N-30D 1 c69959nv30d.txt SEMI-ANNUAL REPORT Table of Contents OVERVIEW LETTER TO SHAREHOLDERS 1 ECONOMIC SNAPSHOT 2 PORTFOLIO AT A GLANCE Q&A WITH YOUR PORTFOLIO MANAGERS 4 BY THE NUMBERS YOUR FUND'S INVESTMENTS 7 FINANCIAL STATEMENTS 9 NOTES TO FINANCIAL STATEMENTS 15 REPORT OF INDEPENDENT AUDITORS 21 VAN KAMPEN INVESTMENTS THE VAN KAMPEN FAMILY OF FUNDS 22 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES 23 TRUSTEE AND OFFICER INFORMATION 24
Given the market's ups and downs-- diversifying has never been more important. This report must be preceded or accompanied by a prospectus for the fund being offered. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE OVERVIEW LETTER TO SHAREHOLDERS June 20, 2002 Dear Shareholder, We seem to be at an economic crossroads--good news about the economy and earnings have been offset by escalating concerns abroad. Given the market's ups and downs, taking steps so your portfolio can be properly diversified has never been more important. So how do you decide what to do next? Contact your financial advisor. Your financial advisor can help you review your current asset allocation and determine whether it remains appropriate for your goals, risk tolerance and time horizon. Remember, while no portfolio is immune to volatility, owning a variety of stock and fixed-income investments may help manage your portfolio's overall risk and improve its long-term performance potential. When reviewing your investment selections with your financial advisor, be sure to keep your long-term goals in mind--don't let short-term volatility distract you from your long-term retirement planning and investment goals. Thank you for your continued trust in Van Kampen. We appreciate the opportunity to help you and your loved ones enjoy life's true wealth--family, friends and life's daily pleasures. Sincerely, [SIG] Richard F. Powers, III President and CEO Van Kampen Asset Management Inc. 1 ECONOMIC SNAPSHOT THE ECONOMY THE ECONOMIC RECOVERY APPEARED TO CONTINUE ITS FORWARD PROGRESS THROUGHOUT MAY 2002, ALBEIT AT A SLOWER PACE. EMPLOYMENT AND MANUFACTURING ACTIVITY FOLLOWED RECENT TRENDS AND RECORDED SLIGHT, BUT STEADY, IMPROVEMENT. HOME SALES AND AUTOMOBILE PURCHASES, OFTEN VIEWED AS INDICATORS OF CONSUMER CONFIDENCE IN THE ECONOMY, CONTINUED TO EXPAND BEYOND LEVELS SEEN IN THE FIRST QUARTER. YET, AFTER THE FIRST QUARTER'S STRONG 5.6 PERCENT GROWTH IN GROSS DOMESTIC PRODUCT, SOME MARKET OBSERVERS PREDICTED ECONOMIC ACTIVITY WOULD SLOW DURING THE SECOND QUARTER--ONCE THE EFFECTS OF TAX REFUNDS, HOME REFINANCING AND WARMER-THAN-ANTICIPATED WEATHER RAN THEIR COURSE. WHILE UNSEASONABLY WARM TEMPERATURES CONTINUED INTO APRIL--GIVING CONSUMERS AN EARLY START TO THE SUMMER SHOPPING SEASON--MAY'S UNUSUALLY COOL AND WET WEATHER KEPT MANY SHOPPERS AT HOME. SINCE CONSUMERS DRIVE TWO-THIRDS OF U.S. ECONOMIC ACTIVITY, THE EFFECTS OF THIS SPRING SLOWDOWN WERE QUICKLY EVIDENT. FOR EXAMPLE, RETAIL AND AUTO SALES WERE DOWN IN MAY ALTHOUGH, WHEN COMBINED WITH APRIL'S STRONG NUMBERS, THE TWO-MONTH TOTAL WAS STILL AHEAD OF FIRST-QUARTER LEVELS. INFLATIONARY PRESSURES REMAINED SUBDUED THROUGHOUT THE REPORTING PERIOD THANKS TO DRAMATIC INCREASES IN WORKER PRODUCTIVITY, RECEDING ENERGY PRICES AND UNDER-UTILIZED MANUFACTURING CAPACITY. 2 U.S. GROSS DOMESTIC PRODUCT SEASONALLY ADJUSTED ANNUALIZED RATES (March 31, 2000--March 31, 2002) [BAR GRAPH]
U.S. GROSS DOMESTIC PRODUCT --------------------------- Mar 00 4.8% Jun 00 5.7% Sep 00 1.3% Dec 00 1.9% Mar 01 1.3% Jun 01 0.3% Sep 01 -1.3% Dec 01 1.7% Mar 02 5.6%
Source: Bureau of Economic Analysis INTEREST RATES AND INFLATION (May 31, 2000--May 31, 2002) [LINE GRAPH]
INTEREST RATES INFLATION -------------- --------- May 00 6.50 3.20 6.50 3.70 6.50 3.70 Aug 00 6.50 3.40 6.50 3.50 6.50 3.40 Nov 00 6.50 3.40 6.50 3.40 5.50 3.70 Feb 01 5.50 3.50 5.00 2.90 4.50 3.30 May 01 4.00 3.60 3.75 3.20 3.75 2.70 Aug 01 3.50 2.70 3.00 2.60 2.50 2.10 Nov 01 2.00 1.90 1.75 1.60 1.75 1.10 Feb 02 1.75 1.10 1.75 1.50 1.75 1.60 May 02 1.75 1.20
Interest rates are represented by the closing midline federal funds target rate on the last day of each month. Inflation is indicated by the annual percentage change of the Consumer Price Index for all urban consumers at the end of each month. Source: Bloomberg 3 Q&A WITH YOUR PORTFOLIO MANAGERS WE RECENTLY SPOKE WITH THE PORTFOLIO MANAGEMENT TEAM FOR VAN KAMPEN RESERVE FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS AND INFLUENCED THE FUND'S RETURN DURING THE 12-MONTH PERIOD ENDING MAY 31, 2002. MEMBERS OF THE TEAM INCLUDE DALE ALBRIGHT, EXECUTIVE DIRECTOR, AND JONATHAN PAGE, MANAGING DIRECTOR. