N-CSR 1 c77846nvcsr.txt CERTIFIED SHAREHOLDER REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-02482 Van Kampen Reserve Fund -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 1221 Avenue of the Americas NY NY 10020 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Ronald Robison 1221 Avenue of the Americas New York, NY 10020 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 ----------------------------- Date of fiscal year end: 05/31/03 ----------- Date of reporting period: 05/31/03 ----------- Item 1. Report to Shareholders Welcome, Shareholder In this update, you'll learn about how your fund performed during the reporting period. The portfolio management team will provide an overview of the market climate, and discuss some of the factors that helped or hindered performance during the reporting period. In addition, this report includes the fund's financial statements and a list of fund investments, as well as other information. This material must be preceded or accompanied by a prospectus for the fund being offered. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the fund will achieve its investment objective. The fund is subject to market risk which is the possibility that the market values of securities owned by the fund will decline and, therefore, the value of the fund shares may be less than what you paid for them. Accordingly, you can lose money investing in this fund. Please see the prospectus for more complete information on investment risks. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Performance Summary
A SHARES B SHARES C SHARES since 7/12/74 since 4/18/95 since 4/18/95 --------------------------------------------------------------------------------------------- AVERAGE ANNUAL W/O SALES W/SALES W/O SALES W/SALES W/O SALES W/SALES TOTAL RETURNS CHARGES CHARGES CHARGES CHARGES CHARGES CHARGES Since Inception 6.58% -- 3.39% 3.39% 3.20% 3.20% 10-year 3.84 -- -- -- -- -- 5-year 3.52 -- 2.76 2.49 2.76 2.76 1-year 0.89 -- 0.13 -3.87 0.17 -0.83 ---------------------------------------------------------------------------------------------
Past performance is no guarantee of future results. An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation nor any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. The returns shown in this report do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. As a result of recent market activity, current performance may vary from the figures shown. For more up-to-date information, please visit vankampen.com or speak with your financial advisor. Average annual total return includes a contingent deferred sales charge of 4.00 percent for Class B shares (in the first and second year and declining to zero after year five), a contingent deferred sales charge of 1.00 percent for Class C shares in year one and combined Rule 12b-1 fees and service fees of up to 0.15 percent for Class A shares and 0.90 percent for Class B and C shares. Certain non-recurring payments were made to Class C Shares, resulting in an increase to the one-year total return by approximately .05%. The fund's adviser has waived or reimbursed fees and expenses from time to time; absent such waivers/reimbursements, the fund's returns would have been lower. Figures shown above assume reinvestment of all dividends and capital gains. 1 Fund Report FOR THE TWELVE-MONTH PERIOD ENDING MAY 31, 2003 Van Kampen Reserve Fund is managed by Dale Albright, Executive Director; and Jonathan Page, Managing Director(1). This discussion reflects the team's views of the fund's performance. Q. BEFORE YOU DISCUSS HOW THE FUND PERFORMED, PLEASE DESCRIBE THE OVERALL MARKET ENVIRONMENT. A. The Federal Reserve (the Fed) has been taking an accommodative posture as it tries to accelerate the slow pace of economic activity. -- On November 2, 2002, the U.S. Federal Open Market Committee (FOMC) reduced its target rate for federal funds to 1.25 percent, a 42-year low. -- Although it has maintained this target rate, the Fed recently changed its formal economic assessment to one that indicates economic risks in the foreseeable future are tilted toward weakness. Against this backdrop, money market fund yield levels have fallen to record lows. Recent economic data continued to reflect a fairly weak economy. -- Preliminary first quarter 2003 Gross Domestic Product (GDP) growth rose by only 1.9 percent, up slightly from 1.4 percent in the fourth quarter of 2002, as high levels of uncertainty slowed the U.S. economy. -- Consumer confidence fell monthly during the first quarter of this year, but bounced higher in April as the war in Iraq was substantially concluded. -- Nonfarm payrolls and manufacturing have also been generally declining. Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? A. The fund continued to serve as a useful investment for liquidity and preservation of capital, and generated a yield that reflects prevailing money market conditions. As of May 31, 2003: -- The fund's seven-day average yield was 0.82 percent for Class A shares, 0.05 percent for Class B shares, and 0.06 percent for Class C shares, with an effective annual yield of 0.82 percent for Class A shares, 0.05 percent for Class B shares, and 0.06 percent for Class C shares. -- For the one-year period, the fund posted a total return at net asset value of 0.89 percent for Class A shares, 0.13 percent for Class B shares, and 0.17 percent for Class C shares. Including sales charges, (1)Team members may change without notice at any time. 2 the fund's total return for Class B and C shares was -3.87 percent and -0.83 