EXHIBIT 17(b)
VAN KAMPEN TAX FREE TRUST
ON BEHALF OF ITS SERIES
VAN KAMPEN FLORIDA INSURED TAX FREE INCOME FUND
SUPPLEMENT DATED MARCH 28, 2002 TO THE
CLASS A SHARES, CLASS B SHARES AND CLASS C SHARES
PROSPECTUS DATED JANUARY 28, 2002,
SUPERSEDING ALL PRIOR SUPPLEMENTS
The Prospectus is hereby supplemented as follows:
(1) The Board of Trustees for the Van Kampen Tax Free Trust has approved a
proposed reorganization of its series, the Van Kampen Florida Insured Tax Free
Income Fund ("Florida Insured Tax Free") into another of its series, the Van
Kampen Insured Tax Free Income Fund ("Insured Tax Free"). Shareholders of
Florida Insured Tax Free will receive a proxy that will enable them to vote on
the proposed reorganization. The proposed reorganization will be presented to
shareholders of Florida Insured Tax Free for approval at a special meeting of
shareholders.
If the proposed reorganization is approved, shareholders will receive shares of
Insured Tax Free in exchange for their shares of Florida Insured Tax Free. The
combined fund would be managed in accordance with the investment objective,
policies and strategies of Insured Tax Free. Upon completion of the
reorganization, Florida Insured Tax Free will be dissolved under state law.
Florida Insured Tax Free will be closed for purchases by new investors at the
close of business on March 22, 2002.
(2) The information on the inside back cover of the Prospectus under the heading
"BOARD OF TRUSTEES" is hereby amended by deleting Philip B. Rooney, effective
March 27, 2002.
RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
FLI SPT 3/02A
220 320 420
Van Kampen Florida Insured Tax Free Income Fund
-------------------------------------------------------------------------------
Van Kampen Florida Insured Tax Free Income Fund's investment objective is to
provide a high level of current income exempt from federal income tax and
Florida intangible personal property taxes, consistent with preservation of
capital. The Fund is designed for investors who are residents of Florida for
Florida tax purposes. The Fund's investment adviser seeks to achieve the Fund's
investment objective by investing primarily in a portfolio of Florida municipal
securities that are insured at the time of investment as to timely payment of
principal and interest by a top-rated private insurance company.
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 JANUARY 28, 2002
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
PROSPECTUS
Table of Contents
<Table>
Risk/Return Summary......................................... 3
Fees and Expenses of the Fund............................... 6
Investment Objective, Policies and Risks.................... 7
Investment Advisory Services................................ 14
Purchase of Shares.......................................... 15
Redemption of Shares........................................ 21
Distributions from the Fund................................. 23
Shareholder Services........................................ 23
Florida Taxation............................................ 26
Federal Income Taxation..................................... 27
Financial Highlights........................................ 29
</Table>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or 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.
Risk/Return Summary
-------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide a high level of current income
exempt from federal income tax and Florida intangible personal property taxes,
consistent with preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment adviser seeks to achieve the Fund's investment objective
by investing primarily in a portfolio of Florida municipal securities that are
insured at the time of investment as to timely payment of principal and interest
by a top-rated private insurance company. The Fund is designed for investors who
are residents of Florida for Florida tax purposes.
The Fund buys and sells Florida municipal securities with a view towards seeking
a high level of current income exempt from federal income taxes and Florida
intangible personal property taxes and selects securities which the Fund's
investment adviser believes entail reasonable credit risk considered in relation
to the investment policies of the Fund. In selecting securities for investment,
the Fund's investment adviser uses its research capabilities to identify and
monitor attractive investment opportunities and to seek to protect the Fund's
portfolio from early payment by issuers of such securities. In conducting its
research and analysis, the Fund's investment adviser considers a number of
factors, including general market and economic conditions and credit, interest
rate and prepayment risks. Portfolio securities are typically sold when the
assessments of the Fund's investment adviser of any of these factors materially
change. Although the Fund invests in insured municipal securities, insurance
does not protect the Fund from market fluctuations in the value of an insured
security, but only guarantees timely payment of principal and interest of such
investments.
Under normal market conditions, the Fund may invest up to 20% of its total
assets in uninsured Florida municipal securities rated "investment grade" at the
time of purchase by a nationally recognized statistical rating organization.
Under normal market conditions, the Fund may invest up to 20% of its total
assets in municipal securities that are subject to the federal alternative
minimum tax. The Fund may purchase and sell securities on a when-issued and
delayed delivery basis. The Fund may purchase and sell certain derivative
instruments, such as options, futures contracts, options on futures contracts
and interest rate swaps or other interest rate-related transactions, for various
portfolio management purposes, including to earn income, facilitate portfolio
management and mitigate risks.
PRINCIPAL INVESTMENT RISKS
An investment in the Fund is subject to risks, and you could lose money on your
investment in the Fund. There can be no assurance that the Fund will achieve its
investment objective.
MARKET RISK. Market risk is the possibility that the market values of securities
owned by the Fund will decline. The prices of debt securities tend to fall as
interest rates rise, and such declines tend to be greater among debt securities
with longer maturities. The Fund has no policy limiting the maturities of its
investments. To the extent the Fund invests in securities with longer
maturities, the Fund is subject to greater market risk than a fund investing
solely in shorter-term securities.
Generally, the Fund's municipal securities are insured as to timely payment of
principal and interest by a top-rated private insurance company. This insurance
does not, however, guarantee that the prices of these securities will remain
stable during interest rate changes.
Market risk is often greater among certain types of debt securities, such as
zero coupon bonds. As interest rates change, these securities often fluctuate
more in price than traditional debt securities and may subject the Fund to
greater market risk than a fund that does not own these types of securities.
When-issued and delayed delivery transactions are subject to changes in market
conditions from the time of the commitment until settlement. This may adversely
affect the prices or yields of the securities being purchased. The greater the
Fund's outstanding commitments for these securities, the greater the Fund's
exposure to market price fluctuations.
CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments
of interest and principal. Credit
3
risk should be low for the Fund because it invests primarily in insured
municipal securities.
INCOME RISK. The income you receive from the Fund is based primarily on interest
rates, which can vary widely over the short- and long-term. If interest rates
drop, your income from the Fund may drop as well.
CALL RISK. If interest rates fall, it is possible that issuers of securities
with high interest rates will prepay or "call" their securities before their
maturity dates. In this event, the proceeds from the called securities would
likely be reinvested by the Fund in securities bearing the new, lower interest
rates, resulting in a possible decline in the Fund's income and distributions to
shareholders.
MUNICIPAL SECURITIES RISK. The Fund invests primarily in insured municipal
securities. The yields of municipal securities, or of insured municipal
securities, may move differently and adversely compared to the yields of the
overall debt securities markets. Although the interest received from municipal
securities generally is exempt from federal income tax, the Fund may invest up
to 20% of its total assets in municipal securities subject to the federal
alternative minimum tax. In addition, there could be changes in applicable tax
laws or tax treatments that reduce or eliminate the current federal income tax
exemption on municipal securities or otherwise adversely affect the current
federal or state tax status of municipal securities.
NON-DIVERSIFICATION RISKS. The Fund is classified as a "non-diversified" fund,
which means the Fund may invest a greater portion of its assets in a more
limited number of issuers than a "diversified" fund. As a result, the Fund may
be subject to greater risk than a diversified fund because changes in the
financial condition or market assessment of a single issuer may cause greater
fluctuations in the value of the Fund's shares.
STATE-SPECIFIC RISKS. Because the Fund invests primarily in a portfolio of
Florida municipal securities, the Fund is more susceptible to political,
economic, regulatory or other factors affecting issuers of Florida municipal
securities than a fund that does not limit its investments to such issuers.
RISKS OF USING DERIVATIVE INSTRUMENTS. In general terms, a derivative instrument
is one whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures contracts, options on futures
contracts and interest rate swaps or other interest rate-related transactions
are examples of derivative instruments. Derivative instruments involve risks
different from direct investments in underlying securities. These risks include
imperfect correlation between the value of the instruments and the underlying
assets; risks of default by the other party to certain transactions; risks that
the transactions may result in losses that partially or completely offset gains
in portfolio positions; and risks that the transactions may not be liquid.
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 current income
- - Are in a high federal income tax bracket
- - Are subject to Florida intangible personal property tax
- - Wish to add to their investment portfolio a fund that invests primarily in
insured Florida municipal securities
An investment in the Fund is not a deposit of any bank or other insured
depository institution. An investment in the Fund is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
An investment in the Fund may not be appropriate for all investors. The Fund is
not intended to be a complete investment program, and investors should consider
their long-term investment goals and financial needs when making an investment
decision about the Fund. An investment in the Fund is intended to be a long-
term investment, and the Fund should not be used as a trading vehicle.
4
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 seven calendar years prior to the
date of this Prospectus. Sales loads are not reflected in this chart. If these
sales loads had been included, the returns shown below would have been lower.
Remember that past performance of the Fund is not indicative of its future
performance. As a result of market activity, current performance may vary from
the figures shown.
BAR GRAPH
<Table>
<Caption>
ANNUAL RETURN
-------------
1995 16.29
1996 4.37
1997 8.73
1998 6.61
1999 -5.06
2000 13.15
2001 3.89
</Table>
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 seven-year period shown in the bar chart, the highest quarterly
return for Class A Shares was 6.75% (for the quarter ended March 31, 1995) and
the lowest quarterly return for Class A Shares was -2.37% (for the quarter ended
March 31, 1996).
