance, or Quarterly Securities Transactions and
New Brokerage Account(s) Report as set forth in of Section VI.
sub-section D; or
(ii) Adhere to the restriction to hold Covered Securities beyond 30 calendar
days from purchase date as set forth in Section VI. sub-section B. 1.
No Van Kampen Entity Access Person shall purchase or sell any Covered Security
which, to their knowledge, at the time of such purchase or sale: (i) is being
considered for purchase or sale by a Fund or a Managed Account; (ii) is being
purchased or sold by a Fund or a Managed Account; or (iii) with respect to a UIT
client, the UIT client has a pending order in that same Covered Security on the
initial date of deposit.
The definition of portfolio managers shall also extend to any person who
exercises investment discretion on behalf of an adviser for a Client, including
those persons who are involved in determining, or have knowledge concerning, the
composition of the portfolios of UITs prior to deposit.
EX-99.(Q)
7
c62223bpex99-q.txt
POWER OF ATTORNEY
1
EXHIBIT (q)
POWER OF ATTORNEY
The undersigned, being Officers and Trustees of each of the Van Kampen
Open End Trusts (individually, a "Trust") as indicated on Schedule 1 attached
hereto and incorporated by reference, each a Delaware business trust, except for
the Van Kampen Pennsylvania Tax Free Income Fund being a Pennsylvania trust, and
being Officers and Directors of Van Kampen Series Fund, Inc. (the
"Corporation"), a Maryland corporation, do hereby, in the capacities shown
below, Michael H. Santo, Sara L. Badler, and Weston B. Wetherell, each of
Oakbrook Terrace, Illinois, as agents and attorneys-in-fact with full power of
substitution and resubstitution, for each of the undersigned, to execute and
deliver, for and on behalf of the undersigned, any and all amendments to the
Registration Statement filed by each Trust or the Corporation with the
Securities and Exchange Commission pursuant to the provisions of the Securities
Act of 1933 and the Investment Company Act of 1940.
This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.
Dated: August 23, 2001
Signature Title
--------- -----
/s/ Richard F. Powers, III President, Trustee/Director
-----------------------------------------
Richard F. Powers, III
/s/ John L. Sullivan Vice President, Chief Financial Officer and Treasurer
-----------------------------------------
John L. Sullivan
/s/ J. Miles Branagan Trustee/Director
-----------------------------------------
J. Miles Branagan
/s/ Jerry D. Choate Trustee/Director
-----------------------------------------
Jerry D. Choate
/s/ Linda Hutton Heagy Trustee/Director
-----------------------------------------
Linda Hutton Heagy
/s/ R. Craig Kennedy Trustee/Director
-----------------------------------------
R. Craig Kennedy
/s/ Mitchell M. Merin Trustee/Director
-----------------------------------------
Mitchell M. Merin
/s/ Jack E. Nelson Trustee/Director
-----------------------------------------
Jack E. Nelson
/s/ Phillip B. Rooney Trustee/Director
-----------------------------------------
Phillip B. Rooney
/s/ Wayne W. Whalen Trustee/Director
-----------------------------------------
Wayne W. Whalen
/s/ Suzanne H. Woolsey Trustee/Director
-----------------------------------------
Suzanne H. Woolsey
2
SCHEDULE 1
VAN KAMPEN U.S. GOVERNMENT TRUST
