-----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, ApQoLwD1/gIBYW/OtD1mwkFh0jdROtwwTOFVjtIlHYzAzZFpowfoVuwQjycHlv7U CAxeBRl6tskVDItVPnxwaw== 0000950137-05-005421.txt : 20050505 0000950137-05-005421.hdr.sgml : 20050505 20050505132734 ACCESSION NUMBER: 0000950137-05-005421 CONFORMED SUBMISSION TYPE: N-14 8C/A PUBLIC DOCUMENT COUNT: 25 FILED AS OF DATE: 20050505 DATE AS OF CHANGE: 20050505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN KAMPEN MUNICIPAL TRUST CENTRAL INDEX KEY: 0000877463 IRS NUMBER: 363779776 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-14 8C/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-123451 FILM NUMBER: 05802534 BUSINESS ADDRESS: STREET 1: VAN KAMPEN INVESTMENTS INC. STREET 2: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2127625441 MAIL ADDRESS: STREET 1: VAN KAMPEN INVESTMENTS INC. STREET 2: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST DATE OF NAME CHANGE: 19960102 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT MUNICIPAL TRUST DATE OF NAME CHANGE: 19920929 FORMER COMPANY: FORMER CONFORMED NAME: VAN KAMPEN MERRITT QUALITY MUNICIPAL TRUST DATE OF NAME CHANGE: 19600201 N-14 8C/A 1 c93084a1nv148cza.txt PRE-EFFECTIVE AMENDMENT TO FORM N-14 As filed with the Securities and Exchange Commission on May 5, 2005 Securities Act File No. 333-123451 Investment Company Act File No. 811-06362 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x] PRE-EFFECTIVE AMENDMENT NO. 1 [ ] POST-EFFECTIVE AMENDMENT NO. _ (CHECK APPROPRIATE BOX OR BOXES) VAN KAMPEN MUNICIPAL TRUST (EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST) (800) 341-2929 (AREA CODE AND TELEPHONE NUMBER) 1221 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10020 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) AMY R. DOBERMAN, ESQ. MANAGING DIRECTOR VAN KAMPEN INVESTMENTS INC. 1221 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10020 (NAME AND ADDRESS OF AGENT FOR SERVICE) COPIES TO: WAYNE W. WHALEN, ESQ. CHARLES B. TAYLOR, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 WEST WACKER DRIVE CHICAGO, ILLINOIS 60606 (312) 407-0700 ================================================================================ Approximate Date of Proposed: As soon as practicable after this Registration Statement is declared effective.
============================================================================================================================ CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933 - ---------------------------------------------------------------------------------------------------------------------------- TITLE OF SECURITIES AMOUNT BEING PROPOSED MAXIMUM PROPOSED AMOUNT OF BEING REGISTERED REGISTERED OFFERING PRICE MAXIMUM AGGREGATE REGISTRATION FEE PER UNIT OFFERING PRICE - --------------------------------------- ----------------- --------------------- ----------------------- -------------------- Common Shares ($0.01 par value) 3,440,119 $ 14.15 (1) $ 48,677,687 $ 5,729 (2) - --------------------------------------- ----------------- --------------------- ----------------------- -------------------- Auction Preferred Shares ($0.01 par value) 1,000 $ 25,000 $ 25,000,000 $ 2,943 (2) - --------------------------------------- ----------------- --------------------- ----------------------- --------------------
(1) Average of high and low reported price for common shares on May 3, 2005. (2) Includes registration fee of $117.70 previously paid in connection with the initial filing of the Registration Statement. The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. EXPLANATORY NOTE This Registration Statement is organized as follows: o Questions and Answers to Van Kampen Investment Grade Municipal Trust Shareholders o Notice of Special Meeting of Shareholders of Van Kampen Investment Grade Municipal Trust o Proxy Statement/Prospectus regarding the Proposed Reorganization of Van Kampen Investment Grade Municipal Trust into Van Kampen Municipal Trust o Statement of Additional Information regarding the Reorganization of Van Kampen Investment Grade Municipal Trust into Van Kampen Municipal Trust o Part C Information o Exhibits -- MAY 2005 -- - -------------------------------------------------------------------------------- IMPORTANT NOTICE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TO SHAREHOLDERS OF VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST - -------------------------------------------------------------------------------- Questions & Answers - --------------------------------------- Although we recommend that you read the complete Proxy Statement/Prospectus, we have provided for your convenience a brief overview of the issue to be voted on. - --------------------------------------- Q WHY IS A SHAREHOLDER MEETING BEING HELD? A You are being asked to vote on a reorganization (the "Reorganization") of Van Kampen Investment Grade Municipal Trust (the "Target Fund") into Van Kampen Municipal Trust (the "Acquiring Fund"), a closed-end investment company that pursues the same investment objective and similar investment policies as the Target Fund. Q WHY IS THE REORGANIZATION BEING RECOMMENDED? A The Board of Trustees of the Target Fund has determined that the Reorganization will benefit common shareholders of the Target Fund. The Target Fund and the Acquiring Fund are similar. Each Fund pursues the same investment objective to seek to provide a high level of current income exempt from federal income tax consistent with preservation of capital. Each Fund invests primarily in investment grade municipal securities. After the Reorganization, it is anticipated that common shareholders of the Target Fund will experience a reduced overall operating expense ratio, as certain fixed administrative costs will be spread across the combined larger asset base, while Target Fund shareholders remain invested in a closed-end fund that has the same investment objective and similar investment policies and is managed by the same investment advisory personnel. It is not anticipated that the Reorganization will directly benefit holders of preferred shares of the Target Fund; however, it is anticipated that the holders of preferred shares of each Fund will not be adversely affected by the Reorganization, and none of the expenses of the Reorganization will be borne by preferred shareholders. Q HOW WILL THE REORGANIZATION AFFECT ME? A Assuming shareholders of the Target Fund approve the Reorganization, the assets and liabilities of the Target Fund will be combined with those of the Acquiring Fund, you will become a shareholder of the Acquiring Fund and the Target Fund will be dissolved. If you are a holder of common shares of the Target Fund, you will receive newly-issued common shares of the Acquiring Fund, and if you are a holder of preferred shares of the Target Fund, you will receive newly-issued preferred shares of the Acquiring Fund. The aggregate net asset value of the common shares you receive in the Reorganization will equal the aggregate net asset value of the common shares you own immediately prior to the Reorganization less the costs of the Reorganization (though you may receive cash for fractional shares). The aggregate liquidation preference of the preferred shares you receive in the Reorganization will equal the aggregate liquidation preference of the preferred shares you own immediately prior to the Reorganization. No certificates for shares of the Acquiring Fund will be issued in connection with the Reorganization, although such certificates will be available upon request. Q WILL I HAVE TO PAY ANY SALES LOAD, COMMISSION OR OTHER SIMILAR FEE IN CONNECTION WITH THE REORGANIZATION? A You will pay no sales loads or commissions in connection with the Reorganization. However, if the Reorganization is completed, the costs associated with the Reorganization, including the costs associated with the shareholder meeting, will be borne by the Target Fund and the Acquiring Fund in proportion to their projected declines in total operating expenses as a consequence of the Reorganization. Q WILL I HAVE TO PAY ANY FEDERAL TAXES AS A RESULT OF THE REORGANIZATION? A The Reorganization is intended to qualify as a "reorganization" within the meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended. If the Reorganization so qualifies, in general, a shareholder of the Target Fund will recognize no gain or loss upon the receipt solely of shares of the Acquiring Fund in connection with the Reorganization. Additionally, the Target Fund will not recognize any gain or loss as a result of the transfer of all of its assets and liabilities solely in exchange for the shares of the Acquiring Fund or as a result of its dissolution. Neither the Acquiring Fund nor its shareholders will recognize any gain or loss in connection with the Reorganization. Q HOW DO I VOTE MY PROXY? A You may cast your vote by mail, phone or internet. To vote by mail, please mark your vote on the enclosed proxy card and sign, date and return the card in the postage-paid envelope provided. If you choose to vote via phone or internet, please refer to the instructions found on the proxy card accompanying this Proxy Statement/Prospectus. To vote by phone or internet, you will need the "control number" that appears on the proxy card. Q HOW DOES THE BOARD OF TRUSTEES OF THE TARGET FUND SUGGEST I VOTE? A After careful consideration, the Board of Trustees of the Target Fund recommend that you vote "FOR" the Reorganization Agreement as described in the Proxy Statement/Prospectus. Q WHOM DO I CONTACT FOR FURTHER INFORMATION? A You can contact your financial adviser for further information. You may also call Van Kampen's Client Relations Department at (800) 341-2929 (Telecommunication Device for the Deaf users may call (800) 421-2833) or visit our web site at www.vankampen.com where you can send us an e-mail message by selecting "Contact Us." ABOUT THE PROXY CARD - -------------------------------------------------------------------------------- Please vote on the proposed Reorganization using blue or black ink to mark an X in one of the boxes provided on the proxy card. Approval of Reorganization -- mark "For," "Against" or "Abstain." Sign, date and return the proxy card in the enclosed postage-paid envelope. All registered owners of an account, as shown in the address, must sign the card. When signing as attorney, trustee, executor, administrator, custodian, guardian or corporate officer, please indicate your full title. [ ] PLEASE MARK X VOTES AS IN THIS EXAMPLE
VAN KAMPEN XXXXX SPECIAL MEETING OF SHAREHOLDERS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
FOR AGAINST ABSTAIN 1. The proposal to [ ] [ ] [ ] 2. To transact such other business as may approve the properly come before the Meeting. Reorganization ----------------------------------
Please be sure to sign and date this Proxy, Date Shareholder sign here Co-owner sign here XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX SAMPLE VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST 1221 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10020 (800) 341-2929 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 22, 2005 Notice is hereby given that a special meeting of shareholders (the "Special Meeting") of Van Kampen Investment Grade Municipal Trust (the "Target Fund") will be held at the offices of Van Kampen Investments Inc., 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555 on June 22, 2005 at 10:30 a.m. for the following purposes: 1. To approve an Agreement and Plan of Reorganization between the Target Fund and Van Kampen Municipal Trust (the "Acquiring Fund"), the termination of the Target Fund's registration under the Investment Company Act of 1940, as amended, and the dissolution of the Target Fund under applicable state law; and 2. To transact such other business as may properly be presented at the Special Meeting or any adjournment thereof. Shareholders of record as of the close of business on April 25, 2005 are entitled to vote at the Special Meeting or any adjournment thereof. THE BOARD OF TRUSTEES OF THE TARGET FUND REQUESTS THAT YOU VOTE YOUR SHARES BY INDICATING YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATING AND SIGNING SUCH PROXY CARD AND RETURNING IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES, OR BY RECORDING YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET. THE BOARD OF TRUSTEES OF THE TARGET FUND RECOMMENDS THAT YOU CAST YOUR VOTE: FOR THE REORGANIZATION OF THE TARGET FUND PURSUANT TO THE AGREEMENT AND PLAN OF REORGANIZATION AS DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS. IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK THAT YOU MAIL YOUR PROXY CARD PROMPTLY OR RECORD YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET. For the Board of Trustees, LOU ANNE MCINNIS Assistant Secretary Van Kampen Investment Grade Municipal Trust May 6, 2005 --------------------- YOUR VOTE IS IMPORTANT. PLEASE VOTE PROMPTLY BY SIGNING AND RETURNING THE ENCLOSED PROXY CARD OR BY RECORDING YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET NO MATTER HOW MANY SHARES YOU OWN. The information in this Proxy Statement/Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Proxy Statement/Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED MAY 5, 2005 PROXY STATEMENT/PROSPECTUS VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST 1221 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10020 (800) 341-2929 SPECIAL MEETING OF SHAREHOLDERS JUNE 22, 2005 This Proxy Statement/Prospectus is furnished to you as a shareholder of Van Kampen Investment Grade Municipal Trust (the "Target Fund"). A special meeting of shareholders of the Target Fund (the "Special Meeting") will be held at the offices of Van Kampen Investments Inc., 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555 on June 22, 2005 at 10:30 a.m. to consider the items listed below and discussed in greater detail elsewhere in this Proxy Statement/Prospectus. If you are unable to attend the Special Meeting or any adjournment thereof, the Board of Trustees of the Target Fund requests that you vote your shares by completing and returning the enclosed proxy card or by recording your voting instructions by telephone or via the internet. The approximate mailing date of this Proxy Statement/Prospectus and accompanying form of proxy is May 10, 2005. The purposes of the Special Meeting are: 1. To approve an Agreement and Plan of Reorganization between the Target Fund and Van Kampen Municipal Trust (the "Acquiring Fund"), the termination of the Target Fund under the Investment Company Act of 1940, as amended (the "1940 Act"), and the dissolution of the Target Fund under applicable state law; and 2. To transact such other business as may properly be presented at the Special Meeting or any adjournment thereof. The Target Fund and the Acquiring Fund are sometimes referred to herein each as a "Fund" and collectively as the "Funds". The Reorganization Agreement that Target Fund shareholders are being asked to consider involves a transaction that will be referred to in this Proxy Statement/Prospectus as the "Reorganization." The Reorganization seeks to combine two similar funds to achieve certain economies of scale and other operational efficiencies. Each Fund pursues the same investment objective to seek to provide a high level of current income exempt from federal income tax consistent with preservation of capital. Each Fund invests primarily in investment grade municipal securities. In the Reorganization, the Acquiring Fund will acquire substantially all of the assets and assume substantially all of the liabilities of the Target Fund in exchange for an equal aggregate value of newly-issued common shares of beneficial interest of the Acquiring Fund, par value $0.01 per share ("Acquiring Fund Common Shares"), and newly-issued Series E auction preferred shares of the Acquiring Fund with a par value of $0.01 per share and a liquidation preference of $25,000 per share ("Acquiring Fund APS"). The Target Fund will distribute Acquiring Fund Common Shares to holders of common shares of the Target Fund ("Target Fund Common Shares") and Acquiring Fund APS to holders of Remarketed Preferred Shares of the Target Fund ("Target Fund RP"), and will then terminate its registration under the 1940 Act, and dissolve under applicable state law. The aggregate net asset value of Acquiring Fund Common Shares received in the Reorganization will equal the aggregate net asset value of the Target Fund Common Shares held immediately prior to the Reorganization less the costs of the Reorganization (though holders of Target Fund Common Shares may receive cash for their fractional shares). The aggregate liquidation preference of the Acquiring Fund APS received in the Reorganization will equal the aggregate liquidation preference of the Target Fund RP held immediately prior to the Reorganization. The Acquiring Fund will continue to operate after the Reorganization as a registered closed-end investment company with the investment objective and policies described in this Proxy Statement/Prospectus. Acquiring Fund APS and Target Fund RP are sometimes referred to herein collectively as "Preferred Shares". In the event that Target Fund shareholders do not approve the Reorganization, the Target Fund will continue to exist and the Board of Trustees of the Target Fund will consider what additional action, if any, to take. This Proxy Statement/Prospectus sets forth concisely the information shareholders of the Target Fund should know before voting on the Agreement and Plan of Reorganization and constitutes an offering of Acquiring Fund Common Shares and Acquiring Fund APS. Please read it carefully and retain it for future reference. A Statement of Additional Information, dated May 6, 2005, relating to this Proxy Statement/Prospectus (the "Reorganization Statement of Additional Information") has been filed with the Securities and Exchange Commission (the "SEC") and is incorporated herein by reference. If you wish to request the Reorganization Statement of Additional Information, please ask for the "Reorganization Statement of Additional Information." Copies of each Fund's most recent annual report and semi-annual report can be obtained on a web site maintained by Van Kampen Investments Inc. at www.vankampen.com. In addition, each Fund will furnish, without charge, a copy of the Reorganization Statement of Additional Information, 2 its most recent annual report and any more recent semi-annual report to any shareholder upon request. Any such request should be directed to the Van Kampen Client Relations Department by calling (800) 341-2929 (TDD users may call (800) 421-2833) or by writing to the respective Fund at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, Illinois 60181-5555. The address of the principal executive offices of the Funds is 1221 Avenue of the Americas, New York, New York 10020, and the telephone number is (800) 341-2929. The Funds are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, file reports, proxy statements, proxy material and other information with the SEC. Materials filed with the SEC can be reviewed and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 or downloaded from the SEC's web site at www.sec.gov. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at (202) 942-8090. You can also request copies of these materials, upon payment at the prescribed rates of a duplicating fee, by electronic request to the SEC's e-mail address (publicinfo@sec.gov) or by writing the Public Reference Branch, Office of Consumer Affairs and Information Services, SEC, Washington, DC, 20549-0102. The Acquiring Fund Common Shares are listed on the New York Stock Exchange (the "NYSE") and the Chicago Stock Exchange (the "CHX") under the ticker symbol "VKQ" and will continue to be so listed subsequent to the Reorganization. The common shares of the Target Fund are listed on the NYSE and the CHX under the ticker symbol "VIG." Reports, proxy statements and other information concerning the Funds may be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005. This Proxy Statement/Prospectus serves as a prospectus of the Acquiring Fund in connection with the issuance of the Acquiring Fund Common Shares and the Acquiring Fund APS in the Reorganization. No person has been authorized to give any information or make any representation not contained in this Proxy Statement/ Prospectus and, if so given or made, such information or representation must not be relied upon as having been authorized. This Proxy Statement/Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which, or to any person to whom, it is unlawful to make such offer or solicitation. The Board of Trustees of the Target Fund knows of no business other than that discussed above that will be presented for consideration at the Special Meeting. If any other matter is properly presented, it is the intention of the persons named in the enclosed proxy to vote in accordance with their best judgment. --------------------- 3 THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Proxy Statement/Prospectus is May 6, 2005. 4 TABLE OF CONTENTS
PAGE ---- SUMMARY..................................................... 6 The Proposed Reorganization............................... 6 Background and Reasons for the Proposed Reorganization.... 6 Expenses.................................................. 7 Further Information Regarding the Reorganization.......... 10 RISK FACTORS AND SPECIAL CONSIDERATIONS..................... 11 Market Risk............................................... 11 Interest Rate Risk........................................ 12 Credit Risk............................................... 12 Income Risk............................................... 13 Nonpayment Risk........................................... 13 Call Risk................................................. 13 Municipal Securities Risk................................. 13 Risks of Using Strategic Transactions..................... 13 Manager Risk.............................................. 14 Market Discount Risk...................................... 14 Leverage Risk............................................. 14 Anti-Takeover Provisions.................................. 16 Special Risks Related to Preferred Shares................. 16 COMPARISON OF THE FUNDS..................................... 18 Investment Objective and Policies......................... 18 Other Investment Practices and Policies................... 22 Investment Restrictions................................... 30 Management of the Funds................................... 34 Other Service Providers................................... 38 Capitalization............................................ 38 Additional Information about Common Shares of the Funds... 40 Additional Information about Preferred Shares of the Funds................................................... 43 Governing Law............................................. 50 Certain Provisions of the Declarations of Trust........... 50 Conversion to Open-End Fund............................... 52 Voting Rights............................................. 52 Financial Highlights...................................... 54 INFORMATION ABOUT THE REORGANIZATION........................ 56 General................................................... 56 Terms of the Agreement and Plan of Reorganization......... 58 Expenses of the Reorganization............................ 59 Material U.S. Federal Income Tax Consequences of the Reorganization.......................................... 60 Shareholder Approval...................................... 62 OTHER INFORMATION........................................... 63 Voting Information and Requirements....................... 63 Shareholder Information................................... 64 Section 16(a) Beneficial Ownership Reporting Compliance... 65 Shareholder Proposals..................................... Solicitation of Proxies................................... 65 Legal Matters............................................. 66 Other Matters to Come Before the Meeting.................. 66 EXHIBIT I: DESCRIPTION OF SECURITIES RATINGS................ I-1
5 ------------------------------------------------------------------------------ SUMMARY ------------------------------------------------------------------------------ The following is a summary of certain information contained elsewhere in this Proxy Statement/Prospectus and is qualified in its entirety by reference to the more complete information contained in this Proxy Statement/Prospectus and in the Reorganization Statement of Additional Information. Shareholders should read the entire Proxy Statement/Prospectus carefully. THE PROPOSED REORGANIZATION The Board of Trustees of the Target Fund, including the trustees who are not "interested persons" of the Target Fund (as defined in the 1940 Act), has unanimously approved the Agreement and Plan of Reorganization. If the shareholders of the Target Fund approve the Agreement and Plan of Reorganization, Acquiring Fund Common Shares and Series E Acquiring Fund APS will be issued to holders of Target Fund Common Shares and Target Fund RP, respectively, in exchange for substantially all of the assets of the Target Fund and the assumption of substantially all of the liabilities of the Target Fund. The Target Fund will then terminate its registration under the 1940 Act and dissolve under applicable state law. The aggregate net asset value of Acquiring Fund Common Shares received in the Reorganization will equal the aggregate net asset value of Target Fund Common Shares held immediately prior to the Reorganization less the costs of the Reorganization (though holders of Target Fund Common Shares may receive cash for their fractional shares). The aggregate liquidation preference of Acquiring Fund APS received in the Reorganization will equal the aggregate liquidation preference of Target Fund RP held immediately prior to the Reorganization. BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION The Reorganization seeks to combine two similar Funds to achieve certain economies of scale and other operational efficiencies. Each Fund is registered as a diversified closed-end management investment company under the 1940 Act. Each Fund invests primarily in investment grade municipal securities. The investment objective of each Fund is to seek to provide a high level of current income exempt from federal income tax, consistent with preservation of capital. The Acquiring Fund invests at least 80% of its total assets in municipal securities rated investment grade at the time of investment. The Target Fund invests at least 80% of its total assets in tax-exempt municipal securities rated investment grade at the time of investment. Each Fund may invest in municipal securities subject to the alternative minimum tax provisions of federal tax law. The Funds are managed by the same investment advisory personnel. The proposed Reorganization will combine the assets of these similar Funds by reorganizing the Target Fund into the Acquiring Fund. The Board of Trustees of 6 the Target Fund (the "Target Fund Board"), based upon its evaluation of all relevant information, anticipates that the Reorganization will benefit holders of Target Fund Common Shares. In particular, the Target Fund Board believes, based on data presented by Van Kampen Asset Management, investment adviser to each of the Funds (the "Adviser"), that holders of Target Fund Common Shares will experience a reduced overall operating expense ratio as a result of the Reorganization. The combined fund resulting from the Reorganization will have a larger asset base than either of the Funds has currently; certain fixed administrative costs, such as costs of printing shareholder reports and proxy statements, legal expenses, audit fees, mailing costs and other expenses, will be spread across this larger asset base, thereby lowering the expense ratio for holders of Target Fund Common Shares. EXPENSES The table below illustrates the anticipated reduction in operating expenses expected as a result of the Reorganization. The table sets forth (i) the fees, expenses and distributions to preferred shareholders paid by the Target Fund for the 12-month period ended October 31, 2004, (ii) the fees, expenses and distributions to preferred shareholders paid by the Acquiring Fund for the 12-month period ended October 31, 2004 and (iii) the pro forma fees, expenses and distributions to preferred shareholders for the Acquiring Fund for the 12-month period ended October 31, 2004, assuming the Reorganization had been completed at the beginning of such period. As shown below, the Reorganization is expected to result in decreased total annual expenses for shareholders of the Target Fund (although such savings will not be immediately realized (see footnote (c) to the table)). 7 FEE, EXPENSE AND DISTRIBUTIONS ON PREFERRED SHARES TABLE FOR COMMON SHAREHOLDERS OF THE FUNDS AS OF OCTOBER 31, 2004
ACTUAL PRO FORMA ---------------------------------- --------------- VAN KAMPEN INVESTMENT GRADE VAN KAMPEN VAN KAMPEN MUNICIPAL TRUST MUNICIPAL TRUST MUNICIPAL TRUST ---------------- --------------- --------------- Common Shareholder Transaction Expenses(a): Maximum Sales Load (as a percentage of offering price)(b)(c)......... None None None Dividend Reinvestment Plan Fees.... None None None Annual Expenses (as a percentage of net assets attributable to Common Shares): Investment Advisory Fees(d)........ 0.82% 0.82% 0.82% Interest Payments on Borrowed Funds............................ 0% 0% 0% Other Expenses..................... 0.61% 0.24% 0.24% Total Annual Expenses(d)......... 1.43% 1.06% 1.06% Distributions Distributions on Preferred Shares(e)........................ 0.56% 0.54% 0.54% Total Annual Expenses and Distributions on Preferred Shares........................... 1.99% 1.60% 1.60%
- --------------- (a) No expense information is presented with respect to Preferred Shares because holders of Preferred Shares do not bear any transaction or operating expenses of either Fund and will not bear any of the Reorganization expenses or any transaction or operating expenses of the combined fund. (b) Common shares purchased in the secondary market may be subject to brokerage commissions or other charges. No sales load will be charged on the issuance of common shares in the Reorganization. Common shares are not available for purchase from the Funds but may be purchased through a broker-dealer subject to individually negotiated commission rates. (c) In connection with the Reorganization, there are certain other transaction expenses which include, but are not limited to: all costs related to the preparation, printing and distributing of this Proxy Statement/Prospectus to shareholders; costs related to preparation and distribution of materials distributed to each Fund's Board; all expenses incurred in connection with the preparation of the Agreement and Plan of Reorganization and registration statement on Form N-14; SEC and state securities commission filing fees; legal and audit fees; portfolio transfer taxes (if any); and any similar expenses incurred in connection with the Reorganization. In accordance with applicable 8 SEC rules, the Board of Trustees of each Fund reviewed the fees and expenses that will be borne directly or indirectly by the Funds in connection with the Reorganization. After considering various alternatives for allocating these costs, the Board of Trustees of each Fund agreed that, in the event the Reorganization is approved and completed, the expenses of the Reorganization will be shared by the Target Fund and the Acquiring Fund in proportion to their projected declines in total annual operating expenses as a result of the Reorganization. The table below summarizes each Fund's net assets (common shares only) at October 31, 2004, projected annual savings to the Target Fund as a result of the Reorganization, allocation of Reorganization expenses among the Funds in dollars and percentages, an estimated pay-back period (in years) and the resulting effect on each Fund's net asset value per common share at October 31, 2004. The Target Fund will benefit more from projected annual expense savings of the Reorganization than the Acquiring Fund. The projected annual expense savings are generally not expected to be immediately realized. The Target Fund is projected to benefit much sooner than the Acquiring Fund whose projected annual expenses are not expected to change as a result of the Reorganization. If a Target Fund shareholder sells his or her common shares prior to the estimated pay-back period, then that shareholder may not realize any of the projected expense savings resulting from the reduced expense ratio of the combined fund. The net asset value per common share of the Target Fund will be reduced at the closing date of the Reorganization to reflect the allocation of Reorganization expenses to such Fund. The reduction in net asset value per common share resulting from the allocation of Reorganization expenses, when compared to the relative net asset sizes of the Funds involved in the Reorganization, will be greater in the Target Fund than in the Acquiring Fund. In the event the Reorganization is not completed, the Adviser will bear the costs associated with the Reorganization. The numbers presented in the table are estimates; actual results may differ.
EFFECT ON ESTIMATED NET ASSET NET ASSETS PROJECTED REORGANIZATION PAYBACK VALUE PER (COMMON ANNUAL EXPENSE ALLOCATION IN PERIOD COMMON FUND SHARES ONLY) SAVINGS DOLLARS/PERCENTAGE (IN YEARS) SHARE ---- ------------ --------- --------------------- ---------- --------- VIG.................. $ 50,148,362 $185,549 $248,000/100% 1.34 0.05 VKQ.................. 603,633,334 0 0/0% 0 0 Total Expenses..... 248,000/100%
(d) Expense information has been restated to reflect permanent reductions made to administrative fees for the Acquiring Fund effective as of June 1, 2004 and permanent reductions made to management fees for the Funds effective as of November 1, 2004. (e) In seeking to enhance the income for its common shareholders, each of the Funds uses preferred shares as financial leverage. Leverage created by 9 borrowing or other forms of indebtedness would create interest expenses which would, if used by the Funds, be charged to common shareholders (shown above as "Interest Payments on Borrowed Funds"). Leverage created by preferred shares creates dividend payments and/or capital gains distributions to preferred shareholders which are charged to common shareholders (shown above as "Distributions on Preferred Shares"). The dividend rates are based on periodic remarketings or auctions as described herein and thus will differ based on varying market conditions at the times of such remarketings or auctions. EXAMPLE. The following example is intended to help you compare the costs of investing in the Acquiring Fund pro forma after the Reorganization with the costs of investing in the Target Fund and the Acquiring Fund without the Reorganization. An investor would pay the following expenses on a $1,000 investment, assuming (1) the operating expense ratio for each Fund (as a percentage of net assets attributable to common shares) set forth in the table above and (2) a 5% annual return throughout the period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Van Kampen Investment Grade Municipal Trust................... $ 15 $45 $78 $171 Van Kampen Municipal Trust.......... $ 11 $34 $58 $129 Pro Forma -- Van Kampen Municipal Trust............................. $ 11 $34 $58 $129
The example set forth above assumes common shares of each Fund were purchased in the initial offerings and the reinvestment of all dividends and distributions and uses a 5% annual rate of return as mandated by SEC regulations. The example should not be considered a representation of past or future expenses or annual rates of return. Actual expenses or annual rates of return may be more or less than those assumed for purposes of the example. FURTHER INFORMATION REGARDING THE REORGANIZATION The Target Fund Board has determined that the Reorganization is in the best interests of holders of Target Fund Common Shares and that the interests of such shareholders will not be diluted as a result of the Reorganization. Similarly, the Board of Trustees of the Acquiring Fund has determined that the Reorganization is in the best interests of holders of Acquiring Fund Common Shares and that the interests of such shareholders will not be diluted as a result of the Reorganization. It is not anticipated that the Reorganization will directly benefit the holders of Preferred Shares of either Fund; however, it is anticipated that the holders of Preferred Shares of each Fund will not be adversely affected by the Reorganization and the expenses of the Reorganization will not be borne by the holders of Preferred Shares of either Fund. As a result of the Reorganization, however, a shareholder of 10 either Fund will hold a reduced percentage of ownership in the larger combined fund than he or she did in either of the separate Funds. The Reorganization is intended to qualify as a "reorganization" within the meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code" or "Code"). If the Reorganization so qualifies, in general, a shareholder of the Target Fund will recognize no gain or loss upon the receipt solely of shares of the Acquiring Fund in connection with the Reorganization. Additionally, the Target Fund will recognize no gain or loss as a result of the transfer of all of its assets and liabilities solely in exchange for the shares of the Acquiring Fund or as a result of its dissolution. Neither the Acquiring Fund nor its shareholders will recognize any gain or loss in connection with the Reorganization. The Target Fund Board requests that shareholders of the Target Fund approve the proposed Reorganization at the Special Meeting to be held on June 22, 2005. Shareholder approval of the Reorganization requires the affirmative vote of shareholders of the Target Fund representing more than 50% of the Target Fund Common Shares and Target Fund RP outstanding and entitled to vote, each voting separately as a class. If shareholders of the Target Fund approve the Reorganization, it is expected that the closing date of the transaction (the "Closing Date") will be after the close of business on or about June 30, 2005, but it may be at a different time as described herein. The Target Fund Board recommends that you vote "FOR" the proposed Reorganization. RISK FACTORS AND SPECIAL CONSIDERATIONS Because each Fund, under normal market conditions, invests at least 80% of its total assets in investment grade municipal securities, any risks inherent in such investments are equally applicable to both Funds and will apply to the combined fund after the Reorganization. The Reorganization is not expected to adversely affect the rights of holders of common shares or Preferred Shares of either Fund or to create additional risks. MARKET RISK Market risk is the possibility that the market values of securities owned by each Fund will decline. The prices of debt securities tend to fall as interest rates rise, and such declines tend to be greater among debt securities with longer maturities. Market risk is often greater among certain types of debt securities, such as zero coupon bonds which do not make regular interest payments but are instead bought at a discount to their face values and paid in full upon maturity. As interest rates change, these securities often fluctuate more in price than securities that make regular interest payments and therefore subject the Funds to greater market risk 11 than a fund that does not own these types of securities. When-issued and delayed delivery transactions are subject to changes in market conditions from the time of the commitment until settlement. This may adversely affect the prices or yields of the securities being purchased. The greater the Funds' outstanding commitments for these securities, the greater the Funds' exposure to market price fluctuations. INTEREST RATE RISK Interest rate risk is the risk that prices of municipal securities generally increase when interest rates decline and decrease when interest rates increase. Prices of longer-term securities generally change more in response to interest rate changes than prices of shorter-term securities. CREDIT RISK Credit risk refers to an issuer's ability to make timely payments of interest and principal. The degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation. The Acquiring Fund invests at least 80% of total assets in municipal bonds that are rated investment grade by ("S&P") or Moody's Investors Service Inc. ("Moody's") or comparably rated by another nationally recognized statistical rating organization. The Target Fund invests at least 80% of total assets in tax-exempt municipal bonds that are rated investment grade by S&P or Moody's or comparably rated by another nationally recognized statistical rating organization. Each Fund may invest up to 20% of its assets in securities rated below investment grade (but not rated lower than B- by S&P or B3 by Moody's) or unrated securities considered by such Fund's investment adviser to be of comparable quality. Therefore, the Funds are subject to a higher level of credit risk than a fund that invests solely in investment grade securities. Securities rated BBB by S&P or Baa by Moody's are in the lowest of the four investment grades and are considered by the rating agencies to be medium-grade obligations which possess speculative characteristics so that changes in economic conditions or other circumstances are more likely to lead to a weakened capacity of the issuer to make principal and interest payments than in the case of higher-rated securities. The credit quality of non-investment grade securities is considered speculative by recognized rating agencies with respect to the issuer's continuing ability to pay interest and principal. Lower-grade securities may have less liquidity and a higher incidence of default than higher-grade securities. The Funds may incur higher expenditures to protect the Funds' interests in such securities. The credit risks and market prices of lower-grade securities generally are more sensitive to negative issuer developments, such as reduced revenues or increased expenditures, or adverse economic conditions, such as a recession, than are higher-grade securities. 