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S PERFORMANCE. Q HOW WOULD YOU CHARACTERIZE THE ECONOMIC AND MARKET CONDITIONS IN WHICH THE FUND OPERATED, AND HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? A Yields available from money market securities continued to trend down during the fiscal year under review as the Federal Open Market Committee (FOMC) lowered its federal funds target rate six times for a total of 225 basis points. The majority of the reductions (175 basis points) took place after the tragic events of September 11. The FOMC's federal funds target now stands at 1.75 percent, a 40-year low. These low yield levels reflected the Federal Reserve's accommodative posture as it tried to moderate the slowing pace of economic activity, which became evident during the spring and summer of 2001, and the adverse effects of the September 11 terrorist attacks. During the early months of 2002, however, the economy showed clear signs of recovery as it responded to stimulative monetary and fiscal initiatives. A preliminary reading on first quarter real gross domestic product (GDP) indicated that the economy grew at a 5.6 percent annual rate, as compared to growth of 1.7 percent in the fourth quarter of 2001 and contraction of 1.3 percent during the third quarter of last year. The May level for the Institute for Supply Management Purchasing Manager Index was 55.7, the fourth consecutive reading above 50 and the first time that has occurred since the four-month period of April through July, 2000. This index is known for its timeliness and track record in marking turns in manufacturing activity. Readings above 50 indicate expansion in manufacturing activity, and four consecutive readings over 50 have historically indicated that our nation's manufacturing sector is recovering. Another positive sign for the economy was the Fed's formal economic assessment at the March 19, 2002, FOMC meeting. At that meeting, the Fed changed its economic assessment to one that indicates risks in the foreseeable future are balanced with respect to meeting goals of price stability and sustainable economic growth. Prior to 4 PORTFOLIO COMPOSITION BY INVESTMENT TYPE (as a percentage of total investments)
As of May 31, 2002 As of May 31, 2001 - Commercial [PIE CHART] - Commercial [PIE CHART] Paper.............. 55.9% Paper........... 60.2% - U.S. Government - U.S. Government Agency............. 18.5% Agency.......... 22.0% - Certificates of - Certificates of Deposit............ 12.4% Deposit......... 13.6% - Repurchase - Repurchase Agreements......... 7.4% Agreements...... 1.4% - Notes.............. 5.8% - Notes........... 2.8%
that, their stance was weighted mainly toward economic weakness. We believe the fund continued to serve as a useful investment for liquidity, preservation of capital and a yield that reflected prevailing money market conditions. As of May 31, 2002, the seven-day current yield was 0.97 percent for Class A shares, 0.21 percent for Class B shares, and 0.20 percent for Class C shares. For the 12 months ending May 31, 2002, the fund posted a total return at net asset value of 1.93 percent for Class A shares, 1.16 percent for Class B shares, and 1.23 percent for Class C shares. Including sales charges, the fund's total return for Class B and C shares was -2.84 percent and 0.23 percent, respectively. (No sales charge is assessed on purchases of Class A shares; be advised that other charges may apply.) Please note that the yield quotation more closely reflects the current earnings of the fund than the total return quotation. Total return assumes reinvestment of all distributions for the 12-month period ending May 31, 2002. As a result of recent market activity, current performance may vary from the figures shown. For more up-to-date information, please visit vankampen.com or speak with your financial advisor. Past performance is no guarantee of future results. Investment return and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than original cost. Q HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE CONDITIONS? A We have continued to invest the fund in high-quality commercial paper, Federal agency obligations, overnight repurchase agreements, and bank notes and negotiable certificates of deposit of what we believe are financially strong commercial banks. Over the past fiscal year, we raised our high credit standards even higher in the fund by using an increased mix of Federal agency obligations, while at the same time attempting to limit purchases of corporate obligations to only those 5 issuers that possess both top short-term credit ratings and relatively high long-term debt ratings. Throughout the reporting period, our primary strategy has been to prudently extend and maintain the average maturity of the portfolio. However, recent economic data have begun to indicate a possible turnaround in the economy. As a result, we allowed the fund's average maturity to decline slightly as interest rates began to reflect some upward pressure. We believe this strategy should position the fund to take better advantage of a possible rise in short-term rates later this year. As of May 31, 2002, the fund's weighted average maturity was 47 days and 83 percent of holdings were due to mature in less than three months. Q WHAT IS YOUR OUTLOOK FOR THE MARKET OVER THE COMING MONTHS? A We expect the pace of economic activity during the next six months to begin to reflect some improvement as the economy regains its footing. Barring further significant terrorist activity in the world, we believe that consumer and business confidence should continue to improve, resulting in a return to economic expansion. Such a recovery would likely lead to moderately higher levels of short-term interest rates, which could potentially materialize during the second half of 2002. In our view, the fund is well positioned to take advantage of the money market yield levels that become available during the months ahead. ANNUAL HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 35555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. 6 BY THE NUMBERS YOUR FUND'S INVESTMENTS May 31, 2002 THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF THE REPORTING PERIOD.