VAN KAMPEN TAX FREE TRUST
VAN KAMPEN TRUST
VAN KAMPEN EQUITY TRUST
VAN KAMPEN EQUITY TRUST II
VAN KAMPEN TAX FREE MONEY FUND
VAN KAMPEN COMSTOCK FUND
VAN KAMPEN CORPORATE BOND FUND
VAN KAMPEN EMERGING GROWTH FUND
VAN KAMPEN ENTERPRISE FUND
VAN KAMPEN EQUITY INCOME FUND
VAN KAMPEN GOVERNMENT SECURITIES FUND
VAN KAMPEN GROWTH AND INCOME FUND
VAN KAMPEN HARBOR FUND
VAN KAMPEN HIGH INCOME CORPORATE BOND FUND
VAN KAMPEN LIFE INVESTMENT TRUST
VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND
VAN KAMPEN PACE FUND
VAN KAMPEN PENNSYLVANIA TAX FREE INCOME FUND
VAN KAMPEN REAL ESTATE SECURITIES FUND
VAN KAMPEN RESERVE FUND
VAN KAMPEN TAX-EXEMPT TRUST
VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME
EX-99.(Z)(1)
8
c62223bpex99-z1.txt
LIST OF CERTAIN INVESTMENT COMPANIES
1
EXHIBIT (z)(1)
Item 27(a)
----------
Van Kampen U.S. Government Trust
Van Kampen U.S. Government Fund
Van Kampen Tax Free Trust
Van Kampen Insured Tax Free Income Fund
Van Kampen Tax Free High Income Fund
Van Kampen California Insured Tax Free Fund
Van Kampen Municipal Income Fund
Van Kampen Intermediate Term Municipal Income Fund
Van Kampen Florida Insured Tax Free Income Fund
Van Kampen New York Tax Free Income Fund
Van Kampen Trust
Van Kampen High Yield Fund
Van Kampen Equity Trust
Van Kampen Aggressive Growth Fund
Van Kampen Growth Fund
Van Kampen Select Growth Fund
Van Kampen Small Company Growth Fund*
Van Kampen Small Cap Growth Fund
Van Kampen Small Cap Value Fund
Van Kampen Utility Fund
Van Kampen Value Opportunities Fund
Van Kampen Equity Trust II
Van Kampen International Advantage Fund*
Van Kampen Tax Managed Equity Growth Fund
Van Kampen Technology Fund
Van Kampen Pennsylvania Tax Free Income Fund
Van Kampen Tax Free Money Fund
Van Kampen Prime Rate Income Trust
Van Kampen Senior Floating Rate Fund
Van Kampen Comstock Fund
Van Kampen Corporate Bond Fund
Van Kampen Emerging Growth Fund
Van Kampen Enterprise Fund
Van Kampen Equity Income Fund
Van Kampen Exchange Fund
2
Van Kampen Limited Maturity Government Fund
Van Kampen Government Securities Fund
Van Kampen Growth and Income Fund
Van Kampen Harbor Fund
Van Kampen High Income Corporate Bond Fund
Van Kampen Life Investment Trust on behalf of its series
Aggressive Growth Portfolio
Asset Allocation Portfolio
Comstock Portfolio
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Global Equity Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Select Growth Portfolio
Strategic Stock Portfolio
Technology Portfolio
Van Kampen Pace Fund
Van Kampen Real Estate Securities Fund
Van Kampen Reserve Fund
Van Kampen Tax Exempt Trust
Van Kampen High Yield Municipal Fund
Van Kampen U.S. Government Trust for Income
Van Kampen Series Fund, Inc.
Van Kampen American Value Fund
Van Kampen Asian Equity Fund
Van Kampen Emerging Markets Debt Fund*
Van Kampen Emerging Markets Fund
Van Kampen Equity Growth Fund
Van Kampen European Value Equity Fund
Van Kampen Focus Equity Fund
Van Kampen Global Equity Allocation Fund
Van Kampen Global Value Equity Fund
Van Kampen Growth and Income Fund II*
Van Kampen International Magnum Fund
Van Kampen Japanese Equity Fund*
Van Kampen Latin American Fund
Van Kampen Mid Cap Growth Fund
Van Kampen Global Franchise Fund
Van Kampen Value Fund
Van Kampen Worldwide High Income Fund
* Funds that have not commenced investment operations.