percent, respectively. (No sales charge is assessed on purchases of Class A shares; other charges may apply.) Q. PLEASE WALK US THROUGH HOW YOU POSITIONED THE FUND, HIGHLIGHTING KEY THEMES. A. We continued our strategy of positioning the fund for stability of principal with a very high degree of liquidity. -- We continued to invest in high-quality commercial paper, Federal agency obligations, overnight repurchase agreements, and bank notes and negotiable certificates of deposit of financially strong commercial banks. -- We maintained our high credit standards by continuing to use a significant proportion of Federal agency obligations, especially in the three-month and longer maturity segment. At the same time, we attempted to limit purchases of corporate obligations to only those issuers that possess both top short-term credit ratings and relatively high long-term debt ratings. -- Our primary strategy has been to prudently maintain the average maturity of the portfolio. As of May 31, 2003, the fund's weighted average maturity was 45 days; 93 percent of holdings were due to mature in less than three months. Q. NOW THAT YOU'VE PROVIDED AN OVERVIEW OF THE FUND, DO YOU HAVE ANY CLOSING THOUGHTS FOR THE SHAREHOLDERS? A. The pace of economic activity in the U.S. in early 2003 was constrained by unstable geopolitical conditions and harsh winter weather in parts of the country. When some of the world's problems become less threatening, we expect consumer and business confidence to improve. This, coupled with the stimulative monetary and fiscal conditions PORTFOLIO COMPOSITION AS OF 5/31/03 Commercial Paper 45.0% U.S. Government Agency 24.9 Certificates of Deposit 16.8 Repurchase Agreements 8.4 Notes 4.9
Subject to change daily. All percentages are as a percentage of total investments. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisor services. 3 already in place, could lead to a meaningful economic expansion. If this environment occurs, we anticipate moderately higher short-term interest rates, perhaps in the first half of 2004, which may help boost the fund's yield. Investment Strategy -- Allocate assets and select maturities based on the shape of the money market yield curve and evaluation of internal and external interest rate forecasts. We gradually shift the portfolio's average maturity slightly shorter or longer, based upon several factors that include portfolio valuation, recent cash flow experience, and current and anticipated shifts in the money market yield curve and interest rates. -- Seek to maintain diversification among sectors. We invest primarily in high-quality commercial paper, negotiable certificates of deposit and bank notes of carefully selected, large depository institutions, and Federal agency and Treasury obligations. -- Formal credit reviews and frequent monitoring of all investments are standard operating procedures. While nationally recognized ratings serve as the starting point for any potential investment, we go far beyond these ratings as part of our due diligence process. Our team continuously reviews and reassesses the relative and absolute desirability of an issuer's obligations, using both fundamental and quantitative analysis. 4 ANNUAL HOUSEHOLDING NOTICE To reduce fund expenses, the fund attempts to eliminate duplicate mailings to the same address. The fund delivers a single copy of certain shareholder documents to investors who share an address, even if the accounts are registered under different names. The fund's prospectuses and shareholder reports (including annual privacy notices) will be delivered to you in this manner indefinitely unless you instruct us otherwise. You can request multiple copies of these documents by either calling (800) 341-2911 or writing to Van Kampen Investor Services at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, IL 60181. Once Investor Services has received your instructions, we will begin sending individual copies for each account within 30 days. 5 BY THE NUMBERS YOUR FUND'S INVESTMENTS May 31, 2003 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 45.8% $30,000 AIG Funding Inc. ............................. 06/13/03 1.227% $ 29,987,750 25,000 American Express Credit....................... 06/03/03 1.241 24,998,278 25,000 BMW US Capital Corp. ......................... 07/22/03 1.213 24,957,146 40,000 Citicorp...................................... 06/18/03 1.231 39,976,767 25,000 Ei Dupont de Nemours Co....................... 07/22/03 1.182 24,958,208 20,000 General Electric Capital Corp. ............... 06/25/03 1.174 19,984,400 20,000 General Electric Capital Corp. ............... 07/25/03 1.223 19,963,400 20,000 Mortgage Interest Networking Trust............ 06/16/03 1.251 19,989,583 21,000 Mortgage Interest Networking Trust............ 06/20/03 1.251 20,986,146 45,000 New Center Asset Trust........................ 06/24/03 1.253 44,964,062 25,000 Northern Trust Corp. ......................... 08/07/03 1.224 24,943,236 40,000 Shell Finance PLC (United Kingdom)............ 08/04/03 1.203 39,914,667 40,000 Societe Generale North America Inc. .......... 08/06/03 1.213 39,911,267 40,000 UBS Finance LLC (Delaware).................... 06/23/03 1.247 39,969,567 ------------ TOTAL COMMERCIAL PAPER............................................. 