COMPARATIVE PERFORMANCE
As a basis for evaluating the Fund's performance and risks, the table below
shows how the Fund's performance compares with the Lehman Brothers Municipal
Bond Index*, a broad-based market index that the Fund's investment adviser
believes is an appropriate benchmark for the Fund. The Fund's performance
figures listed below include the maximum sales charges paid by investors. The
index's performance figures do not include any commissions or sales charges that
would be paid by investors purchasing the securities represented by the index.
An investment cannot be made directly in the index. Average annual total returns
are shown for the periods ended December 31, 2001 (the most recently completed
calendar year prior to the date of this Prospectus). Remember that past
performance of the Fund is not indicative of its future performance.
<Table>
<Caption>
AVERAGE ANNUAL
TOTAL RETURNS PAST
FOR THE 10 YEARS
PERIODS ENDED PAST PAST OR SINCE
DECEMBER 31, 2001 1 YEAR 5 YEARS INCEPTION
- -----------------------------------------------------------------
Van Kampen Florida
Insured Tax Free Income
Fund -- Class A Shares -1.07% 4.27% 5.36%(1)
Lehman Brothers Municipal
Bond Index 5.13% 5.98% 6.53%(1)
...................................................................
Van Kampen Florida
Insured Tax Free Income
Fund -- Class B Shares -0.91% 4.26% 5.32%(1)**
Lehman Brothers Municipal
Bond Index 5.13% 5.98% 6.53%(1)
...................................................................
Van Kampen Florida
Insured Tax Free Income
Fund -- Class C Shares 2.26% 4.52% 5.30%(1)
Lehman Brothers Municipal
Bond Index 5.13% 5.98% 6.53%(1)
...................................................................
</Table>
Inception date: (1) 7/29/94.
* The Lehman Brothers Municipal Bond Index is an unmanaged, broad-based
statistical composite of municipal bonds.
**The "Since Inception" performance for Class B Shares reflects the conversion
of such shares into Class A Shares seven years after the end of the calendar
month in which shares were purchased. Class B Shares purchased on or after
June 1, 1996 will convert to Class A Shares eight years after the end of the
calendar month in which the shares were purchased. See "Purchase of Shares."
5
The current yield for the thirty-day period ended September 30, 2001 is 3.82%
for Class A Shares, 3.25% for Class B Shares and 3.25% for Class C Shares.
Investors can obtain the current yield of the Fund for each class of shares by
calling (800) 341-2911 or through the internet at www.vankampen.com.
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.
<Table>
<Caption>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
- ----------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ----------------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a
percentage of offering
price) 4.75%(1) None None
..................................................................
Maximum deferred sales
charge (load) (as a
percentage of the lesser
of original purchase
price or redemption
proceeds) None(2) 4.00%(3) 1.00%(4)
..................................................................
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(5) 0.50% 0.50% 0.50%
..................................................................
Distribution and/or
service (12b-1) fees(6) 0.25% 1.00%(7) 1.00%(7)
..................................................................
Other expenses(5) 0.30% 0.30% 0.30%
..................................................................
Total annual fund
operating expenses(5) 1.05% 1.80% 1.80%
..................................................................
</Table>
(1) Reduced for purchases of $100,000 and over. See "Purchase of Shares -- Class
A Shares."
(2) Investments of $1 million or more are not subject to any sales charge at the
time of purchase, but a deferred sales charge of 1.00% may be imposed on
certain redemptions made within one year of the purchase. See "Purchase of
Shares -- Class A Shares."
(3) The maximum deferred sales charge is 4.00% in the first year after purchase
and declining thereafter as follows:
Year 1-4.00%
Year 2-3.75%
Year 3-3.50%
Year 4-2.50%
Year 5-1.50%
Year 6-1.00%
After-None
See "Purchase of Shares -- Class B Shares."
(4) 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."
(5) The Fund's investment adviser is currently waiving or reimbursing all or a
portion of the Fund's management fees and other expenses such that actual
total annual fund operating expenses for the fiscal year ended September 30,
2001 were 0.50%, 1.19% and 1.28% for Class A Shares, Class B Shares and
Class C Shares, respectively.
(6) Class A Shares are subject to an annual service fee of up to 0.25% 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 1.00% of the average daily net assets attributable
to such class of shares. See "Purchase of Shares."
(7) 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 year in which the
shares were purchased). Although your actual costs may be higher or lower, based
on these assumptions your costs would be:
<Table>
<Caption>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
- ---------------------------------------------------------
Class A Shares $577 $793 $1,027 $1,697
...........................................................
Class B Shares $583 $916 $1,125 $1,919*
...........................................................
Class C Shares $283 $566 $ 975 $2,116
...........................................................
</Table>
6
You would pay the following expenses if you did not redeem your shares:
<Table>
<Caption>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
- ---------------------------------------------------------
Class A Shares $577 $793 $1,027 $1,697
...........................................................
Class B Shares $183 $566 $ 975 $1,919*
...........................................................
Class C Shares $183 $566 $ 975 $2,116
...........................................................
</Table>
* 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 provide a high level of current income
exempt from federal income tax and Florida intangible personal property taxes,
consistent with preservation of capital. 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"). There are risks
inherent in all investments in securities; accordingly, there can be no
assurance that the Fund will achieve its investment objective.
The Fund's investment adviser seeks to achieve the Fund's investment objective
by investing primarily in a portfolio of Florida municipal securities that are
insured at the time of investment as to timely payment of principal and interest
by an entity whose claims-paying ability is rated AAA by Standard and Poor's
("S&P") or Aaa by Moody's Investors Service, Inc. ("Moody's") or an equivalent
rating by another nationally recognized statistical rating organization
("NRSRO"). The Fund is designed for investors who are residents of Florida for
Florida tax purposes.
The Fund's investment adviser actively manages the Fund's portfolio and adjusts
the average maturity of portfolio investments based upon its expectations about
the direction of interest rates and other economic factors. In selecting
securities for investment, the Fund's investment adviser uses its research
capabilities to identify and monitor attractive investment opportunities and to
seek to protect the Fund's portfolio from early payment by issuers of such
securities. In conducting its research and analysis, the Fund's investment
adviser considers a number of factors, including general market and economic
conditions, and credit, interest rate and prepayment risks. Portfolio securities
are typically sold when the assessments of the Fund's investment adviser of any
of these factors materially change. Although the Fund invests in insured
municipal securities, insurance does not protect the Fund from market
fluctuations in the value of an insured security, but only guarantees timely
payment of principal and interest of such investments.
The Fund's investment adviser buys and sells securities for the Fund's portfolio
with a view towards seeking a high level of current income exempt from federal
income tax and Florida intangible personal property taxes and selects securities
that it believes entail reasonable credit risk considered in relation to the
investment policies of the Fund. As a result, the Fund will not necessarily
invest in the highest yielding Florida municipal securities permitted by its
investment policies if the Fund's investment adviser determines that market
risks or credit risks associated with such investments would subject the Fund's
portfolio to undue risk. The potential realization of capital gains or losses
resulting from possible changes in interest rates will not be a major
consideration and frequency of portfolio turnover generally will not be a
limiting factor if the Fund's investment adviser considers it advantageous to
purchase or sell securities.
Under normal market conditions, the Fund may invest up to 20% of its total
assets in uninsured Florida municipal securities rated investment grade at the
time of investment. Investment grade securities are securities rated BBB or
higher by S&P, Baa or higher by Moody's or an equivalent rating by another NRSRO
and comparably rated short term securities. Under normal market conditions, the
Fund may invest up to 20% of its total assets in municipal securities that are
subject to the federal alternative minimum tax. From time to time, the Fund
temporarily may invest up to 10% of its total assets in tax-exempt money market
funds and such instruments will be treated as investments in municipal
securities. Investments in other mutual funds may involve duplication of
management fees and certain other expenses.
7
MUNICIPAL SECURITIES
Municipal securities are obligations issued by or on behalf of states,
territories or possessions of the United States, the District of Columbia and
their political subdivisions, agencies and instrumentalities, the interest on
which, in the opinion of bond counsel or other counsel to the issuers of such
securities, is, at the time of issuance, exempt from federal income tax. Florida
municipal securities are municipal securities (including issuers from Florida or
issuers outside of Florida), the interest on which, in the opinion of bond
counsel or other counsel to the issuers of such securities, is, at the time of
issuance, exempt from Florida intangible personal property taxes. Under normal
market conditions, the Fund invests at least 80% of its net assets (plus any
borrowings for investment purposes) in Florida municipal securities at the time
of investment. The policy stated in the foregoing sentence is a fundamental
policy of the Fund and may not be changed without shareholder approval of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act. Under normal market conditions, the Fund may invest up to 20% of its total
municipal securities that are subject to the federal alternative minimum tax.
The issuers of municipal securities obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, highways, bridges, schools, hospitals, housing, mass transportation,
streets and water and sewer works. Other public purposes for which municipal
securities may be issued include refunding outstanding obligations, obtaining
funds for general operating expenses and obtaining funds to lend to other public
institutions and facilities. Certain types of municipal securities are issued to
obtain funding for privately operated facilities.
The yields of municipal securities depend on, among other things, general money
market conditions, general conditions of the municipal securities market, size
of a particular offering, maturity of the obligation and rating of the issue.