3
Investment Grade Municipal Trust Series 3
Insured Income Trust (Intermediate) Series 83
Insured Income Trust Series 85
Telecommunications & Bandwidth Trust, A Series 16A
Telecommunications & Bandwidth Trust, B Series 16B
Insured Municipals Income Trust Series 435
Michigan Insured Municipals Income Trust Series 165
Pennsylvania Insured Municipals Income Trust Series 256
The Dow(SM) Strategic 10 Portfolio July 2001 Series
The Dow(SM) Strategic 5 Portfolio July 2001 Series
EAFE Strategic 20 Portfolio July 2001 Series
Strategic Picks Opportunity Trust Portfolio July 2001 Series
NASDAQ Strategic 10 Portfolio July 2001 Series
Internet Portfolio, A Series 30a
Internet Portfolio, B Series 30b
Morgan Stanley High-Technology 35 Index Portfolio, A Series 22a
Morgan Stanley High-Technology 35 Index Portfolio, B Series 22b
Morgan Stanley U.S. Multinational Index Portfolio Series 9a
Morgan Stanley U.S. Multinational Index Portfolio Series 9b
The Dow 30 Index Trust Series 12
Great International Firms Portfolio Series 18
Pharmaceutical Portfolio, A Series 16a
Pharmaceutical Portfolio, B Series 16b
Morgan Stanley Consumer Index Portfolio Series 3a
Morgan Stanley Consumer Index Portfolio Series 3b
Semi-Conductor Portfolio Series 8a
Roaring 2000s Portfolio, A Series 14a
Roaring 2000s Portfolio, B Series 14b
Roaring 2000s Portfolio Traditional Series 10
Global Energy Portfolio Series 19
Financial Institutions Portfolio, A Series 11a
Financial Institutions Portfolio, B Series 11b
Focus Value Portfolio Series 2
Power Portfolio Series 2
Van Kampen Life Portfolios,
Bandwidth & Telecommunications Series 1
Biotechnology & Pharmaceutical Series 1
Internet Series 1
Morgan Stanley High-Technology 35 Index Series 1
Morgan Stanley U.S. Multinational 50 Index Series 1
Edward Jones Central Equity Trust, Diversified Income Series 2
Edward Jones Select Growth Trust July 2001 Series
Swiss Blue Chip Strategic Trust Series 2
Investors' Corporate Income Trust Series 1 and Subsequent Series
Tax Exempt Trust for Various State Residents
Investors' Quality Tax-Exempt Trust Series 1 and Subsequent Series
The First National Dual Series Tax-Exempt Bond Trust Series 3 and Subsequent Series
EX-99.(Z)(2)
9
c62223bpex99-z2.txt
LIST OF OFFICERS & DIRECTORS OF VK FUNDS, INC.
1
EXHIBIT (z)(2)
Richard F. Powers, III Chairman and Chief Executive Officer; Oakbrook Terrace, IL
President of the Funds
John H. Zimmermann, III Managing Director and President; Oakbrook Terrace, IL
Vice President of the Funds
A. Thomas Smith III Managing Director, General Oakbrook Terrace, IL
Counsel and Secretary;
Vice President and Secretary of the Funds
Michael H. Santo Managing Director and Chief Oakbrook Terrace, IL
Operations & Technology Officer;
Vice President of the Funds
Colette M. Saucedo Managing Director and Houston, TX
Chief Administrative Officer
Steven M. Massoni Managing Director Oakbrook Terrace, IL
David M. Swanson Managing Director and Chief Oakbrook Terrace, IL
Marketing Officer
Laurence J. Althoff Sr. Vice President & Controller Oakbrook Terrace, IL
Don J. Andrews Sr. Vice President & Chief Compliance Oakbrook Terrace, IL
Officer
Sara L. Badler Executive Director Oakbrook Terrace, IL
General Counsel & Secretary;
Assistant Secretary of the Funds
Patricia A. Bettlach Executive Director Chesterfield, MO
Michael P. Boos Executive Director Oakbrook Terrace, IL
Robert C. Brooks Sr. Vice President Oakbrook Terrace, IL
Dominick Cogliandro Sr. Vice President & Asst. Treasurer New York, NY
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
John E. Doyle Sr. Vice President Oakbrook Terrace, IL
Richard G. Golod Sr. Vice President Annapolis, MD
Eric J. Hargens Sr. Vice President Oakbrook Terrace, IL
David S. Hogaboom Executive Director Oakbrook Terrace, IL
Michael B. Hughes Executive Director Oakbrook Terrace, IL
David Linton Sr. Vice President Weston, CT
Dominic C. Martellaro Sr. Vice President Oakbrook Terrace, IL
Carl Mayfield Sr. Vice President Oakbrook Terrace, IL
Mark R. McClure Sr. Vice President Oakbrook Terrace, IL
Maura A. McGrath Executive Director New York, NY
Robert F. Muller, Jr. Sr. Vice President Houston, TX
Walter E. Rein Sr. Vice President Oakbrook Terrace, IL