415,504,477 ------------ U.S. GOVERNMENT AND AGENCY OBLIGATIONS 25.4% 10,000 Federal Farm Credit Bank Discount Note........ 08/06/03 1.477 9,973,233 20,000 Federal Home Loan Bank Discount Note.......... 06/11/03 1.257 19,993,055 15,000 Federal Home Loan Mortgage Corporation Discount Note................................. 07/17/03 1.763 14,966,650 20,000 Federal Home Loan Mortgage Corporation Discount Note................................. 10/27/03 1.187 19,902,978 25,000 Federal Home Loan Mortgage Corporation Discount Note................................. 12/12/03 1.130 24,849,111 20,000 Federal National Mortgage Association Discount Note.......................................... 07/02/03 1.257 19,978,472 50,000 Federal National Mortgage Association Discount Note.......................................... 07/31/03 1.236 49,897,500 11,000 Federal National Mortgage Association Discount Note.......................................... 08/22/03 1.776 10,956,153 40,000 Federal National Mortgage Association Discount Note.......................................... 08/27/03 1.179 39,886,417 20,000 Federal National Mortgage Association Discount Note.......................................... 11/05/03 1.137 19,901,439 ------------ TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS....................... 230,305,008 ------------
6 See Notes to Financial Statements YOUR FUND'S INVESTMENTS May 31, 2003
DISCOUNT PAR YIELD ON AMOUNT MATURITY DATE OF AMORTIZED (000) DESCRIPTION DATE PURCHASE COST CERTIFICATES OF DEPOSIT 17.1% $45,000 Canadian Imperial Bank of Commerce............ 06/12/03 1.220% $ 45,000,000 40,000 Chase Manhattan Bank NA....................... 07/03/03 1.240 40,000,000 30,000 State Street Bank & Trust..................... 07/15/03 1.230 30,000,000 40,000 Wells Fargo Bank NA........................... 07/07/03 1.230 40,000,000 ------------ TOTAL CERTIFICATES OF DEPOSIT...................................... 155,000,000 ------------ NOTE 4.9% 45,000 LaSalle Bank NA............................... 06/05/03 1.220 45,000,000 ------------ REPURCHASE AGREEMENTS 8.5% Banc of America Securities LLC ($77,400,000 par collateralized by U.S. Government obligations in a pooled cash account, dated 05/30/03, to be sold on 06/02/03 at $77,408,192)...................................................... 77,400,000 ------------ TOTAL INVESTMENTS 101.7% (A)................................................. 923,209,485 LIABILITIES IN EXCESS OF OTHER ASSETS (1.7%)................................. (15,790,170) ------------ NET ASSETS 100.0%............................................................ $907,419,315 ============
(a) At May 31, 2003, cost is identical for both book and federal income taxes. See Notes to Financial Statements 7 FINANCIAL STATEMENTS Statement of Assets and Liabilities May 31, 2003 ASSETS: Total Investments, at amortized cost which approximates market value.............................................. $923,209,485 Receivables: Fund Shares Sold.......................................... 1,679,298 Interest.................................................. 279,639 Expense Reimbursement from Adviser........................ 61,578 Other....................................................... 143,746 ------------ Total Assets............................................ 925,373,746 ------------ LIABILITIES: Payables: Fund Shares Repurchased................................... 16,557,313 Distributor and Affiliates................................ 739,487 Custodian Bank............................................ 201,138 Income Distributions...................................... 17,157 Accrued Expenses............................................ 251,243 Trustees' Deferred Compensation and Retirement Plans........ 188,093 ------------ Total Liabilities....................................... 17,954,431 ------------ NET ASSETS.................................................. $907,419,315 ============ NET ASSETS CONSIST OF: Capital (Par value of $.01 per share with an unlimited number of shares authorized).............................. $907,410,914 Accumulated Undistributed Net Investment Income............. 39,893 Accumulated Net Realized Loss............................... (31,492) ------------ NET ASSETS.................................................. $907,419,315 ============ MAXIMUM OFFERING PRICE PER SHARE: Class A Shares: Net asset value, offering price and redemption price per share (Based on net assets of $501,449,682 and 501,488,841 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 $349,801,270 and 349,805,100 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 $56,168,363 and 56,161,890 shares of beneficial interest issued and outstanding)............. $ 1.00 ============
8 See Notes to Financial Statements Statement of Operations For the Year Ended May 31, 2003 INVESTMENT INCOME: Interest.................................................... $15,448,686 ----------- EXPENSES: Distribution (12b-1) and Service Fees (Attributed to Classes A, B and C of $780,613, $3,433,550 and $530,500, respectively)............................................. 4,744,663 Investment Advisory Fee..................................... 3,799,489 Shareholder Services........................................ 2,480,387 Custody..................................................... 154,782 Trustees' Fees and Related Expenses......................... 30,586 Legal....................................................... 29,688 Other....................................................... 385,742 ----------- Total Expenses.......................................... 11,625,337 Investment Advisory Fee Reduction....................... 1,516,637 Less Credits Earned on Cash Balances.................... 79,112 ----------- Net Expenses............................................ 10,029,588 ----------- NET INVESTMENT INCOME....................................... $ 5,419,098 =========== NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 5,419,098 ===========
