-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AKkbdfw5Qxd6fzWY7cMNrjAlAeQ0mdufMlpZYwoLn4ZTCi7GuYYGopbwVNZfXCVF cHq/xAkRYMPH0SzbGWEZxg== 0000950137-02-004998.txt : 20020927 0000950137-02-004998.hdr.sgml : 20020927 20020927144843 ACCESSION NUMBER: 0000950137-02-004998 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20020927 EFFECTIVENESS DATE: 20020927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN RESERVE FUND CENTRAL INDEX KEY: 0000005114 IRS NUMBER: 741794065 FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-50870 FILM NUMBER: 02774596 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLAZA STREET 2: VAN KAMPEN INVESTMENTS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 6306846774 MAIL ADDRESS: STREET 1: ONE PARKVIEW PLAZA STREET 2: VAN KAMPEN INVESTMENTS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN CAPITAL RESERVE FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GENERAL RESERVE FUND INC DATE OF NAME CHANGE: 19830912 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL RESERVE FUND DATE OF NAME CHANGE: 19951219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN RESERVE FUND CENTRAL INDEX KEY: 0000005114 IRS NUMBER: 741794065 FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02482 FILM NUMBER: 02774597 BUSINESS ADDRESS: STREET 1: ONE PARKVIEW PLAZA STREET 2: VAN KAMPEN INVESTMENTS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 6306846774 MAIL ADDRESS: STREET 1: ONE PARKVIEW PLAZA STREET 2: VAN KAMPEN INVESTMENTS INC CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN CAPITAL RESERVE FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GENERAL RESERVE FUND INC DATE OF NAME CHANGE: 19830912 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL RESERVE FUND DATE OF NAME CHANGE: 19951219 485BPOS 1 c69996bpe485bpos.txt POST-EFFECTIVE AMENDMENT NO. 44 & 29 TO FORM N-1A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 27, 2002 REGISTRATION NO. 2-50870 NO. 811-2482 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] POST-EFFECTIVE AMENDMENT NO. 44 [X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] AMENDMENT NO. 29 [X]
VAN KAMPEN RESERVE FUND (Exact Name of Registrant as Specified in Declaration of Trust) 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555 (Address of Principal Executive Offices) (Zip Code) (630) 684-6000 Registrant's Telephone Number, Including Area Code A. THOMAS SMITH III Vice President and Secretary Van Kampen Reserve Fund 1221 Avenue of the Americas New York, NY 10020 (Name and Address of Agent for Service) ------------------------ Copies to: WAYNE W. WHALEN, ESQ. THOMAS A. HALE, ESQ. Skadden, Arps, Slate, Meagher & Flom (Illinois) 333 West Wacker Drive Chicago, Illinois 60606 (312) 407-0700 ------------------------ Approximate Date of Proposed Public Offering: As soon as practicable following effectiveness of this Registration Statement. It is proposed that this filing will become effective: [X] immediately upon filing pursuant to paragraph (b) [ ] on (date) pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of Rule 485 If appropriate check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title of Securities Being Registered: Shares of Beneficial Interest, par value $0.01 per share - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Van Kampen Reserve Fund ------------------------------------------------------------------------------- Van Kampen Reserve Fund's investment objective is to seek protection of capital and high current income. The Fund's investment adviser seeks to achieve the Fund's investment objective by investing in a portfolio of U.S. dollar-denominated money-market securities. Shares of the Fund have not been approved or disapproved by the Securities and Exchange Commission (SEC) or any state regulator, and neither the SEC nor any state regulator has passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. This Prospectus is dated SEPTEMBER 27, 2002 CLASS A SHARES CLASS B SHARES CLASS C SHARES PROSPECTUS [VAN KAMPEN INVESTMENTS LOGO] Risk/Return Summary......................................... 3 Fees and Expenses of the Fund............................... 4 Investment Objective, Policies and Risks.................... 5 Investment Advisory Services................................ 7 Purchase of Shares.......................................... 8 Redemption of Shares........................................ 13 Distributions from the Fund................................. 14 Shareholder Services........................................ 15 Federal Income Taxation..................................... 17 Financial Highlights........................................ 19
No dealer, salesperson or any other person has been authorized to give any information or to make any representations, other than those contained in this Prospectus, in connection with the offer contained in this Prospectus and, if given or made, such other information or representations must not be relied upon as having been authorized by the Fund, the Fund's investment adviser or the Fund's distributor. This Prospectus does not constitute an offer by the Fund or by the Fund's distributor to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful for the Fund to make such an offer in such jurisdiction. Table of Contents Risk/Return Summary ------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The Fund's investment objective is to seek protection of capital and high current income. PRINCIPAL INVESTMENT STRATEGIES The Fund's investment adviser seeks to achieve the Fund's investment objective by investing in a portfolio of U.S. dollar-denominated money-market securities, including U.S. government securities, domestic and foreign bank obligations, commercial paper and repurchase agreements secured by such obligations. The Fund seeks to maintain a constant net asset value of $1.00 per share by investing in money-market securities with remaining maturities of 13 months or less and with a dollar-weighted average maturity of 90 days or less. The Fund's investments are limited to those securities that meet maturity, quality and diversification standards with which money market funds must comply. In selecting securities for investment, the Fund's investment adviser seeks to invest in those securities that it believes entail reasonable risk considered in relation to the Fund's investment policies and may sell such securities in order to increase the yield or to adjust the average maturity or credit quality of the Fund's investment portfolio. PRINCIPAL INVESTMENT RISKS An investment in the Fund is subject to risks. An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. There can be no assurance that the Fund will achieve its investment objective. INCOME RISK. The income you receive from the Fund is based primarily on short-term interest rates, which can vary widely over time. If short-term interest rates drop, your income from the Fund may drop as well. CREDIT RISK. Credit risk refers to an issuer's ability to make timely payments of interest and principal. While credit risk should be low for the Fund because it invests in high-quality money-market instruments, an investment in the Fund is not risk free. The Fund is still subject to the risk that the issuers of such securities may experience financial difficulties and, as a result, fail to pay on their obligations. MARKET RISK. Market risk is the possibility that the market values of securities owned by the Fund will decline and adversely affect the Fund's net asset value. The prices of debt securities tend to fall as interest rates rise but market risk should be low for the Fund because it invests in high-quality, short-term securities. MANAGER RISK. As with any managed fund, the Fund's investment adviser may not be successful in selecting the best-performing securities or investment techniques, and the Fund's performance may lag behind that of similar funds. INVESTOR PROFILE In light of the Fund's investment objective and strategies, the Fund may be appropriate for investors who: - - Seek protection of capital and high current income through investments in money-market instruments ANNUAL PERFORMANCE One way to measure the risks of investing in the Fund is to look at how its performance has varied from year to year. The following chart shows the annual returns of the Fund's Class A Shares over the ten calendar years prior to the date of this Prospectus. Remember that past performance of the Fund is not indicative of its future performance.
ANNUAL RETURN ------------- 1992 2.91 1993 2.16 1994 3.38 1995 5.00 1996 4.46 1997 4.68 1998 4.85 1999 4.48 2000 5.60 2001 3.41
3 The Fund's return for the six-month period ended June 30, 2002 for Class A Shares was 0.52%. As a result of market activity, current performance may vary from the figures shown. The annual returns of the Fund's Class B Shares and Class C Shares would be substantially similar to those shown for the Class A Shares because all of the Fund's shares are invested in the same portfolio of securities; however, the actual annual returns of the Class B Shares and Class C Shares would be lower than the annual returns shown for the Fund's Class A Shares because of differences in the expenses borne by each class of shares. During the ten-year period shown in the bar chart, the highest quarterly return for Class A Shares was 1.45% (for the quarter ended December 31, 2000) and the lowest quarterly return for Class A Shares was 0.46% (for the quarter ended December 31, 2001). COMPARATIVE PERFORMANCE As a basis for evaluating the Fund's performance and risks, the table below shows the Fund's average annual total returns for the periods ended December 31, 2001 (the most recently completed calendar year prior to the date of this Prospectus). The Fund's performance figures for Class B Shares and Class C Shares include the maximum contingent deferred sales charges paid by investors. Remember that past performance of the Fund is not indicative of its future performance.
AVERAGE ANNUAL TOTAL RETURNS PAST 10 FOR THE YEARS OR PERIODS ENDED PAST PAST SINCE DECEMBER 31, 2001 1 YEAR 5 YEARS INCEPTION - -------------------------------------------------------- Van Kampen Reserve Fund -- Class A Shares 3.41% 4.60% 4.09% ......................................................... Van Kampen Reserve Fund -- Class B Shares -1.28% 3.58% 3.92%(1) ......................................................... Van Kampen Reserve Fund -- Class C Shares 1.64% 3.82% 3.83%(1) .........................................................
Inception date: (1) 4/18/95. Investors can obtain the current 7-day yield for each class of shares of the Fund by calling (800) 847-2424. Fees and Expenses of the Fund ------------------------------------------------------------------------------- This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
CLASS A CLASS B CLASS C SHARES SHARES SHARES - ---------------------------------------------------------------- SHAREHOLDER FEES (fees paid directly from your investment) - ---------------------------------------------------------------- Maximum sales charge (load) imposed on purchases None None None ................................................................. Maximum deferred sales charge (load) (as a percentage of the lesser of original purchase price or redemption proceeds) None 4.00%(1)(2) 1.00%(1)(3) ................................................................. Maximum sales charge (load) imposed on reinvested dividends None None None ................................................................. Redemption fee None None None ................................................................. Exchange fee None None None ................................................................. ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - ---------------------------------------------------------------- Management fees 0.39% 0.39% 0.39% ................................................................. Distribution and/or service (12b-1) fees(4) 0.15% 0.90%(5) 0.90%(5) ................................................................. Other expenses 0.37% 0.37% 0.37% ................................................................. Total annual fund operating expenses 0.91% 1.66% 1.66% .................................................................
(1) Class B Shares and Class C Shares of the Fund generally are made available to shareholders for temporary investment purposes in connection with exchanges to or from other Van Kampen funds. Unless investors intend to exchange their Fund shares to or from Class B Shares or Class C Shares of other Van Kampen funds, they should purchase the Fund's Class A Shares because Class A Shares are not subject to any sales charges and are subject to less ongoing distribution/service fees and or related expenses. Even investors who do intend to exchange their Fund shares for Class B Shares or Class C Shares of other Van Kampen funds may prefer to purchase Class A Shares of the Fund and then redeem those shares and use the proceeds to purchase Class B Shares or Class C Shares of other Van Kampen funds. See "Purchase of Shares." 4 (2) The maximum deferred sales charge is 4.00% in the first and second year after purchase and declines thereafter as follows: Year 1-4.00% Year 2-4.00% Year 3-3.00% Year 4-2.50% Year 5-1.50% After-None See "Purchase of Shares -- Class B Shares." (3) The maximum deferred sales charge is 1.00% in the first year after purchase and 0.00% thereafter. See "Purchase of Shares -- Class C Shares." (4) Class A Shares are subject to a combined annual distribution and service fee of up to 0.15% of the average daily net assets attributable to such class of shares. Class B Shares and Class C Shares are each subject to a combined annual distribution and service fee of up to 0.90% of the average daily net assets attributable to such class of shares. See "Purchase of Shares." (5) Because distribution and/or service (12b-1) fees are paid out of the Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Example: The following example is intended to help you compare the cost of investing in the Fund with the costs of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same each year (except for the ten-year amounts for Class B Shares which reflect the conversion of Class B Shares to Class A Shares eight years after the end of the calendar month in which the shares were purchased). Although your actual costs may be higher or lower, based on these assumptions your costs would be:
ONE THREE FIVE TEN YEAR YEARS YEARS YEARS - -------------------------------------------------------------------- Class A Shares $ 93 $290 $ 504 $1,120 ..................................................................... Class B Shares $569 $823 $1,052 $1,766* ..................................................................... Class C Shares $269 $523 $ 902 $1,965 .....................................................................
You would pay the following expenses if you did not redeem your shares:
ONE THREE FIVE TEN YEAR YEARS YEARS YEARS - ------------------------------------------------------------------- Class A Shares $ 93 $290 $504 $1,120 .................................................................... Class B Shares $169 $523 $902 $1,766* .................................................................... Class C Shares $169 $523 $902 $1,965 ....................................................................
* Based on conversion to Class A Shares eight years after the end of the calendar month in which the shares were purchased. Investment Objective, Policies and Risks ------------------------------------------------------------------------------- The Fund's investment objective is to seek protection of capital and high current income. The Fund's investment objective is a fundamental policy and may not be changed without shareholder approval of a majority of the Fund's outstanding voting securities, as defined in the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund seeks to maintain a constant net asset value of $1.00 per share. There are risks inherent in all investments in securities; accordingly, there can be no assurance that the Fund's net asset value will not vary or that the Fund will achieve its investment objective. The Fund's investment adviser seeks to achieve the investment objective by investing in a diversified portfolio of U.S. dollar-denominated money-market securities, including U.S. government securities, domestic and foreign bank obligations, commercial paper and repurchase agreements secured by such obligations. The Fund seeks to maintain a constant net asset value of $1.00 per share by investing in high-quality money-market securities with remaining maturities of 13 months or less and with a dollar-weighted average maturity of 90 days or less. To be considered high quality, a security generally must be rated in one of the two highest short-term ratings categories by the ratings services such as Standard & Poor's ("S&P") or Moody's Investors Service, Inc. ("Moody's"). The Fund's investment adviser seeks to invest in those securities that meet the maturity, quality and diversification standards established by the Fund's Board of 5 Trustees and special rules for money market funds under the 1940 Act. These include requirements for maintaining high credit quality in the Fund's portfolio, a short average portfolio maturity to reduce the effects of changes in interest rates on the value of portfolio securities and diversifying investments among issuers to reduce the effects of a default by any one issuer on the value of the Fund's shares. In addition, the Fund's Board of Trustees has adopted procedures to evaluate potential investments and the Fund's investment adviser has the responsibility to implement those procedures in making investments for the Fund's portfolio. In selecting securities for investment, the Fund's investment adviser focuses on identifying what it believes are the best relative values among potential investments based upon an analysis of the yield, price, interest rate sensitivity and credit quality of such securities. The Fund's investment adviser seeks to add value and limit risk through careful security selection and by actively managing the Fund's portfolio. On an ongoing basis, the Fund's investment adviser analyzes the economic and financial outlook of the money markets to anticipate and respond to changing developments that may affect the Fund's existing and prospective investments. While the Fund intends to hold investments until maturity, it may sell portfolio securities prior to maturity to increase the yield or to adjust the average maturity or credit quality of the Fund's investment portfolio. The Fund's dividend and yield are expected to change daily based upon changes in interest rates and other market conditions. Although the Fund is managed to maintain a stable $1.00 share price, there is no guarantee that the Fund will be able to do so. The following is a brief description of the types of money-market instruments in which the Fund may invest, all of which will be U.S. dollar-denominated obligations: U.S. GOVERNMENT SECURITIES. The Fund may invest in obligations issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities which are supported by any of the following: (a) the full faith and credit of the U.S. government which include U.S. Treasury bills (maturing within one year of issuance) and U.S. Treasury notes and bonds (which have longer maturities), (b) the right of the issuer to borrow from the U.S. Treasury, (c) the discretionary authority of the U.S. government agencies or instrumentalities or (d) the credit of the instrumentality issuing the securities. If the securities are not backed by the full faith and credit of the U.S. government, the owners of such securities must look to the agency or instrumentality issuing the obligation for repayment and will not be able to assert a claim against the U.S. government in the event of nonpayment. Governmental agencies or instrumentalities in which the Fund may invest include, but are not limited to, the Federal National Mortgage Association, the Government National Mortgage Association, Federal Land Banks, and the Farmer's Home Administration. BANK OBLIGATIONS. The Fund may invest in high-quality obligations issued by domestic and foreign banks or their subsidiaries or overseas branches. Bank obligations include time deposits, certificates of deposit and bankers' acceptances, as well as securities secured by such obligations. Certificates of deposit are instruments representing the obligation of a bank to repay funds deposited with it for a specified period of time. Time deposits are interest-bearing deposits maintained in a bank for a specified period of time (not longer than seven days) at a specific rate of interest. Time deposits held by the Fund generally will not benefit from insurance provided by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation. Bankers' acceptances are credit instruments evidencing the obligation of a bank to pay a draft drawn on it by a customer. These instruments reflect the obligation both of the bank and of the drawer to pay the face amount of the instrument upon maturity. The Fund only invests in "high-quality" bank obligations which are securities rated in one of the two highest short-term ratings categories by any two nationally recognized statistical rating organizations ("NRSROs"), such as S&P (e.g., A-1 or A-2) or Moody's (e.g., P-1 or P-2) (or any one NRSRO if the instrument was rated by only one such organization). Credit quality at the time of purchase determines which securities may be acquired. Subsequent downgrades in ratings may require reassessment of the credit risks presented by such securities and may even require their sale. NRSROs assign ratings based upon their opinions as to the quality of the debt securities they undertake to rate, but they do not base their assessment on the market value risk of such securities. It should be 6 emphasized that ratings are general and are not absolute standards of quality. The Fund's current policy is to limit investments in bank obligations to those rated A-1 or P-1. The purchase of obligations of foreign banks may subject the Fund to additional investment risks that are different in some respects from those incurred in investing in obligations of domestic banks. Foreign banks and foreign branches or subsidiaries of domestic banks are not necessarily subject to the same or similar regulatory requirements that apply to domestic banks, such as mandatory reserve requirements, loan limitations and accounting, audit and financial record keeping requirements. In addition, less information may be publicly available about a foreign bank or about a foreign branch of a domestic bank. Because evidences of ownership of obligations of foreign branches or subsidiaries of foreign banks usually are held outside the United States, the Fund will be subject to additional risks which include possible adverse political and economic developments, possible seizure or nationalization of foreign deposits and possible adopting of governmental restrictions which might adversely affect the payment of principal and interest on the foreign obligations or might restrict the payment of principal and interest to investors located outside the country of the issuer, whether from currency blockage or otherwise. Income earned or received by the Fund from sources within foreign countries may be reduced by withholding and other taxes imposed by such countries. COMMERCIAL PAPER. Commercial paper consists of short-term (usually 1 to 270 days) unsecured promissory notes issued by corporations in order to finance their current operations. The Fund may invest in a commercial paper obligation that (a) is rated in one of the two highest short-term ratings categories by any two NRSROs (e.g., A-1 or A-2 by S&P and P-1 or P-2 by Moody's) (or any one NRSRO if the instrument was rated by only one such organization) or (b) is unrated, if such security is of comparable quality as determined in accordance with procedures established by the Fund's Board of Trustees or if such security was a long-term security at the time of issuance but has a remaining life of 397 days or less and has received a long-term rating in one of the three highest long-term ratings categories by any two NRSROs (e.g., A or higher by S&P and Moody's) (or any one NRSRO if the instrument was rated by only one such organization). Credit quality at the time of purchase determines which securities may be acquired. The Fund's current policy is to limit investments in commercial paper to obligations rated A-1 or P-1. REPURCHASE AGREEMENTS. A repurchase agreement is a short-term investment in which the purchaser (e.g., the Fund) acquires ownership of a debt security and the seller agrees to repurchase the obligation at a future time and at a set price, thereby determining the yield during the holding period. The Fund may enter into repurchase agreements with U.S. banks, their subsidiaries or overseas branches, and with primary dealers of U.S. government securities that report to the Federal Reserve Bank of New York. The Fund only enters into repurchase agreements that are (a) rated at the time of investment in one of the two highest ratings categories by at least two NRSROs (e.g. A-1 or A-2 by S&P and P-1 or P-2 by Moody's) (or one NRSRO if the instrument was rated by only one such organization) and (b) collateralized by the underlying securities of the same type and quality in which the Fund otherwise may invest. The Fund will not invest in repurchase agreements maturing in more than seven days if any such investment, together with any other illiquid securities held by the Fund, would exceed 10% of the Fund's net assets. Repurchase agreements are subject to the risk of default by the other party. Further information about these types of investments and other investment practices that may be used by the Fund is contained in the Fund's Statement of Additional Information. Investment Advisory Services ------------------------------------------------------------------------------- THE ADVISER. Van Kampen Asset Management Inc. is the Fund's investment adviser (the "Adviser" or "Asset Management"). The Adviser is a wholly owned subsidiary of Van Kampen Investments Inc. ("Van Kampen Investments"). Van Kampen Investments is a diversified asset management company that administers more than three million retail investor accounts, has extensive capabilities for managing 7 institutional portfolios and has more than $70 billion under management or supervision as of June 30, 2002. 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. The Adviser's principal office is located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555. ADVISORY AGREEMENT. The Fund retains the Adviser to manage the investment of its assets and to place orders for the purchase and sale of its portfolio securities. Under an investment advisory agreement between the Adviser and the Fund (the "Advisory Agreement"), the Fund pays the Adviser a monthly fee computed based upon an annual rate applied to the average daily net assets of the Fund as follows:
AVERAGE DAILY NET ASSETS % PER ANNUM - --------------------------------------------------------- First $150 million 0.50% .......................................................... Next $100 million 0.45% .......................................................... Next $100 million 0.40% .......................................................... Over $350 million or thereafter 0.35% ..........................................................
Applying this fee schedule, the effective advisory fee rate was 0.40% of the Fund's average daily net assets for the Fund's fiscal year ended May 31, 2002. The Fund's average daily net assets are determined by taking the average of all of the determinations of the net assets during a given calendar month. Such fee is payable for each calendar month as soon as practicable after the end of that month. Under the Advisory Agreement, the Adviser furnishes offices, necessary facilities and equipment, and provides administrative services to the Fund. The Fund pays all charges and expenses of its day-to-day operations, including service fees, distribution fees, custodian fees, legal and independent accountant fees, the costs of reports and proxies to shareholders, compensation of trustees of the Fund (other than those who are affiliated persons of the Adviser, Distributor or Van Kampen Investments) and all other ordinary business expenses not specifically assumed by the Adviser. From time to time, the Adviser or the Distributor may voluntarily undertake to reduce the Fund's expenses by reducing the fees payable to them or by reducing other expenses of the Fund in accordance with such limitations as the Adviser or Distributor may establish. The Adviser may utilize, at its own expense, credit analysis, research and trading support services provided by its affiliate, Van Kampen Investment Advisory Corp. ("Advisory Corp."). 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 of the Fund represents an interest in the same portfolio of investments of the Fund and has the same rights except that (i) Class A Shares are sold without a sales charge, while Class B Shares and Class C Shares generally bear sales charge expenses at the time of redemption and any expenses (including higher distribution fees and transfer agency costs) resulting from such deferred sales charge arrangement, (ii) each class of shares has exclusive voting rights with respect to approvals of the Rule 12b-1 distribution plan and the service plan (each as described below) under which the class's distribution fee and/or the service fee is paid, (iii) each class of shares has different exchange privileges, (iv) certain classes of shares are subject to a conversion feature and (v) certain classes of shares have different shareholder service options available. The offering price of the Fund's shares is based upon the Fund's net asset value per share. The net asset values per share of the Class A Shares, Class B Shares and Class C Shares are generally expected to be substantially the same. The differences among the classes' per share net asset values reflect the daily 8 expense accruals of the higher distribution fees and transfer agency costs applicable to the Class B Shares and Class C Shares and the differential in the dividends that may be paid on each class of shares. The net asset value per share for each class of shares of the Fund is determined once daily as of the close of trading on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m., New York time) each day the Exchange is open for trading except on any day on which no purchase or redemption orders are received or there is not a sufficient degree of trading in the Fund's portfolio securities such that the Fund's net asset value per share might be materially affected. The Fund's Board of Trustees reserves the right to calculate the net asset value per share and adjust the offering price more frequently than once daily if deemed desirable. Net asset value per share for each class is determined by dividing the value of the Fund's portfolio securities, cash and other assets (including accrued interest) attributable to such class, less all liabilities (including accrued expenses) attributable to such class, by the total number of shares of the class outstanding. The securities held by the Fund are valued on the basis of amortized cost, which does not take into account unrealized capital gains or losses. Amortized cost valuation involves initially valuing a security at its cost and thereafter, applying a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the security. While this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price that the Fund would receive if it sold the security. The Fund has adopted a distribution plan (the "Distribution Plan") with respect to each class of its Class A Shares, Class B Shares and Class C Shares pursuant to Rule 12b-1 under the 1940 Act. The Fund has 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 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 following the wire transfer instructions described below or 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 Class B Shares and Class C Shares and may receive differing compensation for selling Class B Shares or Class C Shares. Sales personnel of authorized dealers 9 are not entitled to receive compensation for selling Class A Shares. The offering price for shares is based upon the next calculation of net asset value per share after an order becomes effective, which is upon receipt by Investor Services of federal funds. Payment by check generally will be converted into federal funds on the second business day following receipt of payment for the order by Investor Services. The Fund and the Distributor reserve the right to refuse any order for the purchase of shares. The Fund also reserves the right to suspend the sale of the Fund's shares in response to conditions in the securities markets or for other reasons. Shares of the Fund may be sold in foreign countries where permissible. Investor accounts will automatically be credited with additional shares of the Fund after any Fund distributions, such as dividends and capital gain dividends, unless the investor instructs the Fund otherwise. Investors wishing to receive cash instead of additional shares should contact the Fund by visiting our web site at www.vankampen.com, by writing to the Fund, c/o Van Kampen Investor Services Inc., PO Box 218256, Kansas City, MO 64121-8256 or by telephone at (800) 847-2424. There is no minimum investment amount when establishing an account with the Fund. However, the Fund may redeem any shareholder account (other than retirement accounts and accounts established through a broker for which the transfer agent does not have discretion to initiate transactions) that has been open for one year or more and has a balance of less than $1,000. Shareholders will receive written notice at least 60 days in advance of any involuntary redemption and will be given the opportunity to purchase at net asset value without sales charge the number of additional shares needed to bring the account value to $1,000. There will be no involuntary redemption if the value of the account is less than $1,000 due to market depreciation. INITIAL INVESTMENT BY BANK WIRE. To open an account by wire an investor should telephone Investor Services at (800) 421-6714 and provide the account registration, the address, tax identification number, the amount being wired and the name of the wiring bank. Investor Services furnishes the investor with an account number. The investor's bank should wire the specified amount along with the account number and registration to the Fund's custodian: State Street Bank and Trust Company ("State Street Bank"), 225 Franklin Street, Boston, Massachusetts 02110, ABA-011000028, attention Van Kampen Investor Services Inc./ Van Kampen Fund Account No. 9900-446-7. The investor should then immediately complete and mail the account application form accompanying this Prospectus to Investor Services. To receive same day credit to an account, the investor must call Investor Services, at the telephone number listed above, by 11:00 a.m. Kansas City time with the intent to wire funds and State Street Bank must then receive such funds by 4:00 p.m. Boston time. INITIAL INVESTMENT BY MAIL. To open an account by mail an investor should send a check payable to the Fund along with a completed account application form to Investor Services. SUBSEQUENT INVESTMENTS BY BANK WIRE. The investor's bank should wire the specified amount along with the account number and registration to State Street Bank. To receive same day credit to an account, the investor must call Investor Services at (800) 421-6714 by 11:00 a.m. Kansas City time with the intent to wire funds and State Street Bank must then receive such funds by 4:00 p.m. Boston time. SUBSEQUENT INVESTMENTS BY MAIL. Subsequent investments may be sent by mail to Investor Services, indicating the account registration and account number. CLASS A SHARES Class A Shares of the Fund are sold at net asset value without a sales charge and no sales charge is imposed on Class A Shares received from reinvestment of dividends or capital gain dividends. Under the Distribution Plan and the Service Plan, the Fund may spend up to a total of 0.15% per year of the Fund's average daily net assets with respect to Class A Shares of the Fund. UNIT INVESTMENT TRUST REINVESTMENT PROGRAM. The Fund permits unitholders of unit investment trusts to reinvest distributions from such trusts in Class A 10 Shares of the Fund at net asset value without charge if the administrator of an investor's unit investment trust program meets certain uniform criteria relating to cost savings by the Fund and the Distributor. The administrator of such a unit investment trust must have an agreement with the Distributor pursuant to which the administrator will (1) submit a single bulk order and make payment with a single remittance for all investments in the Fund during each distribution period by all investors who choose to invest in the Fund through the program and (2) provide Investor Services with appropriate backup data for each investor participating in the program in a computerized format fully compatible with Investor Services' processing system. As further requirements for obtaining these special benefits, the Fund also requires that all dividends and other distributions by the Fund be reinvested in additional shares without any systematic withdrawal program. There will be no minimum for reinvestments from unit investment trusts. The Fund will send account activity statements to such participants on a quarterly basis only, even if their investments are made more frequently. The Fund reserves the right to modify or terminate this program at any time. CLASS B SHARES Class B Shares of the Fund are sold at net asset value and are subject to a contingent deferred sales charge if redeemed within five years of purchase as shown in the following table: CLASS B SHARES SALES CHARGE SCHEDULE
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF DOLLAR AMOUNT YEAR SINCE PURCHASE SUBJECT TO CHARGE - -------------------------------------------------------------- First 4.00% ............................................................... Second 4.00% ............................................................... Third 3.00% ............................................................... Fourth 2.50% ............................................................... Fifth 1.50% ............................................................... Sixth and After None ...............................................................