James J. Ryan Sr. Vice President Oakbrook Terrace, IL
Elizabeth Vale Sr. Vice President West Conshohocken, NJ
Weston B. Wetherell Sr. Vice President, Deputy General Oakbrook Terrace, IL
Counsel & Asst. Secretary;
Assistant Secretary of the Funds
Robert S. West Sr. Vice President Oakbrook Terrace, IL
Edward C. Wood, III Sr. Vice President and Oakbrook Terrace. IL
Chief Operating Officer
James R. Yount Sr. Vice President Coto De Caza, CA
Gregory Heffington 1st Vice President Ft. Collins, CO
Thomas Rowley 1st Vice President Oakbrook Terrace, IL
Andrew J. Scherer 1st Vice President Oakbrook Terrace, IL
James D. Stevens 1st Vice President North Andover, MA
2
Melissa E. Aieta Vice President West Hartford, CT
James K. Ambrosio Vice President Massapequa, NY
Johanna Anders Vice President Oakbrook Terrace, IL
Timothy R. Armstrong Vice President Wellington, FL
Leslie Ann Ashton Vice President Salt Lake City, UT
Matthew T. Baker Vice President Oakbrook Terrace, IL
Shakeel Anwar Barkat Vice President Annapolis, MD
James B. Bennett Vice President Staten Island, NY
Scott C. Bernstiel Vice President Freehold, NJ
Roger J. Bianco Vice President Highlands Ranch, CO
Carol S. Biegel Vice President Naperville, IL
Brian E. Binder Vice President Oakbrook Terrace, IL
Christopher M. Bisaillon Vice President Chicago, IL
William Edwin Bond Vice President New York, NY
Elizabeth M. Brown Vice President Houston, TX
Michael Winston Brown Vice President Colleyville, TX
John T. Browning Vice President Oakbrook Terrace, IL
Loren Burket Vice President Plymouth, MN
Juanita E. Buss Vice President Kennesaw, GA
Richard J. Charlino Vice President Oakbrook Terrace, IL
Deanne Margaret Chiaro Vice President Hermosa Beach, CA
Scott A. Chriske Vice President Safety Harbor, FL
Richard E. Christman Vice President San Francisco, CA
German Clavijo Vice President Tucker, GA
Michael Colston Vice President Louisville, KY
Kevin J. Connors Vice President Atlanta, GA
Gina Costello Vice President & Asst. Secretary Oakbrook Terrace, IL
Suzanne Cummings Vice President Oakbrook Terrace, IL
William David Dickey Vice President Atlanta, GA
Craig Alan Dumnich Vice President Perryville, MD
Michael E. Eccleston Vice President Chicago, IL
William J. Fow Vice President Redding, CT
David Joseph Fredrick Vice President Newton, MA
Charles Friday Vice President Gibsonia, PA
Robert P. Glover Vice President Princeton, NJ
Kyle D. Haas Vice President Danville, CA
Daniel Hamilton Vice President Austin, TX
John G. Hansen Vice President San Francisco, CA
Jim C. Harper Vice President Wilmette, IL
Michael D. Hibsch Vice President Nashville, TN
Michelle Huber Vice President Oakbrook Terrace, IL
Lowell Jackson Vice President Roswell, GA
Laurie L. Jones Vice President Houston, TX
Tara Jones Vice President Oakbrook Terrace, IL
Louis Gregory Kafkes Vice President Oakbrook Terrace, IL
Constance J. Kain Vice President Oakbrook Terrace, IL
Thomas Patrick Kelly Vice President Oakbrook Terrace, IL
Robert Daniel Kendall Vice President Oakbrook Terrace, IL
Gary F. Kleinschmidt Vice President Chalfont, PA
Frederick Kohly Vice President Miami, FL
Lisa Therese Kueng Vice President Oakbrook Terrace, IL
Douglas M. Macomber Vice President Elmhurst, IL
Patricia D. Lathrop Vice President Seffner, FL
Brian Laux Vice President Staten Island, NY
Tony E. Leal Vice President Houston, TX
3
Holly Lieberman Vice President Oakbrook Terrace, IL
Johnathan Linstra Vice President Pasadena, CA
Ivan R. Lowe Vice President Houston, TX
Richard M. Lundgren Vice President River Forest, IL
Christopher Mackay Vice President Ann Arbor, MI
Kevin S. Marsh Vice President Bellevue, WA
Brooks D. McCartney Vice President Issaquah, WA
Anne Therese McGrath Vice President San Francisco, CA
John Mills Vice President Kenner, LA
Stuart R. Moehlman Vice President Houston, TX
Alexis Montoya Vice President New York, NY
Sterling Tyler Moore Vice President San Francisco, CA
Carin Elizabeth Morgan Vice President Oakbrook Terrace, IL
Lance O'Brian Murphy Vice President Dallas, TX
Grant R. Myers Vice President Houston, TX
Peter Nicholas Vice President Marblehead, MA
James A. O'Brien Vice President Rochester, NY