See Notes to Financial Statements 9 Statements of Changes in Net Assets
YEAR ENDED YEAR ENDED MAY 31, 2003 MAY 31, 2002 ---------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.................................. $ 5,419,098 $ 14,409,154 --------------- --------------- Distributions from Net Investment Income: Class A Shares....................................... (4,773,928) (9,391,875) Class B Shares....................................... (508,801) (4,252,158) Class C Shares....................................... (106,105) (748,354) --------------- --------------- Total Distributions.................................... (5,388,834) (14,392,387) --------------- --------------- NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.... 30,264 16,767 --------------- --------------- FROM CAPITAL TRANSACTIONS: Proceeds from Shares Sold.............................. 2,304,701,987 1,896,126,309 Net Asset Value of Shares Issued Through Dividend Reinvestment......................................... 5,388,834 14,392,387 Cost of Shares Repurchased............................. (2,210,465,643) (1,956,211,417) --------------- --------------- NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS..... 99,625,178 (45,692,721) --------------- --------------- TOTAL INCREASE/DECREASE IN NET ASSETS.................. 99,655,442 (45,675,954) NET ASSETS: Beginning of the Period................................ 807,763,873 853,439,827 --------------- --------------- End of the Period (Including accumulated undistributed net investment income of $39,893 and $2,513, respectively)........................................ $ 907,419,315 $ 807,763,873 =============== ===============
10 See Notes to Financial Statements 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 ---------------------------------------------- 2003 2002 2001 2000 1999 ---------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ Net Investment Income...................... .01 .02 .05 .05 .04 Less Distributions from Net Investment Income................................... .01 .02 .05 .05 .04 ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== Total Return* (b)............................ 0.89% 1.93% 5.35%(a) 4.92% 4.55% Net Assets at End of the Period (In millions).................................. $501.4 $458.0 $451.7 $573.3 $529.6 Ratio of Expenses to Average Net Assets* (c)........................................ .69% .91% .95% .82% .84% Ratio of Net Investment Income to Average Net Assets*.................................... .89% 1.94% 5.22% 4.71% 4.38% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets (c)................................... .85% N/A N/A N/A N/A Ratio of Net Investment Income to Average Net Assets.................... .73% N/A N/A N/A N/A
(a) If certain losses had not been assumed by Van Kampen, total return would have been lower by less than .01%. (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) 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 years ended May 31, 2003 and May 31, 1999. N/A=Not Applicable See Notes to Financial Statements 11 Financial Highlights THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
YEAR ENDED MAY 31, CLASS B SHARES ---------------------------------------------- 2003 2002 2001 2000 1999 ---------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ Net Investment Income...................... -0-(d) .01 .05 .04 .04 Less Distributions from Net Investment Income................................... -0-(d) .01 .05 .04 .04 ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== Total Return*(b)............................. 0.13% 1.16% 4.66%(a) 4.14% 3.78% Net Assets at End of the Period (In millions).................................. $349.8 $299.1 $338.7 $238.8 $129.8 Ratio of Expenses to Average Net Assets* (c)........................................ 1.45% 1.67% 1.58% 1.57% 1.63% Ratio of Net Investment Income to Average Net Assets*.................................... .13% 1.17% 4.43% 3.96% 3.71% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets (c)................................... 1.61% N/A N/A N/A N/A Ratio of Net Investment Loss to Average Net Assets............................ (.03%) N/A N/A N/A N/A
(a) If certain losses had not been assumed by Van Kampen, total return would have been lower by less than .01%. (b) 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. (c) 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 years ended May 31, 2003 and May 31, 1999. (d) Amount is less than $.01. N/A=Not Applicable 12 See Notes to Financial Statements 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 ---------------------------------------------- 2003 2002 2001 2000 1999 ---------------------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ Net Investment Income...................... -0-(d) .01 .05 .04 .04 Less Distributions from Net Investment Income................................... -0-(d) .01 .05 .04 .04 ------ ------ ------ ------ ------ NET ASSET VALUE, END OF THE PERIOD........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== Total Return* (b)............................ 0.17% 1.23% 4.57%(a) 4.14% 3.77% Net Assets at End of the Period (In millions).................................. $ 56.2 $ 50.7 $ 63.0 $ 54.7 $ 26.9 Ratio of Expenses to Average Net Assets* (c)........................................ 1.41% 1.60% 1.69% 1.57% 1.63% Ratio of Net Investment Income to Average Net Assets*.................................... .17%(e) 1.29% 4.40% 3.96% 3.73% * If certain expenses had not been voluntarily assumed by Van Kampen, total return would have been lower and the ratios would have been as follows: Ratio of Expenses to Average Net Assets (c)................................... 1.57% N/A N/A N/A N/A Ratio of Net Investment Income to Average Net Assets.................... .01%(e) N/A N/A N/A N/A