12 INCOME RISK The income shareholders receive from a Fund is based primarily on interest rates of securities in that Fund's portfolio, which can vary widely over the short- and long-term. If interest rates drop, your income from such Fund may drop as well. NONPAYMENT RISK Although the Funds invest at least 80% of their respective total assets in municipal securities that are rated investment grade at the time of investment, municipal securities, like other debt obligations, are subject to the risk of nonpayment. The ability of issuers of municipal securities to make timely payments of interest and principal may be adversely impacted in general economic downturns and as relative governmental cost burdens are allocated and reallocated among federal, state and local governmental units. Such nonpayment would result in a reduction of income to a Fund and could result in a reduction in the value of the municipal security experiencing nonpayment and a potential decrease in the net asset value of a Fund. CALL RISK If interest rates fall, it is possible that issuers of securities with high interest rates will prepay or "call" their securities before their maturity dates. In this event, the proceeds from the called securities would likely be reinvested by the Funds in securities bearing the new, lower interest rates, resulting in a possible decline in the Funds' income and distributions to shareholders. MUNICIPAL SECURITIES RISK Under normal market conditions, the Funds invest primarily in municipal securities. The yields of municipal securities may move differently and adversely compared to the yields of overall debt securities markets. Although the interest received from municipal securities generally is exempt from federal income tax, each Fund may invest all or a substantial portion of its total assets in municipal securities that pay interest subject to the federal alternative minimum tax. In addition, there could be changes in applicable tax laws or tax treatments that reduce or eliminate the current federal income tax exemption generally applicable to interest received on municipal securities or otherwise adversely affect the current federal or state tax status of municipal securities. RISKS OF USING STRATEGIC TRANSACTIONS Each Fund may engage in certain transactions ("Strategic Transactions") designed to, among other things, reduce its exposure to interest rate movements. For example, each Fund may purchase and sell exchange-listed and over-the- counter put and call options on securities, financial futures and other financial 13 instruments, purchase and sell financial futures contracts and enter into various interest rate transactions such as swaps, caps, floors or collars. If a Fund incorrectly forecasts market values, interest rates or other factors, that Fund's performance could suffer as a result of its Strategic Transactions. Each Fund also may suffer a loss if the other party to the Strategic Transaction fails to meet its obligations. The Funds are not required to use Strategic Transactions and may choose not to do so. MANAGER RISK As with any managed fund, the investment adviser to each Fund may not be successful in selecting the best-performing securities or investment techniques, and a Funds' performance may lag behind that of similar funds. MARKET DISCOUNT RISK Whether investors will realize gains or losses upon the sale of shares of a Fund will depend upon the market price of the shares at the time of original purchase and subsequent sale, which may be less or more than such Fund's net asset value per share. Since the market price of the shares will be affected by such factors as the relative demand for and supply of the shares in the market, general market and economic conditions and other factors beyond the control of the Funds, the Funds cannot predict whether shares of the Funds will trade at, below or above net asset value. Shares of closed-end funds often trade at a discount to their net asset values, and the Funds' shares may trade at such a discount. In order to reduce or eliminate a market value discount from net asset value, the Board of Trustees of a Fund may, subject to the terms of its preferred shares, authorize such Fund from time to time to repurchase its common shares in the open market or to tender for its common shares at net asset value. The Board of Trustees of a Fund, in consultation with the Adviser, will review on a quarterly basis the possibility of open-market repurchases and/or tender offers for such Fund's common shares. Subject to its borrowing restrictions, a Fund may incur debt to finance such repurchases, which entails risks. The ability of a Fund to enter into tender offers and the common share repurchases may be limited by the 1940 Act asset coverage requirements and any additional asset coverage requirements which may be imposed by a rating agency in connection with any rating of the preferred shares. No assurance can be given that the Board of Trustees of a Fund will, in fact, authorize such Fund to undertake such repurchases and/or tender offers or that, if undertaken, such actions would result in such Fund's common shares trading at a price which is equal or close to net asset value. LEVERAGE RISK Use of leverage, through the issuance of Preferred Shares, involves certain risks to holders of common shares of the Funds. For example, each Fund's issuance of 14 Preferred Shares may result in higher volatility of the net asset value of its common shares and potentially more volatility in the market value of its common shares. In addition, changes in the short-term and medium-term dividend rates on, and the amount of taxable income allocable to, the Preferred Shares of a Fund will affect the yield to holders of common shares of such Fund. In certain circumstances, when a Fund is required to allocate taxable income to holders of its Preferred Shares, such Fund may be required to make an additional distribution to such holders in an amount approximately equal to the tax liability resulting from the allocation (an "Additional Dividend"). Leverage will allow holders of each Fund's common shares to realize a higher current rate of return than if such Fund were not leveraged as long as each Fund, while accounting for its costs and operating expenses, is able to realize a higher net return on its investment portfolio than the then-current dividend rate (and any Additional Dividend) paid on its Preferred Shares. Similarly, since a pro rata portion of the Acquiring Fund's net realized capital gains is generally payable to holders of Acquiring Fund Common Shares, the use of leverage will increase the amount of such gains distributed to holders of Acquiring Fund Common Shares. However, short-term, medium-term and long-term interest rates change from time to time as do their relationships to each other (i.e., the slope of the yield curve) depending upon such factors as supply and demand forces, monetary and tax policies and investor expectations. Changes in any or all of such factors could cause the relationship between short-term, medium-term and long-term rates to change (i.e., to flatten or to invert the slope of the yield curve) so that short-term and medium-term rates may substantially increase relative to the long-term obligations in which each Fund may be invested. To the extent that the current dividend rate (and any Additional Dividend) on a Fund's Preferred Shares approaches the net return on such Fund's investment portfolio, the benefit of leverage to holders of common shares of such Fund will be decreased. If the current dividend rate (and any Additional Dividend) on the Preferred Shares of a Fund were to exceed the net return on such Fund's portfolio, holders of common shares of such Fund would receive a lower rate of return than if the Fund were not leveraged. Similarly, since both the costs of issuing Preferred Shares and any decline in the value of a Fund's investments (including investments purchased with the proceeds from any Preferred Shares offering) will be borne entirely by holders of such Fund's common shares, the effect of leverage in a declining market would result in a greater decrease in net asset value to holders of common shares than if such Fund were not leveraged. If a Fund is liquidated, holders of such Fund's Preferred Shares will be entitled to receive liquidating distributions before any distribution is made to holders of common shares of such Fund. In an extreme case, a decline in net asset value could affect a Fund's ability to pay dividends on its common shares. Failure to make such dividend payments could adversely affect a Fund's qualification as a regulated investment company under the federal tax laws. However, each Fund intends to take all measures necessary to 15 make required Common Share dividend payments. If a Fund's current investment income is ever insufficient to meet dividend payments on either its common shares or its Preferred Shares, such Fund may have to liquidate certain of its investments. In addition, each Fund has the authority to redeem its Preferred Shares for any reason and may be required to redeem all or part of its Preferred Shares in the following circumstances: - if the asset coverage for the Preferred Shares declines below 200%, either as a result of a decline in the value of a Fund's portfolio investments or as a result of the repurchase of common shares in tender offers or otherwise, or - in order to maintain the asset coverage guidelines established by Moody's and S&P in rating the Preferred Shares. In addition, in the case of Target Fund RP, if on any dividend date the Target Fund fails to generate sufficient available net tax-exempt income to pay accrued and unpaid dividends on the RP out of solely tax-exempt income at the applicable dividend rate, the Target Fund will be required to redeem all or part of its Target Fund RP. Redemption of the Preferred Shares or insufficient investment income to make dividend payments, may reduce the net asset value of a Fund's common shares and require a Fund to liquidate a portion of its investments at a time when it may be disadvantageous to do so. ANTI-TAKEOVER PROVISIONS The Declaration of Trust of each Fund (in each case, the "Declaration of Trust") includes provisions that could limit the ability of other entities or persons to acquire control of that Fund or to change the composition of its Board of Trustees. Such provisions could limit the ability of common shareholders to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of either Fund. SPECIAL RISKS RELATED TO PREFERRED SHARES AUCTION/REMARKETING RISK. The dividend rate for the Acquiring Fund APS normally is set through an auction process. In the auction, preferred shareholders may indicate the dividend rate at which they would be willing to hold or sell their shares or purchase additional shares. An auction fails if there are more Acquiring Fund APS offered for sale than there are buyers, in which case preferred shareholders may not be able to sell their Acquiring Fund APS. Also, if preferred shareholders place bids to retain shares at an auction only at a specified dividend rate and that rate exceeds the rate set at the auction, they will not retain their shares. Additionally, if preferred shareholders buy shares or elect to retain shares without specifying a dividend rate below which they would not wish to buy or continue to 16 hold those Acquiring Fund APS, they could receive a lower rate of return on their shares than the market rate. Finally, the dividend period for the Acquiring Fund APS may be changed by the Acquiring Fund, subject to certain conditions, including notice to preferred shareholders, which could also affect the liquidity of an investment in Acquiring Fund APS. The dividend rate on the Target Fund RP is set using a remarketing process, which has separate risks. There can be no assurance that the remarketing agent will be able to remarket all shares of Target Fund RP tendered in a remarketing. If any shares of Target Fund RP tendered in a remarketing are not remarketed, a holder of such shares may be required to hold some or all of its shares at least until the end of the next dividend period or to sell its shares outside a remarketing. In such case, the remarketing procedures may require an allocation of shares of Target Fund RP on a pro rata basis to the extent practicable, or by lot, as determined by the remarketing agent in its sole discretion, which may result in a holder's selling a number of shares of Target Fund RP that is less than the number of shares of Target Fund RP specified in such holder's tender order. Additionally, while a holder or prospective purchaser of Target Fund RP may indicate to the remarketing agent its dividend rate preferences, any such notice given to the remarketing agent to tender or hold shares for a particular dividend period is irrevocable and may not be conditioned upon the level at which applicable dividend rates are set. Therefore, the actual applicable dividend rate for such dividend period may be greater than or less than the rate indicated and will not be determined until after a holder is required to elect to hold or tender its shares. SECONDARY MARKET RISK. Broker-dealers may maintain a secondary trading market in the Preferred Shares outside of auctions or remarketings, as applicable; however, they are not obligated to do so and there can be no assurance that such a secondary market will develop or, if it does develop, that it will provide preferred shareholders with a liquid trading market. It may not be possible to sell Preferred Shares between auctions or remarketings, as applicable, or it may only be possible to sell them for a price less than their liquidation preference plus any accumulated dividends. An increase in the level of interest rates likely will have an adverse effect on the secondary market price of the Preferred Shares. Preferred Shares may only be transferred outside of auctions or remarketings to or through broker-dealers or other persons as a Fund permits. RATINGS AND ASSET COVERAGE RISKS. Although the Preferred Shares of each Fund have been rated "Aaa" by Moody's and "AAA" by S&P, such ratings do not eliminate or necessarily mitigate the risks of investing in Preferred Shares. Moody's or S&P could downgrade its rating of the Preferred Shares or withdraw its rating at any time, which may make the Preferred Shares less liquid at an auction or remarketing, as applicable, or in the secondary market. If a Fund fails to satisfy its asset coverage ratios, it will be required to redeem a sufficient number of Preferred Shares in order to return to compliance with the asset coverage ratios. A Fund may 17 voluntarily redeem Preferred Shares under certain circumstances in order to meet asset coverage tests. COMPARISON OF THE FUNDS INVESTMENT OBJECTIVE AND POLICIES The Funds have the same investment objective and similar investment policies. Each Fund's investment objective is to provide common shareholders with a high level of current income exempt from federal income tax, consistent with preservation of capital. Each Fund intends to achieve its objective primarily by investing in a diversified portfolio of municipal securities which the investment adviser believes does not involve undue risk to income or principal. Under normal market conditions, the Acquiring Fund will invest at least 80% of its total assets in municipal securities rated at least investment grade at the time of investment. Up to 20% of the Acquiring Fund's total assets may be invested in unrated municipal securities believed, at the time of investment, by the Adviser to have credit characteristics equivalent to, and to be comparable quality as, municipal securities that are rated investment grade. The Target Fund will invest at least 80% of its total assets in tax-exempt municipal securities rated investment grade at the time of investment. Investment grade securities are rated BBB or higher by S&P or Baa or higher by Moody's in the case of long-term obligations, and have equivalent ratings in the case of short-term obligations. Securities rated BBB by S&P are regarded by S&P as having an adequate capacity to pay interest and repay principal; whereas such securities normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely, in the opinion of S&P, to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. Securities rated Baa by Moody's are considered by Moody's as medium grade obligations; they are neither highly protected nor poorly secured; interest payments and principal security appear to Moody's to be adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time; in the opinion of Moody's, they lack outstanding investment characteristics and in fact have speculative characteristics as well. Up to 20% of each Fund's total assets may be invested in securities rated between BB+ and B- (inclusive) by S&P or between Ba and B3 (inclusive) by Moody's (or equivalently rated short-term obligations) and unrated securities that the Adviser believes are of comparable quality. With respect to such 20% of a Fund's total assets, neither Fund has established any limit on the percentage of its portfolio which may be invested in securities in any one rating category. Each Fund may be more dependent upon the Adviser's investment analysis of unrated securities than is the case with respect to rated securities. 18 The foregoing policies with respect to credit quality of portfolio investments apply only at the time of purchase of a security, and the Funds are not required to dispose of a security in the event that S&P or Moody's (or any other nationally recognized statistical rating organization) downgrades its assessment of the credit characteristics of a particular issuer or, in the case of unrated securities, in the event the Adviser reassesses its view with respect to the credit quality of the issuer thereof. In determining whether a Fund will retain or sell such a security, the Adviser may consider such factors as the Adviser's assessment of the credit quality of the issuer of such security, the price at which such security could be sold and the rating, if any, assigned to such security by other nationally recognized statistical rating organizations. MUNICIPAL SECURITIES. Municipal securities are obligations issued by or on behalf of states, certain territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, the interest on which is, in the opinion of bond counsel or other counsel to the issuer of such securities, at the time of issuance, not includable in gross income for regular federal income tax purposes. It is a fundamental policy for the Target Fund that at least 80% of the Target Fund's assets be invested in tax-exempt municipal securities and for the Acquiring Fund that under normal market conditions, at least 80% of the Acquiring Fund's total assets be invested in municipal securities. Subject to the limitations set forth in this Proxy Statement/Prospectus, the Funds may engage in certain hedging transactions and may purchase and sell put and call options on municipal securities and on indices of municipal securities. Such transactions will not be treated as investments in tax-exempt securities or in municipal securities for the purpose of the Funds' respective 80% test. The Funds have not established any limit on the percentage of their respective portfolios that may be invested in municipal securities that pay interest subject to the alternative minimum tax provisions of federal tax law, and a substantial portion of the income produced by a Fund may be taxable under the federal alternative minimum tax. Municipal securities include long-term obligations, often called municipal bonds, as well as short-term municipal notes, participation certificates, municipal leases and tax-exempt commercial paper. During ordinary market conditions, longer-term municipal securities generally provide a higher yield than short-term municipal securities of similar credit quality and therefore the Funds generally expect primarily to invest and hold until maturity longer-term municipal securities. The Funds may, however, invest in short-term municipal securities when yields are greater than yields available on long-term municipal securities, to stabilize net asset value and for temporary defensive purposes. The two principal classifications of municipal bonds are "general obligation" bonds and "revenue" or "special obligation" bonds, which include "industrial revenue bonds." General obligation bonds are secured by the issuer's pledge of its 19 faith, credit and taxing power for the payment of principal and interest, and accordingly the capacity of the issuer of a general obligation bond as to the timely payment of interest and the repayment of principal when due is affected by the issuer's maintenance of its tax base. Revenue or special obligation bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special tax or other specific revenue source such as from the user of the facility being financed; accordingly the timely payment of interest and, the repayment of principal in accordance with the terms of the revenue or special obligation bond is a function of the economic viability of such facility or such revenue source. Although the ratings of S&P or Moody's of the municipal securities in the Funds' portfolio are relative and subjective, and are not absolute standards of quality, such ratings reflect the assessment of S&P or Moody's, as the case may be, of the issuer's ability, or the economic viability of the special revenue source, with respect to the timely payment of interest and the repayment of principal in accordance with the terms of the obligation. Also included within the general category of municipal securities are participations in lease obligations or installment purchase contract obligations (collectively called "lease obligations") of municipal authorities or entities. Although lease obligations do not constitute general obligations of the municipality for which the municipality's taxing power is pledged, a lease obligation ordinarily is backed by the municipality's covenant to budget for, appropriate and make the payments due under the lease obligation. However, certain lease obligations contain "non-appropriation" clauses which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. Although "non-appropriation" lease obligations are secured by the leased property, disposition of the property in the event of foreclosure might prove difficult. There is no limitation on the percentage of a Fund's assets that may be invested in "non-appropriation" lease obligations. Participation certificates are obligations issued by state and local governments or authorities to finance the acquisition of equipment and facilities. They may represent participations in a lease, an installment purchase contract, or a conditional sales contract. Some municipal leases and participation certificates may not be readily marketable. The "issuer" of municipal securities is generally deemed to be the governmental agency, authority, instrumentality or other political subdivision, or the non-governmental user of a revenue bond-financed facility, the assets and revenues of which will be used to meet the payment obligations, or the guarantee of such payment obligations, of the municipal securities. Municipal securities may have fixed or variable interest rates. The Funds may purchase floating and variable rate demand notes, which are municipal securities 20 normally having a stated maturity in excess of one year, but which permit the holder to tender the notes for purchase at the principal amount thereof. The interest rate on a floating rate demand note is based on a known lending rate, such as a bank's prime rate, and is adjusted each time such rate is adjusted. The interest rate demand note is adjusted at specified intervals. There generally is no secondary market for these notes, although they may be tendered for redemption at face value. Each such note purchased by the Funds will meet the criteria established for the purchase of municipal securities. There is no limitation as to the maturity of municipal securities in which each Fund may invest. The Adviser may adjust the average maturity of each Fund's portfolio from time to time, depending on its assessment of the relative yields available on securities of different maturities and its expectations of future changes in interest rates. A Fund generally will not invest 25% or more of its total assets in any industry, nor will either Fund generally invest more than 5% of its total assets in the securities of any single issue. Governmental issuers of municipal securities are not considered part of any "industry." However, municipal securities backed only by the assets and revenues of nongovernmental users may for this purpose be deemed to be issued by such nongovernmental users, and the 25% limitation would apply to such obligations. It is nonetheless possible that a Fund may invest 25% or more of its total assets in a broader segment of the municipal securities market, such as revenue obligations of hospitals and other health care facilities, housing agency revenue obligations or airport revenue obligations if the Adviser determines that the yields available from obligations in a particular segment of the market justify the additional risks associated with a larger investment in such segment. Although such obligations could be supported by the credit of governmental users or by the credit of nongovernmental users engaged in a number of industries, economic, business, political and other developments generally affecting the revenues of such users (for example, proposed legislation or pending court decisions affecting the financing of such projects and market factors affecting the demand for their services or products) may have a general adverse effect on all municipal securities in such a market segment. Additionally, each Fund reserves the right to invest 25% or more of its assets in industrial development bonds or in issuers located in the same state, although neither Fund has a present intention to invest 25% or more of its total assets in issuers located in the same state. TEMPORARY DEFENSIVE STRATEGIES. At times, the Adviser may judge that conditions in the markets for tax-exempt municipal securities make pursuing a Fund's basic investment strategy inconsistent with the best interests of its shareholders. At such times, the Adviser may use alternative strategies, primarily designed to reduce fluctuations in the value of such Fund's assets. In implementing these "defensive" strategies, a Fund may invest to a substantial degree in high-quality, short-term 21 municipal obligations. If these high-quality, short-term municipal obligations are not available or, in the Adviser's judgment, do not afford sufficient protection against adverse market conditions, a Fund may invest in taxable obligations. Such taxable obligations may include: obligations of the U.S. Government, its agencies or instrumentalities; other debt securities rated within the four highest grades by either S&P or Moody's; commercial paper rated in the highest grade by either rating service; certificates of deposit and bankers' acceptances; repurchase agreements with respect to any of the foregoing investments; or any other fixed-income securities that the Adviser considers consistent with such strategy. Further, each Fund may generally invest up to 20% of its total assets in taxable obligations if such investment is determined by the Adviser to be in the best interest of such Fund, provided, however, that the Target Fund will not invest in taxable obligations rated below B- by S&P or below B by Moody's or in taxable obligations regarded as comparable in quality to such rated securities by the Adviser and the Acquiring Fund will not invest in taxable obligations rated below Baa by Moody's or below BBB by S&P, or in non-rated taxable obligations regarded as comparable in quality to such rated securities by the Adviser. To the extent that the use of certain of these strategies produces taxable income to the Target Fund, this taxable income will be distributed exclusively to the holders of Target Fund Common Shares. To the extent that the use of certain of these strategies produces taxable income to the Acquiring Fund, this taxable income will be distributed on a pro rata basis among the Acquiring Fund APS and the Acquiring Fund Common Shares. It is impossible to predict whether, or for how long, a Fund will use any such defensive strategies. Further, the yields on such securities may approach or be less than the then current dividend rate payable to preferred shareholders. In such event, the benefit of leverage to the common shareholders will diminish and such Fund's leveraged capital structure may work to the disadvantage of the common shareholders. OTHER INVESTMENT PRACTICES AND POLICIES In connection with the investment objective and policies described above, each Fund may, but is not required to, utilize various other investment strategies as described below to earn income, to facilitate portfolio management and to mitigate risk. Such strategies are generally accepted by modern portfolio managers and are regularly utilized by many investment companies and other institutional investors. These investment practices entail risks. Although the Adviser believes that these investment practices may further the Funds' respective investment objectives, no assurance can be given that these investment practices will achieve this result. OPTIONS. Put options and call options typically have similar structural characteristics and operational mechanics regardless of the underlying instrument on which they are purchased or sold. Thus, the following general discussion relates to each of the particular types of options discussed in greater detail below. In general, each Fund may purchase and sell (write) options on up to 20% of its assets. In addition, many 22 Strategic Transactions involving options require segregation of Fund assets in special accounts, as described below under "Use of Segregated and Other Special Accounts." A put option gives the purchaser of the option, upon payment of a premium, the right to sell, and the writer the obligation to buy, the underlying security, commodity, index or other instrument at the exercise price. For instance, a Fund's purchase of a put option on a security might be designed to protect its holdings in the underlying instrument (or, in some cases, a similar instrument) against a substantial decline in the market value by giving that Fund the right to sell such instrument at the option exercise price. A call option, upon payment of a premium, gives the purchaser of the option the right to buy, and the seller the obligation to sell, the underlying instrument at the exercise price. A Fund's purchase of a call option on a security, financial future contract, index or other instrument might be intended to protect that Fund against an increase in the price of the underlying instrument that it intends to purchase in the future by fixing the price at which it may purchase such instrument. An American style put or call option may be exercised at any time during the option period while a European style put or call option may be exercised only upon expiration or during a fixed period prior thereto. Each Fund is authorized to purchase and sell exchange listed options and over-the-counter options ("OTC options"). Exchange listed options are issued by a regulated intermediary such as the Options Clearing Corporation ("OCC"), which guarantees the performance of the obligations of the parties to such options. The discussion below uses the OCC as a paradigm, but is also applicable to other financial intermediaries. With certain exceptions, OCC issued and exchange listed options generally settle by physical delivery of the underlying security or currency, although in the future cash settlement may become available. Index options and Eurodollar instruments are cash settled for the net amount, if any, by which the option is "in-the-money" (i.e., where the value of the underlying instrument exceeds, in the case of a call option, or is less than, in the case of a put option, the exercise price of the option) at the time the option is exercised. Frequently, rather than taking or making delivery of the underlying instrument through the process of exercising the option, listed options are closed by entering into offsetting purchase or sale transactions that do not result in ownership of the new option. A Fund's ability to close out its position as a purchaser or seller of an OCC or exchange listed put or call option is dependent, in part, upon the liquidity of the option market. Among the possible reasons for the absence of a liquid option market on an exchange are: (i) insufficient trading interest in certain options; (ii) restrictions on transactions imposed by an exchange; (iii) trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options or underlying securities including reaching daily price limits; (iv) interruption of the normal operations of the OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to handle current trading 23 volume; or (vi) a decision by one or more exchanges to discontinue the trading of options (or a particular class or series of options), in which event the relevant market for that option on that exchange would cease to exist, although outstanding options on that exchange would generally continue to be exercisable in accordance with their terms. The hours of trading for listed options may not coincide with the hours during which the underlying financial instruments are traded. To the extent that the option markets close before the markets for the underlying financial instruments, significant price and rate movements can take place in the underlying markets that cannot be reflected in the option markets. OTC options are purchased from or sold to securities dealers, financial institutions or other parties ("Counterparties") through direct bilateral agreement with the Counterparty. In contrast to exchange listed options, which generally have standardized terms and performance mechanics, all the terms of an OTC option, including such terms as method of settlement, term, exercise price, premium, guarantees and security, are set by negotiation of the parties. Each Fund will only enter into OTC options that have a buy-back provision permitting that Fund to require the Counterparty to close the option at a formula price within seven days. Each Fund expects generally to enter into OTC options that have cash settlement provisions, although it is not required to do so. Unless the parties provide for it, there is no central clearing or guaranty function in an OTC option. As a result, if the Counterparty fails to make or take delivery of the security, or other instrument underlying an OTC option it has entered into with a Fund or fails to make a cash settlement payment due in accordance with the terms of that option, that Fund will lose any premium it paid for the option as well as any anticipated benefit of the transaction. Accordingly, the Adviser must assess the creditworthiness of each such Counterparty or any guarantor or credit enhancement of the Counterparty's credit to determine the likelihood that the terms of the OTC option will be satisfied. Each Fund will engage in OTC option transactions only with U.S. government securities dealers recognized by the Federal Reserve Bank of New York as "primary dealers", or broker-dealers, domestic or foreign banks or other financial institutions which have received (or the guarantors of the obligation which have received) a short-term credit rating of "A-1" from S&P or "P-1" from Moody's or an equivalent rating from any other nationally recognized statistical rating organization ("NRSRO"). The staff of the SEC currently takes the position that, in general, OTC options on securities (other than U.S. government securities) purchased by a Fund, and portfolio securities "covering" the amount of such Fund's obligation pursuant to an OTC option sold by it (the cost of the sell-back plus the in-the-money amount, if any) are illiquid, and are subject to a Fund's limitation on illiquid securities, if any, described herein. 24 If a Fund sells a call option, the premium that it receives may serve as a partial hedge, to the extent of the option premium, against a decrease in the value of the underlying securities or instruments in its portfolio or will increase that Fund's income. The sale of put options can also provide income. Each Fund may purchase and sell call options on securities, including U.S. Treasury and agency securities, municipal obligations, mortgage-backed securities, corporate debt securities that are traded on securities exchanges and in the OTC markets and related futures contracts. All calls sold by a Fund must be "covered" (i.e., a Fund must own the securities or futures contract subject to the call) or must meet the asset segregation requirements described below as long as the call is outstanding. Even though a Fund will receive the option premium to help protect it against loss, a call sold by a Fund exposes that Fund during the term of the option to possible loss of opportunity to realize appreciation in the market price of the underlying security or instrument and may require that Fund to hold a security or instrument which it might otherwise have sold. In the event of exercise of a call option sold by a Fund with respect to securities not owned by that Fund, such Fund may be required to acquire the underlying security at a disadvantageous price to satisfy its obligation with respect to the call option. Each Fund may purchase and sell put options on securities including U.S. Treasury and agency securities, municipal obligations, mortgage-backed securities and corporate debt securities (whether or not it holds the above securities in its portfolio.) In selling put options, there is a risk that a Fund may be required to buy the underlying security at a disadvantageous price above the market price. FUTURES CONTRACTS. Each Fund may enter into financial futures contracts or purchase or sell put and call options on futures contracts as a hedge against anticipated interest rate or fixed-income market changes, for duration management and for risk management purposes. Futures contracts generally are bought and sold on the commodities exchanges where they are listed with payment of initial and variation margin as described below. The purchase of a futures contract creates a firm obligation by a Fund, as purchaser, to take delivery from the seller of the specific type of financial instrument called for in the contract at a specific future time for a specified price (or, with respect to index futures contracts and Eurodollar instruments, the net cash amount). The sale of a futures contract creates a firm obligation by a Fund, as seller, to deliver to the buyer the specific type of financial instrument called for in the contract at a specific future time for a specified price (or, with respect to index futures and Eurodollar instruments, the net cash amount). Options on futures contracts are similar to options on securities except that an option on a futures contract gives the purchaser the right in return for the premium paid to assume a position in a futures contract and obligates the seller to deliver such option. 25 Each Fund's use of financial futures contracts and options on futures contracts will in all cases be consistent with applicable regulatory requirements and in particular the rules and regulations of the Commodity Futures Trading Commission and will be entered into only for bona fide hedging, risk management (including duration management) or other portfolio management purposes. Typically, maintaining a futures contract or selling an option on a futures contract requires a Fund to deposit with a financial intermediary as security for its obligations an amount of cash or other specified assets (initial margin) which initially is typically 1% to 10% of the face amount of the contract (but may be higher in some circumstances). Additional cash or assets (variation margin) may be required to be deposited thereafter on a daily basis as the mark to market value of the contract fluctuates. The purchase of options on financial futures contracts involves payment of a premium for the option without any further obligation on the part of a Fund. If a Fund exercises an option on a futures contract it will be obligated to post initial margin (and potential subsequent variation margin) for the resulting futures contracts position just as it would for any position. Futures contracts and options on futures contracts are generally settled by entering into an offsetting transaction but there can be no assurance that the position can be offset prior to settlement at an advantageous price nor that delivery will occur. Each Fund will not enter into a futures contract or an option on a futures contracts (except for closing transactions) for other than bona fide hedging purposes if, immediately thereafter, the sum of the amount of its initial margin and premiums on open futures contracts and options thereon would exceed 5% of such Fund's total assets (taken at current value); however, in the case of an option that is in-the-money at the time of the purchase, the in-the-money amount may be excluded in calculating the 5% limitation. The segregation requirements with respect to futures contracts and options thereon are described below. OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES. Each Fund also may purchase and sell call and put options on securities indices and other financial indices and in so doing can achieve many of the same objectives it would achieve through the sale or purchase of options on individual securities or other instruments. Options on securities indices and other financial indices are similar to options on a security or other instrument except that, rather than settling by physical delivery of the underlying instrument, they settle by cash settlement, i.e., an option on an index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of the index upon which the option is based exceeds, in the case of a call, or is less than, in the case of a put, the exercise price of the option (except if, in the case of an OTC option, physical delivery is specified). This amount of cash is equal to the excess of the closing price of the index over the exercise price of the option, which also may be multiplied by a formula value. The seller of the option is obligated, in return for the premium received, to make delivery of this amount. The gain or loss on an option on an index depends on price movements in the 26 instruments making up the market, market segment, industry or other composite on which the underlying index is based, rather than price movements in individual securities, as is the case with respect to options on securities. COMBINED TRANSACTIONS. Each Fund may enter into multiple transactions, including multiple options transactions, multiple futures contracts transactions and multiple interest rate transactions and any combination of futures contracts, options and interest rate transactions ("component" transactions), instead of a single Strategic Transaction, as part of a single or combined strategy when, in the opinion of the Adviser, it is in the best interests of a Fund to do so. A combined transaction will usually contain elements of risk that are present in each of its component transactions. Although combined transactions are normally entered into based on the Adviser's judgment that the combined strategies will reduce risk or otherwise more effectively achieve the desired portfolio management goal, it is possible that the combination will instead increase such risks or hinder achievement of the portfolio management objective. SWAPS, CAPS, FLOORS AND COLLARS. Among the Strategic Transactions into which each Fund may enter are interest rate and index swaps and the purchase or sale of related caps, floors and collars. Each Fund expects to enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its portfolio, as a duration management technique or to protect against any increase in the price of securities such Fund anticipates purchasing at a later date. Each Fund intends to use these transactions as hedges and not as speculative investments and will not sell interest rate caps or floors where it does not own securities or other instruments providing the income stream such Fund may be obligated to pay. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. An index swap is an agreement to swap cash flows on a notional amount based on changes in the values of the reference indices. The purchase of a cap entitles the purchaser to receive payments on a notional principal amount from the party selling such cap to the extent that a specified index exceeds a predetermined interest rate or amount. The purchase of a floor entitles the purchaser to receive payments on a notional principal amount from the party selling such floor to the extent that a specified index falls below a predetermined interest rate or amount. A collar is a combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates or values. USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS. Many Strategic Transactions, in addition to other requirements, require that a Fund segregate cash and/or liquid securities to the extent that such Fund's obligations are not otherwise "covered" through ownership of the underlying security, financial instrument or currency. In general, either the full amount of any obligation by a Fund to pay or deliver 27 securities or assets must be covered at all times by the securities, instruments or currency required to be delivered, or, subject to any regulatory restrictions, a Fund must segregate cash and/or liquid securities in an amount at least equal to the current amount of the obligation. The segregated assets cannot be sold or transferred unless equivalent assets are substituted in their place or it is no longer necessary to segregate. For example, a call option written by a Fund will require that Fund to hold the securities subject to the call (or securities convertible into the needed securities without additional consideration) or to segregate cash and/or liquid securities sufficient to purchase and deliver the securities if the call is exercised. A call option sold by a Fund on an index will require that Fund to own portfolio securities which correlate with the index or to segregate cash and/or liquid securities equal to the excess of the index value over the exercise price on a current basis. A put option written by a Fund requires that Fund to segregate cash and/or liquid securities equal to the exercise price. OTC options entered into by a Fund, including those on securities, financial instruments or indices and OCC issued and exchange listed index options, will generally provide for cash settlement. As a result, when a Fund sells these instruments it will only segregate an amount of cash and/or liquid securities equal to its accrued net obligations, as there is no requirement for payment or delivery of amounts in excess of the net amount. These amounts will equal 100% of the exercise price in the case of a non cash-settled put, the same as an OCC guaranteed listed option sold by a Fund, or the in-the-money amount plus any sell-back formula amount in the case of a cash-settled put or call. In addition, when a Fund sells a call option on an index at a time when the in-the-money amount exceeds the exercise price, that Fund will segregate, until the option expires or is closed out, cash and/or liquid securities equal in value to such excess. OCC issued and exchange listed options sold by a Fund other than those above generally settle with physical delivery, and that Fund will segregate an amount of cash and/or liquid securities equal to the full value of the option. OTC options settling with physical delivery, or with an election of either physical delivery or cash settlement, will be treated the same as other options settling with physical delivery. In the case of a futures contract or an option on a futures contract, a Fund must deposit initial margin and possible daily variation margin in addition to segregating cash and/or liquid securities sufficient to meet its obligation to purchase or provide securities or currencies, or to pay the amount owed at the expiration of an index-based futures contract. With respect to swaps, each Fund will accrue the net amount of the excess, if any, of its obligations over its entitlements with respect to each swap on a daily basis and will segregate an amount of cash and/or liquid securities having a value equal to the accrued excess. Caps, floors and collars require segregation of cash and/or liquid securities with a value equal to a Fund's net obligation, if any. 28 Strategic Transactions may be covered by other means when consistent with applicable regulatory policies. Each Fund also may enter into offsetting transactions so that its combined position, coupled with any segregated cash and/or liquid securities, equals its net outstanding obligation in related options and Strategic Transactions. For example, a Fund could purchase a put option if the strike price of that option is the same or higher than the strike price of a put option sold by that Fund. Moreover, instead of segregating cash and/or liquid securities if a Fund held a futures contract or forward contract, it could purchase a put option on the same futures contract or forward contract with a strike price as high or higher than the price of the contract held. Other Strategic Transactions also may be offset in combinations. If the offsetting transaction terminates at the time of or after the primary transaction no segregation is required, but if it terminates prior to such time, cash and/or liquid securities equal to any remaining obligation could need to be segregated. A Fund's activities involving Strategic Transactions may be limited by the requirements of the Code for qualification as a regulated investment company. Losses resulting from the use of Strategic Transactions would reduce net asset value, and possibly income, and such losses can be greater than if the Strategic Transactions had not been utilized. Income earned or gains realized or deemed to be earned or realized, if any, by a Fund from engaging in Strategic Transactions generally will be taxable income of such Fund. Such income earned or realized by the Target Fund is allocated to the Target Fund Common Shares. Such income earned or realized by the Acquiring Fund is allocated to the Acquiring Fund Common Shares and the Acquiring Fund APS on a pro rata basis. "WHEN ISSUED" AND "DELAYED DELIVERY" TRANSACTIONS. Each Fund may also purchase and sell municipal securities on a "when issued" and "delayed delivery" basis. No income accrues to a Fund on municipal securities in connection with such transactions prior to the date that Fund actually takes delivery of such securities. These transactions are subject to market fluctuation; the value of the municipal securities at delivery may be more or less than their purchase price, and yields generally available on municipal securities when delivery occurs may be higher or lower than yields on the municipal securities obtained pursuant to such transactions. Because a Fund engaging in such transactions relies on the buyer or seller, as the case may be, to consummate the transaction, failure by the other party to complete the transaction may result in such Fund missing the opportunity of obtaining a price or yield considered to be advantageous. When a Fund is the buyer in such a transaction, however, it will maintain, in a segregated account with its custodian, cash or liquid portfolio securities having an aggregate value equal to the amount of such purchase commitments until payment is made. A Fund will make commitments to purchase municipal securities on such basis only with the intention of actually acquiring these securities, but a Fund may sell such securities prior to the settlement date if such sale is considered to be advisable. To the extent a Fund 29 engages in "when issued" and "delayed delivery" transactions, it will do so for the purpose of acquiring securities for a Fund's portfolio consistent with that Fund's investment objective and policies and not for the purpose of investment leverage. No specific limitation exists as to the percentage of a Fund's assets which may be used to acquire securities on a "when issued" or "delayed delivery" basis. INVESTMENT RESTRICTIONS Each Fund's investment objective, the Target Fund's policy of investing at least 80% of its assets in tax-exempt municipal securities, the Acquiring Fund's policy of, under normal market conditions, investing at least 80% of its total assets in municipal securities and the following investment restrictions are fundamental and cannot be changed without the approval of the holders of a majority of the applicable Fund's outstanding voting securities (defined in the 1940 Act as the lesser of (i) more than 50% of the applicable Fund's outstanding common shares and of the outstanding Preferred Shares, voting by class, or (ii) 67% of such outstanding common shares and of the outstanding Preferred Shares, voting by class, present at a meeting at which the holders of more than 50% of the outstanding shares of each such class are present in person or by proxy). All other investment policies or practices are considered by the Funds not to be fundamental and accordingly may be changed without shareholder approval. If a percentage restriction on investment or use of assets set forth below is adhered to at the time a transaction is effected, later changes in percentage resulting from changing market values will not be considered a deviation from policy. With respect to the limitations on illiquid securities and borrowings, the percentage limitations apply at the time of purchase and on an ongoing basis. The Acquiring Fund may not: 1. With respect to 75% of its total assets, purchase any securities (other than tax-exempt obligations guaranteed by the United States Government or by its agencies or instrumentalities), if as a result more than 5% of the Fund's total assets would then be invested in securities of a single issuer or if as a result the Fund would hold more than 10% of the outstanding voting securities of any single issuer, except that the Fund may purchase securities of other investment companies to the extent permitted by (i) 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the Securities and Exchange Commission under the 1940 Act, as amended from time to time or, (iii) an exemption or other relief from the provisions of the 1940 Act. 2. Invest more than 25% of its total assets in a single industry; however, as described above under "Investment Objective and Policies," the Fund may from time to time invest more than 25% of its total assets in a particular segment of the municipal securities market. 