The ratings of S&P and Moody's represent their opinions of the quality of the
municipal securities they undertake to rate. It should be emphasized, however,
that ratings are general and are not absolute standards of quality.
Consequently, municipal securities with the same maturity, coupon and rating may
have different yields while municipal securities of the same maturity and coupon
with different ratings may have the same yield.
The two principal classifications of municipal securities are "general
obligation" and "revenue" or "special delegation" securities. "General
obligation" securities are secured by the issuer's pledge of its faith, credit
and taxing power for the payment of principal and interest. "Revenue" securities
are usually payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise tax
or other specific revenue source. Industrial development bonds are usually
revenue securities, the credit quality of which is normally directly related to
the credit standing of the industrial user involved.
Within these principal classifications of municipal securities, there are a
variety of types of municipal securities, including fixed and variable rate
securities, municipal notes, variable rate demand notes, municipal leases,
custodial receipts, participation certificates and derivative municipal
securities (which include terms or elements similar to certain strategic
transactions described below). Variable rate securities bear rates of interest
that are adjusted periodically according to formulae intended to reflect market
rates of interest. The Fund also may invest in derivative variable rate
securities, such as inverse floaters whose rates vary inversely with changes in
market rates of interest. Investment in such securities involves special risks
as compared to a fixed rate municipal security. The extent of increases and
decreases in the value of derivative variable rate securities and the
corresponding change to the net asset value of the Fund generally will be larger
than comparable changes in the value of an equal principal amount of a fixed
rate municipal security having similar credit quality, redemption provisions and
maturity. The markets for such securities may be less developed and have less
liquidity than the markets for conventional municipal securities. The Fund will
not invest more than 20% of its total assets in derivative variable rate
securities, such as inverse floaters whose rates vary inversely with changes in
market rates of interest or range floaters or capped floaters whose rates are
subject to periodic or lifetime caps. Municipal notes include tax, revenue and
bond anticipation notes of short maturity, generally less than three years,
which are issued to obtain temporary funds for various public purposes. Variable
rate demand notes are obligations
8
which contain a floating or variable interest rate adjustment formula and which
are subject to a right of demand for payment of the principal balance plus
accrued interest either at any time or at specified intervals. The interest rate
on a variable rate demand note may be based on a known lending rate, such as a
bank's prime rate, and may be adjusted when such rate changes, or the interest
rate may be a market rate that is adjusted at specified intervals. The
adjustment formula maintains the value of the variable rate demand note at
approximately the par value of such note at the adjustment date. Municipal
leases are obligations issued by state and local governments or authorities to
finance the acquisition of equipment and facilities. Certain municipal lease
obligations may include "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase payments in
future years unless money is appropriated for such purpose on a yearly basis.
Custodial receipts are underwritten by securities dealers or banks and evidence
ownership of future interest payments, principal payments or both on certain
municipal securities. Participation certificates are obligations issued by state
or local governments or authorities to finance the acquisition of equipment and
facilities. They may represent participations in a lease, an installment
purchase contract or a conditional sales contract. Municipal securities may not
be backed by the faith, credit and taxing power of the issuer. Other than as set
forth above, there is no limitation with respect to the amount of the Fund's
assets that may be invested in the foregoing types of municipal securities.
Certain of the municipal securities in which the Fund may invest represent
relatively recent innovations in the municipal securities markets and the
markets for such securities may be less developed than the market for
conventional fixed rate municipal securities. A more detailed description of the
types of municipal securities in which the Fund may invest is included in the
Fund's Statement of Additional Information. The Fund's Statement of Additional
Information can be obtained by investors free of charge as described on the back
cover of this Prospectus.
Under normal market conditions, longer-term municipal securities generally
provide a higher yield than shorter-term municipal securities. The Fund has no
limitation as to the maturity of the municipal securities in which it may
invest. The Fund's investment adviser may adjust the average maturity of the
Fund's portfolio from time to time depending on the investment adviser's
assessment of the relative yields available on securities of different
maturities and the investment adviser's expectations of future changes in
interest rates. The Fund may invest in shorter-term municipal securities when it
believes market conditions warrant such investments.
The net asset value of the Fund will change with changes in the value of its
portfolio securities. Because the Fund invests primarily in fixed income
municipal securities, the net asset value of the Fund can be expected to change
as general levels of interest rates fluctuate. When interest rates decline, the
value of a portfolio invested in fixed income securities generally can be
expected to rise. Conversely, when interest rates rise, the value of a portfolio
invested in fixed income securities generally can be expected to decline. The
prices of longer term municipal securities generally are more volatile with
respect to changes in interest rates than the prices of shorter term municipal
securities. Volatility may be greater during periods of general economic
uncertainty.
Although the Fund invests primarily in municipal securities that are insured at
the time of purchase as to timely payment of principal and interest, municipal
securities, like other debt obligations, are subject to the credit risk of
nonpayment. The ability of issuers of municipal securities to make timely
payments of interest and principal may be adversely impacted in general economic
downturns and as relative governmental cost burdens are allocated and
reallocated among federal, state and local governmental units. Such nonpayment
would result in a reduction of income to the Fund, and could result in a
reduction in the value of the municipal securities experiencing nonpayment and a
potential decrease in the net asset value of the Fund. In addition, the Fund may
incur expenses to work out or restructure a distressed or defaulted security.
The Fund may invest up to 20% of its total assets in municipal securities that
are subject to the federal alternative minimum tax. Accordingly, the Fund may
not be a suitable investment for investors who are already subject to the
federal alternative minimum tax or who could become subject to the federal
alternative minimum tax as a result of an investment in the Fund.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the current federal tax exemption on
9
municipal securities. If such a proposal were enacted, the ability of the Fund
to pay tax exempt interest dividends might be adversely affected and the Fund
would re-evaluate its investment objective and policies and consider changes in
its structure.
The Fund generally considers investments in municipal securities not to be
subject to industry concentration policies (issuers of municipal securities as a
group are not an industry) and the Fund may invest in municipal securities
issued by entities having similar characteristics. The issuers may be located in
the same geographic area or may pay their interest obligations from revenue of
similar projects, such as hospitals, airports, utility systems and housing
finance agencies. This may make the Fund's investments more susceptible to
similar economic, political or regulatory occurrences. As the similarity in
issuers increases, the potential for fluctuation in the Fund's net asset value
also increases. The Fund may invest more than 25% of its total assets in a
segment of the municipal securities market with similar characteristics if the
Fund's investment adviser determines that the yields available from obligations
in a particular segment justify the additional risks of a larger investment in
such segment. The Fund may not, however, invest more than 25% of its total
assets in industrial development revenue bonds issued for companies in the same
industry. Sizeable investments in such obligations could involve increased risk
to the Fund should any of such issuers or any such related projects or
facilities experience financial difficulties.
From time to time, the Fund's investments may include securities as to which the
Fund, by itself or together with other funds or accounts managed by the Fund's
investment adviser, holds a major portion or all of an issue of municipal
securities. Because there may be relatively few potential purchasers for such
investments and, in some cases, there may be contractual restrictions on
resales, the Fund may find it more difficult to sell such securities at a time
when the Fund's investment adviser believes it is advisable to do so.
INSURED MUNICIPAL SECURITIES
The Fund invests primarily in a portfolio of municipal securities that are
insured at the time of investment as to timely payment of principal and interest
by a top-rated private insurance company. Under normal market conditions, the
Fund invests at least 80% of its net assets (plus any borrowings for investment
purposes) in insured securities at the time of investment. The Fund's policy in
the foregoing sentence may be changed by the Fund's Board of Trustees without
shareholder approval, but no change is anticipated; if the Fund's policy in the
foregoing sentence changes, the Fund will notify shareholders at least 60 days
prior to implementation of the change and shareholders should consider whether
the Fund remains an appropriate investment in light of the change. Such
insurance could be provided as: Original Issue Insurance, Secondary Market
Insurance or Portfolio Insurance. Original Issue Insurance is purchased with
respect to a particular issue of municipal securities by the issuer thereof or a
third party in conjunction with the original issue of such municipal securities.
Secondary Market Insurance is purchased by the Fund or a third party subsequent
to the time of original issuance of a municipal security. Both Original Issue
Insurance and Secondary Market Insurance remain in effect as long as the
municipal securities covered thereby remain outstanding and the insurer remains
in business, regardless of whether the Fund ultimately disposes of such
municipal securities. Portfolio Insurance may be purchased by the Fund with
respect to municipal securities which the Fund intends to purchase or already
owns and would generally terminate when the municipal security is sold by the
Fund or redeemed. There is no limitation on the percentage of the Fund's assets
that may be invested in municipal securities insured by any type of insurance or
by any given insurer.
Original Issue Insurance, Secondary Market Insurance and Portfolio Insurance
generally do not insure payment on an accelerated basis, the payment of any
redemption premium or the market value of the Fund's portfolio securities. Such
insurance also does not insure against nonpayment of principal or interest on
municipal securities resulting from the insolvency, negligence or any other act
or omission of the trustee or other paying agent for such obligations.
The Fund invests in municipal securities insured by insurers whose claims-paying
ability is rated AAA by S&P, Aaa by Moody's or the equivalent by another NRSRO
at the time of the Fund's investment. A subsequent downgrade by S&P, Moody's or
another NRSRO of an insurer's claims-paying ability may result in increased
credit risk of the municipal securities insured by such insurer and may result
in a downgrade of the rating assigned to the municipal securities insured by
such insurer. The securities could experience
10
a decrease in market price as a result of such a downgrade. In the event the
ratings assigned to such municipal securities decline to below investment grade,
such municipal securities would probably become less liquid or even illiquid.