(a) If certain losses had not been assumed by Van Kampen, total return would have been lower by less than .01%. (b) 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. (c) 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 years ended May 31, 2003 and May 31, 1999. (d) Amount is less than $.01. (e) Certain non-recurring payments were made to Class C Shares, resulting in an increase to the ratio of net investment income to average net assets of .05%. N/A=Not Applicable See Notes to Financial Statements 13 NOTES TO FINANCIAL STATEMENTS 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, 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 14 NOTES TO FINANCIAL STATEMENTS such losses against any future realized capital gains. At May 31, 2003, the Fund had an accumulated capital loss carryforward for tax purposes of $19,288 which will expire between May 31, 2004 and May 31, 2009. Of this amount, $9,826 will expire on May 31, 2004. 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 the years ended May 31, 2003 and 2002 were as follows:
2003 2002 Distributions paid from: Ordinary income........................................... $5,400,589 $14,639,745
Due to 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. A permanent book and tax difference relating to expenses which are not deductible for tax purposes totaling $3,010 was reclassified from accumulated undistributed net investment income to capital. Additionally, a permanent book tax difference relating to the Fund's investments in other regulated investment companies totaling $3,857 was reclassified from accumulated undistributed net investment income to accumulated net realized gains/losses. Also a permanent book tax difference relating to the Fund's investments in other regulated investment companies totaling $249 was reclassified from accumulated undistributed net investment income to capital. As of May 31, 2003, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $249,513
Net realized gains or losses may differ for financial and tax reporting purposes primarily as a result of the deferral of losses relating to post October 31 losses which are not recognized for tax purposes until the first day of the following fiscal year. F. EXPENSE REDUCTIONS During the period ended May 31, 2003, the Fund's custody fee was reduced by $79,112 as a result of credits earned on cash balances. 15 NOTES TO FINANCIAL STATEMENTS 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, 2003, the Adviser voluntarily waived $1,516,637 of its investment advisory fees. This waiver is voluntary in nature and can be discontinued at the Adviser's discretion. For the year ended May 31, 2003, the Fund recognized expenses of approximately $29,700 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, 2003, the Fund recognized expenses of approximately $71,900 representing Van Kampen Investments Inc.'s 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. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the year ended May 31, 2003, the Fund recognized expenses of approximately $1,950,900 representing transfer agency fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Board of Trustees. 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 $102,000 are included in "Other" assets on the Statement of Assets and Liabilities at May 31, 2003. 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 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. 16 NOTES TO FINANCIAL STATEMENTS 3. CAPITAL TRANSACTIONS At May 31, 2003, capital aggregated $501,452,585, $349,799,299 and $56,159,030 for Classes A, B, and C, respectively. For the year ended May 31, 2003, transactions were as follows:
SHARES VALUE Sales: Class A............................................... 1,778,019,559 $ 1,778,019,559 Class B............................................... 427,304,116 427,304,116 Class C............................................... 99,378,312 99,378,312 -------------- --------------- Total Sales............................................. 2,304,701,987 $ 2,304,701,987 ============== =============== Dividend Reinvestment: Class A............................................... 4,830,628 $ 4,830,628 Class B............................................... 461,020 461,020 Class C............................................... 97,186 97,186 -------------- --------------- Total Dividend Reinvestment............................. 5,388,834 $ 5,388,834 ============== =============== Repurchases: Class A............................................... (1,739,422,702) $(1,739,422,702) Class B............................................... (377,039,529) (377,039,529) Class C............................................... (94,003,412) (94,003,412) -------------- --------------- Total Repurchases....................................... (2,210,465,643) $(2,210,465,643) ============== ===============
17 NOTES TO FINANCIAL STATEMENTS 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) ============== ===============