The contingent deferred sales charge is assessed on an amount equal to the lesser of the then current market value or the cost of the shares being redeemed. Accordingly, no sales charge is imposed on increases in net asset value above the initial purchase price. In addition, no sales charge is assessed on shares derived from reinvestment of dividends or capital gain dividends. The Fund will generally not accept a purchase order for Class B Shares in the amount of $100,000 or more. The amount of the contingent deferred sales charge, if any, varies depending on the number of years from the time of payment for each purchase of Class B Shares until the time of redemption of such shares. In determining whether a contingent deferred sales charge applies to a redemption, it is assumed that the shares being redeemed first are any shares in the shareholder's Fund account that are not subject to a contingent deferred sales charge, followed by shares held the longest in the shareholder's account. Under the Distribution Plan, the Fund may spend up to 0.75% per year of the Fund's average daily net assets with respect to Class B Shares of the Fund. In addition, under the Service Plan, the Fund may spend up to 0.15% per year of the Fund's average daily net assets with respect to Class B Shares of the Fund. CLASS C SHARES Class C Shares of the Fund are sold at net asset value and are subject to a contingent deferred sales charge of 1.00% of the dollar amount subject to charge if redeemed within one year of purchase. The contingent deferred sales charge is assessed on an amount equal to the lesser of the then current market value or the cost of the shares being redeemed. Accordingly, no sales charge is imposed on increases in net asset value above the initial purchase price. In addition, no sales charge is assessed on shares derived from reinvestment of dividends or capital gain dividends. The Fund will not accept a purchase order for Class C Shares in the amount of $1 million or more. In determining whether a contingent deferred sales charge applies to a redemption, it is assumed that the shares being redeemed first are any shares in the shareholder's Fund account that are not subject to a contingent deferred sales charge, followed by shares held the longest in the shareholder's account. 11 Under the Distribution Plan, the Fund may spend up to 0.75% per year of the Fund's average daily net assets with respect to Class C Shares of the Fund. In addition, under the Service Plan, the Fund may spend up to 0.15% per year of the Fund's average daily net assets with respect to Class C Shares of the Fund. CONVERSION FEATURE Class B Shares purchased on or after June 1, 1996, including Class B Shares received from reinvestment of distributions through the dividend reinvestment plan 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, including Class B Shares received from reinvestment of distributions through the dividend reinvestment plan on such shares, automatically convert to Class A Shares six years after the end of the calendar month in which the shares were purchased. Class C Shares purchased before January 1, 1997, including Class C Shares received from reinvestment of distributions through the dividend reinvestment plan on such shares, automatically convert to Class A Shares ten years after the end of the calendar month in which the shares were purchased. Such conversion will be on the basis of the relative net asset values per share, without the imposition of any sales load, fee or other charge. The conversion schedule applicable to a share of the Fund acquired through the exchange privilege from another Van Kampen fund participating in the exchange program is determined by reference to the Van Kampen fund from which such share was originally purchased. The conversion of such shares to Class A Shares is subject to the continuing availability of an opinion of counsel to the effect that (i) the assessment of the higher distribution fee and transfer agency costs with respect to such shares does not result in the Fund's dividends or capital gain dividends constituting "preferential dividends" under the federal income tax law and (ii) the conversion of shares does not constitute a taxable event under federal income tax law. The conversion may be suspended if such an opinion is no longer available and such shares might continue to be subject to the higher aggregate fees applicable to such shares for an indefinite period. FACTORS FOR CONSIDERATION Class B Shares and Class C Shares of the Fund generally are made available to shareholders for temporary investment purposes in connection with exchanges to or from other Van Kampen funds participating in the exchange program. Investors purchasing shares of the Fund without regard to the availability of exchanges should purchase Class A Shares because Class A Shares are not subject to any sales charges and are subject to less ongoing distribution/service fees and related expenses. Therefore, Class A Shares will have a higher yield than Class B Shares and Class C Shares. Even investors who do intend to exchange their shares for Class B Shares or Class C Shares of other Van Kampen funds should consider purchasing Class A Shares and then redeeming those shares when they wish to invest in Class B Shares or Class C Shares of other Van Kampen funds. Since Class A Shares are subject to lower distribution/service fees and related expenses, purchasing Class A Shares and then redeeming them to purchase Class B Shares or Class C Shares of other Van Kampen funds is likely to result in a higher return to the investor than purchasing Class B Shares or Class C Shares and then exchanging them for Class B Shares or Class C Shares of other Van Kampen funds. The contingent deferred sales charges applicable to Class B Shares and Class C Shares is not imposed on exchanges among Van Kampen funds participating in the exchange program for the same class of shares. Instead, Class B Shares or Class C Shares acquired in an exchange remain subject to the contingent deferred sales charges schedule of the initial fund from which the Class B Shares or Class C Shares were purchased. Similarly the holding period for calculating any contingent deferred sales charge is based upon the date of purchase of such shares from the initial fund. WAIVER OF CONTINGENT DEFERRED SALES CHARGE The contingent deferred sales charge is waived on redemptions of Class B Shares and Class C Shares (i) within one year following the death or disability (as disability is defined by federal income tax law) of a shareholder, (ii) for required minimum distributions from an individual retirement account ("IRA") or certain other retirement plan distributions, (iii) for withdrawals under the Fund's systematic withdrawal plan but limited to 12% annually of the initial value of the account, (iv) if no commission or transaction fee is paid by the Distributor to authorized dealers at the time of purchase of such shares or (v) if made by the Fund's involuntary liquidation of a shareholder's account as described herein. Subject to certain limitations, a 12 shareholder who has redeemed Class C Shares of the Fund may reinvest in Class C Shares at net asset value with credit for any contingent deferred sales charge if the reinvestment is made within 180 days after the redemption, provided that shares of the Fund are available for sale at the time of reinvestment. For a more complete description of contingent deferred sales charge waivers, please refer to the Fund's Statement of Additional Information or contact your authorized dealer. Redemption of Shares ------------------------------------------------------------------------------- Generally, shareholders may redeem for cash some or all of their shares without charge by the Fund (other than any applicable sales charge) at any time. As described under the Prospectus heading "Purchase of Shares," redemptions of Class B Shares and Class C Shares may be subject to a contingent deferred sales charge. Redemptions completed through an authorized dealer or a custodian/trustee of a retirement plan account may involve additional fees charged by the dealer or custodian/trustee. Except as specified below under "Telephone Redemption Requests," payment for shares redeemed generally will be made by check mailed within seven days after receipt by Investor Services of the redemption request and any other necessary documents in proper form as described below. Such payment may be postponed or the right of redemption suspended as provided by the rules of the SEC. Such payment may, under certain circumstances, be paid wholly or in part by a distribution-in-kind of portfolio securities. A distribution-in-kind may result in recognition by the shareholder of a gain or loss for federal income tax purposes when such securities are distributed, and the shareholder may have brokerage costs and a gain or loss for federal income tax purposes upon the shareholder's disposition of such securities. If the shares to be redeemed have been recently purchased by check, Investor Services may delay the payment of redemption proceeds until it confirms that the purchase check has cleared, which may take up to 15 calendar days from the date of purchase. A taxable gain or loss may be recognized by the shareholder upon redemption of shares. WRITTEN REDEMPTION REQUESTS. Shareholders may request a redemption of shares by written request in proper form sent directly to Van Kampen Investor Services Inc., PO Box 218256, Kansas City, MO 64121-8256. The request for redemption should indicate the number of shares or dollar amount to be redeemed, the Fund name and class designation of such shares and the shareholder's account number. The redemption request must be signed by all persons in whose names the shares are registered. Signatures must conform exactly to the account registration. If the proceeds of the redemption exceed $100,000, or if the proceeds are not to be paid to the record owner at the record address, or if the record address has changed within the previous 15 calendar days, signature(s) must be guaranteed by one of the following: a bank or trust company; a broker-dealer; a credit union; a national securities exchange, registered securities association or clearing agency; a savings and loan association; or a federal savings bank. 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 13 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) 847-2424 to request that a copy of the Telephone Redemption Authorization form be sent to the shareholder for completion or visit our web site at www.vankampen.com to download this form. Shares may be redeemed by calling (800) 847-2424, our automated telephone system, which is generally accessible 24 hours a day, seven days a week. Van Kampen Investments and its subsidiaries, including Investor Services, and the Fund employ procedures considered by them to be reasonable to confirm that instructions communicated by telephone are genuine. Such procedures include requiring certain personal identification information prior to acting upon telephone instructions, tape-recording telephone communications and providing written confirmation of instructions communicated by telephone. If reasonable procedures are employed, none of Van Kampen Investments, Investor Services or the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. Telephone redemptions may not be available if the shareholder cannot reach Investor Services by telephone, whether because all telephone lines are busy or for any other reason; in such case, a shareholder would have to use the Fund's other redemption procedure previously described. Requests received by Investor Services prior to 4:00 p.m., New York time, will be processed at the next determined net asset value per share. These privileges are available for most accounts other than retirement accounts or accounts with shares represented by certificates. If an account has multiple owners, Investor Services may rely on the instructions of any one owner. For redemptions authorized by telephone, amounts of $50,000 or less may be redeemed daily if the proceeds are to be paid by check and amounts of at least $1,000 up to $1 million may be redeemed daily if the proceeds are to be paid by wire. The proceeds must be payable to the shareholder(s) of record and sent to the address of record for the account or wired directly to their predesignated bank account. This privilege is not available if the address of record has been changed within 15 calendar days prior to a telephone redemption request. Proceeds from redemptions payable by wire transfer are expected to be wired on the next business day following the date of redemption. The Fund reserves the right at any time to terminate, limit or otherwise modify this redemption privilege. EXPEDITED TELEPHONE REDEMPTION REQUESTS. Shareholders of the Fund who have completed the appropriate section of the application may request expedited redemption payment of shares having a value of $1,000 or more by calling (800) 421-5684. Redemption proceeds in the form of federal funds will be wired to the bank designated in the application. Expedited telephone redemption requests received prior to 10:00 a.m. Kansas City time are processed and the proceeds are wired on the date of receipt. Redemption requests received by Investor Services after such hour are subsequently processed and the proceeds are wired on the next banking day following receipt of such request. Investor Services reserves the right to deduct the wiring costs from the proceeds of the redemption. A shareholder may change the bank account previously designated at any time by written notice to Investor Services with the signature(s) of the shareholder(s) guaranteed. The Fund reserves the right at any time to terminate, limit or otherwise modify this expedited redemption privilege. Distributions from the Fund ------------------------------------------------------------------------------- Shareholders may receive distributions from the Fund of dividends and capital gain dividends. 14 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 all, or substantially all, of this net investment income monthly as dividends to shareholders. All dividends are automatically applied to purchase additional full and fractional shares of the Fund at the next determined net asset value. Shareholders may elect to receive a monthly payment of dividends in cash by written instruction to Investor Services. Dividends are paid to shareholders of record immediately prior to the determination of net asset value for that day. Since shares are issued and redeemed at the time net asset value is determined, dividends commence on the day following the date shares are issued and are paid for. A redeeming shareholder receives all dividends accrued through the date of redemption. The per share dividends on Class B Shares and Class C Shares will be lower than the per share dividends on Class A Shares as a result of the higher distribution/ service expenses and transfer agency expenses applicable to such classes of shares. CAPITAL GAIN DIVIDENDS. The Fund may realize capital gains or losses when it sells securities, depending on whether the sales prices for the securities are higher or lower than purchase prices. The Fund distributes any net capital gains to shareholders as capital gain dividends at least annually. As in the case of dividends, capital gain dividends are automatically reinvested in additional shares of the Fund at the next determined net asset value unless the shareholder instructs otherwise. Shareholder Services ------------------------------------------------------------------------------- Listed below are some of the shareholder services the Fund offers to investors. For a more complete description of the Fund's shareholder services, such as investment accounts, share certificates, retirement plans, automated clearing house deposits, dividend diversification and the systematic withdrawal plan, please refer to the Fund's Statement of Additional Information or contact your authorized dealer. INTERNET TRANSACTIONS. In addition to performing transactions on your account through written instruction or by telephone, you may also perform certain transactions through the internet. Please refer to our website at www.vankampen.com for further instruction. Van Kampen Investments and its subsidiaries, including Investor Services, and the Fund employ procedures considered by them to be reasonable to confirm that instructions communicated through the internet are genuine. Such procedures include requiring use of a personal identification number prior to acting upon internet instructions and providing written confirmation of instructions communicated through the internet. If reasonable procedures are employed, none of Van Kampen Investments, Investor Services or the Fund will be liable for following instructions received through the internet which it reasonably believes to be genuine. If an account has multiple owners, Investor Services may rely on the instructions of any one owner. 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 a 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 visiting our web site at www.vankampen.com, writing to Investor Services or by telephone by calling (800) 847-2424 ((800) 421-2833 for the hearing impaired). The investor may, on the account application form or prior to any declaration, instruct that dividends and/or capital gain dividends be paid in cash, be reinvested in the Fund at the next determined net asset value or be reinvested in another Participating Fund (defined below) at the next determined net asset value. AUTOMATIC INVESTMENT PLAN. An automatic investment plan is available under which a shareholder can authorize Investor Services to debit a shareholder's bank account on a regular basis to invest predetermined amounts in the Fund. Additional information is available from the Distributor or your authorized dealer. CHECK WRITING PRIVILEGE. A Class A shareholder holding shares of the Fund for which certificates have 15 not been issued and which are not in escrow may write checks against such shareholder's account by completing the Authorization for Redemption by Check form and the appropriate section of the account application and returning the form and the account application to Investor Services. Once the forms are properly completed, signed and returned, a supply of checks (redemption drafts) will be sent to the Class A shareholder. Checks can be written to the order of any person in any amount of $100 or more. When a check is presented to the custodian bank, State Street Bank, for payment, full and fractional Class A Shares required to cover the amount of the check are redeemed from the shareholder's Class A Share account by Investor Services at the next determined net asset value per share. Check writing redemptions represent the sale of Class A Shares. Any gain or loss realized on the redemption of shares is a taxable event. Checks will not be honored for redemption of Class A Shares held less than 15 calendar days, unless such Class A Shares have been paid for by bank wire. Any Class A Shares for which there are outstanding certificates may not be redeemed by check. If the amount of the check is greater than the proceeds of all uncertificated shares held in the shareholder's Class A Share account, the check will be returned and the shareholder may be subject to additional charges. A Class A shareholder may not liquidate the entire account by means of a check. The check writing privilege may be terminated or suspended at any time by the Fund or by State Street Bank and neither shall incur any liability for such amendment or termination or for effecting redemptions to pay checks reasonably believed to be genuine or for returning or not paying on checks which have not been accepted for any reason. Retirement plans and accounts that are subject to backup withholding are not eligible for the check writing privilege. EXCHANGE PRIVILEGE. Shares of the Fund may be exchanged for shares of the same class of any Participating Fund (defined below) based on the next determined net asset value per share of each fund after requesting the exchange without any sales charge, subject to certain limitations. Shares of the Fund may be exchanged for shares of any Participating Fund only if shares of that Participating Fund are available for sale. Class A shares of the Fund which have not previously been charged a sales charge (except for Class A Shares issued under the reinvestment option) or that have been charged a lower sales charge than the sales charge applicable to the shares of the Participating Fund being acquired will have any applicable sales charges differential imposed upon an exchange into a Participating Fund. Shareholders seeking an exchange into a Participating Fund should obtain and read the current prospectus for such fund prior to implementing an exchange. A prospectus of any of the Participating Funds may be obtained from any authorized dealer or the Distributor. As used herein, "Participating Funds" refers to certain open-end investment companies advised by Asset Management or Advisory Corp. and distributed by the Distributor as determined from time to time by the Fund's Board of Trustees. When shares that are subject to a contingent deferred sales charge are exchanged among Participating Funds, the holding period for purposes of computing the 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) 847-2424, 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 16 by telephone are genuine. Such procedures include requiring certain personal identification information prior to acting upon telephone instructions, tape- recording telephone communications, and providing written confirmation of instructions communicated by telephone. If reasonable procedures are employed, none of Van Kampen Investments, Investor Services or the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. If the exchanging shareholder does not have an account in the fund whose shares are being acquired, a new account will be established with the same registration, dividend and capital gain dividend options (except dividend diversification) and authorized dealer of record as the account from which shares are exchanged, unless otherwise specified by the shareholder. In order to establish a systematic withdrawal plan for the new account or reinvest dividends from the new account into another fund, however, an exchanging shareholder must submit a specific request. The Fund reserves the right to reject any order to purchase its shares through exchange or otherwise. Certain patterns of past exchanges and/or purchase or sale transactions involving the Fund or other Participating Funds may result in the Fund and other Participating Funds limiting or prohibiting, at its discretion, additional purchases and/or exchanges. Determinations in this regard may be made based on the frequency or dollar amount of the previous exchanges or purchases or sale transactions. Generally, all shareholders are limited to a maximum of eight exchanges per fund during a rolling 365-day period. Exchange privileges will be suspended on a particular fund if more than eight exchanges out of that fund are made by a shareholder during a rolling 365-day period. If exchange privileges are suspended, subsequent exchange requests during the stated period will not be processed. Exchange privileges will be restored when the account history shows fewer than eight exchanges in the rolling 365-day period. This eight exchange policy does not apply to money market funds, systematic exchange plans or employer-sponsored retirement plans. The Fund may modify, restrict or terminate the exchange privilege at any time. Shareholders will receive 60 days' notice of any termination or material amendment. Federal Income Taxation ------------------------------------------------------------------------------- Distributions of the Fund's investment company taxable income (generally ordinary income and net short-term capital gain) are taxable to shareholders as ordinary income to the extent of the Fund's earnings and profits, whether paid in cash or reinvested in additional shares. Distributions of the Fund's net capital gain (which is the excess of net long-term capital gain over net short-term capital loss) as capital gain dividends, if any, are taxable to shareholders as long-term capital gains, whether paid in cash or reinvested in additional shares, and regardless of how long the shares of the Fund have been held by such shareholders. The Fund expects that its distributions will consist primarily of ordinary income. Distributions in excess of the Fund's earnings and profits will first reduce the adjusted tax basis of a shareholder's shares and, after 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 17 the Fund their correct taxpayer identification number (in the case of individuals, their social security number) and make certain required certifications (including certifications as to foreign status, if applicable), or who are otherwise subject to backup withholding. Foreign shareholders, including shareholders who are non-resident aliens, may be subject to U.S. withholding tax on certain distributions (whether received in cash or in shares) at a rate of 30% or such lower rate as prescribed by an applicable treaty. Dividends paid by the Fund generally will be subject to such U.S. withholding tax, whereas interest income with respect to a direct investment in the underlying assets of the Fund by a foreign shareholder may not be subject to U.S. withholding tax. Prospective foreign investors should consult their advisers concerning the tax consequences to them of an investment in shares. The Fund intends to qualify as a regulated investment company under federal income tax law. If the Fund so qualifies and distributes each year to its shareholders at least 90% of its investment company taxable income, the Fund will not be required to pay federal income taxes on any income it distributes to shareholders. If the Fund distributes less than an amount equal to the sum of 98% of its ordinary income and 98% of its capital gain net income, then the Fund will be subject to a 4% excise tax on the undistributed amounts. The federal income tax discussion set forth above is for general information only. Shareholders and prospective investors should consult their own advisers regarding the specific federal tax consequences of purchasing, holding and disposing of shares of the Fund, as well as the effects of state, local and foreign tax law and any proposed tax law changes. 18 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 or taxes on Fund distributions or redemptions). The information for the fiscal years ended May 31, 2002, 2001 and 2000 has been audited by Ernst & Young LLP, independent auditors, whose report, along with the Fund's most recent financial statements, is included in the Statement of Additional Information and may be obtained without charge by calling the telephone number on the back cover of this Prospectus. The information for the fiscal years ended May 31, 1999 and 1998 has been audited by PricewaterhouseCoopers LLP. The financial highlights table should be read in conjunction with the financial statements and notes thereto included in the Statement of Additional Information.
CLASS A SHARES YEAR ENDED MAY 31, 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........................ 1.93%(b) $5.35%(b)* 4.92%(b) 4.55%(b) 4.78%(b) 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(a)......................... .91% .95% 0.82% 0.84% 1.02% Ratio of Net Investment Income to Average Net Assets................ 1.94% 5.22% 4.71% 4.38% 4.60% CLASS B SHARES YEAR ENDED MAY 31, 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........................ 1.16%(c) 4.66%(c)* 4.14%(c) 3.78%(c) 3.99%(c) 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(a)......................... 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% CLASS C SHARES YEAR ENDED MAY 31, 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........................ 1.23%(d) 4.57%(d)* 4.14%(d) 3.77%(d) 3.99%(d) 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(a)......................... 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 the Adviser, total return would have been lower by less than .01%. (a) The Ratio of Expenses to Average Net Assets does not reflect credits earned on cash balances. If these credits were reflected as a reduction of expenses, the ratio would decrease by .01% for the year ended May 31, 1999. (b) Assumes reinvestment of all distributions for the period and includes combined Rule 12b-1 fees and service fees of up to .15% and does 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 contingent deferred sales charge 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. (d) Assumes reinvestment of all distributions for the period and does not include payment of the maximum contingent deferred sales charge of 1%, charged on certain redemptions made within one year of purchase. If the sales charge was included, total returns would be lower. These returns include 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. See Financial Statements and Notes thereto. 19 For More Information ------------------------------------------------------------------------------- EXISTING SHAREHOLDERS OR PROSPECTIVE INVESTORS - Call your broker - WEB SITE www.vankampen.com - FUNDINFO(R) Automated Telephone System 800-847-2424 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 (TDD) - For shareholder and dealer inquiries through TDD, call 800-421-2835 VAN KAMPEN RESERVE FUND 1 Parkview Plaza PO Box 5555 Oakbrook Terrace, IL 60181-5555 Investment Adviser VAN KAMPEN ASSET MANAGEMENT INC. 1 Parkview Plaza PO Box 5555 Oakbrook Terrace, IL 60181-5555 Distributor VAN KAMPEN FUNDS INC. 1 Parkview Plaza PO Box 5555 Oakbrook Terrace, IL 60181-5555 Transfer Agent VAN KAMPEN INVESTOR SERVICES INC. PO Box 218256 Kansas City, MO 64121-8256 Attn: Van Kampen Reserve Fund Custodian STATE STREET BANK AND TRUST COMPANY 225 Franklin Street, PO Box 1713 Boston, MA 02110-1713 Attn: Van Kampen Reserve Fund Legal Counsel SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive Chicago, IL 60606 Independent Auditors ERNST & YOUNG LLP 233 South Wacker Drive Chicago, IL 60606 A Statement of Additional Information, which contains more details about the Fund, is incorporated by reference in its entirety into this Prospectus. You will find additional information about the Fund in its annual and semiannual reports to shareholders. You can ask questions or obtain a free copy of the Fund's reports or its Statement of Additional Information by calling (800) 847-2424. Telecommunications Device for the Deaf users may call (800) 421-2833. A free copy of the Fund's reports can also be ordered from our web site at www.vankampen.com. Information about the Fund, including its reports and Statement of Additional Information, has been filed with the Securities and Exchange Commission (SEC). It can be reviewed and copied at the SEC's Public Reference Room in Washington, DC or on the EDGAR database on the SEC's internet site (http://www.sec.gov). Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. You can also request copies of these materials upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference section of the SEC, Washington, DC 20549-0102. SEPTEMBER 27, 2002 PROSPECTUS Van Kampen Reserve Fund [VAN KAMPEN INVESTMENTS LOGO] RES PRO 9/02 65138PRO The Fund's Investment Company Act File No. is 811-2482. STATEMENT OF ADDITIONAL INFORMATION VAN KAMPEN RESERVE FUND Van Kampen Reserve Fund's (the "Fund") investment objective is to seek protection of capital and high current income. The Fund's investment adviser seeks to achieve the Fund's investment objective by investing in a portfolio of U.S. dollar-denominated money-market securities. The Fund is organized as a diversified series of the Van Kampen Reserve Fund, an open-end, management investment company (the "Trust"). This Statement of Additional Information is not a prospectus. This Statement of Additional Information should be read in conjunction with the Fund's prospectus (the "Prospectus") dated as of the same date as this Statement of Additional Information. This Statement of Additional Information does not include all the information that a prospective investor should consider before purchasing shares of the Fund. Investors should obtain and read the Prospectus prior to purchasing shares of the Fund. A Prospectus may be obtained without charge by writing or calling Van Kampen Funds Inc. at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555 or (800) 847-2424 (or (800) 421-2833 for the hearing impaired). --------------------------------------------- TABLE OF CONTENTS ---------------------------------------------
Page ---- General Information......................................... B-2 Investment Objective, Policies and Risks.................... B-4 Investment Restrictions..................................... B-7 Description of Securities Ratings........................... B-10 Trustees and Officers....................................... B-14 Investment Advisory Agreement............................... B-26 Other Agreements............................................ B-27 Distribution and Service.................................... B-28 Transfer Agent.............................................. B-31 Portfolio Transactions and Brokerage Allocation............. B-31 Shareholder Services........................................ B-33 Redemption of Shares........................................ B-36 Waiver of Class B and Class C Contingent Deferred Sales Charges................................................... B-36 Taxation.................................................... B-38 Yield Information........................................... B-43 Other Information........................................... B-45 Report of Independent Auditors.............................. F-1 Financial Statements........................................ F-4 Notes to Financial Statements............................... F-10
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED SEPTEMBER 27, 2002. RES SAI 9/02 GENERAL INFORMATION The Fund was originally incorporated in Maryland on March 28, 1974 under the name American Capital Reserve Fund, Inc. As of July 31, 1995, the Fund was reorganized as a series of the Trust under the name Van Kampen American Capital Reserve Fund. The Trust is a business trust organized under the laws of the State of Delaware. On July 14, 1998, the Fund and the Trust adopted their present names. Van Kampen Asset Management Inc. (the "Adviser" or "Asset Management"), Van Kampen Funds Inc. (the "Distributor") and Van Kampen Investor Services Inc. ("Investor Services") are wholly owned subsidiaries of Van Kampen Investments Inc. ("Van Kampen Investments"), which is an indirect wholly owned subsidiary of Morgan Stanley. The principal office of the Trust, the Fund, the Adviser, the Distributor and Van Kampen Investments is located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555. The principal office of Investor Services is located at 7501 Tiffany Springs Parkway, Kansas City, Missouri 64153. Morgan Stanley is a preeminent global financial services firm that maintains leading market positions in each of its three primary businesses: securities, asset management and credit services. The authorized capitalization of the Trust consists of an unlimited number of shares of beneficial interest, par value $0.01 per share, which can be divided into series, such as the Fund, and further subdivided into classes of each series. Each share represents an equal proportionate interest in the assets of the series with each other share in such series and no interest in any other series. No series is subject to the liabilities of any other series. The Declaration of Trust provides that shareholders are not liable for any liabilities of the Trust or any of its series, requires inclusion of a clause to that effect in every agreement entered into by the Trust or any of its series and indemnifies shareholders against any such liability. The Fund currently offers three classes of shares, designated as Class A Shares, Class B Shares and Class C Shares. Other classes may be established from time to time in accordance with the provisions of the Declaration of Trust. Each class of shares of the Fund generally is identical in all respects except that each class of shares is subject to its own sales charge schedule and its own distribution and service expenses. Each class of shares also has exclusive voting rights with respect to its distribution and service fees. Shares of the Trust entitle their holders to one vote per share; however, separate votes are taken by each series on matters affecting an individual series and separate votes are taken by each class of a series on matters affecting an individual class of such series. For example, a change in investment policy for a series would be voted upon by shareholders of only the series involved and a change in the distribution or service fee for a class of a series would be voted upon by shareholders of only the class of such series involved. Except as otherwise described in the Prospectus or herein, shares do not have cumulative voting rights, preemptive rights or any conversion, subscription or exchange rights. The Fund does not contemplate holding regular meetings of shareholders to elect Trustees or otherwise. However, the holders of 10% or more of the outstanding shares may by written request require a meeting to consider the removal of Trustees by a vote of a majority of the shares then outstanding cast in person or by proxy at such meeting. The B-2 Fund will assist such holders in communicating with other shareholders of the Fund to the extent required by the Investment Company Act of 1940, as amended (the "1940 Act"), or rules or regulations promulgated by the Securities and Exchange Commission ("SEC"). In the event of liquidation, each of the shares of the Fund is entitled to its portion of all of the Fund's net assets after all debts and expenses of the Fund have been paid. Since Class B Shares and Class C Shares have higher distribution fees and transfer agency costs, the liquidation proceeds to holders of Class B Shares and Class C Shares are likely to be less than the liquidation proceeds to holders of Class A Shares. The Trustees may amend the Declaration of Trust (including with respect to any series) in any manner without shareholder approval, except that the Trustees may not adopt any amendment adversely affecting the rights of shareholders of any series without approval by a majority of the shares of each affected series outstanding and entitled to vote (or such higher vote as may be required by the 1940 Act or other applicable law) and except that the Trustees cannot amend the Declaration of Trust to impose any liability on shareholders, make any assessment on shares or impose liabilities on the Trustees without approval from each affected shareholder or Trustee, as the case may be. Statements contained in this Statement of Additional Information as to the contents of any contract or other document referred to are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement of which this Statement of Additional Information forms a part, each such statement being qualified in all respects by such reference. B-3 As of September 13, 2002, no person was known by the Fund to own beneficially or to hold of record 5% or more of the outstanding Class A Shares, Class B Shares or Class C Shares of the Fund except as follows:
NAME AND ADDRESS NUMBER OF OF RECORD HOLDER CLASS OF SHARES SHARES HELD PERCENT OF CLASS ---------------- --------------- ----------- ---------------- PFPC Brokerage Services A 121,054,269 23% FBO Primerica Financial Services B 41,889,877 11% 211 South Gulph Road King of Prussia, PA 19406-3101 Morgan Stanley DW Inc. B 60,819,961 16% 825 Third Avenue C 6,863,205 11% New York, NY 10022-7519
INVESTMENT OBJECTIVE, POLICIES AND RISKS The following disclosure supplements the disclosure set forth under the same caption in the Prospectus and does not, standing alone, present a complete or accurate explanation of the matters disclosed. Readers must refer also to this caption in the Prospectus for a complete presentation of the matters disclosed below. MONEY-MARKET SECURITIES The Fund seeks to maintain a net asset value of $1.00 per share for purchases and redemptions. To do so, the Fund uses the amortized cost method of valuing the Fund's securities pursuant to Rule 2a-7 under the 1940 Act, certain requirements of which are summarized below. In accordance with Rule 2a-7, the Fund is required to (i) maintain a dollar-weighted average portfolio maturity of 90 days or less, (ii) purchase only instruments having remaining maturities of 13 months or less and (iii) invest only in U.S. dollar denominated securities determined in accordance with procedures established by the Board of Trustees to present minimal credit risks. Additionally, securities purchased for investment must be rated in one of the two highest short-term rating categories for debt obligations by any two nationally recognized statistical rating organizations ("NRSROs") (or any one NRSRO if the instrument was rated by only one such organization) or, if unrated, are of comparable quality as determined in accordance with procedures established by the Board of Trustees. In addition, the Fund will not invest more than 5% of its total assets in the securities (including the securities collateralizing a repurchase agreement) of a single issuer, except that (i) the Fund may invest up to 25% of its total assets in the "first tier securities" of a single issuer for a period of up to three business days in certain limited circumstances, (ii) the Fund may invest in obligations issued or guaranteed by the U.S. government without any such limitation, and (iii) the Fund may invest, with limitations, more than 5% of its total assets in securities subject to a guarantee issued by a non-controlled person. First tier securities are those that have been rated in the highest rating category for short-term obligations by at least two NRSROs (or one NRSRO if the instrument was rated by only one such organization), and unrated securities determined by the Fund's Board of Trustees to be comparable to those rated in the highest category. The Fund will be limited B-4 to 5% of the Fund's total assets for other permitted investments not in the first tier ("second tier securities"), with the investment in any one such issuer being limited to no more than the greater of 1% of the Fund's total assets or $1,000,000. As to each security, these percentages are measured at the time the Fund purchases the security. If a security's rating is downgraded, the Adviser and/or the Fund's Board of Trustees may have to reassess the security's credit risk. If a security has ceased to be a first tier security, the Adviser will promptly reassess whether the security continues to present minimal credit risk. If the Adviser becomes aware that any NRSRO has downgraded its rating of a second tier security or rated previously unrated security below its second highest rating category, the Fund's Board of Trustees shall promptly reassess whether the security presents minimal credit risk and whether it is in the best interests of the Fund to dispose of it. If the Fund disposes of the security within five days of the Adviser learning of the downgrade, the Adviser will provide the Board of Trustees with subsequent notice of such downgrade. If a security is in default, ceases to be a security permitted for investment, is determined no longer to present minimal credit risks or if an event of insolvency as defined in Rule 2a-7 occurs, the Fund must dispose of the security as soon as practicable unless the Fund's Board of Trustees determines it would be in the best interests of the Fund not to dispose of the security. There can be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. REPURCHASE AGREEMENTS Repurchase agreements are fully collateralized by the underlying securities and may be considered to be loans under the 1940 Act. The Fund makes payment for such securities only upon physical delivery or evidence of book entry transfer to the account of a custodian or bank acting as agent. The seller under a repurchase agreement is required to maintain the value of the underlying securities marked-to-market daily at not less than the repurchase price. The underlying securities must be of a type in which the Fund may invest (normally securities of the U.S. government, or its agencies and instrumentalities), except that the underlying securities may have maturity dates exceeding one year. The Fund may enter into repurchase agreements with broker-dealers, banks and other financial institutions deemed to be creditworthy by the Adviser under guidelines approved by the Fund's Board of Trustees. The Fund will not invest in repurchase agreements maturing in more than seven days if any such investment, together with any other illiquid securities held by the Fund, would exceed the Fund's limitation on illiquid securities described herein. The Fund does not bear the risk of a decline in value of the underlying security unless the seller defaults under its repurchase obligation. In the event of the bankruptcy or other default of a seller of a repurchase agreement, the Fund could experience both delays in liquidating the underlying securities and losses including: (a) possible decline in the value of the underlying security during the period while the Fund seeks to enforce its rights thereto; (b) possible lack of access to income on the underlying security during this period; and (c) expenses of enforcing its rights. For the purpose of investing in repurchase agreements, the Adviser may aggregate the cash that certain funds advised or subadvised by the Adviser or certain of its affiliates would otherwise invest separately into a joint account. The cash in the joint account is then invested in repurchase agreements and the funds that contributed to the joint account share pro rata in the net revenue generated. The Adviser believes that the joint account B-5 produces efficiencies and economies of scale that may contribute to reduced transaction costs, higher returns, higher quality investments and greater diversity of investments for the Fund than would be available to the Fund investing separately. The manner in which the joint account is managed is subject to conditions set forth in an exemptive order from the SEC permitting this practice, which conditions are designed to ensure the fair administration of the joint account and to protect the amounts in that account. ILLIQUID SECURITIES The Fund may invest up to 10% of its net assets in illiquid securities, which includes securities that are not readily marketable, repurchase agreements which have a maturity of longer than seven days, and generally includes securities that are restricted from sale to the public without registration under the Securities Act of 1933, as amended (the "1933 Act"). The sale of such securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of liquid securities trading on national securities exchanges or in the over-the-counter markets. Restricted securities are often purchased at a discount from the market price of unrestricted securities of the same issuer reflecting the fact that such securities may not be readily marketable without some time delay. Investments in securities for which market quotations are not readily available are valued at their fair value as determined in good faith by the Adviser in accordance with procedures approved by the Fund's Board of Trustees. Ordinarily, the Fund would invest in restricted securities only when it receives the issuer's commitment to register the securities without expense to the Fund. However, registration and underwriting expenses (which typically range from 7% to 15% of the gross proceeds of the securities sold) may be paid by the Fund. Restricted securities which can be offered and sold to qualified institutional buyers under Rule 144A under the 1933 Act ("144A Securities") and are determined to be liquid under guidelines adopted by and subject to the supervision of the Fund's Board of Trustees are not subject to the limitation on illiquid securities. Such 144A Securities are subject to monitoring and may become illiquid to the extent qualified institutional buyers become, for a time, uninterested in purchasing such securities. Factors used to determine whether 144A Securities are liquid include, among other things, a security's trading history, the availability of reliable pricing information, the number of dealers making quotes or making a market in such security and the number of potential purchasers in the market for such security. For purposes hereof, investments by the Fund in securities of other investment companies will not be considered investments in restricted securities to the extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief (such as "no action" letters issued by the staff of the SEC interpreting or providing guidance on the 1940 Act or regulations thereunder) from the provisions of the 1940 Act, as amended from time to time. LOANS OF PORTFOLIO SECURITIES The Fund may lend portfolio securities to brokers, dealers and financial institutions provided that cash equal to 100% of the market value of the securities loaned is deposited by the borrower with the Fund and is maintained each business day. While such securities are on loan, the borrower is required to pay the Fund any income accruing thereon. Furthermore, the Fund may invest the cash collateral in portfolio securities thereby B-6 increasing the return to the Fund as well as increasing the market risk to the Fund. The Fund does not presently intend to lend its portfolio securities in excess of 5% of its total assets. Loans would be made for short-term purposes and subject to termination by the Fund in the normal settlement time, currently three business days after notice, or by the borrower on one day's notice. Borrowed securities must be returned when the loan is terminated. Any gain or loss in the market price of the borrowed securities which occurs during the term of the loan inures to the Fund and its shareholders, but any gain can be realized only if the borrower does not default. The Fund may pay reasonable finders', administrative and custodial fees in connection with a loan. INVESTMENT RESTRICTIONS The Fund has adopted the following fundamental investment restrictions which may not be changed without shareholder approval by the vote of a majority of its outstanding voting securities, which is defined by the 1940 Act as the lesser of (i) 67% or more of the Fund's voting securities present at a meeting, if the holders of more than 50% of the Fund's outstanding voting securities are present or represented by proxy; or (ii) more than 50% of the Fund's outstanding voting securities. The percentage limitations contained in the restrictions and policies set forth herein apply at the time of purchase of securities. With respect to the limitations on illiquid securities and borrowings, the percentage limitations apply at the time of purchase and on an ongoing basis. These restrictions provide that the Fund shall not: 1. Purchase any security which matures more than two years from the date of purchase. As set forth under "Investment Objective, Policies and Risks" in the Prospectus, the Fund's operating policy is not to purchase any security having a remaining maturity of more than 13 months. 2. Purchase any security other than (a) obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities; (b) bank time deposits, certificates of deposit and bankers' acceptances which are obligations of a domestic bank (or a foreign branch or subsidiary thereof), or of a foreign bank, rated at the time of investment A-1 and A-2 by S & P or Prime-1 and Prime-2 by Moody's; (c) instruments secured by a bank obligation described in item 2(b); (d) commercial paper if rated A by S & P's or Prime by Moody's, or if not rated, issued by a company having an outstanding debt issue rated at least A by S & P's or Moody's (see "Description of Securities Ratings" for an explanation of these ratings); and (e) repurchase agreements collateralized by the debt securities described above. 3. Issue any senior security, although the Fund may borrow as set forth under item 14 below. 4. Purchase or sell real estate; although the Fund may purchase securities issued by companies, including real estate investment trusts, which invest in real estate or interest therein. B-7 5. Purchase securities on margin, make short sales of securities or maintain a short position. 6. Purchase or sell commodities or commodity contracts, or invest in oil, gas or mineral exploration or development programs. 7. The Fund may not invest in securities issued by other investment companies except as part of a merger, reorganization or other acquisition and except to the extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief from the provisions of the 1940 Act, as amended from time to time. 8. Make investments for the purpose of exercising control or management, except that the Fund may purchase securities of other investment companies to the extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief from the provisions of the 1940 Act, as amended from time to time. 9. Lend its portfolio securities in excess of 10% of its total assets, both taken at market value provided that any loans shall be in accordance with the guidelines established for such loans by the Trustees of the Fund as described under "Investment Objective, Policies and Risks -- Loans of Portfolio Securities," including the maintenance of collateral from the borrower equal at all times to the current market value of the securities loaned. 10. Invest in securities, except repurchase agreements, for which there are legal or contractual restrictions on resale, except that the Fund may purchase securities of other investment companies to the extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief from the provisions of the 1940 Act, as amended from time to time. 11. Underwrite securities of other issuers except that the Fund may sell an investment position even though it may be deemed an underwriter as that term is defined under the Securities Act of 1933, as amended (the "1933 Act"). 12. Invest in warrants, or write, purchase or sell puts, calls, straddles, spreads or combinations thereof. 13. Purchase or retain securities of any issuer if those officers and directors of the Fund or its investment adviser who own beneficially more than 0.50% of the securities of such issuer, together own more than 5% of the securities of such issuer. 14. Borrow money, except from banks for temporary or emergency purposes and then in amounts not exceeding 10% of the value of the Fund's total net assets; or mortgage, pledge, or hypothecate any assets except in connection with any such borrowing and in amounts not exceeding the lesser of the dollar amount borrowed or 5% of the value of the Fund's assets at the time of such borrowing (the Fund B-8 will not borrow for leveraging or investment but only to meet redemption requests which might otherwise require undue dispositions of portfolio securities). 15. Lend money, except through the purchase or holding of the types of debt securities in which the Fund may invest. 16. With respect to 75% of its assets, purchase securities if the purchase would cause the Fund, at that time, to have more than 5% of the value of its total assets invested in the securities of any one issuer (except obligations of the U.S. government, its agencies or instrumentalities and repurchase agreements fully collateralized thereby). 17. Invest in the securities of any issuer, if immediately thereafter, the Fund would own more than 10% of the total value of all outstanding securities of such issuer, except that the Fund may purchase securities of other investment companies to the extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief from the provisions of the 1940 Act, as amended from time to time. 18. Invest more than 5% of its assets in companies having a record together with predecessors, of less than three years continuous operation. 19. Invest more than 25% of the value of its total assets in securities of issuers in any particular industry (except obligations of the U.S. government and of domestic branches of U.S. banks). B-9 DESCRIPTION OF SECURITIES RATINGS Below is a description of the two highest rating categories for short-term debt obligations and long-term debt obligations by the "nationally recognized statistical rating organizations." The ratings descriptions are based on information supplied by the ratings organizations to subscribers. SHORT-TERM DEBT RATINGS MOODY'S INVESTORS SERVICE, INC. ("Moody's"): The following rating designations for commercial paper (defined by Moody's as promissory obligations not having original maturity in excess of one year), are judged by Moody's to be investment grade, to indicate the relative repayment activity of rated issuers: PRIME-1: Superior ability for repayment. Ability will often be evidenced by many of the following characteristics: (a) leading market positions in well-established industries; (b) high rates of return on funds employed; (c) conservative capitalization structure with moderate reliance on debt and ample asset protection; (d) broad margins in earnings coverage of fixed financial charges and high internal cash generation; and (e) well-established access to a range of financial markets and assured sources of alternate liquidity. PRIME-2: Strong ability for repayment. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. PRIME-3: Acceptable ability for repayment. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt-protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
The following rating designations for state and municipal notes, are judged by Moody's to be investment grade, and indicate the relative repayment capacity of rated issuers: MIG-1/ VMIG-1: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing. MIG-2/ VMIG-2: This designation denotes strong credit quality. Margins of protection are ample, although not so large as in the preceding group.
B-10 MIG-3/ VMIG-3: This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.
STANDARD & POOR'S ("S&P"): The following ratings by S&P for commercial paper (defined by S&P as debt having an original maturity of no more than 365 days) assess the likelihood of payment: A-1: A short-term obligation rated "A-1" is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong. A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory. A-3: A short-term obligation rated "A-3" exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
The following ratings by S&P for state and municipal notes assess the likelihood of payment: SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation. SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
FITCH IBCA, DUFF & PHELPS. Fitch's short-term debt credit ratings are applied to the spectrum of corporate, structured, and public finance. They cover sovereign (including supranational and subnational), financial, bank, insurance, and other corporate entities and the securities they issue, as well as municipal and other public finance entities, and securities backed by receivables or other financial assets, and counterparties. When applied to an entity, these short-term ratings assess its general creditworthiness on a senior basis. When applied to specific issues and programs, these ratings take into account the relative preferential position of the holder of the security and reflect the terms, conditions, and covenants attaching to that security. Short-term debt credit ratings assess the capacity to meet foreign currency or local currency commitments. Both "foreign currency" and "local currency" ratings are internationally comparable assessments. The local currency rating measures the probability of payment within the relevant sovereign state's currency and jurisdiction and therefore, unlike the foreign currency rating, does not take account of the possibility of foreign exchange controls limiting transfer into foreign currency. B-11 A short-term rating has a time horizon of less than 12 months for most obligations, or up to three years for US public finance securities, and thus places greater emphasis on the liquidity necessary to meet the financial commitments in a timely manner. F-1: Highest credit quality, indicates the strongest capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature. F-2: Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings. F-3: Fair credit quality. The capacity for timely payment of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade.
Notes: "+" or "-" may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to short-term ratings other than "F1". LONG-TERM DEBT RATINGS These ratings are relevant for securities purchased by the Fund with a remaining maturity of 397 days or less, or for rating issuers of short-term obligations. Bonds (including municipal bonds) are rated as follows: MOODY'S INVESTORS SERVICE, INC.: AAA: Judged to be the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin, and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong positions of such issues. AA: Judged to be of high quality by all standards. Together with "Aaa" group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in "Aaa" securities or fluctuations of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in "Aaa" securities. A: Possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.
Moody's applies numerical modifiers "1", "2" and "3" in its "Aa" and "A" rating classifications. The modifier "1" indicates that the security ranks in the higher end of its B-12 generic rating category; the modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a ranking in the lower end of its generic rating category. STANDARD & POOR'S: AAA: The highest rating assigned by S&P. Capacity to meet its financial commitment on the obligation is extremely strong. AA: Differs from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A: Somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. Capacity to meet its financial commitment on the obligation is still strong.
FITCH IBCA, DUFF & PHELPS AAA: Highest credit quality. "AAA" ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. AA: Very high credit quality. "AA" ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A: High credit quality. "A" ratings denote a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. BBB: Good credit quality. "BBB" ratings indicate that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category.
B-13 TRUSTEES AND OFFICERS The business and affairs of the Fund are managed under the direction of the Fund's Board of Trustees and the Fund's officers appointed by the Board of Trustees. The tables below list the trustees and officers of the Fund and executive officers of the Fund's investment adviser and their principal occupations 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 Management Inc., 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 OF HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE ------------------------ ----------- ---------- ----------------------- ---------- ------------------- J. Miles Branagan (70).... Trustee Trustee Private investor. 55 1632 Morning Mountain Road since 1991 Trustee/ Director of Raleigh, NC 27614 funds 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. Jerry D. Choate (64)...... Trustee Trustee Trustee/Director of 55 Director of Amgen 53 Monarch Bay Drive since 1999 funds in the Fund Inc., a Dana Point, CA 92629 Complex. Prior to biotechnological January 1999, Chairman company, and and Chief Executive Director of Valero Officer of the Allstate Energy Corporation, Corporation an independent ("Allstate") and refining company. Allstate Insurance Company. Prior to January 1995, President and Chief Executive Officer of Allstate. Prior to August 1994, various management positions at Allstate.
B-14
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE ------------------------ ----------- ---------- ----------------------- ---------- ------------------- Linda Hutton Heagy (54)... Trustee Trustee Regional Managing 55 Sears Tower since 1995 Partner of Heidrick & 233 South Wacker Drive Struggles, an executive Suite 7000 search firm. Trustee/ Chicago, IL 60606 Director of 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.
B-15
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE ------------------------ ----------- ---------- ----------------------- ---------- ------------------- R. Craig Kennedy (50)..... Trustee Trustee Director and President, 55 1744 R Street, N.W. 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 55 423 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.
B-16
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE ------------------------ ----------- ---------- ----------------------- ---------- ------------------- Suzanne H. Woolsey (60)... Trustee Trustee Chief Communications 55 Director of 2101 Constitution Ave., since 1999 Officer of the National Neurogen N.W. Academy of Sciences/ Corporation, a Room 285 National Research pharmaceutical Washington, D.C. 20418 Council, an company, since independent, federally January 1998. chartered policy institution, since 2001 and previously Chief Operating Officer from 1993 to 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.
B-17 INTERESTED TRUSTEES:
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE ------------------------ ----------- ---------- ----------------------- ---------- ------------------- Mitchell M. Merin* (49)... Trustee Trustee President and Chief 55 1221 Avenue of the since 1999 Operating Officer of Americas Morgan Stanley New York, NY 10020 Investment 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.
B-18
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE ------------------------ ----------- ---------- ----------------------- ---------- ------------------- Richard F. Powers, III* Trustee and Trustee Chairman, President, 92 (56)...................... President since 1999 Chief Executive 1 Parkview Plaza Officer, Director and P.O. Box 5555 Managing Director of Oakbrook Terrace, IL 60181 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 Dean Witter 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 Dean Witter and Director of Dean Witter Discover & Co. and Dean Witter Realty. Prior to 1996, Director of Dean Witter Reynolds Inc. Wayne W. Whalen* (63)..... Trustee Trustee Partner in the law firm 92 333 West Wacker Drive since 1995 of Skadden, Arps, Chicago, IL 60606 Slate, 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. B-19 OFFICERS:
TERM OF OFFICE AND LENGTH OF POSITION(S) HELD TIME PRINCIPAL OCCUPATION(S) DURING PAST NAME, AGE AND ADDRESS OF OFFICER WITH FUND SERVED 5 YEARS - -------------------------------- ---------------- ---------- ----------------------------------- Stephen L. Boyd (61)........... Vice President Officer Managing Director and Chief 2800 Post Oak Blvd. since 1998 Investment Officer of Van Kampen 45th Floor Investments, and Managing Director Houston, TX 77056 and President of the Advisers and Van Kampen Advisors Inc. Executive Vice 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 1221 Avenue of the Americas Officer since 2002 Investment Officer of Morgan Stanley New York, NY 10020 Investment Advisors Inc., Morgan Stanley Investment Management Inc. and Morgan Stanley Investments LP, and Director of Morgan Stanley Trust for over 5 years.
B-20
TERM OF OFFICE AND LENGTH OF POSITION(S) HELD TIME PRINCIPAL OCCUPATION(S) DURING PAST NAME, AGE AND ADDRESS OF OFFICER WITH FUND SERVED 5 YEARS - -------------------------------- ---------------- ---------- ----------------------------------- A. Thomas Smith III (45)....... Vice President and Officer Managing Director and Director of Van 1221 Avenue of the Americas Secretary since 1999 Kampen Investments, Director of the New York, NY 10020 Advisers, Van Kampen Advisors Inc., the Distributor, Investor Services and certain other subsidiaries of Van Kampen Investments. Managing Director and General Counsel-Mutual Funds of Morgan Stanley Investment Advisors, Inc. Vice President 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 1 Parkview Plaza since 2000 and Van Kampen Advisors Inc. Vice Oakbrook Terrace, IL 60181 President of funds in the Fund Complex. Prior to 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.
B-21
TERM OF OFFICE AND LENGTH OF POSITION(S) HELD TIME PRINCIPAL OCCUPATION(S) DURING PAST NAME, AGE AND ADDRESS OF OFFICER WITH FUND SERVED 5 YEARS - -------------------------------- ---------------- ---------- ----------------------------------- John L. Sullivan (47).......... Vice President, Chief Officer Executive Director of Van Kampen 1 Parkview Plaza Financial Officer and since 1996 Investments, the Advisers and Van Oakbrook Terrace, IL 60181 Treasurer Kampen Advisors Inc. Vice President, Chief Financial Officer and Treasurer of funds in the Fund Complex. Head of Fund Accounting for Morgan Stanley Investment Management. John H. Zimmermann, III (44)... Vice President Officer Managing Director and Director of Van Harborside Financial Center since 2000 Kampen Investments, and Managing Plaza 2 - 7th Floor Director, President and Director of Jersey City, NJ 07311 the Distributor. Vice President of funds in the Fund Complex. Prior to December 2000, President of Van Kampen Insurance Agency of Illinois Inc., and Senior Vice President and Director of Van Kampen Investments. From November 1992 to December 1997, Mr. Zimmermann was Senior Vice President of the Distributor.
As of the date of this Statement of Additional Information, each trustee/director holds the same position with each of the 55 operating open-end funds in the Fund Complex (the "Open-End Fund Complex"). Each trustee/director who is not an affiliated person (as defined in the 1940 Act) of Van Kampen Investments, the Advisers or the Distributor (each a "Non-Affiliated Trustee") is compensated by an annual retainer and meeting fees for services to the funds in the Open-End Fund Complex. Each fund in the Open-End Fund Complex provides a deferred compensation plan to its Non-Affiliated Trustees that allows trustees/directors to defer receipt of their compensation and earn a return on such deferred amounts. Deferring compensation has the same economic effect as if the Non-Affiliated Trustee reinvested his or her compensation into the funds. Each fund in the Open-End Fund Complex provides a retirement plan to its Non-Affiliated Trustees that provides Non-Affiliated Trustees with compensation after retirement, provided that certain eligibility requirements are met as more fully described below. The compensation of each Non-Affiliated Trustee for the Open-End Fund Complex includes an annual retainer in an amount equal to $50,000 per calendar year, due in four quarterly installments on the first business day of each quarter. Payment of the annual retainer is allocated among the funds in the Open-End Fund Complex on the basis of the relative net assets of each fund as of the last business day of the preceding calendar quarter. The compensation of each Non-Affiliated Trustee includes a per meeting fee from each fund in the Open-End Fund Complex in the amount of $200 per quarterly or special meeting attended by the Non-Affiliated Trustee, due on the date of the meeting, plus reasonable expenses incurred by the Non-Affiliated Trustee in connection with his or her services as a trustee/director, provided that no compensation will be paid in connection with certain telephonic special meetings. Under the deferred compensation plan, each Non-Affiliated Trustee generally can elect to defer receipt of all or a portion of the compensation earned by such Non-Affiliated Trustee until retirement. Amounts deferred are retained by the Fund and earn a rate of return determined by reference to the return on the common shares of the Fund or other B-22 funds in the Open-End Fund Complex as selected by the respective Non-Affiliated Trustee, with the same economic effect as if such Non-Affiliated Trustee had invested in one or more funds in the Open-End Fund Complex. To the extent permitted by the 1940 Act, the Fund may invest in securities of those funds selected by the Non-Affiliated Trustees in order to match the deferred compensation obligation. The deferred compensation plan is not funded and obligations thereunder represent general unsecured claims against the general assets of the Fund. Under the retirement plan, a Non-Affiliated Trustee who is receiving compensation from the Fund prior to such Non-Affiliated Trustee's retirement, has at least 10 years of service (including years of service prior to adoption of the retirement plan) and retires at or after attaining the age of 60, is eligible to receive a retirement benefit equal to $2,500 per year for each of the ten years following such retirement from the Fund. Non-Affiliated Trustees retiring prior to the age of 60 or with fewer than 10 years but more than 5 years of service may receive reduced retirement benefits from the Fund. The retirement plan contains an Open-End Fund Complex retirement benefit cap of $60,000 per year. Additional information regarding compensation and benefits for trustees is set forth below for the periods described in the notes accompanying the table. COMPENSATION TABLE
Open-End Fund Complex ------------------------------------------------- Aggregate Estimated Maximum Total Annual Compensation Aggregate Pension Benefits from before Aggregate or Retirement the Open-End Deferral from Compensation Benefits Accrued Fund Complex Open-End from the as Part of Upon Fund Name(1) Trust(2) Expenses(3) Retirement(4) Complex(5) ------- ------------ ----------------- ------------- ------------- J. Miles Branagan $1,995 $55,340 $60,000 $124,400 Jerry D. Choate 1,795 19,952 60,000 112,000 Linda Hutton Heagy 1,795 5,454 60,000 112,000 R. Craig Kennedy 1,995 3,654 60,000 124,400 Jack E. Nelson 1,995 27,520 60,000 124,400 Wayne W. Whalen 1,995 18,424 60,000 124,400(5) Suzanne H. Woolsey 1,995 12,355 60,000 124,400
- ------------------------------------ (1) Trustees not eligible for compensation are not included in the Compensation Table. Phillip B. Rooney resigned as a member of the Board of Trustees for the Trust and other funds in the Open-End Fund Complex on March 27, 2002. (2) The amounts shown in this column represent the aggregate compensation before deferral with respect to the Fund's fiscal year ended May 31, 2002. The following trustees deferred compensation from the Fund during the fiscal year ended May 31, 2002: Mr. Branagan, $1,995; Mr. Choate, $1,795; Ms. Heagy, $1,795; Mr. Kennedy, $1,710; Mr. Nelson, $1,995; and Mr. Whalen, $1,995. Amounts deferred are retained by the Fund and earn a rate of return determined by reference to either the return on the common shares of the Fund or other funds in the Open-End Fund Complex as selected by the respective Non-Affiliated Trustee, with the same economic effect as if B-23 such Non-Affiliated Trustee had invested in one or more funds in the Open-End Fund Complex. To the extent permitted by the 1940 Act, each fund may invest in securities of those funds selected by the Non-Affiliated Trustees in order to match the deferred compensation obligation. The cumulative deferred compensation (including interest) accrued with respect to each trustee, including former trustees, from the Fund as of the Fund's fiscal year ended May 31, 2002 is as follows: Mr. Branagan, $13,537; Mr. Choate, $4,589; Ms. Heagy, $7,484; Mr. Kennedy, $13,639; Mr. Miller, $4,242; Mr. Nelson, $24,476; Mr. Rees, $27,380; Mr. Robinson, $5,776; Mr. Rooney, $6,223; Mr. Sisto, $16,772 and Mr. Whalen, $15,061. The deferred compensation plan is described above the Compensation Table. (3) The amounts shown in this column represent the sum of the retirement benefits accrued by the operating investment companies in the Open-End Fund Complex for each of the trustees for the funds' respective fiscal years ended in 2001. The retirement plan is described above the Compensation Table. (4) For each trustee, this is the sum of the estimated maximum annual benefits payable by the funds in the Open-End Fund Complex for each year of the 10-year period commencing in the year of such trustee's anticipated retirement. The retirement plan is described above the Compensation Table. (5) The amounts shown in this column represent the aggregate compensation paid by all of the funds in the Open-End Fund Complex as of December 31, 2001 before deferral by the trustees under the deferred compensation plan. Because the funds in the Open-End Fund Complex have different fiscal year ends, the amounts shown in this column are presented on a calendar year basis. Certain trustees deferred all or a portion of their aggregate compensation from the Open-End Fund Complex during the calendar year ended December 31, 2001. The deferred compensation earns a rate of return determined by reference to the return on the shares of the funds in the Open-End Fund Complex as selected by the respective Non-Affiliated Trustee, with the same economic effect as if such Non-Affiliated Trustee had invested in one or more funds in the Open-End Fund Complex. To the extent permitted by the 1940 Act, the Fund may invest in securities of those investment companies selected by the Non-Affiliated Trustees in order to match the deferred compensation obligation. The Advisers and their affiliates also serve as investment adviser for other investment companies; however, with the exception of Mr. Whalen, the Non-Affiliated Trustees were not trustees of such investment companies. Combining the Open-End Fund Complex with other investment companies advised by the Advisers and their affiliates, Mr. Whalen earned Total Compensation of $276,650 during the calendar year ended December 31, 2001. During the Fund's last fiscal year, the Board of Trustees had three standing committees (an audit committee, a brokerage and services committee and a retirement plan committee) and one ad hoc committee (a nominating committee). Each committee is comprised of trustees who are not "interested persons" of the Fund (as defined by the 1940 Act) (referred to herein as "Independent Trustees" or "non-interested trustees"). The Board's audit committee consists of J. Miles Branagan, Jerry D. Choate and R. Craig Kennedy. The audit committee makes recommendations to the Board of Trustees concerning the selection of the Fund's independent public accountants, reviews with such B-24 accountants the scope and results of the Fund's annual audit and considers any comments which the accountants may have regarding the Fund's financial statements, books of account or internal controls. The Board's brokerage and services committee consists of Linda Hutton Heagy, Jack E. Nelson and Suzanne H. Woolsey. The brokerage and services committee reviews the Board's allocation of brokerage transactions and soft-dollar practices and reviews the transfer agency and shareholder servicing arrangements with Investor Services. The Board's retirement plan committee consists of Linda Hutton Heagy, R. Craig Kennedy and Jack E. Nelson. The retirement plan committee is responsible for reviewing the terms of the Fund's retirement plan and reviews any administrative matters which arise with respect thereto. During the Fund's last fiscal year, the audit committee of the Board held 2 meetings and the brokerage and services committee of the Board held 6 meetings. The retirement plan committee of the Board does not meet on a regular basis, but does meet on an ad hoc basis as necessary to administer the retirement plan. The non-interested trustees of the Fund select and nominate any other non-interested trustees of the Fund. The Board has an ad hoc nominating committee currently consisting of J. Miles Branagan, Linda Hutton Heagy and R. Craig Kennedy. While the non-interested trustees of the Funds expect to be able to continue to identify from their own resources an ample number of qualified candidates for the Board of Trustees as they deem appropriate, they will review nominations from shareholders to fill any vacancies. Nominations from shareholders should be in writing and addressed to the non-interested trustees at the Fund's office. In addition to deferred compensation balances as described in the Compensation Table, as of December 31, 2001, the most recently completed calendar year prior to the date of this Statement of Additional Information, each trustee of the Fund beneficially owned equity securities of the Fund and of all of the funds in the Open-End Fund Complex overseen by the trustee in the dollar range amounts specified below. 2001 TRUSTEE BENEFICIAL OWNERSHIP OF SECURITIES INDEPENDENT TRUSTEES