There can be no assurance that an insurer will be able to honor its obligations
with respect to municipal securities in the Fund's portfolio. For more
information on insurance and a description of S&P's and Moody's claims-paying
ability ratings of insurers, see the Fund's Statement of Additional Information.
The Fund's Statement of Additional Information may be obtained by investors free
of charge as described on the back cover of this Prospectus.
SPECIAL CONSIDERATIONS REGARDING
FLORIDA MUNICIPAL SECURITIES
The Fund invests primarily in a portfolio of Florida municipal securities, which
are municipal securities, the interest on which, in the opinion of bond counsel
or other counsel to the issuers of such securities, is, at the time of issuance,
exempt from Florida intangible personal property taxes. Because the Fund invests
primarily in a portfolio of Florida municipal securities, the Fund is more
susceptible to political, economic, regulatory or other factors affecting
issuers of Florida municipal securities than a fund which does not limit its
investments to such issuers. These risks include possible legislative, state
constitutional or regulatory amendments that may affect the ability of state and
local governments or regional governmental authorities to raise money to pay
principal and interest on their municipal securities. Economic, fiscal and
budgetary conditions throughout the state may also influence the Fund's
performance.
The following information is a summary of a more detailed description of certain
factors affecting Florida municipal securities which is contained in the Fund's
Statement of Additional Information. Investors should obtain a copy of the
Fund's Statement of Additional Information for the more detailed discussion of
such factors. Such information is derived from certain official statements of
the State of Florida published in connection with the issuance by the State of
Florida of specific Florida municipal securities, as well as from other publicly
available documents. Such information has not been independently verified by the
Fund and may not apply to all Florida municipal securities acquired by the Fund.
The Fund assumes no responsibility for the completeness or accuracy of such
information.
Florida state and local government obligations may be adversely affected by
political and economic conditions and developments within the State of Florida
and the nation as a whole.
Historically, Florida's unemployment rate has generally tracked below that of
the nation; however, beginning with the recession in the early 1990's, the trend
reversed. Since 1995, the state's unemployment rate has again been below or
about the same as the nation's. The unemployment rate for Florida in 2000 was
3.89% while the national rate in 2000 was 4.1%. Florida's unemployment rate is
expected to be 4.5% for fiscal year 2000-01.
Tourism is an important aspect of Florida's economy. Approximately 48.7 million
people visited the State in 1998.
County and municipal governments in Florida depend primarily upon ad valorem
property taxes, sales, motor fuel and other local excise taxes and miscellaneous
revenue sources, including revenues from utilities services. Florida school
districts derive substantially all of their revenues from local property taxes.
The overall level of revenue from these sources is in part dependent upon the
local, state and national economies. Local government obligations held by the
Fund may constitute general obligations or may be special obligations payable
solely from one or more specified revenue sources. The ability of the local
governments to repay their obligations on a timely basis will be dependent upon
the continued strength of the revenues pledged and of the overall fiscal status
of the local government.
Voters at the general election in November 1994 approved an amendment to the
Constitution of the State of Florida limiting future state revenues. It is
unclear what effect, if any, such amendment would have on state or local
government debt obligations.
The value of Florida municipal instruments may also be affected by general
conditions in the money markets or the municipal bond markets, the levels of
federal income tax rates, the supply of tax-exempt bonds, the credit quality and
rating of the issues and perceptions with respect to the level of interest
rates.
11
There can be no assurance that there will not be a decline in economic
conditions or that particular Florida municipal securities in the portfolio of
the Fund will not be adversely affected by any such changes.
More detailed information concerning Florida municipal securities and the State
of Florida is included in the Fund's Statement of Additional Information.
DERIVATIVE INSTRUMENTS
The Fund may, but is not required to, use various investment strategic
transactions described below to earn income, facilitate portfolio management and
mitigate risks. Although the Fund's investment adviser seeks to use these
transactions to further the Fund's investment objective, no assurance can be
given that the use of these transactions will achieve this result.
The Fund may purchase and sell derivative instruments such as exchange-listed
and over-the-counter put and call options on securities, financial futures
contracts, fixed-income and other interest rate indices and other financial
instruments, purchase and sell financial futures contracts and options on
futures contracts and enter into various interest rate transactions such as
swaps, caps, floors or collars. Collectively, all of the above are referred to
as "Strategic Transactions." Strategic Transactions may be used to attempt to
protect against possible changes in the market value of securities held in or to
be purchased for the Fund's portfolio resulting from securities markets
fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
or to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular securities. Any or all of these investment
techniques may be used at any time and there is no particular strategy that
dictates the use of one technique rather than another, as use of any Strategic
Transaction is a function of numerous variables including market conditions. The
ability of the Fund to utilize these Strategic Transactions successfully will
depend on the investment adviser's ability to predict pertinent market
movements, which cannot be assured. The Fund will comply with applicable
regulatory requirements when implementing these strategies, techniques and
instruments.
Strategic Transactions have risks including the imperfect correlation between
the value of such instruments and the underlying assets, the possible default by
the other party to the transaction, illiquidity of the derivative instrument
and, to the extent the investment adviser's view as to certain market movements
is incorrect, the risk that the use of such Strategic Transactions could result
in losses greater than if they had not been used. Use of put and call options
may result in losses to the Fund, force the sale of portfolio securities at
inopportune times or for prices other than at current market values, limit the
amount of appreciation the Fund can realize on its investments or cause the Fund
to hold a security it might otherwise sell. The use of options and futures
contracts transactions entails certain other risks. In particular, the variable
degree of correlation between price movements of futures contracts and price
movements in the related portfolio position of the Fund creates the possibility
that losses on the risk management or hedging instrument may be greater than
gains in the value of the Fund's position. In addition, futures contracts and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the contemplated use of these futures
contracts and options on futures contracts should tend to minimize the risk of
loss due to a decline in the value of the hedged position, at the same time they
tend to limit any potential gain which might result from an increase in value of
such position. Finally, the daily variation margin requirements for futures
contracts would create a greater ongoing potential financial risk than would
purchases of options, where the exposure is limited to the cost of the initial
premium. Losses resulting from the use of Strategic Transactions would reduce
net asset value, and possibly income, and such losses can be greater than if the
Strategic Transactions had not been utilized. The Strategic Transactions that
the Fund may use and their risks are described more fully in the Fund's
Statement of Additional Information. Income earned or deemed to be earned by the
Fund from its Strategic Transactions, if any, generally will be taxable income
of the Fund.
OTHER INVESTMENTS AND RISK FACTORS
The Fund may invest in zero coupon securities which are debt securities that do
not entitle the holder to
12
periodic payment of interest prior to maturity or a specified date when the
securities begin paying current interest. Zero coupon securities are issued and
traded at a discount from their face amounts or par value. The discount varies
depending on the time remaining until cash payments begin, prevailing interest
rates, liquidity of the security and the perceived credit quality of the issuer.
Because such securities do not entitle the holder to any periodic payments of
interest prior to maturity, this prevents any reinvestment of interest payments
at prevailing interest rates if prevailing interest rates rise. On the other
hand, because there are no periodic interest payments to be reinvested prior to
maturity, zero coupon securities eliminate the reinvestment risk and may lock in
a favorable rate of return to maturity if interest rates drop. The amount of
non-cash interest income earned on zero coupon securities is included, for
federal income tax purposes, in the Fund's calculation of income that is
required to be distributed to shareholders for the Fund to maintain its desired
federal income tax status (even though such non-cash paying securities do not
provide the Fund with the cash flow with which to pay such distributions).
Accordingly, the Fund may be required to borrow or to liquidate portfolio
securities at a time that it otherwise would not have done so to make such
distributions. The Fund's investment adviser will weigh these concerns against
the expected total returns from such instruments.
The Fund may purchase and sell securities on a "when-issued" and "delayed
delivery" basis whereby the Fund buys or sells a security with payment and
delivery taking place in the future. The payment obligation and the interest
rate are fixed at the time the Fund enters into the commitment. No income
accrues on such securities until the date the Fund actually takes delivery of
such securities. These transactions are subject to market risk as the value or
yield of a security at delivery may be more or less than the purchase price or
the yield generally available on securities when delivery occurs. In addition,
the Fund is subject to counterparty risk because it relies on the buyer or
seller, as the case may be, to consummate the transaction, and failure by the
other party to complete the transaction may result in the Fund missing the
opportunity of obtaining a price or yield considered to be advantageous. The
Fund will only make commitments to purchase such securities with the intention
of actually acquiring these securities, but the Fund may sell these securities
prior to settlement if it is deemed advisable. No specific limitation exists as
to the percentage of the Fund's assets which may be used to acquire securities
on a "when-issued" and "delayed delivery" basis.
The Fund may invest up to 15% of the Fund's net assets in illiquid securities
and certain restricted securities. Such securities may be difficult or
impossible to sell at the time and the price that the Fund would like. Thus, the
Fund may have to sell such securities at a lower price, sell other securities
instead to obtain cash or forego other investment opportunities.
The Fund may borrow amounts up to 5% of its total assets to pay for redemptions
when liquidation of portfolio securities is considered disadvantageous or
inconvenient and may pledge up to 10% of its total assets to secure such
borrowings.