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, 2003 and 2002, 11,787,742 and 18,883,624 Class B Shares automatically converted to Class A Shares, respectively. 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, 2003 and 2002, 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 18 NOTES TO FINANCIAL STATEMENTS 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 period ended May 31, 2003, Van Kampen, as Distributor for the Fund, received net commissions on redeemed shares which were subject to a CDSC of approximately $2,834,900. 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, 2003, are payments retained by Van Kampen of approximately $3,048,200 and payments made to Morgan Stanley DW Inc., an affiliate of the Adviser, of approximately $14,300. Also, the amount of distribution expense incurred by Van Kampen and not yet reimbursed was approximately $8,604,300 and $0 for Class B and Class C Shares, respectively. These amounts may be recovered from future payments under the plan or CDSC. 19 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 of Van Kampen Reserve Fund (the "Fund"), including the portfolio of investments, as of May 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four 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 the year 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, 2003 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 Van Kampen Reserve Fund at May 31, 2003, 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 four years in the period then ended in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Chicago, Illinois July 15, 2003 20 BOARD OF TRUSTEES AND IMPORTANT ADDRESSES VAN KAMPEN RESERVE FUND BOARD OF TRUSTEES DAVID C. ARCH(1) J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER(1) LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J. KERR(1) MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN(1) WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT INC. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 DISTRIBUTOR VAN KAMPEN FUNDS INC. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 947 Jersey City, New Jersey 07303-0947 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS ERNST & YOUNG LLP 233 South Wacker Drive Chicago, Illinois 60606 (1) Appointed to the Board of Trustees effective July 23, 2003. * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 21 TRUSTEE AND OFFICER INFORMATION The business and affairs of the Fund are managed under the direction of the Fund's Board of Trustees and the Fund's officers appointed by the Board of Trustees. The tables below list the trustees and executive officers of the Fund and their principal occupations during the last five years, other directorships held by trustees and their affiliations, if any, with Van Kampen Investments Inc. ("Van Kampen Investments"), Van Kampen Investment Advisory Corp. ("Advisory Corp."), Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). Advisory Corp. and Asset Management sometimes are referred to herein collectively as the "Advisers." The term "Fund Complex" includes each of the investment companies advised by the Advisers or their affiliates as of the date of this Statement of Additional Information. Trustees serve until reaching their retirement age or until their successors are duly elected and qualified. Officers are annually elected by the trustees. INDEPENDENT TRUSTEES
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE David C. Arch (58) Trustee Trustee Chairman and Chief 91 Trustee/Director/Managing Blistex Inc. since 2003 Executive Officer of General Partner of funds 1800 Swift Drive Blistex Inc., a consumer in the Fund Complex. Oak Brook, IL 60523 health care products manufacturer. Former Director of the World Presidents Organization-Chicago Chapter. Director of the Heartland Alliance, a nonprofit organization serving human needs based in Chicago. J. Miles Branagan (71) Trustee Trustee Private investor. 89 Trustee/Director/Managing 1632 Morning Mountain Road since 1991 Co-founder, and prior to General Partner of funds Raleigh, NC 27614 August 1996, Chairman, in the Fund Complex. 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.
22
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Jerry D. Choate (64) Trustee Trustee Prior to January 1999, 89 Trustee/Director/Managing 33971 Selva Road since 1999 Chairman and Chief General Partner of funds Suite 130 Executive Officer of the in the Fund Complex. Dana Point, CA 92629 Allstate Corporation Director of Amgen Inc., a ("Allstate") and Allstate biotechnological company, Insurance Company. Prior and Director of Valero to January 1995, Energy Corporation, an President and Chief independent refining Executive Officer of company. Allstate. Prior to August 1994, various management positions at Allstate. Rod Dammeyer (62) Trustee Trustee President of CAC, llc., a 91 Trustee/Director/Managing CAC, llc. since 2003 private company offering General Partner of funds 4350 LaJolla Village Drive capital investment and in the Fund Complex. Suite 980 management advisory Director of TeleTech San Diego, CA 92122-6223 services. Prior to July Holdings Inc., 2000, Managing Partner of Stericycle, Inc., Equity Group Corporate TheraSense, Inc., GATX Investment (EGI), a Corporation, Arris Group, company that makes Inc. and Trustee of the private investments in University of Chicago other companies. Hospitals and Health Systems. Prior to May 2002, Director of Peregrine Systems Inc. Prior to February 2001, Vice Chairman and Director of Anixter International, Inc. and IMC Global Inc. Prior to July 2000, Director of Allied Riser Communications Corp., Matria Healthcare Inc., Transmedia Networks, Inc., CNA Surety, Corp. and Grupo Azcarero Mexico (GAM). Prior to April 1999, Director of Metal Management, Inc.