BRANAGAN CHOATE HEAGY KENNEDY NELSON WOOLSEY ---------- -------- -------- --------- --------- -------- DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND Reserve Fund none none $1- $1- none none $10,000 $10,000 AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED INVESTMENT COMPANIES OVERSEEN BY TRUSTEE IN THE OPEN-END FUND COMPLEX over $10,001- $10,001- over over $10,001- $1,000,000 $50,000 $50,000 $100,000 $100,000 $50,000
B-25 INTERESTED TRUSTEES
MERIN POWERS WHALEN --------- --------- --------- DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND Reserve Fund none none $10,001- $50,000 AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED INVESTMENT COMPANIES OVERSEEN BY TRUSTEE IN THE OPEN-END FUND COMPLEX over over over $100,000 $100,000 $100,000
As of September 13, 2002, the trustees and officers of the Fund as a group owned less than 1% of the shares of the Fund. The Fund, the Adviser and the Distributor have adopted a Code of Ethics (the "Code of Ethics") that sets forth general and specific standards relating to the securities trading activities of their employees. The Code of Ethics does not prohibit employees from acquiring securities that may be purchased or held by the Fund, but is intended to ensure that all employees conduct their personal transactions in a manner that does not interfere with the portfolio transactions of the Fund or other Van Kampen funds, or that such employees take unfair advantage of their relationship with the Fund. Among other things, the Code of Ethics prohibits certain types of transactions absent prior approval, imposes various trading restrictions (such as time periods during which personal transactions may or may not be made) and requires quarterly reporting of securities transactions and other reporting matters. All reportable securities transactions and other required reports are to be reviewed by appropriate personnel for compliance with the Code of Ethics. Additional restrictions apply to portfolio managers, traders, research analysts and others who may have access to nonpublic information about the trading activities of the Fund or other Van Kampen funds or who otherwise are involved in the investment advisory process. Exceptions to these and other provisions of the Code of Ethics may be granted in particular circumstances after review by appropriate personnel. INVESTMENT ADVISORY AGREEMENT The Fund and the Adviser are parties to an investment advisory agreement (the "Advisory Agreement"). Under the Advisory Agreement, the Fund retains the Adviser to manage the investment of the Fund's assets, including the placing of orders for the purchase and sale of portfolio securities. The Adviser obtains and evaluates economic, statistical and financial information to formulate strategy and implement the Fund's investment objective. The Adviser also furnishes offices, necessary facilities and equipment, provides administrative services to the Fund, renders periodic reports to the Fund's Board of Trustees and permits its officers and employees to serve without compensation as trustees of the Trust or officers of the Fund if elected to such positions. The Fund, however, bears the costs of its day-to-day operations, including service fees, distribution fees, custodian fees, legal and independent accountant fees, the costs of reports and proxies to shareholders, compensation of trustees of the 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. The Advisory Agreement also provides that the Adviser shall not be liable to the Fund for any actions or omissions if it acted without willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations. B-26 The Advisory Agreement also provides that, in the event the expenses of the Fund for any fiscal year exceed 1% of the Fund's average daily net assets, the compensation due the Adviser will be reduced by the amount of such excess and that, if a reduction in and refund of the advisory fee is insufficient, the Adviser will pay the Fund monthly an amount sufficient to make up the deficiency, subject to readjustment during the fiscal year. Ordinary business expenses include the investment advisory fee and other operating costs paid by the Fund except (1) interest and taxes, (2) brokerage commissions, (3) certain litigation and indemnification expenses as described in the Advisory Agreement and (4) payments made by the Fund pursuant to its distribution plans. The Advisory Agreement may be continued from year to year if specifically approved at least annually (a)(i) by the Fund's Board of Trustees or (ii) by a vote of a majority of the Fund's outstanding voting securities and (b) by a vote of a majority of the Trustees who are not parties to the agreement or interested persons of any such party by votes cast in person at a meeting called for such purpose. The Advisory Agreement provides that it shall terminate automatically if assigned and that it may be terminated without penalty by either party on 60 days' written notice. In approving the Advisory Agreement, the Board of Trustees, including the non-interested Trustees, considered the nature, quality and scope of the services provided by the Adviser, the performance, fees and expenses of the Fund compared to other similar investment companies, the Adviser's expenses in providing the services and the profitability of the Adviser and its affiliated companies. The Board of Trustees also reviewed the benefit to the Adviser of receiving third party research paid for by Fund assets and the propriety of such an arrangement and evaluated other benefits the Adviser derives from its relationship with the Fund. The Board of Trustees considered the extent to which any economies of scale experienced by the Adviser are shared with the Fund's shareholders, and the propriety of existing and alternative breakpoints in the Fund's advisory fee schedule. The Board of Trustees considered comparative advisory fees of the Fund and other investment companies at different asset levels and considered the trends in the industry versus historical and projected sales and redemptions of the Fund. The Board of Trustees reviewed reports from third parties about the foregoing factors and considered changes, if any, in such items since its previous approval. The Board of Trustees discussed the financial strength of the Adviser and its affiliated companies and the capability of the personnel of the Adviser. The Board of Trustees reviewed the statutory and regulatory requirements for approval of advisory agreements. The Board of Trustees, including the non-interested Trustees, evaluated all of the foregoing and determined, in the exercise of its business judgment, that approval of the Advisory Agreement was in the best interests of the Fund and its shareholders. ADVISORY FEES
FISCAL YEAR ENDED MAY 31, ------------------------------------ 2002 2001 2000 ---------- ---------- ---------- Adviser received the approximate advisory fee net of fee waivers................................................... $3,546,700 $3,088,600 $3,651,500
OTHER AGREEMENTS Accounting Services Agreement. The Fund has entered into an accounting services agreement pursuant to which Advisory Corp. provides accounting services supplementary B-27 to those provided by the custodian. Such services are expected to enable the Fund to more closely monitor and maintain its accounts and records. The Fund pays all costs and expenses related to such services, including all salary and related benefits of accounting personnel, as well as the overhead and expenses of office space and the equipment necessary to render such services. The Fund shares together with the other Van Kampen funds in the cost of providing such services with 25% of such costs shared proportionately based on the respective number of classes of securities issued per fund and the remaining 75% of such costs based proportionately on the respective net assets per fund. During the fiscal years ended May 31, 2002, 2001 and 2000, Advisory Corp. received approximately $62,500, $74,700 and $38,200, respectively, in accounting services fees from the Fund. DISTRIBUTION AND SERVICE The Distributor acts as the principal underwriter of the Fund's shares pursuant to a written agreement (the "Distribution and Service Agreement"). The Distributor has the exclusive right to distribute shares of the Fund through authorized dealers on a continuous basis. The Distributor's obligation is an agency or "best efforts" arrangement under which the Distributor is required to take and pay for only such shares of the Fund as may be sold to the public. The Distributor is not obligated to sell any stated number of shares. The Distributor bears the cost of printing (but not typesetting) prospectuses used in connection with this offering and certain other costs including the cost of supplemental sales literature and advertising. The Distribution and Service Agreement is renewable from year to year if approved (a)(i) by the Fund's Board of Trustees or (ii) by a vote of a majority of the Fund's outstanding voting securities and (b) by a vote of a majority of Trustees who are not parties to the Distribution and Service Agreement or interested persons of any party, by votes cast in person at a meeting called for such purpose. The Distribution and Service Agreement provides that it will terminate if assigned, and that it may be terminated without penalty by either party on 90 days' written notice. With respect to sales of Class B Shares and Class C Shares of the Fund, a commission or transaction fee generally will be paid by the Distributor at the time of purchase directly out of the Distributor's assets (and not out of the Fund's assets) to authorized dealers who initiate and are responsible for such purchases computed based on a percentage of the dollar value of such shares sold of 4.00% on Class B Shares and 1.00% on Class C Shares. Proceeds from any contingent deferred sales charge and any distribution fees on Class B Shares and Class C Shares of the Fund are paid to the Distributor and are used by the Distributor to defray its distribution related expenses in connection with the sale of the Fund's shares, such as the payment to authorized dealers for selling such shares. With respect to Class C Shares, the authorized dealers generally are paid the ongoing commission and transaction fees of up to 0.75% of the average daily net assets of the Fund's Class C Shares annually commencing in the second year after purchase. In addition to reallowances or commissions described above, the Distributor may from time to time implement programs under which an authorized dealer's sales force may be eligible to win nominal awards for certain sales efforts or under which the Distributor will reallow to any authorized dealer that sponsors sales contests or recognition programs B-28 conforming to criteria established by the Distributor, or participates in sales programs sponsored by the Distributor, an amount not exceeding the total applicable sales charges on the sales generated by the authorized dealer at the public offering price during such programs. Also, the Distributor in its discretion may from time to time, pursuant to objective criteria established by the Distributor, pay fees to, and sponsor business seminars for, qualifying authorized dealers for certain services or activities which are primarily intended to result in sales of shares of the Fund or other Van Kampen funds. Fees may include payment for travel expenses, including lodging, incurred in connection with trips taken by invited registered representatives for meetings or seminars of a business nature. In some instances additional compensation or promotional incentives may be offered to brokers, dealers or financial intermediaries that have sold or may sell significant amounts of shares during specified periods of time. The Distributor may provide additional compensation to Edward D. Jones & Co. or an affiliate thereof based on a combination of its quarterly sales of shares of the Fund and other Van Kampen Funds and increases in net assets of the Fund and other Van Kampen Funds over specified thresholds. All of the foregoing payments are made by the Distributor out of its own assets. Such fees paid for such services and activities with respect to the Fund will not exceed in the aggregate 1.25% of the average total daily net assets of the Fund on an annual basis. These programs will not change the price an investor will pay for shares or the amount that a Fund will receive from such sale. The Fund has adopted a distribution plan (the "Distribution Plan") with respect to each of its Class A Shares, Class B Shares and Class C Shares pursuant to Rule 12b-1 under the 1940 Act. The Fund also adopted a service plan (the "Service Plan") with respect to each such class of its shares. The Distribution Plan and the Service Plan sometimes are referred to herein as the "Plans". The Plans provide that the Fund may spend a portion of the Fund's average daily net assets attributable to each class of shares in connection with distribution of the respective class of shares and in connection with the provision of ongoing services to shareholders of such class, respectively. The Distribution Plan and the Service Plan are being implemented through the Distribution and Service Agreement with the Distributor of each class of the Fund's shares, sub-agreements between the Distributor and members of the NASD who are acting as securities dealers and NASD members or eligible non-members who are acting as brokers or agents and similar agreements between the Fund and financial intermediaries who are acting as brokers (collectively, "Selling Agreements") that may provide for their customers or clients certain services or assistance, which may include, but not be limited to, processing purchase and redemption transactions, establishing and maintaining shareholder accounts regarding the Fund, and such other services as may be agreed to from time to time and as may be permitted by applicable statute, rule or regulation. Brokers, dealers and financial intermediaries that have entered into sub-agreements with the Distributor and sell shares of the Fund are referred to herein as "financial intermediaries." Certain financial intermediaries may be prohibited under law from providing certain underwriting or distribution services. If a financial intermediary was prohibited from acting in any capacity or providing any of the described services, the Distributor would consider what action, if any, would be appropriate. The Distributor does not believe that termination of a relationship with a financial intermediary would result in any material adverse consequences to the Fund. B-29 The Distributor must submit quarterly reports to the Board of Trustees setting forth separately by class of shares all amounts paid under the Distribution Plan and the purposes for which such expenditures were made, together with such other information as from time to time is reasonably requested by the Trustees. The Plans provide that they will continue in full force and effect from year to year so long as such continuance is specifically approved by a vote of the Trustees, and also by a vote of the disinterested Trustees, cast in person at a meeting called for the purpose of voting on the Plans. Each of the Plans may not be amended to increase materially the amount to be spent for the services described therein with respect to any class of shares without approval by a vote of a majority of the outstanding voting shares of such class, and all material amendments to either of the Plans must be approved by the Trustees and also by the disinterested Trustees. Each of the Plans may be terminated with respect to any class of shares at any time by a vote of a majority of the disinterested Trustees or by a vote of a majority of the outstanding voting shares of such class. For Class A Shares in any given year in which the Plans are in effect, the Plans generally provide for the Fund to pay the Distributor the lesser of (i) the amount of the Distributor's actual expenses incurred during such year less any deferred sales charges (if any) it received during such year (the "actual net expenses") or (ii) the distribution and service fees at the rates specified in the Prospectus (the "plan fees"). Therefore, to the extent the Distributor's actual net expenses in a given year are less than the plan fees for such year, the Fund only pays the actual net expenses. Alternatively, to the extent the Distributor's actual net expenses in a given year exceed the plan fees for such year, the Fund only pays the plan fees for such year. For Class A Shares, there is no carryover of any unreimbursed actual net expenses to succeeding years. The Plans for Class B Shares and Class C Shares are similar to the Plans for Class A Shares, except that any actual net expenses which exceed plan fees for a given year are carried forward and are eligible for payment in future years by the Fund so long as the Plans remain in effect. Thus, for each of the Class B Shares and Class C Shares, in any given year in which the Plans are in effect, the Plans generally provide for the Fund to pay the Distributor the lesser of (i) the applicable amount of the Distributor's actual net expenses incurred during such year for such class of shares plus any actual net expenses from prior years that are still unpaid by the Fund for such class of shares or (ii) the applicable plan fees for such class of shares. Except as may be mandated by applicable law, the Fund does not impose any limit with respect to the number of years into the future that such unreimbursed actual net expenses may be carried forward (on a Fund level basis). These unreimbursed actual net expenses may or may not be recovered through plan fees or contingent deferred sales charges in future years. Because of fluctuations in net asset value, the plan fees with respect to a particular Class B Share or Class C Share may be greater or less than the amount of the initial commission (including carrying cost) paid by the Distributor with respect to such share. In such circumstances, a shareholder of a share may be deemed to incur expenses attributable to other shareholders of such class. As of May 31, 2002, there were $0 and $0 of unreimbursed distribution-related expenses with respect to Class B Shares and Class C Shares, respectively, representing 0.00% and 0.00% of the Fund's net assets attributable to Class B Shares and Class C Shares, respectively. If the Plans were terminated or not continued, the Fund would not be B-30 contractually obligated to pay the Distributor for any expenses not previously reimbursed by the Fund or recovered through contingent deferred sales charges. For the fiscal year ended May 31, 2002, the Fund's aggregate expenses paid under the Plans for Class A Shares were $723,657 or 0.15% of the Class A Shares' average daily net assets. For the fiscal year ended May 31, 2002, the Fund's aggregate expenses paid under the Plans for Class B Shares were $3,279,975 or 0.90% of the Class B Shares' average daily net assets. Such expenses were paid to reimburse the Distributor for the following payments: $2,720,123 for commissions and transaction fees paid to financial intermediaries in respect of sales of Class B Shares of the Fund and $559,852 for fees paid to financial intermediaries for servicing Class B shareholders and administering the Class B Share Plans. For the fiscal year ended May 31, 2002, the Fund's aggregate expenses paid under the Plans for Class C Shares were $523,388 or 0.90% of the Class C Shares' average daily net assets. Such expenses were paid to reimburse the Distributor for the following payments: $180,588 for commissions and transaction fees paid to financial intermediaries in respect of sales of Class C Shares of the Fund and $342,800 for fees paid to financial intermediaries for servicing Class C shareholders and administering the Class C Share Plans. TRANSFER AGENT The Fund's transfer agent, shareholder service agent and dividend disbursing agent is Van Kampen Investor Services Inc. The transfer agency fees are determined through negotiations with the Fund's Board of Trustees and are based on competitive benchmarks. PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION The Adviser is responsible for decisions to buy and sell securities for the Fund, the selection of brokers and dealers to effect the transactions and the negotiation of prices and any brokerage commissions on such transactions. While the Adviser will be primarily responsible for the placement of the Fund's portfolio business, the policies and practices in this regard are subject to review by the Board of Trustees of the Fund. As most transactions made by the Fund are principal transactions at net prices, the Fund generally incurs little or no brokerage costs. The portfolio securities in which the Fund invests are normally purchased directly from the issuer or in the over-the-counter market from an underwriter or market maker for the securities. Purchases from underwriters of portfolio securities include a commission or concession paid by the issuer to the underwriter and purchases from dealers serving as market makers include a spread or markup to the dealer between the bid and asked price. Sales to dealers are effected at bid prices. The Fund may also purchase certain money-market instruments directly from an issuer, in which case no commissions or discounts are paid, or may purchase and sell listed securities on an exchange, which are effected through brokers who charge a commission for their shares. The Adviser is responsible for placing portfolio transactions and does so in a manner deemed fair and reasonable to the Fund and not according to any formula. The primary consideration in all portfolio transactions is prompt execution of orders in an effective manner at the most favorable price. In selecting broker-dealers and in negotiating prices B-31 and any brokerage commissions on such transactions, the Adviser considers the firm's reliability, integrity and financial condition and the firm's execution capability, the size and breadth of the market for the security, the size of and difficulty in executing the order, and the best net price. There are many instances when, in the judgment of the Adviser, more than one firm can offer comparable execution services. In selecting among such firms, consideration may be given to those firms which supply research and other services in addition to execution services. The Adviser is authorized to pay higher commissions to brokerage firms that provide it with investment and research information than to firms which do not provide such services if the Adviser determines that such commissions are reasonable in relation to the overall services provided. No specific value can be assigned to such research services which are furnished without cost to the Adviser. Since statistical and other research information is only supplementary to the research efforts of the Adviser to the Fund and still must be analyzed and reviewed by its staff, the receipt of research information is not expected to reduce its expenses materially. The investment advisory fee is not reduced as a result of the Adviser's receipt of such research services. Services provided may include (a) furnishing advice as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; (b) furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and the performance of accounts; and (c) effecting securities transactions and performing functions incidental thereto (such as clearance, settlement and custody). Research services furnished by firms through which the Fund effects its securities transactions may be used by the Adviser in servicing all of its advisory accounts; not all of such services may be used by the Adviser in connection with the Fund. The Adviser also may place portfolio transactions, to the extent permitted by law, with brokerage firms affiliated with the Fund, the Adviser or the Distributor and with brokerage firms participating in the distribution of the Fund's shares if it reasonably believes that the quality of execution and the commission are comparable to that available from other qualified firms. Similarly, to the extent permitted by law and subject to the same considerations on quality of execution and comparable commission rates, the Adviser may direct an executing broker to pay a portion or all of any commissions, concessions or discounts to a firm supplying research or other services or to a firm participating in the distribution of the Fund's shares. The Adviser may place portfolio transactions at or about the same time for other advisory accounts, including other investment companies. The Adviser seeks to allocate portfolio transactions equitably whenever concurrent decisions are made to purchase or sell securities for the Fund and another advisory account. In some cases, this procedure could have an adverse effect on the price or the amount of securities available to the Fund. In making such allocations among the Fund and other advisory accounts, the main factors considered by the Adviser are the respective sizes of the Fund and other advisory accounts, the respective investment objectives, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment, the size of investment commitments generally held and opinions of the persons responsible for recommending the investment. B-32 Effective October 31, 1996, Morgan Stanley & Co. Incorporated ("Morgan Stanley & Co.") became an affiliate of the Adviser. Effective May 31, 1997, Morgan Stanley DW Inc. ("Morgan Stanley DW") became an affiliate of the Adviser. The Fund's Board of Trustees has adopted certain policies incorporating the standards of Rule 17e-1 issued by the SEC under the 1940 Act which require that the commissions paid to affiliates of the Fund must be reasonable and fair compared to the commissions, fees or other remuneration received or to be received by other brokers in connection with comparable transactions involving similar securities during a comparable period of time. The rule and procedures also contain review requirements and require the Adviser to furnish reports to the trustees and to maintain records in connection with such reviews. After consideration of all factors deemed relevant, the trustees will consider from time to time whether the advisory fee for the Fund will be reduced by all or a portion of the brokerage commission paid to affiliated brokers. The Fund paid the following commissions to all brokers and affiliated brokers during the fiscal years shown: Commissions Paid:
Affiliated Brokers ------------------------------ All Morgan Morgan Stanley Brokers Stanley & Co. DW ------- ------------- -------------- Fiscal year ended May 31, 2002................. $ 0 $ 0 $ 0 Fiscal year ended May 31, 2001................. $ 0 $ 0 $ 0 Fiscal year ended May 31, 2000................. $ 0 $ 0 $ 0 Fiscal 2002 Percentages: Commissions with affiliate to total commissions........ 0.00% 0.00% Value of brokerage transactions with affiliate to total transactions.................................. 0.00% 0.00%
During the fiscal year ended May 31, 2002, the Fund paid no brokerage commissions to brokers selected primarily on the basis of research services provided to the Adviser. SHAREHOLDER SERVICES The Fund offers a number of shareholder services designed to facilitate investment in its shares at little or no extra cost to the investor. Below is a description of such services. The following information supplements the section in the Fund's Prospectus captioned "Shareholder Services." INVESTMENT ACCOUNT Each shareholder has an investment account under which the investor's shares of the Fund are held by Investor Services, the Fund's transfer agent. Investor Services performs bookkeeping, data processing and administrative services related to the maintenance of shareholder accounts. Except as described in the Prospectus and this Statement of Additional Information, after each share transaction in an account, the shareholder receives a statement showing the activity in the account. Each shareholder who has an account in any of the Participating Funds (as defined in the Prospectus) will receive statements quarterly from Investor Services showing any reinvestments of dividends and capital gain dividends and any other activity in the account since the preceding statement. Such B-33 shareholders also will receive separate confirmations for each purchase or sale transaction other than reinvestment of dividends and capital gain dividends and systematic purchases or redemptions. Additional shares may be purchased at any time through authorized dealers, by bank wire or by mailing a check and detailed instructions directly to Investor Services. SHARE CERTIFICATES Generally, the Fund will not issue share certificates. However, upon written or telephone request to the Fund, a share certificate will be issued representing shares (with the exception of fractional shares) of the Fund. A shareholder will be required to surrender such certificates upon an exchange or redemption of the shares represented by the certificate. In addition, if such certificates are lost the shareholder must write to Van Kampen Funds Inc., c/o Investor Services, PO Box 218256, Kansas City, MO 64121-8256, requesting an "Affidavit of Loss" and obtain a Surety Bond in a form acceptable to Investor Services. On the date the letter is received, Investor Services will calculate the fee for replacing the lost certificate equal to no more than 1.50% of the net asset value of the issued shares, and bill the party to whom the replacement certificate was mailed. RETIREMENT PLANS Eligible investors may establish individual retirement accounts ("IRAs"); SEP; 401(k) plans; 403(b)(7) plans in the case of employees of public school systems and certain non-profit organizations; or other pension or profit sharing plans. Documents and forms containing detailed information regarding these plans are available from the Distributor. State Street Bank and Trust Company serves as custodian under the IRA, 403(b)(7) and Money Purchase and Profit Sharing Keogh plans. AUTOMATED CLEARING HOUSE("ACH") DEPOSITS Shareholders can use ACH to have redemption proceeds deposited electronically into their bank accounts. Redemption proceeds transferred to a bank account via the ACH plan are available to be credited to the account on the second business day following normal payment. To utilize this option, the shareholder's bank must be a member of ACH. In addition, the shareholder must fill out the appropriate section of the account application form. The shareholder must also include a voided check or deposit slip from the bank account into which redemption proceeds are to be deposited together with the completed application. Once Investor Services has received the application and the voided check or deposit slip, such shareholder's designated bank account, following any redemption, will be credited with the proceeds of such redemption. Once enrolled in the ACH plan, a shareholder may terminate participation at any time by writing Investor Services or by calling (800) 847-2424 ((800) 421-2833 for the hearing impaired). DIVIDEND DIVERSIFICATION A shareholder may elect, by completing the appropriate section of the account application form or by calling (800) 847-2424 ((800) 421-2833 for the hearing impaired), to have all dividends and capital gain dividends paid on a class of shares of the Fund invested into shares of the same class of any of the Participating Funds (as defined in the B-34 Prospectus) so long as the investor has a pre-existing account for such class of shares of the other fund. Both accounts must be of the same type, either non-retirement or retirement. If the accounts are retirement accounts, they must both be for the same class and of the same type of retirement plan (e.g. IRA, 403(b)(7), 401(k), Money Purchase and Profit Sharing Keogh) and for the benefit of the same individual. If a qualified, pre-existing account does not exist, the shareholder must establish a new account subject to any requirements of the Participating Fund into which distributions will be invested. Distributions are invested into the selected Participating Fund, provided that shares of such Participating Fund are available for sale, at its net asset value per share as of the payable date of the distribution from the Fund. SYSTEMATIC WITHDRAWAL PLAN A shareholder may establish a monthly, quarterly, semiannual or annual withdrawal plan if the shareholder owns shares in a single account valued at $10,000 or more at the next determined net asset value per share at the time the plan is established. If a shareholder owns shares in a single account valued at $5,000 or more at the next determined net asset value per share at the time the plan is established, the shareholder may establish a quarterly, semiannual or annual withdrawal plan. This plan provides for the orderly use of the entire account, not only the income but also the capital, if necessary. Each payment represents the proceeds of a redemption of shares on which any capital gain or loss will be recognized. The planholder may arrange for periodic checks in any amount, not less than $25. Such a systematic withdrawal plan may also be maintained by an investor purchasing shares for a retirement plan and can be established on a form made available by the Fund when State Street Bank and Trust Company serves as the plan custodian. See "Shareholder Services--Retirement Plans." Class B Shareholders and Class C Shareholders who establish a systematic withdrawal plan may redeem up to 12% annually of the shareholder's initial account balance without incurring a contingent deferred sales charge. Initial account balance means the amount of the shareholder's investment at the time the election to participate in the plan is made. Under the plan, sufficient shares of the Fund are redeemed to provide the amount of the periodic withdrawal payment. Dividends and capital gain dividends on shares held in accounts with systematic withdrawal plans are reinvested in additional shares at the next determined net asset value per share. If periodic withdrawals continuously exceed reinvested dividends and capital gain dividends, the shareholder's original investment will be correspondingly reduced and ultimately exhausted. Redemptions made concurrently with the purchase of additional shares ordinarily will be disadvantageous to the shareholder because of the duplication of sales charges. Any gain or loss realized by the shareholder upon redemption of shares is a taxable event. The Fund reserves the right to amend or terminate the systematic withdrawal program upon 30 days' notice to its shareholders. REINSTATEMENT PRIVILEGE A Class A Shareholder or Class B Shareholder who has redeemed shares of the Fund may reinstate any portion or all of the net proceeds of such redemption (and may include that amount necessary to acquire a fractional share to round off his or her purchase to the next full share) in Class A Shares of the Fund. A Class C Shareholder who has redeemed B-35 shares of the Fund may reinstate any portion or all of the net proceeds of such redemption (and may include that amount necessary to acquire a fractional share to round off his or her purchase to the next full share) in Class C Shares of the Fund with credit given for any contingent deferred sales charge paid upon such redemption, provided that such shareholder has not previously exercised this reinstatement privilege with respect to Class C Shares of the Fund. Shares acquired in this manner will be deemed to have the original cost and purchase date of the redeemed shares for purposes of applying the CDSC-Class C (defined below) to subsequent redemptions. Reinstatements are made at the net asset value per share (without sales charge) next determined after the order is received, which must be made within 180 days after the date of the redemption, provided that shares of the Fund are available for sale. Reinstatement at net asset value per share is also offered to participants in those eligible retirement plans held or administered by State Street Bank and Trust Company for repayment of principal (and interest) on their borrowings on such plans, provided that shares of the Fund are available for sale. REDEMPTION OF SHARES Redemptions are not made on days during which the New York Stock Exchange (the "Exchange") is closed. The right of redemption may be suspended and the payment therefor may be postponed for more than seven days during any period when (a) the Exchange is closed for other than customary weekends or holidays; (b) the SEC determines trading on the Exchange is restricted; (c) the SEC determines an emergency exists as a result of which disposal by the Fund of securities owned by it is not reasonably practicable or it is not reasonably practicable for the Fund to fairly determine the value of its net assets; or (d) the SEC, by order, so permits. In addition, if the Fund's Board of Trustees determines that payment wholly or partly in cash would be detrimental to the best interests of the remaining shareholders of the Fund, the Fund may pay the redemption proceeds in whole or in part by a distribution-in-kind of portfolio securities held by the Fund in lieu of cash in conformity with applicable rules of the SEC. A distribution-in-kind may result in recognition by the shareholder of a gain or loss for federal income tax purposes when such securities are distributed, and the shareholder may have brokerage costs and a gain or loss for federal income tax purposes upon the shareholder's disposition of such securities. WAIVER OF CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGES As described in the Fund's Prospectus under "Redemption of Shares," redemptions of Class B Shares and Class C Shares will be subject to a contingent deferred sales charge ("CDSC-Class B and C"). The CDSC-Class B and C is waived on redemptions of Class B Shares and Class C Shares in the circumstances described below: REDEMPTION UPON DEATH OR DISABILITY The Fund will waive the CDSC-Class B and C on redemptions following the death or disability of a Class B shareholder and Class C shareholder. An individual will be considered disabled for this purpose if he or she meets the definition thereof in B-36 Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the "Code"), which in pertinent part defines a person as disabled if such person "is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration." While the Fund does not specifically adopt the balance of the Code's definition which pertains to furnishing the Secretary of Treasury with such proof as he or she may require, the Distributor will require satisfactory proof of death or disability before it determines to waive the CDSC-Class B and C. In cases of death or disability, the CDSC-Class B and C will be waived where the decedent or disabled person is either an individual shareholder or owns the shares as a joint tenant with right of survivorship or is the beneficial owner of a custodial or fiduciary account, and where the redemption is made within one year of the death or initial determination of disability. This waiver of the CDSC-Class B and C applies to a total or partial redemption, but only to redemptions of shares held at the time of the death or initial determination of disability. REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS The Fund will waive the CDSC-Class B and C when a total or partial redemption is made in connection with certain distributions from retirement plans. The CDSC-Class B and C will be waived upon the tax-free rollover or transfer of assets to another retirement plan invested in one or more Participating Funds; in such event, as described below, the Fund will "tack" the period for which the original shares were held on to the holding period of the shares acquired in the transfer or rollover for purposes of determining what, if any, CDSC-Class B and C is applicable in the event that such acquired shares are redeemed following the transfer or rollover. The charge also will be waived on any redemption which results from the return of an excess contribution or other contribution pursuant to Code Section 408(d)(4) or (5), the return of excess contributions or deferral amounts pursuant to Code Section 401(k)(8) or 402(g)(2), the financial hardship of the employee pursuant to U.S. Treasury regulation Section 1.401(k)-1(d)(2) or the death or disability of the employee (see Code Section 72(m)(7) and 72(t)(2)(A)(ii)). In addition, the charge will be waived on any minimum distribution required to be distributed in accordance with Code Section 401(a)(9). The Fund does not intend to waive the CDSC-Class B and C for any distributions from IRAs or other retirement plans not specifically described above. REDEMPTION PURSUANT TO THE FUND'S SYSTEMATIC WITHDRAWAL PLAN A shareholder may elect to participate in a systematic withdrawal plan with respect to the shareholder's investment in the Fund. Under the systematic withdrawal plan, a dollar amount of a participating shareholder's investment in the Fund will be redeemed systematically by the Fund on a periodic basis, and the proceeds sent to the designated payee of record. The amount to be redeemed and frequency of the systematic withdrawals will be specified by the shareholder upon his or her election to participate in the systematic withdrawal plan. The amount of the shareholder's investment in the Fund at the time the election to participate in the systematic withdrawal plan is made with respect to the Fund is B-37 hereinafter referred to as the "initial account balance." The amount to be systematically redeemed from the Fund without the imposition of a CDSC-Class B and C may not exceed a maximum of 12% annually of the shareholder's initial account balance. The Fund reserves the right to change the terms and conditions of the systematic withdrawal plan and the ability to offer the systematic withdrawal plan. NO INITIAL COMMISSION OR TRANSACTION FEE The Fund will waive the CDSC-Class B and C in circumstances under which no commission or transaction fee is paid to authorized dealers at the time of purchase of shares. See "Purchase of Shares -- Waiver of Contingent Deferred Sales Charge" in the Prospectus. INVOLUNTARY REDEMPTIONS OF SHARES The Fund reserves the right to redeem shareholder accounts with balances of less than a specified dollar amount as set forth in the Prospectus. Prior to such redemptions, shareholders will be notified in writing and allowed a specified period of time to purchase additional shares to bring the value of the account up to the required minimum balance. The Fund will waive the CDSC-Class B and C upon such involuntary redemption. REDEMPTION BY ADVISER The Fund may waive the CDSC-Class B and C when a total or partial redemption is made by the Adviser with respect to its investments in the Fund. TAXATION FEDERAL INCOME TAXATION OF THE FUND The Fund has elected and qualified, and intends to continue to qualify each year, to be treated as a regulated investment company under Subchapter M of the Code. To qualify as a regulated investment company, the Fund must comply with certain requirements of the Code relating to, among other things, the sources of its income and diversification of its assets. If the Fund so qualifies and distributes each year to its shareholders at least 90% of its investment company taxable income (generally including ordinary income and net short-term capital gain, but not net capital gain, which is the excess of net long-term capital gain over net short-term capital loss) and meets certain other requirements, it will not be required to pay federal income taxes on any income it distributes to shareholders. The Fund intends to distribute at least the minimum amount necessary to satisfy the 90% distribution requirement. The Fund will not be subject to federal income tax on any net capital gain distributed to shareholders. To avoid a 4% excise tax, the Fund will be required to distribute, by December 31st of each year, at least an amount equal to the sum of (i) 98% of its ordinary income for such year and (ii) 98% of its capital gain net income (the latter of which generally is computed on the basis of the one-year period ending on October 31st of such year) plus B-38 any amounts that were not distributed in previous taxable years. For purposes of the excise tax, any ordinary income or capital gain net income retained by, and subject to federal income tax in the hands of, the Fund will be treated as having been distributed. If the Fund failed to qualify as a regulated investment company or failed to satisfy the 90% distribution requirement in any taxable year, the Fund would be taxed as an ordinary corporation on its taxable income (even if such income were distributed to its shareholders) and all distributions out of earnings and profits would be taxed to shareholders as ordinary income. In addition, the Fund could be required to recognize unrealized gains, pay taxes and make distributions (which could be subject to interest charges) before requalifying for taxation as a regulated investment company. Investments of the Fund in securities issued at a discount or providing for deferred interest or payment of interest in kind are subject to special tax rules that will affect the amount, timing and character of distributions to shareholders. For example, with respect to securities issued at a discount, the Fund will be required to accrue as income each year a portion of the discount and to distribute such income each year to maintain its qualification as a regulated investment company and to avoid income and excise taxes. To generate sufficient cash to make distributions necessary to satisfy the 90% distribution requirement and to avoid income and excise taxes, the Fund may have to dispose of securities that it would otherwise have continued to hold. DISTRIBUTIONS TO SHAREHOLDERS Distributions of the Fund's investment company taxable income are taxable to shareholders as ordinary income to the extent of the Fund's earnings and profits, whether paid in cash or reinvested in additional shares. Distributions of the Fund's net capital gains as capital gain dividends, if any, are taxable to shareholders as long-term capital gains regardless of the length of time shares of the Fund have been held by such shareholders. Distributions in excess of the Fund's earnings and profits will first reduce the adjusted tax basis of a shareholder's shares and, after such adjusted tax basis is reduced to zero, will constitute capital gains to such shareholder (assuming such shares are held as a capital asset). For a summary of the maximum tax rates applicable to capital gains (including capital gain dividends), see "Capital Gains Rates" below. Tax-exempt shareholders not subject to federal income tax on their income generally will not be taxed on distributions from the Fund. Shareholders receiving distributions in the form of additional shares issued by the Fund will be treated for federal income tax purposes as receiving a distribution in an amount equal to the fair market value of the shares received, determined as of the distribution date. The basis of such shares will equal their fair market value on the distribution date. B-39 The Fund will inform shareholders of the source and tax status of all distributions promptly after the close of each calendar year. Distributions from the Fund generally will not be eligible for the corporate dividends received deduction. Although dividends generally will be treated as distributed when paid, dividends declared in October, November or December, payable to shareholders of record on a specified date in such month and paid during January of the following year will be treated as having been distributed by the Fund and received by the shareholders on the December 31st prior to the date of payment. In addition, certain other distributions made after the close of a taxable year of the Fund may be "spilled back" and treated as paid by the Fund (except for purposes of the 4% excise tax) during such taxable year. In such case, shareholders will be treated as having received such dividends in the taxable year in which the distribution was actually made. Income from investments in foreign securities received by the Fund may be subject to income, withholding or other taxes imposed by foreign countries and U.S. possessions. Such taxes generally will not be deductible or creditable by shareholders. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. SALE OF SHARES The sale of shares (including transfers in connection with a redemption or repurchase of shares) may be a taxable transaction for federal income tax purposes. Selling shareholders will generally recognize gain or loss in an amount equal to the difference between their adjusted tax basis in the shares sold and the amount received. If the shares sold are held as a capital asset, the gain or loss will be a capital gain or loss. For a summary of the maximum tax rates applicable to capital gains, see "Capital Gains Rates" below. Any loss recognized upon a taxable disposition of shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends received with respect to such shares. For purposes of determining whether shares have been held for six months or less, the holding period is suspended for any periods during which the shareholder's risk of loss is diminished as a result of holding one or more other positions in substantially similar or related property or through certain options or short sales. CAPITAL GAINS RATES The maximum tax rate applicable to net capital gains recognized by individuals and other non-corporate taxpayers investing in the Fund is (i) the same as the maximum ordinary income tax rate for capital assets held for one year or less or (ii) 20% for capital assets held for more than one year. The maximum long-term capital gains rate for corporations is 35%. B-40 WITHHOLDING ON PAYMENTS TO NON-U.S. SHAREHOLDERS For purposes of this and the following paragraphs, a "Non-U.S. Shareholder" shall include any shareholder who is not - an individual who is a citizen or resident of the United States; - a corporation or partnership created or organized under the laws of the United States or any state or political subdivision thereof; - an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or - a trust that (i) is subject to the primary supervision of a U.S. court and which has one or more U.S. fiduciaries who have the authority to control all substantial decisions of the trust, or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. A Non-U.S. Shareholder generally will be subject to withholding of U.S. federal income tax at a 30% rate (or lower applicable treaty rate), rather than backup withholding (discussed below), on dividends from the Fund (other than capital gain dividends) that are not "effectively connected" with a U.S. trade or business carried on by such shareholder if such shareholder furnishes to the Fund a properly completed Internal Revenue Service ("IRS") Form W-8 BEN certifying the shareholder's non-United States status. Non-effectively connected capital gain dividends and gains realized from the sale of shares will not be subject to U.S. federal income tax in the case of (i) a Non-U.S. Shareholder that is a corporation and (ii) an individual Non-U.S. Shareholder who is not present in the United States for more than 182 days during the taxable year (assuming that certain other conditions are met). However, certain Non-U.S. Shareholders may nonetheless be subject to backup withholding and information reporting on capital gain dividends and gross proceeds paid to them upon the sale of their shares. See "Backup Withholding" and "Information Reporting" below. If income from the Fund or gains realized from the sale of shares are effectively connected with a Non-U.S. Shareholder's U.S. trade or business, then such amounts will not be subject to the 30% withholding described above, but rather will be subject to U.S. federal income tax on a net basis at the tax rates applicable to U.S. citizens and residents or domestic corporations. To establish that income from the Fund or gains realized from the sale of shares are effectively connected with a U.S. trade or business, a Non-U.S. Shareholder must provide the Fund with a properly completed IRS Form W-8ECI certifying that such amounts are effectively connected with the Non-U.S. Shareholder's U.S. trade or business. Non-U.S. Shareholders that are corporations may also be subject to an additional "branch profits tax" with respect to income from the Fund that is effectively connected with a U.S. trade or business. The tax consequences to a Non-U.S. Shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described in this section. To claim tax treaty benefits, Non-U.S. Shareholders will be required to provide the Fund with a properly completed IRS Form W-8BEN certifying their entitlement thereto. In addition, in certain cases where payments are made to a Non-U.S. Shareholder that is a partnership or B-41 other pass-through entity, both the entity and the persons holding an interest in the entity will need to provide certification. For example, an individual Non-U.S. Shareholder who holds shares in the Fund through a non-U.S. partnership must provide an IRS Form W-8BEN to claim the benefits of an applicable tax treaty. Non-U.S. Shareholders are advised to consult their advisers with respect to the tax implications of purchasing, holding and disposing of shares of the Fund. BACKUP WITHHOLDING The Fund may be required to withhold federal income tax ("backup withholding") from dividends and redemption proceeds paid to non-corporate shareholders. This tax may be withheld from dividends paid to a Shareholder (other than a Non-U.S. Shareholder) if (i) the shareholder fails to properly furnish the Fund with its correct taxpayer identification number (ii) the IRS notifies the Fund that the shareholder has failed to properly report certain interest and dividend income to the IRS and to respond to notices to that effect or (iii) when required to do so, the shareholder fails to certify that the taxpayer identification number provided is correct, that the shareholder is not subject to backup withholding and that the shareholder is a U.S. person (as defined for U.S. federal income tax purposes). Redemption proceeds may be subject to backup withholding under the circumstances described in (i) above. Generally, dividends paid to Non-U.S. Shareholders that are subject to the 30% federal income tax withholding described above under "Withholding on Payments to Non-U.S. Shareholders" are not subject to backup withholding. To avoid backup withholding, Non-U.S. Shareholders must provide a properly completed IRS Form W-8BEN certifying their non-United States status. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from payments made to a shareholder may be refunded or credited against such shareholder's U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS. INFORMATION REPORTING The Fund must report annually to the IRS and to each shareholder (other than a Non-U.S. Shareholder) the amount of dividends, capital gain dividends or gross proceeds paid to such shareholder and the amount, if any, of tax withheld pursuant to backup withholding rules with respect to such amounts. In the case of a Non-U.S. Shareholder, the Fund must report to the IRS and such shareholder the amount of dividends, capital gain dividends or gross proceeds paid that are subject to withholding (including backup withholding, if any) and the amount of tax withheld with respect to such amounts. This information may also be made available to the tax authorities in the Non-U.S. Shareholder's country of residence. GENERAL The federal income tax discussion set forth above is for general information only. Shareholders and prospective investors should consult their advisers regarding the specific federal tax consequences of purchasing, holding and disposing of shares of the Fund, as well as the effects of state, local and foreign tax law and any proposed tax law changes. B-42 YIELD INFORMATION From time to time the Fund may advertise its "yield" and "effective yield." Both yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of the Fund refers to the income generated by an investment in the Fund over a seven-day period (which period will be stated in the advertisement). This income is then "annualized." That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The "effective yield" is calculated similarly but, when annualized, the income earned by an investment in the Fund is assumed to be reinvested. The "effective yield" will be slightly higher than the "yield" because of the compounding effect of this assumed reinvestment. The yield of the Fund is its net income expressed in annualized terms. The SEC requires by rule that a yield quotation set forth in an advertisement for a "money market" fund be computed by a standardized method based on a historical seven-calendar-day period. The standardized yield is computed by determining the net change (exclusive of realized gains and losses and unrealized appreciation and depreciation) in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, dividing the net change in account value by the value of the account at the beginning of the base period to obtain the base period return, and multiplying the base period return by 365/7. The determination of net change in account value reflects the value of additional shares purchased with dividends from the original share, dividends declared on both the original share and such additional shares, and all fees that are charged to all shareholder accounts, in proportion to the length of the base period and the Fund's average account size. The Fund may also calculate its effective yield by compounding the unannualized base period return (calculated as described above) by adding 1 to the base period return, raising the sum to a power equal to 365 divided by 7, and subtracting one. Yield and effective yield are calculated separately for Class A Shares, Class B Shares and Class C Shares. Because of the differences in distribution fees, the yield and effective yield for each class of shares will differ. The yield and effective yield quoted at any time represents the amount being earned on a current basis for the indicated period and is a function of the types of instruments in the Fund, their quality and length of maturity, and the Fund's operating expenses. The length of maturity for the Fund is the average dollar-weighted maturity of the Fund. This means that the Fund has an average maturity of a stated number of days for all of its issues. The calculation is weighted by the relative value of the investment. The yield and effective yield fluctuate daily as the income earned on the investments of the Fund fluctuates. Accordingly, there is no assurance that the yield and effective yield quoted on any given occasion will remain in effect for any period of time. It should also be emphasized that there is no guarantee that the net asset value will remain constant. A shareholder's investment in the Fund is not insured. Investors comparing results of the Fund with investment results and yields from other sources such as banks or savings and loan associations should understand this distinction. B-43 Other funds of the money market type as well as banks and savings and loan associations may calculate their yield on a different basis, and the yield quoted by the Fund could vary upwards or downwards if another method of calculation or base period were used. Additionally, since yield and effective yield fluctuate, yield data cannot necessarily be used to compare an investment in the Fund's shares with bank deposits, savings accounts and similar investment alternatives which often provide an agreed or guaranteed fixed yield for a stated period of time. Shareholders should remember that yield and effective yield are generally a function of the kind and quality of the instrument held in a fund's portfolio, portfolio maturity, operating expenses and market conditions. From time to time marketing materials may provide a portfolio manager update, an adviser update and discuss general economic conditions and outlooks. The Fund's marketing materials may also show the Fund's asset class diversification, top five sector holdings and ten largest holdings. Materials may also mention how the Distributor believes the Fund compares relative to other Van Kampen funds. The Fund may also be marketed on the Internet. In reports or other communications to shareholders or in advertising material, the Fund may compare its performance with that of other mutual funds as listed in the rankings or ratings prepared by Lipper Analytical Services, Inc., CDA, Morningstar Mutual Funds or similar independent services which monitor the performance of mutual funds with the Consumer Price Index, the Dow Jones Industrial Average, Standard & Poor's indices, NASDAQ Composite Index, other appropriate indices of investment securities, or with investment or savings vehicles. The performance information may also include evaluations of the Fund published by nationally recognized ranking services and by nationally recognized financial publications. Such comparative performance information will be stated in the same terms in which the comparative data or indices are stated. Such advertisements and sales material may include the yield quotation as of a current period. Such yield information will be calculated pursuant to rules established by the SEC and will be computed separately for each class of the Fund's shares. For these purposes, the performance of the Fund, as well as the performance of other mutual funds or indices, do not reflect sales charges, the inclusion of which would reduce the Fund's performance. The Fund will include performance data for each class of shares of the Fund in any advertisement or information including performance data of the Fund. The Fund may also utilize performance information in hypothetical illustrations. For example, the Fund may, from time to time: (1) illustrate the benefits of tax-deferral by comparing taxable investments to investments made through tax-deferred retirement plans; (2) illustrate in graph or chart form, or otherwise, the benefits of dollar-cost averaging by comparing investments made pursuant to a systematic investment plan to investments made in a rising market; (3) illustrate allocations among different types of mutual funds for investors at different stages of their lives; and (4) in reports or other communications to shareholders or in advertising material, illustrate the benefits of compounding at various assumed yields. The Fund's Annual Report and Semiannual Report contain additional performance information. A copy of the Annual Report or Semiannual Report may be obtained without B-44 charge by calling or writing the Fund at the telephone number and address printed on the cover of this Statement of Additional Information. OTHER INFORMATION CUSTODY OF ASSETS All securities owned by the Fund and all cash, including proceeds from the sale of shares of the Fund and of securities in the Fund's investment portfolio, are held by State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as custodian. The custodian also provides accounting services to the Fund. SHAREHOLDER REPORTS Semiannual statements are furnished to shareholders, and annually such statements are audited by the independent auditors. INDEPENDENT AUDITORS Independent auditors for the Fund perform an annual audit of the Fund's financial statements. The Fund's Board of Trustees has engaged Ernst & Young LLP, located at 233 South Wacker Drive, Chicago, Illinois 60606, to be the Fund's independent auditors. PricewaterhouseCoopers LLP, located at 200 East Randolph Drive, Chicago, Illinois 60601 ("PWC"), ceased being the Fund's independent accountants effective May 18, 2000. The cessation of the client-auditor relationship between the Fund and PWC was based on a possible business relationship by PWC with an affiliate of the Fund's investment adviser. The change in independent accountants was approved by the Fund's audit committee and the Fund's Board of Trustees, including Trustees who are not "interested persons" of the Fund (as defined in the 1940 Act). LEGAL COUNSEL Counsel to the Fund is Skadden, Arps, Slate, Meagher & Flom (Illinois). B-45 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 F-1 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 F-2 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 F-3 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 F-4 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 F-5 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 F-6 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 F-7 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 F-8 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 F-9 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, F-10 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. F-11 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 F-12 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) ============== ===============
F-13 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 F-14 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. F-15 PART C. OTHER INFORMATION ITEM 23. EXHIBITS. (a)(1) First Amended and Restated Agreement and Declaration of Trust(1) (2) Second Certificate of Amendment(3) (3) Second Amended and Restated Certificate of Designation(3) (b) Amended and Restated Bylaws(1) (c)(1) Specimen Class A Share Certificate(3) (2) Specimen Class B Share Certificate(3) (3) Specimen Class C Share Certificate(3) (d) Investment Advisory Agreement(2) (e)(1) Distribution and Service Agreement(2) (2) Form of Dealer Agreement(1) (3) Form of Broker Fully Disclosed Clearing Agreement(1) (4) Form of Bank Fully Disclosed Clearing Agreement(1) (f)(1) Form of Trustee Deferred Compensation Plan(4) (2) Form of Trustee Retirement Plan(4) (g)(1)(a) Custodian Contract(2) (b) Amendment to Custodian Contract+ (2) Transfer Agency and Service Agreement(2) (h)(1) Fund Accounting Agreement(2) (i)(1) Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)(1) (2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois)+ (j)(1) Consent of Ernst & Young LLP+ (2) Consent of PricewaterhouseCoopers LLP+ (k) Audit Report and Financial Statements for the fiscal year ended May 31, 1999(5) (l) Not Applicable (m)(1) Plan of Distribution pursuant to Rule 12b-1(2) (2) Form of Shareholder Assistance Agreement(2) (3) Form of Administrative Services Agreement(2) (4) Form of Shareholder Servicing Agreement+ (5) Service Plan+ (n) Amended Multi-Class Plan(2) (p)(1) Code of Ethics of the Investment Adviser and the Distributor+ (2) Code of Ethics of the Funds(6) (q) Power of Attorney+ (z)(1) List of certain investment companies in response to Item 27(a)+ (2) List of officers and directors of Van Kampen Funds Inc. in response to Item 27(b)+
(1) Incorporated herein by reference to Post-Effective Amendment No. 37 to Registrant's Registration Statement on Form N-1A, File No. 2-50870, filed September 27, 1996. (2) Incorporated herein by reference to Post-Effective Amendment No. 38 to the Registrant's Registration Statement on Form N1-A, File No. 2-50870, filed September 26, 1997. C-1 (3) Incorporated herein by reference to Post-Effective Amendment No. 39 to the Registrant's Registration Statement on Form N1-A, File No. 2-50870, filed September 15, 1998. (4) Incorporated herein by reference to Post-Effective Amendment No. 81 to Van Kampen Harbor Fund's Registration Statement on Form N-1A, File No. 2-12685, and 811-734, filed April 29, 1999. (5) Incorporated herein by reference to Post-Effective Amendment No. 41 to the Registrant's Registration Statement on Form N-1A, File No. 2-50870 and 811-2482, filed September 28, 1999. (6) Incorporated herein by reference to Post-Effective Amendment No. 42 to the Registrant's Registration Statement on Form N-1A, File No. 2-50870, and 811-2482, filed September 28, 2000. + Filed herewith. ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. See the Statement of Additional Information. ITEM 25. INDEMNIFICATION. Pursuant to Del. Code Ann. Title 12 Section 3817, a Delaware business trust may provide in its governing instrument for the indemnification of its officers and trustees from and against any and all claims and demands whatsoever. Reference is made to Article 8, Section 8.4 of the Registrant's Agreement and Declaration of Trust. Article 8, Section 8.4 of the Agreement and Declaration of Trust provides that each officer and trustee of the Registrant shall be indemnified by the Registrant against all liabilities incurred in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which the officer or trustee may be or may have been involved by reason of being or having been an officer or trustee, except that such indemnity shall not protect any such person against a liability to the Registrant or any shareholder thereof to which such person would otherwise be subject by reason of (i) not acting in good faith in the reasonable belief that such person's actions were not in the best interests of the Trust, (ii) willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, or (iii) for a criminal proceeding not having a reasonable cause to believe that such conduct was unlawful (collectively "Disabling Conduct"). Absent a court determination that an officer or trustee seeking indemnification was not liable on the merits or guilty of Disabling Conduct in the conduct of his or her office, the decision by the Registrant to indemnify such person must be based upon the reasonable determination of independent counsel or non-party independent trustees, after review of the facts, that such officer or trustee is not guilty of Disabling Conduct in the conduct of his or her office. The Registrant has purchased insurance on behalf of its officers and trustees protecting such persons from liability arising from their activities as officers or trustees of the Registrant. The insurance does not protect or purport to protect such persons from liability to the Registrant or to its shareholders to which such officers or trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of their office. Conditional advancing of indemnification monies may be made if the trustee or officer undertakes to repay the advance unless it is ultimately determined that he or she is entitled to the indemnification and only if the following conditions are met: (1) the trustee or officer provides a security for the undertaking; (2) the Registrant is insured against losses arising from lawful advances; or (3) a majority of a quorum of the Registrant's disinterested, non-party trustees, or an independent legal counsel in a written opinion, shall determine, based upon a review of readily available facts, that a recipient of the advance ultimately will be found entitled to indemnification. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "1933 Act") may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In C-2 the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by the trustee, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. Pursuant to Section 7 of the Distribution and Service Agreement, the Registrant agrees to indemnify and hold harmless Van Kampen Funds Inc. (the "Distributor") and each of its trustees and officers and each person, if any, who controls the Distributor within the meaning of Section 15 of the 1933 Act against any loss, liability, claim, damages or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damages, or expense and reasonable counsel fees) arising by reason of any person acquiring any shares, based upon the ground that the Registration Statement, prospectus, shareholder reports or other information filed or made public by the Registrant (as from time to time amended) included an untrue statement of a material fact or omitted to state a material fact required to be stated or necessary in order to make the statements not misleading under the 1933 Act, or any other statute or the common law. The Registrant does not agree to indemnify the Distributor or hold it harmless to the extent that the statement or omission was made in reliance upon, and in conformity with, information furnished to the Registrant by or on behalf of the Distributor. In no case is the indemnity of the Registrant in favor of the Distributor or any person indemnified to be deemed to protect the Distributor or any person against any liability to the Fund or its security holders to which the Distributor or such person would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under the agreement. Pursuant to the agreement by which Van Kampen Investor Services Inc. ("Investor Services") is appointed transfer agent of the Fund, the Registrant agrees to indemnify and hold Investor Services harmless against any losses, damages, costs, charges, payments, liabilities and expenses (including reasonable counsel fees) arising out of or attributable to: (1) the performance of Investor Services under the agreement provided that Investor Services acted in good faith with due diligence and without negligence or willful misconduct. (2) reliance by Investor Services on, or reasonable use by, Investor Services of information, records and documents which have been prepared on behalf of, or have been furnished by, the Fund, or the carrying out by Investor Services of any instructions or requests of the Fund. (3) the offer or sale of the Fund's shares in violation of any federal or state law or regulation or ruling by any federal agency unless such violation results from any failure by Investor Services to comply with written instructions from the Fund that such offers or sales were not permitted under such law, rule or regulation. (4) the refusal of the Fund to comply with terms of the agreement, or the Fund's lack of good faith, negligence or willful misconduct or breach of any representation or warranty made by the Fund under the agreement provided that if the reason for such failure is attributable to any action of the Fund's investment adviser or distributor or any person providing accounting or legal services to the Fund, Investor Services only will be entitled to indemnification if such entity is otherwise entitled to the indemnification from the Fund. See also "Investment Advisory Agreement" in the Statement of Additional Information. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER See "Investment Advisory Services" in the Prospectus and "Investment Advisory Agreement," "Other Agreements" and "Trustees and Officers" in the Statement of Additional Information for information regarding the business of Van Kampen Asset Management Inc. (the "Adviser"). For information as to the business, profession, vocation and employment of a substantial nature of each of the officers and directors of the Adviser, reference is made to the Adviser's current Form ADV (File No. 801-1669) filed under the Investment Advisers Act of 1940, as amended, incorporated herein by reference. C-3 ITEM 27. PRINCIPAL UNDERWRITERS (a) The sole principal underwriter is Van Kampen Funds Inc. (the "Distributor") which acts as principal underwriter for certain investment companies and unit investment trusts. See Exhibit (z)(1). (b) Van Kampen Funds Inc. is an affiliated person of the Registrant and is the only principal underwriter for the Registrant. The name, principal business address and positions and offices with Van Kampen Funds Inc. of each of the trustees and officers are disclosed in Exhibit (z)(2). Except as disclosed under the heading, "Trustees and Officers" in Part B of this Registration Statement, none of such persons has any position or office with the Registrant. (c) Not applicable. ITEM 28. LOCATION OF ACCOUNTS AND RECORDS. All accounts, books and other documents of the Registrant required by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder to be maintained (i) by the Registrant will be maintained at its offices located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181- 5555; Van Kampen Investor Services Inc., 7501 Tiffany Springs Parkway, Kansas City, Missouri 64153; or at State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy, Massachusetts 02171, (ii) by the Adviser, will be maintained at its offices located at 1 Parkview Plaza, PO Box 5555, Oakbrook Terrace, Illinois 60181-5555 and (iii) by Van Kampen Funds Inc., the principal underwriter, will be maintained at its offices located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555. ITEM 29. MANAGEMENT SERVICES. Not applicable. ITEM 30. UNDERTAKINGS. Not applicable. C-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant, VAN KAMPEN RESERVE FUND, certifies that it meets all of the requirements for effectiveness of this Amendment to the Registration Statement pursuant to Rule 485(b) under the 1933 Act and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, and the State of New York, on the 27th day of September, 2002. VAN KAMPEN RESERVE FUND By: /s/ A. THOMAS SMITH III ------------------------------------- A. Thomas Smith III, Secretary Pursuant to the requirements of the 1933 Act, this Amendment to the Registration Statement has been signed on September 27, 2002, by the following persons in the capacities indicated.