30 3. Issue senior securities, as defined in the 1940 Act, other than preferred shares of beneficial interest, except to the extent such issuance might be involved with borrowings described under subparagraph (4) below or with respect to hedging and risk management transactions or the writing of options within limits described in this Proxy Statement/Prospectus. 4. Borrow money, except for temporary or emergency purposes from banks or for repurchase of the Fund's Shares, and then only in an amount not exceeding one-third of the Fund's total assets, including the amount borrowed. The Fund will not mortgage, pledge or hypothecate any assets except in connection with a borrowing. The Fund will not purchase portfolio securities during any period that such borrowings exceed 5% of the total asset value of the Fund. Notwithstanding this investment restriction, the Fund may enter into "when issued" and "delayed delivery" transactions as described above under the heading "Investment Objective and Policies" in this Proxy Statement/Prospectus. 5. Make loans of money or property to any person, except to the extent the securities in which the Fund may invest are considered to be loans and except that the Fund may lend money or property in connection with maintenance of the value of or the Fund's interest with respect to the municipal securities owned by the Fund. 6. Buy any securities "on margin." Neither the deposit of initial or variation margin in connection with hedging and risk management transactions nor short-term credits as may be necessary for the clearance of transactions is considered the purchase of a security on margin. 7. Sell any securities "short," write, purchase or sell puts, calls or combinations thereof, or purchase or sell financial futures or options, except as described under the heading "Investment Objective and Policies -- Other Investment Practices and Policies" in this Proxy Statement/Prospectus. 8. Act as an underwriter of securities, except to the extent the Fund may be deemed to be an underwriter in connection with the sale of securities held in its portfolio. 9. Make investments for the purpose of exercising control or participation in management, except to the extent that exercise by the Fund of its rights under agreements related to municipal securities would be deemed to constitute such control or participation, and except that the Fund may purchase securities of other investment companies to the extent permitted by (i) 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the Securities and Exchange Commission under the 1940 Act, as amended from time to time or, (iii) an exemption or other relief from the provisions of the 1940 Act. 31 10. 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) 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the Securities and Exchange Commission under the 1940 Act, as amended from time to time or, (iii) an exemption or other relief from the provisions of the 1940 Act. 11. Invest in equity interests in oil, gas or other mineral exploration or development programs except pursuant to the exercise by the Fund of its rights under agreements relating to municipal securities. 12. Purchase or sell real estate, commodities or commodity contracts, except to the extent the municipal securities the Fund may invest in are considered to be interests in real estate, commodities or commodity contracts or to the extent the Fund exercises its rights under agreements relating to such municipal securities (in which case the Fund may liquidate real estate acquired as a result of a default on a mortgage), and except to the extent that financial futures and related options the Fund may invest in are considered to be commodities or commodities contracts. Additionally, the Target Fund may not: 1. With respect to 75% of its total assets, purchase any securities (other than tax-exempt obligations guaranteed by the United States Government or by its agencies or instrumentalities), if as a result more than 5% of the Fund's total assets would then be invested in securities of a single issuer or if as a result the Fund would hold more than 10% of the outstanding voting securities of any single issuer, except that the Fund may purchase securities of other investment companies to the extent permitted by (i) 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the Securities and Exchange Commission under the 1940 Act, as amended from time to time or, (iii) an exemption or other relief from the provisions of the 1940 Act. 2. Invest more than 25% of its assets in a single industry; however, as described above under "Investment Objective and Policies," the Fund may from time to time invest more than 25% of its assets in a particular segment of the municipal bond market. 3. Issue senior securities, as defined in the 1940 Act, other than the RP or other preferred shares of beneficial interest, except to the extent such issuance might be involved with borrowings described under subparagraph (4) below or with respect to hedging transactions or the writing of options within limits described in this Proxy Statement/Prospectus. 32 4. Borrow money, except for temporary or emergency purposes from banks or for repurchase of its shares, and then only in an amount not exceeding one- third of the Fund's total assets, including the amount borrowed. The Fund will not mortgage, pledge or hypothecate any assets except in connection with a borrowing. The Fund will not purchase portfolio securities during any period in which such borrowings exceed 5% of the total asset value of the Fund. Notwithstanding this investment restriction, the Fund may enter into "when issued" and "delayed delivery" transactions as described above under the heading "Investment Objective and Policies" in this Proxy Statement/Prospectus. 5. Make loans of money or property to any person, except to the extent the securities in which the Fund may invest are considered to be loans and except that the Fund may lend money or property in connection with maintenance of the value of, or the Fund's interest with respect to, the securities owned by the Fund. 6. Buy any securities "on margin." Neither the deposit of initial or variation margin in connection with hedging transactions nor short-term credits as may be necessary for the clearance of transactions is considered the purchase of a security on margin. 7. Sell any securities "short," write, purchase or sell puts, calls or combinations thereof, or purchase or sell financial futures or options, except as described under the heading "Investment Objective and Policies--Other Investment Practices and Policies" in this Proxy Statement/Prospectus. 8. Act as an underwriter of securities, except to the extent the Fund may be deemed to be an underwriter in connection with the sale of securities held in its portfolio. 9. Make investments for the purpose of exercising control or participation in management, except to the extent that exercise by the Fund of its rights under agreements related to securities owned by the Fund would be deemed to constitute such control or participation, and except that the Fund may purchase securities of other investment companies to the extent permitted by (i) 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the Securities and Exchange Commission under the 1940 Act, as amended from time to time or, (iii) an exemption or other relief from the provisions of the 1940 Act. 10. 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) 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the Securities and Exchange Commission under 33 the 1940 Act, as amended from time to time or, (iii) an exemption or other relief from the provisions of the 1940 Act. 11. Invest in equity interests in oil, gas or other mineral exploration or development programs. 12. Purchase or sell real estate, commodities or commodity contracts, except to the extent the securities the Fund may invest in are considered to be interests in real estate, commodities or commodities contracts or to the extent the Fund exercises its rights under agreements relating to such securities (in which case the Fund may liquidate real estate acquired as a result of a default on a mortgage), and except to the extent the hedging and risk management transactions the Fund may engage in are considered to be commodities or commodities contracts. 13. Invest in illiquid investments, including securities which are subject to legal or contractual restrictions on resale or for which there is no readily available market (e.g., trading in the securities is suspended or, in the case of unlisted securities, market makers do not exist or will not entertain bids or offers), if more than 25% of the Fund's assets (taken at market value) would be invested in such securities. The Fund does not treat investments in caps, swaps and floors as illiquid investments. As a matter of operating policy, each Fund will not invest 25% or more of its assets in a single industry; however, each Fund may from time to time invest 25% or more of its assets in a particular segment of the municipal securities market. MANAGEMENT OF THE FUNDS THE BOARDS. The Board of each Fund is responsible for the overall supervision of the operations of its respective Fund and performs the various duties imposed on trustees of investment companies by the 1940 Act and under applicable state law. THE ADVISER. The investment adviser for each Fund is Van Kampen 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 institutional portfolios and has more than $98 billion under management or supervision as of March 31, 2005. Van Kampen Investments is an indirect wholly owned subsidiary of Morgan Stanley, a preeminent global financial services firm that maintains leading market positions in each of its three primary businesses: securities, asset management and credit services. Morgan Stanley is a full service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. The principal business address of the Adviser 34 and Van Kampen Investments is 1221 Avenue of the Americas, New York, New York 10020. Pursuant to separate investment advisory agreements between each Fund and the Adviser, each Fund pays the Adviser a monthly fee at the annual rate of 0.55% of such Fund's average daily net assets, including assets attributable to Preferred Shares. Effective November 1, 2004, the investment advisory fee paid by each Fund was reduced from 0.60% to 0.55%. Subsequent to the Reorganization, the Adviser will continue to receive compensation at the rate of 0.55% of the average daily net assets, including assets attributable to Preferred Shares, of the combined fund. Because the fees paid to the Adviser are calculated on net assets including assets attributable to Preferred Shares, the fees earned by the Adviser will be higher when Preferred Shares are outstanding. Under a separate Accounting Services Agreement, the Adviser provides accounting services to each Fund. The Adviser allocates the cost of such services to each Fund. Additionally, under a separate Legal Services Agreement, Van Kampen Investments provides legal services to each Fund. Van Kampen Investment allocates the cost of such services to each Fund. PORTFOLIO MANAGEMENT. Each Fund's portfolio is managed by the Adviser's Municipal Fixed Income team. The team is made up of established investment professionals. Current members of the team include Thomas Byron, Vice President; Robert Wimmel, Vice President; and John Reynoldson, Executive Director. Thomas Byron has worked for the Adviser since 1981 and began managing the Funds in 2000. Robert Wimmel has worked for the Adviser since 1996 and began managing the Funds in 2001. John Reynoldson has worked for the Adviser since 1987 and began managing the Funds in 2001. Prior to 2001, Messrs. Wimmel and Reynoldson worked in an investment management capacity for the Adviser. Thomas Byron is the lead portfolio manager of each Fund. Robert Wimmel and John Reynoldson are co-portfolio managers of each Fund. All team members are responsible for the day-to-day management of each Fund and for the execution of the overall strategy of each Fund. The Reorganization Statement of Additional Information provides additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in the Acquiring Fund. PORTFOLIO TRANSACTIONS WITH AFFILIATES. The Adviser may place portfolio transactions, to the extent permitted by law, with brokerage firms affiliated with the Funds and the Adviser if it reasonably believes that the quality of execution and the commission are comparable to that available from other qualified firms. 35 LEGAL PROCEEDINGS INVOLVING THE ADVISER. The Adviser, certain affiliates of the Adviser, and certain investment companies advised by the Adviser or its affiliates were named as defendants in a number of similar class action complaints which were consolidated. The amended complaint also names as defendants certain individual trustees and directors of certain investment companies advised by affiliates of the Adviser; the complaint does not, however, name the individual trustees of any Van Kampen funds. The complaint generally alleges that defendants violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Adviser and certain affiliates of the Adviser allegedly offered economic incentives to brokers and others to steer investors to the funds advised by the Adviser or its affiliates rather than funds managed by other companies, and (ii) that the funds advised by the Adviser or its affiliates allegedly paid excessive commissions to brokers in return for their alleged efforts to steer investors to these funds. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The defendants' motion to dismiss this action is pending. After defendants moved to dismiss, the plaintiffs filed a motion for leave to amend the complaint, which is also pending. The proposed amendment drops all claims against the named investment companies, which are listed only as nominal defendants. The proposed amendment raises similar claims against the Adviser and its affiliates with respect to the investment companies advised by the Adviser or its affiliates, and, in addition, alleges that affiliates of the Adviser received undisclosed compensation for steering investors into thirteen non-affiliated fund families. The defendants intend to continue to defend this action vigorously. While the defendants believe that they have meritorious defenses, the ultimate outcome of this matter is not presently determinable at this early stage of litigation. The Adviser and certain affiliates of the Adviser are also named as defendants in a derivative suit which additionally names as defendants individual trustees of certain Van Kampen funds; the named investment companies are listed as nominal defendants. The complaint alleges that defendants caused the Van Kampen funds to pay economic incentives to a proprietary sales force to promote the sale of Van Kampen mutual funds. The complaint also alleges that the Van Kampen funds paid excessive commissions to Morgan Stanley and its affiliates in connection with the sales of the funds. The complaint seeks, among other things, the removal of the current trustees of the funds, rescission of the management contracts for the funds, disgorgement of profits by Morgan Stanley and its affiliates and monetary damages. This complaint has been coordinated with the consolidated action described in the preceding paragraph. The defendants have moved to dismiss this action and otherwise intend to defend it vigorously. This action is currently stayed until the later of (i) a ruling on the motion to dismiss the action described in the preceding paragraph or (ii) a ruling on a motion to dismiss the action described in the next paragraph. While the defendants believe that they have meritorious defenses, the 36 ultimate outcome of this matter is not presently determinable at this early stage of litigation. The plaintiff in the action described in the preceding paragraph recently filed a separate derivative action against the Adviser, certain affiliates of the Adviser, the individual trustees of certain Van Kampen funds, and certain unaffiliated entities. The named investment companies are listed as nominal defendants. The complaint alleges that certain unaffiliated entities engaged in or facilitated market timing and late trading in the Van Kampen funds, and that the Adviser, certain affiliates of the Adviser, and the trustees failed to prevent and/or detect such market timing and late trading. The complaint seeks, among other things, the removal of the current trustees of the funds, rescission of the management contracts and distribution plans for the funds, disgorgement of fees and profits from the Adviser and its affiliates, and monetary damages. The defendants' motion to dismiss this action is pending. While the defendants believe that they have meritorious defenses, the ultimate outcome of this matter is not presently determinable at this early stage of litigation. The Adviser and one of the investment companies advised by the Adviser are named as defendants in a class action complaint generally alleging that the defendants breached their duties of care to long-term shareholders of the investment company by valuing portfolio securities at the closing prices of the foreign exchanges on which they trade without accounting for significant market information that became available after the close of the foreign exchanges but before calculation of net asset value. As a result, the complaint alleges, short-term traders were able to exploit stale pricing information to capture arbitrage profits that diluted the value of shares held by long-term investors. The complaint seeks unspecified compensatory damages, punitive damages, fees and costs. Defendants appealed an order of the federal district court remanding this case to state court. The federal appeals court recently reversed the federal district court's order remanding this case to state court and directed entry of judgment in favor of defendants. The Adviser and individual trustees of certain Van Kampen funds are named as defendants in a recently filed class action complaint that alleges that the defendants breached various fiduciary and statutory duties to investors by failing to ensure that the funds participated in securities class action settlements involving securities held in the funds' portfolios. The complaint seeks compensatory and punitive damages on behalf of investors in the funds. None of the funds are named as defendants and no claims are asserted against them. The defendants expect to move to dismiss the complaint and believe that they have meritorious defenses. The Adviser, one of the investment companies advised by the Adviser, and certain officers and directors of the investment company are defendants in a class action filed in 2001 alleging that the defendants issued a series of prospectuses and registration statements that were materially false and misleading. Among other things, the complaint alleges that the prospectuses and registration statements 37 contained misleading descriptions of the method defendants used to value senior loan interests in the fund's portfolio, and that defendants materially overstated the net asset value of the fund. The parties recently mediated the dispute through a court-supervised settlement conference and reached an agreement to settle the case. The parties presented a settlement agreement for preliminary Court approval in April 2005. OTHER SERVICE PROVIDERS COMMUNICATIONS SUPPORT SERVICES PROVIDER. Van Kampen Funds Inc.(the "Support Services Provider") serves as the communications support service provider to the Target Fund. The principal place of business of the Support Services Provider is 1221 Avenue of the Americas, New York, New York 10020. The communications support services include telephonic and written correspondence with shareholders and brokers. The Target Fund does not pay any fee to the Support Services Provider but bears certain expenses incurred by the Support Services Provider. CUSTODIAN, TRANSFER AGENT, AUCTION AGENT AND DIVIDEND PAYING AGENT. State Street Bank and Trust Company is the custodian for each of the Funds. Its principal business address is 225 West Franklin Street, Boston, Massachusetts 02110. EquiServe Trust Company, N.A. is the transfer agent, dividend disbursing agent and registrar for the common shares of each of the Funds. Its principal business address is 250 Royall Street, Canton, Massachusetts 02021. Deutsche Bank Trust Company Americas is the auction agent and paying agent for the Acquiring Fund APS and is the paying agent with respect to the Target Fund RP. Its principal business address is 280 Park Avenue, New York, New York 10017. Merrill Lynch, Pierce, Fenner & Smith Incorporated is the remarketing agent for the Target Fund RP. Its principal business address is World Financial Center, North Tower, New York, New York 10281. CAPITALIZATION The Board of Trustees of each Fund may authorize separate classes of shares together with such designation of preferences, rights, voting powers, restrictions, limitations, qualifications or terms as may be determined from time to time by the trustees. 38 The table below sets forth the capitalization of the Target Fund and the Acquiring Fund as of February 28, 2005, and the pro forma capitalization of the combined fund as if the Reorganization had occurred on that date. CAPITALIZATION AS OF FEBRUARY 28, 2005 (UNAUDITED) AMOUNTS IN THOUSANDS
ACTUAL PRO FORMA ---------------------------------- --------------- VAN KAMPEN VAN KAMPEN INVESTMENT GRADE VAN KAMPEN MUNICIPAL TRUST MUNICIPAL TRUST MUNICIPAL TRUST --------------- ---------------- --------------- NET ASSETS CONSIST OF: Common Shares ($0.01 par value)*......................... 364 48 394 Paid in surplus................... 538,413 51,563 589,746 Net unrealized appreciation....... 55,892 4,835 60,727 Accumulated undistributed net investment income............... 3,119 (34) 3,085 Accumulated net realized gain (loss).......................... 912 (6,527) (5,615) NET ASSETS APPLICABLE TO COMMON SHARES.......................... 598,700 49,885 648,337** PREFERRED SHARES ($0.01 par value, with liquidation preference of $25,000 and $100,000 for Acquiring Fund and Target Fund, respectively)*.................. 300,000 25,000 325,000 NET ASSETS INCLUDING PREFERRED SHARES.......................... $898,700 $74,885 $973,337
- --------------- * Based on the number of outstanding shares listed in "Outstanding Securities of the Funds" table below. ** Reflect a non-recurring cost associated with the Reorganization of approximately $248,000, with all of such $248,000 to be borne by the Target Fund common shareholders. See "Information about the Reorganization -- Expenses of the Reorganization" for additional information. 39 OUTSTANDING SECURITIES OF THE FUNDS AS OF FEBRUARY 28, 2005
AMOUNT OUTSTANDING AMOUNT HELD EXCLUSIVE OF AMOUNT FOR ITS OWN SHOWN IN PREVIOUS TITLE OF CLASS AMOUNT AUTHORIZED ACCOUNT COLUMN - -------------- ----------------- ----------- ------------------- VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST Common Shares............... Unlimited 0 4,839,000 Preferred Shares............ 100,000,000 0 250 VAN KAMPEN MUNICIPAL TRUST Common Shares............... Unlimited 0 36,365,393 Preferred Shares............ 100,000,000 0 12,000
ADDITIONAL INFORMATION ABOUT COMMON SHARES OF THE FUNDS GENERAL. Common shareholders of a Fund are entitled to share equally in dividends declared by such Fund's Board of Trustees payable to holders of the common shares and in the net assets of such Fund available for distribution to holders of the common shares after payment of the preferential amounts payable to preferred shareholders. Common shareholders do not have preemptive or conversion rights, and a Fund's common shares are not redeemable. The outstanding common shares of each Fund are fully paid and nonassessable (except as described under "Governing Law" below). So long as any Preferred Shares of a Fund are outstanding, holders of such Fund's common shares will not be entitled to receive any dividends or other distributions from that Fund unless all accrued dividends on the Fund's outstanding Preferred Shares have been paid, and unless asset coverage (as defined in the 1940 Act) with respect to such Preferred Shares would be at least 200% after giving effect to such distributions. PURCHASE AND SALE. Purchase and sale procedures for the common shares of each of the Funds are identical. Investors typically purchase and sell common shares of the Funds through a registered broker-dealer on the NYSE or CHX, thereby incurring a brokerage commission set by the broker-dealer. Alternatively, investors may purchase or sell common shares of the Funds through privately negotiated transactions with existing shareholders. 40 COMMON SHARE PRICE DATA. The following table sets forth the high and low sales prices for common shares of each Fund on the NYSE for each full quarterly period within each Fund's two most recent fiscal years and for the first fiscal quarter in the current fiscal year for each Fund, along with the net asset value and discount or premium to net asset value for each quotation. VAN KAMPEN MUNICIPAL TRUST
NET ASSET PREMIUM NET ASSET PREMIUM QUARTERLY PERIOD ENDING HIGH PRICE VALUE (DISCOUNT) LOW PRICE VALUE (DISCOUNT) - ----------------------- ---------- --------- ---------- --------- --------- ---------- January 31, 2005...... $14.92 $16.57 (9.96)% $14.10 $16.28 (13.39)% October 31, 2004...... 14.90 16.60 (10.24)% 14.30 16.25 (12.00)% July 31, 2004......... 14.18 16.04 (11.60)% 13.30 15.40 (13.64)% April 30, 2004........ 15.74 17.05 (7.68)% 13.79 16.05 (14.08)% January 31, 2004...... 15.42 16.71 (7.72)% 14.53 16.42 (11.51)% October 31, 2003...... 14.80 16.43 (9.92)% 13.93 15.69 (11.22)% July 31, 2003......... 15.75 17.11 (7.95)% 14.02 15.69 (10.64)% April 30, 2003........ 15.05 16.50 (8.79)% 14.20 16.25 (12.62)% January 31, 2003...... 14.50 16.21 (10.55)% 13.90 15.92 (12.69)%
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST
NET ASSET PREMIUM NET ASSET PREMIUM QUARTERLY PERIOD ENDING HIGH PRICE VALUE (DISCOUNT) LOW PRICE VALUE (DISCOUNT) - ----------------------- ---------- --------- ---------- --------- --------- ---------- January 31, 2005...... $9.18 $10.37 (11.48)% $8.65 $10.17 (14.95)% October 31, 2004...... 9.15 10.29 (11.08)% 8.77 10.16 (13.68)% July 31, 2004......... 8.77 10.05 (12.74)% 8.34 9.84 (15.24)% April 30, 2004........ 9.73 10.65 (8.64)% 8.52 10.01 (14.89)% January 31, 2004...... 9.48 10.40 (8.85)% 8.91 10.15 (12.22)% October 31, 2003...... 8.98 10.11 (11.18)% 8.55 9.82 (12.93)% July 31, 2003......... 9.55 10.56 (9.56)% 8.74 9.89 (11.63)% April 30, 2003........ 9.01 10.25 (12.10)% 8.73 10.01 (12.79)% January 31, 2003...... 8.85 10.15 (12.81)% 8.55 9.96 (14.16)%
As of April 25, 2005, (i) the net asset value per share for Target Fund Common Shares was $10.26 and the market price per share was $8.94, representing a discount to net asset value of 12.87%, and (ii) the net asset value per share for Acquiring Fund Common Shares was $16.39 and the market price per share was $14.03, representing a discount to net asset value of 14.40%. Common shares of each Fund have traded at both a premium and a discount to net asset value for extended periods since the applicable Fund's inception. In order to reduce or eliminate a market value discount from net asset value, the Board of Trustees of each Fund may, subject to the terms and conditions of its Preferred Shares, authorize that Fund from time to time to repurchase the common shares in 41 the open market or to tender for the common shares at net asset value. The Board of Trustees of each Fund, in consultation with the Adviser, will review on a quarterly basis the possibility of open market repurchases and/or tender offers for the common shares. Subject to its borrowing restrictions, each Fund may incur debt to finance such repurchases, which entails risks. The ability of a Fund to enter into tender offers and the common share repurchases may be limited by the 1940 Act asset coverage requirements and any additional asset coverage requirements which may be imposed by a rating agency in connection with any rating of the Preferred Shares. No assurance can be given that the Board of Trustees of either Fund will, in fact, authorize that Fund to undertake such repurchases and/or tender offers or that, if undertaken, such actions would result in the common shares trading at a price which is equal or close to net asset value. DIVIDENDS AND DISTRIBUTIONS. The Funds' current policies with respect to dividends and distributions relating to their respective common shares are similar. It is each Fund's present policy, which may be changed by its Board of Trustees, to make monthly distributions to holders of its common shares of substantially all of the Fund's net investment income remaining after the payment of dividends on any outstanding Preferred Shares. Net income of each Fund consists of all interest income accrued on portfolio assets less all expenses of such Fund. Under current federal tax law, the Target Fund may allocate net capital gains and other taxable income, if any, received by the Target Fund to the Target Fund Common Shares, allowing the Target Fund to pay dividends to the Target Fund RP which qualify in their entirety as tax-exempt distributions. The Acquiring Fund, however, is required to allocate net capital gains and other taxable income, if any, received by the Acquiring Fund among the Acquiring Fund Common Shares and Acquiring Fund APS on a pro rata basis in the year for which such capital gains and other income is realized. Expenses of each Fund are accrued each day. Net realized capital gains, if any, are expected to be distributed to shareholders at least once a year. While there are any Preferred Shares of a Fund outstanding, such Fund may not declare any cash dividend or other distribution on its common shares, unless at the time of such declaration, (1) all accrued Preferred Shares dividends have been paid and (2) the value of such Fund's total assets (determined after deducting the amount of such dividend or other distribution), less all liabilities and indebtedness of such Fund, is at least 200% (as required by the 1940 Act) of the liquidation value of the outstanding Preferred Shares (expected to equal the aggregate original purchase price of the outstanding Preferred Shares plus any accrued and unpaid dividends thereon, whether or not earned or declared on a cumulative basis). In addition to the requirements of the 1940 Act, each Fund may be required to comply with other asset coverage requirements as a condition of such Fund obtaining a rating of its Preferred Shares from a nationally recognized rating service. These requirements may include an asset coverage test more stringent than under the 1940 Act. This 42 limitation on a Fund's ability to make distributions on its common shares could in certain circumstances impair the ability of such Fund to maintain its qualification for taxation as a regulated investment company. Each Fund intends, however, to the extent possible, to purchase or redeem Preferred Shares from time to time to maintain compliance with such asset coverage requirements and may pay special dividends to the holders of the Preferred Shares in certain circumstances in connection with any such impairment of such Fund's status as a regulated investment company. For information concerning the manner in which dividends and distributions to holders of each Fund's common shares may be reinvested automatically in the Fund's common shares, see "-- Dividend Reinvestment Plan" below. DIVIDEND REINVESTMENT PLAN. Each Fund offers a Dividend Reinvestment Plan (each a "Plan," and collectively the "Plans") pursuant to which holders of common shares may elect to have all distributions of dividends and all capital gains automatically reinvested in common shares pursuant to such Plan. The Plans for the Target Fund and the Acquiring Fund are similar. Unless common shareholders elect to participate in a Plan, common shareholders will receive distributions of dividends and capital gains in cash. EquiServe Trust Company, N.A., as plan agent (the "Plan Agent"), serves as agent for the holders of common shares of each Fund in administering the Plans. After the Reorganization, a holder of shares of a Fund who receives dividends in cash will continue to receive dividends in cash; all holders who elect to participate in the Plan of a Fund will have their dividends automatically reinvested in shares of the combined fund. All correspondence concerning the Plan should be directed to the Plan Agent at P.O. Box 43011, Providence, Rhode Island 02940-3011. Telephone calls concerning the Plan may be directed to the Plan Agent between the hours of 7:30 a.m. and 5:00 p.m. Central Standard Time at (800) 341-2929. ADDITIONAL INFORMATION ABOUT PREFERRED SHARES OF THE FUNDS GENERAL. The Preferred Shares of each Fund have similar structures. Both Target Fund RP and Acquiring Fund APS are preferred shares of beneficial interest which entitle their holders to receive dividends when, as and if declared by the Board of Trustees of such Fund out of funds legally available therefor, at a rate per annum that may vary for successive dividend periods. While the Target Fund RP and Acquiring Fund APS are similar in many respects, there are several differences that shareholders should consider. The Acquiring Fund APS have a liquidation preference of $25,000 per share. The Target Fund RP have a liquidation preference of $100,000 per share. Neither Target Fund RP nor Acquiring Fund APS are traded on a stock exchange or over-the-counter. Holders of each Fund's Preferred Shares do not have preemptive rights to purchase any shares of RP or APS, as applicable, 43 or any other preferred shares that might be issued. The net asset value per share of a Fund's Preferred Shares equals its liquidation preference plus accumulated but unpaid dividends per share. PURCHASE AND SALE. Acquiring Fund APS and Target Fund RP are purchased or sold using different procedures. Acquiring Fund APS generally are purchased and sold through auctions generally conducted every 7 days in the case of Series A APS and Series C APS and every 28 days in the case of Series B APS and Series D APS by Deutsche Bank Trust Company Americas, as the auction agent for the Acquiring Fund's APS (the "Auction Agent") unless the Acquiring Fund elects to declare a special dividend period. Unless otherwise permitted by the Acquiring Fund, existing and potential holders of Acquiring Fund APS only may participate in auctions through their broker-dealers. Broker-dealers submit the orders of their respective customers who are existing and potential holders of APS to the Auction Agent. On or prior to each auction date for the APS (the business day next preceding the first day of each dividend period), each holder may submit orders to buy, sell or hold APS to its broker-dealer. Outside of these auctions, shares of APS may be purchased or sold through broker-dealers for the APS in a secondary trading market maintained by the broker-dealers. However, there can be no assurance that a secondary market will develop or if it does develop, that it will provide holders with a liquid trading market for the Acquiring Fund APS. Target Fund RP generally are purchased and sold through remarketings conducted every 28 days by Merrill Lynch (the "Remarketing Agent"), unless the Target Fund elects to declare a special dividend period. On each tender date (the business day preceding the related dividend reset date) for shares of Target Fund RP, the Remarketing Agent will, after canvassing the market and considering prevailing market conditions, provide to holders of shares of Target Fund RP non-binding indications of the applicable dividend rate for the next succeeding 28-day dividend period. The actual applicable dividend rate for such dividend period may be greater than or less than the rate indicated in such non-binding indications and will not be determined until after a holder is required to elect to hold or tender its shares of Target Fund RP or a new purchaser is required to agree to purchase shares of Target Fund RP. Each holder of shares of Target Fund RP then must notify the Remarketing Agent of its desire (on a share-by-share basis) either to tender such share at a price of $100,000 per share or to continue to hold such share for a 28-day dividend period. Any holder or prospective purchaser may informally indicate to the Remarketing Agent its applicable dividend rate preferences. However, any such notice given to the Remarketing Agent to tender or hold shares for a particular dividend period is irrevocable (subject to limit exceptions) and may not be conditioned upon the level at which applicable dividend rates are set. On the dividend reset date, the Remarketing Agent will then determine the 44 applicable dividend rate for the next dividend period, which will be the lowest rate available which enables the Remarketing Agent to remarket on behalf of the holders thereof all shares of Target Fund RP tendered to it on such tender date at a price of $100,000 per share. Such determination will be made in the sole discretion of the Remarketing Agent and will be conclusive and binding on the Target Fund and on the holders of shares of Target Fund RP. The Remarketing Agent intends to make a secondary market in the shares of Target Fund RP outside of remarketings. The Remarketing Agent, however, has no obligation to make a secondary market in the shares of Target Fund RP outside of remarketings, and there can be no assurance that a secondary market for shares of Target Fund RP will develop or, if it does develop, that it will provide holders with liquidity of investment. With respect to the Acquiring Fund APS, each auction requires the participation of one or more broker-dealers. The Auction Agent has entered into agreements with certain broker-dealers, and may enter into similar agreements with one or more additional broker-dealers (collectively, the "Broker-Dealers") selected by the Acquiring Fund, which provide for the participation of Broker-Dealers in auctions. The Auction Agent after each auction for Acquiring Fund APS will pay to each Broker-Dealer, from funds provided by the Acquiring Fund, a service charge at the annual rate of 0.25 of 1% in the case of any auction immediately preceding a rate period of less than one year, or a percentage agreed to by such Fund and the Broker-Dealers in the case of any auction immediately preceding a rate period of one year or longer, of the purchase price of Acquiring Fund APS placed by such Broker-Dealer at such auction. With respect to the Target Fund, for their services in determining the applicable dividend rate and remarketing shares of Target Fund RP, the Remarketing Agent will receive from the Target Fund an annual fee of approximately 0.25% of the average amount of RP outstanding. The Remarketing Agent will pay to selected broker-dealers a pro rata portion of the 0.25% per annum fee, reflecting shares sold through such broker-dealers to purchasers in remarketings. In connection with the Reorganization, a holder of Target Fund RP would receive Series E Acquiring Fund APS whose auctions generally will be conducted every 28 days by the Auction Agent unless the Acquiring Fund elects to declare a special dividend period. Accordingly, Acquiring Fund APS received in connection with the Reorganization would have a regular dividend period of 28 days like the 28 day dividend period of the Target Fund RP. DIVIDENDS AND DISTRIBUTIONS. The holders of Acquiring Fund APS are entitled to receive, when, as and if declared by the Board of Trustees of such Fund, out of funds legally available therefor, cumulative cash dividends on their shares. The holders of Target Fund RP are entitled to receive, when and if declared by the Board of Trustees of such Fund, out of funds legally available therefor, cumulative cash dividends on their shares, subject to available net tax-exempt income. The RP do not have any dividend 45 accumulation right with respect to any amount by which such Fund's available net tax-exempt income limited the amount of any dividend that would have otherwise been paid for any dividend period. In the event of such a limitation on dividend accumulations, the shares of RP would be subject to mandatory redemption. Dividends on a Fund's Preferred Shares so declared and payable shall be paid (i) in preference to and in priority over any dividends so declared and payable on the Fund's common shares, and (ii) with respect to the Target Fund, to the extent permitted under the Internal Revenue Code and to the extent of available net tax-exempt income, out of net tax-exempt income earned by the Target Fund's investments. Prior to each dividend payment date, the relevant Fund is required to deposit with the Auction Agent, in the case of the Acquiring Fund, or the paying agent in the case of the RP, sufficient funds for the payment of such declared dividends. No interest will be payable in respect of any dividend payment or payment on a Fund's Preferred Shares which may be in arrears. As described below, a Fund may be required to pay Additional Dividends in certain circumstances. In no other instances will either Fund be required to make payments to holders of its Preferred Shares to offset the tax effect of any reallocation of net capital gains or other taxable income. Holders of Target Fund RP generally receive dividends out of the Target Fund's available net tax-exempt income, which qualify in their entirety as distributions of tax-exempt interest income for federal income tax purposes (subject to the possible application of the alternative minimum tax). The Acquiring Fund, however, is required to allocate net capital gains and other taxable income, if any, proportionately between its common shares and APS. The amount of taxable income allocated to the APS depends upon the amount of such income realized by the Acquiring Fund, but is generally not expected to be significant. If for any taxable year, with respect to the Target Fund's income and gains, if any, allocable to the Target Fund RP, the Target Fund realizes net capital gains or any portion of the Target Fund's net income does not qualify in its entirety as a distribution of tax-exempt interest income for federal income tax purposes, then an Additional Dividend will become payable to the holders of Target Fund RP in an amount such that the net after-tax return to such holders will be the same as the net after-tax return that would have been derived if such dividend, including any Additional Dividends, had qualified in its entirety as a distribution of tax-exempt interest income. However, the Target Fund may, at least 15 days prior to any remarketing, give notice to the Remarketing Agent of the estimated taxable percentage or a change in the estimated taxable percentage to be applicable to dividends on such shares for the dividend period next succeeding such notice. If such notice is given, and unless and until otherwise duly notified, Additional Dividends will not be payable as described above and instead, Additional Dividends will be payable to such holders only if, and to the extent of, the portion of dividends 46 paid with respect to such shares for such dividend period that does not qualify as a distribution of tax-exempt interest income for federal income tax purposes exceeds the estimated taxable percentage. In normal circumstances, whenever the Acquiring Fund intends to include any net capital gains or other taxable income in any dividend on APS, the Fund will notify the Auction Agent of the amount to be so included prior to the Auction establishing the applicable rate for such dividend. The Auction Agent will in turn notify each broker-dealer who will notify existing and potential holders of Acquiring Fund APS. As a result, auction participants may, in response to such information, place bids which take account of the inclusion of net capital gains or other taxable income in the dividend. If the Acquiring Fund retroactively allocates any net capital gains or other taxable income to the APS without having given notice to the Auction Agent, solely by reason of the fact that such allocation is made as a result of the redemption of all or a portion of the outstanding Acquiring Fund APS or the liquidation of the Acquiring Fund, the Acquiring Fund will pay an Additional Dividend to offset substantially the tax effect thereof. As a result of the notice and Additional Dividend provisions, the after-tax return to a holders of Target Fund RP and Acquiring Fund APS is not expected to differ substantially. While the Funds normally utilize the auction or remarketing procedures described above, each Fund may utilize special dividend periods in certain circumstances to set the dividend rate. DIVIDEND RATES. The following table provides information about the dividend rates for each Fund's APS or RP, as applicable, as of a recent auction or remarketing date.