DISCOUNT PAR YIELD ON AMOUNT MATURITY DATE OF AMORTIZED (000) DESCRIPTION DATE PURCHASE COST COMMERCIAL PAPER 55.9% $25,000 Abbey National North America............. 07/29/02 1.885% $ 24,924,681 20,000 AIG Funding, Inc......................... 07/15/02 1.953 19,952,578 20,000 American Express Credit.................. 06/07/02 1.762 19,994,133 10,000 American General Finance Corp............ 06/06/02 1.762 9,997,556 10,000 American Honda Finance................... 06/11/02 1.774 9,995,083 15,000 Barclays US Funding Corp................. 08/30/02 1.808 14,932,500 20,000 BP Amoco Capital PLC..................... 07/09/02 1.865 19,960,944 15,000 CBA Finance, Inc......................... 06/13/02 1.889 14,990,600 20,000 Ciesco, LP............................... 06/03/02 1.785 19,998,022 15,000 Citicorp................................. 06/10/02 1.762 14,993,400 18,000 Citicorp................................. 06/27/02 1.807 17,976,600 20,000 Deutsche Bank Financial, Inc............. 07/24/02 1.808 19,947,000 15,000 Fcar Owner Trust II...................... 06/17/02 1.857 14,987,667 20,000 Fcar Owner Trust II...................... 06/24/02 1.796 19,977,128 15,000 General Electric Capital Corp............ 07/19/02 1.839 14,963,400 10,000 General Electric Capital Corp............ 12/31/02 2.172 9,873,383 15,000 Halifax PLC.............................. 07/02/02 1.879 14,975,846 15,000 ING (US) Funding LLC..................... 08/23/02 1.862 14,936,021 15,000 JP Morgan Chase & Co..................... 06/19/02 1.783 14,986,650 15,000 Lloyds TSB Bank PLC...................... 07/12/02 1.943 14,967,029 25,000 Mortgage Interest Networking............. 06/18/02 1.812 24,978,632 10,000 Mortgage Interest Networking............. 07/26/02 1.806 9,972,500 20,000 New Center Asset Trust................... 07/09/02 1.930 19,959,467 15,000 New Center Asset Trust................... 10/21/02 1.915 14,887,583 15,000 Schering Corp............................ 06/27/02 1.807 14,980,500 15,000 UBS Finance, LLC......................... 08/13/02 1.912 14,942,208 10,000 Wells Fargo Financial, Inc............... 06/17/02 1.909 9,991,556 15,000 Wells Fargo Financial, Inc............... 08/29/02 1.808 14,933,250 ------------ TOTAL COMMERCIAL PAPER........................................... 451,975,917 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS 18.5% 15,000 Federal Home Loan Bank Discount Note..... 08/02/02 1.768 14,954,533 20,000 Federal Home Loan Mortgage Association Discount Note............................ 07/17/02 1.829 19,953,489 20,000 Federal Home Loan Mortgage Association Discount Note............................ 07/18/02 1.845 19,952,217
See Notes to Financial Statements 7 YOUR FUND'S INVESTMENTS May 31, 2002
DISCOUNT PAR YIELD ON AMOUNT MATURITY DATE OF AMORTIZED (000) DESCRIPTION DATE PURCHASE COST U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED) $15,000 Federal Home Loan Mortgage Association Discount Note............................ 08/08/02 1.773% $ 14,949,992 20,000 Federal Home Loan Mortgage Association Discount Note............................ 12/13/02 2.095 19,776,833 15,000 Federal National Mortgage Association Discount Note............................ 07/03/02 1.818 14,975,867 15,000 Federal National Mortgage Association Discount Note............................ 07/08/02 1.860 14,971,556 15,000 Federal National Mortgage Association Discount Note............................ 11/06/02 1.907 14,875,575 15,000 Federal National Mortgage Association Discount Note............................ 10/04/02 2.145 14,889,583 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 18.5%.................. 149,299,645 ------------ CERTIFICATES OF DEPOSIT 12.4% 15,000 Deutsche Bank AG......................... 07/23/02 1.790 15,000,000 17,000 Mellon Bank North America................ 06/05/02 1.780 17,000,000 18,000 Mellon Bank North America................ 06/21/02 1.850 18,000,000 20,000 State Street Bank & Trust................ 06/26/02 1.780 20,000,000 15,000 State Street Bank & Trust................ 07/31/02 1.790 15,000,000 15,000 Toronto Dominion Holding................. 07/12/02 1.860 15,000,000 ------------ TOTAL CERTIFICATES OF DEPOSIT.................................... 100,000,000 ------------ NOTES 5.8% 10,000 Bank America North America Charlotte..... 09/05/02 1.820 10,000,000 37,000 LaSalle National Bank.................... 06/20/02 1.830 37,000,000 ------------ TOTAL NOTES...................................................... 47,000,000 ------------ REPURCHASE AGREEMENT 7.4% BankAmerica Securities ($59,600,000 par collateralized by U.S. Government obligations in a pooled cash account, dated 05/31/02, to be sold on 06/03/02 at $59,608,940)............... 59,600,000 ------------ TOTAL INVESTMENTS 100.0% (a)............................................... 807,875,562 LIABILITIES IN EXCESS OF OTHER ASSETS (0.0%)............................... (111,689) ------------ NET ASSETS 100.0%.......................................................... $807,763,873 ============
(a) At May 31, 2002, cost is identical for both book and federal income taxes. See Notes to Financial Statements 8 FINANCIAL STATEMENTS Statement of Assets and Liabilities May 31, 2002 ASSETS: Total Investments, at amortized cost which approximates market value.............................................. $807,875,562 Cash........................................................ 71,792 Receivables: Fund Shares Sold.......................................... 3,418,924 Interest.................................................. 472,352 Other....................................................... 151,300 ------------ Total Assets............................................ 811,989,930 ------------ LIABILITIES: Payables: Fund Shares Repurchased................................... 2,850,714 Distributor and Affiliates................................ 653,591 Investment Advisory Fee................................... 270,361 Income Distributions...................................... 29,161 Accrued Expenses............................................ 230,917 Trustees' Deferred Compensation and Retirement Plans........ 191,313 ------------ Total Liabilities....................................... 4,226,057 ------------ NET ASSETS.................................................. $807,763,873 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $807,788,995 Accumulated Undistributed Net Investment Income............. 2,513 Accumulated Net Realized Loss............................... (27,635) ------------ NET ASSETS.................................................. $807,763,873 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value, offering price and redemption price per share (Based on net assets of $458,022,209 and 458,061,356 shares of beneficial interest issued and outstanding)............................................ $ 1.00 ============ Class B Shares: Net asset value and offering price per share (Based on net assets of $299,075,662 and 299,079,493 shares of beneficial interest issued and outstanding)............. $ 1.00 ============ Class C Shares: Net asset value and offering price per share (Based on net assets of $50,666,002 and 50,689,804 shares of beneficial interest issued and outstanding)............. $ 1.00 ============