SIGNATURES TITLE ---------- ----- Principal Executive Officer: /s/ RICHARD F. POWERS, III* Trustee and President - ------------------------------------------------ Richard F. Powers, III Principal Financial Officer: /s/ JOHN L. SULLIVAN* Vice President, Chief Financial Officer and Treasurer - ------------------------------------------------ John L. Sullivan Trustees: /s/ J. MILES BRANAGAN* Trustee - ------------------------------------------------ J. Miles Branagan /s/ JERRY D. CHOATE* Trustee - ------------------------------------------------ Jerry D. Choate /s/ LINDA HUTTON HEAGY* Trustee - ------------------------------------------------ Linda Hutton Heagy /s/ R. CRAIG KENNEDY* Trustee - ------------------------------------------------ R. Craig Kennedy /s/ MITCHELL M. MERIN* Trustee - ------------------------------------------------ Mitchell M. Merin /s/ JACK E. NELSON* Trustee - ------------------------------------------------ Jack E. Nelson /s/ WAYNE W. WHALEN* Trustee - ------------------------------------------------ Wayne W. Whalen /s/ SUZANNE H. WOOLSEY* Trustee - ------------------------------------------------ Suzanne H. Woolsey - --------------- * Signed by A. Thomas Smith III pursuant to a power of attorney filed herewith. /s/ A. THOMAS SMITH III September 27, 2002 - ------------------------------------------------ A. Thomas Smith III Attorney-in-Fact
C-5 SCHEDULE OF EXHIBITS TO POST-EFFECTIVE AMENDMENT 44 TO FORM N-1A
EXHIBIT NUMBER EXHIBIT ------- ------- (g)(1)(b) Amendment to Custodian Contract (i)(2) Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois) (j)(1) Consent of Ernst & Young LLP (2) Consent of PricewaterhouseCoopers LLP (m)(4) Form of Shareholder Servicing Agreement (5) Service Plan (p)(1) Code of Ethics of Adviser and Distributor (q) Power of Attorney (z)(1) List of certain investment companies in response to Item 27(a) (2) List of officers and directors of Van Kampen Funds Inc. in response to Item 27(b)
EX-99.(G)(1)(B) 3 c69996bpexv99wxgyx1yxby.txt AMENDMENT TO CUSTODIAN CONTRACT EXHIBIT (g)(1)(b) AMENDMENT TO CUSTODIAN CONTRACT This Amendment to the Custodian Contract made as of May 24, 2001 by and between each fund or series of a fund listed on Appendix A which evidences its agreement to be bound hereby by executing a copy of this Amendment (each such Fund is individually hereinafter referred to as the "Fund") and State Street Bank and Trust Company (the "Custodian"). Capitalized terms used in this Amendment without definition shall have the respective meanings given to such terms in the Custodian Contract referred to below. WHEREAS, the Fund and the Custodian entered into a Custodian Contract Agreement dated as of August 1, 1997 (the "Contract"); WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets, and the Fund has made each fund or series of a fund listed on Appendix A subject to the Contract (each such series, together with all other series subsequently established by the Fund and made subject to the Contract in accordance with the terms thereof, shall be referred to as a "Portfolio", and, collectively, the "Portfolios"); WHEREAS, the Fund and the Custodian desire to amend certain provisions of the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5") and the adoption of Rule 17f-7 ("Rule 17f-7") promulgated under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund and the Custodian desire to amend and restate certain other provisions of the Contract relating to the custody of assets of each of the Portfolios held outside of the United States. NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the parties hereby agree to amend the Contract, pursuant to the terms thereof, as follows: I. Article 3 of the Contract is hereby deleted, and Articles 4 through 22 of the Contract are hereby renumbered, as of the effective date of this Amendment, as Articles 5 through 23, respectively. II. New Articles 3 and 4 of the Contract are hereby added, as of the effective date of this Amendment, as set forth below. 3. PROVISIONS RELATING TO RULES 17f-5 AND 17f-7 3.1. DEFINITIONS. Capitalized terms in this Amendment shall have the following meanings: "Country Risk" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment, economic and financial infrastructure (including any Eligible Securities Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country. "Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act; the term does not include any Eligible Securities Depository. "Eligible Securities Depository" has the meaning set forth in section (b)(1) of Rule 17f-7. "Foreign Assets" means any of the Portfolios' investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios' transactions in such investments. "Foreign Custody Manager" has the meaning set forth in section (a)(3) of Rule 17f-5. 3.2. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. 3.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Fund, by resolution adopted by its Board of Trustees (the "Board"), hereby delegates to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect to Foreign Assets of the Portfolios held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager with respect to the Portfolios. 3.2.2 COUNTRIES COVERED. The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Contract, which list of countries may be amended from time to time by the Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the assets of the Portfolios, which list of Eligible Foreign Custodians may be 2 amended from time to time in the sole discretion of the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedule A in accordance with Section 3.2.5 hereof. Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by the Fund, on behalf of the Portfolios, of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by the Board on behalf of the Portfolios responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Amendment by the Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A in which the Custodian has previously placed or currently maintains Foreign Assets pursuant to the terms of the Contract. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board on behalf of the Portfolios to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager of the Portfolios with respect to that country. The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Thirty days (or such longer period to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility in its capacity as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian's acceptance of delegation is withdrawn. 3.2.3 SCOPE OF DELEGATED RESPONSIBILITIES: (a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1). (b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2). 3 (c) MONITORING. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.2.5 hereunder. 3.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes of this Section 3.2, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Portfolios. 3.2.5 REPORTING REQUIREMENTS. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board an amended Schedule A at the end of the calendar quarter in which an amendment to such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Portfolios described in this Section 3.2 after the occurrence of the material change. 3.2.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A PORTFOLIO. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise. 3.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the Board has determined that it is reasonable for the Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Contract to the Custodian as the Foreign Custody Manager of the Portfolios. 3.2.8 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign Custody Manager of the Portfolios shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisions of Section 3.2.2 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Portfolios with respect to designated countries. 4 3.3 ELIGIBLE SECURITIES DEPOSITORIES. 3.3.1 ANALYSIS AND MONITORING. The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment adviser) with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on Schedule B hereto in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and promptly notify the Fund (or its duly-authorized investment manager or investment adviser) of any material change in such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7. 3.3.2 STANDARD OF CARE. The Custodian agrees to exercise reasonable care, prudence and diligence in performing the duties set forth in Section 3.3.1. 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS HELD OUTSIDE THE UNITED STATES. 4.1 DEFINITIONS. Capitalized terms in this Article 4 shall have the following meanings: "Foreign Securities System" means an Eligible Securities Depository listed on Schedule B hereto. "Foreign Sub-Custodian" means a foreign banking institution serving as an Eligible Foreign Custodian. 4.2. HOLDING SECURITIES. The Custodian shall identify on its books as belonging to the Portfolios the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the Portfolios which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian. 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign Securities System in a designated country through arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country. 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. 4.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Portfolios held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of 5 Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: (i) upon the sale of such foreign securities for the Portfolio in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System; (ii) in connection with any repurchase agreement related to foreign securities; (iii) to the depository agent in connection with tender or other similar offers for foreign securities of the Portfolios; (iv) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable; (v) to the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; (vi) to brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Foreign Sub-Custodian's own negligence or willful misconduct; (vii) for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; (viii) in the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; (ix) for delivery as security in connection with any borrowing by the Portfolios requiring a pledge of assets by the Portfolios; (x) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; 6 (xi) in connection with the lending of foreign securities; and (xii) for any other purpose, but only upon receipt of Proper Instructions specifying the foreign securities to be delivered and naming the person or persons to whom delivery of such securities shall be made. 4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in the following cases only: (i) upon the purchase of foreign securities for the Portfolio, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System; (ii) in connection with the conversion, exchange or surrender of foreign securities of the Portfolio; (iii) for the payment of any expense or liability of the Portfolio, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Contract, legal fees, accounting fees, and other operating expenses; (iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through the Custodian or its Foreign Sub-Custodians; (v) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (vi) for payment of part or all of the dividends received in respect of securities sold short; (vii) in connection with the borrowing or lending of foreign securities; and (viii) for any other purpose, but only upon receipt of Proper Instructions specifying the amount of such payment and naming the person or persons to whom such payment is to be made. 4.4.3. MARKET CONDITIONS. Notwithstanding any provision of this Contract to the contrary, settlement and payment for Foreign Assets received for the account of the Portfolios and delivery of Foreign Assets maintained for the account of the Portfolios 7 may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer. The Custodian shall provide to the Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in the Board being provided with substantively less information than had been previously provided hereunder. 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the applicable Portfolio or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the Fund on behalf of such Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms of this Contract unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice. 4.6 BANK ACCOUNTS. The Custodian shall identify on its books as belonging to the Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian. All accounts referred to in this Section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Portfolio. Cash maintained on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts. 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Portfolios shall be entitled and shall credit such income, as collected, to the applicable Portfolio. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures. 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities held pursuant to this Article 4, the Custodian will use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. The 8 Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights. 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit promptly to the Fund written information with respect to materials received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith). With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund written information with respect to materials so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Portfolios at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power. 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties, and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian's performance of such obligations. At the Fund's election, the Portfolios shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim. 4.11. TAX LAW. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund, the Portfolios or the Custodian as custodian of the Portfolios by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of the Fund to notify the Custodian of the obligations imposed on the Fund with respect to the Portfolios or the Custodian as custodian of the Portfolios by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which the Fund has provided such information. 4.12. LIABILITY OF CUSTODIAN. Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a Sub-Custodian, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by anything which is part of Country Risk. 9 The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in the Contract and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Sub-Custodian has otherwise acted with reasonable care. III. Except as specifically superseded or modified herein, the terms and provisions of the Contract shall continue to apply with full force and effect. In the event of any conflict between the terms of the Contract prior to this Amendment and this Amendment, the terms of this Amendment shall prevail. If the Custodian is delegated the responsibilities of Foreign Custody Manager pursuant to the terms of Article 3 hereof, in the event of any conflict between the provisions of Articles 3 and 4 hereof, the provisions of Article 3 shall prevail. [Remainder of page intentionally blank.] 10 IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and behalf by its duly authorized representative as of the date first above written. WITNESSED BY: STATE STREET BANK and TRUST COMPANY By: - --------------------------- ----------------------------------------- Raelene S. LaPlante Name: Ronald E. Logue V.P. and Assoc. Counsel Title: Vice Chairman and Chief Operating Officer WITNESSED BY: EACH OF THE FUNDS LISTED ON APPENDIX A By: - --------------------------- ----------------------------------------- Sara L. Badler Name: A. Thomas Smith III Assistant Secretary Title: Vice President and Secretary 11 APPENDIX A As of May 24, 2001 Van Kampen Comstock Fund Van Kampen Corporate Bond Fund Van Kampen Emerging Growth Fund Van Kampen Enterprise Fund Van Kampen Equity Income Fund Van Kampen Government Securities Fund Van Kampen Growth and Income Fund Van Kampen Harbor Fund Van Kampen High Income Corporate Bond Fund VAN KAMPEN LIFE INVESTMENT TRUST On behalf of its series Aggressive Growth Portfolio Asset Allocation Portfolio Comstock Portfolio Domestic Income portfolio Emerging Growth Portfolio Enterprise Portfolio Global Equity Portfolio Government Portfolio Growth and income Portfolio Money Market portfolio Select Growth Portfolio Strategic Stock Portfolio Technology Portfolio Van Kampen Limited Maturity Government Fund Van Kampen Pace Fund Van Kampen Real Estate Securities Fund Van Kampen Reserve Fund VAN KAMPEN TAX-EXEMPT TRUST On behalf of its series Van Kampen Technology Fund Van Kampen U.S. Government Trust for Income VAN KAMPEN EQUITY TRUST II On behalf of its series Van Kampen Tax Managed Equity Growth Fund Van Kampen Technology Fund i APPENDIX A As of May 24, 2001 Van Kampen Municipal Income Trust Van Kampen California Municipal Trust Van Kampen High Income Trust Van Kampen High Income Trust II Van Kampen Investment Grade Municipal Trust Van Kampen Prime Rate Income Trust Van Kampen Senior Income Trust Van Kampen Senior Floating Rate Fund Van Kampen Municipal Trust Van Kampen California Quality Municipal Trust Van Kampen Florida Quality Municipal Trust Van Kampen New York Quality Municipal Trust Van Kampen Ohio Quality Municipal Trust Van Kampen Pennsylvania Quality Municipal Trust Van Kampen Trust for Insured Municipals Van Kampen Trust for Investment Grade Municipals Van Kampen Trust for Investment Grade California Municipals Van Kampen Trust for Investment Grade Florida Municipals Van Kampen Trust for Investment Grade New Jersey Municipals Van Kampen Trust for Investment Grade New York Municipals Van Kampen Trust for Investment Grade Pennsylvania Municipals Van Kampen Municipal Opportunity Trust Van Kampen Advantage Municipal Income Trust Van Kampen Advantage Pennsylvania Municipal Income Trust Van Kampen Strategic Sector Municipal Trust Van Kampen Value Municipal Income Trust Van Kampen California Value Municipal Income Trust Van Kampen Massachusetts Value Municipal Income Trust Van Kampen New York Value Municipal Income Trust Van Kampen Ohio Value Municipal Income Trust Van Kampen Pennsylvania Value Municipal Income Trust Van Kampen Municipal Opportunity Trust II Van Kampen Advantage Municipal Income Trust II Van Kampen Select Sector Municipal Trust Van Kampen Bond Fund Van Kampen Income Trust ii APPENDIX A As of May 24, 2001 VAN KAMPEN U.S. GOVERNMENT TRUST On behalf of its series Van Kampen U.S. Government Fund VAN KAMPEN TAX FREE TRUST On behalf of its series Van Kampen Insured Tax Free Income Fund Van Kampen Tax Free High Income Fund Van Kampen California Insured Tax Free Fund Van Kampen Municipal Income Fund Van Kampen Intermediate Term Municipal Income Fund Van Kampen Florida Insured Tax Free Income Fund Van Kampen New York Insured Tax Free Income Fund VAN KAMPEN TRUST On behalf of its series Van Kampen High Yield Fund Van Kampen Managed Short Term Income Fund VAN KAMPEN EQUITY TRUST On behalf of its series Van Kampen Utility Fund Van Kampen Growth Fund Van Kampen Aggressive Growth Fund Van Kampen Small Cap Value Fund Van Kampen Small Cap Growth Fund Van Kampen Small Company Growth Fund Van Kampen Select Growth Fund Van Kampen Value Opportunities Fund Van Kampen Pennsylvania Tax Free Income Fund Van Kampen Tax Free Money Fund Van Kampen Exchange Fund iii STATE STREET SCHEDULE A GLOBAL CUSTODY NETWORK SUBCUSTODIANS
COUNTRY SUBCUSTODIAN Argentina Citibank, N.A. Australia Westpac Banking Corporation Austria Erste Bank der Osterreichischen Sparkassen AG Bahrain HSBC Bank Middle East (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Bangladesh Standard Chartered Bank Belgium Fortis Bank nv-sa Bermuda The Bank of Bermuda Limited Bolivia Citibank, N. A. Botswana Barclays Bank of Botswana Limited Brazil Citibank, N.A. Bulgaria ING Bank N.V. Canada State Street Trust Company Canada Chile Citibank, N.A. People's Republic The Hongkong and Shanghai of China Banking Corporation Limited, Shanghai and Shenzhen branches Colombia Cititrust Colombia S.A. Sociedad Fiduciaria
12/11/01 1 STATE STREET SCHEDULE A GLOBAL CUSTODY NETWORK SUBCUSTODIANS
COUNTRY SUBCUSTODIAN Costa Rica Banco BCT S.A. Croatia Privredna Banka Zagreb d.d Cyprus The Cyprus Popular Bank Ltd. Czech Republic Ceskoslovenska Obchodni Banka, A.S. Denmark Den Danske Bank Ecuador Citibank, N.A. Egypt Egyptian British Bank S.A.E. (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Estonia Hansabank Finland Merita Bank Plc. France BNP Paribas, S.A. Germany Dresdner Bank AG Ghana Barclays Bank of Ghana Limited Greece National Bank of Greece S.A. Hong Kong Standard Chartered Bank Hungary Citibank Rt.
12/11/01 2 STATE STREET SCHEDULE A GLOBAL CUSTODY NETWORK SUBCUSTODIANS
COUNTRY SUBCUSTODIAN Iceland Icebank Ltd. India Deutsche Bank AG The Hongkong and Shanghai Banking Corporation Limited Indonesia Standard Chartered Bank Ireland Bank of Ireland Israel Bank Hapoalim B.M. Italy BNP Paribas, Italian Branch Ivory Coast Societe Generale de Banques en Cote d'Ivoire Jamaica Scotiabank Jamaica Trust and Merchant Bank Ltd. Japan The Fuji Bank, Limited The Sumitomo Bank, Limited Jordan HSBC Bank Middle East (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Kazakhstan HSBC Bank Kazakhstan Kenya Barclays Bank of Kenya Limited Republic of Korea The Hongkong and Shanghai Banking Corporation Limited
12/11/01 3 STATE STREET SCHEDULE A GLOBAL CUSTODY NETWORK SUBCUSTODIANS
COUNTRY SUBCUSTODIAN Latvia A/s Hansabanka Lebanon HSBC Bank Middle East (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Lithuania Vilniaus Bankas AB Malaysia Standard Chartered Bank Malaysia Berhad Mauritius The Hongkong and Shanghai Banking Corporation Limited Mexico Citibank Mexico, S.A. Morocco Banque Commerciale du Maroc Namibia Standard Bank Namibia Limited - Netherlands Fortis Bank (Nederland) N.V. New Zealand ANZ Banking Group (New Zealand) Limited Nigeria Stanbic Merchant Bank Nigeria Limited Norway Christiania Bank og Kreditkasse ASA Oman HSBC Bank Middle East (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Pakistan Deutsche Bank AG Palestine HSBC Bank Middle East (as delegate of The Hongkong and Shanghai Banking Corporation Limited)
12/11/01 4 STATE STREET SCHEDULE A GLOBAL CUSTODY NETWORK SUBCUSTODIANS
COUNTRY SUBCUSTODIAN Panama BankBoston, N.A. Peru Citibank, N.A. Philippines Standard Chartered Bank Poland Citibank (Poland) S.A. Portugal Banco Comercial Portugues Qatar HSBC Bank Middle East (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Romania ING Bank N.V. Russia Credit Suisse First Boston AO - Moscow (as delegate of Credit Suisse First Boston - Zurich) Singapore The Development Bank of Singapore Limited Slovak Republic Ceskoslovenska Obchodni Banka, A.S. Slovenia Bank Austria Creditanstalt d.d. - Ljubljana South Africa Standard Bank of South Africa Limited Spain Banco Santander Central Hispano S.A. Sri Lanka The Hongkong and Shanghai Banking Corporation Limited Swaziland Standard Bank Swaziland Limited
12/11/01 5 STATE STREET SCHEDULE A GLOBAL CUSTODY NETWORK SUBCUSTODIANS
COUNTRY SUBCUSTODIAN Sweden Skandinaviska Enskilda Banken Switzerland UBS AG Taiwan - R.O.C. Central Trust of China Thailand Standard Chartered Bank Trinidad & Tobago Republic Bank Limited Tunisia Banque Internationale Arabe de Tunisie Turkey Citibank, N.A. Ukraine ING Bank Ukraine United Kingdom State Street Bank and Trust Company, London Branch Uruguay BankBoston, N.A. Venezuela Citibank, N.A. Vietnam The Hongkong and Shanghai Banking Corporation Limited Zambia Barclays Bank of Zambia Limited Zimbabwe Barclays Bank of Zimbabwe Limited
12/11/01 6 STATE STREET SCHEDULE B GLOBAL CUSTODY NETWORK DEPOSITORIES OPERATING IN NETWORK MARKETS
COUNTRY DEPOSITORIES Argentina Caja de Valores S.A. Australia Austraclear Limited Reserve Bank Information and Transfer System Austria Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division) Belgium Caisse Interprofessionnelle de Depots et de Virements de Titres, S.A. Banque Nationale de Belgique Brazil Companhia Brasileira de Liquidacao e Custodia Bulgaria Central Depository AD Bulgarian National Bank Canada Canadian Depository for Securities Limited Chile Deposito Central de Valores S.A. People's Republic Shanghai Securities Central Clearing & of China Registration Corporation Shenzhen Securities Central Clearing Co., Ltd. Colombia Deposito Centralizado de Valores Costa Rica Central de Valores S.A.
10/12/00 1 STATE STREET SCHEDULE B GLOBAL CUSTODY NETWORK DEPOSITORIES OPERATING IN NETWORK MARKETS
COUNTRY DEPOSITORIES Croatia Ministry of Finance National Bank of Croatia Sredisnja Depozitarna Agencija d.d. Czech Republic Stredisko cennych papiru Czech National Bank Denmark Vaerdipapircentralen (Danish Securities Center) Egypt Misr for Clearing, Settlement, and Depository Estonia Eesti Vaartpaberite Keskdepositoorium Finland Finnish Central Securities Depository France Societe Interprofessionnelle pour la Compensation des Valeurs Mobilieres Germany Clearstream Banking AG, Frankfurt Greece Bank of Greece, System for Monitoring Transactions in Securities in Book-Entry Form Apothetirion Titlon AE - Central Securities Depository Hong Kong Central Clearing and Settlement System Central Moneymarkets Unit Hungary Kozponti Elszamolohaz es Ertektar (Budapest) Rt. (KELER)
10/12/00 2 STATE STREET SCHEDULE B GLOBAL CUSTODY NETWORK DEPOSITORIES OPERATING IN NETWORK MARKETS
COUNTRY DEPOSITORIES India National Securities Depository Limited Central Depository Services India Limited Reserve Bank of India Indonesia Bank Indonesia PT Kustodian Sentral Efek Indonesia Ireland Central Bank of Ireland Securities Settlement Office Israel Tel Aviv Stock Exchange Clearing House Ltd. (TASE Clearinghouse) Italy Monte Titoli S.p.A. Banca d'Italia Ivory Coast Depositaire Central - Banque de Reglement Jamaica Jamaica Central Securities Depository Japan Japan Securities Depository Center (JASDEC) Bank of Japan Net System Kazakhstan Central Depository of Securities Kenya Central Bank of Kenya Republic of Korea Korea Securities Depository Latvia Latvian Central Depository
10/12/00 3 STATE STREET SCHEDULE B GLOBAL CUSTODY NETWORK DEPOSITORIES OPERATING IN NETWORK MARKETS
COUNTRY DEPOSITORIES Lebanon Custodian and Clearing Center of Financial Instruments for Lebanon and the Middle East (Midclear) S.A.L. Banque du Liban Lithuania Central Securities Depository of Lithuania Malaysia Malaysian Central Depository Sdn. Bhd. Bank Negara Malaysia, Scripless Securities Trading and Safekeeping System Mauritius Central Depository and Settlement Co. Ltd. Bank of Mauritius Mexico S.D. INDEVAL (Instituto para el Deposito de Valores) Morocco Maroclear Netherlands Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (NECIGEF) New Zealand New Zealand Central Securities Depository Limited Nigeria Central Securities Clearing System Limited Norway Verdipapirsentralen (Norwegian Central Securities Depository) Oman Muscat Depository & Securities Registration Company, SAOC
10/12/00 4 STATE STREET SCHEDULE B GLOBAL CUSTODY NETWORK DEPOSITORIES OPERATING IN NETWORK MARKETS
COUNTRY DEPOSITORIES Pakistan Central Depository Company of Pakistan Limited State Bank of Pakistan Palestine Clearing Depository and Settlement, a department of the Palestine Stock Exchange Peru Caja de Valores y Liquidaciones, Institucion de Compensacion y Liquidacion de Valores S.A Philippines Philippine Central Depository, Inc. Registry of Scripless Securities (ROSS) of the Bureau of Treasury Poland National Depository of Securities (Krajowy Depozyt Papierow Wartos<180>ciowych SA) Central Treasury Bills Registrar Portugal Central de Valores Mobiliarios Qatar Central Clearing and Registration (CCR), a department of the Doha Securities Market Romania National Securities Clearing, Settlement and Depository Company Bucharest Stock Exchange Registry Division National Bank of Romania Singapore Central Depository (Pte) Limited Monetary Authority of Singapore
10/12/00 5 STATE STREET SCHEDULE B GLOBAL CUSTODY NETWORK DEPOSITORIES OPERATING IN NETWORK MARKETS
COUNTRY DEPOSITORIES Slovak Republic Stredisko cennych papierov National Bank of Slovakia Slovenia Klirinsko Depotna Druzba d.d. South Africa Central Depository Limited Share Transactions Totally Electronic (STRATE) Ltd. Spain Servicio de Compensacion y Liquidacion de Valores, S.A. Banco de Espana, Central de Anotaciones en Cuenta Sri Lanka Central Depository System (Pvt) Limited Sweden Vardepapperscentralen VPC AB (Swedish Central Securities Depository) Switzerland SegaIntersettle AG (SIS) Taiwan - R.O.C. Taiwan Securities Central Depository Co., Ltd. Thailand Thailand Securities Depository Company Limited Tunisia Societe Tunisienne Interprofessionelle pour la Compensation et de Depots des Valeurs Mobilieres Turkey Takas ve Saklama Bankasi A.S. (TAKASBANK) Central Bank of Turkey
10/12/00 6 STATE STREET SCHEDULE B GLOBAL CUSTODY NETWORK DEPOSITORIES OPERATING IN NETWORK MARKETS
COUNTRY DEPOSITORIES Ukraine National Bank of Ukraine United Kingdom Central Gilts Office and Central Moneymarkets Office Venezuela Banco Central de Venezuela Zambia LuSE Central Shares Depository Limited Bank of Zambia
TRANSNATIONAL Euroclear Clearstream Banking AG 10/12/00 7 SCHEDULE C MARKET INFORMATION
PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION - ------------------------------- ----------------- (FREQUENCY) The Guide to Custody in World Markets An overview of safekeeping and settlement practices and procedures (annually) in each market in which State Street Bank and Trust Company offers custodial services. Global Custody Network Review Information relating to the operating history and structure of (annually) depositories and subcustodians located in the markets in which State Street Bank and Trust Company offers custodial services, including transnational depositories. Global Legal Survey With respect to each market in which State Street Bank and Trust (annually) Company offers custodial services, opinions relating to whether local law restricts (i) access of a fund's independent public accountants to books and records of a Foreign Sub-Custodian or Foreign Securities System, (ii) the Fund's ability to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian or Foreign Securities System, (iii) the Fund's ability to recover in the event of a loss by a Foreign Sub-Custodian or Foreign Securities System, and (iv) the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars. Subcustodian Agreements Copies of the subcustodian contracts State Street Bank and Trust (annually) Company has entered into with each subcustodian in the markets in which State Street Bank and Trust Company offers subcustody services to its US mutual fund clients. Network Bulletins (weekly): Developments of interest to investors in the markets in which State Street Bank and Trust Company offers custodial services. Foreign Custody Advisories (as necessary): With respect to markets in which State Street Bank and Trust Company offers custodial services which exhibit special custody risks, developments which may impact State Street's ability to deliver expected levels of service.