AUCTION OR REMARKETING DIVIDEND DATE PREFERRED SHARES RATE - ------------------------------------ ---------------- ---- April 12, 2005............................ Target Fund RP 2.45% April 18, 2005............................ Acquiring Fund Series A APS 2.20% April 19, 2005............................ Acquiring Fund Series B APS 2.85% April 13, 2005............................ Acquiring Fund Series C APS 2.23% April 14, 2005............................ Acquiring Fund Series D APS 2.40%
The dividend rates in effect at the closing of the Reorganization will be the rates determined in the remarketing or auction, as the case may be, most recently preceding such closing. RATINGS. The Target Fund RP and the Acquiring Fund APS have each been assigned a rating of "AAA" from S&P and "Aaa" from Moody's. Each Fund intends that, so long as its Preferred Shares are outstanding, the composition of its portfolio will reflect guidelines established by S&P and Moody's in connection with each Fund's receipt of a rating for such shares of at least "AAA" from S&P and "Aaa" from Moody's. S&P and Moody's, which are nationally recognized statistical 47 rating organizations, issue ratings for various securities reflecting the perceived creditworthiness of such securities. The guidelines for rating such preferred shares have been developed by S&P and Moody's in connection with issuances of asset-backed and similar securities, including debt obligations and variable rate preferred stock, generally on a case-by-case basis through discussions with the issuers of these securities. The guidelines are designed to ensure that assets underlying outstanding debt or preferred stock will be varied sufficiently and will be of sufficient quality and amount to justify investment grade ratings. The guidelines do not have the force of law but have been adopted by each Fund in order to satisfy current requirements necessary for S&P and Moody's to issue the above-described ratings for Preferred Shares, which ratings generally are relied upon by institutional investors in purchasing such securities. The guidelines provide a set of tests for portfolio composition and asset coverage that supplement (and in some cases are more restrictive than) the applicable requirements under the 1940 Act. Each Fund may, but is not required to, adopt any modifications to these guidelines that hereafter may be established by S&P or Moody's. Failure to adopt any such modifications, however, may result in a change in the ratings described above or a withdrawal of the ratings altogether. In addition, any rating agency providing a rating for a Fund's Preferred Shares, at any time, may change or withdraw any such rating. As set forth in the Certificate of Vote of each Fund, the Board of Trustees of each Fund, without shareholder approval, may modify certain definitions or restrictions that have been adopted by such Fund pursuant to the rating agency guidelines, provided the Board of Trustees has obtained written confirmation from S&P and Moody's that any such change would not impair the ratings then assigned by S&P and Moody's to the Preferred Shares. For so long as any shares of a Fund's Preferred Shares are rated by S&P or Moody's, as the case may be, a Fund's use of options and financial futures contracts and options thereon will be subject to certain limitations mandated by the rating agencies. REDEMPTIONS. The redemption provisions pertaining to the Preferred Shares of each Fund are similar. Preferred Shares of each Fund are generally redeemable at the option of the Fund at a price equal to their liquidation preference plus accumulated but unpaid dividends (whether or not earned or declared) to the date of redemption plus, in certain circumstances, a redemption premium. Each Fund's Preferred Shares are also subject to mandatory redemption at a price equal to their liquidation preference plus accumulated but unpaid dividends (whether or not earned or declared) to the date of redemption upon the occurrence of certain specified events, such as the failure of a Fund to maintain asset coverage requirements for the Preferred Shares specified by Moody's and S&P in connection with their issuance of ratings on the Preferred Shares. Additionally, with respect to the RP, the Target Fund is required to redeem RP if on any dividend payment date the Target Fund fails to generate sufficient available net tax-exempt income to pay accrued and unpaid dividends on the RP out of solely tax-exempt income at the 48 applicable dividend rate. The liquidation preference per share of the Target Fund RP is $100,000 and the liquidation preference per share of the Acquiring Fund APS is $25,000. LIQUIDATION RIGHTS. Upon any liquidation, dissolution or winding up of a Fund, whether voluntary or involuntary, the holders of such Fund's Preferred Shares will be entitled to receive, out of the assets of such Fund available for distribution to shareholders, before any distribution or payment is made upon any of such Fund's common shares or any other capital shares of such Fund ranking junior in right of payment upon liquidation to Preferred Shares, the liquidation preference of such Preferred Shares, together with the amount of any dividends accumulated but unpaid (whether or not earned or declared) thereon to the date of distribution, and after such payment the holders of Preferred Shares will be entitled to no other payments except for any Additional Dividends, in the case of the Acquiring Fund. The liquidation preference per share of the Target Fund RP is $100,000 and the liquidation preference per share of the Acquiring Fund APS is $25,000. If such assets of a Fund are insufficient to make the full liquidation payment on the Preferred Shares and liquidation payments on any other outstanding class or series of preferred shares of such Fund ranking on a parity with the Preferred Shares as to payment upon liquidation, then such assets will be distributed among the holders of Preferred Shares and the holders of shares of such other class or series ratably in proportion to the respective preferential amounts to which they are entitled. After payment of the full amount of liquidation distribution to which they are entitled, the holders of a Fund's Preferred Shares will not be entitled to any further participation in any distribution of assets by the Fund except for any Additional Dividends, in the case of the Acquiring Fund. A consolidation, merger or share exchange of a Fund with or into any other entity or entities or a sale, whether for cash, shares of stock, securities or properties, of all or substantially all or any part of the assets of a Fund shall not be deemed or construed to be a liquidation, dissolution or winding up of such Fund for this purpose. SERIES. Under the 1940 Act, each Fund is permitted to have outstanding more than one series of preferred shares as long as no single series has priority over another series as to the distribution of assets of such Fund or the payment of dividends. The Target Fund currently has one series of RP outstanding. The Acquiring Fund currently has four series of APS outstanding, Series A APS, Series B APS, Series C APS and Series D APS. In connection with the Reorganization, the Acquiring Fund will create a new series, designated Series E APS, to replace the Target Fund's RP. Four shares of Series E APS, liquidation preference $25,000 per share, will be issued for each share of Target Fund RP, liquidation preference $100,000 per share. The number of days in the regular dividend period for Series E APS will remain the same as for the Target Fund's RP. 49 ADDITIONAL INFORMATION. For additional information regarding Acquiring Fund APS, Target Fund shareholders should consult the Reorganization Statement of Additional Information, which contains a more complete summary of the terms of the Acquiring Fund APS, and the Certificate of Vote governing the Acquiring Fund APS, included as Appendix B to the Reorganization Statement of Additional Information. APS issued in connection with the Reorganization will be governed by the Certificate of Vote of the Acquiring Fund, which, upon completion of the Reorganization, will be amended to reflect the creation of Series E and the issuance of additional APS. GOVERNING LAW Each Fund is organized as a business trust under the laws of The Commonwealth of Massachusetts. The Target Fund was organized on April 14, 1989 and commenced operations on November 30, 1989; the Acquiring Fund was organized on July, 19 1991 and commenced operations on November 30, 1991. Under Massachusetts law, shareholders of a business trust may, under certain circumstances, be held personally liable as partners for its obligations. However, the Declaration of Trust of each Fund contains an express disclaimer of shareholder liability for acts or obligations of such Fund and provides for indemnification and reimbursement of expenses out of such Fund's property for any shareholder held personally liable for the obligations of such Fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which a Fund itself would be unable to meet its obligations. Given the nature of each Fund's assets and operations, the possibility of a Fund being unable to meet its obligations is remote and, in the opinion of counsel to the Funds, the risk to the Funds' respective shareholders is remote. Each Fund is also subject to federal securities laws, including the 1940 Act and the rules and regulations promulgated by SEC thereunder, and applicable state securities laws. Each Fund is registered as a diversified, closed-end management investment company under the 1940 Act. CERTAIN PROVISIONS OF THE DECLARATIONS OF TRUST Each Fund's Declaration of Trust includes provisions that could have the effect of limiting the ability of other entities or persons to acquire control of such Fund or to change the composition of its Board of Trustees, and could have the effect of depriving common shareholders of an opportunity to sell their common shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of such Fund. The Board of Trustees of each Fund is divided into three classes, with the term of one class expiring at the annual meeting of shareholders. At each annual meeting, each class whose term is expiring will be elected to a three-year term. This provision could delay for up to two years the 50 replacement of a majority of the Board of Trustees. A trustee may be removed from office only for cause by a written instrument signed by at least two-thirds of the remaining trustees or by a vote of the holders of at least two-thirds of the class of shares of the Fund that elected such trustee and entitled to vote on the matter. In addition, each Fund's Declaration of Trust requires the favorable vote of the holders of at least 75% of the outstanding shares of each class of the Fund in question, voting as a class, then entitled to vote to approve, adopt or authorize certain transactions with 5%-or-greater holders of a class of shares and their associates, unless the Board of Trustees shall by resolution have approved a memorandum of understanding with such holders, in which case normal voting requirements would be in effect. For purposes of these provisions, a 5%-or-greater holder of a class of shares (a "Principal Shareholder") refers to any person who, whether directly or indirectly and whether alone or together with its affiliates and associates, beneficially owns 5% or more of the outstanding shares of any class of beneficial interest of such Fund. The transactions subject to these special approval requirements are: (i) the merger or consolidation of such Fund or any subsidiary of such Fund with or into any Principal Shareholder; (ii) the issuance of any securities of such Fund to any Principal Shareholder for cash (except pursuant to the Dividend Reinvestment Plan); (iii) the sale, lease or exchange of all or any substantial part of the assets of such Fund to any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period); or (iv) the sale, lease or exchange to such Fund or any subsidiary thereof, in exchange for securities of such Fund, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period). The Board of Trustees of each Fund has determined that the 75% voting requirements described above, which are greater than the minimum requirements under Massachusetts law or the 1940 Act, are in the best interest of shareholders of each respective Fund generally. Reference should be made to the Declaration of Trust of each Fund on file with the SEC for the full text of these provisions. The Declaration of Trust of each Fund further provides that no trustee, officer, employee or agent of a Fund is liable to such Fund or to any shareholder, nor is any trustee, officer, employee or agent liable to any third persons in connection with the affairs of such Fund, except as such liability may arise from his or her own bad faith, willful misfeasance, gross negligence, or reckless disregard of their duties. It also provides that all third persons shall look solely to such Fund's property for satisfaction of claims arising in connection with the affairs of such Fund. With the exceptions stated, the Declaration of Trust of each Fund provides that a trustee or 51 officer is entitled to be indemnified against all liability in connection with the affairs of a Fund. CONVERSION TO OPEN-END FUND Each Fund may be converted to an open-end investment company at any time by an amendment to its Declaration of Trust. Each Fund's Declaration of Trust provides that such an amendment would require the approval of (a) a majority of the trustees, including the approval by a majority of the disinterested trustees of the applicable Fund, and (b) the lesser of (i) more than 50% of the Fund's outstanding common and preferred shares, each voting as a class or (ii) 67% of the common and preferred shares, each voting as a class, present at a meeting at which holders of more than 50% of the outstanding shares of each such class are present in person or by proxy. If approved in the foregoing manner, conversion of the Fund could not occur until 90 days after the shareholders' meeting at which such conversion was approved and would also require at least 30 days prior notice to all shareholders. Conversion of a Fund to an open-end investment company would require the redemption of all outstanding Preferred Shares, which would eliminate the leveraged capital structure of such Fund. In the event of conversion, the common shares would cease to be listed on the NYSE, AMEX, CHX, NASDAQ National Market System or other national securities exchange or national market system. Shareholders of an open-end investment company may require the company to redeem their shares at any time (except in certain circumstances as authorized by or under the 1940 Act) at their net asset value, less such redemption charge, if any, as might be in effect at the time of a redemption. If a Fund were converted to an open-end fund, it is likely that new common shares would be sold at net asset value plus a sales load. Following any such conversion, it is also possible that certain of such Fund's investment policies and strategies would have to be modified to assure sufficient portfolio liquidity. In particular such Fund would be required to maintain its portfolio such that not more than 15% of its assets would be invested in illiquid securities. Such requirement could cause such Fund to dispose of portfolio securities or other assets at a time when it is not advantageous to do so, and could adversely affect the ability of such Fund to meet its investment objective. VOTING RIGHTS Voting rights are identical for the holders of each Fund's common shares. Holders of each Fund's common shares are entitled to one vote for each share held. Except as set forth above under "Certain Provisions of the Declarations of Trust" or "Conversion to Open-End Fund," or except as expressly required by applicable law or expressly set forth in the designation of rights and preferences with respect to a Fund's Preferred Shares, holders of Preferred Shares have no voting rights. When holders of a Fund's Preferred Shares are entitled to vote, they are also entitled to cast one vote per share held. 52 Holders of Preferred Shares of a Fund, voting as a class, are entitled to elect two of each Fund's trustees. Under the 1940 Act, if at any time dividends on a Fund's Preferred Shares are unpaid in an amount equal to two full years dividends thereon, the holders of all outstanding Preferred Shares, voting as a class, are entitled to elect a majority of such Fund's trustees until all dividends have been paid or declared and set apart for payment. The Certificate of Vote establishing the Preferred Shares of each Fund provides that such Fund shall not take certain actions relating to the preferences, rights or powers of holders of such Fund's Preferred Shares without the affirmative vote of the holders of a majority of the outstanding Preferred Shares. Additionally, if the Acquiring Fund has more than one series of Preferred Shares outstanding, an affirmative vote of a majority of the outstanding shares of each series of Preferred Shares, each voting separately as a class, is required with respect to any matter that materially affects the series in a manner different from that of other series of such Fund's Preferred Shares. The specific provisions of each Fund's Certificate of Vote with respect to the voting rights of holders of Preferred Shares may differ and Target Fund shareholders should consult the Certificate of Vote governing the Acquiring Fund APS, included as Appendix B to the Reorganization Statement of Additional Information. 53 FINANCIAL HIGHLIGHTS TARGET FUND. The following schedule presents financial highlights for one Target Fund Common Share outstanding throughout the periods indicated.
YEAR ENDED OCTOBER 31, -------------------------------------------------------------------------- 2004 2003 2002(A) 2001 2000 1999 1998 ---- ---- ------- ---- ---- ---- ---- NET ASSET VALUE, BEGINNING OF THE PERIOD............................ $ 10.15 $ 9.97 $ 10.01 $ 9.43 $ 9.39 $ 10.66 $ 10.66 -------- -------- -------- -------- -------- -------- -------- Net Investment Income............. .61 .63 .65 .67 .76 .83 .86 Net Realized and Unrealized Gain/Loss........................ .15 .10 (.13) .59 .09 (1.26) .01 Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income............ (.06) (.06) (.07) (.18) (.21) (.17) (.19) -------- -------- -------- -------- -------- -------- -------- Total from Investment Operations... .70 .67 .45 1.08 .64 (.60) .68 Distributions Paid to Common Shareholders: Net Investment Income............. (.49) (.49) (.49) (.50) (.60) (.67) (.68) -------- -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF THE PERIOD............................ $ 10.36 $ 10.15 $ 9.97 $ 10.01 $ 9.43 $ 9.39 $ 10.66 ======== ======== ======== ======== ======== ======== ======== Common Share Market Price at End of the Period........................ $ 9.07 $ 8.96 $ 8.69 $ 8.70 $ 8.08 $ 8.8125 $11.0625 Total Return(b).................... 6.85% 8.91% 5.64% 14.11% -1.60% -15.09% 7.63% Net Assets Applicable to Common Shares at End of the Period (In millions)......................... $ 50.1 $ 49.1 $ 48.2 $ 48.4 $ 45.6 $ 45.4 $ 51.6 Ratio of Expenses to Average Net Assets Applicable to Common Shares(c)......................... 1.53% 1.49% 1.42% 1.46% 1.52% 1.69% 1.47% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares(c).................. 5.99% 6.19% 6.62% 6.77% 8.25% 8.11% 8.14% Portfolio Turnover................. 19% 36% 37% 45% 41% 46% 33% SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares(c)......................... 1.01% .99% .93% .96% .98% 1.12% .99% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares(d).................. 5.42% 5.64% 5.87% 4.98% 5.92% 6.41% 6.40% SENIOR SECURITIES: Total Preferred Shares Outstanding....................... 250 250 250 250 250 250 250 Asset Coverage Per Preferred Share(e).......................... $300,616 $296,504 $292,949 $293,730 $282,465 $281,691 $306,365 Involuntary Liquidating Preference Per Preferred Share............... $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 Average Market Value Per Preferred Share............................. $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 YEAR ENDED OCTOBER 31, ------------------------------ 1997 1996 1995 ---- ---- ---- NET ASSET VALUE, BEGINNING OF THE PERIOD............................ $ 10.47 $ 10.75 $ 10.50 -------- -------- -------- Net Investment Income............. .96 .88 .88 Net Realized and Unrealized Gain/Loss........................ .12 (.19) .40 Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income............ (.18) (.19) (.20) -------- -------- -------- Total from Investment Operations... .90 .50 1.08 Distributions Paid to Common Shareholders: Net Investment Income............. (.71) (.78) (.83) -------- -------- -------- NET ASSET VALUE, END OF THE PERIOD............................ $ 10.66 $ 10.47 $ 10.75 ======== ======== ======== Common Share Market Price at End of the Period........................ $10.9375 $ 11.00 $ 10.625 Total Return(b).................... 6.13% 11.02% 2.88% Net Assets Applicable to Common Shares at End of the Period (In millions)......................... $ 51.6 $ 50.7 $ 52.0 Ratio of Expenses to Average Net Assets Applicable to Common Shares(c)......................... 1.47% 1.51% 1.52% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares(c).................. 9.14% 8.32% 8.22% Portfolio Turnover................. 25% 39% 50% SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares(c)......................... .99% 1.01% 1.02% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares(d).................. 7.38% 6.55% 6.31% SENIOR SECURITIES: Total Preferred Shares Outstanding....................... 250 250 250 Asset Coverage Per Preferred Share(e).......................... $306,303 $302,730 $308,150 Involuntary Liquidating Preference Per Preferred Share............... $100,000 $100,000 $100,000 Average Market Value Per Preferred Share............................. $100,000 $100,000 $100,000
(a) As required, effective November 1, 2001, the Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended October 31, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios, and supplemental data for periods prior to October 31, 2002 have not been restated to reflect this change in presentation. (b) Total return assumes an investment at the common share market price at the beginning of the period indicated, reinvestment of all distributions for the period in accordance with the Trust's dividend reinvestment plan, and sale of all shares at the closing common share price at the end of the period indicated. (c) Ratios do not reflect the effect of dividend payments to preferred shareholders. (d) Ratios reflect the effect of dividend payments to preferred shareholders. (e) Calculated by subtracting the Trust's total liabilities (not including the preferred shares) from the Trust's total assets and dividing this by the number of preferred shares outstanding. 54 ACQUIRING FUND. The following schedule presents financial highlights for one Acquiring Fund Common Share outstanding throughout the periods indicated.
TWO MONTHS YEAR ENDED OCTOBER 31, ENDED ---------------------------------------------------------- OCTOBER 31, 2004 2003 2002(A) 2001 2000 1999 1998 ---- ---- ------- ---- ---- ---- ----------- NET ASSET VALUE, BEGINNING OF THE PERIOD............................ $ 16.25 $ 16.12 $16.07 $ 14.91 $ 14.60 $ 17.39 $ 17.32 ------- ------- ------- ------- ------- -------- -------- Net Investment Income............. 1.03 1.02 1.06 1.13 1.17 1.20 .21 Net Realized and Unrealized Gain/Loss........................ .37 .13 .01 1.12 .42 (2.30) .08 Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income............ (.09) (.08) (.11) (.27) (.34) (.24) (.02) Net Realized Gain................ -0-(f) -0- -0- -0- -0- (.06) (.04) ------- ------- ------- ------- ------- -------- -------- Total from Investment Operations... 1.31 1.07 .96 1.98 1.25 (1.40) .23 Distributions Paid to Common Shareholders: Net Investment Income............ (.94) (.94) (.91) (.82) (.94) (.96) (.16) Net Realized Gain................ (.02) -0- -0- -0- -0- (.43) -0- ------- ------- ------- ------- ------- -------- -------- NET ASSET VALUE, END OF THE PERIOD............................ $ 16.60 $ 16.25 $16.12 $ 16.07 $ 14.91 $ 14.60 $ 17.39 ======= ======= ======= ======= ======= ======== ======== Common Share Market Price at End of the Period........................ $ 14.90 $ 14.57 $14.30 $ 13.79 $12.625 $13.1875 $16.8125 Total Return (b)................... 9.15% 8.60% 10.49% 15.97% 2.80% -14.47% 4.84%* Net Assets Applicable to Common Shares at End of the Period (In millions)......................... $ 603.6 $ 590.9 $586.2 $ 584.4 $ 542.1 $ 530.9 $ 630.6 Ratio of Expenses to Average Net Assets Applicable to Common Shares(c)......................... 1.19% 1.23% 1.35% 1.55% 1.67% 1.60% 1.57% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares(c).................. 6.24% 6.28% 6.70% 7.26% 8.07% 7.43% 7.20% Portfolio Turnover................. 19% 24% 38% 28% 39% 80% 6%* SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares(c)......................... .79% .81% .89% 1.01% 1.07% 1.06% 1.07% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares(d).................. 5.70% 5.77% 5.98% 5.51% 5.71% 5.95% 6.48% SENIOR SECURITIES: Total Preferred Shares Outstanding....................... 12,000 12,000 12,000 12,000 12,000 12,000 6,000 Asset Coverage Per Preferred Share(e).......................... $75,312 $74,245 $73,861 $73,700 $70,177 $ 69,241 $155,104 Involuntary Liquidating Preference Per Preferred Share............... $25,000 $25,000 $25,000 $25,000 $25,000 $ 25,000 $ 50,000 Average Market Value Per Preferred Share............................. $25,000 $25,000 $25,000 $25,000 $25,000 $ 25,000 $ 50,000 YEAR ENDED AUGUST 31, ----------------------------------------- 1998 1997 1996 1995 ---- ---- ---- ---- NET ASSET VALUE, BEGINNING OF THE PERIOD............................ $ 16.60 $ 15.84 $ 15.73 $ 15.56 -------- -------- -------- -------- Net Investment Income............. 1.26 1.28 1.30 1.31 Net Realized and Unrealized Gain/Loss........................ .72 .73 .10 .26 Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income............ (.30) (.29) (.30) (.32) Net Realized Gain................ -0- -0- -0- -0- -------- -------- -------- -------- Total from Investment Operations... 1.68 1.72 1.10 1.25 Distributions Paid to Common Shareholders: Net Investment Income............ (.96) (.96) (.99) (1.08) Net Realized Gain................ -0- -0- -0- -0- -------- -------- -------- -------- NET ASSET VALUE, END OF THE PERIOD............................ $ 17.32 $ 16.60 $ 15.84 $ 15.73 ======== ======== ======== ======== Common Share Market Price at End of the Period........................ $16.1875 $ 15.75 $ 14.50 $ 14.25 Total Return (b)................... 9.06% 15.87% 8.98% 2.39% Net Assets Applicable to Common Shares at End of the Period (In millions)......................... $ 628.2 $ 601.9 $ 574.6 $ 570.7 Ratio of Expenses to Average Net Assets Applicable to Common Shares(c)......................... 1.57% 1.61% 1.61% 1.65% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares(c).................. 7.42% 7.86% 8.08% 8.58% Portfolio Turnover................. 94% 54% 36% 49% SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares(c)......................... 1.06% 1.07% 1.06% 1.07% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares(d).................. 5.66% 6.04% 6.20% 6.48% SENIOR SECURITIES: Total Preferred Shares Outstanding....................... 6,000 6,000 6,000 6,000 Asset Coverage Per Preferred Share(e).......................... $154,696 $150,322 $145,764 $145,113 Involuntary Liquidating Preference Per Preferred Share............... $ 50,000 $ 50,000 $ 50,000 $ 50,000 Average Market Value Per Preferred Share............................. $ 50,000 $ 50,000 $ 50,000 $ 50,000
* Non-Annualized (a) As required, effective November 1, 2001, the Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended October 31, 2002 was to increase net investment income per share by $.01, decrease net realized and unrealized gains and losses per share by $.01 and increase the ratio of net investment income to average net assets applicable to common shares from 6.69% to 6.70%. Per share, ratios and supplemental data for periods prior to October 31, 2002 have not been restated to reflect this change in presentation. (b) Total return assumes an investment at the common share market price at the beginning of the period indicated, reinvestment of all distributions for the period in accordance with the Trust's dividend reinvestment plan, and sale of all shares at the closing common share market price at the end of the period indicated. (c) Ratios do not reflect the effect of dividend payments to preferred shareholders. (d) Ratios reflect the effect of dividend payments to preferred shareholders. (e) Calculated by subtracting the Trust's total liabilities (not including the preferred shares) from the Trust's total assets and dividing this by the number of preferred shares outstanding. (f) Amount is less than $0.01 per share. 55 INFORMATION ABOUT THE REORGANIZATION GENERAL Under the Agreement and Plan of Reorganization (a form of which is attached as Appendix A to the Reorganization Statement of Additional Information), the Acquiring Fund will acquire substantially all of the assets, and will assume substantially all of the liabilities, of the Target Fund, in exchange for Acquiring Fund Common Shares and Acquiring Fund Series E APS to be issued by the Acquiring Fund. The Acquiring Fund will issue and cause to be listed on the NYSE and CHX additional Acquiring Fund Common Shares. The Acquiring Fund Common Shares issued to the Target Fund will have an aggregate net asset value equal to the aggregate net asset value of the Target Fund Common Shares, less the costs of the Reorganization (though cash may be paid in lieu of any fractional shares). The shares of Series E Acquiring Fund APS issued to the Target Fund will have an aggregate liquidation preference equal to the aggregate liquidation preference of the Target Fund RP. Upon receipt by the Target Fund of such shares, the Target Fund will (i) distribute the Acquiring Fund Common Shares to the holders of Target Fund Common Shares and (ii) distribute the Series E Acquiring Fund APS to the holders of Target Fund RP. As soon as practicable after the Closing Date for the Reorganization, the Target Fund will deregister as an investment company under the 1940 Act and dissolve under applicable state law. The Target Fund will distribute the Acquiring Fund Common Shares and the Series E Acquiring Fund APS received by it pro rata to its holders of record of Target Fund Common Shares and Target Fund RP, as applicable, in exchange for such shareholders' shares in the Target Fund. Such distribution will be accomplished by opening new accounts on the books of the Acquiring Fund in the names of the common and preferred shareholders of the Target Fund and transferring to those shareholder accounts the Acquiring Fund Common Shares and the Acquiring Fund APS previously credited on those books to the accounts of the Target Fund. Each newly-opened account on the books of the Acquiring Fund for the former common shareholders of the Target Fund will represent the respective pro rata number of Acquiring Fund Common Shares (rounded down, in the case of fractional shares held other than in a Dividend Reinvestment Plan account, to the next largest number of whole shares) due such shareholder. No fractional Acquiring Fund Common Shares will be issued (except for shares held in a Plan account). In the event of fractional shares in an account other than a Plan account, the Acquiring Fund's transfer agent will aggregate all such fractional Acquiring Fund Common Shares and sell the resulting whole shares on the NYSE for the account of all holders of such fractional interests, and each such holder will be entitled to the pro rata share of the proceeds from such sale upon surrender of the Target Fund Common Share certificates. Similarly, each newly-opened account on the books of the Acquiring Fund for the former preferred shareholder of Target Fund RP would represent the respective pro rata number of Acquiring Fund APS due such shareholder. See 56 "Terms of the Agreement and Plan of Reorganization -- Surrender and Exchange of Share Certificates" below for a description of the procedures to be followed by Target Fund shareholders to obtain their Acquiring Fund Common Shares or Acquiring Fund APS (and cash in lieu of fractional shares, if any). As a result of the Reorganization, every holder of Target Fund Common Shares would own Acquiring Fund Common Shares that (except for cash payments received in lieu of fractional shares) will have an aggregate net asset value immediately after the Closing Date equal to the aggregate net asset value of that shareholder's Target Fund Common Shares immediately prior to the Closing Date less the costs of the Reorganization. Since the Acquiring Fund Common Shares will be issued at net asset value in exchange for the net assets of the Target Fund having a value equal to the aggregate net asset value of those Acquiring Fund Common Shares, the net asset value per share of Acquiring Fund Common Shares should remain virtually unchanged by the Reorganization except for its share (if any) of the reorganizational costs. Similarly, the aggregate liquidation preference of the Acquiring Fund APS to be issued to the Target Fund will equal the aggregate liquidation preference of the Target Fund RP. Each holder of Target Fund RP will receive Acquiring Fund APS that will have an aggregate liquidation preference immediately after the Closing Date equal to the aggregate liquidation preference of that shareholder's Target Fund RP immediately prior to the Closing Date. The liquidation preference per share of the Acquiring Fund APS will remain unchanged by the Reorganization. Thus, the Reorganization will result in no dilution of net asset value of the Target Fund Common Shares or Acquiring Fund Common Shares, other than to reflect the costs of the Reorganization, and will result in no dilution of the value per share of Acquiring Fund APS or Target Fund RP. However, as a result of the Reorganization, a shareholder of either Fund will hold a reduced percentage of ownership in the larger combined entity than he or she did in either of the separate Funds. No sales charge or fee of any kind will be charged to shareholders of the Target Fund in connection with their receipt of Acquiring Fund Common Shares or Acquiring Fund APS in the Reorganization. Holders of Target Fund RP will find that the auction dates and dividend payment dates for the Acquiring Fund APS received in the Reorganization are ordinarily (i.e., except in the case of a special dividend period) on a 28 day schedule similar to the 28 day remarketing schedule in the case of RP. The auction or remarketing procedures for the RP and APS of the Funds are similar. As a result of the Reorganization, the last dividend period for the Target Fund RP prior to the Closing Date and the initial dividend period for the Acquiring Fund APS issued in connection with the Reorganization after the Closing Date may be shorter than the ordinary dividend period for such shares. 57 TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION The following is a summary of the significant terms of the Agreement and Plan of Reorganization. This summary is qualified in its entirety by reference to the Agreement and Plan of Reorganization, attached as Appendix A to the Reorganization Statement of Additional Information. VALUATION OF ASSETS AND LIABILITIES. The respective assets of each of the Funds will be valued on the business day prior to the Closing Date (the "Valuation Date"). The valuation procedures are the same for each Fund: the net asset value per common share of each Fund will be determined after the close of business on the NYSE (generally 4:00 p.m. Eastern time) on the Valuation Date. For the purpose of determining the net asset value of a Common Share of each Fund, the value of the securities held by the issuing Fund plus any cash or other assets (including interest accrued but not yet received) minus all liabilities (including accrued expenses) and the aggregate liquidation value of the outstanding APS of the issuing Fund is divided by the total number of common shares of the issuing Fund outstanding at such time. Daily expenses, including the fees payable to the Adviser, will accrue on the Valuation Date. AMENDMENTS AND CONDITIONS. The Agreement and Plan of Reorganization may be amended at any time prior to the Closing Date with respect to any of the terms therein. The obligations of each Fund pursuant to the Agreement and Plan of Reorganization are subject to various conditions, including a registration statement on Form N-14 being declared effective by the SEC, approval by the shareholders of the Target Fund, receipt of an opinion of counsel as to tax matters, receipt of an opinion of counsel as to corporate and securities matters and the continuing accuracy of various representations and warranties of the Funds being confirmed by the respective parties. POSTPONEMENT; TERMINATION. Under the Agreement and Plan of Reorganization, the Board of Trustees of either Fund may cause the Reorganization to be postponed or abandoned in certain circumstances should such Board determine that it is in the best interests of the shareholders of its respective Fund to do so. The Agreement and Plan of Reorganization may be terminated, and the Reorganization abandoned at any time (whether before or after adoption thereof by the shareholders of either of the Funds) prior to the Closing Date, or the Closing Date may be postponed: (i) by mutual consent of the Boards of Trustees of the Funds and (ii) by the Board of Trustees of either Fund if any condition to that Fund's obligations set forth in the Agreement and Plan of Reorganization has not been fulfilled or waived by such Board. SURRENDER AND EXCHANGE OF SHARE CERTIFICATES. After the Closing Date, each holder of an outstanding certificate or certificates formerly representing Target Fund Common Shares will be entitled to receive, upon surrender of his or her 58 certificate or certificates, a certificate or certificates representing the number of Acquiring Fund Common Shares distributable with respect to such holder's Target Fund Common Shares, together with cash in lieu of any fractional Acquiring Fund Common Shares held other than in a Dividend Reinvestment Plan account. Promptly after the Closing Date, the transfer agent for the Acquiring Fund Common Shares will mail to each holder of certificates formerly representing Target Fund Common Shares a letter of transmittal for use in surrendering his or her certificates for certificates representing Acquiring Fund Common Shares and cash in lieu of any fractional shares held other than in a Plan account. Please do not send in any share certificates at this time. Upon consummation of the Reorganization, holders of Target Fund Common Shares will be furnished with instructions for exchanging their share certificates for Acquiring Fund share certificates and, if applicable, cash in lieu of fractional shares. From and after the Closing Date, certificates formerly representing Target Fund Common Shares will be deemed for all purposes to evidence ownership of the number of full Acquiring Fund Common Shares distributable with respect to the Target Fund Common Shares held before the Reorganization, as described above, provided that, until such share certificates have been so surrendered, no dividends payable to the holders of record of Target Fund Common Shares as of any date subsequent to the Closing Date will be reinvested pursuant to the Acquiring Fund's Dividend Reinvestment Plan, but will instead be paid in cash. Once such Target Fund share certificates have been surrendered, participants in the Target Fund's Dividend Reinvestment Plan will automatically be enrolled in the Dividend Reinvestment Plan of the Acquiring Fund. From and after the Closing Date, there will be no transfers on the share transfer books of the Target Fund. If, after the Closing Date, certificates representing Target Fund Common Shares are presented to the Acquiring Fund, they will be cancelled and exchanged for certificates representing Acquiring Fund Common Shares and cash in lieu of fractional shares, if applicable, distributable with respect to such Target Fund Common Shares in the Reorganization. Preferred Shares are held in "street name" by the Depository Trust Company and all transfers will be accomplished by book entry. EXPENSES OF THE REORGANIZATION In the event the Reorganization is approved and completed, the expenses of the Reorganization will be shared by the Target Fund and the Acquiring Fund in proportion to their projected declines in total operating expenses as a result of the Reorganization. In the event the Reorganization is not completed, the Adviser will bear the costs associated with the Reorganization. 59 Expenses incurred in connection with the Reorganization include, but are not limited to: all costs related to the preparation and distribution of materials distributed to each Fund's Board; all expenses incurred in connection with the preparation of the Agreement and Plan of Reorganization and a registration statement on Form N-14; SEC and state securities commission filing fees and legal and audit fees in connection with the Reorganization; the costs of printing and distributing this Proxy Statement/Prospectus; legal fees incurred preparing materials for the Board of each Fund, attending each Fund's Board meetings and preparing the minutes; auditing fees associated with each Fund's financial statements; portfolio transfer taxes (if any); and any similar expenses incurred in connection with the Reorganization. Neither the Funds nor the Adviser will pay any expenses of shareholders arising out of or in connection with the Reorganization. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION The following is a general summary of the material anticipated U.S. federal income tax consequences of the Reorganization. The discussion is based upon the Internal Revenue Code, Treasury regulations, court decisions, published positions of the Internal Revenue Service ("IRS") and other applicable authorities, all as in effect on the date hereof and all of which are subject to change or differing interpretations (possibly with retroactive effect). The discussion is limited to U.S. persons who hold shares of the Target Fund as capital assets for U.S. federal income tax purposes (generally, assets held for investment). This summary does not address all of the U.S. federal income tax consequences that may be relevant to a particular shareholder or to shareholders who may be subject to special treatment under U.S. federal income tax laws. No ruling has been or will be obtained from the IRS regarding any matter relating to the Reorganization. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax aspects described below. Prospective investors must consult their own tax advisers as to the U.S. federal income tax consequences of the Reorganization, as well as the effects of state, local and non-U.S. tax laws. It is a condition to closing the Reorganization that each of the Target Fund and the Acquiring Fund receives an opinion from Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden Arps"), dated as of the Closing Date, regarding the characterization of the Reorganization as a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code. As such a reorganization, the U.S. federal income tax consequences of the Reorganization can be summarized as follows: - No gain or loss will be recognized by the Target Fund or the Acquiring Fund upon the transfer to the Acquiring Fund of substantially all of the assets of the Target Fund in exchange for Acquiring Fund Common Shares and Acquiring Fund APS and the assumption by the Acquiring Fund of substantially all of the 60 liabilities of the Target Fund and the subsequent liquidation of the Target Fund. - No gain or loss will be recognized by a shareholder of the Target Fund who exchanges, as the case may be, all of his, her or its Target Fund Common Shares for Acquiring Fund Common Shares pursuant to the Reorganization or all of his, her or its Target Fund RP solely for Acquiring Fund APS pursuant to the Reorganization (except with respect to cash received in lieu of a fractional share of the Acquiring Fund, as discussed below). - The aggregate tax basis of the Acquiring Fund Common Shares or Acquiring Fund APS, as the case may be, received by a shareholder of the Target Fund pursuant to the Reorganization will be the same as the aggregate tax basis of the shares of the Target Fund surrendered in exchange therefor (reduced by any amount of tax basis allocable to a fractional share for which cash is received). - The holding period of the Acquiring Fund Common Shares or Acquiring Fund APS, as the case may be, received by a shareholder of the Target Fund pursuant to the Reorganization will include the holding period of the shares of the Target Fund surrendered in exchange therefor. - A shareholder of the Target Fund that receives cash in lieu of a fractional share of the Acquiring Fund pursuant to the Reorganization will recognize capital gain or loss with respect to the fractional share in an amount equal to the difference between the amount of cash received for the fractional share and the portion of such shareholder's tax basis in its Target Fund shares that is allocable to the fractional share. The capital gain or loss will be long-term if the holding period for such Target Fund Common Shares is more than one year as of the date of the exchange. - The Acquiring Fund's tax basis in the Target Fund's assets received by the Acquiring Fund pursuant to the Reorganization will equal the tax basis of such assets in the hands of the Target Fund immediately prior to the Reorganization, and the Acquiring Fund's holding period of such assets will include the period during which the assets were held by the Target Fund. The Acquiring Fund intends to continue to be taxed under the rules applicable to regulated investment companies as defined in Section 851 of the Internal Revenue Code, which are the same rules currently applicable to the Target Fund and its shareholders. The opinion of Skadden Arps will be based on federal income tax law in effect on the Closing Date. In rendering its opinion, Skadden Arps will also rely upon certain representations of the management of the Acquiring Fund and the Target Fund and assume, among other things, that the Reorganization will be consummated in 61 accordance with the Agreement and Plan of Reorganization and as described herein. An opinion of counsel is not binding on the IRS or any court. Pursuant to the grandfather relief granted in Revenue Ruling 89-81, 1989-1 C.B. 226, Target Fund is permitted to designate that dividends paid on the Target Fund RP consist of more than the Target Fund RP's pro rata share of tax-exempt income earned by the Target Fund. The Acquiring Fund, however, is not eligible to make such disproportionate designations. Accordingly, designations made by the Acquiring Fund with respect to dividends paid on the Acquiring Fund APS will be treated as consisting of a pro rata portion of each type of income so designated. The Acquiring Fund will succeed to the capital loss carryforwards of the Target Fund, which will be subject to the limitations described below. The Target Fund has capital loss carryforwards that, in the absence of the Reorganization, would generally be available to offset its capital gains. As a result of the Reorganization, however, the Target Fund will undergo an "ownership change" for tax purposes (because the Target Fund is significantly smaller than the Acquiring Fund), and accordingly, the use of capital loss carryforwards of the Target Fund (and certain built-in losses) will be limited by the operation of the tax loss limitations rules of the Code. The Code generally limits the amount of pre-ownership change losses that may be used to offset post-ownership change gains to an "annual loss limitation amount" (generally the product of the net asset value of the Target Fund immediately prior to the ownership change and a rate established by the IRS for the month in which the Reorganization occurs (for example, such rate is 4.27% for March 2005). Subject to certain limitations, any unused portion of the "annual loss limitation amount" may be available in subsequent years, subject to the overall eight-year capital loss carryforward limit, as measured from the date of recognition. In addition, for five years after the Closing Date, the combined fund will not be allowed to offset certain pre-Reorganization built-in gains attributable to one Fund with capital loss carryforwards (and certain built-in losses) attributable to the other Fund. SHAREHOLDER APPROVAL Under the Declaration of Trust of the Target Fund (as amended to date and including the Certificate of Vote of the Target Fund), relevant Massachusetts law and the rules of the NYSE and CHX, shareholder approval of the Agreement and Plan of Reorganization requires the affirmative vote of shareholders of the Target Fund representing more than 50% of the outstanding Target Fund Common Shares and Target Fund RP, each voting separately as a class. 62 ------------------------------------------------------------------------------ OTHER INFORMATION ------------------------------------------------------------------------------ VOTING INFORMATION AND REQUIREMENTS GENERAL. A list of shareholders of the Target Fund entitled to be present and vote at the Special Meeting will be available at the offices of the Target Fund, 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555, for inspection by any shareholder during regular business hours for ten days prior to the date of the Special Meeting. RECORD DATE. The Board of Trustees of the Target Fund has fixed the close of business on April 25, 2005 as the record date (the "Record Date") for the determination of shareholders entitled to notice of, and to vote at, the Special Meeting or any adjournment thereof. Shareholders on the Record Date will be entitled to one vote for each share held, with no shares having cumulative voting rights. At the Record Date, the Target Fund had outstanding 4,839,000 Target Fund Common Shares and 250 Target Fund RP. PROXIES. Target Fund shareholders may vote by appearing in person at the Special Meeting, by returning the enclosed proxy card or by casting their vote via telephone or the internet using the instructions provided on the enclosed proxy card and more fully described below. Shareholders of the Target Fund have the opportunity to submit their voting instructions via the internet by utilizing a program provided by a third-party vendor hired by the Target Fund, or by "touch-tone" telephone voting. The giving of such a proxy will not affect your right to vote in person should you decide to attend the Special Meeting. To use the internet, please access the internet address found on your proxy card. To record your voting instructions by automated telephone, please call the toll-free number listed on your proxy card. The internet and automated telephone voting instructions are designed to authenticate shareholder identities, to allow shareholders to give their voting instructions, and to confirm that shareholders' instructions have been recorded properly. Shareholders submitting their voting instructions via the internet should understand that there may be costs associated with internet access, such as usage charges from internet access providers and telephone companies, that must be borne by the shareholders. Any person giving a proxy may revoke it at any time prior to its exercise by giving written notice of the revocation to the Secretary of the Target Fund at the address indicated above, by delivering a duly executed proxy bearing a later date, by recording later-dated voting instructions via the internet or automated telephone, or by attending the Special Meeting and voting in person. The giving of a proxy will not affect your right to vote in person if you attend the Special Meeting and wish to do so. All properly executed proxies received prior to the Special Meeting will be voted in accordance with the instructions marked thereon or otherwise as provided 63 therein. Unless instructions to the contrary are marked, proxies will be voted "FOR" the approval of the proposed Reorganization. Abstentions and broker non-votes (i.e., where a nominee, such as a broker holding shares for beneficial owners, votes on certain matters pursuant to discretionary authority or instructions from beneficial owners, but with respect to one or more proposals does not receive instructions from beneficial owners or does not exercise discretionary authority) are not treated as votes "FOR" the proposed Reorganization and have the same effect as votes "AGAINST" the proposed Reorganization since approval of the proposed Reorganization is based on the affirmative vote of a majority of the total shares outstanding. A majority of the outstanding shares entitled to vote on a proposal must be present in person or by proxy to have a quorum to conduct business at the Special Meeting. Abstentions and broker non-votes will be deemed present for quorum purposes. CERTAIN VOTING INFORMATION REGARDING TARGET FUND RP. RP held in "street name" may be voted under certain conditions by broker-dealer firms and counted for purposes of establishing a quorum of that Fund if no instructions are received one business day before the Meeting or, if adjourned, one business day before the day to which the Meetings are adjourned. These conditions include, among others, that (i) at least 30% of the Target Fund's RP outstanding have voted on the Reorganization and (ii) less than 10% of the Target Fund RP outstanding have voted against the Reorganization. In such instance, the broker-dealer firm will vote such uninstructed Target Fund RP on the Reorganization in the same proportion as the votes cast by all holders of Target Fund RP who voted on the Reorganization. The Target Fund will include shares held of record by broker-dealers as to which such authority has been granted in its tabulation of the total number of shares present for purposes of determining whether the necessary quorum of shareholders of the Target Fund exists. SHAREHOLDER INFORMATION As of April 25, 2005, to the knowledge of the Acquiring Fund, no shareholder owned beneficially more than 5% of the outstanding common shares of the Acquiring Fund. Except as set forth below, as of April 25, 2005, to the knowledge of the Target Fund, no shareholder owned beneficially more than 5% of the outstanding common shares of the Target Fund:
APPROXIMATE PERCENTAGE OWNERSHIP ON SHAREHOLDER AND ADDRESS APRIL 25, 2005 - ----------------------- ---------------------- Karpus Management, Inc. d/b/a/ Karpus 9.86% Investment Management 183 Sullys Trail Pittsford, New York 14534
64 The table below indicates the number of common shares of the Funds owned beneficially by each trustee of the Funds, as of April 25, 2005, and the percentage of such trustee's Common Shares to the total common shares outstanding for such fund is shown in parenthesis when such ownership individually exceeds 1% of the total common shares outstanding.