See Notes to Financial Statements 9 Statement of Operations For the Year Ended May 31, 2002 INVESTMENT INCOME: Interest.................................................... $25,793,185 ----------- EXPENSES: Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $704,090, $3,265,027 and $479,678, respectively)............................................. 4,448,795 Investment Advisory Fee..................................... 3,546,711 Shareholder Services........................................ 2,727,713 Custody..................................................... 132,262 Legal....................................................... 36,288 Trustees' Fees and Related Expenses......................... 29,432 Other....................................................... 499,308 ----------- Total Expenses.......................................... 11,420,509 Less Credits Earned on Cash Balances.................... 36,478 ----------- Net Expenses............................................ 11,384,031 ----------- NET INVESTMENT INCOME....................................... $14,409,154 =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $14,409,154 ===========
See Notes to Financial Statements 10 Statements of Changes in Net Assets
YEAR ENDED YEAR ENDED MAY 31, 2002 MAY 31, 2001 ---------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income............................. $ 14,409,154 $ 37,999,919 --------------- --------------- Distributions from Net Investment Income: Class A Shares.................................. (9,391,875) (24,360,250) Class B Shares.................................. (4,252,158) (11,451,242) Class C Shares.................................. (748,354) (2,205,189) --------------- --------------- Total Distributions............................... (14,392,387) (38,016,681) --------------- --------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES...................................... 16,767 (16,762) --------------- --------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold......................... 1,896,126,309 2,505,005,403 Net Asset Value of Shares Issued Through Dividend Reinvestment.................................... 14,392,387 38,016,681 Cost of Shares Repurchased........................ (1,956,211,417) (2,556,368,681) --------------- --------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS.................................... (45,692,721) (13,346,597) --------------- --------------- TOTAL DECREASE IN NET ASSETS...................... (45,675,954) (13,363,359) NET ASSETS: Beginning of the Period........................... 853,439,827 866,803,186 --------------- --------------- End of the Period (Including accumulated undistributed net investment income of $2,513 and ($14,254), respectively).................... $ 807,763,873 $ 853,439,827 =============== ===============
See Notes to Financial Statements 11 Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED MAY 31, CLASS A SHARES ---------------------------------------------- 2002 2001 2000 1999 1998 ---------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ Net Investment Income................. .02 .05 .05 .04 .05 Less Distributions from Net Investment Income.............................. .02 .05 .05 .04 .05 ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== Total Return (a)........................ 1.93% 5.35%* 4.92% 4.55% 4.78% Net Assets at End of the Period (In millions)............................. $458.0 $451.7 $573.3 $529.6 $634.1 Ratio of Expenses to Average Net Assets (b)................................... .91% .95% .82% .84% 1.02% Ratio of Net Investment Income to Average Net Assets.................... 1.94% 5.22% 4.71% 4.38% 4.60%
* If certain losses had not been assumed by Van Kampen, total return would have been lower by less than .01%. (a) Assumes reinvestment of all distributions for the period and includes combined Rule 12b-1 fees and service fees of up to .15% and does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) The Ratio of Expenses to Average Net Assets does not reflect credits earned on cash balances. If these credits were reflected as a reduction of expenses, the ratio would decrease by .01% for the year ended May 31, 1999. See Notes to Financial Statements 12 Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED MAY 31, CLASS B SHARES ---------------------------------------------- 2002 2001 2000 1999 1998 ---------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ Net Investment Income................. .01 .05 .04 .04 .04 Less Distributions from Net Investment Income.............................. .01 .05 .04 .04 .04 ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== Total Return (a)........................ 1.16% 4.66%* 4.14% 3.78% 3.99% Net Assets at End of the Period (In millions)............................. $299.1 $338.7 $238.8 $129.8 $123.0 Ratio of Expenses to Average Net Assets (b)................................... 1.67% 1.58% 1.57% 1.63% 1.79% Ratio of Net Investment Income to Average Net Assets.................... 1.17% 4.43% 3.96% 3.71% 3.91%
* If certain losses had not been assumed by Van Kampen, total return would have been lower by less than .01%. (a) Assumes reinvestment of all distributions for the period and does not include payment of the maximum contingent deferred sales charge (CDSC) of 4%, charged on certain redemptions made within the first and second year of purchase and declining to 0% after the fifth year. If the sales charge was included, total returns would be lower. These returns include combined Rule 12b-1 fees and service fees of up to .90% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) The Ratio of Expenses to Average Net Assets does not reflect credits earned on cash balances. If these credits were reflected as a reduction of expenses, the ratio would decrease by .01% for the year ended May 31, 1999. See Notes to Financial Statements 13 Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED MAY 31, CLASS C SHARES ----------------------------------------- 2002 2001 2000 1999 1998 ----------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD... $1.00 $1.00 $1.00 $1.00 $1.00 ----- ----- ----- ----- ----- Net Investment Income.................... .01 .05 .04 .04 .04 Less Distributions from Net Investment Income................................. .01 .05 .04 .04 .04 ----- ----- ----- ----- ----- NET ASSET VALUE, END OF THE PERIOD......... $1.00 $1.00 $1.00 $1.00 $1.00 ===== ===== ===== ===== ===== Total Return (a)........................... 1.23% 4.57%* 4.14% 3.77% 3.99% Net Assets at End of the Period (In millions)................................ $50.7 $63.0 $54.7 $26.9 $16.1 Ratio of Expenses to Average Net Assets (b)...................................... 1.60% 1.69% 1.57% 1.63% 1.78% Ratio of Net Investment Income to Average Net Assets............................... 1.29% 4.40% 3.96% 3.73% 3.91%
* If certain losses had not been assumed by Van Kampen, total return would have been lower by less than .01%. (a) 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 up to .90% and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (b) The Ratio of Expenses to Average Net Assets does not reflect credits earned on cash balances. If these credits were reflected as a reduction of expenses, the ratio would decrease by .01% for the year ended May 31, 1999. See Notes to Financial Statements 14 NOTES TO FINANCIAL STATEMENTS May 31, 2002 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Reserve Fund (the "Fund") is organized as a Delaware business trust. The Fund is an open-end diversified management investment company registered under the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's investment objective is to seek protection of capital and high current income. The Fund's investment adviser seeks to achieve this objective through investments in U.S. dollar denominated money market securities. The Fund commenced investment operations on July 12, 1974. The distribution of the Fund's Class B and Class C Shares commenced on April 18, 1995. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Investments are valued at amortized cost, which approximates market value. Under this valuation method, a portfolio instrument is valued at cost and any discount or premium is accreted or amortized to the maturity of the instrument. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Fund may invest in repurchase agreements, which are short-term investments whereby the Fund acquires ownership of a debt security and the seller agrees to repurchase the security at a future time and specified price. The Fund may invest independently in repurchase agreements, or transfer uninvested cash balances into a pooled cash account along with other investment companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its affiliates, the daily aggregate of which is invested in repurchase agreements. Repurchase agreements are fully collateralized by the underlying debt security. The Fund will make payment for such securities only upon physical delivery or evidence of book entry transfer to the account of the custodian bank. The seller is required to maintain the value of the underlying security at not less than the repurchase proceeds due the Fund. C. INCOME AND EXPENSES Interest income is recorded on an accrual basis. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares, 15 NOTES TO FINANCIAL STATEMENTS May 31, 2002 except for distribution and service fees and transfer agency costs which are unique to each class of shares. D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income, if any, to its shareholders. Therefore, no provision for federal income taxes is required. The Fund intends to utilize provisions of the federal income tax laws which allow it to carry a realized capital loss forward for eight years following the year of the loss and offset such losses against any future realized capital gains. At May 31, 2002, the Fund had an accumulated capital loss carryforward for tax purposes of $27,635, which will expire between May 31, 2004 and 2009. E. DISTRIBUTION OF INCOME AND GAINS The Fund declares dividends daily from net investment income and automatically reinvests such dividends daily. Shareholders can elect to receive the cash equivalent of their daily dividends at each month end. The Fund distributes capital gains, if any, to shareholders at least annually. The tax character of distributions paid during 2002 and 2001 was as follows:
2002 2001 Distributions paid from: Ordinary income......................................... $14,639,745 $38,139,803
Due to the inherent differences in the recognition of income, expenses and realized gains/losses under accounting principles generally accepted in the United States of America and federal income tax purposes, permanent differences between book and tax basis reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. Permanent book and tax differences of $30,479 relating to the capital loss carryforward expiring in the current year was reclassified from accumulated net realized loss to capital. As of May 31, 2002, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $214,129
F. EXPENSE REDUCTIONS During the year ended May 31, 2002, the Fund's custody fee was reduced by $36,478 as a result of credits earned on cash balances. 16 NOTES TO FINANCIAL STATEMENTS May 31, 2002 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, the Adviser will provide investment advice and facilities to the Fund for an annual fee payable monthly as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM First $150 million.......................................... .50% Next $100 million........................................... .45% Next $100 million........................................... .40% Over $350 million........................................... .35%
For the year ended May 31, 2002, the Fund recognized expenses of approximately $36,300 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated person. Under an Accounting Services agreement, the Adviser provides accounting services to the Fund. The Adviser allocates the cost of such services to each fund. For the year ended May 31, 2002, the Fund recognized expenses of approximately $62,500 representing Van Kampen Investments Inc. or its affiliates' (collectively "Van Kampen") cost of providing accounting services to the Fund, which are reported as part of "Other" expenses in the Statement of Operations. Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the year ended May 31, 2002, the Fund recognized expenses of approximately $2,121,500. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees and are based on competitive market benchmarks. Certain officers and trustees of the Fund are also officers and directors of Van Kampen. The Fund does not compensate its officers or trustees who are officers of Van Kampen. The Fund provides deferred compensation and retirement plans for its trustees who are not officers of Van Kampen. Under the deferred compensation plan, trustees may elect to defer all or a portion of their compensation. Amounts deferred are retained by the Fund and, to the extent permitted by the 1940 Act, as amended, may be invested in the common shares of those funds selected by the trustees. Investments in such funds of approximately $109,500 are included in "Other" assets on the Statement of Assets and Liabilities at May 31, 2002. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. Benefits under the 17 NOTES TO FINANCIAL STATEMENTS May 31, 2002 retirement plan are payable upon retirement for a ten-year period and are based upon each trustee's years of service to the Fund. The maximum annual benefit per trustee under the plan is $2,500. 3. CAPITAL TRANSACTIONS At May 31, 2002, capital aggregated $458,026,901, $299,074,948 and $50,687,146 for Classes A, B, and C, respectively. For the year ended May 31, 2002, transactions were as follows:
SHARES VALUE Sales: Class A.......................................... 1,374,222,816 $ 1,374,222,816 Class B.......................................... 382,872,986 382,872,986 Class C.......................................... 139,030,507 139,030,507 -------------- --------------- Total Sales........................................ 1,896,126,309 $ 1,896,126,309 ============== =============== Dividend Reinvestment: Class A.......................................... 9,391,875 $ 9,391,875 Class B.......................................... 4,252,158 4,252,158 Class C.......................................... 748,354 748,354 -------------- --------------- Total Dividend Reinvestment........................ 14,392,387 $ 14,392,387 ============== =============== Repurchases: Class A.......................................... (1,377,327,816) $(1,377,327,816) Class B.......................................... (426,739,268) (426,739,268) Class C.......................................... (152,144,333) (152,144,333) -------------- --------------- Total Repurchases.................................. (1,956,211,417) $(1,956,211,417) ============== ===============
18 NOTES TO FINANCIAL STATEMENTS May 31, 2002 At May 31, 2001, capital aggregated $451,757,308, $338,700,357, and $63,054,530 for Classes A, B, and C, respectively. For the year ended May 31, 2001, transactions were as follows:
SHARES VALUE Sales: Class A.......................................... 1,646,318,049 $ 1,646,318,049 Class B.......................................... 687,547,727 687,547,727 Class C.......................................... 171,139,627 171,139,627 -------------- --------------- Total Sales........................................ 2,505,005,403 $ 2,505,005,403 ============== =============== Dividend Reinvestment: Class A.......................................... 24,360,250 $ 24,360,250 Class B.......................................... 11,451,242 11,451,242 Class C.......................................... 2,205,189 2,205,189 -------------- --------------- Total Dividend Reinvestment........................ 38,016,681 $ 38,016,681 ============== =============== Repurchases: Class A.......................................... (1,792,234,974) $(1,792,234,973) Class B.......................................... (599,148,102) (599,148,112) Class C.......................................... (164,985,596) (164,985,596) -------------- --------------- Total Repurchases.................................. (2,556,368,672) $(2,556,368,681) ============== ===============