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.
The Fund may sell securities without regard to the length of time they have been
held to take advantage of new investment opportunities, or yield differentials,
or for other reasons. The Fund's portfolio turnover rate may vary from year to
year. A high portfolio turnover rate (100% or more) increases a fund's
transaction costs (including brokerage commissions or dealer costs), which would
adversely impact a fund's performance. Higher portfolio turnover may result in
the realization of more short-term capital gains than if a fund had lower
portfolio turnover. The turnover rate will not be a limiting factor, however, if
the Fund's investment adviser considers portfolio changes appropriate.
TEMPORARY DEFENSIVE STRATEGY. When market conditions dictate a more "defensive"
investment strategy, the Fund may, on a temporary basis, hold cash or invest a
portion or all of its assets in high-quality, short-term Florida municipal
securities. If such municipal securities are not available or, in the judgment
of the Fund's investment adviser, do not afford sufficient protection against
adverse market conditions, the Fund may invest in high-quality, municipal
securities of issuers other than issuers of Florida municipal securities.
Furthermore, if such high-quality securities are not
13
available or, in the judgment of the Fund's investment adviser, do not afford
sufficient protection against adverse market conditions, the Fund may invest in
taxable securities. Such taxable securities may include securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities, other
investment grade quality income securities, prime commercial paper, certificates
of deposit, bankers' acceptances and other obligations of domestic banks having
total assets of at least $500 million, and repurchase agreements. In taking such
a defensive position, the Fund would temporarily not be pursuing and may not
achieve its investment objective.
Investment
Advisory Services
-------------------------------------------------------------------------------
THE ADVISER. Van Kampen Investment Advisory Corp. is the Fund's investment
adviser (the "Adviser" or "Advisory Corp."). The Adviser is a wholly owned
subsidiary of Van Kampen Investments Inc. ("Van Kampen Investments"). Van Kampen
Investments is a diversified asset management company that administers more than
three million retail investor accounts, has extensive capabilities for managing
institutional portfolios and has more than $73 billion under management or
supervision as of December 31, 2001. Van Kampen Investments has more than 50
open-end funds, more than 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:
<Table>
<Caption>
AVERAGE DAILY NET ASSETS % PER ANNUM
- --------------------------------------------------
First $500 million 0.50%
....................................................
Over $500 million 0.45%
....................................................
</Table>
Applying this fee schedule, the effective advisory fee rate was 0.50% of the
Fund's average daily net assets for the Fund's fiscal year ended September 30,
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 Asset Management
Inc. ("Asset Management").
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.
14
PORTFOLIO MANAGEMENT. The Fund is managed by the Adviser's Municipal team. The
team is made up of established investment professionals. Current members of the
team includes Dennis S. Pietrzak, an Executive Director of the Adviser, John R.
Reynoldson, an Executive Director of the Adviser and Thomas M. Byron, a Vice
President of the Adviser. The composition of the team may change without notice
from time to time.
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 generally
bear the sales charge expenses at the time of purchase while Class B Shares and
Class C Shares generally bear the sales charge expenses at the time of
redemption and any expenses (including higher distribution fees and transfer
agency costs) resulting from such deferred sales charge arrangement, (ii) 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 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 (plus sales charges, where applicable). The net asset values per share
of the Class A Shares, Class B Shares and Class C Shares are generally expected
to be substantially the same. In certain circumstances, however, the per share
net asset values of the classes of shares may differ from one another,
reflecting the daily expense accruals of the higher distribution fees and
transfer agency costs applicable to the Class B Shares and Class C Shares and
the differential in the dividends that may be paid on each class of shares.
The net asset value per share for each class of shares of the Fund is determined
once daily as of the close of trading on the New York Stock Exchange (the
"Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open
for trading except on any day 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. Portfolio securities are valued
by using market quotations, prices provided by market makers or estimates of
market values determined in good faith based upon yield data relating to
instruments or securities with similar characteristics in accordance with
procedures established by the Board of Trustees of the Fund. Securities for
which market quotations are not readily available and other assets are valued at
their fair value as determined in good faith by the Adviser in accordance with
procedures established by the Fund's Board of Trustees. Securities with
remaining maturities of 60 days or less are valued at amortized cost, which
approximates market value. See the financial statements and notes thereto in the
Fund's Statement of Additional Information.
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. 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
15
ongoing services to shareholders of each such 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 completing the account
application form and forwarding the account application form, directly or
through an authorized dealer, to the Fund's shareholder service agent, Van
Kampen Investor Services Inc. ("Investor Services"), a wholly owned subsidiary
of Van Kampen Investments. When purchasing shares of the Fund 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 such shares and
may receive differing compensation for selling Class A Shares, Class B Shares or
Class C Shares.
The offering price for shares is based upon the next calculation of net asset
value per share (plus sales charges, where applicable) after an order is
received by Investor Services. Orders received by authorized dealers prior to
the close of the Exchange are priced based on the date of receipt provided such
order is transmitted to Investor Services prior to Investor Services' close of
business on such date. Orders received by authorized dealers after the close of
the Exchange or transmitted to Investor Services after its close of business are
priced based on the date of the next determined net asset value per share
provided they are received by Investor Services prior to Investor Services'
close of business on such date. It is the responsibility of authorized dealers
to transmit orders received by them to Investor Services so they will be
received in a timely manner.
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 the 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
16
value of the account is less than $1,000 due to market depreciation.
CLASS A SHARES
Class A Shares of the Fund are sold at net asset value plus an initial maximum
sales charge of up to 4.75% of the offering price (or 4.99% of the net amount
invested), reduced on investments of $100,000 or more as follows:
<Table>
<Caption>
AS % OF AS % OF
SIZE OF OFFERING NET AMOUNT
INVESTMENT PRICE INVESTED
- ----------------------------------------------------------------
Less than $100,000 4.75% 4.99%
..................................................................
$100,000 but less than
$250,000 3.75% 3.90%
..................................................................
$250,000 but less than
$500,000 2.75% 2.83%
..................................................................
$500,000 but less than
$1,000,000 2.00% 2.04%
..................................................................
$1,000,000 or more * *
..................................................................
</Table>
* No sales charge is payable at the time of purchase on investments of $1
million or more, although for such investments the Fund may impose a
contingent deferred sales charge of 1.00% on certain redemptions made within
one year of the purchase. The contingent deferred sales charge is assessed on
an amount equal to the lesser of the then current market value or the cost of
the shares being redeemed. Accordingly, no sales charge is imposed on
increases in net asset value above the initial purchase price.
No sales charge is imposed on Class A Shares received from reinvestment of
dividends or capital gain dividends.
Under the Distribution Plan and the Service Plan, the Fund may spend up to a
total of 0.25% 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 0.25% per year of the Fund's average daily net assets with
respect to Class A Shares of the Fund.
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 six years of purchase as
shown in the table as follows:
CLASS B SHARES
SALES CHARGE SCHEDULE
<Table>
<Caption>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
- -----------------------------------------------------
First 4.00%
.......................................................
Second 3.75%
.......................................................
Third 3.50%
.......................................................
Fourth 2.50%
.......................................................
Fifth 1.50%
.......................................................
Sixth 1.00%
.......................................................
Seventh and After None
.......................................................
</Table>
The contingent deferred sales charge is assessed on an amount equal to the
lesser of the then current market value or the cost of the shares being
redeemed. Accordingly, no sales charge is imposed on increases in net asset
value above the initial purchase price. In addition, no sales charge is assessed
on shares derived from reinvestment of dividends or capital 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
17
0.25% 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 0.25% 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 seven 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.
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.
18
QUANTITY DISCOUNTS
Investors purchasing Class A Shares may, under certain circumstances described
below, be entitled to pay reduced or no sales charges. Investors, or their
authorized dealers, must notify the Fund at the time of the purchase order
whenever a quantity discount is applicable to purchases. Upon such notification,
an investor will pay the lowest applicable sales charge. Quantity discounts may
be modified or terminated at any time. For more information about quantity
discounts, investors should contact their authorized dealer or the Distributor.
A person eligible for a reduced sales charge includes an individual, his or her
spouse and children under 21 years of age and any corporation, partnership or
sole proprietorship which is 100% owned, either alone or in combination, by any
of the foregoing; a trustee or other fiduciary purchasing for a single trust or
for a single fiduciary account, or a "company" as defined in Section 2(a)(8) of
the 1940 Act.
As used herein, "Participating Funds" refers to certain open-end investment
companies advised by Asset Management or Advisory Corp. and distributed by the
Distributor as determined from time to time by the Fund's Board of Trustees.
VOLUME DISCOUNTS. The size of investment shown in the Class A Shares sales
charge table applies to the total dollar amount being invested by any person in
shares of the Fund, or in any combination of shares of the Fund and shares of
other Participating Funds, although other Participating Funds may have different
sales charges.
CUMULATIVE PURCHASE DISCOUNT. The size of investment shown in the Class A Shares
sales charge table may also be determined by combining the amount being invested
in shares of the Participating Funds plus the current offering price of all
shares of the Participating Funds currently owned.
LETTER OF INTENT. A Letter of Intent provides an opportunity for an investor to
obtain a reduced sales charge by aggregating investments over a 13-month period
to determine the sales charge as outlined in the Class A Shares sales charge
table. The size of investment shown in the Class A Shares sales charge table
includes purchases of shares of the Participating Funds in Class A Shares over a
13-month period based on the total amount of intended purchases plus the value
of all shares of the Participating Funds previously purchased and still owned.