TARGET FUND ACQUIRING FUND ----------- -------------- Independent Trustees Arch....................................... 524 800 Dammeyer................................... 0 8,300 Heagy...................................... 100 100 Kennedy.................................... 100 100 Sonnenschein............................... 300 300 Interested Trustees Whalen..................................... 339 371
To the knowledge of the Funds, no executive officers owned, directly or beneficially, common shares of the Funds as of April 25, 2005 and no trustees or executive officers owned Preferred Shares of the Funds as of that date. As of April 25, 2005, the trustees and executive officers of the Funds individually and as a group owned less than 1% of the outstanding shares of each Fund. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 30(f) of the 1940 Act and Section 16(a) of the Securities Exchange Act of 1934, as amended, require the Funds' trustees, officers, investment adviser, affiliated persons of the investment adviser and persons who own more than 10% of a registered class of the applicable Fund's equity securities to file forms with the SEC and the NYSE, as applicable, reporting their affiliation with the applicable Fund and reports of ownership and changes in ownership of Fund shares. These persons and entities are required by SEC regulation to furnish the applicable Fund with copies of all such forms they file. Based on a review of these forms furnished to each Fund, each Fund believes that during its last fiscal year, its trustees, officers, investment adviser and affiliated persons of the investment adviser complied with the applicable filing requirements except that, due to clerical errors, the Form 4 filings of Wayne W. Whalen, a trustee of each Fund, regarding a sales transaction of common shares of the Acquiring Fund and of the Target Fund, were not filed in a timely manner. SOLICITATION OF PROXIES Solicitation of proxies is being made primarily by the mailing of this Notice and Proxy Statement/Prospectus with its enclosures on or about May 10, 2005. Target Fund shareholders whose shares are held by nominees such as brokers can vote their proxies by contacting their respective nominee. In addition to the solicitation 65 of proxies by mail, employees of the Adviser and its affiliates as well as dealers or their representatives may, without additional compensation, solicit proxies in person or by mail, telephone, telegraph, facsimile or oral communication. The Target Fund has retained Computershare Fund Services ("CFS") to make telephone calls to Target Fund shareholders to remind them to vote. CFS will be paid a project management fee as well as fees charged on a per call basis and certain other expenses. Management estimates that any such solicitation would cost approximately $9,600. Proxy solicitation expenses are an expense of the Reorganization which will be borne by the Target Fund and the Acquiring Fund in proportion to their projected declines in total operating expenses as a result of the Reorganization. LEGAL MATTERS Certain legal matters concerning the federal income tax consequences of the Reorganization and the issuance of Acquiring Fund Common Shares and Acquiring Fund APS will be passed upon by Skadden Arps, which serves as counsel to the Target Fund and the Acquiring Fund. Wayne W. Whalen, a partner of Skadden Arps, is a trustee of both the Target Fund and the Acquiring Fund. OTHER MATTERS TO COME BEFORE THE MEETING The Target Fund Board of Trustees knows of no business other than that described in this Proxy Statement/Prospectus which will be presented for consideration at the Special Meeting. If any other matters are properly presented, it is the intention of the persons named on the enclosed proxy card to vote proxies in accordance with their best judgment. In the event that a quorum is present at the Special Meeting but sufficient votes to approve the proposed Reorganization are not received, proxies (including abstentions and broker non-votes) will be voted in favor of one or more adjournments of the Special Meeting to permit further solicitation of proxies on the proposed Reorganization, provided that the Target Fund Board of Trustees determines that such an adjournment and additional solicitation is reasonable and in the interest of shareholders based on a consideration of all relevant factors, including the percentage of votes then cast, the percentage of negative votes cast, the nature of the proposed solicitation activities and the nature of the reasons for such further solicitation. Any such adjournment will require the affirmative vote of the holders of a majority of the outstanding shares voted at the session of the Special Meeting to be adjourned. 66 If you cannot be present in person at the Special Meeting, please fill in, sign and return the enclosed proxy card promptly or please record your voting instructions by telephone or via the internet. No postage is necessary if the enclosed proxy card is mailed in the United States. LOU ANNE MCINNIS Assistant Secretary Van Kampen Investment Grade Municipal Trust May 6, 2005 67 EXHIBIT I DESCRIPTION OF SECURITIES RATINGS STANDARD & POOR'S -- A brief description of the applicable Standard & Poor's (S&P) rating symbols and their meanings (as published by S&P) follows: A S&P issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation, inasmuch as it does not comment as to market price or suitability for a particular investor. Issue credit ratings are based on current information furnished by the obligors or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any credit rating and may, on occasion, rely on unaudited financial information. Credit ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or based on other circumstances. Issue credit ratings can be either long-term or short-term. Short-term ratings are generally assigned to those obligations considered short term in the relevant market. In the U.S., for example, that means obligations with an original maturity of no more than 365 days, including commercial paper. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. The result is a dual rating, in which the short-term ratings address the put feature, in addition to the usual long-term rating. Medium-term notes are assigned long-term ratings. LONG-TERM ISSUE CREDIT RATINGS Issue credit ratings are based, in varying degrees, on the following considerations: - Likelihood of payment -- capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation; - Nature of and provisions of the obligation; - Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. The issue rating definitions are expressed in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower I-1 than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation applies when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.) Accordingly, in the case of junior debt, the rating may not conform exactly with the category definition. AAA: An obligation rated "AAA" has the highest rating assigned by S&P. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA: An obligation rated "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: An obligation rated "A" is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB: An obligation rated "BBB" 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. SPECULATIVE GRADE BB, B, CCC, CC, C: Obligations rated "BB", "B", "CCC", "CC" and "C" are regarded as having significant speculative characteristics. "BB" indicates the least degree of speculation and "C" the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. BB: An obligation rated "BB" is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B: An obligation rated "B" is more vulnerable to nonpayment than obligations rated "BB", but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation. CCC: An obligation rated "CCC" is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse I-2 business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. CC: An obligation rated "CC" is currently highly vulnerable to nonpayment. C: A subordinated debt or preferred stock obligation rated "C" is CURRENTLY HIGHLY VULNERABLE to nonpayment. The "C" rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A "C" also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying. D: An obligation rated "D" is in payment default. The "D" rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. r: This symbol is attached to the ratings of instruments with significant noncredit risks. It highlights risks to principal or volatility of expected returns which are not addressed in the credit rating. N.R.: This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy. SHORT-TERM ISSUE CREDIT RATINGS A-1: A short-term obligation rated "A-1" is rated in the highest category by S&P. 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 I-3 likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. B: A short-term obligation rated "B" is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. C: A short-term obligation rated "C" is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. D: A short-term obligation rated "D" is in payment default. The "D" rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. MOODY'S INVESTORS SERVICE INC. -- A brief description of the applicable Moody's Investors Service, Inc. (Moody's) rating symbols and their meanings (as published by Moody's) follows: Aaa: Obligations rated Aaa are judged to be of the highest quality with minimal credit risk. Aa: Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. A: Obligations rated A are considered upper-medium grade and are subject to low credit risk. Baa: Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics. Ba: Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk. B: Obligations rated B are considered speculative and are subject to high credit risk. Caa: Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk. Ca: Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. I-4 C: Obligations rated C are the lowest rated class of bonds, and are typically in default, with little prospect for recovery of principal or interest. Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Moody's assigns long-term ratings to individual debt securities issued from medium-term note (MTN) programs, in addition to indicating ratings to MTN programs themselves. Notes issued under MTN programs with such indicated ratings are rated at issuance at the rating applicable to all pari passu notes issued under the same program, at the program's relevant indicated rating, provided such notes do not exhibit any of the characteristics listed below: -- Notes containing features that link interest or principal to the credit performance of any third party or parties. -- Notes allowing for negative coupons, or negative principal. -- Notes containing any provision that could obligate the investor to make any additional payments. -- Notes containing provisions that subordinate the claim. For notes with any of these characteristics, the rating of the individual note may differ from the indicated rating of the program. Market participants must determine whether any particular note is rated, and if so, at what rating level. Moody's encourages market participants to contact Moody's Ratings Desks directly or visit www.moodys.com directly if they have questions regarding ratings for specific notes issued under a medium-term note program. Unrated notes issued under an MTN program may be assigned an NR symbol. I-5 SHORT-TERM RATINGS Moody's short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted. Moody's employs the following designations to indicate the relative repayment ability of rated issuers: P-1 Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations. P-2 Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations. P-3 Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations. NP Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories. NOTE: Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced by the senior-most long-term rating of the issuer, its guarantor or support-provider. I-6 [VAN KAMPEN INVESTMENTS LOGO] THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED MAY 5, 2005 STATEMENT OF ADDITIONAL INFORMATION RELATING TO THE ACQUISITION OF THE ASSETS AND LIABILITIES OF VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST BY AND IN EXCHANGE FOR SHARES OF VAN KAMPEN MUNICIPAL TRUST DATED MAY 6, 2005 This Statement of Additional Information is available to the shareholders of Van Kampen Investment Grade Municipal Trust (the "Target Fund") in connection with a proposed transaction (the "Reorganization") whereby Van Kampen Municipal Trust (the "Acquiring Fund") will acquire substantially all of the assets and assume substantially all of the liabilities of the Target Fund in exchange for an equal aggregate value of newly-issued common shares of beneficial interest, par value $0.01 per share ("Acquiring Fund Common Shares"), and newly-issued Series E auction preferred shares with a par value of $0.01 per share and a liquidation preference of $25,000 per share ("Acquiring Fund APS"). The Target Fund will distribute Acquiring Fund Common Shares to holders of common shares of the Target Fund ("Target Fund Common Shares") and Series E Acquiring Fund APS to holders of Remarketed Preferred Shares of the Target Fund ("Target Fund RP"), and will then terminate its registration under the Investment Company Act of 1940, as amended (the "1940 Act"), and dissolve under applicable state law. A copy of a form of the Agreement and Plan of Reorganization between the Target Fund and the Acquiring Fund is attached hereto as Appendix A. Unless otherwise defined herein, capitalized terms have the meanings given to them in the Proxy Statement/Prospectus. This Reorganization Statement of Additional Information is not a prospectus and should be read in conjunction with the Proxy Statement/Prospectus dated May 6, 2005 relating to the proposed Reorganization of the Target Fund into the Acquiring Fund. A copy of the Proxy Statement/Prospectus may be obtained, without charge, by writing to the Van Kampen Client Relations Department at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, Illinois 60181-5555 or by calling (800) 341-2929 (TDD users may call (800) 421-2833). The Acquiring Fund will provide, without charge, upon the written or oral request of any person to whom this Reorganization Statement of Additional Information is delivered, a copy of any and all documents that have been incorporated by reference in the registration statement of which this Reorganization Statement of Additional Information is a part. This Reorganization Statement of Additional Information is intended to provide Target Fund shareholders with certain additional information about the Acquiring Fund, which will hereinafter sometimes be referred to simply as the "Fund." TABLE OF CONTENTS
Page ---- Trustees and Officers....................................... S-2 Investment Advisory Agreement............................... S-13 Other Agreements............................................ S-14 Fund Management............................................. S-15 Code of Ethics.............................................. S-17 Portfolio Transactions and Brokerage Allocation............. S-17 Additional Information Relating to Auction Preferred Shares of the Acquiring Fund..................................... S-19 Other Information........................................... S-29 Financial Statements........................................ S-29 Pro Forma Financial Statements.............................. S-30 Appendix A Form of Agreement and Plan of Reorganization..... A-1 Appendix B Certificate of Vote of Trustees.................. B-1 Appendix C Acquiring Fund Annual Report Dated October 31, 2004...................................................... C-1 Appendix D Target Fund Annual Report Dated October 31, 2004...................................................... D-1 Appendix E Proxy Voting Procedures.......................... E-1
TRUSTEES AND OFFICERS GENERAL 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 Acquiring Fund and the Target Fund share the same Board of Trustees and executive officers. 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 Asset Management (the "Adviser"), Van Kampen Funds Inc. (the "Administrator"), Van Kampen Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). The term "Fund Complex" includes each of the investment companies advised by the Adviser as of the date of this Reorganization 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 (59) Trustee Trustee Chairman and Chief Executive 82 Trustee/Director/ Blistex Inc. since 1991 Officer of Blistex Inc., a Managing General 1800 Swift Drive consumer health care products Partner of funds in Oak Brook, IL 60523 manufacturer. Director of the the Fund Complex. Heartland Alliance, a nonprofit organization serving human needs based in Chicago. Director of St. Vincent de Paul Center, a Chicago based day care facility serving the children of low income families. Board member of the Illinois Manufacturers' Association. Jerry D. Choate (66) Trustee Trustee Prior to January 1999, 80 Trustee/Director/ 33971 Selva Road since 2003 Chairman and Chief Executive Managing General Suite 130 Officer of the Allstate Partner of funds in Dana Point, CA 92629 Corporation ("Allstate") and the Fund Complex. Allstate Insurance Company. Director of Amgen Prior to January 1995, Inc., a President and Chief Executive biotechnological Officer of Allstate. Prior to company, and Director August 1994, various of Valero Energy management positions at Corporation, an Allstate. independent refining company.
S-2
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 Rod Dammeyer+ (64) Trustee Trustee President of CAC, L.L.C., a 82 Trustee/Director/ CAC, L.L.C. since 1991 private company offering Managing General 4350 LaJolla Village Drive capital investment and Partner of funds in Suite 980 management advisory services. the Fund Complex. San Diego, CA 92122-6223 Prior to February 2001, Vice Director of Chairman and Director of Stericycle, Inc., Anixter International, Inc., a Ventana Medical global distributor of wire, Systems, Inc., and cable and communications GATX Corporation, and connectivity products. Prior Trustee of The to July 2000, Managing Partner Scripps Research of Equity Group Corporate Institute. Prior to Investment (EGI), a company January 2005, Trustee that makes private investments of the University of in other companies. Chicago Hospitals and Health Systems. Prior to April 2004, Director of TheraSense, Inc. Prior to January 2004, Director of TeleTech Holdings Inc. and Arris Group, Inc. Prior to May 2002, Director of Peregrine Systems Inc. Prior to February 2001, Director of 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). Linda Hutton Heagy (56) Trustee Trustee Managing Partner of Heidrick & 80 Trustee/Director/ Heidrick & Struggles since 2003 Struggles, an executive search Managing General 233 South Wacker Drive firm. Trustee on the Partner of funds in Suite 7000 University of Chicago the Fund Complex. Chicago, IL 60606 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.
S-3
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE R. Craig Kennedy (53) Trustee Trustee Director and President of the 80 Trustee/Director/ 1744 R Street, NW since 2003 German Marshall Fund of the Managing General Washington, DC 20009 United States, an independent Partner of funds in U.S. foundation created to the Fund Complex. 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 (69) Trustee Trustee Prior to 1998, President and 82 Trustee/Director/ 736 North Western Avenue since 1992 Chief Executive Officer of Managing General P.O. Box 317 Pocklington Corporation, Inc., Partner of funds in Lake Forest, IL 60045 an investment holding company. the Fund Complex. Director of the Marrow Director of the Lake Foundation. Forest Bank & Trust. Jack E. Nelson (69) Trustee Trustee President of Nelson Investment 80 Trustee/Director/ 423 Country Club Drive since 2003 Planning Services, Inc., a Managing General Winter Park, FL 32789 financial planning company and Partner of funds in registered investment adviser the Fund Complex. 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+ (64) Trustee Trustee President Emeritus and 82 Trustee/Director/ 1126 E. 59th Street since 1994 Honorary Trustee of the Managing General Chicago, IL 60637 University of Chicago and the Partner of funds in Adam Smith Distinguished the Fund Complex. Service Professor in the Director of Winston Department of Economics at the Laboratories, Inc. 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.
S-4
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND POSITION(S) LENGTH OF COMPLEX NAME, AGE AND ADDRESS HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS OF INDEPENDENT TRUSTEE FUND SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Suzanne H. Woolsey, Ph.D. (63) Trustee Trustee Chief Communications Officer 80 Trustee/Director/ 815 Cumberstone Road since 2003 of the National Academy of Managing General Harwood, MD 20776 Sciences/National Research Partner of funds in Council, an independent, the Fund Complex. federally chartered policy Director of Fluor institution, from 2001 to Corp., an November 2003 and Chief engineering, Operating Officer from 1993 to procurement and 2001. Director of the construction Institute for Defense organization, since Analyses, a federally funded January 2004 and research and development Director of Neurogen center, Director of the German Corporation, a Marshall Fund of the United pharmaceutical States, Director of the Rocky company, since Mountain Institute and Trustee January 1998. 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.
S-5 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* (51) Trustee, Trustee President and Chief Executive 80 Trustee/Director/ 1221 Avenue of the Americas President since Officer of funds in the Fund Managing General New York, NY 10020 and Chief 2003; Complex. Chairman, President, Partner of funds in Executive President Chief Executive Officer and the Fund Complex. Officer and Chief Director of the Adviser and Van Executive Kampen Advisors Inc. since Officer December 2002. Chairman, since 2002 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. Richard F. Powers, III* (59) Trustee Trustee Advisory Director of Morgan 82 Trustee/Director/ 1221 Avenue of the Americas since 1999 Stanley. Prior to December 2002, Managing General New York, NY 10020 Chairman, Director, President, Partner of funds in Chief Executive Officer and the Fund Complex. 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.
S-6
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 Wayne W. Whalen* (65) Trustee Trustee Partner in the law firm of 82 Trustee/Director/ 333 West Wacker Drive since 1991 Skadden, Arps, Slate, Meagher & Managing General Chicago, IL 60606 Flom LLP, legal counsel to funds Partner of funds in in the Fund Complex. the Fund Complex. Director of the Abraham Lincoln Presidential Library Foundation.
- ------------------------------------ * Such trustee is an "interested person" (within the meaning of Section 2(a)(19) of the 1940 Act). Messrs. Merin and Powers are interested persons of funds in the Fund Complex and the Adviser by reason of their current or former positions with Morgan Stanley or its affiliates. Mr. Whalen is an interested person of certain funds in the Fund Complex by reason of he and his firm currently providing legal services as legal counsel to such funds in the Fund Complex. + Designated as Preferred Shares Trustee. S-7 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 Stefanie V. Chang Yu (38) Vice President Officer Executive Director of Morgan Stanley Investment Management. 1221 Avenue of the Americas and Secretary since 2003 Vice President and Secretary of funds in the Fund Complex. New York, NY 10020 Amy R. Doberman (43) Vice President Officer Managing Director and General Counsel, U.S. Investment 1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment New York, NY 10020 Management, Inc., Morgan Stanley Investment Advisers Inc. and the Adviser. Vice President of the Morgan Stanley Institutional and Retail Funds since July 2004 and Vice President of funds in the Fund Complex as of August 2004. Previously, Managing Director and General Counsel of Americas, UBS Global Asset Management from July 2000 to July 2004 and General Counsel of Aeltus Investment Management, Inc from January 1997 to July 2000. James W. Garrett (36) Chief Financial Officer Executive Director of Morgan Stanley Investment Management. 1221 Avenue of the Americas Officer and since 2005 Chief Financial Officer and Treasurer of Morgan Stanley New York, NY 10020 Treasurer Institutional Funds since 2002 and of funds in the Fund Complex since 2005. Joseph J. McAlinden (62) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan 1221 Avenue of the Americas President and since 2002 Stanley Investment Advisors Inc., Morgan Stanley Investment New York, NY 10020 Chief Investment Management Inc. and Morgan Stanley Investments LP and Officer 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 Adviser and Van Kampen Advisors Inc. since December 2002. Ronald E. Robison (66) Executive Vice Officer Executive Vice President and Principal Executive Officer of 1221 Avenue of the Americas President and since 2003 Funds in the Fund Complex since May 2003. Chief Executive New York, NY 10020 Principal Officer and Chairman of Investor Services. Managing Director Executive of Morgan Stanley. Chief Administrative Officer, Managing Officer Director and Director of Morgan Stanley Investment Advisors Inc., Morgan Stanley Services Company Inc. and Managing Director and Director of Morgan Stanley Distributors Inc. Chief Executive Officer and Director of Morgan Stanley Trust. Executive Vice President and Principal Executive Officer of the Institutional and Retail Morgan Stanley Funds; Director of Morgan Stanley SICAV; previously Chief Global Operations Officer and Managing Director of Morgan Stanley Investment Management Inc. John L. Sullivan (49) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since 1 Parkview Plaza Officer since 1996 August 2004. Prior to August 2004, Director and Managing Oakbrook Terrace, IL 60181 Director of Van Kampen Investments, the Adviser, Van Kampen Advisors Inc. and certain other subsidiaries of Van Kampen Investments, Vice President, Chief Financial Officer and Treasurer of funds in the Fund Complex and head of Fund Accounting for Morgan Stanley Investment Management. Prior to December 2002, Executive Director of Van Kampen Investments, the Adviser and Van Kampen Advisors Inc.
- --------------- COMPENSATION Each trustee/director/managing general partner (hereinafter referred to in this section as "trustee") who is not an affiliated person (as defined in the 1940 Act) of Van Kampen Investments, the Adviser or the Administrator (each a "Non-Affiliated Trustee") is compensated by an annual retainer and meeting fees for services to funds in the Fund Complex. Each fund in the Fund Complex (except Van Kampen Exchange Fund) provides a deferred compensation plan to its Non-Affiliated Trustees that allows trustees to defer receipt of their compensation until retirement and earn a return on such deferred amounts. Amounts deferred are retained by the Fund and earn a rate of return determined S-8 by reference to the return on the common shares of the Fund or other funds in the Fund Complex as selected by the respective Non-Affiliated Trustee. 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. 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 Fund Complex (except Van Kampen Exchange Fund) 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. 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 per year for each of the 10 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. Additional information regarding compensation and benefits for trustees is set forth below for the periods described in the notes accompanying the table. COMPENSATION TABLE
Fund Complex -------------------------------------------------------------- Aggregate Pension Aggregate Estimated or Retirement Maximum Annual Aggregate Benefits Accrued Benefits from the Total Compensation Compensation as Part of Fund Complex before Deferral from Name(1) from the Fund(2) Expenses(3) Upon Retirement(4) Fund Complex(5) ------- ---------------- ----------------- ------------------- -------------------- INDEPENDENT TRUSTEES David C. Arch $6,729 $ 35,277 $147,500 $192,530 Jerry D. Choate 9,470 82,527 126,000 200,002 Rod Dammeyer 6,735 63,782 147,500 208,000 Linda Hutton Heagy 9,269 24,465 142,500 184,784 R. Craig Kennedy 9,470 16,911 142,500 200,002 Howard J Kerr 6,935 140,743 146,250 208,000 Jack E. Nelson 9,470 97,294 109,500 200,002 Hugo F. Sonnenschein 6,935 64,476 147,500 208,000 Suzanne H. Woolsey 9,470 58,450 142,500 200,002 INTERESTED TRUSTEE Wayne W. Whalen(1) 6,935 72,001 147,500 208,000
- ------------------------------------ (1) Trustees not eligible for compensation are not included in the Compensation Table. Mr. Whalen is an "interested person" (within the meaning of Section 2(a)(19) of the 1940 Act) of the Fund and certain other funds in the Fund Complex. J. Miles Branagan retired as a member of the Board of Trustees of the Fund and other funds in the Fund Complex on December 31, 2004. Theodore A. Myers retired from the Board of Trustees of the Fund and other funds in the Fund Complex as of December 31, 2003. S-9 (2) The amounts shown in this column represent the aggregate compensation before deferral with respect to the Fund's fiscal year ended October 31, 2004. The following Trustees deferred compensation from the Fund during the fiscal year ended October 31, 2004: Mr. Choate, $9,470; Mr. Dammeyer, $6,735; Ms. Heagy, $9,269; Mr. Nelson, $9,470; Mr. Sonnenschein, $6,935; and Mr. Whalen, $6,935. The cumulative deferred compensation (including interest) accrued with respect to each trustee, including former trustees, from the Fund as of October 31, 2004 is as follows: Mr. Choate, $12,378; Mr. Dammeyer, $81,838; Ms. Heagy, $12,335; Mr. Kerr, $31,468; Mr. Nelson, $12,268; Mr. Sonnenschein, $71,005; and Mr. Whalen, $73,419. 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 funds in the Fund Complex for each of the trustees for the funds' respective fiscal years ended in 2004. The retirement plan is described above the Compensation Table. (4) For each trustee, this is the sum of the estimated maximum annual benefits payable by the funds in the Fund Complex for each year of the 10-year period commencing in the year of such person's anticipated retirement. The retirement plan is described above the Compensation Table. (5) The amounts shown in this column represent the aggregate compensation paid by all of the funds in the Fund Complex as of December 31, 2004 before deferral by the trustees under the deferred compensation plan. Because the funds in the Fund Complex have different fiscal year ends, the amounts shown in this column are presented on a calendar year basis. BOARD COMMITTEES The Board of Trustees has three standing committees (an audit committee, a brokerage and services committee and a governance committee). Each committee is comprised solely of "Independent Trustees", which is defined for purposes herein as trustees who: (1) are not "interested persons" of the Fund as defined by the 1940 Act and (2) are "independent" of the Fund as defined by the New York Stock Exchange, American Stock Exchange and Chicago Stock Exchange listing standards. The Board's audit committee consists of Jerry D. Choate, Rod Dammeyer and R. Craig Kennedy. In addition to being Independent Trustees as defined above, each of these trustees also meets the additional independence requirements for audit committee members as defined by the New York Stock Exchange, American Stock Exchange and Chicago Stock Exchange listing standards. The audit committee makes recommendations to the Board of Trustees concerning the selection of the Fund's independent registered public accounting firm, reviews with such independent registered public accounting firm the scope and results of the Fund's annual audit and considers any comments which the independent registered public accounting firm may have regarding the Fund's financial statements, books of account or internal controls. The Board of Trustees has adopted a formal written charter for the audit committee which sets forth the audit committee's responsibilities. The audit committee has reviewed and discussed the financial statements of the Fund with management as well as with the independent registered public accounting firm of the Fund, and discussed with the independent registered public accounting firm the matters required to be discussed under the Statement of Auditing Standards No. 61. The audit committee has received the written disclosures and the S-10 letter from the independent registered public accounting firm required under Independence Standards Board Standard No. 1 and has discussed with the independent registered public accounting firm its independence. Based on this review, the audit committee recommended to the Board of Trustees of the Fund that the Fund's audited financial statements be included in the Fund's annual report to shareholders for the most recent fiscal year for filing with the SEC. The Board's brokerage and services committee consists of Linda Hutton Heagy, Hugo F. Sonnenschein and Suzanne H. Woolsey. The brokerage and services committee reviews the Fund's allocation of brokerage transactions and soft-dollar practices and reviews the transfer agency and shareholder servicing arrangements with Investor Services. The Board's governance committee consists of David C. Arch, Howard J Kerr and Jack E. Nelson. In addition to being Independent Trustees as defined above, each of these trustees also meets the additional independence requirements for nominating committee members as defined by the New York Stock Exchange, American Stock Exchange and Chicago Stock Exchange listing standards. The governance committee identifies individuals qualified to serve as Independent Trustees on the Board and on committees of the Board, advises the Board with respect to Board composition, procedures and committees, develops and recommends to the Board a set of corporate governance principles applicable to the Fund, monitors corporate governance matters and makes recommendations to the Board, and acts as the administrative committee with respect to Board policies and procedures, committee policies and procedures and codes of ethics. The Independent Trustees of the Fund select and nominate any other nominee Independent Trustees for the Fund. While the Independent Trustees of the Fund 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 consider nominations from shareholders to the Board. Nominations from shareholders should be in writing and sent to the Independent Trustees of the Fund at the Fund's offices 1221 Avenue of the Americas, New York, New York 10020 or directly to the Independent Trustees at the address specified above for each trustee. During the Fund's last fiscal year, the Board of Trustees held 16 meetings. During the Fund's last fiscal year, the audit committee of the Board held 5 meetings, the brokerage and services committee of the Board held 4 meetings and the governance committee of the Board held 5 meetings. SHARE OWNERSHIP Excluding any to deferred compensation balances as described in the Compensation Table, as of December 31, 2004, the most recently completed calendar year prior to the date of this Reorganization Statement of Additional Information, each trustee of the Fund beneficially owned equity securities of the Fund and of all of the funds in the Fund Complex overseen by the trustee in the dollar range amounts specified below. S-11 2004 TRUSTEE BENEFICIAL OWNERSHIP OF SECURITIES INDEPENDENT TRUSTEES
TRUSTEE ----------------------------------------------------------------------------------------- ARCH CHOATE DAMMEYER HEAGY KENNEDY KERR NELSON SONNENSCHEIN WOOLSEY -------- ------- -------- -------- -------- ------- ------- ------------ -------- Dollar range of equity securities in the Fund....................... $10,001- none over $1- $1- none none $1- none $50,000 $100,000 $10,000 $10,000 $10,000 Aggregate dollar range of equity securities in all registered investment companies overseen by trustee in the Fund Complex....... $50,001- $1- over $10,001- over $1- $1- $10,001- $10,001- $100,000 $10,000 $100,000 $50,000 $100,000 $10,000 $10,000 $50,000 $50,000
INTERESTED TRUSTEES
TRUSTEE ---------------------------- MERIN POWERS WHALEN -------- -------- -------- Dollar range of equity securities in the Fund............... none none none Aggregate dollar range of equity securities in all registered investment companies overseen by trustee in the Fund Complex............................................... over over over $100,000 $100,000 $100,000
Including deferred compensation balances (which are amounts deferred and thus retained by the Fund as described in the Compensation Table), as of December 31, 2004, the most recently completed calendar year prior to the date of this Reorganization Statement of Additional Information, each trustee of the Fund had in the aggregate, combining beneficially owned equity securities and deferred compensation of the Fund and of all of the funds in the Fund Complex overseen by the trustee, the dollar range of amounts specified below. 2004 TRUSTEE BENEFICIAL OWNERSHIP AND DEFERRED COMPENSATION INDEPENDENT TRUSTEES
TRUSTEE -------------------------------------------------------------------------------------------- ARCH CHOATE DAMMEYER HEAGY KENNEDY KERR NELSON SONNENSCHEIN WOOLSEY -------- -------- -------- -------- -------- -------- -------- ------------ -------- Dollar range of equity securities and deferred compensation in the Fund....... $10,001- none over $1- $1- none none $1- none $50,000 $100,000 $10,000 $10,000 $10,000 Aggregate dollar range of equity securities and deferred compensation in all registered investment companies overseen by trustee in Fund Complex..... $50,001- over over over over over over over $10,000- $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $50,001
INTERESTED TRUSTEES
TRUSTEE ------------------------------ MERIN POWERS WHALEN -------- -------- -------- Dollar range of equity securities and deferred compensation in the Fund....... none none none Aggregate dollar range of equity securities and deferred compensation in all registered investment companies overseen by trustee in the Fund Complex........................ over over over $100,000 $100,000 $100,000
S-12 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 or officers of the Fund if elected to such positions. The Fund, however, bears the costs of its day-to-day operations, including custodian fees, auction agent fees, fees for broker-dealers participating in auctions of the Fund's APS, legal and independent registered public accounting firm 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, Administrator 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 in the absence of willful misfeasance, bad faith, negligence or reckless disregard of its obligations and duties under the Advisory Agreement. 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 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 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. 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. S-13 ADVISORY FEES
FISCAL YEAR ENDED OCTOBER 31, ------------------------------------ 2004 2003 2002 ---------- ---------- ---------- The Adviser received the approximate advisory fees of.............................................. $5,364,400 $5,355,900 $5,256,800
OTHER AGREEMENTS THE ADMINISTRATION AGREEMENT The administrative services provided by the Administrator include record keeping and reporting responsibilities with respect to the Fund's portfolio and Preferred Shares and providing certain services to shareholders. Prior to June 1, 2004, the Fund paid the Administrator a monthly administrative fee at the annual rate of 0.05% of the average net assets of the Fund. Effective June 1, 2004, the administrative fee was reduced from 0.05% to 0.00%. ADMINISTRATIVE FEES
FISCAL YEAR ENDED OCTOBER 31, -------------------------------- 2004 2003 2002 -------- -------- ---------- Van Kampen Funds Inc. received the approximate administrative fees of............................ $261,200 $466,300 $1,133,600
ACCOUNTING SERVICES AGREEMENT The Fund has entered into an accounting services agreement pursuant to which the Adviser provides accounting services to the Fund supplementary to those provided by the custodian. Such services are expected to enable the Fund to more closely monitor and maintain its accounts and records. The Fund pays all costs and expenses related to such services, including all salary and related benefits of accounting personnel, as well as the overhead and expenses of office space and the equipment necessary to render such services. The Fund shares together with the other Van Kampen funds in the cost of providing such services with 25% of such costs shared proportionately based on the respective number of classes of securities issued per fund and the remaining 75% of such costs based proportionately on the respective net assets per fund. ACCOUNTING SERVICES FEES
FISCAL YEAR ENDED OCTOBER 31, ------------------------------ 2004 2003 2002 -------- -------- -------- The Adviser received the approximate accounting services fees of................................................ $41,400 $48,500 $47,200
LEGAL SERVICES AGREEMENT The Fund and certain other Van Kampen funds have entered into legal services agreements pursuant to which Van Kampen Investments provides legal services, including without limitation: accurate maintenance of each fund's minute books and records, S-14 preparation and oversight of each fund's regulatory reports and other information provided to shareholders, as well as responding to day-to-day legal issues on behalf of the funds. Payment by the funds for such services is made on a cost basis for the salary and salary-related benefits, including but not limited to bonuses, group insurance and other regular wages for the employment of personnel. Other funds distributed by the Administrator also receive legal services from Van Kampen Investments. Of the total costs for legal services provided to the funds distributed by the Administrator, one half of such costs are allocated equally to each fund and the remaining one half of such costs are allocated to specific funds based on monthly time records. LEGAL SERVICES FEES
FISCAL YEAR ENDED OCTOBER 31, ------------------------------ 2004 2003 2002 -------- -------- -------- Van Kampen Investments received the approximate legal services fees of....................................... $24,000 $25,800 $22,600
FUND MANAGEMENT OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGERS As of October 31, 2004, Thomas Byron managed 6 registered investment companies with a total of $2.5 billion in assets; 0 pooled investment vehicles other than registered investment companies; and 0 other accounts. As of October 31, 2004, Robert Wimmel managed 39 registered investment companies with a total of $11.4 billion in assets; 0 pooled investment vehicles other than registered investment companies; and 0 other accounts. As of October 31, 2004, John Reynoldson managed 36 registered investment companies with a total of $8.3 billion in assets; 0 pooled investment vehicles other than registered investment companies; and 295 other accounts with a total of $239 million in assets. Because the portfolio managers manage assets for other investment companies, pooled investment vehicles and/or other accounts (including institutional clients, pension plans and certain high net worth individuals) there may be an incentive to favor one client over another resulting in conflicts of interest. For instance, the Adviser may receive fees from certain accounts that are higher than the fee it receives from the Fund, or it may receive a performance-based fee on certain accounts. In those instances, the portfolio managers may have an incentive to favor the higher and/or performance-based fee accounts over the Fund. The portfolio managers of the Fund do not currently manage assets for other investment companies, pooled investment vehicles or other accounts that charge a performance fee. The Adviser has adopted trade allocation and other policies and procedures that it believes are reasonably designed to address these and other conflicts of interest. S-15 PORTFOLIO MANAGER COMPENSATION STRUCTURE. Portfolio managers receive a combination of base compensation and discretionary compensation, comprised of a cash bonus and several deferred compensation programs described below. The methodology used to determine portfolio manager compensation is applied across all accounts managed by the portfolio manager. BASE SALARY COMPENSATION. Generally, portfolio managers receive base salary compensation based on the level of their position with the Adviser. DISCRETIONARY COMPENSATION. In addition to base compensation, portfolio managers may receive discretionary compensation. Discretionary compensation can include: - Cash Bonus; - Morgan Stanley's Equity Incentive Compensation Program (EICP) awards--a mandatory program that defers a portion of discretionary year-end compensation into restricted stock units or other awards based on Morgan Stanley common stock that are subject to vesting and other conditions; - Investment Management Deferred Compensation Plan (IMDCP) awards--a mandatory program that defers a portion of discretionary year-end compensation and notionally invests it in designated funds advised by the Adviser or its affiliates. The award is subject to vesting and other conditions. Portfolio managers must notionally invest a minimum of 25% to a maximum of 50% of the IMDCP deferral into a combination of the designated funds they manage that are included in the IMDCP fund menu. - Select Employees' Capital Accumulation Program (SECAP) awards--a voluntary program that permits employees to elect to defer a portion of their discretionary compensation and notionally invest the deferred amount across a range of designated investment funds, including funds advised by the Adviser or its affiliates, and - Voluntary Equity Incentive Compensation Program (VEICP) awards--a voluntary program that permits employees to elect to defer a portion of their discretionary compensation to invest in Morgan Stanley stock units. Several factors determine discretionary compensation, which can vary by portfolio management team and circumstances. In order of relative importance, these factors include - Investment performance. A portfolio manager's compensation is linked to the pre-tax investment performance of the accounts managed by the portfolio manager. Investment performance is calculated for one-, three and five-year periods measured against a fund's primary benchmark (as set forth in the fund's prospectus), indices and/or peer groups. Generally, the greatest weight is placed on the three- and five-year periods. - Revenues generated by the investment companies, pooled investment vehicles and other accounts managed by the portfolio manager. - Contribution to the business objectives of the Adviser. S-16 - The dollar amount of assets managed by the portfolio manager. - Market compensation survey research by independent third parties. - Other qualitative factors, such as contributions to client objectives. - Performance of Morgan Stanley and Morgan Stanley Investment Management, and the overall performance of the Global Investor Group, a department within Morgan Stanley Investment Management that includes all investment professionals. Occasionally, to attract new hires or to retain key employees, the total amount of compensation will be guaranteed in advance of the fiscal year end based on current market levels. In limited circumstances, the guarantee may continue for more than one year. The guaranteed compensation is based on the same factors as those comprising overall compensation described above. SECURITIES OWNERSHIP OF PORTFOLIO MANAGERS As the Fund's fiscal year end, none of the portfolio managers owned equity securities in the Fund. CODE OF ETHICS The Fund and the Adviser 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. 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 Fund's Board of Trustees. S-17 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 services. The Adviser is responsible for placing portfolio transactions and does so in a manner deemed fair and reasonable to the Fund and not according to any formula. The primary consideration in all portfolio transactions is prompt execution of orders in an effective manner at the most favorable price. In selecting broker-dealers and in negotiating prices and any brokerage commissions on such transactions, the Adviser considers the firm's reliability, integrity and financial condition and the firm's execution capability, the size and breadth of the market for the security, the size of and difficulty in executing the order, and the best net price. There are many instances when, in the judgment of the Adviser, more than one firm can offer comparable execution services. In selecting among such firms, consideration may be given to those firms which supply research and other services in addition to execution services. The Adviser is authorized to pay higher commissions to brokerage firms that provide it with investment and research information than to firms which do not provide such services if the Adviser determines that such commissions are reasonable in relation to the overall services provided. No specific value can be assigned to such research services which are furnished without cost to the Adviser. Since statistical and other research information is only supplementary to the research efforts of the Adviser to the Fund and still must be analyzed and reviewed by its staff, the receipt of research information is not expected to reduce its expenses materially. The investment advisory fee is not reduced as a result of the Adviser's receipt of such research services. Services provided may include (a) furnishing advice as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; (b) furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and the performance of accounts; and (c) effecting securities transactions and performing functions incidental thereto (such as clearance, settlement and custody). Research services furnished by firms through which the Fund effects its securities transactions may be used by the Adviser in servicing all of its advisory accounts; not all of such services may be used by the Adviser in connection with the Fund. The Adviser also may place portfolio transactions, to the extent permitted by law, with brokerage firms affiliated with the Fund and the Adviser if it reasonably believes that the quality of execution and the commission are comparable to that available from other qualified firms. 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 S-18 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. Certain broker-dealers, through which the Fund may effect securities transactions, are affiliated persons (as defined in the 1940 Act) of the Fund or affiliated persons of such affiliates, including Morgan Stanley or its subsidiaries. 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. Unless otherwise disclosed below, the Fund paid no commissions to affiliated brokers during the last three fiscal years. The Fund paid the following commissions to brokers during the fiscal years shown:
AFFILIATED BROKERS ALL BROKERS MORGAN STANLEY DW INC. ----------- ---------------------- COMMISSIONS PAID: Fiscal year ended October 31, 2004..... 1,195 0 Fiscal year ended October 31, 2003..... 15,671 0 Fiscal year ended October 31, 2002..... 4,411 0 FISCAL YEAR 2004 PERCENTAGES: Commissions with affiliate to total commissions..... 0% Value of brokerage transactions with affiliate to total transactions............................... 0%
During the fiscal year ended October 31, 2004, the Fund paid no brokerage commissions to brokers selected primarily on the basis of research services provided to the Adviser. ADDITIONAL INFORMATION RELATING TO AUCTION PREFERRED SHARES OF THE ACQUIRING FUND The following is a brief description of the terms of the shares of each series of APS of the Fund. This description does not purport to be complete and is subject to and qualified in its entirety by reference to Fund's Declaration of Trust, including the Certificate of Vote establishing and fixing the rights and preferences of the shares of such series of APS attached hereto as Appendix B (the "Certificate of Vote" and, together with the Fund's S-19 Declaration of Trust, the "APS Provisions"). For purposes of this section, capitalized terms not otherwise defined below are defined in the Certificate of Vote. The Declaration of Trust currently authorizes the issuance of an unlimited number of shares of Common Shares and 100,000,000 Preferred Shares of beneficial interest, par value $.01 per share (which may be issued from time to time in such series and with such designations, preferences and other rights, qualifications, limitations and restrictions as are determined in a resolution of the Board of Trustees of the Fund). Under the APS Provisions, the Fund currently has outstanding 12,000 APS. All shares of each series of APS have a liquidation preference of $25,000 per share plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared). The shares of each series of APS will rank on a parity with shares of any other series of Preferred Shares (including any other series of APS) as to the payment of dividends and the distribution of assets upon liquidation. So long as either Moody's or S&P is rating the shares of any series of APS, the Fund may, without the vote of the holders of APS, issue additional series of Preferred Shares, including APS, subject to applicable provisions of the 1940 Act and to continuing compliance with the 1940 Act APS Asset Coverage and the APS Basic Maintenance Amount, provided that (1) any such additional series ranks on a parity with the then Outstanding APS as to the payment of dividends and the distribution of assets upon liquidation and (2) the Fund obtains written confirmation from Moody's or S&P, or both, as the case may be, that the issuance of any such additional series would not impair the rating then assigned by such rating agency to the APS. DIVIDENDS AND DIVIDEND PERIODS Dividends on shares of each series of APS will accumulate at the Applicable Rate per annum and will be payable, when, as and if declared by the Board of Trustees of the Fund out of funds legally available therefor, on shares of APS Series A on each Tuesday, on shares of APS Series B on each fourth Wednesday, on shares of APS Series C on each Thursday and on shares of APS Series D on each fourth Friday, in each case subject to certain exceptions. The Fund, subject to certain conditions, may designate any Dividend Period as a Special Dividend Period, which shall be such number of consecutive days or whole years as the Board of Trustees shall specify, subject to certain exceptions. Dividends will be paid through the Securities Depository (The Depository Trust Company or any successor) on each Dividend Payment Date in accordance with its normal procedures, which now provide for it to distribute dividends in next-day funds to Agent Members, who in turn are expected to distribute such dividend payments to the persons for whom they are acting as agents. Each of the initial Broker Dealers, however, has indicated to the Fund that such Broker-Dealer or one of its affiliates will make such dividend payments available in same-day funds on each Dividend Payment Date to customers that use such Broker Dealer or such affiliate as Agent Member. For each Dividend Period, the dividend rate for shares of each series of APS will be the Applicable Rate per annum that the Auction Agent advises the Fund results from an Auction, except as provided below. The dividend rate that results from an Auction for a series of APS will not be greater than the Maximum Rate, which is: (i) in the case of any Auction Date which is not the Auction Date immediately prior to the first day of any proposed Special Dividend Period, the product of (1) the S-20 "AA" Composite Commercial Paper Rate on such Auction Date for the next Rate Period of such series and (2) the Applicable Percentage on such Auction Date, unless such series of APS has or had a Special Dividend Period (other than a Special Dividend Period of 28 days or less) and an Auction at which Sufficient Clearing Bids existed has not yet occurred for a Minimum Dividend Period for such series (7 days with respect to APS Series A and APS Series C and 28 days with respect to APS Series B and APS Series D) after such Special Dividend Period, in which case the higher of: (A) the dividend rate on shares of such series of APS for the then-ending Rate Period, and (B) the product of (x) the higher of (I) the "AA" Composite Commercial Paper Rate on such Auction Date for the then-ending Rate Period of such series, if such Rate Period is less than one year, or the Treasury Rate on such Auction Date for such Rate Period, if such Rate Period is one year or longer, and (II) the "AA" Composite Commercial Paper Rate on such Auction Date for such Special Dividend Period of such series, if such Special Dividend Period is less than one year, or the Treasury Rate on such Auction Date for such Special Dividend Period, if such Special Dividend Period is one year or longer and (y) the Applicable Percentage on such Auction Date; or (ii) in the case of any Auction Date which is the Auction Date immediately prior to the first day of any proposed Special Dividend Period, the product of (1) the highest of (x) the "AA" Composite Commercial Paper Rate on such Auction Date for the then-ending Rate Period of such series, if such Rate Period is less than one year, or the Treasury Rate on such Auction Date for such Rate Period, if such Rate Period is one year or longer, (y) the "AA" Composite Commercial Paper Rate on such Auction Date for the Special Dividend Period of such series for which the Auction is being held if such Special Dividend Period is less than one year or the Treasury Rate on such Auction Date for the Special Dividend Period for which the Auction is being held if such Special Dividend Period is one year or longer, and (z) the "AA" Composite Commercial Paper Rate on such Auction Date for a Minimum Dividend Period and (2) the Applicable Percentage on such Auction Date. The applicable "AA" Composite Commercial Paper Rates and Treasury Rates will be the rates announced on such Auction Date for the Business Day immediately prior to such Auction Date. S-21 The "Applicable Percentage" will be a percentage, determined as set forth below, based on the prevailing rating of the APS in effect at the close of business on the Business Day next preceding such Auction Date:
APPLICABLE PREVAILING RATING PERCENTAGE - ----------------- ---------- "Aa3"/AA- or higher........................................ 110% "A3"/A-.................................................... 125% "Baa3"/BBB................................................. 150% "Ba3"/BB-.................................................. 200% Below "Ba3"/BB-............................................ 250%
provided, however, that in the event the Fund has notified the Auction Agent of its intent to allocate income that is taxable for federal income tax purposes to the APS prior to any Auction, for purposes of determining the Maximum Rate with respect to such Auction the Applicable Percentage in the foregoing table shall be divided by the quantity 1 minus the maximum marginal regular federal individual income tax rate applicable to ordinary income or the maximum marginal regular federal corporate income tax rate, whichever is greater, provided, however, that the Applicable Percentage shall be divided in the foregoing manner only to the extent that the portion of the dividend on the APS for such Rate Period that represents the allocation of taxable income to the APS. If the APS are rated by only one rating agency, such rating will be the prevailing rating. If the ratings for the APS are split between two of the foregoing categories, the lower rating will determine the prevailing rating. If an Auction for any Dividend Period of any series of APS is not held for any reason or if the Fund fails to pay in a timely manner to the Auction Agent the full amount of any dividend on, or Redemption Price of, shares of any series of APS and such failure has not been cured as set forth below prior to any succeeding Dividend Period thereof, then, subject to the next paragraph, the dividend rate on the shares of such series for any such Dividend Period will be the Maximum Rate for such series on the Auction Date for such Dividend Period. If the Fund fails to pay in a timely manner to the Auction Agent the full amount of any dividend on, or the Redemption Price of, any shares of any series of APS during any Rate Period thereof (other than any Special Dividend Period consisting of four or more Dividend Periods or any Rate Period succeeding any Special Dividend Period consisting of four or more Dividend Periods during which such a failure occurred that has not been cured), and, prior to 12:00 Noon on the third Business Day next succeeding the date on which such failure occurred, such failure shall not have been cured or the Fund shall not have paid a late charge, then Auctions for such series will be suspended until such failure is so cured and the dividend rate for such shares of APS for each Dividend Period thereof commencing after such failure to and including the Dividend Period, if any, during which such failure is so cured shall be a rate per annum equal to the Maximum Rate on the Auction Date for each such Dividend Period (but with the prevailing rating for such shares, for purposes of determining such Maximum Rate, being deemed to be "Below "Ba3"/BB-"). If the Fund fails to pay in a timely manner to the Auction Agent the full amount of any dividend on, or the Redemption Price of, any shares of any series of APS during a Special Dividend Period thereof consisting of four or more Dividend Periods, or S-22 during any Dividend Period thereof succeeding any Special Dividend Period consisting of four or more Dividend Periods during which such a failure occurred that has not been cured, and such failure shall not have been cured as described herein, then Auctions for such series will be suspended until such failure is so cured and the dividend rate for such shares of APS for each Dividend Period thereof commencing after such failure to and including the Dividend Period, if any, during which such failure is so cured shall be a rate per annum equal to the Maximum Rate on the Auction Date for each such Dividend Period (but with the prevailing rating for such shares, for purposes of determining such Maximum Rate, being deemed to be "Below "Ba3"/BB-"). DESIGNATION OF SPECIAL DIVIDEND PERIODS The Fund, at its option, may designate any succeeding Dividend Period of any series of APS as a Special Dividend Period which shall consist of such number of days or whole years as the Board of Trustees shall specify; provided, however, that such designation shall be effective only if (i) notice thereof shall have been given as provided in the APS Provisions, (ii) any failure to pay in a timely manner to the Auction Agent the full amount of any dividend on, or the Redemption Price of, shares of such series of APS shall have been cured as set forth above, (iii) Sufficient Clearing Bids for such series shall have existed in an Auction held on the Auction Date immediately preceding the first day of such proposed Special Dividend Period, (iv) if the Fund shall have mailed a notice of redemption with respect to any shares of such series, the Redemption Price with respect to such shares shall have been deposited with the Auction Agent, and (v) in the event the Fund wishes to designate any succeeding Dividend Period for such series as a Special Dividend Period consisting of more than 28 days, the Fund has received written confirmation from S&P (if S&P is then rating the APS) and Moody's (if Moody's is then rating the APS) that such designation would not affect the rating then assigned by S&P to such series. ADDITIONAL DIVIDENDS Whenever the Fund intends to include any net capital gains or other income that is taxable for federal income tax purposes in any dividend on shares of any series of APS, the Fund will notify the Auction Agent of the amount to be so included 15 days prior to the Auction Date on which the Applicable Rate for such dividend is to be established. Whenever the Auction Agent receives such notice from the Fund, it will in turn notify each Broker-Dealer, who, on or prior to such Auction Date, in accordance with its Broker-Dealer Agreement, will notify its Existing Holders and Potential Holders believed by it to be interested in submitting an Order in the Auction to be held on such Auction Date. If the Fund retroactively allocates any net capital gains or other income taxable for federal income tax purposes to the APS without having given advance notice thereof to the Auction Agent solely by reason of the fact that such allocation is made as a result of the redemption of all or a portion of the outstanding APS or the liquidation of the Fund (such allocation is referred to herein as a "Retroactive Taxable Allocation"), the Fund will, within 270 days after the end of the Fund's taxable year in which a Retroactive Taxable Allocation is made, provide notice thereof to the Auction Agent and to each holder of APS during such taxable year at such holder's address as the same appears or last appeared on the share books of the Fund. The Fund will, within 30 days after such notice S-23 is given to the Auction Agent, pay to the Auction Agent (who will then distribute to such holders of shares of APS), out of funds legally available therefor, an amount equal to the aggregate Additional Dividends (as defined below) with respect to all Retroactive Taxable Allocations made to such holders during the taxable year in question. "Additional Dividends" means payment to a Holder of APS of an amount which, when taken together with the aggregate amount of Retroactive Taxable Allocations made to such Holder with respect to the taxable year in question, would cause such Holder's dividends in dollars (after federal income tax consequences as described below) from the aggregate of both the Retroactive Taxable Allocations and the Additional Dividends to be equal to the dollar amount of the dividends which would have been received by such Holder if the amount of the aggregate Retroactive Taxable Allocations would have been excludable from the gross income of such Holder. State taxes imposed on the Additional Dividends, however, may reduce the amount of after tax cash a holder would have had if there were no Retroactive Taxable Allocation. Such Additional Dividends shall be calculated (i) without consideration being given to the time value of money; (ii) assuming that no holder of APS is subject to the federal alternative minimum tax with respect to dividends received from the Fund; and (iii) assuming that each Retroactive Taxable Allocation would be taxable in the hands of each holder of APS at the maximum marginal regular federal individual income tax rate applicable to ordinary income or net capital gains, as applicable, or the maximum marginal regular federal corporate income tax rate, whichever is greater, in effect during the taxable year in question. AUCTION PROCEDURES On each Auction Date for each series of APS (the Business Day prior to the beginning of each Rate Period), each Existing Holder may submit Orders through a Broker-Dealer to the Auction Agent as follows: - Hold Order-indicating its desire to hold without regard to the Applicable Rate for the next Rate Period. - Bid-indicating its desire to sell if the Applicable Rate for the next Rate Period is less than the rate specified in such Bid. - Sell Order-indicating its desire to sell without regard to the Applicable Rate for the next Rate Period. An Existing Holder may submit different types of Orders in an Auction with respect to shares of APS then held by such Existing Holder. An Existing Holder that offers to purchase additional shares of APS is, for purposes of such offer, treated as a Potential Holder as described below. Bids of Existing Holders with rates higher than the Maximum Rate on the Auction Date will be treated as Sell Orders. A Hold Order will be deemed to have been submitted on behalf of an Existing Holder if an Order is not submitted on behalf of such Existing Holder for any reason, including the failure of a Broker-Dealer to submit such Existing Holder's Order to the Auction Agent. Potential Holders of shares of any series of APS may submit Bids in which they will offer to purchase shares of such series of APS if the Applicable Rate for the next Rate Period is not less than the rate specified in such Bid. A Bid by a Potential Holder specifying a rate higher than the Maximum Rate will not be accepted. S-24 If Sufficient Clearing Bids exist (that is, the number of shares of a particular series of APS subject to Bids by Potential Holders with rates equal to or lower than the Maximum Rate is at least equal to the number of shares of such series of APS subject to Sell Orders by Existing Holders), the Applicable Rate for such series will be the lowest rate specified in the Submitted Bids which, taking into account such rate and all lower rates bid by Existing Holders and Potential Holders, would result in Existing Holders and Potential Holders owning all the shares of such series of APS available for purchase in the Auction. If Sufficient Clearing Bids do not exist, the Applicable Rate will be the Maximum Rate on the Auction Date, and, in such event, Existing Holders that have submitted Sell Orders may not be able to sell in such Auction all shares of such series of APS subject to such Sell Orders. If all Existing Holders of shares of such series of APS submit or are deemed to have submitted Hold Orders, the Applicable Rate will be the product of (i) (1) the "AA" Composite Commercial Paper Rate on such Auction Date for the Rate Period for which the Auction is held, if such Rate Period is less than one year or (2) the Treasury Rate on such Auction Date for such Rate Period, if such Rate Period is one year or longer and (ii) 1 minus the maximum marginal regular federal individual income tax rate applicable to ordinary income or the maximum marginal regular federal corporate income tax rate, whichever is greater; provided, however, that if the Fund has notified the Auction Agent of its intent to allocate to the APS in such Rate Period any net capital gains or other income that is taxable for federal income tax purposes, the Applicable Rate in respect of that portion of the dividend on the APS for such Rate Period that represents the allocation of net capital gains or other income taxable for Federal income tax purposes will be the rate described in the preceding clause (i) (1) or (2), as applicable, without being multiplied by the factor set forth in the preceding clause (ii). The Auction Procedures include a pro rata allocation of shares for purchase and sale, which may result in an Existing Holder continuing to hold or selling, or a Potential Holder purchasing, a number of shares of APS that is fewer than the number of shares of APS specified in its Order. A Bid placed by an Existing Holder specifying a rate greater than the Applicable Rate determined in the Auction or a Sell Order shall constitute an irrevocable offer to sell the shares of such series of APS subject thereto, in each case at a price per share equal to $25,000. A Bid placed by a Potential Holder shall constitute an irrevocable offer to purchase the shares of such series of APS subject thereto at a price per share equal to $25,000 if the rate specified in such Bid is less than or equal to the Applicable Rate determined in the Auction. Settlement of purchases and sales will be made on the next Business Day (also a Dividend Payment Date) after the Auction Date through the Securities Depository. Purchasers will make payment through their Agent Members in same-day funds to the Securities Depository against delivery to their respective Agent Members. The Securities Depository will make payment to the sellers' Agent Members in accordance with the Securities Depository's normal procedures, which now provide for payment against delivery by their Agent Members in same-day funds. ASSET MAINTENANCE Under the APS Provisions, the Fund must maintain (i) assets having in the aggregate a Discounted Value at least equal to the APS Basic Maintenance Amount, and (ii) 1940 Act APS Asset Coverage of at least 200%. S-25 The Discount Factors and guidelines for calculating the Discounted Value of the Fund's portfolio for purposes of determining whether the APS Basic Maintenance Amount has been satisfied have been established by Moody's and S&P in connection with the Fund's receipt of ratings on the shares of each series of APS of "Aaa" from Moody's and AAA from S&P. MINIMUM LIQUIDITY LEVEL So long as any of the APS are Outstanding and S&P is rating the APS, the Fund will be required under the APS Provisions to maintain as of each Valuation Date certain Dividend Coverage Assets with a value not less than the Dividend Coverage Amount (the "Minimum Liquidity Level"). MANDATORY REDEMPTION If the APS Basic Maintenance Amount or the 1940 Act APS Asset Coverage is not maintained or restored as specified in the APS Provisions, the APS will be subject to mandatory redemption on a date specified by the Board of Trustees, out of funds legally available therefor, at the redemption price of $25,000 per share plus an amount equal to accumulated but unpaid dividends thereon (whether or not earned or declared) to the date fixed for redemption. Any such redemption will be limited to the number of APS necessary to restore the APS Basic Maintenance Amount or the 1940 Act APS Asset Coverage, as the case may be. OPTIONAL REDEMPTION Except as described in the APS Provisions shares of each series of APS are redeemable, in whole or in part, at the option of the Fund, on the next succeeding scheduled Dividend Payment Date applicable to the shares of such series of APS called for redemption, out of funds legally available therefor, at the Optional Redemption Price of $25,000 per share plus (in the case of a Special Dividend Period only) a premium, if any, resulting from the designation of a Premium Call Period, plus an amount equal to dividends thereon (whether or not earned or declared) accumulated but unpaid to the date fixed for redemption; provided that during a Special Dividend Period of 365 days or more, no share of such series of APS will be subject to optional redemption during any Non-Call Period to which such series of APS may be subject. LIQUIDATION PREFERENCE The liquidation preference of the shares of each series of APS is $25,000 per share plus accumulated but unpaid dividends, if any, thereon (whether or not earned or declared). VOTING RIGHTS The 1940 Act requires that the holders of APS, voting as a separate class, have the right to elect at least two Trustees at all times and to elect a majority of the Trustees at any time that two years' dividends on the APS are unpaid. The holders of APS will vote as a separate class or classes on certain other matters as required under the APS S-26 Provisions, the 1940 Act and Massachusetts law. In addition, each series of APS may vote as a separate series under certain circumstances. MASTER PURCHASER'S LETTER Each prospective purchaser of shares of any series of APS or its Broker-Dealer will be required to sign and deliver a Master Purchaser's Letter to the Auction Agent in which such prospective purchaser or its Broker-Dealer will agree, among other things, that (i) dispositions of shares of such series of APS may be made only pursuant to a Bid or a Sell Order placed in an Auction, or to or through a Broker-Dealer or to a person that has delivered a signed Master Purchaser's Letter to the Auction Agent, provided that in the case of all transfers other than those pursuant to Auctions, the Existing Holder of the shares so transferred, its Agent Member or its Broker-Dealer advises the Auction Agent of such transfer, and (ii) ownership of shares of such series of APS will be maintained in book entry form by the Securities Depository for the account of such prospective purchaser's Agent Member, which in turn will maintain records of such prospective purchaser's beneficial ownership. Each prospective purchaser should ask its Broker-Dealer whether such prospective purchaser should sign a Master Purchaser's Letter. If the Broker-Dealer submits Orders for such prospective purchaser listing the Broker-Dealer as the Existing Holder or the Potential Holder, a Master Purchaser's Letter signed by such prospective purchaser may not be required. Execution by a prospective purchaser or its Broker-Dealer of a Master Purchaser's Letter is not a commitment to purchase shares of APS in the offering being made by this Prospectus or in any Auction, but is a condition precedent to such purchaser's purchasing shares of APS. In addition, acceptance of a Master Purchaser's Letter is not a guarantee that shares of APS will be available for purchase. The Broker-Dealers may maintain a secondary trading market in the APS outside of Auctions. They have no obligation to do so, however, and there can be no assurance that a secondary market for the APS will develop or, if it does develop, that it will provide holders with liquidity of investment. The APS will not be registered on any stock exchange or on the National Association of Securities Dealers Automated Quotations system. RATING AGENCY GUIDELINES The Fund intends that, so long as shares of any series of APS are Outstanding, the composition of its portfolio will reflect guidelines established by Moody's and S&P in connection with the Fund's receipt on the Date of Original Issue of the shares of each series of APS of ratings of "Aaa" from Moody's and AAA from S&P. Moody's and S&P, nationally recognized independent rating agencies, issue ratings for various securities reflecting their perceived creditworthiness of such securities. The Fund will pay certain fees to Moody's and S&P for rating shares of the APS. The guidelines have been developed by Moody's and S&P in connection with other issuances of asset-backed and similar securities, including debt obligations and adjustable rate preferred stock, generally on a case-by-case basis through discussions with the issuers of these securities. The guidelines are designed to ensure that assets underlying outstanding debt or preferred stock will be sufficiently varied and will be of sufficient quality and amount to justify investment grade S-27 ratings. The guidelines do not have the force of law, but have been adopted by the Fund in order to satisfy current requirements necessary for Moody's and S&P to issue the above-described ratings for shares of each series of APS, which ratings are generally relied upon by institutional investors in purchasing such securities. In the context of a closed-end investment company such as the Fund, therefore, the guidelines provide a set of tests for portfolio composition and asset coverage that supplement (and in some cases are more restrictive than) the applicable requirements under the 1940 Act. A rating agency's guidelines will apply to shares of any series of APS only so long as such rating agency is rating such shares. The Fund intends to maintain a Discounted Value for its portfolio at least equal to the APS Basic Maintenance Amount and, in addition, so long as S&P is rating the shares of any series of APS, the Fund intends to maintain a Minimum Liquidity Level. Moody's and S&P have each established separate guidelines for determining Discounted Value. To the extent any particular portfolio holding does not satisfy the applicable rating agency's guidelines, all or a portion of such holding's value will not be included in the calculation of Discounted Value (as defined by such rating agency). The Moody's and S&P guidelines do not impose any limitations on the percentage of Fund assets that may be invested in holdings not eligible for inclusion in the calculation of the Discounted Value of the Fund's portfolio. The amount of such assets included in the portfolio at any time may vary depending upon the rating, diversification and other characteristics of the Eligible Assets included in the portfolio, although it is not anticipated that in the normal course of business the value of such assets would exceed 20% of the Fund's total assets. In managing the Fund's portfolio, the Adviser will not alter the composition of the Fund's portfolio if, in the reasonable belief of the Adviser, the effect of any such alteration would be to cause the Fund to have Eligible Assets with an aggregate Discounted Value, as of the immediately preceding Valuation Date, less than the APS Basic Maintenance Amount as of such Valuation Date; provided, however, that in the event that, as of the immediately preceding Valuation Date, the aggregate Discounted Value of the Fund's Eligible Assets exceeded the APS Basic Maintenance Amount by five percent or less, the Adviser will not alter the composition of the Fund's portfolio in a manner reasonably expected to reduce the aggregate Discounted Value of the Fund's Eligible Assets unless the Fund shall have confirmed that, after giving effect to such alteration, the aggregate Discounted Value of the Fund's Eligible Assets would exceed the APS Basic Maintenance Amount. Upon any failure to maintain the required Discounted Value, the Fund will seek to alter the composition of its portfolio to reattain the APS Basic Maintenance Amount on or prior to the APS Basic Maintenance Cure Date, thereby incurring additional transaction costs and possible losses and/or gains on dispositions of portfolio securities. To the extent any such failure is not cured in a timely manner, shares of each series of APS will be subject to redemption if either Moody's or S&P is rating such shares. The Fund may, but is not required to, adopt any modifications to these guidelines that may hereafter be established by Moody's and S&P. Failure to adopt any such modifications, however, may result in a change in the ratings described above or a withdrawal of ratings altogether. In addition, any rating agency providing a rating for the shares of any series of APS may, at any time, change or withdraw any such rating. As set forth in the APS Provisions, the Board of Trustees may, without Shareholder approval, S-28 modify certain definitions or policies which have been adopted by the Fund pursuant to the rating agency guidelines, provided the Board of Trustees has obtained written confirmation from Moody's and S&P, as appropriate, that any such change would not impair the ratings then assigned by Moody's and S&P to any series of APS. A rating agency's guidelines will apply to shares of any series of APS only so long as such rating agency is rating such shares. The ratings on any series of the APS are not recommendations to purchase, hold or sell shares of any series of APS, inasmuch as the ratings do not comment as to market price or suitability for a particular investor nor do the rating agency guidelines described above address the likelihood that a holder of shares of any series of APS will be able to sell such shares in an Auction. The ratings are based on current information furnished to Moody's and S&P by the Fund and the Adviser, and information obtained from other sources. The ratings may be changed, suspended or withdrawn as a result of changes in, or the unavailability of, such information. OTHER INFORMATION CUSTODY OF ASSETS All securities owned by the Fund and all cash, including proceeds from the sale of securities in the Fund's investment portfolio, are held by State Street Bank and Trust Company, 225 West Franklin Street, Boston, Massachusetts 02110, as custodian. The custodian also provides accounting services to the Fund. PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD The Fund's Proxy Voting Policy and Procedures are included as Appendix E to this Reorganization Statement of Additional Information. Information on how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon request, by calling (800) 341-2929 or by visiting our web site at www.vankampen.com. This information is also available on the SEC's web site at http://www.sec.gov. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM An independent registered public accounting firm for the Fund performs an annual audit of the Fund's financial statements. The Fund's Board of Trustees has engaged Deloitte & Touche LLP, located at Two Prudential Plaza, 180 North Stetson, Chicago, Illinois 60601-6710, to be the Fund's independent registered public accounting firm. FINANCIAL STATEMENTS Incorporated herein by reference and included in their respective entireties are (i) the audited financial statements of the Acquiring Fund for the fiscal year ended October 31, 2004, as included in Appendix C hereto and (ii) the audited financial statements of the Target Fund for fiscal year ended October 31, 2004, as included in Appendix D hereto. S-29 PRO FORMA FINANCIAL STATEMENTS Pro forma financial statements have not been prepared because, as of February 28, 2005, the net asset value of the Target Fund did not exceed ten percent of the Acquiring Fund's net asset value, which is the threshold under applicable rules for which pro forma financial statements is required. S-30 APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION APPENDIX A FORM OF AGREEMENT AND PLAN OF REORGANIZATION In order to consummate the Reorganization and in consideration of the promises and the covenants and agreements hereinafter set forth, and intending to be legally bound, Van Kampen XXXXXX, a registered closed-end investment company, File No. 811-XXXX (the "Target Fund") and Van Kampen XXXXXX (the "Acquiring Fund"), a registered closed-end investment company, File No. 811-XXXX, each hereby agree as follows: 1. Representations and Warranties of the Acquiring Fund. The Acquiring Fund represents and warrants to, and agrees with, the Target Fund that: (a) The Acquiring Fund is a trust, with transferable shares, duly organized, validly existing and in good standing in conformity with the laws of its jurisdiction of organization, and has the power to own all of its assets and to carry out this Agreement. The Acquiring Fund has all necessary federal, state and local authorizations to carry on its business as it is now being conducted and to carry out this Agreement. (b) The Acquiring Fund is duly registered under the Investment Company Act of 1940, as amended (the "1940 Act") as a [non-]diversified, closed-end management investment company and such registration has not been revoked or rescinded and is in full force and effect. The Acquiring Fund has elected and qualified for the special tax treatment afforded regulated investment companies ("RICs") under Section 851 of the Internal Revenue Code (the "Code") at all times since its inception and intends to continue to so qualify until consummation of the reorganization contemplated hereby (the "Reorganization") and thereafter. (c) The Target Fund has been furnished with the Acquiring Fund's Annual Report to Shareholders for the fiscal year ended XXXX, 2004, and the audited financial statements appearing therein, having been audited by Deloitte & Touche LLP, independent registered public accounting firm, fairly present the financial position of the Acquiring Fund as of the respective dates indicated, in conformity with accounting principles generally accepted in the United States applied on a consistent basis. (d) An unaudited statement of assets, liabilities and capital of the Acquiring Fund and an unaudited schedule of investments of the Acquiring Fund, each as of the Valuation Time (as defined in Section 5(d) of this Agreement), will be furnished to the Target Fund, at or prior to the Closing Date (as defined in Section 7(a) herein), for the purpose of determining the number of Acquiring Fund Common Shares and Acquiring Fund APS to be issued pursuant to Section 6 of this Agreement; each will fairly present the financial position of the Acquiring Fund as of the Valuation Time in conformity with generally accepted accounting principles applied on a consistent basis. (e) The Acquiring Fund has full power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement has been duly authorized by all necessary action of its Board of Trustees, and this Agreement constitutes a valid and binding contract enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar A-1 laws relating to or affecting creditors' rights generally and court decisions with respect thereto. (f) There are no material legal, administrative or other proceedings pending or, to the knowledge of the Acquiring Fund, threatened against it which assert liability on the part of the Acquiring Fund or which materially affect its financial condition or its ability to consummate the Reorganization. The Acquiring Fund is not charged with or, to the best of its knowledge, threatened with any violation or investigation of any possible violation of any provisions of any federal, state or local law or regulation or administrative ruling relating to any aspect of its business. (g) The Acquiring Fund is not obligated under any provision of its Declaration of Trust, as amended, or its by-laws, as amended, and is not a party to any contract or other commitment or obligation, and is not subject to any order or decree which would be violated by its execution of or performance under this Agreement, except insofar as the Funds have mutually agreed to amend such contract or other commitment or obligation to cure any potential violation as a condition precedent to the Reorganization. (h) There are no material contracts outstanding to which the Acquiring Fund is a party that have not been disclosed in the N-14 Registration Statement (as defined in subsection (k) below) or that will not otherwise be disclosed to the Target Fund prior to the Valuation Time. (i) The Acquiring Fund has no known liabilities of a material amount, contingent or otherwise, other than those shown on its statements of assets, liabilities and capital referred to in subsection (c) above, those incurred in the ordinary course of its business as an investment company, and those incurred in connection with the Reorganization. As of the Valuation Time, the Acquiring Fund will advise the Target Fund in writing of all known liabilities, contingent or otherwise, whether or not incurred in the ordinary course of business, existing or accrued as of such time, except to the extent disclosed in the financial statements referred to in subsection (c) above. (j) No consent, approval, authorization or order of any court or government authority is required for the consummation by the Acquiring Fund of the Reorganization, except such as may be required under the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act") and the 1940 Act or state securities laws (which term as used herein shall include the laws of the District of Columbia and Puerto Rico). (k) The registration statement filed by the Acquiring Fund on Form N-14, which includes the proxy statement of the Target Fund and the Acquiring Fund with respect to the transactions contemplated herein (the "Joint Proxy Statement/Prospectus"), and any supplement or amendment thereto or to the documents therein (as amended or supplemented, the "N-14 Registration Statement"), on its effective date, at the time of the shareholders' meetings referred to in Section 8(a) of this Agreement and at the Closing Date, insofar as it relates to the Acquiring Fund, (i) complied or will comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) did not or will not contain any A-2 untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Joint Proxy Statement/Prospectus included therein did not or will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection only shall apply to statements in or omissions from the N-14 Registration Statement made in reliance upon and in conformity with information furnished by the Acquiring Fund for use in the N-14 Registration Statement. (l) The Acquiring Fund is authorized to issue an unlimited number of common shares of beneficial interest, par value $.01 per share (the "Acquiring Fund Common Shares"), and XXXX preferred shares of beneficial interest, par value $.01 per share. The Board of Trustees of the Acquiring Fund has designated XXXX preferred shares as Auction Preferred Shares ("Acquiring Fund APS"). Each outstanding Acquiring Fund Common Share and each Acquiring Fund APS of the Acquiring Fund is fully paid and, except as provided in Section 5.1 of the Acquiring Fund's Declaration of Trust, nonassessable, and has full voting rights. (m) The Acquiring Fund Common Shares and the Acquiring Fund APS to be issued to the Target Fund pursuant to this Agreement will have been duly authorized and, when issued and delivered pursuant to this Agreement, will be legally and validly issued and will be fully paid and, except as provided in Section 5.1 of the Acquiring Fund's Declaration of Trust, nonassessable and will have full voting rights, and no shareholder of the Acquiring Fund will have any preemptive right of subscription or purchase in respect thereof. (n) At or prior to the Closing Date, the Acquiring Fund Common Shares to be transferred to the Target Fund for distribution to the shareholders of the Target Fund on the Closing Date will be duly qualified for offering to the public in all states of the United States in which the sale of shares of the Funds presently are qualified, and there will be a sufficient number of such shares registered under the 1933 Act and, as may be necessary, with each pertinent state securities commission to permit the transfers contemplated by this Agreement to be consummated. (o) At or prior to the Closing Date, the Acquiring Fund APS to be transferred to the Target Fund on the Closing Date will be duly qualified for offering to the public in all states of the United States in which the sale of APS of the Target Fund presently are qualified, and there are a sufficient number of Acquiring Fund APS registered under the 1933 Act and with each pertinent state securities commission to permit the transfers contemplated by this Agreement to be consummated. (p) At or prior to the Closing Date, the Acquiring Fund will have obtained any and all regulatory, trustee and shareholder approvals necessary to issue the Acquiring Fund Common Shares and the Acquiring Fund APS to the Target Fund. (q) The Acquiring Fund has filed, or intends to file, or has obtained extensions to file, all federal, state and local tax returns which are required to be filed by it, and has paid or has obtained extensions to pay, all federal, state and local taxes shown on said returns to be due and owing and all assessments received by it, up to and including the taxable year in which the Closing Date occurs. All tax liabilities of the Acquiring Fund have been adequately provided for on its books, and no tax deficiency or liability of the Acquiring Fund has been asserted and no question with respect thereto has been raised by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid, up to and including the taxable year in which the Closing Date occurs. (r) The Acquiring Fund has elected to qualify and has qualified as a RIC as of and since its inception; has been a RIC under the Code at all times since the end of its first taxable year when it so qualified; qualifies and will continue to qualify as a RIC under the Code; and has satisfied the distribution requirements imposed by the Code for each of its taxable years. 