Class B Shares purchased on or after June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Class B Shares purchased before June 1, 1996, and any dividend reinvestment plan Class B Shares received on such shares, automatically convert to Class A Shares six years after the end of the calendar month in which the shares were purchased. For the years ended May 31, 2002 and 2001, 18,883,624 and 12,687,998 Class B Shares automatically converted to Class A Shares, respectively, and are shown in the above table as sales of Class A Shares and repurchases of Class B Shares. Class C Shares purchased before January 1, 1997, and any dividend reinvestment plan Class C Shares received on such shares, automatically convert to Class A Shares ten years after the end of the calendar month in which such shares were purchased. Class C Shares purchased on or after January 1, 1997 do not possess a conversion feature. For the years ended May 31, 2002 and 2001, no Class C Shares converted to Class A Shares. Class B and C Shares are offered without a front end sales charge, but are subject to a contingent deferred sales charge (CDSC). The CDSC will be imposed on most redemptions made within five 19 NOTES TO FINANCIAL STATEMENTS May 31, 2002 years of the purchase for Class B and one year of the purchase for Class C as detailed in the following schedule.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR AMOUNT SUBJECT TO CHARGE -------------------------- YEAR OF REDEMPTION CLASS B CLASS C First...................................................... 4.00% 1.00% Second..................................................... 4.00% None Third...................................................... 3.00% None Fourth..................................................... 2.50% None Fifth...................................................... 1.50% None Sixth and Thereafter....................................... None None
For the year ended May 31, 2002, Van Kampen, as Distributor for the Fund, received net commissions on redeemed shares which were subject to a CDSC of approximately $2,656,700. Sales charges do not represent expenses to the Fund. 4. DISTRIBUTION AND SERVICE PLANS With respect to its Class A Shares, Class B Shares and Class C Shares, the Fund and its shareholders have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, as amended, and a service plan (collectively, the "Plans"). The Plans govern payments for: the distribution of the Fund's Class A Shares, Class B Shares and Class C Shares; the provision of ongoing shareholder services with respect to such classes of shares; and the maintenance of shareholder accounts with respect to such classes of shares. Annual fees under the Plans of up to .15% of Class A average daily net assets and .90% each of Class B and Class C average daily net assets are accrued daily. Included in these fees for the year ended May 31, 2002, are payments retained by Van Kampen of approximately $2,962,900 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $121,500. 20 REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Trustees of Van Kampen Reserve Fund: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Van Kampen Reserve Fund (the "Fund"), as of May 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the Fund for each of the two years in the period ended May 31, 1999 were audited by other auditors whose report dated July 1, 1999 expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of May 31, 2002, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund at May 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Chicago, Illinois July 11, 2002 21 VAN KAMPEN INVESTMENTS THE VAN KAMPEN FAMILY OF FUNDS Growth Aggressive Growth American Value Emerging Growth Enterprise Equity Growth Focus Equity Growth Mid Cap Growth Pace Select Growth Small Cap Growth Small Cap Value Tax Managed Equity Growth Technology Growth and Income Comstock Equity and Income Growth and Income Harbor Real Estate Securities Utility Value Value Opportunities Global/International Asian Equity Emerging Markets European Value Equity Global Equity Allocation Global Franchise Global Value Equity International Advantage International Magnum Latin American Worldwide High Income Income Corporate Bond Government Securities High Income Corporate Bond High Yield Limited Maturity Government U.S. Government U.S. Government Trust for Income* Capital Preservation Reserve Tax Free Money Senior Loan Prime Rate Income Trust Senior Floating Rate Tax Free California Insured Tax Free Florida Insured Tax Free Income* High Yield Municipal** Insured Tax Free Income Intermediate Term Municipal Income Municipal Income New York Tax Free Income Pennsylvania Tax Free Income Strategic Municipal Income For more complete information, including risk considerations, fees, sales charges and ongoing expenses, please contact your financial advisor for a prospectus. Please read it carefully before you invest or send money. To view a current Van Kampen fund prospectus or to receive additional fund information, choose from one of the following: - visit our Web site at VANKAMPEN.COM-- to view a prospectus, select Download Prospectus [COMPUTER ICON] - call us at (800) 847-2424 Telecommunications Device for the Deaf (TDD) users, call (800) 421-2833. [PHONE ICON] - e-mail us by visiting VANKAMPEN.COM and selecting Contact Us [MAIL ICON] * Closed to new investors ** Open to new investors for a limited time 22 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES VAN KAMPEN RESERVE FUND BOARD OF TRUSTEES J. MILES BRANAGAN JERRY D. CHOATE LINDA HUTTON HEAGY R. CRAIG KENNEDY MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT INC. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 218256 Kansas City, Missouri 64121-8256 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 23 TRUSTEE AND OFFICER INFORMATION The business and affairs of the Fund are managed under the direction of the Fund's Board of Trustees and the Fund's officers appointed by the Board of Trustees. The tables below list the trustees and executive officers of the Fund and their principal occupations during the last five years, other directorships held by trustees and their affiliations, if any, with Van Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). Advisory Corp. and Asset Management sometimes are referred to herein collectively as the "Advisers." The term "Fund Complex" includes each of the investment companies advised by the Advisers or their affiliates as of the date of this Statement of Additional Information. Trustees serve until reaching their retirement age or until their successors are duly elected and qualified. Officers are annually elected by the trustees. INDEPENDENT TRUSTEES:
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE J. Miles Branagan (70) Trustee Trustee Private investor. 57 1632 Morning Mountain Road since 1991 Trustee/Director of funds Raleigh, NC 27614 in the Fund Complex. Co-founder, and prior to August 1996, Chairman, Chief Executive Officer and President, MDT Corporation (now known as Getinge/Castle, Inc., a subsidiary of Getinge Industrier AB), a company which develops, manufactures, markets and services medical and scientific equipment.