Mark E. O'Donnell Vice President Watertown, MA
Timothy Jay Ott Vice President Ashburn, VA
Pete Papageorgakis Vice President Oakbrook Terrace, IL
Gregory S. Parker Vice President Bellaire, TX
Christopher Petrungaro Vice President Naperville, IL
Richard J. Poli Vice President Downingtown, PA
Ronald E. Pratt Vice President Alpharetta, GA
Theresa Marie Renn Vice President Oakbrook Terrace, IL
Kevin Wayne Reszel Vice President Oakbrook Terrace, IL
Michael W. Rohr Vice President Naperville, IL
Christine Cleary Ross Vice President Scottsdale, AZ
Suzette N. Rothberg Vice President Maple Grove, MN
Jeffrey Rourke Vice President Malvern, PA
Jason F. Ruimerman Vice President Salem, MA
Shahid S. Saigol Vice President Tampa, FL
Thomas J. Sauerborn Vice President New York, NY
Diane Saxon Vice President & Assistant Treasurer Oakbrook Terrace, IL
Stephanie Scarlata Vice President Mount Kisco, NY
Maura Scherer Vice President Oakbrook Terrace, IL
Stanley Schiewe Vice President Watauga, TX
Timothy M. Scholten Vice President New Albany, OH
Paul F. Schorkopf Vice President Basking Ridge, NJ
Robert Schumacher Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Orlando, FL
Jeffrey M. Scott Vice President Oakbrook Terrace, IL
Gwen L. Shaneyfelt Vice President Oakbrook Terrace, IL
Heather Smith Vice President Richmond, VA
Darren D. Stabler Vice President Coto DeCaza, CA
Christopher J. Staniforth Vice President Leawood, KS
Richard Stefanec Vice President Tarzana, CA
Scott Stevens Vice President Oakbrook Terrace, IL
William C. Strafford Vice President Granger, IN
Terry L. Swenson Vice President Amery, WI
Joseph L. Thomas Vice President San Diego, CA
Charles S. Thompson Vice President Highland, IN
John F. Tierney Vice President Oakbrook Terrace, IL
Thomas Buckley Tyson Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Brett Van Bortel Vice President Oakbrook Terrace, IL
Larry Brian Vickrey Vice President Houston, TX
Daniel B. Waldron Vice President Oakbrook Terrace, IL
Jeff Warland Vice President Oakbrook Terrace, IL
Robert A. Watson Vice President Oakbrook Terrace, IL
Sharon Wells Coicou Vice President New York, NY
Scott A. Wentsel Vice President Oakbrook Terrace, IL
Steven P. Werner Vice President Mission Viejo, CA
Harold Whitworth, III Vice President Liberty Township, OH
Joel John Wilczewski Vice President Franklin, TN
Thomas M. Wilson Vice President Oakbrook Terrace, IL
Barbara A. Withers Vice President Oakbrook Terrace, IL
John Wyckoff Vice President Santa Monica, CA
4
David M. Wynn Vice President Chandler, AZ
John C. Young Vice President Houston, TX
Patrick M. Zacchea Vice President Oakbrook Terrace, IL
Scott F. Becker Asst. Vice President Oakbrook Terrace, IL
Lynn Chadderton Asst. Vice President Valrico, FL
Regina Coleman Asst. Vice President Oakbrook Terrace, IL
Kristen L. Doss Asst. Vice President Houston, TX
Paula Duerr Asst. Vice President Oakbrook Terrace, IL
Tammy Echevarria-Davis Asst. Vice President Oakbrook Terrace, IL
Craig S. Falduto Asst. Vice President Oakbrook Terrace, IL
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Nancy Johannsen Asst. Vice President Oakbrook Terrace, IL
Thomas Johnson Asst. Vice President New York NY
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Dennis M. Rady Asst. Vice President Oakbrook Terrace, IL
Leah Richardson Asst. Vice President Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Pamela S. Salley Asst. Vice President Houston, TX
David T. Saylor Asst. Vice President Oakbrook Terrace, IL
Lisa Schultz Asst. Vice President Oakbrook Terrace, IL
Laurel Shipes Asst. Vice President Duluth, GA
Michael Trizil Asst. Vice President Oakbrook Terrace, IL
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Judy Wooley Asst. Vice President Houston, TX
Cathy Napoli Assistant Secretary Oakbrook Terrace, IL
Scott P. Pedersen Assistant Secretary Oakbrook Terrace, IL
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Rebecca Newman Officer Houston, TX
John Yovanovic Officer Houston, TX
Richard F. Powers, III Director Oakbrook Terrace, IL
Michael H. Santo Director Oakbrook Terrace, IL
A. Thomas Smith III Director Oakbrook Terrace, IL
John H. Zimmermann, III Director Oakbrook Terrace, IL