2. Representations and Warranties of the Target Fund. The Target Fund represents and warrants to, and agrees with, the Acquiring Fund that: (a) The Target Fund is a trust, with transferable shares, duly organized, validly existing and in good standing in conformity with the laws of the jurisdiction of its organization, and has the power to own all of its assets and to carry out this Agreement. The Target Fund has all necessary federal, state and local authorizations to carry on its business as it is now being conducted and to carry out this Agreement. A-3 (b) The Target Fund is duly registered under the 1940 Act as a [non-]diversified, closed-end management investment company, and such registration has not been revoked or rescinded and is in full force and effect. The Target Fund has elected and qualified for the special tax treatment afforded RICs under Section 851 of the Code at all times since its inception, and intends to continue to so qualify through its taxable year ending upon liquidation. (c) As used in this Agreement, the term "Target Fund Investments" shall mean (i) the investments of the Target Fund shown on the schedule of its investments as of the Valuation Time furnished to the Acquiring Fund; and (ii) all other assets owned by the Target Fund or liabilities incurred as of the Valuation Time. (d) The Target Fund has full power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement has been duly authorized by all necessary action of its Board of Trustees and this Agreement constitutes a valid and binding contract enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws relating to or affecting creditors' rights generally and court decisions with respect thereto. (e) The Acquiring Fund has been furnished with the Target Fund's Annual Report to Shareholders for the fiscal year ended XXXX, 2004, and the audited financial statements appearing therein, having been audited by Deloitte & Touche LLP, independent registered public accounting firm, fairly present the financial position of the Target Fund as of the respective dates indicated, in conformity with accounting principles generally accepted in the United States applied on a consistent basis. (f) An unaudited statement of assets, liabilities and capital of the Target Fund and an unaudited schedule of investments of the Target Fund, each as of the Valuation Time, will be furnished to the Acquiring Fund at or prior to the Closing Date for the purpose of determining the number of shares of Acquiring Fund Common Shares and Acquiring Fund APS to be issued to the Target Fund pursuant to Section 3 of this Agreement; each will fairly present the financial position of the Target Fund as of the Valuation Time in conformity with generally accepted accounting principles applied on a consistent basis. (g) There are no material legal, administrative or other proceedings pending or, to the knowledge of the Target Fund, threatened against it which assert liability on the part of the Target Fund or which materially affect its financial condition or its ability to consummate the Reorganization. The Target Fund is not charged with or, to the best of its knowledge, threatened with any violation or investigation of any possible violation of any provisions of any federal, state or local law or regulation or administrative ruling relating to any aspect of its business. (h) There are no material contracts outstanding to which the Target Fund is a party that have not been disclosed in the N-14 Registration Statement or will not otherwise be disclosed to the Acquiring Fund prior to the Valuation Time. (i) The Target Fund is not obligated under any provision of its Declaration of Trust, as amended, or its by-laws, as amended, or a party to any contract or other commitment or obligation, and is not subject to any order or decree which would be violated by its execution of or performance under this Agreement, except insofar as the Funds have A-4 mutually agreed to amend such contract or other commitment or obligation to cure any potential violation as a condition precedent to the Reorganization. (j) The Target Fund has no known liabilities of a material amount, contingent or otherwise, other than those shown on its statements of assets, liabilities and capital referred to above, those incurred in the ordinary course of its business as an investment company and those incurred in connection with the Reorganization. As of the Valuation Time, the Target Fund will advise the Acquiring Fund in writing of all known liabilities, contingent or otherwise, whether or not incurred in the ordinary course of business, existing or accrued as of such time. (k) The Target Fund has filed, or intends to file, or has obtained extensions to file, all federal, state and local tax returns which are required to be filed by it, and has paid or has obtained extensions to pay, all federal, state and local taxes shown on said returns to be due and owing and all assessments received by it, up to and including the taxable year in which the Closing Date occurs. All tax liabilities of the Target Fund have been adequately provided for on its books, and no tax deficiency or liability of the Target Fund has been asserted and no question with respect thereto has been raised by the Internal Revenue Service or by any state or local tax authority for taxes in excess of those already paid, up to and including the taxable year in which the Closing Date occurs. (l) At both the Valuation Time and the Closing Date, the Target Fund will have full right, power and authority to sell, assign, transfer and deliver the Target Fund Investments. At the Closing Date, subject only to the obligation to deliver the Target Fund Investments as contemplated by this Agreement, the Target Fund will have good and marketable title to all of the Target Fund Investments, and the Acquiring Fund will acquire all of the Target Fund Investments free and clear of any encumbrances, liens or security interests and without any restrictions upon the transfer thereof (except those imposed by the federal or state securities laws and those imperfections of title or encumbrances as do not materially detract from the value or use of the Target Fund Investments or materially affect title thereto). (m) No consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Target Fund of the Reorganization, except such as may be required under the 1933 Act, the 1934 Act, the 1940 Act or state securities laws. (n) The N-14 Registration Statement, on its effective date, at the time of the shareholders' meetings called to vote on this Agreement and on the Closing Date, insofar as it relates to the Target Fund (i) complied or will comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder, and (ii) did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Joint Proxy Statement/Prospectus included therein did not or will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall apply only to statements in or omissions from the N-14 Registration Statement made in reliance upon and in conformity with information furnished by the Target Fund for use in the N-14 Registration Statement. A-5 (o) The Target Fund is authorized to issue an unlimited number of common shares of beneficial interest, par value $.01 per share (the "Target Fund Common Shares"), and XXXX preferred shares of beneficial interest, par value $.01 per share. The Board of Trustees of the Acquiring Fund has designated XXXX preferred shares as Target Fund Preferred Shares (the "Target Fund Preferred Shares"). Each outstanding Target Fund Common Share and each of the outstanding Target Fund Preferred Shares is fully paid and, except as provided in Section 5.1 of the Target Fund's Declaration of Trust, nonassessable, and has full voting rights. (p) All of the issued and outstanding Target Fund Common Shares and Target Fund Preferred Shares were offered for sale and sold in conformity with all applicable federal and state securities laws. (q) The books and records of the Target Fund made available to the Acquiring Fund and/or its counsel are substantially true and correct and contain no material misstatements or omissions with respect to the operations of the Target Fund. (r) The Target Fund will not sell or otherwise dispose of any of the Acquiring Fund Common Shares or Acquiring Fund APS to be received in the Reorganization, except in distribution to the shareholders of the Target Fund, as provided in Section 3 of this Agreement. (s) The Target Fund has elected to qualify and has qualified as a "RIC" under the Code as of and since its inception; has been a RIC under the Code at all times since the end of its first taxable year when it so qualified; qualifies and will continue to qualify as a RIC under the Code for its taxable year ending upon its liquidation; and has satisfied the distribution requirements imposed by the Code for each of its taxable years. 3. The Reorganization. (a) Subject to receiving the requisite approvals of the shareholders of the Target Fund, and to the other terms and conditions contained herein, (i) the Target Fund agrees to convey, transfer and deliver to the Acquiring Fund and the Acquiring Fund agrees to acquire from the Target Fund, on the Closing Date, all of the Target Fund Investments (including interest accrued as of the Valuation Time on debt instruments), and assume substantially all of the liabilities of the Target Fund, in exchange for that number of Target Fund Common Shares and Target Fund Preferred Shares provided in Section 4 of this Agreement. Pursuant to this Agreement, as soon as practicable after the Closing Date, the Target Fund will distribute all Acquiring Fund Common Shares and Acquiring Fund APS received by it to its shareholders in exchange for their Target Fund Common Shares and Target Fund Preferred Shares. Such distributions shall be accomplished by the opening of shareholder accounts on the share ledger records of the Acquiring Fund in the amounts due the shareholders of the Target Fund based on their respective holdings in the Target Fund as of the Valuation Time. (b) If it is determined that the portfolios of the Target Fund and the Acquiring Fund, when aggregated, would contain investments exceeding certain percentage limitations imposed upon the Acquiring Fund with respect to such investments, the Target Fund, if requested by the Acquiring Fund, will dispose of a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date. Notwithstanding the foregoing, (a) nothing herein will require the Target Fund to dispose of any portfolios, securities or other investments, if, in the reasonable judgment of the Target Fund's trustees or investment adviser, such disposition would adversely affect the tax-free nature of the Reorganization for federal income tax purposes or would otherwise not be in the best interests of the Target Fund, and (b) nothing will permit the Target Fund to dispose of any portfolio securities or other investments if, in the reasonable judgment of the Acquiring Fund's trustees or investment adviser, such disposition would adversely affect the tax-free nature of the Reorganization for federal income tax purposes or would otherwise not be in the best interests of the Acquiring Fund. (c) Prior to the Closing Date, the Target Fund shall declare a dividend or dividends which, together with all such previous dividends, shall have the effect of distributing to their respective shareholders all of their respective net investment company taxable income to and including the Closing Date, if any (computed without regard to any deduction for dividends paid), and all of its net capital gain, if any, realized to and including the Closing Date. In this regard and in connection with the Reorganization, the last dividend period for the Target Fund Preferred Shares prior to the Closing Date may be shorter than the dividend period for such Target Fund Preferred Shares determined as set forth in the applicable Certificate of Vote pertaining to such Target Fund Preferred Shares. (d) The Target Fund will pay or cause to be paid to the Acquiring Fund any interest the Target Fund receives on or after the Closing Date with respect to any of the Target Fund Investments transferred to the Acquiring Fund hereunder. A-6 (e) The Valuation Time shall be 4:00 p.m., Eastern time, on XXXX, 2005, or such earlier or later day and time as may be mutually agreed upon in writing (the "Valuation Time"). (f) Recourse for liabilities assumed from the Target Fund by the Acquiring Fund in the Reorganization will be limited to the net assets acquired by the Acquiring Fund. The known liabilities of the Target Fund, as of the Valuation Time, shall be confirmed to the Acquiring Fund pursuant to Section 2(j) of this Agreement. (g) The Target Fund will be terminated following the Closing Date by terminating its registration under the 1940 Act and its organization under Massachusetts law and will withdraw its authority to do business in any state where it is required to do so. (h) The Acquiring Fund will file with the Secretary of State of The Commonwealth of Massachusetts, as required, any amendment to its Certificate of Vote establishing the powers, rights and preferences of the Acquiring Fund APS prior to the closing of the Reorganization. 4. Issuance and Valuation of Acquiring Fund Common Shares and Acquiring Fund APS in the Reorganization. Acquiring Fund Common Shares and Acquiring Fund APS of an aggregate net asset value or aggregate liquidation preference, as the case may be, equal to the value of the assets of the Target Fund acquired in the Reorganization determined as hereinafter provided, reduced by the amount of liabilities of the Target Fund assumed by the Acquiring Fund in the Reorganization, shall be issued by the Acquiring Fund to the Target Fund in exchange for such assets of the Target Fund. The Acquiring Fund will issue to the Target Fund (i) a number of Acquiring Fund Common Shares, the aggregate net asset value of which will equal the aggregate net asset value of the Target Fund Common Shares, determined as set forth below, and (ii) a number of Acquiring Fund APS, the aggregate liquidation preference and value of which will equal the aggregate liquidation preference and value of the Target Fund Preferred Shares, determined as set forth below. The net asset value of each of the Funds and the liquidation preference and value of each of the Target Fund Preferred Shares and the Acquiring Fund APS shall be determined as of the Valuation Time in accordance with the regular procedures of the investment adviser, and no formula will be used to adjust the net asset value so determined of any Fund to take into account differences in realized and unrealized gains and losses. Values in all cases shall be determined as of the Valuation Time. The value of the Target Fund Investments to be transferred to the Acquiring Fund shall be determined pursuant to the regular procedures of the investment adviser. Such valuation and determination shall be made by the Acquiring Fund in cooperation with the Target Fund and shall be confirmed in writing by the Acquiring Fund to the Target Fund. The net asset value per share of the Acquiring Fund Common Shares and the liquidation preference and value per share of the Acquiring Fund APS shall be determined in accordance with such procedures and the Acquiring Fund shall certify the computations involved. For purposes of determining the net asset value of each of a Target Fund Common Share and an Acquiring Fund Common Share, the value of the securities held by the applicable Fund plus any cash or other assets (including interest accrued but not yet received) minus all liabilities (including accrued expenses) and the aggregate liquidation value of the outstanding shares of Target Fund Preferred Shares or Acquiring Fund APS, as the case may be, is divided by the total number of Target Fund Common Shares or Acquiring Fund Common Shares, as the case may be, outstanding at such time. A-7 The Acquiring Fund shall issue to the Target Fund separate certificates or share deposit receipts for the Acquiring Fund Common Shares and the Acquiring Fund APS, each registered in the name of the Target Fund. The Target Fund shall then distribute the Acquiring Fund Common Shares and the Acquiring Fund APS to the holders of Target Fund Common Shares and Target Fund Preferred Shares by redelivering the certificates or share deposit receipts evidencing ownership of (i) the Acquiring Fund Common Shares to EquiServe Trust Company, N.A., as the transfer agent and registrar for the Acquiring Fund Common Shares, for distribution to the holders of Target Fund Common Shares on the basis of such holder's proportionate interest in the aggregate net asset value of the Target Fund Common Shares and (ii) the Acquiring Fund APS to Deutsche Bank Trust Company Americas, as the transfer agent and registrar for the Acquiring Fund APS, for distribution to the holders of Target Fund Preferred Shares on the basis of such holder's proportionate interest in the aggregate liquidation preference and value of the Target Fund Preferred Shares. With respect to any Target Fund shareholder holding certificates evidencing ownership of Target Fund Common Shares as of the Closing Date, and subject to the Acquiring Fund being informed thereof in writing by the Target Fund, the Acquiring Fund will not permit such shareholder to receive new certificates evidencing ownership of the Acquiring Fund Common Shares or Acquiring Fund APS, exchange Acquiring Fund Common Shares or Acquiring Fund APS credited to such shareholder's account for shares of other investment companies managed by the Adviser or any of its affiliates, or pledge or redeem such Acquiring Fund Common Shares or Acquiring Fund APS, in any case, until notified by the Target Fund or its agent that such shareholder has surrendered his or her outstanding certificates evidencing ownership of Target Fund Common Shares or Target Fund Preferred Shares or, in the event of lost certificates, posted adequate bond. The Target Fund, at its own expense, will request its shareholders to surrender their outstanding certificates evidencing ownership of Target Fund Common Shares or Target Fund Preferred Shares, as the case may be, or post adequate bond therefor. No fractional shares of Acquiring Fund Common Shares will be issued to holders of Target Fund Common Shares unless such shares are held in a Dividend Reinvestment Plan account. In lieu thereof, the Acquiring Fund's transfer agent, EquiServe Trust Company, N.A., will aggregate all fractional Acquiring Fund Common Shares to be issued in connection with the Reorganization (other than those issued to a Dividend Reinvestment Plan account) and sell the resulting full shares on the New York Stock Exchange at the current market price for Acquiring Fund Common Shares for the account of all holders of such fractional interests, and each such holder will receive such holder's pro rata share of the proceeds of such sale upon surrender of such holder's certificates representing Acquiring Fund Common Shares. 5. Payment of Expenses. (a) With respect to expenses incurred in connection with the Reorganization, the Target Fund and the Acquiring Fund will share, in proportion to their respective projected declines in total operating expenses, all expenses incurred in connection with the Reorganization, including, but not limited to, all costs related to the preparation and distribution of materials distributed to each Fund's Board of Trustees; expenses incurred in connection with the preparation of the Agreement and Plan of Reorganization and a registration statement on Form N-14; SEC and state securities commission filing fees and legal and audit fees in connection with the Reorganization; costs of printing and distributing the Joint Proxy Statement/ Prospectus; legal fees incurred preparing each Fund's board materials, attending each Fund's board meetings and preparing the minutes; auditing fees associated with each Fund's financial statements; stock exchange fees, rating agency fees, portfolio transfer taxes (if any) and any similar expenses incurred in connection with the Reorganization. (b) If for any reason the Reorganization is not consummated, no party shall be liable to any other party for any damages resulting therefrom, including, without limitation, consequential damages, and the investment adviser shall pay all expenses incurred by each Fund in connection with the Reorganization. A-8 6. Covenants of the Funds. (a) Each Fund covenants to operate its business as presently conducted between the date hereof and the Closing Date. (b) The Target Fund agrees that following the consummation of the Reorganization, it will terminate in accordance with the laws of The Commonwealth of Massachusetts and any other applicable law, it will not make any distributions of any Acquiring Fund Common Shares or Acquiring Fund APS other than to its respective shareholders and without first paying or adequately providing for the payment of all of its respective liabilities not assumed by the Acquiring Fund, if any, and on and after the Closing Date it shall not conduct any business except in connection with its termination. (c) The Target Fund undertakes that if the Reorganization is consummated, it will file an application pursuant to Section 8(f) of the 1940 Act for an order declaring that the Target Fund has ceased to be a registered investment company. (d) The Acquiring Fund will file the N-14 Registration Statement with the Securities and Exchange Commission (the "Commission") and will use its best efforts to provide that the N-14 Registration Statement becomes effective as promptly as practicable. Each Fund agrees to cooperate fully with the other, and each will furnish to the other the information relating to itself to be set forth in the N-14 Registration Statement as required by the 1933 Act, the 1934 Act the 1940 Act, and the rules and regulations thereunder and the state securities laws. (e) The Acquiring Fund has no plan or intention to sell or otherwise dispose of the Target Fund Investments, except for dispositions made in the ordinary course of business. (f) Each of the Funds agrees that by the Closing Date all of its federal and other tax returns and reports required to be filed on or before such date shall have been filed and all taxes shown as due on said returns either have been paid or adequate liability reserves have been provided for the payment of such taxes. The intention of the parties is that the transaction contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. Neither the Acquiring Fund nor the Target Fund shall take any action or cause any action to be taken (including, without limitation, the filing of any tax return) that is inconsistent with such treatment or results in the failure of the transaction to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. At or prior to the Closing Date, the Acquiring Fund and the Target Fund will take such action, or cause such action to be taken, as is reasonably necessary to enable Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden"), special counsel to the Funds, to render the tax opinion required herein (including, without limitation, each party's execution of representations reasonably requested by and addressed to Skadden. In connection with this covenant, the Funds agree to cooperate with each other in filing any tax return, amended return or claim for refund, determining a liability for taxes or a right to a refund of taxes or participating in or conducting any audit or other proceeding in respect of taxes. The Acquiring Fund agrees to retain for a period of ten (10) years following the Closing Date all returns, schedules and work papers and all material records or other documents relating to tax matters of the Target Fund for each of such Fund's taxable period first ending after the Closing Date and for all prior taxable periods. After the Closing Date, the Target Fund shall prepare, or cause its agents to prepare, any federal, state or local tax returns required to be filed by such fund with respect to its final taxable year ending with its complete liquidation and for any prior periods or taxable years and further shall cause such tax returns to be duly filed with the appropriate taxing authorities. Notwithstanding the aforementioned provisions of this subsection, any expenses incurred by the Target Fund (other than for payment of taxes) in connection with the preparation and filing of said tax returns after the Closing Date shall be borne by such Fund to the extent such expenses have been accrued by such Fund in the ordinary course without regard to the Reorganization; any excess expenses shall be borne by the investment adviser or an affiliate thereof. A-9 (g) The Target Fund agrees to mail to its shareholders of record entitled to vote at the special meeting of shareholders at which action is to be considered regarding this Agreement, in sufficient time to comply with requirements as to notice thereof, a combined proxy statement and prospectus which complies in all material respects with the applicable provisions of Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act, and the rules and regulations, respectively, thereunder. (h) Following the consummation of the Reorganization, the Acquiring Fund will continue its business as a diversified, closed-end management investment company registered under the 1940 Act. 7. Closing Date. (a) Delivery of the assets of the Target Fund to be transferred, together with any other Target Fund Investments, and the Acquiring Fund Common Shares and Acquiring Fund APS to be issued as provided in this Agreement, shall be made at such place and time as the Funds shall mutually agree on the next full business day following the Valuation Time, or at such other time and date agreed to by the Funds, the date and time upon which such delivery is to take place being referred to herein as the "Closing Date." To the extent that any Target Fund Investments, for any reason, are not transferable on the Closing Date, the Target Fund shall cause such Target Fund Investments to be transferred to the Acquiring Fund's account with its custodian at the earliest practicable date thereafter. (b) The Target Fund will deliver to the Acquiring Fund on the Closing Date confirmation or other adequate evidence as to the tax basis of the Target Fund Investments delivered to the Acquiring Fund hereunder. (c) As soon as practicable after the close of business on the Closing Date, the Target Fund shall deliver to the Acquiring Fund a list of the names and addresses of all of the shareholders of record of the Target Fund on the Closing Date and the number of Target Fund Common Shares and Target Fund Preferred Shares owned by each such shareholder, certified to the best of its knowledge and belief by the transfer agent for the Target Fund or by its President. 8. Conditions of the Target Fund. The obligations of the Target Fund hereunder shall be subject to the following conditions: (a) That this Agreement shall have been adopted, and the Reorganization shall have been approved, by the Board of Trustees of the Target Fund and by the affirmative vote of the holders of a majority of each of the outstanding Target Fund Common Shares and Target Fund Preferred Shares, each voting separately as a class; and that the Acquiring Fund shall have delivered to the Target Fund a copy of the resolution approving this Agreement adopted by the Board of Trustees of the Acquiring Fund, and a certificate setting forth the vote of holders of Acquiring Fund Common Shares approving the issuance of additional Acquiring Fund Common Shares, each certified by its Secretary. (b) That the Target Fund shall have received from the Acquiring Fund a statement of assets, liabilities and capital, with values determined as provided in Section 4 of this Agreement, together with a schedule of such Fund's investments, all as of the Valuation Time, certified on the Target Fund's behalf by its President (or any Vice President) or its Treasurer, and a certificate signed by the Fund's President (or any Vice President) and its Treasurer, dated as of the Closing Date, certifying that as of the Valuation Time and as of the Closing Date there has been no material adverse change in the financial position of the Target Fund since the date of such Fund's most recent Annual or Semi-Annual Report, A-10 as applicable, other than changes in its portfolio securities since that date or changes in the market value of its portfolio securities. (c) That the Acquiring Fund shall have furnished to the Target Fund a certificate signed by the Acquiring Fund's President (or any Vice President) or its Treasurer, dated as of the Closing Date, certifying that, as of the Valuation Time and as of the Closing Date, all representations and warranties of the Acquiring Fund made in this Agreement are true and correct in all material respects with the same effect as if made at and as of such dates, and that the Acquiring Fund has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied at or prior to each of such dates. (d) That there shall not be any material litigation pending with respect to the matters contemplated by this Agreement. (e) The Target Fund shall have received the opinion(s) of Skadden, counsel for the Acquiring Fund, dated as of the Closing Date, addressed to the Target Fund substantially in the form and to the effect that: (i) the Acquiring Fund is duly formed and validly existing under the laws of its state of organization; (ii) the Acquiring Fund is registered as a closed-end, management investment company under the 1940 Act; (iii) this Agreement and the Reorganization provided for herein and the execution of this Agreement have been duly authorized and approved by all requisite action of the Acquiring Fund, and this Agreement has been duly executed and delivered by the Acquiring Fund and (assuming this Agreement is a valid and binding obligation of the other party hereto) is a valid and binding obligation of the Acquiring Fund; (iv) neither the execution or delivery by the Acquiring Fund of this Agreement nor the consummation by the Acquiring Fund of the transactions contemplated hereby violate any provision of any statute or any published regulation or any judgment or order disclosed to counsel by the Acquiring Fund as being applicable to the Acquiring Fund; (v) the Acquiring Fund Common Shares and Acquiring Fund APS have each been duly authorized and, upon issuance thereof in accordance with this Agreement, each will be validly issued, fully paid and, except as provided in Section 5.1 of the Acquiring Fund's Declaration of Trust, nonassessable; and (vi) to their knowledge and subject to the qualifications set forth below, the execution and delivery by the Acquiring Fund of this Agreement and the consummation of the transactions herein contemplated do not require, under the laws of its state of organization or any state in which the Acquiring Fund is qualified to do business or the federal laws of the United States, the consent, approval, authorization, registration, qualification or order of, or filing with, any court or governmental agency or body (except such as have been obtained). Counsel need express no opinion, however, as to any such consent, approval, authorization, registration, qualification, order or filing which may be required as a result of the involvement of other parties to this Agreement in the transactions herein contemplated because of their legal or regulatory status or because of any other facts specifically pertaining to them; A-11 (f) The Target Fund shall have obtained an opinion from Skadden, Arps, dated as of the Closing Date, addressed to the Target Fund, that the consummation of the transactions set forth in this Agreement comply with the requirements of a reorganization as described in Section 368(a) of the Internal Revenue Code. (g) That all proceedings taken by each of the Funds and its counsel in connection with the Reorganization and all documents incidental thereto shall be satisfactory in form and substance to the others. (h) That the N-14 Registration Statement shall have become effective under the 1933 Act, and no stop order suspending such effectiveness shall have been instituted or, to the knowledge of the Acquiring Fund, be contemplated by the SEC. 9. Acquiring Fund Conditions. The obligations of the Acquiring Fund hereunder shall be subject to the following conditions: (a) That this Agreement shall have been adopted, and the Reorganization shall have been approved, by the Board of Trustees of the Acquiring Fund and that the issuance of additional Acquiring Fund Common Shares shall have been approved by the affirmative vote of a majority of votes cast, where total votes cast represented over 50% of all securities entitled to vote; and the Target Fund shall have delivered to the Acquiring Fund a copy of the resolution approving this Agreement adopted by the Target Fund's Board of Trustees, and a certificate setting forth the vote of the holders of Target Fund Common Shares and Target Fund Preferred Shares obtained, each certified by its Secretary. (b) That the Target Fund shall have furnished to the Acquiring Fund a statement of its assets, liabilities and capital, with values determined as provided in Section 4 of this Agreement, together with a schedule of investments with their respective dates of acquisition and tax costs, all as of the Valuation Time, certified on such Fund's behalf by its President (or any Vice President) or its Treasurer, and a certificate signed by such Fund's President A-12 (or any Vice President) or its Treasurer, dated as of the Closing Date, certifying that as of the Valuation Time and as of the Closing Date there has been no material adverse change in the financial position of the Target Fund since the date of such Fund's most recent Annual Report or Semi-Annual Report, as applicable, other than changes in the Target Fund Investments since that date or changes in the market value of the Target Fund Investments. (c) That the Target Fund shall have furnished to the Acquiring Fund a certificate signed by such Fund's President (or any Vice President) or its Treasurer, dated the Closing Date, certifying that as of the Valuation Time and as of the Closing Date all representations and warranties of the Target Fund made in this Agreement are true and correct in all material respects with the same effect as if made at and as of such dates and the Target Fund has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied at or prior to such dates. (d) That there shall not be any material litigation pending with respect to the matters contemplated by this Agreement. (e) That the Acquiring Fund shall have received the opinion of Skadden, counsel for the Target Fund, dated as of the Closing Date, addressed to the Acquiring Fund, substantially in the form and to the effect that: (i) the Target Fund is duly formed and validly existing under the laws of its state of organization; (ii) the Target Fund is registered as a closed-end, management investment company under the 1940 Act; (iii) this Agreement and the Reorganization provided for herein and the execution of this Agreement have been duly authorized by all requisite action of the Target Fund, and this Agreement has been duly executed and delivered by the Target Fund and (assuming this Agreement is a valid and binding obligation of the other party hereto) is a valid and binding obligation of the Target Fund; (iv) neither the execution or delivery by the Target Fund of this Agreement nor the consummation by the Target Fund of the transactions contemplated hereby violate any provision of any statute, or any published regulation or any judgment or order disclosed to them by the Target Fund as being applicable to the Target Fund; and (v) to their knowledge and subject to the qualifications set forth below, the execution and delivery by the Target Fund of the Agreement and the consummation of the transactions herein contemplated do not require, under the laws of its state of organization or any state in which the Target Fund is qualified to do business, or the federal laws of the United States, the consent, approval, authorization, registration, qualification or order of, or filing with, any court or governmental agency or body (except such as have been obtained under the 1933 Act, 1934 Act, the 1940 Act or the rules and regulations thereunder). Counsel need express no opinion, however, as to any such consent, approval, authorization, registration, qualification, order or filing A-13 which may be required as a result of the involvement of other parties to this Agreement in the transactions herein contemplated because of their legal or regulatory status or because of any other facts specifically pertaining to them; (f) That the Acquiring Fund shall have obtained an opinion from Skadden, counsel for the Target Fund, dated as of the Closing Date, addressed to the Acquiring Fund, that the consummation of the transactions set forth in this Agreement comply with the requirements of a reorganization as described in Section 368(a) of the Code. (g) That the N-14 Registration Statement shall have become effective under the 1933 Act and no stop order suspending such effectiveness shall have been instituted or, to the knowledge of the Target Fund, be contemplated by the SEC. (h) That all proceedings taken by the Target Fund and its counsel in connection with the Reorganization and all documents incidental thereto shall be satisfactory in form and substance to the Acquiring Fund. (i) That prior to the Closing Date the Target Fund shall have declared a dividend or dividends which, together with all such previous dividends, shall have the effect of distributing to its shareholders all of its net investment company taxable income for the period to and including the Closing Date, if any (computed without regard to any deduction for dividends paid), and all of its net capital gain, if any, realized to and including the Closing Date. In this regard, the last dividend period for the Target Fund Preferred Shares may be shorter than the dividend period for such APS determined as set forth in the applicable Certificate of Vote. 10. Termination, Postponement and Waivers. (a) Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated and the Reorganization abandoned at any time (whether before or after adoption thereof by the shareholders of the Funds) prior to the Closing Date, or the Closing Date may be postponed, (i) by mutual consent of the Boards of Trustees of the A-14 Funds, (ii) by the Board of Trustees of the Target Fund if any condition of the Target Fund's obligations set forth in Section 8 of this Agreement has not been fulfilled or waived by such Board; or (iii) by the Board of Trustees of the Acquiring Fund if any condition of the Acquiring Fund's obligations set forth in Section 9 of this Agreement have not been fulfilled or waived by such Board. (b) If the transactions contemplated by this Agreement have not been consummated by December 31, 2005, this Agreement automatically shall terminate on that date, unless a later date is mutually agreed to by the Boards of Trustees of the Funds. (c) In the event of termination of this Agreement pursuant to the provisions hereof, the same shall become void and have no further effect, and there shall not be any liability on the part of any Fund or persons who are their directors, trustees, officers, agents or shareholders in respect of this Agreement. (d) At any time prior to the Closing Date, any of the terms or conditions of this Agreement may be waived by the Board of Trustees of any Fund (whichever is entitled to the benefit thereof), if, in the judgment of such Board after consultation with its counsel, such action or waiver will not have a material adverse effect on the benefits intended under this Agreement to the shareholders of their respective fund, on behalf of which such action is taken. (e) The respective representations and warranties contained in Sections 1 and 2 of this Agreement shall expire with, and be terminated by, the consummation of the Reorganization, and neither Fund nor any of its officers, trustees, agents or shareholders shall have any liability with respect to such representations or warranties after the Closing Date. This provision shall not protect any officer, trustee, agent or shareholder of either Fund against any liability to the entity for which that officer, trustee, agent or shareholder so acts or to its shareholders, to which that officer, trustee, agent or shareholder otherwise would be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties in the conduct of such office. (f) If any order or orders of the Commission with respect to this Agreement shall be issued prior to the Closing Date and shall impose any terms or conditions which are determined by action of the Boards of Trustees of the Funds to be acceptable, such terms and conditions shall be binding as if a part of this Agreement without further vote or approval of the shareholders of the Funds unless such terms and conditions shall result in a change in the method of computing the number of Acquiring Fund Common Shares or Acquiring Fund APS to be issued to the Acquired Funds, as applicable, in which event, unless such terms and conditions shall have been included in the proxy solicitation materials furnished to the shareholders of the Funds prior to the meetings at which the Reorganization shall have been approved, this Agreement shall not be consummated and shall terminate unless the Funds promptly shall call a special meeting of shareholders at which such conditions so imposed shall be submitted for approval. 11. Indemnification. (a) Each party (an "Indemnitor") shall indemnify and hold the other and its officers, trustees, agents and persons controlled by or controlling any of them (each an "Indemnified A-15 Party") harmless from and against any and all losses, damages, liabilities, claims, demands, judgments, settlements, deficiencies, taxes, assessments, charges, costs and expenses of any nature whatsoever (including reasonable attorneys' fees) including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred by such Indemnified Party in connection with the defense or disposition of any claim, action, suit or other proceeding, whether civil or criminal, before any court or administrative or investigative body in which such Indemnified Party may be or may have been involved as a party or otherwise or with which such Indemnified Party may be or may have been threatened (collectively, the "Losses") arising out of or related to any claim of a breach of any representation, warranty or covenant made herein by the Indemnitor, provided, however, that no Indemnified Party shall be indemnified hereunder against any Losses arising directly from such Indemnified Party's (i) willful misfeasance, (ii) bad faith, (iii) gross negligence or (iv) reckless disregard of the duties involved in the conduct of such Indemnified Party's position. (b) The Indemnified Party shall use its best efforts to minimize any liabilities, damages, deficiencies, claims, judgments, assessments, costs and expenses in respect of which indemnity may be sought hereunder. The Indemnified Party shall give written notice to Indemnitor within the earlier of ten (10) days of receipt of written notice to Indemnified Party or thirty (30) days from discovery by Indemnified Party of any matters which may give rise to a claim for indemnification or reimbursement under this Agreement. The failure to give such notice shall not affect the right of Indemnified Party to indemnity hereunder unless such failure has materially and adversely affected the rights of the Indemnitor; provided that in any event such notice shall have been given prior to the expiration of the Survival Period. At any time after ten (10) days from the giving of such notice, Indemnified Party may, at its option, resist, settle or otherwise compromise, or pay such claim unless it shall have received notice from Indemnitor that Indemnitor intends, at Indemnitor's sole cost and expense, to assume the defense of any such matter, in which case Indemnified Party shall have the right, at no cost or expense to Indemnitor, to participate in such defense. If Indemnitor does not assume the defense of such matter, and in any event until Indemnitor states in writing that it will assume the defense, Indemnitor shall pay all costs of Indemnified Party arising out of the defense until the defense is assumed; provided, however, that Indemnified Party shall consult with Indemnitor and obtain indemnitor's prior written consent to any payment or settlement of any such claim. Indemnitor shall keep Indemnified Party fully apprised at all times as to the status of the defense. If Indemnitor does not assume the defense, Indemnified Party shall keep Indemnitor apprised at all times as to the status of the defense. Following indemnification as provided for hereunder, Indemnitor shall be subrogated to all rights of Indemnified Party with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. 12. Other Matters. A-16 (a) All covenants, agreements, representations and warranties made under this Agreement and any certificates delivered pursuant to this Agreement shall be deemed to have been material and relied upon by each of the parties, notwithstanding any investigation made by them or on their behalf. (b) All notices hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally or sent by registered mail or certified mail, postage prepaid. Notice to the Target Fund shall be addressed to the Target Fund c/o Van Kampen Asset Management, 1221 Avenue of the Americas, New York, New York 10020, Attention: General Counsel, or at such other address as the Target Fund may designate by written notice to the Acquiring Fund. Notice to the Acquiring Fund shall be addressed to the Acquiring Fund c/o Van Kampen Asset Management, 1221 Avenue of the Americas, New York, New York 10020, Attention: General Counsel, or at such other address and to the attention of such other person as the Acquiring Fund may designate by written notice to the Target Fund. Any notice shall be deemed to have been served or given as of the date such notice is delivered personally or mailed. (c) This Agreement supersedes all previous correspondence and oral communications between the parties regarding the Reorganization, constitutes the only understanding with respect to the Reorganization, may not be changed except by a letter of agreement signed by each party and shall be governed by and construed in accordance with the laws of the State of Illinois applicable to agreements made and to be performed in said state. (d) It is expressly agreed that the obligations of the Funds hereunder shall not be binding upon any of their respective trustees, shareholders, nominees, officers, agents, or employees personally, but shall bind only the trust property of the respective Fund as provided in such Fund's Declaration of Trust. The execution and delivery of this Agreement has been authorized by the trustees of each Fund and signed by authorized officers of each Fund, acting as such, and neither such authorization by such trustees, nor such execution and delivery by such officers shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of each Fund as provided in such Funds' Declaration of Trust. This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original but all such counterparts together shall constitute but one instrument. IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to be executed and delivered by their duly authorized officers as of the day and year first written above. A-17 VAN KAMPEN XXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXX ----------------------------------------- [Name] [Title] Attest: [Name] [Title] VAN KAMPEN XXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXX ----------------------------------------- [Name] [Title] Attest: [Name] [Title] A-18 APPENDIX B FEDERAL IDENTIFICATION NO. 36-3779776 THE COMMONWEALTH OF MASSACHUSETTS OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE MICHAEL J. CONNOLLY, SECRETARY ONE ASHBURTON PLACE, BOSTON, MASS. 02108 CERTIFICATE OF VOTE OF TRUSTEES ESTABLISHING FOUR SERIES OF PREFERRED SHARES I, Ronald A. Nyberg, Secretary, of Van Kampen Merritt Municipal Trust (the "Fund") located at One Parkview Plaza, Oakbrook Terrace, IL 60181, do hereby certify that at a meeting of the trustees of the Fund held on November 13, 1991, the following vote establishing and designating four series of preferred shares of beneficial interest and determining the relative rights and preferences thereof was duly adopted: First: Pursuant to authority expressly vested in the Board of Trustees of the Fund by Article I of its Declaration of Trust (which, as amended or restated from time to time is, together with this Certificate of Vote, herein called the "Declaration of Trust"), the Board of Trustees hereby authorizes the issuance of four series of 6,000 shares of its authorized preferred shares of beneficial interest, par value $.01 per share ("Preferred Shares"), liquidation preference of $50,000 per share, designated, respectively, Auction Preferred Shares, Series A ("APS Series A"), Auction Preferred Shares, Series B ("APS Series B"), Auction Preferred Shares, Series C ("APS Series C") and Auction Preferred Shares, Series D ("APS Series D") (collectively the APS Series A, APS Series B, APS Series C and APS Series D are referred to herein as "APS"). Second: The preferences, voting powers, qualifications, and special or relative rights or privileges of each such series of preferred shares of beneficial interest are as follows: DESIGNATION APS SERIES A: A series of 1,500 preferred shares of beneficial interest, $.01 par value, liquidation preference $50,000 per share, is hereby designated "Auction Preferred Shares, Series A" (hereinafter, "APS Series A"). Each share of APS Series A shall be issued on December 10, 1991; have an Applicable Rate for its Initial Dividend Period equal to 4.50% per annum; have an Initial Dividend Payment Date of January 7, 1992; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth in Part I and Part II of this Certificate of Vote. The APS Series A shall constitute a separate series of Preferred Shares of beneficial interest of the Fund, and each share of APS Series A shall be identical except as provided in Section 3 of Part I of this Certificate of Vote. B-1 APS SERIES B: A series of 1,500 preferred shares of beneficial interest, par value $.01 per share, liquidation preference $50,000 per share, is hereby designated "Auction Preferred Shares, Series B" (hereinafter, "APS Series B"). Each share of APS Series B shall be issued on December 10, 1991; have an Applicable Rate for its Initial Dividend Period equal to 4.50% per annum; have an Initial Dividend Payment Date of January 15, 1992; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth in Part I and Part II of this Certificate of Vote. The APS Series B shall constitute a separate series of Preferred Shares of the Fund, and each share of APS Series B shall be identical except as provided in Section 3 of Part I of this Certificate of Vote. APS SERIES C: A series of 1,500 preferred shares of beneficial interest, par value $.01 per share, liquidation preference $50,000 per share, is hereby designated "Auction Preferred Shares, Series C" (hereinafter, "APS Series C"). Each share of APS Series C shall be issued on December 10, 1991; have an Applicable Rate for its Initial Dividend Period equal to 4.50% per annum; have an Initial Dividend Payment Date of January 9, 1992; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth in Part I and Part II of this Certificate of Vote. The APS Series C shall constitute a separate series of Preferred Shares of the Fund, and each share of APS Series C shall be identical except as provided in Section 3 of Part I of this Certificate of Vote. APS SERIES D: A series of 1,500 preferred shares of beneficial interest, par value $.01 per share, liquidation preference $50,000 per share, is hereby designated "Auction Preferred Shares, Series D." Each share of APS Series D shall be issued on December 10, 1991; have an Applicable Rate for its Initial Dividend Period equal to 4.50% per annum; have an Initial Dividend Payment Date of January 10, 1992; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth in Part I and Part II of this Certificate of Vote. The APS Series D shall constitute a separate series of Preferred Shares of the Fund, and each share of APS Series D shall be identical except as provided in Section 3 of Part I of this Certificate of Vote. No holder of any series of APS shall have, solely by reason of being such a holder of any series of APS, any right to acquire, purchase or subscribe for any APS, common shares of beneficial interest, par value $.01 per share, of the Fund or other securities of the Fund which it may hereafter issue or sell (whether out of the number of shares authorized by the Declaration of Trust, or out of any shares acquired by the Fund after the issuance thereof, or otherwise). ARTICLE I. Number of Shares; Ranking. (a) No fractional APS shall be issued. 