24
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Jerry D. Choate (63) Trustee Trustee Trustee/Director of funds 57 Director of Amgen Inc., a 53 Monarch Bay Drive since 1999 in the Fund Complex. biotechnological company, Dana Point, CA 92629 Prior to January 1999, and Director of Valero Chairman and Chief Energy Corporation, an Executive Officer of the independent refining Allstate Corporation company. ("Allstate") and Allstate Insurance Company. Prior to January 1995, President and Chief Executive Officer of Allstate. Prior to August 1994, various management positions at Allstate. Linda Hutton Heagy (54) Trustee Trustee Regional Managing Partner 57 Sears Tower since 1995 of Heidrick & Struggles, 233 South Wacker Drive an executive search firm. Suite 7000 Trustee/ Director of Chicago, IL 60606 funds in the Fund Complex. Trustee on the University of Chicago Hospitals Board, Vice Chair of the Board of the YMCA of Metropolitan Chicago and a member of the Women's Board of the University of Chicago. Prior to 1997, Partner, Ray & Berndtson, Inc., an executive recruiting firm. Prior to 1996, Trustee of The International House Board, a fellowship and housing organization for international graduate students. Formerly, Executive Vice President of ABN AMRO, N.A., a Dutch bank holding company. Prior to 1992, Executive Vice President of La Salle National Bank.
25
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE R. Craig Kennedy (50) Trustee Trustee Director and President, 57 1744 R Street, since 1995 German Marshall Fund of Washington, D.C. 20009 the United States, an independent U.S. foundation created to deepen understanding, promote collaboration and stimulate exchanges of practical experience between Americans and Europeans. Trustee/Director of funds in the Fund Complex. Formerly, advisor to the Dennis Trading Group Inc., a managed futures and option company that invests money for individuals and institutions. Prior to 1992, President and Chief Executive Officer, Director and member of the Investment Committee of the Joyce Foundation, a private foundation. Jack E. Nelson (66) Trustee Trustee President, Nelson 57 423 Country Club Drive since 1995 Investment Planning Winter Park, FL 32789 Services, Inc., a financial planning company and registered investment adviser in the State of Florida. President, Nelson Ivest Brokerage Services Inc., a member of the National Association of Securities Dealers, Inc. and Securities Investors Protection Corp. Trustee/ Director of funds in the Fund Complex.
26
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Suzanne H. Woolsey (60) Trustee Trustee Chief Communications 57 Director of Neurogen 2101 Constitution Ave., N.W. since 1999 Officer of the National Corporation, a Room 285 Academy of pharmaceutical company, Washington, D.C. 20418 Sciences/National since January 1998. Research Council, an independent, federally chartered policy institution, since 2001 and previously Chief Operating Officer from 1993-2001. Trustee/Director of funds in the Fund Complex. Director of the Institute for Defense Analyses, a federally funded research and development center, Director of the German Marshall Fund of the United States, Trustee of Colorado College and Vice Chair of the Board of the Council for Excellence in Government. Prior to 1993, Executive Director of the Commission on Behavioral and Social Sciences and Education at the National Academy of Sciences/National Research Council. From 1980 through 1989, Partner of Coopers & Lybrand.
27 INTERESTED TRUSTEES:*
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Mitchell M. Merin* (48) Trustee Trustee President and Chief 57 1221 Avenue of the Americas since 1999 Operating Officer of 21st Floor Morgan Stanley Investment New York, NY 10020 Management since December 1998. President and Director since April 1997 and Chief Executive Officer since June 1998 of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. Chairman, Chief Executive Officer and Director of Morgan Stanley Distributors Inc. since June 1998. Chairman and Chief Executive Officer since June 1998, and Director since January 1998 of Morgan Stanley Trust. Director of various Morgan Stanley subsidiaries. President of the Morgan Stanley Funds since May 1999. Trustee/Director of funds in the Fund Complex. Previously Chief Strategic Officer of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. and Executive Vice President of Morgan Stanley Distributors Inc. April 1997-June 1998, Vice President of the Morgan Stanley Funds May 1997-April 1999, and Executive Vice President of Dean Witter, Discover & Co. prior to May 1997.