23
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Linda Hutton Heagy (55) Trustee Trustee Managing Partner of 89 Trustee/Director/Managing Heidrick & Struggles since 1995 Heidrick & Struggles, an General Partner of funds 233 South Wacker Drive executive search firm. in the Fund Complex. Suite 7000 Trustee on the University Chicago, IL 60606 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 of 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. Prior to 1995, Executive Vice President of ABN AMRO, N.A., a bank holding company. Prior to 1992, Executive Vice President of La Salle National Bank. R. Craig Kennedy (51) Trustee Trustee Director and President of 89 Trustee/Director/Managing 11 DuPont Circle, N.W. since 1995 the German Marshall Fund General Partner of funds Washington, D.C. 20016 of the United States, an in the Fund Complex. independent U.S. foundation created to deepen understanding, promote collaboration and stimulate exchanges of practical experience between Americans and Europeans. 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. Howard J Kerr (67) Trustee Trustee Prior to 1998, President 91 Trustee/Director/Managing 736 North Western Avenue since 2003 and Chief Executive General Partner of funds P.O. Box 317 Officer of Pocklington in the Fund Complex. Lake Forest, IL 60045 Corporation, Inc., an Director of the Lake investment holding Forest Bank & Trust. company. Director of the Marrow Foundation
24
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Jack E. Nelson (67) Trustee Trustee President of Nelson 89 Trustee/Director/Managing 423 Country Club Drive since 1995 Investment Planning General Partner of funds Winter Park, FL 32789 Services, Inc., a in the Fund Complex. financial planning company and registered investment adviser in the State of Florida. President of Nelson Ivest Brokerage Services Inc., a member of the NASD, Securities Investors Protection Corp. and the Municipal Securities Rulemaking Board. President of Nelson Sales and Services Corporation, a marketing and services company to support affiliated companies. Hugo F. Sonnenschein (62) Trustee Trustee President Emeritus and 91 Trustee/Director/Managing 1126 E. 59th Street since 2003 Honorary Trustee of the General Partner of funds Chicago, IL 60637 University of Chicago and in the Fund Complex. the Adam Smith Director of Winston Distinguished Service Laboratories, Inc. Professor in the Department of Economics at the University of Chicago. Prior to July 2000, President of the University of Chicago. Trustee of the University of Rochester and a member of its investment committee. Member of the National Academy of Sciences, the American Philosophical Society and a fellow of the American Academy of Arts and Sciences. Suzanne H. Woolsey (61) Trustee Trustee Chief Communications 89 Trustee/Director/Managing 2101 Constitution Ave., N.W. since 1999 Officer of the National General Partner of funds Room 285 Academy of in the Fund Complex. Washington, D.C. 20418 Sciences/National Director of Neurogen Research Council, an Corporation, a independent, federally pharmaceutical company, chartered policy since January 1998. institution, since 2001 and previously Chief Operating Officer from 1993 to 2001. Director of the Institute for Defense Analyses, a federally funded research and development center, Director of the German Marshall Fund of the United States, and Trustee of Colorado College. 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.
25 INTERESTED TRUSTEES*
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Mitchell M. Merin* (49) Trustee, Trustee President and Chief 89 Trustee/Director/Managing 1221 Avenue of the Americas President since 1999 Executive Officer of General Partner of funds New York, NY 10020 and Chief funds in the Fund in the Fund Complex. Executive Complex. Chairman, Officer President, Chief Executive Officer and Director of the Advisers and VK Advisors Inc. since December 2002. Chairman, President and Chief Executive Officer of Van Kampen Investments since December 2002. Director of Van Kampen Investments since December 1999. Chairman and Director of Van Kampen Funds Inc. since December 2002. President, Director and Chief Operating Officer of Morgan Stanley 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 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. Previously Chief Executive Officer of Van Kampen Funds Inc. from December 2002 to July 2003, Chief Strategic Officer of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. and Executive Vice President of Morgan Stanley Distributors Inc. from April 1997 to June 1998. Chief Executive Officer from September 2002 to April 2003 and Vice President from May 1997 to April 1999 of the Morgan Stanley Funds.