EX-99.(I)(2) 4 c69996bpexv99wxiyx2y.txt CONSENT OF SKADDEN ARPS SLATE MEAGHER & FLOM EXHIBIT (i)(2) [LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)] September 27, 2002 Van Kampen Reserve Fund 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 Re: Post-Effective Amendment No. 44 to the Registration Statement on Form N-1A for the Van Kampen Reserve Fund (the "Registration Statement") (File Nos. 2-50870 and 811-2482) -------------------------------- We hereby consent to the reference to our firm under the heading "Legal Counsel" in the Registration Statement. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder. Very truly yours, /s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) EX-99.(J)(1) 5 c69996bpexv99wxjyx1y.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT (j)(1) CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Financial Highlights" and "Independent Auditors" and to the incorporation by reference of our report dated July 11, 2002 in the Registration Statement (Form N-1A) and related Prospectus and Statement of Additional Information of the Van Kampen Reserve Fund filed with the Securities and Exchange Commission in this Post-Effective Amendment No. 44 to the Registration Statement under the Securities Act of 1933 (Registration No. 2-50870) and in this Amendment No. 29 to the Registration Statement under the Investment Company Act of 1940 (Registration No. 811-2482). /s/ ERNST & YOUNG LLP Chicago, Illinois September 26, 2002 EX-99.(J)(2) 6 c69996bpexv99wxjyx2y.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT (j)(2) CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A of our reports dated July 1, 1999, relating to the financial statements and financial highlights, which appears in the May 31, 1999 Annual Report to Shareholders of Van Kampen Reserve Fund, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial Highlights" and "Independent Auditors" in such Registration Statement. /s/ PricewaterhouseCoopers LLP Chicago, Illinois September 26, 2002 EX-99.(M)(4) 7 c69996bpexv99wxmyx4y.txt FORM OF SHAREHOLDER SERVICING AGREEMENT EXHIBIT (m)(4) VAN KAMPEN FUNDS INC. SHAREHOLDER SERVICING AGREEMENT This Agreement is entered into as of the _____day of _____, 200__, by and between Van Kampen Funds Inc. (the "Company") and the undersigned (the "Financial Intermediary"). WHEREAS, the Company is the principal underwriter of certain open-end investment companies (hereinafter individually the "Fund" or collectively the "Funds"); and WHEREAS, each respective Fund has adopted a Service Plan (the "Service Plan") relating to such Fund, the Service Plan being described in the Fund's Prospectus and Statement of Additional Information; and WHEREAS, each respective Fund's Service Plan authorizes the Company to enter into shareholder service and maintenance agreements such as this Agreement with financial intermediaries selected by the Company, and the Financial Intermediary has been so selected; and WHEREAS, each respective Fund's Service Plan authorizes the Company to make payments at a rate specified in an agreement such as this Agreement varying directly with the aggregate average daily net asset value of shares of each respective Fund serviced by such financial intermediary on or after the effective date of this Agreement, as determined pursuant to Section 3 hereof, and held at the close of each day in accounts of clients or customers serviced by a particular financial intermediary, such amount being referred to herein as the "Holding Level"; for purposes of calculating the Holding Level, shares of such Fund which are redeemed or otherwise disposed of from any account existing prior to such effective date shall be deemed to have been shares sold prior to such effective date to the extent of the number of shares held in such account immediately after the close of business on the day prior to such effective date. NOW, THEREFORE, the Company and the Financial Intermediary agree as follows: 1. Subject to continuing compliance with its obligations pursuant to Section 2 hereof, the Financial Intermediary shall be entitled to service fee payments, if any, to be paid by the Company at the annual percentage rate of the Holding Level set forth from time to time in the then current Prospectus of the Fund on a quarterly basis (prorated for any portion of such period during which this Agreement is in effect for less than the full amount of such period); it is understood and agreed that the Company may make final and binding determinations as to whether such continuing compliance and as to whether or not any Fund shares are to be considered in determining the Holding Level of any particular financial intermediary and what Fund shares, if any, are to be attributed to such purpose to a particular financial intermediary, to a different financial intermediary or to no financial intermediary. Payments shall be made to the Financial Intermediary named above and portions of the payments may be, in the discretion of the Financial Intermediary, paid over to individual registered representatives of said Financial Intermediary to whom there have been assigned accounts of clients or customers serviced by the Financial Intermediary with respect to which the respective Holding Level was determined. 2. In consideration for the service fee payments to be made in accordance with Section 1 hereof, the Financial Intermediary shall provide to its clients or customers who hold shares of each respective Fund with respect to which payments to the Financial Intermediary may be made under such Fund's Service Plan such services and other assistance as may from time to time be reasonably requested by the Company (which services and assistance shall not constitute distribution services primarily intended to result in the sale of Fund shares), including but not limited to answering inquiries regarding the Fund, providing information programs regarding the Fund, assisting in selected dividend payment options, account designations and addresses and maintaining the investment of such customer or client in the Fund. 3. The Company shall have the right at any time and from time to time without notice to the Financial Intermediary to amend its Prospectus with respect to the amount of the service free to be paid pursuant hereto. Such amendments shall be effective as of the date of the amended Prospectus. 4. This Agreement shall go into effect on the later of the date set forth above or the date on which it is approved by a vote of each Fund's Board of Directors (or Trustees, as the case may be), and of those Directors/Trustees (the "Qualified Directors/Trustees") who are not interested persons (as defined in the 1940 Act), of the Fund and have no direct or indirect financial interest in the operations of the Service Plan or any agreement related to the Service Plan cast in person at a meeting called for the purpose of voting on this Agreement and shall continue in effect (unless terminated) until the June 30th next succeeding such effective date and will continue thereafter only if such continuance is specifically approved at least annually in the manner heretofore specified for initial approval. This agreement will terminate automatically in the event of its assignment or if the Service Plan is terminated. This Agreement may also be terminated at any time, without the payment of any penalty, on sixty (60) days written notice to the Financial Intermediary, by vote of a majority of the Qualified Directors/Trustees or by vote of a majority (as that term is used in the Rule) of the outstanding voting securities of the Fund. 5. The Financial Intermediary agrees that it shall provide only shareholder services pursuant to this agreement and that it shall not provide distribution services primarily intended to result in the sale of Fund shares; moreover, the Financial Intermediary agrees to indemnify and hold harmless the Company and the Funds for all liability, damages, losses and expenses (including legal fees and expenses) arising from any determination that the Financial 2 Intermediary's services provided hereunder are distribution services primarily intended to result in the sale of Fund shares or that the Financial Intermediary must be registered as a broker-dealer under the Securities Exchange Act of 1934, as amended, in order to provide such services. IN WITNESS WHEREOF, this Agreement is executed as of the date first above written. VAN KAMPEN FUNDS INC. - -------------------------- By: Title: - ---------------------------- ----------------------------------- Financial Intermediary Firm Name Financial Intermediary Firm Address - ---------------------------- By: Title: 3 EX-99.(M)(5) 8 c69996bpexv99wxmyx5y.txt SERVICE PLAN EXHIBIT (m)(5) VAN KAMPEN RESERVE FUND SERVICE PLAN The plan set forth below (the "Service Plan") for the VAN KAMPEN RESERVE FUND (the "Fund") describes the material terms and conditions under which assets of the Fund may be used to compensate the Fund's principal underwriter, within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"), brokers, dealers and other financial intermediaries (collectively "Financial Intermediaries") for providing personal services to shareholders and/or the maintenance of shareholder accounts with respect to each of its Class A Shares of beneficial interest (the "Class A Shares"), its Class B Shares of beneficial interest (the "Class B Shares"), and its Class C Shares of beneficial interest (the "Class C Shares") The Class A Shares, Class B Shares and Class C Shares sometimes are referred to herein collectively as the "Shares." Each class of Shares is offered and sold subject to a different combination of front-end sales charges, distribution fees, service fees and contingent deferred sales charges.(1) Classes of shares, if any, subject to a front-end sales charge and a distribution and/or service fee are referred to herein as "Front-End Classes" and the Shares of such classes are referred to herein as "Front-End Shares." Classes of shares, if any, subject to a contingent-deferred sales charge and a distribution and or a service fee are referred to herein as "CDSC Classes" and Shares of such classes are referred to herein as "CDSC Shares." Classes of shares, if any, subject to a front-end sales charge, a contingent-deferred sales charge and a distribution and/or service fee are referred to herein as "Combination Classes" and Shares of such class are referred to herein as "Combination Shares." The Fund has adopted this Service Plan pursuant to which the Fund is authorized to expend on an annual basis a portion of its average net assets attributable to each class of Shares for providing personal services to shareholders and/or the maintenance of shareholder accounts. The Fund also has entered into a distribution and services agreement (the "Distribution and Services Agreement") with Van Kampen Funds Inc. (the "Distributor"), pursuant to which the Distributor acts as agent on behalf of the Fund in connection with the implementation of the Service Plan and acts as the principal underwriter with respect to each class of Shares. The Distributor may enter into service agreements (the "Service Agreements") with brokers, dealers and other financial intermediaries ("Financial Intermediaries") in order to implement this Service Plan. 1. The Fund hereby is authorized to pay a service fee with respect to its Class A Shares, Class B Shares and Class C Shares to any Financial Intermediary who provides personal services to shareholders and/or maintains shareholder accounts in an annual amount not to exceed 0.25% of the average annual net asset value of the Shares maintained in the Fund by such person that were sold on or after the date on which this Service Plan was first implemented. The aggregate annual amount of all such payments - -------------- (1) The Fund is authorized to offer multiple classes of shares pursuant to a Rule 18f-3 Plan adopted under the 1940 Act. with respect to each such class of Shares may not exceed 0.25% of the Fund's average annual net assets attributable to the respective class of Shares sold on or after the date on which this Service Plan was first implemented and maintained in the Fund more than one year. 2. Payments pursuant to this Service Plan may be paid or prepaid on behalf of the Fund by the Distributor acting as the Fund's agent. 3. Payments by the Fund to the Distributor pursuant to this Service Plan shall not be made more often than monthly upon receipt by the Fund of a separate written expense report with respect to each class of Shares setting forth the expenses qualifying for such reimbursement allocated to each class of Shares and the purposes thereof. 4. In the event that amounts payable hereunder with respect to a class of Shares do not fully reimburse the Distributor for pre-paid service fees, such unreimbursed service fee expenses will be carried forward and paid by the Fund hereunder in future years so long as this Service Plan remains in effect, subject to applicable laws and regulations. Reimbursements for service fee related expenses payable hereunder with respect to a particular class of Shares may not be used to subsidize services provided with respect to any other class of Shares. 5. The Fund shall not compensate the Distributor, and neither the Fund nor the Distributor shall compensate any Financial Intermediary, for any service related expenses incurred with respect to a class of Shares prior to the later of (a) the implementation of this Service Plan with respect to such class of Shares or (b) the date that such Financial Intermediary enters into a Service Agreement with the Distributor. 6. The Fund hereby authorizes the Distributor to enter into Service Agreements with certain Financial Intermediaries to provide compensation to such Financial Intermediaries for activities and services of the type referred to in Paragraph 1 hereof. Prior to the implementation of a Service Agreement, such agreement shall be approved by a majority of the Board of Trustees of the Trust and a majority of the Disinterested Trustees (within the meaning of the 1940 Act) by a vote cast in person at a meeting called for the purpose of voting on such Service Agreements. Such Service Agreements shall provide that the Financial Intermediaries shall provide the Distributor with such information as is reasonably necessary to permit the Distributor to comply with the reporting requirements set forth in Paragraphs 3 and 8 hereof. 7. Subject to the provisions of this Service Plan, the Fund is hereby authorized to pay a service fee to any person that is not an "affiliated person" or "interested person" of the Fund or its "investment adviser" or "principal underwriter" (as such terms are defined in the 1940 Act) who provides any of the foregoing services for the Fund. Such fee shall be paid only pursuant to written agreements between the Fund and such other person the terms of which permit payments to such person only in accordance with the provisions of this Service Plan and which have the approval of a majority of the Disinterested Trustees by vote cast separately with respect to each class of 2 Shares and cast in person at a meeting called for the purpose of voting on such written agreement. 8. The Fund and the Distributor shall prepare separate written reports for each class of Shares and shall submit such reports to the Fund's Board of Trustees on a quarterly basis summarizing all payments made by them with respect to each class of Shares pursuant to this Service Plan and the agreements contemplated hereby, the purposes for which such payments were made and such other information as the Board of Trustees or the Disinterested Trustees may reasonably request from time to time, and the Board of Trustees shall review such reports and other information. 9. This Service Plan may be terminated with respect to a class of Shares without penalty at any time by a majority of the Disinterested Trustees or by a "majority of the outstanding voting securities" of the respective class of Shares of the Fund. 10. This Service Plan shall become effective upon its approval by (a) a majority of the Board of Trustees and a majority of the Disinterested Trustees by vote cast separately with respect to each class of Shares cast in person at a meeting called for the purpose of voting on this Service Plan, and (b) with respect to each class of Shares, a "majority of the outstanding voting securities" (as such phrase is defined in the 1940 Act) of such class of Shares voting separately as a class. 11. This Service Plan and any agreement contemplated hereby shall continue in effect beyond the first anniversary of its adoption by the Board of Trustees of the Fund only so long as (a) its continuation is approved at least annually in the manner set forth in clause (a) of paragraph 10 above and (b) the selection and nomination of those trustees of the Fund who are not "interested persons" of the Fund are committed to the discretion of such trustees. 12. This Service Plan may not be amended to increase materially the maximum amounts permitted to be expended hereunder except with the approval of a "majority of the outstanding voting securities" of the respective class of Shares of the Fund. This Service Plan may not be amended in any material respect except with the approval of a majority of the Disinterested Trustees. Amendments required to conform this Service Plan to changes in the 1940 Act, the rules and regulations thereunder or the Rules of Fair Practice of the National Association of Securities Dealers, Inc. shall not be deemed to be material amendments. The Trustees of the Trust have adopted this Service Plan as trustees under the Declaration of Trust of the Trust and the policies of the Trust adopted hereby are not binding upon any of the Trustees or shareholders of the Trust individually, but bind only the trust estate. 3 EX-99.(P)(1) 9 c69996bpexv99wxpyx1y.txt CODE OF ETHICS OF ADVISER AND DISTRIBUTOR Exhibit (p)(1) [MORGAN STANLEY LOGO] MORGAN STANLEY INVESTMENT MANAGEMENT CODE OF ETHICS EFFECTIVE AUGUST 16, 2002 - ---------------- (Print Name) The investment advisors, advisors, distribution companies and related service companies listed on the attached Schedule A that operate within Morgan Stanley Investment Management (each; a "Covered Company" and collectively, "Investment Management") have adopted this Code of Ethics (the "Code"). The principal objectives of the Code are (i) to provide policies and procedures consistent with applicable law and regulation, including Rule 17j-1 under the Investment Company Act of 1940, as amended (the "1940 Act"), and Section 204 A of the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and (ii) to ensure that the personal trading and other business activities of Employees of Investment Management (defined in Section III. below) are conducted in a manner consistent with applicable law and regulation and the general principles set forth in the Code. Employees of Investment Management are also subject to the "Morgan Stanley Code of Conduct - Securities and Asset Management Businesses" (the "Code of Conduct"). The Code of Conduct can be found on the Morgan Stanley Today intranet site at http://law.corp.msdw.com:8080/portal/cr/code_of_conduct_securities_assetmgmt_ 12_7_00.pdf Employees are reminded that they are also subject to other Morgan Stanley Investment Management policies, including policies on insider trading, the receipt of gifts, the handling of all internally distributed proprietary and confidential information, Morgan Stanley Investment Management Senior Loan Firewall Procedures, and service as a director of a publicly traded company. All internally distributed information is proprietary and confidential information and should not be discussed with people outside of Morgan Stanley Investment Management or shared with anybody outside of the Investment Department. I. Summary of Policy/Procedures The Code is designed to ensure that all acts, practices and courses of business engaged in by Employees are conducted in accordance with the highest possible standards and to prevent abuses or even the appearance of abuses by Employees relating to their personal trading and other business activity. The Code accomplishes this by requiring, among other things, that Employees: 1 [MORGAN STANLEY LOGO] >> Pre-clear all personal securities transactions, including transactions in Morgan Stanley securities; >> Pre-clear the opening of brokerage accounts and maintain such accounts at Morgan Stanley (exceptions may be granted in unusual circumstances by the Local Compliance Group); >> Report all securities transactions on a quarterly basis; >> Not enter into a personal transaction in a Covered Security (defined in Section V. below) if there is an open order to purchase or sell that Covered Security for a Fund or a Managed Account (defined in Section II. below); >> Not acquire any security in an initial public offering (IPO) or any other public underwriting; >> Not acquire any private placements unless special permission is obtained from the Code of Ethics Review Committee (defined in Section VI. below); >> Not serve on the board of any company without prior approval from the Code of Ethics Review Committee; >> Not sell Covered Securities at a profit unless the Covered Securities have been held for at least 60 days; >> Not sell Covered Securities under any circumstances unless the Covered Securities have been held for at least 30 days; >> Not purchase any Covered Security sold by the Employee within the previous 30 days; >> Not purchase any Covered Security sold by the Employee within the previous sixty days if the purchase price is lower than any sale price within the 60-day period; >> Report all holdings on an annual basis and certify annually that they have read and understand the provisions of the Code; >> Who are portfolio managers or analysts, or who report to a portfolio manager or analyst, not trade in a security if accounts they manage trade in the same security within the 7 days prior to or 7 days following the Employee's transaction. While the provisions of the Code, including exceptions to its general provisions, are more specifically described below, each Employee should note that with respect to their personal securities transactions, compliance with the Code is a matter of understanding the basic requirements set forth above and making sure that the steps the Employee takes with respect to each personal securities transaction, and their personal investment activity in general, are in accordance with these requirements. Employees with interpretative questions or any other questions are strongly urged to consult with their Local Compliance Group prior to taking the action in question. 2 [MORGAN STANLEY LOGO] II. General Principles A. Shareholder and Client Interests Come First Every Employee owes a fiduciary duty to the shareholders of registered investment companies (each; a "Fund" and collectively, the "Funds") and to the Managed Account Clients (defined as clients other than registered investment companies including unregistered investment companies, institutional clients and individuals). This means that in every decision relating to investments, every Employee must recognize the needs and interests of the Fund shareholders and the Managed Account Clients, and be certain that at all times the interests of the Fund shareholders and other Managed Account Clients are placed ahead of any personal interest. B. Avoid Actual and Potential Conflicts of Interest The restrictions and requirements of the Code are designed to prevent behavior, which actually or potentially conflicts, or raises the appearance of actual or potential conflict, with the interests of the Fund shareholders or the Managed Account Clients. It is of the utmost importance that the Personal Securities Transactions of Employees (defined in Section IV below) be conducted in a manner consistent with both the letter and spirit of the Code, including these principles, to ensure the avoidance of any such conflict of interest, or abuse of an individual's position of trust and responsibility. III. Access Persons "Access Persons" shall include all directors, officers, and employees of Investment Management as well as certain other persons falling within such definition under Rule 17j-1 under the 1940 Act and such other persons that may be so deemed by each Local Compliance Group from time to time, except those persons who are not officers and directors of an investment adviser under Morgan Stanley Investment Management and who meet the following criteria: (i) directors and officers of Morgan Stanley Distributors, Morgan Stanley Distribution, Morgan Stanley & Co., and Van Kampen Funds Inc. (each a "Distributor" and collectively, the "Distributors") that do not devote substantially all of their working time to the activities (including distribution activities) of an investment adviser under Morgan Stanley Investment Management; (ii) directors and officers of the Distributors that do not, in connection with their regular functions and duties, participate in, obtain information with respect to, or make recommendations as to, or purchase and sell securities on behalf of a Fund or a Managed Account Client; and (iii) directors and officers of the Distributors that do not have access to information regarding the day-to-day investment activities of Investment Management shall not be deemed Access Persons. Such persons are, however, subject to the Code of Conduct. The Local 3 [MORGAN STANLEY LOGO] Compliance Group for each Covered Company will identify all Access Persons of Investment Management and notify them of their pre-clearance and reporting obligations at the time they become an Access Person. Access Persons will be referred to as "Employees" throughout the Code. Employees with questions concerning their status as Access Persons are urged to consult with their Local Compliance Group. IV. Grounds for Disqualification from Employment Pursuant to the terms of Section 9 of the 1940 Act, no director, officer or employee of a Covered Company may become, or continue to remain, an officer, director or employee without an exemptive order issued by the U.S. Securities and Exchange Commission if such director, officer or employee: A. within the past ten years has been convicted of any felony or misdemeanor (i) involving the purchase or sale of any security; or (ii) arising out of their conduct as an underwriter, broker, dealer, investment adviser, municipal securities dealer, government securities broker, government securities dealer, transfer agent, or entity or person required to be registered under the U.S. Commodity Exchange Act, or as an affiliated person, salesman or employee of any investment company, bank, insurance company or entity or person required to be registered under the Commodity Exchange Act; or B. is or becomes permanently or temporarily enjoined by any court from: (i) acting as an underwriter, broker, dealer, investment adviser, municipal securities dealer, government securities broker, government securities dealer, transfer agent, or entity or person required to be registered under the U.S. Commodity Exchange Act, or as an affiliated person, salesman or employee of any investment company, bank, insurance company or entity or person required to be registered under the U.S. Commodity Exchange Act; or (ii) engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any security. It is your obligation to immediately report any conviction or injunction falling within the foregoing provisions to the Chief Legal or Compliance Officer of Investment Management. V. Personal Securities Transactions A. Prohibited Conduct No Employee shall buy or sell any "Covered Security" (defined as all securities, including any option to purchase or sell, and any security convertible into or exchangeable for such securities, with the exception of those described in sub- 4 [MORGAN STANLEY LOGO] section C.3. below) for his/her own account or for an account in which the individual has, or as a result of the transaction acquires, any direct or indirect "beneficial ownership" (referred to herein as a "Personal Securities Transaction") unless: 1. pre-clearance of the transaction has been obtained; and 2. the transaction is reported in writing to the Local Compliance Group in accordance with the requirements below. B. Restrictions and Limitations on Personal Securities Transactions Except where otherwise indicated, the following restrictions and limitations govern investments and personal securities transactions by Employees: 1. Covered Securities (defined in sub-section A. above) purchased may not be sold until at least 30 calendar days from the purchase trade date and may not be sold at a profit until at least 60 calendar days from the purchase trade date. Covered Securities sold may not be repurchased until at least 30 calendar days from the sale trade date. In addition, Covered Securities sold may not be purchased at a lower price until at least 60 calendar days from the sale trade date. Any violation may result in disgorgement of all profits from the transactions as well as other possible sanctions. 2. No short sales are permitted. 3. No transactions in options or futures are permitted, except that listed options may be purchased, and covered calls written. No option may be purchased or written if the expiration date is less than 60 calendar days from the date of purchase. No option position may be closed at a profit less than 60 calendar days from the date it is established. 4. No Employee may acquire any security in an initial public offering (IPO) or any other public underwriting. No Employee shall purchase shares of a registered investment company that is managed by a Covered Company if such investment company is not generally available to the public, unless the vehicle is designed for Morgan Stanley employees and there is no intention of it becoming public in the future. 5a. Private placements of any kind may only be acquired with special permission from the Code of Ethics Review Committee and, if approved, will be subject to continuous monitoring by the Local Compliance Group for possible future conflict. Any Employee wishing to request approval for 5 [MORGAN STANLEY LOGO] private placements must complete a Private Placement Approval Request Form and submit the form to the Local Compliance Group. A copy of the Private Placement Approval Request Form, which may be revised from time to time, is attached as EXHIBIT A. Where the Code of Ethics Review Committee approves any acquisition of a private placement, its decision and reasons for supporting the decision will be documented in a written report, which is to be kept for five years by the Local Compliance Group after the end of the fiscal year in which the approval was granted. 5b. Any Employee who has a personal position in an issuer through a private placement must affirmatively disclose that interest if such person is involved in consideration of any subsequent investment decision by a Fund or Managed Account regarding any security of that issuer or its affiliate. In such event, the President or Chief Investment Officer of Investment Management shall independently determine the final investment decision. Written records of any such circumstance shall be sent to the Local Compliance Group and maintained for a period of five years after the end of the fiscal year in which the approval was granted. Restrictions 6.a. and 6.b. apply only to portfolio managers and research analysts (and all persons reporting to portfolio managers and research analysts) of Investment Management. Restriction 6.c. applies only to personnel in the trading department of each Covered Company. 6a. No purchase or sale transaction may be made in any Covered Security by any portfolio manager or research analyst (or person reporting to a portfolio manager or research analyst) for a period of 7 calendar days before or after that Covered Security is bought or sold by any Fund (other than Morgan Stanley Value-Added Market Series, Morgan Stanley Select Dimensions Investment Series - Value-Added Market Portfolio, and Morgan Stanley index funds, or Portfolios) or any Managed Account (other than index-based Managed Accounts) for which such portfolio manager or research analyst (or person reporting to a portfolio manager or research analyst) serves in that capacity. 6b. The definition of portfolio manager shall also extend to any person involved in determining the composition of the portfolios of Funds that are UITs or who have knowledge of a composition of a UIT portfolio prior to deposit. These individuals shall not buy or sell a Covered Security within 7 calendar days before or after such Covered Security is included in the initial deposit of a UIT portfolio. 6 [MORGAN STANLEY LOGO] 6c. No purchase or sale transaction may be made in any Covered Security traded through the appropriate Covered Company's trading desk(s) (as determined by the Local Compliance Group) by any person on that trading desk at the same time that any Fund (other than Morgan Stanley Value-Added Market Series, Morgan Stanley Select Dimensions Investment Series-Value-Added Market Portfolio, and Morgan Stanley index funds, or Portfolios) or any Managed Account (other than index-based Managed Accounts) has a pending purchase or sale order in that same Covered Security. 6d. Any transaction by persons described in sub-sections 6.a., 6.b., and 6.c. above within such enumerated period may be required to be reversed, if applicable, and any profits or, at the discretion of the Code of Ethics Review Committee, any differential between the sale price of the Personal Security Transaction and the subsequent purchase or sale price by a relevant Fund or Managed Account during the enumerated period, will be subject to disgorgement; other sanctions may also be applied. 7. No Employee shall purchase or sell any Covered Security which to their knowledge at the time of such purchase or sale: (i) is being considered for purchase or sale by a Fund or a Managed Account; or (ii) is being purchased or sold by a Fund or a Managed Account. With respect to portfolio managers and research analysts (and all persons reporting to portfolio managers and research analysts) of a Covered Company, no such persons may purchase shares of a closed-end investment company over which such person exercises investment discretion. 8. If a transaction is not executed on the day pre-clearance is granted, it is required that pre-clearance be sought again on a subsequent day (i.e., open orders, such as limit orders, good until cancelled orders and stop-loss orders, must be cleared each day until the transaction is effected). 9. Employees shall not participate in investment clubs. IMPORTANT: Regardless of the limited applicability of Restrictions 6.a., 6.b., and 6.c. each Local Compliance Group monitors all transactions by Employees in all locations in order to ascertain any pattern of conduct that may evidence actual or potential conflicts with the principles and objectives of the Code, including a pattern of front-running. The Compliance Group of each Covered Company: (i) on a quarterly basis, will provide the Boards of Directors/Trustees of the Funds it manages with a written report that describes any issues that arose during the previous quarter under the Code and, if applicable, any Funds' Sub-Adviser's Code of Ethics, including but not limited to, information about material violations 7 [MORGAN STANLEY LOGO] and sanctions imposed in response to the material violations; and (ii) on an annual basis, will certify that each Covered Company has adopted procedures reasonably necessary to prevent its Employees from violating the Code. Also, as stated elsewhere in this Code, any violation of the foregoing restrictions may result in disgorgement of all profits from the transactions as well as other possible sanctions. C. Pre-Clearance Requirement 1. Procedures (a) From Whom Obtained All Employees are required to obtain pre-clearance of a Personal Securities Transaction by: (i) confirming that no open orders exist in the same or related security with the appropriate trading desk(s) (as determined by the Local Compliance Group); and (ii) having the transaction approved by the Local Compliance Group. Portfolio managers and research analysts (or persons reporting to portfolio managers or research analysts) of Investment Management seeking approval for a Personal Securities Transaction must obtain an additional approval signature from a designated Senior Portfolio Manager (prior to pre-clearance from the Local Compliance Group). Trading desk personnel at any Covered Company seeking approval for a Personal Securities Transaction must obtain an additional approval signature from their immediate supervisor prior to pre-clearance from the Local Compliance Group. A copy of the Personal Securities Transaction Approval Form, which may be revised from time to time, is attached as EXHIBIT B. Each Local Compliance Group has implemented procedures reasonably designed to monitor purchases and sales effected pursuant to these pre-clearance procedures. (b) Permitted Brokerage Accounts All securities transactions must be made through a Morgan Stanley brokerage account(1). No other brokerage accounts are permitted unless special permission is obtained from the Local Compliance - --------------------------- (1) Morgan Stanley brokerage account shall mean an account with an affiliated Morgan Stanley broker in the Employee's local jurisdiction. 