28
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Richard F. Powers, III* (56) Trustee and Trustee Chairman, President, 94 1 Parkview Plaza President since 1999 Chief Executive Officer, P.O. Box 5555 Director and Managing Oakbrook Terrace, IL 60181 Director of Van Kampen Investments. Chairman, Director and Chief Executive Officer of the Advisers, the Distributor and Van Kampen Advisors Inc. since 1998. Managing Director of the Advisers, the Distributor and Van Kampen Advisors Inc. since July 2001. Director and Officer of certain other subsidiaries of Van Kampen Investments. Chief Sales and Marketing Officer of Morgan Stanley Asset Management Inc. Trustee/Director and President or Trustee, President and Chairman of the Board of funds in the Fund Complex. Prior to May 1998, Executive Vice President and Director of Marketing at Morgan Stanley and Director of Dean Witter, Discover & Co. and Dean Witter Realty. Prior to 1996, Director of Dean Witter Reynolds Inc. Wayne W. Whalen* (62) Trustee Trustee Partner in the law firm 94 333 West Wacker Drive since 1995 of Skadden, Arps, Slate, Chicago, IL 60606 Meagher & Flom (Illinois), legal counsel to funds in the Fund Complex. Trustee/ Director/Managing General Partner of funds in the Fund Complex.
* Such trustee is an "interested person" (within the meaning of Section 2(a)(19) of the 1940 Act). Mr. Whalen is an interested person of certain funds in the Fund Complex by reason of his firm currently acting as legal counsel to such funds in the Fund Complex. Messrs. Merin and Powers are interested persons of funds in the Fund Complex and the Advisers by reason of their positions with Morgan Stanley or its affiliates. 29 OFFICERS:
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS Stephen L. Boyd (61) Vice President Officer Managing Director and Chief Investment Officer of Van Kampen 2800 Post Oak Blvd. since 1998 Investments, and Managing Director and President of the 45th Floor Advisers and Van Kampen Advisors Inc. Executive Vice Houston, TX 77056 President and Chief Investment Officer of funds in the Fund Complex. Prior to December 2000, Executive Vice President and Chief Investment Officer of Van Kampen Investments, and President and Chief Operating Officer of the Advisers. Prior to April 2000, Executive Vice President and Chief Investment Officer for Equity Investments of the Advisers. Prior to October 1998, Vice President and Senior Portfolio Manager with AIM Capital Management, Inc. Prior to February 1998, Senior Vice President and Portfolio Manager of Van Kampen American Capital Asset Management, Inc., Van Kampen American Capital Investment Advisory Corp. and Van Kampen American Capital Management, Inc. Joseph J. McAlinden (59) Chief Investment Officer Managing Director and Chief Investment Officer of Morgan 1221 Avenue of the Americas Officer since Stanley Investment Advisors Inc. and Director of Morgan New York, NY 10020 2002 Stanley Trust for over 5 years.
30
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS A. Thomas Smith III (45) Vice President and Officer Managing Director and Director of Van Kampen Investments, 1221 Avenue of the Americas Secretary since 1999 Director of the Advisers, Van Kampen Advisors Inc., the 22nd Floor Distributor, Investor Services and certain other New York, NY 10020 subsidiaries of Van Kampen Investments. Managing Director and General Counsel-Mutual Funds of Morgan Stanley Investment Advisors, Inc. Vice President or Principal Legal Officer and Secretary of funds in the Fund Complex. Prior to July 2001, Managing Director, General Counsel, Secretary and Director of Van Kampen Investments, the Advisers, the Distributor, Investor Services, and certain other subsidiaries of Van Kampen Investments. Prior to December 2000, Executive Vice President, General Counsel, Secretary and Director of Van Kampen Investments, the Advisers, Van Kampen Advisors Inc., the Distributor, Investor Services and certain other subsidiaries of Van Kampen Investments. Prior to January 1999, Vice President and Associate General Counsel to New York Life Insurance Company ("New York Life"), and prior to March 1997, Associate General Counsel of New York Life. Prior to December 1993, Assistant General Counsel of The Dreyfus Corporation. Prior to August 1991, Senior Associate, Willkie Farr & Gallagher. Prior to January 1989, Staff Attorney at the Securities and Exchange Commission, Division of Investment Management, Office of Chief Counsel. John R. Reynoldson (49) Vice President Officer Executive Director of the Advisers and Van Kampen Advisors 1 Parkview Plaza since 2000 Inc. Vice President of funds in the Fund Complex. Prior to Oakbrook Terrace, IL 60181 July 2001, Principal and Co-head of the Fixed Income Department of the Advisers and Van Kampen Advisors Inc. Prior to December 2000, Senior Vice President of the Advisers and Van Kampen Advisors Inc. Prior to May 2000, he managed the investment grade taxable group for the Advisers since July 1999. From July 1988 to June 1999, he managed the government securities bond group for Asset Management. Mr. Reynoldson has been with Asset Management since April 1987.
31
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS John L. Sullivan (46) Vice President, Chief Officer Executive Director of Van Kampen Investments, the Advisers 1 Parkview Plaza Financial Officer and since 1996 and Van Kampen Advisors Inc. Vice President, Chief Financial Oakbrook Terrace, IL 60181 Treasurer Officer and Treasurer of funds in the Fund Complex. John H. Zimmermann, III (44) Vice President Officer Managing Director and Director of Van Kampen Investments, Harborside Financial Center since 2000 and Managing Director, President and Director of the Plaza 2 - 7th Floor Distributor. Vice President of funds in the Fund Complex. Jersey City, NJ 07311 Prior to December 2000, President of Van Kampen Insurance Agency of Illinois Inc., and Senior Vice President and Director of Van Kampen Investments. From November 1992 to December 1997, Mr. Zimmermann was Senior Vice President of the Distributor.
32 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you make with us, our affiliates, or third parties. We may also collect information you provide when using our web site, and text files (a.k.a. "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen Trust Company, Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. The Statement of Additional Information includes additional information about Fund trustees and is available, without charge, upon request by calling (800) 847-2424. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com [VAN KAMPEN INVESTMENTS LOGO] Copyright (C)2002 Van Kampen Funds Inc. All rights reserved. 23, 133, 233 Member NASD/SIPC. RES ANR 7/02 6345G02-AP-7/02