26
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INTERESTED TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Richard F. Powers, III* (57) Trustee Trustee Advisory Director of 91 Trustee/Director/Managing 1 Parkview Plaza since 1999 Morgan Stanley. Prior to General Partner of funds P.O. Box 5555 December 2002, Chairman, in the Fund Complex. Oakbrook Terrace, IL 60181 Director, President, Chief Executive Officer and Managing Director of Van Kampen Investments and its investment advisory, distribution and other subsidiaries. Prior to December 2002, President and Chief Executive Officer of funds in the Fund Complex. Prior to May 1998, Executive Vice President and Director of Marketing at Morgan Stanley and Director of Dean Witter, Discover & Co. and Dean Witter Realty. Prior to 1996, Director of Dean Witter Reynolds Inc. Wayne W. Whalen* (63) Trustee Trustee Partner in the law firm 91 Trustee/Director/Managing 333 West Wacker Drive since 1995 of Skadden, Arps, Slate, General Partner of funds Chicago, IL 60606 Meagher & Flom in the Fund Complex. (Illinois), legal counsel to 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 current or former positions with Morgan Stanley or its affiliates. 27 OFFICERS
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS Stephen L. Boyd (62) Vice President Officer Managing Director of Global Research Investment Management. 2800 Post Oak Blvd. since 1998 Vice President of funds in the Fund Complex. Prior to 45th Floor December 2002, Chief Investment Officer of Van Kampen Houston, TX 77056 Investments and President and Chief Operations Officer of the Advisers and Van Kampen Advisors Inc. Prior to May 2002, Executive Vice President and Chief Investment Officer of funds in the Fund Complex. Prior to May 2001, Managing Director and Chief Investment Officer of Van Kampen Investments, and Managing Director and President of the Advisers and Van Kampen Advisors Inc. 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. Stefanie V. Chang (36) Vice President Officer Executive Director of Morgan Stanley Investment Management. since 2003 Vice President of funds in the Fund Complex. Joseph J. McAlinden (60) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan 1221 Avenue of the Americas President and Chief since 2002 Stanley Investment Advisors Inc., Morgan Stanley Investment New York, NY 10020 Investment Officer Management Inc. and Morgan Stanley Investments LP and Director of Morgan Stanley Trust for over 5 years. Executive Vice President and Chief Investment Officer of funds in the Fund Complex. Managing Director and Chief Investment Officer of Van Kampen Investments, the Advisers and Van Kampen Advisors Inc. since December 2002. John R. Reynoldson (50) Vice President Officer Executive Director and Portfolio Specialist of the Advisers 1 Parkview Plaza since 2000 and Van Kampen Advisors Inc. Vice President of funds in the P.O. Box 5555 Fund Complex. Prior to July 2001, Principal and Co-head of Oakbrook Terrace, IL 60181 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, Senior Vice President of the investment grade taxable group for the Advisers. Prior to June 1999, Senior Vice President of the government securities bond group for Asset Management.
28
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER FUND SERVED DURING PAST 5 YEARS Ronald E. Robison (64) Executive Vice Officer Chief Executive Officer and Chairman of Investor Services. 1221 Avenue of the Americas President and since 2003 Executive Vice President and Principal Executive Officer of New York, NY 10020 Principal Executive funds in the Fund Complex. Chief Global Operations Officer Officer and Managing Director of Morgan Stanley Investment Management Inc. Managing Director of Morgan Stanley. Managing Director and Director of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. Chief Executive Officer and Director of Morgan Stanley Trust. Vice President of the Morgan Stanley Funds. A. Thomas Smith III (46) Vice President and Officer Managing Director of Morgan Stanley, Managing Director and 1221 Avenue of the Americas Secretary since 1999 Director of Van 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 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 L. Sullivan (47) Vice President, Chief Officer Director and Managing Director of Van Kampen Investments, 1 Parkview Plaza Financial Officer and since 1996 the Advisers, Van Kampen Advisors Inc. and certain other P.O. Box 5555 Treasurer subsidiaries of Van Kampen Investments. Vice President, Oakbrook Terrace, IL 60181 Chief Financial Officer and Treasurer of funds in the Fund Complex. Head of Fund Accounting for Morgan Stanley Investment Management. Prior to December 2002, Executive Director of Van Kampen Investments, the Advisers and Van Kampen Advisors Inc.
29 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you conduct with us, our affiliates, or third parties. We may also collect information you provide when using our Web site, and text files (also known as "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. The Statement of Additional Information includes additional information about Fund trustees and is available, without charge, upon request by calling (800) 847-2424. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com (VAN KAMPEN INVESTMENTS LOGO) Copyright (C)2003 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. 23, 133, 233 RES ANR 7/03 11465G03-AP-7/03 Item 2. Code of Ethics. Applicable only for reports covering fiscal years ending on or after July 15, 2003. Item 3. Audit Committee Financial Expert. Applicable only for reports covering fiscal years ending on or after July 15, 2003. Item 4. Principal Accountant Fees and Services. Applicable only for reports covering fiscal years ending on or after December 15, 2003. Item 5. Audit Committee of Listed Registrants. Applicable only for reports covering periods ending on or after the earlier of (i) the first annual shareholder meeting after January 15, 2004 or (ii) October 31, 2004. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Applicable only to annual reports filed by closed-end funds on or after July 1, 2003. Item 8. [Reserved.] Item 9. The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Trust's internal controls or in other factors that could significantly affect the Trust's internal controls subsequent to the date of their evaluation. Item 10. Exhibits. (a) Code of Ethics -- Applicable only for reports covering fiscal years ending on or after July 15, 2003. (b) Certifications of Principal Executive Officer and Principal Financial Officer attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Van Kampen Reserve Fund ----------------------------------------------------------- By: /s/ Ronald E. Robison ------------------------------------------------------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: July 22, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Ronald E. Robison ------------------------------------------------------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: July 22, 2003 By: /s/ John L. Sullivan ------------------------------------------------------------------- Name: John L. Sullivan Title: Principal Financial Officer Date: July 22, 2003