An investor may elect to compute the 13-month period starting up to 90 days
before the date of execution of a Letter of Intent. Each investment made during
the period receives the reduced sales charge applicable to the total amount of
the investment goal. The Letter of Intent does not preclude the Fund (or any
other Participating Fund) from discontinuing the sale of its shares. The initial
purchase must be for an amount equal to at least 5% of the minimum total
purchase amount of the level selected. If trades not initially made under a
Letter of Intent subsequently qualify for a lower sales charge through the
90-day backdating provisions, an adjustment will be made at the expiration of
the Letter of Intent to give effect to the lower sales charge. Such adjustment
in sales charge will be used to purchase additional shares. The Fund initially
will escrow shares totaling 5% of the dollar amount of the Letter of Intent to
be held by Investor Services in the name of the shareholder. In the event the
Letter of Intent goal is not achieved within the specified period, the investor
must pay the difference between the sales charge applicable to the purchases
made and the reduced sales charges previously paid. Such payments may be made
directly to the Distributor or, if not paid, the Distributor will liquidate
sufficient escrowed shares to obtain the difference.
OTHER PURCHASE PROGRAMS
Purchasers of Class A Shares may be entitled to reduced or no initial sales
charges in connection with the unit investment trust reinvestment program and
purchases by registered representatives of selling firms or purchases by persons
affiliated with the Fund or the Distributor. The Fund reserves the right to
modify or terminate these arrangements at any time.
UNIT INVESTMENT TRUST REINVESTMENT PROGRAM. The Fund permits unitholders of unit
investment trusts to reinvest distributions from such trusts in Class A Shares
of the Fund at net asset value per share without sales 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
total sales charge for all other investments made from unit investment trust
distributions will be 1.00% of the offering price (1.01% of net asset value). Of
this amount, the Distributor will pay to the authorized dealer, if any, through
which such
19
participation in the qualifying program was initiated 0.50% of the offering
price as a dealer concession or agency commission. Persons desiring more
information with respect to this program, including the terms and conditions
that apply to the program, should contact their authorized dealer or the
Distributor.
The administrator of such a unit investment trust must have an agreement with
the Distributor pursuant to which the administrator will (1) submit a single
bulk order and make payment with a single remittance for all investments in the
Fund during each distribution period by all investors who choose to invest in
the Fund through the program and (2) provide Investor Services with appropriate
backup data for each investor participating in the program in a computerized
format fully compatible with Investor Services' processing system.
To obtain these special benefits, all dividends and other distributions from the
Fund must be reinvested in additional shares and there cannot be any systematic
withdrawal program. The Fund will send account activity statements to such
participants on a quarterly basis only, even if their investments are made more
frequently. The Fund reserves the right to modify or terminate this program at
any time.
NET ASSET VALUE PURCHASE OPTIONS. Class A Shares of the Fund may be purchased at
net asset value, without sales charge, generally upon written assurance that the
purchase is made for investment purposes and that the shares will not be resold
except through redemption by the Fund, by:
(1) Current or retired trustees or directors of funds advised by Morgan Stanley
Dean Witter & Co. and any of its subsidiaries and such persons' families
and their beneficial accounts.
(2) Current or retired directors, officers and employees of Morgan Stanley Dean
Witter & Co. and any of its subsidiaries; employees of an investment
subadviser to any fund described in (1) above or an affiliate of such
subadviser; and such persons' families and their beneficial accounts.
(3) Directors, officers, employees and, when permitted, registered
representatives, of financial institutions that have a selling group
agreement with the Distributor and their spouses and children under 21
years of age when purchasing for any accounts they beneficially own, or, in
the case of any such financial institution, when purchasing for retirement
plans for such institution's employees; provided that such purchases are
otherwise permitted by such institutions.
(4) Registered investment advisers who charge a fee for their services, trust
companies and bank trust departments investing on their own behalf or on
behalf of their clients. The Distributor may pay authorized dealers through
which purchases are made an amount up to 0.50% of the amount invested, over
a 12-month period.
(5) Trustees and other fiduciaries purchasing shares for retirement plans which
invest in multiple fund families through broker-dealer retirement plan
alliance programs that have entered into agreements with the Distributor
and which are subject to certain minimum size and operational requirements.
Trustees and other fiduciaries should refer to the Statement of Additional
Information for further details with respect to such alliance programs.
(6) Beneficial owners of shares of Participating Funds held by a retirement
plan or held in a tax-advantaged retirement account who purchase shares of
the Fund with proceeds from distributions from such a plan or retirement
account other than distributions taken to correct an excess contribution.
(7) Accounts as to which a bank or broker-dealer charges an account management
fee ("wrap accounts"), provided the bank or broker-dealer has a separate
agreement with the Distributor.
(8) Trusts created under pension, profit sharing or other employee benefit
plans qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), or custodial accounts held by a bank created
pursuant to Section 403(b) of the Code and sponsored by nonprofit
organizations defined under Section 501(c)(3) of the Code and assets held
by an employer or trustee in connection with an eligible deferred
compensation plan under
20
Section 457 of the Code. Such plans will qualify for purchases at net asset
value provided, for plans initially establishing accounts with the Distributor
in the Participating Funds after January 1, 2000, that (a) the total plan assets
are at least $1 million or (b) such shares are purchased by an employer
sponsored plan with more than 100 eligible employees. Such plans that have
been established with a Participating Fund or have received proposals from
the Distributor prior to January 1, 2000 based on net asset value purchase
privileges previously in effect will be qualified to purchase shares of
the Participating Funds at net asset value. Section 403(b) and similar
accounts for which Van Kampen Trust Company serves as custodian will not
be eligible for net asset value purchases based on the aggregate
investment made by the plan or the number of eligible employees, except
under certain uniform criteria established by the Distributor from time to
time. A commission will be paid to authorized dealers who initiate and are
responsible for such purchases within a rolling twelve-month period as
follows: 1.00% on sales to $2 million, plus 0.80% on the next $1 million,
plus 0.50% on the next $47 million, plus 0.25% on the excess over $50
million.
(9) Individuals who are members of a "qualified group." For this purpose, a
qualified group is one which (i) has been in existence for more than six
months, (ii) has a purpose other than to acquire shares of the Fund or
similar investments, (iii) has given and continues to give its endorsement
or authorization, on behalf of the group, for purchase of shares of the
Fund and Participating Funds, (iv) has a membership that the authorized
dealer can certify as to the group's members and (v) satisfies other
uniform criteria established by the Distributor for the purpose of
realizing economies of scale in distributing such shares. A qualified group
does not include one whose sole organizational nexus, for example, is that
its participants are credit card holders of the same institution, policy
holders of an insurance company, customers of a bank or broker-dealer,
clients of an investment adviser or other similar groups. Shares purchased
in each group's participants account in connection with this privilege will
be subject to a contingent deferred sales charge of 1.00% in the event of
redemption within one year of purchase, and a commission will be paid to
authorized dealers who initiate and are responsible for such sales to each
individual as follows: 1.00% on sales to $2 million, plus 0.80% on the next
$1 million and 0.50% on the excess over $3 million.
(10)Certain qualified state tuition plans qualifying pursuant to Section 529 of
the Code ("Section 529 Plans") that are approved by the Fund's Distributor.
There is no minimum investment amount for purchases made under this option
(10).
The term "families" includes a person's spouse, children and grandchildren under
21 years of age, parents and the parents of the person's spouse.
Purchase orders made pursuant to clause (4) may be placed either through
authorized dealers as described above or directly with Investor Services by the
investment adviser, trust company or bank trust department, provided that
Investor Services receives federal funds for the purchase by the close of
business on the next business day following acceptance of the order. An
authorized dealer may charge a transaction fee for placing an order to purchase
shares pursuant to this provision or for placing a redemption order with respect
to such shares. Authorized dealers will be paid a service fee as described above
on purchases made under options (3) through (10) above. The Fund may terminate,
or amend the terms of, offering shares of the Fund at net asset value to such
groups at any time.
Redemption of Shares
-------------------------------------------------------------------------------
Generally, shareholders may redeem for cash some or all of their shares without
charge by the Fund (other than applicable sales charge) at any time. As
described under the Prospectus heading "Purchase of Shares," redemptions of
Class B Shares and Class C Shares may be subject to a contingent deferred sales
charge. In addition, certain redemptions of Class A Shares for shareholder
accounts of $1 million or more may be subject to a contingent deferred sales
charge. Redemptions completed through an authorized dealer or a
custodian/trustee of a retirement plan account may
21
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.
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,
22
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.
Distributions from
the Fund
-------------------------------------------------------------------------------
In addition to any increase in the value of shares which the Fund may achieve,
shareholders may receive distributions from the Fund of dividends and capital
gain dividends.
DIVIDENDS. Interest 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 monthly as
dividends to shareholders all, or substantially all, of this net investment
income. Dividends are automatically applied to purchase additional shares of the
Fund at the next determined net asset value unless the shareholder instructs
otherwise.
The per share dividends on Class B Shares and Class C Shares may be lower than
the per share dividends on Class A Shares as a result of the higher distribution
fees and transfer agency costs applicable to such classes of shares.
CAPITAL 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,
23
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 instructions regarding internet transactions. 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.