8 [MORGAN STANLEY LOGO] Group. If an Employee maintains an account(s) outside of Morgan Stanley, that Employee must transfer his/her account(s) to a Morgan Stanley brokerage account as soon as practical (generally thirty days or less). Failure to do so will be considered a significant violation of the Code. In the event permission to maintain an outside brokerage account is granted by the Local Compliance Group, it is the responsibility of the Employee to arrange for duplicate confirmations of all securities transactions and monthly brokerage statements to be sent to the Local Compliance Group. Prior to opening a Morgan Stanley brokerage account, Employees must obtain approval from their Local Compliance Group. No Employee may open a brokerage account unless a completed and signed copy of a Morgan Stanley Employee Account Request Form is submitted to the Local Compliance Group for approval. A copy of the Morgan Stanley Employee Account Request Form, which may be revised from time to time, is attached as EXHIBIT C. After account has been opened, Employees are responsible for reporting their Morgan Stanley account number to the Local Compliance Group. (c) Personal Securities Transaction Approval Form Pre-clearance must be obtained by completing and signing the Personal Securities Transaction Approval Form, provided for that purpose, and obtaining the proper pre-clearance signatures. The Approval Form must also indicate, as applicable, the name of the individual's financial advisor, the branch office numbers, as well as other required information. If an Employee has more than one account under his/her control, the Employee must indicate for which account the trade is intended on the Personal Securities Transaction Approval Form. Employees are required to have duplicate copies of their trade confirms and account statements (which can be electronically transmitted) sent to the Local Compliance Group for each account the Employee has, or as a result of the transaction acquires, any direct or indirect beneficial ownership (as defined in sub-section C.4. below). (d) Filing After all required signatures are obtained, the Personal Securities Transaction Approval Form must be filed with the Local Compliance 9 [MORGAN STANLEY LOGO] Group by noon of the day following execution of the trade for filing in the respective individual's Code of Ethics file. The Employee should retain a copy for his/her records. (The Local Compliance Group will also retain a copy of the form if a pre-clearance request is denied.) 2. Factors Considered in Pre-Clearance of Personal Securities Transactions In reviewing any trade for approval, the following factors, among others, will generally be considered in determining whether or not to clear a proposed transaction: (a) Whether the amount or the nature of the transaction, or the person making it, is likely to affect the price or market of security that is held by a Fund or a Managed Account Client. (b) Whether the purchase or sale transaction of the Covered Security by the Employee: (i) is being considered for purchase or sale by a Fund or a Managed Account; or (ii) is being purchased or sold by a Fund or a Managed Account Client. (c) Whether the individual making the proposed purchase or sale is likely to benefit from purchases or sales being made or considered on behalf of any Fund or a Managed Account Client. (d) Whether the transaction is non-volitional on the part of the individual. (e) Whether the transaction is conducted in a manner that is consistent with the Code to avoid any potential for appearance of impropriety. In addition to the requirements set forth in the Code, the Local Compliance Group and/or, if applicable, designated Senior Portfolio Manager/immediate trading room supervisor (as appropriate), in keeping with the general principles and objectives of the Code, may refuse to grant pre-clearance of a Personal Securities Transaction in their sole discretion without being required to specify any reason for the refusal. 3. Exempt Securities (a) The securities listed below are exempt from: (i) the restrictions of Section V., sub-sections B.1. , B.6. and B.7.; (ii) the pre-clearance requirements; and (iii) the initial, quarterly and annual reporting requirements. Accordingly, it is not necessary to obtain pre- 10 [MORGAN STANLEY LOGO] clearance for Personal Securities Transactions in any of the following securities, nor is it necessary to report such securities in the quarterly transaction reports or the initial and annual securities holdings list: (i) Direct obligations of the United States Government(2); (ii) Bank Certificates of Deposit; (iii) Bankers' Acceptances; (iv) Commercial Paper; (v) High Quality Short-Term Debt Instruments (which for these purposes are repurchase agreements and any instrument that has a maturity at issuance of less than 366 days that is rated in one of the two highest categories by a Nationally Recognized Statistical Rating Organization); and (vi) Shares of open-end investment companies (mutual funds). (Exchange Traded Funds ("ETFs") and Closed-end funds must be pre-cleared and are subject to all other reporting requirements.) (b) Transactions in redeemable Unit Investment Trusts are exempt from the restrictions contained in Section V., sub-sections B.1., B.6. and B.7 and the pre-clearance requirement of Section V., sub-section C., but are subject to the initial, quarterly and annual reporting requirements of Section V., sub-section D. (c) All Employees wishing to participate in an issuer's direct stock purchase plan or automatic dividend reinvestment plans must submit a memorandum to the Local Compliance Group stating the name and the amount to be invested in the plan. Any sale transactions from an automatic dividend reinvestment plan must be pre-approved. Purchases under an issuer's direct stock purchase plan or automatic dividend reinvestment plan are exempt from the restrictions contained in sub-sections B.1., B.6. and B.7. and the pre-clearance requirement but are subject to the initial, quarterly and annual reporting requirements. (d) Holdings and transactions in MWD stock(3) are subject to the initial, quarterly and annual reporting requirements as well as the 30-day holding period restriction and the 60-day short swing profit restriction and the pre-clearance requirements described above. The - --------------------------- (2) Includes securities that carry full faith and credit of the U.S. government for the timely payment of principal and interest, such as Ginnie Mae, U.S. Savings Bonds, and U.S. Treasuries. (3) In connection with the sale of MWD stock, periodic purchases through employer sponsored equity purchase plans shall not be looked to in calculating the 30-day holding period restriction or the 60-day short swing profit restriction. 11 [MORGAN STANLEY LOGO] restrictions imposed by Morgan Stanley on Senior Management and other persons in connection with transactions in MWD stock are in addition to this Code, and must be observed to the extent applicable. Employees are required to read the Code of Conduct for a listing of specific restrictions and limitations relating to the purchase or sale of MWD stock. (e) Employees may maintain fully discretionary accounts managed by either an internal or external registered investment adviser provided that each of the following conditions are met: (i) the investment program is offered by Morgan Stanley; (ii) the portfolio manager's strategy/investment discipline/investment program offered/utilized is the same for both Employee and non-Employee client accounts; (iii) written permission is obtained from the Director of Compliance and the Chief Investment Officer (or their designees) prior to opening a fully discretionary account; (iv) written certification is obtained stating that there will be no communication between the portfolio manager and the Employee with regard to investment decisions prior to execution; and (v) Employee accounts will be treated no differently from non-Employee accounts. The Employee must designate duplicate copies of trade confirmations and monthly statements to be sent to the Compliance Department. To the extent that an Employee directs trades for tax purposes, that Employee shall obtain pre-clearance for each transaction from his/her Local Compliance Group. 4. Accounts Covered An Employee must obtain pre-clearance for any Personal Securities Transaction if such Employee has, or as a result of the transaction acquires, any direct or indirect beneficial ownership in the security. The term "beneficial ownership" shall be interpreted with reference to the definition contained in the provisions of Section 16 of the Securities Exchange Act of 1934. Generally, a person is regarded as having beneficial ownership of securities held in the name of: (a) the individual; or (b) a husband, wife or a minor child; or (c) a relative sharing the same house; or 12 [MORGAN STANLEY LOGO] (d) other person if the Employee: (i) obtains benefits substantially equivalent to ownership of the securities; (ii) can obtain ownership of the securities immediately or at some future time; or (iii) can have investment discretion or otherwise can exercise control. The following circumstances constitute Beneficial Ownership by an Employee of securities held by a trust: (a) Ownership of securities as a trustee where either the Employee or members of the Employee's immediate family have a vested interest in the principal or income of the trust. (b) Estate or trust accounts in which the Employee has the power to effect investment decisions, unless a specific exemption is granted. (c) Any Employee who is a settlor of a trust is required to comply with all the provisions of the Code, unless special exemption in advance is granted by the Local Compliance Group and: (i) the Employee does not have any direct or indirect beneficial interest in the trust; (ii) the Employee does not have the direct or indirect power to effect investment decisions for the trust, and (iii) the consent of all the beneficiaries is required in order for the Employee to revoke the trust. It is the responsibility of the Employee to arrange for duplicate confirmations of all securities transactions and monthly statements to be sent to the Local Compliance Group. The final determination of beneficial ownership is a question to be determined in light of the facts of each particular case. If there are any questions as to beneficial ownership, please contact your Local Compliance Group. 5. Exemption from Pre-clearance Requirement Pre-clearance is not required for any account where the Employee does not have direct or indirect beneficial ownership. In case of doubt as to whether an account is covered by the Code, Employees must consult with their Local Compliance Group. 13 [MORGAN STANLEY LOGO] D. Report of Transactions 1. Transactions and Accounts Covered (a) All Personal Securities Transactions in Covered Securities must be reported in the next quarterly transaction report after the transaction is effected. The quarterly report shall contain the following information: (i) The date of the transaction, the title, interest rate and maturity date (if applicable), number of shares and principal amount of each security involved; (ii) The nature of the transaction (i.e., purchase, sale, or any other type of acquisition or disposition); (iii) The price at which the purchase or sale was effected; (iv) The name of the broker, dealer, or bank with, or through which, the purchase or sale was effected; and (v) The date the report was submitted to the Local Compliance Group by such person. In addition, any new brokerage account(s) opened during the quarter without approval from the Local Compliance Group as well as the date(s) the account(s) was (were) opened must be reported. The report must contain the following information: (i) The name of the broker, dealer, or bank with whom the account was established; (ii) The date the account was established; and (iii) The date the report was submitted to the Local Compliance Group. (b) An Employee need not make a quarterly transaction report if he/she: (i) maintains only a Morgan Stanley brokerage account and the report would duplicate information contained in the broker trade confirms, system generated reports or account statements received by the Local Compliance Group; and (ii) has not opened any new 14 [MORGAN STANLEY LOGO] brokerage accounts or mutual fund accounts with brokerage facilities without obtaining approval from their Local Compliance Group during the quarter. 2. Time of Reporting (a) Initial Listing of Securities Holdings and Brokerage Accounts Report Each Employee must provide an Initial Listing of Securities Holdings and Brokerage Accounts Report to their Local Compliance Group disclosing: (i) all Covered Securities, including private placement securities, beneficially owned by the Employee listing the title of the security, number of shares held, and principal amount of the security; (ii) the name of the broker dealer or financial institution where the Employee maintains a personal account; and (iii) the date the report is submitted by the Employee. New Access Persons will be required to provide a listing as of the date such person becomes an Access Person of all holdings in Covered Securities and all outside brokerage accounts and mutual fund accounts with brokerage facilities. This report must be provided no later than 10 calendar days after a person becomes an Access Person. (b) Quarterly Securities Transactions and New Brokerage Account(s) Reports Quarterly Securities Transactions and New Brokerage Account(s) Reports must be submitted by Employees within 10 calendar days after the end of each calendar quarter. Any new brokerage account(s) opened during the quarter without their Local Compliance Group's prior approval, as well as the date(s) the account(s) was (were) opened, must be reported within 10 calendar days after the end of each calendar quarter. (c) Annual Listing of Securities Holdings Reports and Certification of Compliance The Annual Listing of Securities Holdings Report and Certification of Compliance requires all Employees to provide an annual listing of holdings of: (i) all Covered Securities beneficially owned, listing the title of the security, number of shares held, and principal amount of the security as of December 31 of the preceding year, (ii) the name of any broker dealer or financial institution where the account(s) in which Covered Securities were maintained, as of 15 [MORGAN STANLEY LOGO] December 31 of the preceding year; and (iii) the date the report is submitted. This report must be provided no later than 30 calendar days after December 31 each year. In the case of Employees maintaining Morgan Stanley brokerage accounts for which broker trade confirms, system generated reports or account statements are already received on a quarterly basis by the Local Compliance Group, an annual certification (Certification of Compliance) that the holdings information already provided to the Local Compliance Group accurately reflects all such holdings will satisfy the aforementioned requirement. 3. Form of Reporting The Initial Listing of Securities Holdings and Brokerage Accounts Report, Quarterly Securities Transactions and New Brokerage Account(s) Reports, and the Annual Listing of Securities Holdings Report and Certification of Compliance must be completed on the appropriate forms, attached as EXHIBITS D, E, AND F respectively, which would be provided by each Local Compliance Group. By not submitting a quarterly transaction report form, an Employee will be deemed to have represented that such person has: (i) executed reportable transactions only in accounts listed with the Local Compliance Group; or (ii) only traded securities exempt from the reporting requirements. Copies of the Initial Listing of Securities Holdings Report and Brokerage Accounts Report, Quarterly Securities Transactions and New Brokerage Account(s) Reports, and the Annual Listing of Securities Holdings Report and Certification of Compliance, which may be revised from time to time, are attached as EXHIBITS D, E, AND F, respectively. 4. Responsibility to Report The responsibility for reporting is imposed on each individual required to make a report. Any effort by a Covered Company to facilitate the reporting process does not change or alter that individual's responsibility. 5. Leave of Absence Employees on leave of absence may not be subject to the pre-clearance and reporting provisions of the Code, provided that, during their leave period, they: (i) do not participate in, obtain information with respect to, make recommendations as to, or make the purchase and sale of securities on behalf of a Fund or a Managed Account Client; and (ii) do not have access to information regarding the day-to-day investment activities of Investment Management. 16 [MORGAN STANLEY LOGO] 6. Where to File Report All reports must be filed by Employees with their Local Compliance Group. 7. Responsibility to Review Each Local Compliance Group will review all Initial Listing of Securities Holdings and Brokerage Accounts Reports, Quarterly Securities Transactions and New Brokerage Account(s) Reports, and Annual Listing of Securities Holdings Reports and Certification of Compliance, filed by Employees, as well as broker confirmations, system generated reports, and account statements. VI. Review Committee A Code of Ethics Review Committee, consisting of the President/Chief Operating Officer, Chief Investment Officer, Chief Legal Officer, and the Chief Administrative Officer - Investments of Morgan Stanley Investment Management or their designees will review and consider any proper request of an Employee for relief or exemption from any restriction, limitation or procedure contained herein consistent with the principles and objectives outlined in this Code. The Committee shall meet on an ad hoc basis, as it deems necessary, upon written request by an Employee stating the basis for the requested relief. The Committee's decision is within its sole discretion. VII. Service as a Director No Employee may serve on the board of any company without prior approval of the Code of Ethics Review Committee. If such approval is granted, it will be subject to the implementation of information barrier procedures to isolate any such person from making investment decisions for Funds or Managed Accounts concerning the company in question. VIII. Gifts No Employee shall accept directly or indirectly anything of value, including gifts and gratuities, in excess of $100 per year from any person or entity that does business with any Fund or Managed Account, not including occasional meals or tickets to theater or sporting events or other similar entertainment.(4) - --------------------------- (4) For MSAITM-Tokyo, the receipt of gifts shall not be in excess of $20,000 per year. For MSIM-Mumbai, the receipt of gifts shall not be in excess of INR 4,500. For MSIM-Singapore, the receipt of gifts shall not be in excess of SGD 170. For MSIM-Ltd, the receipt of gifts shall not be in excess of Europe 50 (pound sterling) or equivalent. 17 [MORGAN STANLEY LOGO] IX. Sanctions Upon discovering a violation of this Code, Investment Management may impose such sanctions as they deem appropriate, including a reprimand (orally or in writing), demotion, suspension or termination of employment and/or other possible sanctions. The President/Chief Operating Officer of Investment Management and the Chief Legal Officer or Compliance Officer together, are authorized to determine the choice of sanctions to be imposed in specific cases, including termination of employment. X. Employee Certification Employees are required to sign a copy of this Code indicating their understanding of, and their agreement to abide by the terms of this Code. In addition, Employees will be required to certify annually that: (i) they have read and understand the terms of this Code and recognize the responsibilities and obligations incurred by their being subject to this Code; and (ii) they are in compliance with the requirements of this Code, including but not limited to the reporting of all brokerage accounts, and the pre-clearance of all non-exempt Personal Securities Transactions in accordance with this Code. I have read and understand the terms of the above Code. I recognize the responsibilities and obligations, including but not limited to my quarterly transaction, annual listing of holdings, and initial holdings reporting obligations (as applicable), incurred by me as a result of my being subject to this Code. I hereby agree to abide by the above Code. - ------------------ ------------------ (Signature) (Date) - ------------------ (Print name) MORGAN STANLEY INVESTMENT MANAGEMENT CODE OF ETHICS DATED: AUGUST 16, 2002 18 [MORGAN STANLEY LOGO] SCHEDULE A MORGAN STANLEY INVESTMENT ADVISORS INC. ("ADVISORS") MORGAN STANLEY INVESTMENT MANAGEMENT INC. ("MSIM") MORGAN STANLEY INVESTMENT GROUP INC. ("MSIG") MORGAN STANLEY INVESTMENT MANAGEMENT LIMITED ("MSIM-LTD.") MORGAN STANLEY INVESTMENT MANAGEMENT COMPANY ("MSIM-SINGAPORE") MORGAN STANLEY ASSET & INVESTMENT TRUST MANAGEMENT CO., LIMITED ("MSAITM-TOKYO") MORGAN STANLEY INVESTMENT MANAGEMENT PRIVATE LIMITED ("MSIM MUMBAI") MORGAN STANLEY INVESTMENTS LP ("MSI-LP") MORGAN STANLEY ALTERNATIVE INVESTMENT PARTNERS LP ("AIP-LP") MORGAN STANLEY AIP GP LP ("AIP GP-LP") MORGAN STANLEY SERVICES COMPANY INC. ("SERVICES") MORGAN STANLEY DISTRIBUTORS INC. ("MORGAN STANLEY DISTRIBUTORS") MORGAN STANLEY DISTRIBUTION, INC. ("MORGAN STANLEY DISTRIBUTION") MORGAN STANLEY & CO. INCORPORATED ("MORGAN STANLEY & CO.") VAN KAMPEN INVESTMENT ADVISORY CORP. ("VKIAC") VAN KAMPEN ASSET MANAGEMENT INC. ("VKAM") VAN KAMPEN ADVISORS INC. ("VK ADVISORS") VAN KAMPEN INVESTMENTS, INC. ("VK INVESTMENTS") VAN KAMPEN FUNDS INC. ("VK FUNDS") 19 EX-99.(Q) 10 c69996bpexv99wxqy.txt POWER OF ATTORNEY EXHIBIT (Q) POWER OF ATTORNEY The undersigned, being officers and trustees of each of the Van Kampen Open End Trusts (individually, a "Trust") as indicated on Schedule 1 attached hereto and incorporated by reference, each a Delaware business trust, except for the Van Kampen Pennsylvania Tax Free Income Fund being a Pennsylvania trust, and being Officers and Directors of Van Kampen Series Fund, Inc. (the "Corporation"), a Maryland corporation, do hereby, in the capacities shown below, appoint Sara L. Badler, Stefanie Chang Yu, Lou Anne McInnis and A. Thomas Smith III, each of New York, New York, as agents and attorneys-in-fact with full power of substitution and resubstitution, for each of the undersigned, in any and all capacities, to execute and deliver, for and on behalf of the undersigned, in any and all capacities, any Registration Statement on Form N-1A (including any and all amendments thereto), any Registration Statement on Form N-14 (including any and all amendments thereto) and any other document, upon the advice of counsel, filed by each Trust or the Corporation with the Securities and Exchange Commission pursuant to the provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of his or their substitute may lawfully do or cause to be done by virtue thereof. This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument. Dated: August 22, 2002
Signature Title --------- ----- /s/ Richard F. Powers, III President, Trustee/Director - ------------------------------------------- Richard F. Powers, III /s/ John L. Sullivan Vice President, Chief Financial Officer and Treasurer - ------------------------------------------- John L. Sullivan /s/ J. Miles Branagan Trustee/Director - ------------------------------------------- J. Miles Branagan /s/ Jerry D. Choate Trustee/Director - ------------------------------------------- Jerry D. Choate /s/ Linda Hutton Heagy Trustee/Director - ------------------------------------------- Linda Hutton Heagy /s/ R. Craig Kennedy Trustee/Director - ------------------------------------------- R. Craig Kennedy /s/ Mitchell M. Merin Trustee/Director - ------------------------------------------- Mitchell M. Merin /s/ Jack E. Nelson Trustee/Director - ------------------------------------------- Jack E. Nelson /s/ Wayne W. Whalen Trustee/Director - ------------------------------------------- Wayne W. Whalen /s/ Suzanne H. Woolsey Trustee/Director - ------------------------------------------- Suzanne H. Woolsey
SCHEDULE 1 VAN KAMPEN U.S. GOVERNMENT TRUST VAN KAMPEN TAX FREE TRUST VAN KAMPEN TRUST VAN KAMPEN EQUITY TRUST VAN KAMPEN EQUITY TRUST II VAN KAMPEN TAX FREE MONEY FUND VAN KAMPEN COMSTOCK FUND VAN KAMPEN CORPORATE BOND FUND VAN KAMPEN EMERGING GROWTH FUND VAN KAMPEN ENTERPRISE FUND VAN KAMPEN EQUITY AND INCOME FUND VAN KAMPEN GOVERNMENT SECURITIES FUND VAN KAMPEN GROWTH AND INCOME FUND VAN KAMPEN HARBOR FUND VAN KAMPEN HIGH INCOME CORPORATE BOND FUND VAN KAMPEN LIFE INVESTMENT TRUST VAN KAMPEN LIMITED MATURITY GOVERNMENT FUND VAN KAMPEN PACE FUND VAN KAMPEN PENNSYLVANIA TAX FREE INCOME FUND VAN KAMPEN REAL ESTATE SECURITIES FUND VAN KAMPEN RESERVE FUND VAN KAMPEN TAX-EXEMPT TRUST VAN KAMPEN U.S. GOVERNMENT TRUST FOR INCOME EX-99.(Z)(1) 11 c69996bpexv99wxzyx1y.txt LIST OF CERTAIN INVESTMENT COMPANIES EXHIBIT (z)(1) Item 27(a) - ---------- Van Kampen U.S. Government Trust Van Kampen U.S. Government Fund Van Kampen Tax Free Trust Van Kampen Insured Tax Free Income Fund Van Kampen Strategic Municipal Income Fund Van Kampen California Insured Tax Free Fund Van Kampen Municipal Income Fund Van Kampen Intermediate Term Municipal Income Fund Van Kampen New York Tax Free Income Fund Van Kampen Trust Van Kampen High Yield Fund Van Kampen Equity Trust Van Kampen Aggressive Growth Fund Van Kampen Growth Fund Van Kampen Select Growth Fund Van Kampen Small Company Growth Fund* Van Kampen Small Cap Growth Fund Van Kampen Small Cap Value Fund Van Kampen Utility Fund Van Kampen Value Opportunities Fund Van Kampen Equity Trust II Van Kampen International Advantage Fund Van Kampen Tax Managed Equity Growth Fund Van Kampen Technology Fund Van Kampen Pennsylvania Tax Free Income Fund Van Kampen Tax Free Money Fund Van Kampen Prime Rate Income Trust Van Kampen Senior Floating Rate Fund Van Kampen Comstock Fund Van Kampen Corporate Bond Fund Van Kampen Emerging Growth Fund Van Kampen Enterprise Fund Van Kampen Equity and Income Fund Van Kampen Exchange Fund Van Kampen Limited Maturity Government Fund Van Kampen Government Securities Fund Van Kampen Growth and Income Fund Van Kampen Harbor Fund Van Kampen High Income Corporate Bond Fund Van Kampen Life Investment Trust on behalf of its series Aggressive Growth Portfolio Comstock Portfolio Emerging Growth Portfolio Enterprise Portfolio Government Portfolio Growth and Income Portfolio Money Market Portfolio Van Kampen Pace Fund Van Kampen Real Estate Securities Fund Van Kampen Reserve Fund Van Kampen Tax Exempt Trust Van Kampen High Yield Municipal Fund Van Kampen Series Fund, Inc. Van Kampen American Value Fund Van Kampen Asian Equity Fund Van Kampen Emerging Markets Debt Fund* Van Kampen Emerging Markets Fund Van Kampen Equity Growth Fund Van Kampen European Value Equity Fund Van Kampen Focus Equity Fund Van Kampen Global Equity Allocation Fund Van Kampen Global Value Equity Fund Van Kampen Growth and Income Fund II* Van Kampen International Magnum Fund Van Kampen Japanese Equity Fund* Van Kampen Latin American Fund Van Kampen Mid Cap Growth Fund Van Kampen Global Franchise Fund Van Kampen Value Fund Van Kampen Worldwide High Income Fund * Funds that have not commenced investment operations. FLORIDA INSURED MUNICIPALS INCOME TRUST SERIES 133 MICHIGAN INSURED MUNICIPALS INCOME TRUST SERIES 171 NEW JERSEY INSURED MUNICIPALS INCOME TRUST SERIES 132 NEW YORK INSURED MUNICIPALS INCOME TRUST SERIES 155 OHIO INSURED MUNICIPALS INCOME TRUST SERIES 115 PENNSYLVANIA INSURED MUNICIPALS INCOME TRUST SERIES 266 INVESTMENT GRADE MUNICIPAL TRUST SERIES 19 INSURED MUNICIPALS INCOME TRUST SERIES 451 LONG TERM INVESTMENT GRADE TRUST SERIES 4 NORTH CAROLINA INVESTORS' QUALITY TAX-EXEMPT TRUST SERIES 97 VIRGINIA INVESTORS' QUALITY TAX-EXEMPT TRUST SERIES 87 VK INSURED INCOME TRUST SERIES 96 CENTRAL EQUITY TRUST DIVERSIFIED INCOME SERIES 7 MORGAN STANLEY CONSUMER INDEX PORTFOLIO SERIES 7 DOW 30 INDEX TRUST SERIES 14 VK STRATEGIC 10 U.S. TRADITIONAL SERIES JULY 2002 SERIES EAFE STRATEGIC 20 TRUST SERIES 23 COMPETITIVE EDGE BEST IDEAS PORTFOLIO SERIES 23 ENERGY PORTFOLIO SERIES 4 FINANCIAL INSTITUTIONS TRUST SERIES 15 SELECT 5 INDUSTRIAL PORTFOLIO SERIES 23 FOCUS VALUE PORTFOLIO SERIES 6 VK GREAT INTERNATIONAL FIRMS TRUST SERIES 20 VK HEALTHCARE AND PHARMACEUTICAL TRUST SERIES 20 VK INTERNET TRUST SERIES 34 STRATEGIC GROWTH LARGE CAP PORTFOLIO SERIES 23 VK LIFE PORTFOLIOS BIOTECHNOLOGY & PHARMACEUTICAL SERIES SERIES 1 VK LIFE PORTFOLIOS INTERNET SERIES SERIES 1 VK LIFE PORTFOLIOS MS HIGH TECHNOLOGY 35 INDEX SERIES SERIES 1 VK LIFE PORTFOLIOS MS US MULTINATIONAL 50 INDEX SERIES SERIES 1 VK LIFE PORTFOLIOS BANDWIDTH & TELECOMMUNICATIONS SERIES SERIES 1 MORGAN STANLEY HI-TECH 35 INDEX TRUST SERIES 26 MORGAN STANLEY US MULTINATL 50 INDEX PORTFOLIO SERIES 12 ROARING 2000S TRUST SERIES 18 ROARING 2000S TRUST, TRADITIONAL SERIES SERIES 13 STRATEGIC SMALL CAP PORTFOLIO SERIES 23 S AND P SELECT CORE 20 PORTFOLIO SERIES 23 SELECT 10 INDUSTRIAL PORTFOLIO SERIES 25 SELECT S AND P INDUSTRIAL PORTFOLIO SERIES 23 MORGAN STANLEY TECHNOLOGY INDEX PORTFOLIO SERIES 23 VK TELECOMMUNICATIONS TRUST SERIES 20 COHEN AND STEERS REIT INCOME PORTFOLIO SERIES 4 SELECT GROWTH TRUST JULY 2002 SERIES TAX EXEMPT TRUST FOR VARIOUS STATE RESIDENTS SERIES 1 AND SUBSEQUENT SERIES INVESTORS' QUALITY TAX-EXEMPT TRUST SERIES 1 AND SUBSEQUENT SERIES THE FIRST NATIONAL DUAL SERIES TAX-EXEMPT BOND TRUST SERIES 3 AND SUBSEQUENT SERIES
EX-99.(Z)(2) 12 c69996bpexv99wxzyx2y.txt LIST OF OFFICERS AND DIRECTORS EXHIBIT (z)(2) Richard F. Powers, III Managing Director, Chairman and New York, NY Chief Executive Officer; President of the Funds John H. Zimmermann, III Managing Director and President; Oakbrook Terrace, IL Vice President of the Funds A. Thomas Smith III Managing Director, General New York, NY Counsel and Secretary; Vice President and Secretary of the Funds Colette M. Saucedo Managing Director and Houston, TX Chief Administrative Officer Dominic C. Martellaro Managing Director Danville, CA Steven M. Massoni Managing Director Oakbrook Terrace, IL David M. Swanson Managing Director Oakbrook Terrace, IL Laurence J. Althoff Executive Director Oakbrook Terrace, IL Don J. Andrews Executive Director & Chief Compliance Oakbrook Terrace, IL Officer Sara L. Badler Executive Director; New York, NY Assistant Secretary of the Funds Patricia A. Bettlach Executive Director Chesterfield, MO Michael P. Boos Executive Director Oakbrook Terrace, IL David S. Hogaboom Executive Director Oakbrook Terrace, IL Michael B. Hughes Executive Director Oakbrook Terrace, IL Maura A. McGrath Executive Director New York, NY Andrew J. Scherer Executive Director Oakbrook Terrace, IL Gwen L. Shaneyfelt Executive Director Oakbrook Terrace, IL Robert Watson Executive Director Oakbrook Terrace, IL Scott Allen Wentsel Executive Director Oakbrook Terrace, IL Patrick M. Zacchea Executive Director Oakbrook Terrace, IL Dominick Cogliandro Executive Director & Asst. Treasurer New York, NY Gary R. DeMoss Executive Director Oakbrook Terrace, IL Richard G. Golod Executive Director Annapolis, MD Eric J. Hargens Executive Director Oakbrook Terrace, IL Troy D. Huber Executive Director Oakbrook Terrace, IL David Linton Executive Director Weston, CT Carl Mayfield Executive Director Lakewood, CO Mark R. McClure Executive Director Oakbrook Terrace, IL Robert F. Muller, Jr. Executive Director Cypress, FL Walter E. Rein Executive Director Oakbrook Terrace, IL James J. Ryan Executive Director Oakbrook Terrace, IL Elizabeth Vale Executive Director West Conshohocken, NJ Robert S. West Executive Director Oakbrook Terrace, IL Edward C. Wood, III Executive Director Oakbrook Terrace. IL James R. Yount Executive Director Coto De Caza, CA Gregory Heffington 1st Vice President Ft. Collins, CO Thomas Rowley 1st Vice President Oakbrook Terrace, IL James D. Stevens 1st Vice President North Andover, MA
James K. Ambrosio Vice President Lloyd Harbor, NY George Steven Amidon Vice President Oakbrook Terrace, IL Johanna Anders Vice President Oakbrook Terrace, IL Leslie Ann Ashton Vice President Salt Lake City, UT Matthew T. Baker Vice President Oakbrook Terrace, IL Scott C. Bernstiel Vice President Freehold, NJ Roger J. Bianco Vice President Highlands Ranch, CO Carol S. Biegel Vice President Naperville, IL Brian E. Binder Vice President Oakbrook Terrace, IL Christopher M. Bisaillon Vice President Chicago, IL William Edwin Bond Vice President New York, NY Elizabeth M. Brown Vice President Houston, TX Michael Winston Brown Vice President Colleyville, TX John T. Browning Vice President Oakbrook Terrace, IL Loren Burket Vice President Plymouth, MN Juanita E. Buss Vice President Kennesaw, GA Richard J. Charlino Vice President Oakbrook Terrace, IL Deanne Margaret Chiaro Vice President Hermosa Beach, CA Scott A. Chriske Vice President Safety Harbor, FL Richard E. Christman Vice President San Francisco, CA German Clavijo Vice President Tucker, GA Michael Colston Vice President Louisville, KY Gina Costello Vice President & Asst. Secretary Oakbrook Terrace, IL Suzanne Cummings Vice President Oakbrook Terrace, IL Pat Flynn Dredze Vice President Oakbrook Terrace, IL Paula Duerr Vice President Oakbrook Terrace, IL Craig Alan Dumnich Vice President Perryville, MD Michael E. Eccleston Vice President Chicago, IL William J. Fow Vice President Redding, CT David Joseph Fredrick Vice President Newton, MA Charles Friday Vice President Gibsonia, PA Robert P. Glover Vice President Princeton, NJ Daniel Hamilton Vice President Austin, TX John G. Hansen Vice President San Francisco, CA William G. Harrigan Vice President New York, NY Michael D. Hibsch Vice President Nashville, TN Kevin P. Holleron Vice President Oakbrook Terrace, IL Michelle Huber Vice President Oakbrook Terrace, IL Lowell Jackson Vice President Roswell, GA Nancy Johannsen Vice President Oakbrook Terrace, IL Laurie L. Jones Vice President Houston, TX Tara Jones Vice President Oakbrook Terrace, IL Louis Gregory Kafkes Vice President Oakbrook Terrace, IL Thomas Patrick Kelly Vice President Oakbrook Terrace, IL Robert Daniel Kendall Vice President Oakbrook Terrace, IL Gary F. Kleinschmidt Vice President Chalfont, PA Frederick Kohly Vice President Miami, FL Lisa Therese Kueng Vice President Oakbrook Terrace, IL Tony E. Leal Vice President Houston, TX
Holly Lieberman Vice President Oakbrook Terrace, IL Ivan R. Lowe Vice President Houston, TX Richard M. Lundgren Vice President River Forest, IL Christopher Mackay Vice President Ann Arbor, MI Douglas M. Macomber Vice President Elmhurst, IL Eric J. Marmoll Vice President Oakbrook Terrace, IL Anne Therese McGrath Vice President San Francisco, CA John Mills Vice President Kenner, LA Elisa R. Mitchell Vice President & Assistant Secretary Oakbrook Terrace, IL Stuart R. Moehlman Vice President Houston, TX Alexis Montoya Vice President New York, NY Sterling Tyler Moore Vice President San Francisco, CA Lance O'Brian Murphy Vice President Dallas, TX Grant R. Myers Vice President Houston, TX Elizabeth A. Nelson Vice President & Assistant Secretary Oakbrook Terrace, IL Peter Nicholas Vice President Marblehead, MA James A. O'Brien Vice President Rochester, NY Mark E. O'Donnell Vice President Watertown, MA Timothy Jay Ott Vice President Highland, VA Pete Papageorgakis Vice President Oakbrook Terrace, IL Gregory S. Parker Vice President Bellaire, TX Paul R. Peterson Vice President Oakbrook Terrace, IL Richard J. Poli Vice President Downingtown, PA Shannon C. Poley Vice President Oakbrook, IL Ronald E. Pratt Vice President Alpharetta, GA Theresa Marie Renn Vice President Oakbrook Terrace, IL Kevin Wayne Reszel Vice President Oakbrook Terrace, IL Michael W. Rohr Vice President Naperville, IL Suzette N. Rothberg Vice President Maple Grove, MN Jason F. Ruimerman Vice President Salem, MA Thomas J. Sauerborn Vice President New York, NY Diane Saxon Vice President & Assistant Treasurer Oakbrook Terrace, IL Maura Scherer Vice President Oakbrook Terrace, IL Stanley S. Schiewe Vice President Keller, TX Timothy M. Scholten Vice President New Albany, OH Robert Schumacher Vice President Oakbrook Terrace, IL Frank Skubic Vice President San Francisco, CA Heather Smith Vice President Richmond, VA Christopher J. Staniforth Vice President Leawood, KS Richard Stefanec Vice President Tarzana, CA Terry L. Swenson Vice President Amery, WI Brian S. Terwilliger Vice President Oakbrook Terrace, IL Joseph L. Thomas Vice President San Diego, CA Albert L. Thompson Vice President Oakbrook Terrace, IL John F. Tierney Vice President Oakbrook Terrace, IL Hugh C. Triplett Vice President Thousand Oaks, CA Thomas Buckley Tyson Vice President Oakbrook Terrace, IL Brett Van Bortel Vice President Oakbrook Terrace, IL Larry Brian Vickrey Vice President Houston, TX Daniel B. Waldron Vice President Oakbrook Terrace, IL Jeff Warland Vice President Oakbrook Terrace, IL Sharon Wells Coicou Vice President New York, NY Steven P. Werner Vice President Mission Viejo, CA Harold Whitworth, III Vice President Liberty Township, OH Joel John Wilczewski Vice President Franklin, TN Thomas M. Wilson Vice President Oakbrook Terrace, IL Barbara A. Withers Vice President Oakbrook Terrace, IL John Wyckoff Vice President Santa Monica, CA
David M. Wynn Vice President Chandler, AZ Lynn Chadderton Asst. Vice President Valrico, FL Regina Coleman Asst. Vice President Oakbrook Terrace, IL Kristen L. Doss Asst. Vice President Houston, TX Tammy Echevarria-Davis Asst. Vice President Oakbrook Terrace, IL Craig S. Falduto Asst. Vice President Oakbrook Terrace, IL Walter C. Gray Asst. Vice President Oakbrook Terrace, IL Thomas Johnson Asst. Vice President New York NY Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL Dennis M. Rady Asst. Vice President Oakbrook Terrace, IL Leah Richardson Asst. Vice President Oakbrook Terrace, IL David P. Robbins Asst. Vice President Oakbrook Terrace, IL Pamela S. Salley Asst. Vice President Houston, TX David T. Saylor Asst. Vice President Oakbrook Terrace, IL Lisa Schultz Asst. Vice President Oakbrook Terrace, IL Laurel Shipes Asst. Vice President Duluth, GA Michael Trizil Asst. Vice President Oakbrook Terrace, IL David H. Villarreal Asst. Vice President Oakbrook Terrace, IL Judy Wooley Asst. Vice President Houston, TX Cathy Napoli Assistant Secretary Oakbrook Terrace, IL Scott P. Pedersen Assistant Secretary Oakbrook Terrace, IL John Browning Officer Oakbrook Terrace, IL Leticia George Officer Houston, TX William D. McLaughlin Officer Houston, TX Rebecca Newman Officer Houston, TX John Yovanovic Officer Houston, TX Richard F. Powers, III Director New York, NY A. Thomas Smith III Director New York, NY John H. Zimmermann, III Director Oakbrook Terrace, IL
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