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 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 the 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
form and returning the forms 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 and Trust
Company (the "Bank"), for payment, full and fractional Class A Shares required
to cover the amount of the check are redeemed from the shareholder's Class A
Shares 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 Shares account, the
check will be returned and the shareholder may be subject to additional charges.
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 the 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 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
24
Participating Fund are available for sale. 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 an authorized dealer or the Distributor.
To be eligible for exchange, shares of the Fund must have been registered in the
shareholder's name for at least 30 days prior to an exchange. Shares of the Fund
registered in a shareholder's name for less than 30 days may only be exchanged
upon receipt of prior approval of the Adviser. It is the policy of the Adviser,
under normal circumstances, not to approve such requests.
When shares that are subject to a contingent deferred sales charge are exchanged
among Participating Funds, the holding period for purposes of computing the
contingent deferred sales charge is based upon the date of the initial purchase
of such shares from a Participating Fund. 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 limiting or prohibiting, in the Fund's discretion, additional purchase
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.
For purposes of determining the sales charge rate previously paid on Class A
Shares, all sales charges paid on the exchanged security and on any security
previously exchanged for such security or for any of its predecessors shall be
included. If the exchanged security was acquired through reinvestment, that
security is
25
deemed to have been sold with a sales charge rate equal to the rate previously
paid on the security on which the dividend or distribution was paid. If a
shareholder exchanges less than all of such shareholder's securities, the
security upon which the highest sales charge rate was previously paid is deemed
exchanged first.
Exchange requests received on a business day prior to the time shares of the
funds involved in the request are priced will be processed on the date of
receipt. "Processing" a request means that shares of the fund which the
shareholder is redeeming will be redeemed at the net asset value per share next
determined on the date of receipt. Shares of the fund that the shareholder is
purchasing will also normally be purchased at the net asset value per share,
plus any applicable sales charge, next determined on the date of receipt.
Exchange requests received on a business day after the time that shares of the
funds involved in the request are priced will be processed on the next business
day in the manner described herein.
Florida Taxation
-------------------------------------------------------------------------------
The following Florida tax discussion is based on the advice of Squire, Sanders &
Dempsey L.L.P., special counsel to the Fund for Florida tax matters.
Under current Florida law, shares of the Fund will not be subject to the Florida
intangible personal property tax for any year if, by the close of business on
the last business day of the previous calendar year, at least 90% of the net
asset value of the Fund's portfolio consisted of (1) notes, bonds and other
obligations issued by the State of Florida or its municipalities, counties, and
other taxing districts, or by the United States Government and its agencies, or
by the governments of Puerto Rico, Guam or the U.S. Virgin Islands, or (2) other
intangible personal property exempt from the Florida intangible personal
property tax. (FOR THIS PURPOSE, OBLIGATIONS ISSUED BY A NONPROFIT CORPORATION
FORMED UNDER THE GENERAL NONPROFIT CORPORATION LAW OF A STATE ARE NOT EXEMPT
FROM THE FLORIDA INTANGIBLE PERSONAL PROPERTY TAX EVEN IF THEY ARE CONSIDERED
FOR FEDERAL INCOME TAX PURPOSES TO BE OBLIGATIONS ISSUED "ON BEHALF OF" A
GOVERNMENTAL UNIT THE INTEREST ON WHICH IS EXEMPT FROM FEDERAL INCOME TAX.)
Shares of the Fund will generally be subject to the Florida intangible personal
property tax for any year if, on the last business day of the previous calendar
year, less than 90% of the net asset value of the Fund's portfolio is invested
in assets that are exempt from the Florida intangible property tax.
The State of Florida and its political subdivisions do not impose income taxes
on individuals. Consequently, individual shareholders of the Fund will not be
subject to a Florida income tax on distributions from the Fund or on gain from
the sale or other disposition of shares of the Fund. Shareholders subject to
taxation in a state other than Florida may realize a lower after-tax rate of
return than Florida shareholders if the dividends distributed by the Fund are
not exempt from taxation in such other state.
Corporations (and certain other entities treated as corporations under the
Florida Income Tax Code) that are subject to the Florida income tax will be
taxable on distributions from the Fund and on gain from the sale or other
disposition of shares of the Fund to the extent such income or gain is allocated
or apportioned to Florida. Accordingly, investment in shares of the Fund may not
be appropriate for such corporations.
The transfer of shares of the Fund will not be subject to the Florida
documentary stamp tax. Shares of the Fund will be included in assets subject to
Florida estate tax.
Under current Florida tax law, the Florida intangible personal property tax rate
is $1.00 per $1,000 of taxable intangible property. Effective July 1, 2003, (i)
the maximum amounts of taxable intangible personal property exempt from the
Florida intangible personal property tax increase from $20,000 to $250,000 for
single individuals and from $40,000 to $500,000 for married individuals filing
jointly, and (ii) a $250,000 exemption from Florida intangible personal property
tax for trusts and business entities will become available. These exemptions
will be in addition to the $60,000 Florida intangible personal property tax
credit provided under current Florida tax law. The effect of such increased
exemptions from the Florida intangible personal property tax will be to further
reduce the Florida intangible personal property tax benefit of investing in
shares of the Fund. Public discussion continues regarding the possible repeal of
the Florida
26
intangible personal property tax or, alternatively, a further reduction in such
tax. The increase in exemptions was slated to become effective January 1, 2002,
however, national and state economic conditions prompted the Florida Legislature
to delay the effective date during a Special Legislative session in the Fall of
2001.
The state tax discussion set forth above is for general information only.
Prospective investors should consult their own tax advisers regarding the
specific state tax consequences of holding and disposing of shares of the Fund,
as well as the effects of federal, local and foreign tax law and any proposed
tax law changes.
Federal Income Taxation
-------------------------------------------------------------------------------
The following federal income tax discussion is based on the advice of Skadden,
Arps, Slate, Meagher & Flom (Illinois).
The Fund intends to invest in sufficient tax-exempt municipal securities to
permit payment of "exempt-interest dividends" (as defined under applicable
federal income tax law). The aggregate amount of dividends designated as
exempt-interest dividends cannot exceed, however, the excess of the amount of
interest exempt from tax under Section 103 of the Code received by the Fund
during the year over any amounts disallowed as deductions under Sections 265 and
171(a)(2) of the Code. Since the percentage of dividends which are
exempt-interest dividends is determined on an average annual method for the
taxable year, the percentage of income designated as tax-exempt for any
particular dividend may be substantially different from the percentage of the
Fund's income that was tax exempt during the period covered by the dividend.
Exempt-interest dividends paid to shareholders generally are not includable in
the shareholders' gross income for federal income tax purposes. Exempt-interest
dividends are included in determining what portion, if any, of a person's social
security and railroad retirement benefits will be includable in gross income
subject to federal income tax.
Under applicable federal income tax law, the interest on certain municipal
securities may be an item of tax preference subject to the federal alternative
minimum tax. The Fund may invest a portion of its assets in municipal securities
subject to this provision so that a portion of its exempt-interest dividends may
be an item of tax preference to the extent such dividends represent interest
received from such municipal securities. Accordingly, investment in the Fund
could cause shareholders to be subject to (or result in an increased liability
under) the federal alternative minimum tax.
Although exempt-interest dividends from the Fund generally may be treated by
shareholders as interest excluded from their gross income, each shareholder is
advised to consult his or her tax adviser with respect to whether
exempt-interest dividends retain this exclusion given the shareholder's
particular tax circumstances. For example, exempt-interest dividends may not be
excluded if the shareholder would be treated as a "substantial user" (or a
"related person" of a substantial user, as each term is defined by applicable
federal income tax law) of the facilities financed with respect to any of the
tax-exempt obligations held by the Fund.
If the Fund distributes exempt-interest dividends during the shareholder's
taxable year, some or all of the interest on indebtedness incurred or continued
by a shareholder to purchase or carry shares of the Fund will not be deductible
for federal income tax purposes, depending upon the ratio of exempt-interest
dividends to the total of exempt-interest dividends plus taxable dividends
received by the shareholder (excluding capital gain dividends) during the year.
If a shareholder receives an exempt-interest dividend with respect to any shares
and such shares are held for six months or less, any loss on the sale or
exchange of the shares will be disallowed to the extent of the amount of such
exempt-interest dividend.
While the Fund expects that a major portion of its income will constitute
tax-exempt interest, a portion of the Fund's income may consist of investment
company taxable income (generally 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). Distributions of 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,
whether paid
27
in cash or reinvested in additional shares, and regardless of how long the
shares of the Fund have been held by such shareholders. Fund distributions
generally will not qualify for the corporate dividends received deduction.
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). 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 or who are otherwise
subject to backup withholding.
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 an amount equal to the sum of 90% of its investment
company taxable income and 90% of its net tax-exempt interest 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.
28
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 distributions and not
including payment of the maximum sales charge). The information for the
fiscal years ended September 30, 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
year ended September 30, 1999, the nine month fiscal period ended September
30, 1998 and the fiscal years ended December 31, 1997 and 1996 have been
audited by KPMG LLP. The financial highlights table should be read in
conjunction with the financial statements and notes thereto included in the
Statement of Additional Information.
<Table>
<Caption>
CLASS A SHARES
NINE MONTHS FISCAL YEAR
FISCAL YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
2001 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of the Period.............. $14.69 $14.58 $15.92 $15.55 $15.06 $15.20
------ ------ ------ ------ ------ ------
Net Investment Income................................ .72 .73 .78 .56 .76 .78
Net Realized and Unrealized Gain/Loss................ .85 .10 (1.35) .39 .51 (.15)
------ ------ ------ ------ ------ ------
Total from Investment Operations...................... 1.57 .83 (.57) .95 1.27 .63
------ ------ ------ ------ ------ ------
Less:
Distributions from and in Excess of Net Investment
Income............................................. .72 .72 .77 .58 .77 .77
Distributions from Net Realized Gain................. -0- -0- -0- -0- .01 -0-
------ ------ ------ ------ ------ ------
Total Distributions................................... .72 .72 .77 .58 .78 .77
------ ------ ------ ------ ------ ------
Net Asset Value, End of the Period.................... $15.54 $14.69 $14.58 $15.92 $15.55 $15.06
====== ====== ====== ====== ====== ======
Total Return *........................................ 10.87%(a) 5.89%(a) -3.74%(a) 6.26%**(a) 8.72%(a) 4.37%(a)
Net Assets at End of the Period (In millions)......... $39.0 $31.2 $39.8 $27.1 $29.3 $22.2
Ratio of Expenses to Average Net Assets *............. .50% .48% .37% .60% .59% .28%
Ratio of Net Investment Income to Average Net Assets
*.................................................... 4.66% 5.11% 4.98% 4.85% 5.05% 5.31%
Portfolio Turnover.................................... 26% 61% 101% 50%** 48% 73%
*If certain expenses had not been assumed by the
Adviser, total return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets............... 1.02% 1.20% 1.10% 1.30% 1.29% 1.47%
Ratio of Net Investment Income to Average Net
Assets............................................... 4.14% 4.39% 4.25% 4.15% 4.35% 4.13%
<Caption>
CLASS B SHARES
NINE MONTHS FISCAL YEAR
FISCAL YEAR ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
2001 2000 1999 1998 1997 1996
------------------------------------------------------ --------------------------------------------------------------
Net Asset Value, Beginning of the Period.............. $14.69 $14.58 $15.93 $15.55 $15.06 $15.20
------ ------ ------ ------ ------ ------
Net Investment Income................................ .61 .62 .66 .48 .65 .67
Net Realized and Unrealized Gain/Loss................ .86 .10 (1.35) .39 .51 (.15)
------ ------ ------ ------ ------ ------
Total from Investment Operations...................... 1.47 .72 (.69) .87 1.16 .52
------ ------ ------ ------ ------ ------
Less:
Distributions from and in Excess of Net Investment
Income............................................. .61 .61 .66 .49 .66 .66
Distributions from Net Realized Gain................. -0- -0- -0- -0- .01 -0-
------ ------ ------ ------ ------ ------
Total Distributions................................... .61 .61 .66 .49 .67 .66
------ ------ ------ ------ ------ ------
Net Asset Value, End of the Period.................... $15.55 $14.69 $14.58 $15.93 $15.55 $15.06
====== ====== ====== ====== ====== ======
Total Return *........................................ 10.12%(b) 5.06%(b) -4.51%(b) 5.74%**(b) 7.91%(b) 3.58%(b)
Net Assets at End of the Period (In millions)......... $33.4 $29.5 $29.0 $23.6 $22.5 $18.9
Ratio of Expenses to Average Net Assets *............. 1.19% 1.26% 1.13% 1.35% 1.33% 1.03%
Ratio of Net Investment Income to Average Net Assets
*.................................................... 3.97% 4.33% 4.23% 4.09% 4.30% 4.56%
Portfolio Turnover.................................... 26% 61% 101% 50%** 48% 73%
*If certain expenses had not been assumed by the
Adviser, total return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets............... 1.71% 1.98% 1.86% 2.05% 2.03% 2.22%
Ratio of Net Investment Income to Average Net
Assets............................................... 3.45% 3.61% 3.50% 3.39% 3.60% 3.38%
<Caption>
CLASS C SHARES
NINE MONTHS
FISCAL YEAR ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000 1999 1998
------------------------------------------------------ ----------------------------------------------
Net Asset Value, Beginning of the Period.............. $14.71 $14.59 $15.94 $15.58
------ -------- -------- --------
Net Investment Income................................ .58 .63 .66 .48
Net Realized and Unrealized Gain/Loss................ .91 .10 (1.35) .37
------ -------- -------- --------
Total from Investment Operations...................... 1.49 .73 (.69) .85
------ -------- -------- --------
Less:
Distributions from and in Excess of Net Investment
Income............................................. .61 .61 .66 .49
Distributions from Net Realized Gain................. -0- -0- -0- -0-
------ -------- -------- --------
Total Distributions................................... .61 .61 .66 .49
------ -------- -------- --------
Net Asset Value, End of the Period.................... $15.59 $14.71 $14.59 $15.94
====== ======== ======== ========
Total Return *........................................ 10.25%(c) 5.13%(c) -4.51%(c) 5.60%**(c)
Net Assets at End of the Period (In millions)......... $4.0 $2.2 $3.1 $1.6
Ratio of Expenses to Average Net Assets *............. 1.28% 1.22% 1.14% 1.32%
Ratio of Net Investment Income to Average Net Assets
*.................................................... 3.88% 4.37% 4.28% 4.08%
Portfolio Turnover.................................... 26% 61% 101% 50%**
*If certain expenses had not been assumed by the
Adviser, total return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets............... 1.80% 1.94% 1.87% 2.03%
Ratio of Net Investment Income to Average Net
Assets............................................... 3.36% 3.65% 3.55% 3.38%
<Caption>
CLASS C SHARES
FISCAL YEAR
ENDED
DECEMBER 31,
1997 1996
------------------------------------------------------ ---------------------
Net Asset Value, Beginning of the Period.............. $15.08 $15.21
-------- ------
Net Investment Income................................ .67 .67
Net Realized and Unrealized Gain/Loss................ .50 (.14)
-------- ------
Total from Investment Operations...................... 1.17 .53
-------- ------
Less:
Distributions from and in Excess of Net Investment
Income............................................. .66 .66
Distributions from Net Realized Gain................. .01 -0-
-------- ------
Total Distributions................................... .67 .66
-------- ------
Net Asset Value, End of the Period.................... $15.58 $15.08
======== ======
Total Return *........................................ 7.97%(c) 3.65%(c)
Net Assets at End of the Period (In millions)......... $ 1.2 $.8
Ratio of Expenses to Average Net Assets *............. 1.37% 1.03%
Ratio of Net Investment Income to Average Net Assets
*.................................................... 4.38% 4.56%
Portfolio Turnover.................................... 48% 73%
*If certain expenses had not been assumed by the
Adviser, total return would have been lower and the
ratios would have been as follows:
Ratio of Expenses to Average Net Assets............... 2.06% 2.22%
Ratio of Net Investment Income to Average Net
Assets............................................... 3.68% 3.38%
</Table>
** Non-Annualized
(a) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 4.75% or contingent
deferred sales charge ("CDSC"). On purchases of $1 million or more, a
CDSC of 1% may be imposed on certain redemptions made within one year of
purchase. If the sales charges were included, total returns would be
lower. These returns include combined Rule 12b-1 fees and service fees
of up to .25% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 4%, charged on certain
redemptions made within one year of purchase and declining thereafter to
0% after the sixth year. If the sales charge was included, total returns
would be lower. These returns include combined Rule 12b-1 fees and
service fees of 1% and do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
(c) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC 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 combined
Rule 12b-1 fees and service fees of 1% and do not reflect the deduction
of taxes that a shareholder would pay on Fund distributions or the
redemption of Fund shares.
29
Board of Trustees
-------------------------------------------------------------------------------
<Table>
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
</Table>
* "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
- -Web Site
www.vankampen.com
- -FundInfo(R)
Automated Telephone System 800-847-2424
- -Investor Services 800-341-2911
DEALERS
- -Web Site
www.vankampen.com
- -FundInfo(R)
Automated Telephone System 800-847-2424
- -Van Kampen Investments 800-421-5666
TELECOMMUNICATIONS DEVICE FOR THE DEAF
For shareholder and dealer inquiries through Telecommunications Device for the
Deaf (TDD), call (800) 421-2833
VAN KAMPEN FLORIDA INSURED TAX FREE
INCOME FUND
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Investment Adviser
VAN KAMPEN INVESTMENT ADVISORY CORP.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Distributor
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
PO Box 5555
Oakbrook Terrace, IL 60181-5555
Transfer Agent
VAN KAMPEN INVESTOR SERVICES INC.
PO Box 218256
Kansas City, MO 64121-8256
Attn: Van Kampen Florida Insured Tax Free Income Fund
Custodian
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street, PO Box 1713
Boston, MA 02110-1713
Attn: Van Kampen Florida Insured Tax Free Income Fund
Legal Counsel
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, IL 60606
Independent Auditors
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
Van Kampen
Florida Insured
Tax Free
Income Fund
A Statement of Additional Information, which contains more details about the
Fund, is incorporated by reference in its entirety into this Prospectus.
You will find additional information about the Fund
in its annual and semiannual reports to shareholders.
The annual report explains the market conditions and
investment strategies affecting the Fund's performance during
its last fiscal year.
You can ask questions or obtain a free copy of the Fund's reports or its
Statement of Additional Information by calling (800) 341-2911.
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.
JANUARY 28, 2002
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
PROSPECTUS
[VAN KAMPEN INVESTMENTS LOGO]
FLI PRO 1/02
The Fund's Investment Company
Act File No. is 811-4386.