2. Any APS which at any time have been redeemed or purchased by the Fund shall, after such redemption or purchase, have the status of authorized but unissued Preferred Shares, without designation as to series. The shares of each series of APS shall rank on a parity with shares of any other series of Preferred Shares (including any other series of APS) as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund. Dividends. (a) The Holder of shares of any series of APS shall be entitled to receive, when, as and if declared by the Board of Trustees, out of funds legally available therefor, cumulative cash dividends at the Applicable Rate per annum thereof, determined as set forth in paragraph (c) of this B-2 Section 2, and no more (except to the extent set forth in Section 12 of this Part I), payable on the respective dates (each a "Dividend Payment Date") determined as set forth in paragraph (b) of this Section 2. Dividends on shares of any series of APS shall accumulate at the Applicable Rate per annum from the Date of Original Issue thereof. (i) Dividends shall be payable subject to subparagraph (b) (ii) of this Section 2, on shares of: (i) APS Series A, on Tuesday, January 7, 1992, and on each Tuesday thereafter, (ii) APS Series B, on Wednesday, January 15, 1992, and on each fourth Wednesday thereafter, (iii) APS Series C, on Thursday, January 9, 1992, and on each Thursday thereafter, and (iv) APS Series D, on Friday, January 10, 1992, and on each fourth Friday thereafter, provided that if the Fund, subject to the conditions set forth in Section 4 of this Part I, designates any Subsequent Dividend Period as a Special Dividend Period, dividends will be payable: (1) with respect to a Special Dividend Period of less than 91 days, the day after the last day thereof, (2) with respect to a Special Dividend Period of 91 days or more and fewer than 365 days, the 92nd day thereof, the 183rd day thereof, if any, the 247th day thereof, if any, and the day after the last day, thereof and (3) with respect to a Special Dividend Period of 365 or more days, on such date in each quarterly period after the commencement thereof as is determined by the Board of Trustees. After any Special Dividend Period, dividends on shares of such series of APS shall be payable, subject to subparagraph (b)(ii) of this Section 2, on each succeeding Tuesday if such series is APS Series A, each fourth succeeding Wednesday if such series is APS Series B, each succeeding Thursday if such series is APS Series C, and each fourth succeeding Friday if such series is APS Series D, subject in each case to the options of the Fund to further designate from time to time any Subsequent Dividend Period thereof as a Special Dividend Period. In the case of dividends that would be payable on a Monday, Tuesday, Wednesday, Thursday or Friday as determined by subparagraph (b) (i) of this Section 2, including clause (1), (2) or (3) of the proviso thereto, if (i) the Monday or Tuesday that would otherwise be the Dividend Payment Date is not a Business Day, then dividends shall be payable on the first Business Day that falls after such Monday or Tuesday, or (ii) the Wednesday, Thursday or Friday that would otherwise be the Dividend Payment Date is not a Business Day, then dividends shall be payable on the first Business Day that falls prior to such Wednesday, Thursday or Friday. The Fund shall pay to the Auction Agent not later than 12:00 Noon, New York City time, on the Business Day next preceding each Dividend Payment Date for shares of such series, an aggregate amount of funds available on the next Business Day in The City of New York, New York, equal to the dividends to be paid to all Holders of shares of such series on such Dividend Payment Date. All moneys paid to the Auction Agent for the payment of dividends (or for the payment of any late charges pursuant to subparagraph (c)(i) of this Section 2) shall be held in trust for the payment of such dividends (and any such late charge) by the Auction Agent for the benefit of the B-3 Holders specified in subparagraph (b)(v) of this Section 2. Any moneys paid to the Auction Agent in accordance with the foregoing but not applied by the Auction Agent to the payment of dividends (and any late charge) will, to the extent permitted by law, be repaid to the Fund at the end of 90 days from the date on which such moneys were so to have been applied. Each dividend on the APS shall be paid on the Dividend Payment Date therefor to the Holders as their names appear on the share books of the Fund on the Business Day next preceding such Dividend Payment Date. Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holders as their names appear on the share books of the Fund on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Trustees. 1. (i) The dividend rate on shares of any series of APS during the period from and after the Date of Original Issue thereof to and including the last day of the Initial Dividend Period therefor shall be equal to the rate per annum set forth with respect to such series under "Designation," above. For each Subsequent Dividend Period of any series of APS outstanding thereafter, the dividend rate on shares of such series shall be equal to the rate per annum that results from an Auction for such series on the Auction Date next preceding such Subsequent Dividend Period; provided, however, that if an Auction for any Subsequent Dividend Period of any series of APS is not held for any reason or if a Failure to Deposit occurs and such failure has not been cured as set forth below prior to any succeeding Subsequent Dividend Period thereof, then, subject to the next succeeding provision, the dividend rate on the shares of such series for any such Subsequent Dividend Period shall be the Maximum Rate (as defined herein) for such series on the Auction Date for such Subsequent Dividend Period; provided, further, however, that if (A) any Failure to Deposit shall have occurred with respect to shares of any series of APS during any Rate Period thereof (other than any Special Dividend Period consisting of four or more Dividend Periods or any Rate Period succeeding any Special Dividend Period consisting of four or more Dividend Periods during which a Failure to Deposit occurred that has not been cured), and prior to 12:00 noon, New York City time, on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall not have been cured in accordance with the next succeeding sentence or the Fund shall not have paid to the Auction Agent a late charge equal to the sum of (1) if such Failure to Deposit consisted of the failure timely to pay to the Auction Agent the full amount of dividends with respect to any Dividend Period on the shares of such series, an amount computed by multiplying (x) 200% of the "AA" Composite Commercial Paper Rate for the Rate Period during which such Failure to Deposit occurs on the Dividend Payment Date for such Dividend Period by (y) a fraction, the numerator of which shall be the number of days for which such Failure to Deposit has not been cured in accordance with the next succeeding sentence (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator of which shall be 365, and applying the rate obtained against the aggregate liquidation preference of the outstanding shares of such series of APS and (2) if such Failure to Deposit consisted of the failure timely to pay to the Auction Agent the Redemption Price of the shares of such series of APS, if any, for which Notice of Redemption has been given by the Fund pursuant to paragraph (b) of Section 3 of this Part I, an amount computed by multiplying (x) 200% of the "AA" Composite Commercial Paper Rate for the Rate Period during which such Failure to Deposit occurs on the redemption date by (y) a fraction, the numerator of which shall be the number of days for which such Failure to Deposit is not cured in accordance with the next succeeding sentence (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator of which shall be 365, and applying the rate obtained against the aggregate liquidation preference of the outstanding shares of APS to be redeemed, or (B) any Failure to Deposit shall have occurred with respect to shares of any series of APS during a Special Dividend Period thereof consisting of four or more Dividend Periods, or during any Rate Period thereof succeeding any Special Dividend Period consisting of four or more Dividend Periods during which a Failure to Deposit occurred that has not been cured, and such Failure to Deposit shall not have been cured in accordance with the next B-4 succeeding sentence during such Special Dividend Period or such other Rate Period, then the dividend rate for shares of such series of APS for each Subsequent Dividend Period thereof commencing after such failure to and including the Subsequent Dividend Period, if any, during which such Failure to Deposit is so cured shall be a rate per annum equal to the Maximum Rate on the Auction Date for such Subsequent Dividend Period (but with the prevailing rating for such shares, for purposes of determining such Maximum Rate, being deemed to be "Below "ba3"/BB-") (the rate per annum at which dividends are payable on the APS for any Rate Period for such shares being herein referred to as the "Applicable Rate" for such shares). A Failure to Deposit with respect to shares of any series of APS shall have been cured (if such Failure to Deposit is not solely due to the willful failure of the Fund to make the required payment to the Auction Agent) with respect to any Rate Period if, not later than 12:00 Noon, New York City time, on the fourth Business Day preceding the Auction Date for the Rate Period subsequent to such Rate Period the Fund shall have paid to the Auction Agent (A) all accumulated and unpaid dividends on the shares of such series of APS and (B) without duplication, the Redemption Price for the APS, if any, for which Notice of Redemption has been given by the Fund pursuant to paragraph (b) of Section 3 of this Part 1. (b) The amount of dividends per share payable on shares of any series of APS on any date on which dividends shall be payable on shares of such series shall be computed by multiplying the respective Applicable Rate for such series in effect for such Dividend Period or Dividend Periods or part thereof for which dividends have not been paid by a fraction, the numerator of which shall be the number of days in such Dividend Period or Dividend Periods or part thereof and the denominator of which shall be 365 if such Dividend Period is a Rate Period, or is contained in a Rate Period, of less than one year and 360 for all other Dividend Periods, and applying the rate obtained against $50,000. 3. Any dividend payment made on the APS shall first be credited against the earliest accumulated but unpaid dividends due with respect to such APS. Except as set forth in the next sentence, no dividends shall be declared or paid or set apart for payment on the shares of any class or series of shares ranking, as to the payment of dividends, on a parity with the APS for any period unless full cumulative dividends have been or contemporaneously are declared and paid on the shares of each series of APS through the most recent Dividend Payment Date for each such series. When dividends are not paid in full upon the APS through their most recent respective Dividend Payment Dates or upon the shares of any other class or series of shares ranking on a parity as to the payment of dividends with the APS through their most recent respective dividend payment dates, all dividends declared upon the APS and any other such class or series of shares ranking on a parity as to the payment of dividends with the APS shall be declared pro rata so that the amount of dividends declared per share on the APS and such other class or series of shares shall in all cases bear to each other the same ratio that accumulated dividends per share on the APS and such other class or series of shares bear to each other (for purposes of this sentence, the amount of dividends declared per share shall be based on the Applicable Rate for such shares for the Dividend Periods during which dividends were not paid in full). Holders of the APS shall not be entitled to any dividend, whether payable in cash, property or shares, in excess of full cumulative dividends, as herein provided, on the APS. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the APS which may be in arrears, and, except to the extent set forth in subsection (c)(i) of this Section 2, no additional sum of money shall be payable in respect of any such arrearage. Dividends on the APS shall be designated as exempt-interest dividends up to the amount of tax-exempt income of the Fund, to the extent permitted by, and for purposes of, Section 852 of the Internal Revenue Code of 1986, as amended from time to time. B-5 The Board of Trustees shall not declare any dividend (except a dividend payable in Common Shares), or declare any other distribution, upon the Common Shares, or purchase Common Shares, unless in every such case the APS have, at the time of any such declaration or purchase, an asset coverage (as defined in and determined pursuant to the 1940 Act) of at least 200% (or such other asset coverage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities which are stock of a closed-end investment company as a condition of declaring dividends on its common stock) after deducting the amount of such dividend, distribution or purchase price, as the case may be. A. Redemption. (a)(i) Upon giving a Notice of Redemption, as provided below, the Fund at its option may redeem shares of any series of APS, in whole or in part, on the Second Business Day next preceding any Dividend Payment Date applicable to those shares of APS called for redemption, out of funds legally available therefor, at the Optional Redemption Price; provided that during a Special Dividend Period of 365 days or more no share of APS will be subject to optional redemption during any Non-Call Period; provided, that shares of any series of APS may not be redeemed in part if after such partial redemption fewer than 250 shares of such series remain outstanding. If fewer than all of the outstanding shares of any series of APS are to be redeemed pursuant to subparagraph (a)(i) of this Section 3, the number of shares of such series to be redeemed shall be determined by the Board of Trustees, and such shares shall be redeemed pro rata from the Holders of such series in proportion to the number of such shares held by such Holders. No APS shall be redeemed pursuant to subparagraphs (a)(i) or (a)(ii) of this Section 3 unless, on the date on which the Fund intends to give notice of such redemption pursuant to paragraph (b) of this Section 3, (a) the Fund has available Deposit Securities with maturity or tender dates not later than the day preceding the applicable redemption date and having a value not less than the amount (including the applicable premium, if any) due to Holders of the APS by reason of the redemption of such shares on such redemption date and (b) Moody's Eligible Assets (if Moody's is then rating the APS) and S&P Eligible Assets (if S&P is then rating the APS) each at least equal the APS Basic Maintenance Amount, and would at least equal the APS Basic Maintenance Amount immediately subsequent to such redemption if such redemption were to occur on such date. The Fund shall redeem, at the Mandatory Redemption Price, certain of the APS to the extent permitted under the 1940 Act and Massachusetts law, if the Fund fails to maintain the APS Basic Maintenance Amount or 1940 Act APS Asset Coverage in accordance with the requirements of the rating agency or agencies then rating the APS and such failure is not cured on or before the APS Basic Maintenance Cure Date or the 1940 Act Cure Date, as the case may be. The number of APS to be redeemed shall be equal to the lesser of (i) the minimum number of APS the redemption of which, if deemed to have occurred immediately prior to the opening of business on the Cure Date, together with all other Preferred Shares subject to redemption or retirement, would result in the satisfaction of the APS Basic Maintenance Amount or the 1940 Act APS Asset Coverage, as the case may be, on such Cure Date (provided that, if there is no such minimum number of APS and other Preferred Shares the redemption of which would have such result, all the APS and Preferred Shares then outstanding shall be redeemed), and (ii) the maximum number of APS, together with all other Preferred Shares subject to redemption or retirement, that can be redeemed out of funds expected to be legally available therefor. In determining the APS required to be redeemed in accordance with the foregoing, the Fund shall allocate the number required to be redeemed to satisfy the APS Basic Maintenance Amount or the 1940 Act APS Asset Coverage, as the case may be, pro rata among each series of APS and other Preferred Shares subject to redemption provisions similar to those contained in this subparagraph (a)(iv) of this B-6 Section 3. The Fund shall effect such redemption not earlier than 20 days and not later than 40 days after such Cure Date, except that if the Fund does not have funds legally available for the redemption of all of the required number of APS and other Preferred Shares which are subject to redemption provisions similar to those contained in this subparagraph (a)(iv) of this Section 3 or the Fund otherwise is unable to effect such redemption on or prior to 40 days after such Cure Date, the Fund shall redeem those APS and other Preferred Shares which it was unable to redeem on the earliest practicable date on which it is able to effect such redemption. If fewer than all of the outstanding shares of any series of APS are to be redeemed pursuant to this Section 3(a)(iv), the number of shares of such series to be redeemed shall be redeemed pro rata from the Holders of such shares in proportion to the number of shares held by such Holders. 2. The Fund is required to give 30 days Notice of Redemption. In the event the Fund obtains appropriate exemptive or no-action relief from the Securities and Exchange Commission, the number of days' notice required for a mandatory redemption may be reduced by the Board of Trustees of the Fund to as few as two Business Days if Moody's and S&P each has agreed in writing that the revised notice provision would not adversely affect its then-current ratings of the APS. The Auction Agent will use its reasonable efforts to provide telephonic notice to each holder of APS called for redemption not later than the close of business on the Business Day on which the Auction Agent determines the shares to be redeemed (as described above) (or, during the occurrence of a Failure to Deposit with respect to such shares, not later than the close of business on the Business Day immediately following the day on which the Auction Agent receives Notice of Redemption from the Fund). Such telephonic notice will be confirmed promptly in writing not later than the close of business on the third Business Day preceding the redemption date by notice sent by the Auction Agent to each holder of record of APS called for redemption, the Broker-Dealers and the Securities Depository. Every Notice of Redemption and other redemption notice with respect to APS will state: (1) the redemption date, (2) the number of APS to be redeemed, (3) the redemption price, (4) that dividends on the APS to be redeemed will cease to accumulate as of such redemption date and (5) the provision of the APS Provisions pursuant to which such shares are being redeemed. No defect in the Notice of Redemption or other redemption notice or in the transmittal or the mailing thereof will affect the validity of the redemption proceedings, except as required by applicable law. If fewer than all shares of any series held by any Holder are to be redeemed, the Notice of Redemption mailed to such Holder shall also specify the number of shares of such series to be redeemed from such Holder. 3. Notwithstanding the provisions of paragraph (a) of this Section 3, if any dividends on shares of any series of APS are in arrears, no shares of such series of APS shall be redeemed unless all outstanding shares of such series of APS are simultaneously redeemed, and the Fund shall not purchase or otherwise acquire any shares of such series of APS; provided, however, that the foregoing shall not prevent the purchase or acquisition of all outstanding shares of such series of APS pursuant to the successful completion of an otherwise lawful purchase or exchange offer made on the same terms to, and accepted by, Holders of all outstanding shares of such series of APS. 4. Upon the deposit of funds sufficient to redeem the APS with the Auction Agent and the giving of Notice of Redemption under Paragraph (b) of this Section 3, dividends on such shares shall cease to accumulate and such shares shall no longer be deemed to be outstanding for any purpose, and all rights of the Holders of the shares so called for redemption shall cease and terminate, except the right of such Holders to receive the Optional Redemption Price or Mandatory Redemption Price, as the case may be, but without any interest or other additional amount, except as provided in Section 2(c)(i) and in Section 12. Upon surrender in accordance with the Notice of Redemption of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Trustees shall so require and the Notice of Redemption shall so state), the Optional Redemption Price or Mandatory Redemption Price, as the case may be, shall be paid by the Auction Agent to the Holders of the APS subject to redemption. In B-7 the case that fewer than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued, representing the unredeemed shares, without cost to the Holder thereof. The Fund shall be entitled to receive from the Auction Agent, promptly after the date fixed for redemption, any cash deposited with the Auction Agent in excess of (i) the aggregate Optional Redemption Price of the APS called for redemption on such date and (ii) all other amounts to which Holders of the APS called for redemption may be entitled. Any funds so deposited that are unclaimed at the end of 90 days from such redemption date shall, to the extent permitted by law, be repaid to the Fund, after which time the Holders of the APS so called for redemption may look only to the Fund for payment of the Optional Redemption Price or Mandatory Redemption Price, as the case may be, and all other amounts to which they may be entitled. The Fund shall be entitled to receive, from time to time after the date fixed for redemption, any interest on the funds so deposited. 5. To the extent that any redemption for which Notice of Redemption has been given is not made by reason of the absence of legally available funds therefor, such redemption shall be made as soon as practicable to the extent such funds become available. Failure to redeem the APS shall be deemed to exist at any time after the date specified for redemption in a Notice of Redemption when the Fund shall have failed, for any reason whatsoever, to deposit in trust with the Auction Agent the Redemption Price with respect to any shares for which such Notice of Redemption has been given. Notwithstanding the fact that the Fund may not have redeemed the APS for which a Notice of Redemption has been given, dividends may be declared and paid on the APS and shall include those APS for which a Notice of Redemption has been given. 6. All moneys paid to the Auction Agent for payment of the Optional Redemption Price or Mandatory Redemption Price, as the case may be, of the APS called for redemption shall be held in trust by the Auction Agent for the benefit of Holders of shares so to be redeemed. 7. In effecting any redemption pursuant to this Section 3, the Fund shall use its best efforts to comply with all applicable procedural conditions precedent to effecting such redemption under the 1940 Act and Massachusetts law, but shall effect no redemption except in accordance with the 1940 Act and Massachusetts law. 8. In the case of any redemption pursuant to this Section 3, only whole APS shall be redeemed, and in the event that any provision of the Declaration of Trust would require redemption of a fractional share, the Auction Agent shall be authorized to round up so that only whole shares are redeemed. B. Designation of Special Dividend Periods. (a) The Fund, at its option, may designate any succeeding Subsequent Dividend Period of any series of APS as a Special Dividend Period; provided, however, that such designation shall be effective only if (A) notice thereof shall have been given in accordance with paragraph (b) and clause (i) of paragraph (c) of this Section 4, (B) any Failure to Deposit that shall have occurred with respect to shares of such series during any Dividend Period shall have been cured in accordance with the provisions of the third sentence of paragraph (c)(i) of Section 2 of this Part I, (C) Sufficient Clearing Bids (as defined in Section 1 of Part II hereof) for such series shall have existed in an Auction held on the Auction Date immediately preceding the first day of such proposed Special Dividend Period, (D) if any Notice of Redemption shall have been mailed by the Fund pursuant to paragraph (b) of Section 3 of this Part I with respect to any shares of such series of APS, the Redemption Price with respect to such shares shall have been deposited with the Auction Agent and (E) in the event the Fund wishes to designate any succeeding Subsequent Dividend Period for such series as a Special Dividend Period consisting of more than 28 Rate Period Days, the Fund has B-8 received written confirmation from S&P (if S&P is then rating the APS) and Moody's (if Moody's is then rating the APS) that such designation would not affect the rating then assigned by S&P and Moody's to such series. 2. If the Fund proposes to designate any succeeding Subsequent Dividend Period of any series of APS as a Special Dividend Period pursuant to paragraph (a) of this Section 4, not less than 20 nor more than 30 days prior to the date the Fund proposes to designate as the first day of such Special Dividend Period (which shall be such day that would otherwise be the first day of a Minimum Dividend Period), notice shall be (i) published or caused to be published by the Fund in a newspaper of general circulation to the financial community in The City of New York, New York, which carries financial news, and (ii) communicated by the Fund by telephonic or other means to the Auction Agent and confirmed in writing promptly thereafter. Each such notice shall state (A) that the Fund may exercise its option to designate a succeeding Subsequent Dividend Period of such series of APS as a Special Dividend Period, specifying the first day thereof and (B) that the Fund will by 11:00 A.M., New York City time, on the second Business Day next preceding such date notify the Auction Agent of either (x) its determination, subject to certain conditions, to exercise such option, in which case the Fund shall specify the Special Dividend Period designated and the terms of the Specific Redemption Provisions, if any, or (y) its determination not to exercise such option. 3. No later than 11:00 A.M., New York City time, on the second Business Day next preceding the first day of any proposed Special Dividend Period as to which notice has been given as set forth in paragraph (b) of this Section 4, the Fund shall deliver to the Auction Agent either: (a) a notice stating (A) that the Fund has determined to designate the next succeeding Dividend Period of such series as a Special Dividend Period, specifying the same and the first day thereof, (B) the Auction Date immediately prior to the first day of such Special Dividend Period, (C) the terms of the Specific Redemption Provisions, if any, for such series, (D) that such Special Dividend Period shall not commence if (1) on such Auction Date Sufficient Clearing Bids for such series shall not exist or (2) a Failure to Deposit shall have occurred prior to the first day of such Special Dividend Period with respect to shares of such series and (E) the scheduled Dividend Payment Dates for such series of APS during such Special Dividend Period; such notice to be accompanied by an APS Basic Maintenance Report showing that, as of the third Business Day next preceding such proposed Special Dividend Period, (1) Moody's Eligible Assets, assuming for the purposes calculating Moody's Eligible Assets, in connection with an APS Basic Maintenance Report required to be prepared pursuant to this Section 4(c)(i), a Moody's Exposure Period of "eight weeks or less but greater than seven weeks" (if Moody's is then rating such series) and (2) S&P Eligible Assets (if S&P is then rating such series) each at least equal the APS Basic Maintenance Amount as of such Business Day (assuming for purposes of the foregoing calculation that the Maximum Rate is the Maximum Rate on such Business Day as if such Business Day were the Auction Date for the proposed Special Dividend Period); or (b) a notice stating that the Fund has determined not to exercise its option to designate a Special Dividend Period for such series of APS and that the next succeeding Dividend Period of such series shall be a Minimum Dividend Period. If the Fund fails to deliver either such notice (and, in the case of the notice described in clause (i) of the preceding sentence, an APS Basic Maintenance Report to the effect set forth in clause (i) (if either Moody's or S&P is then rating shares of the series in question)) with respect to any designation of any proposed Special Dividend Period to the Auction Agent by 11:00 A.M., New York City time, on the B-9 second Business Day next preceding the first day of such proposed Special Dividend Period, the Fund shall be deemed to have delivered a notice to the Auction Agent with respect to such Special Dividend Period to the effect set forth in clause (ii) of the preceding sentence. Voting Rights. (a) Except as otherwise provided in the Declaration of Trust or as otherwise required by law, (i) each Holder of APS shall be entitled to one vote for each of the APS held on each matter submitted to a vote of shareholders of the Fund, and (ii) the holders of outstanding Preferred Shares, including APS, and of Common Shares shall vote together as a single class; provided that, at a meeting of the shareholders of the Fund held for the election of the trustees, the holders of outstanding Preferred Shares, including APS, represented in person or by proxy at said meeting, shall elect two trustees of the Fund, each Preferred Share, including each of the APS, entitling the holder thereof to one vote. Subject to paragraph (b) of this Section 5, the holders of outstanding Common Shares shall elect the balance of the trustees. 2. During any period in which any one or more of the conditions described below shall exist (such period being referred to herein as a "Voting Period"), the number of trustees constituting the Board of Trustees shall be automatically increased by the smallest number that, when added to the two trustees elected exclusively by the holders of Preferred Shares, including APS, would constitute a majority of the Board of Trustees as so increased by such smallest number, and the holders of Preferred Shares, including APS, shall be entitled, voting as a class on a one-vote-per-share basis (to the exclusion of the holders of all other securities and class of capital shares of the Fund), to elect such smallest number of additional trustees, together with the two trustees that such holders are in any event entitled to elect. A Voting Period shall commence: (a) if at the close of business on any Dividend Payment Date accumulated dividends (whether or not earned or declared) on any outstanding APS equal to at least two full years' dividends shall be due and unpaid and sufficient cash or specified securities shall not have been deposited with the Auction Agent for the payment of such accumulated dividends; or if at any time holders of any other Preferred Shares are entitled under the 1940 Act to elect a majority of the trustees of the Fund. Upon the termination of a Voting Period, the voting rights described in this paragraph (b) of Section 5 shall cease, subject always, however, to the revesting of such voting rights in the Holders upon the further occurrence of any of the events described in this paragraph (b) of Section 5. (i) As soon as practicable after the accrual of any right of the holders of Preferred Shares to elect additional trustees as described in paragraph (b) of this Section 5, the Fund shall notify the Auction Agent and the Auction Agent shall call a special meeting of such holders, by mailing a notice of such special meeting to such holders, such meeting to be held not less than 10 nor more than 20 days after the date of mailing of such notice. If the Fund fails to send such notice to the Auction Agent or if the Auction Agent does not call such a special meeting, it may be called by any such holder on like notice. The record date for determining the holders entitled to notice of and to vote at such special meeting shall be the close of business on the fifth Business Day preceding the day on which such notice is mailed. At any such special meeting and at each meeting of holders of Preferred Shares held during a Voting Period at which trustees are to be elected, such holders, voting together as a class (to the exclusion of the holders of all other securities and classes of capital shares of the Fund), shall be entitled to elect the number of trustees prescribed in paragraph (b) of this Section 5 on a one-vote-per-share basis. B-10 For purposes of determining any rights of the Holders to vote on any matter, whether such right is created by this Certificate of Vote, by the other provisions of the Declaration of Trust, by statute or otherwise, no Holder shall be entitled to vote and no APS shall be deemed to be "outstanding" for the purpose of voting or determining the number of shares required to constitute a quorum if, prior to or concurrently with the time of determination of shares entitled to vote or shares deemed outstanding for quorum purposes, as the case may be, the Redemption Price for the redemption of such shares has been deposited in trust with the Auction Agent for that purpose and the requisite Notice of Redemption with respect to such shares shall have been given as provided in Section 3 of this Part I. None of the APS held by the Fund or any affiliate of the Fund shall have any voting rights or be deemed to be outstanding for voting or other purposes. The terms of office of all persons who are Trustees of the Fund at the time of a special meeting of Holders and holders of other Preferred Shares to elect trustees shall continue, notwithstanding the election at such meeting by the Holders and such other holders of the number of trustees that they are entitled to elect, and the persons so elected by the Holders and such other holders, together with the two incumbent trustees elected by the Holders and such other holders of Preferred Shares and the remaining incumbent trustees elected by the holders of the Common Shares, shall constitute the duly elected trustees of the Fund. Simultaneously with the termination of a Voting Period, the terms of office of the additional trustees elected by the Holders and holders of other Preferred Shares pursuant to paragraph (b) of this Section 5 shall terminate, the remaining trustees shall constitute the trustees of the Fund and the voting rights of the Holders and such other holders to elect additional trustees pursuant to paragraph (b) of this Section 5 shall cease, subject to the provisions of the last sentence of paragraph (b) of this Section 5. (i) So long as any of the APS are outstanding, the Fund shall not, without the affirmative vote of the Holders of the Outstanding APS determined with reference to a "majority of outstanding voting securities" as that term is defined in Section 2(a)(49) of the 1940 Act (voting separately as one class): (a) authorize, create or issue any class or series of shares of beneficial interest ranking prior to or on a parity with the APS with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund, or increase the authorized amount of any series of APS (except that, notwithstanding the foregoing, but subject to the provisions of Section 13, the Board of Trustees, without the vote or consent of the Holders of APS, may from time to time authorize and create, and the Fund may from time to time issue, classes or series of Preferred Shares, including APS, ranking on a parity with the APS with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund, subject to continuing compliance by the Fund with 1940 Act APS Asset Coverage and APS Basic Maintenance Amount requirements, provided that the Fund obtains written confirmation from Moody's (if Moody's is then rating APS) and S&P (if S&P is then rating APS) that the issuance of such class or series would not impair the rating then assigned by such rating agency to the APS, (b) amend, alter or repeal the provisions of the Declaration of Trust, including this Certificate of Vote, whether by merger, consolidation or otherwise, so as to affect any preference, right or power of such APS or the Holders thereof; provided that (i) none of the actions permitted by the exception to (a) above will be deemed to affect such preferences, rights or powers and (ii) the authorization, creation and issuance of classes or series of shares ranking junior to the APS with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund, will be deemed to affect such preferences, rights or powers only if Moody's or S&P is then rating the APS and such issuance would, at the time thereof, cause the Fund not to satisfy the 1940 Act APS Asset Coverage or the APS Basic Maintenance Amount, or (c) file a voluntary application for relief under Federal bankruptcy law or any similar application under state law for so long as the Fund is solvent and does not foresee becoming insolvent. B-11 (a) The Board of Trustees, without the vote or consent of the Holders of APS, may from time to time amend, alter or repeal any or all of the definitions of the terms listed below, and any such amendment, alteration or repeal will not be deemed to affect the preferences, rights or powers of the APS or the Holders thereof, provided the Board of Trustees receives written confirmation from Moody's (such confirmation being required to be obtained only in the event Moody's is rating the APS and in no event being required to be obtained in the case of the definitions of Deposit Securities, Discounted Value and Receivables for Municipal Securities Sold as such terms apply to S&P Eligible Assets, Dividend Coverage Amount, Dividend Coverage Assets, Minimum Liquidity Level, S&P Discount Factor, S&P Eligible Assets, S&P Exposure Period and Valuation Date as such term applies to the definitions of Dividend Coverage Amount, Dividend Coverage Assets and Minimum Liquidity Level) and S&P (such confirmation being required to be obtained only in the event S&P is rating the APS and in no event being required to be obtained in the case of the definitions of Discounted Value and Receivables for Municipal Securities Sold as such terms apply to Moody's Eligible Assets, Moody's Discount Factor, Moody's Eligible Asset and Moody's Exposure Period) that any such amendment, alteration or repeal would not impair the ratings then assigned by Moody's or S&P, as the case may be, to the APS: APS Basic Maintenance Amount APS Basic Maintenance Cure Date APS Basic Maintenance Report Deposit Securities Discounted Value Dividend Coverage Amount Dividend Coverage Assets Market Value Maximum Potential Gross-up Payment Liability Minimum Liquidity Level Moody's Discount Factor Moody's Eligible Asset Moody's Exposure Period 1940 Act Cure Date 1940 Act APS Asset Coverage Quarterly Valuation Date Receivables for Municipal Securities Sold S&P Discount Factor S&P Eligible Asset S&P Exposure Period Valuation Date Unless otherwise required by law, the Holders of the APS shall not have any relative rights or preferences or other special rights other than those specifically set forth herein. The Holders of the APS shall have no preemptive rights or rights to cumulative voting. In the event that the Fund fails to pay any B-12 dividends on the APS, the exclusive remedy of the Holders shall be the right to vote for trustees pursuant to the provisions of this Section 5. Unless a higher percentage is provided for in the Declaration of Trust, the affirmative vote of the Holders of a majority of the outstanding APS, voting as a separate class, shall be required to approve any plan of reorganization (as such term is used in the 1940 Act) adversely affecting such shares or any action requiring a vote of security holders of the Fund under Section 13(a) of the 1940 Act. In the event a vote of Holders of APS is required pursuant to the provisions of Section 13(a) of the 1940 Act, the Fund shall, not later than ten Business Days prior to the date on which such vote is to be taken, notify Moody's (if Moody's is then rating the APS) and S&P (if S&P is then rating the APS) that such vote is to be taken and the nature of the action with respect to which such vote is to be taken. In addition, the Fund shall notify Moody's (if Moody's is then rating the APS) and S&P (if S&P is then rating the APS) of the results of any vote described in the proceeding sentence. Right to Vote with Respect to Certain Other Matters. The affirmative vote of the holders of a majority (unless a higher percentage vote is required under the Declaration of Trust or under this Certificate of Vote) of the outstanding shares of each series of APS, each voting as a separate class, is required with respect to any matter that materially affects the series in a manner different from that of other series of classes of the Fund's shares, including without limitation any proposal to do the following: (1) increase or decrease the aggregate number of authorized shares of the series; (2) effect an exchange, reclassification, or cancellation of all or part of the shares of the series; (3) effect an exchange, or create a right of exchange, of all or any part of the shares of the series; (4) change the rights or preferences of the shares of the series; (5) change the shares of the series, whether with or without par value, into the same or a different number of shares, either with or without par value, of the same or another class or series; (6) create a new class or series of shares having rights and preferences prior and superior to the shares of the series, or increase the rights and preferences or the number of authorized shares of a series having rights and preferences prior or superior to the shares of the series; or (7) cancel or otherwise affect distributions on the shares of the series that have accrued but have not been declared. To the extent that the interests of a series of APS affected by a matter are substantially identical to the interests of another series of APS affected by such matter (e.g., a vote of shareholders required under Section 13(a) of the 1940 Act), each such series shall vote together collectively as one class. The vote of holders of APS described above will in each case be in addition to a separate vote of the requisite percentage of Common Shares and APS necessary to authorize the action in question. Liquidation Rights. (a) Upon the dissolution, liquidation or winding up of the affairs of the Fund, whether voluntary or involuntary, the Holders of the APS then outstanding shall be entitled to receive and to be paid out of the assets of the Fund available for distribution to its shareholders, before any payment or distribution shall be made on the Common Shares or on any other class of shares of the Fund ranking junior to the APS upon dissolution, liquidation or winding up, an amount equal to the liquidation preference with respect to such shares. The liquidation preference for the APS shall be $50,000 per share, plus an amount equal to all dividends thereon (whether or not earned or declared) accumulated but unpaid to the date of final distribution in same-day funds, together with any payments required to be made pursuant to Section 12 in connection with the liquidation of the Fund. 3. Neither the sale of all or substantially all the property or business of the Fund, nor the merger or consolidation of the Fund into or with any other corporation nor the merger or consolidation of any other corporation into or with the Fund shall be a dissolution, liquidation or winding up, whether voluntary or involuntary, for the purposes of this Section 6. B-13 After the payment to the Holders of the APS of the full preferential amounts provided for in this Section 6, the Holders of the APS as such shall have no right or claim to any of the remaining assets of the Fund. In the event the assets of the Fund available for distribution to the Holders of the APS upon any dissolution, liquidation or winding up of the affairs of the Fund, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such Holders are entitled pursuant to paragraph (a) of this Section 6, no such distribution shall be made on account of any shares of any other class or series of Preferred Shares ranking on a parity with the APS with respect to the distribution of assets upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the APS, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. Subject to the rights of the holders of shares of any series or class or classes of shares ranking on a parity with the APS with respect to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund, after payment shall have been made in full to the Holders of the APS as provided in paragraph (a) of this Section 6, but not prior thereto, any other series or class or classes of shares ranking junior to the APS with respect to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the Holders of the APS shall not be entitled to share therein. Auction Agent. For so long as any of the APS is outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be in each case a commercial bank, trust company or other financial institution independent of the Fund and its affiliates (which, however, may engage or have engaged in business transactions with the Fund or its affiliates) and at no time shall the Fund or any of its affiliates act as the Auction Agent in connection with the Auction Procedures. If the Auction Agent resigns or for any reason its appointment is terminated during any period that any of the APS is outstanding, the Board of Trustees shall use its best efforts promptly thereafter to appoint another qualified commercial bank, trust company or financial institution to act as the Auction Agent. 1940 Act APS Asset Coverage. The Fund shall maintain, as of the last Business Day of each month in which any of the APS is outstanding, the 1940 Act APS Asset Coverage. APS Basic Maintenance Amount. (a) So long as APS are Outstanding, the Fund shall maintain, on each Valuation Date, and shall verify to its satisfaction that it is maintaining on such Valuation Date, (i) S&P Eligible Assets having an aggregate Discounted Value equal to or greater than the APS Basic Maintenance Amount (if S&P is then rating the APS) and (ii) Moody's Eligible Assets having an aggregate Discounted Value equal to or greater than the APS Basic Maintenance Amount (if Moody's is then rating the APS). On or before 5:00 P.M., New York City time, on the third Business Day after a Valuation Date on which the Fund fails to satisfy the APS Basic Maintenance Amount, and on the third Business Day after the APS Basic Maintenance Cure Date with respect to such Valuation Date, the Fund shall complete and deliver to S&P (if S&P is then rating the APS), Moody's (if Moody's is then rating the APS) and the Auction Agent (if either S&P or Moody's is then rating the APS) an APS Basic Maintenance Report as of the date of such failure or such APS Basic Maintenance Cure Date, as the case may be, which will be deemed to have been delivered to the Auction Agent if the Auction Agent receives a copy or telecopy, telex or other electronic transcription thereof and on the same day the Fund mails to the Auction Agent for delivery on the next Business Day the full APS Basic Maintenance Report. The Fund shall also deliver an APS Basic Maintenance Report to S&P (if S&P is then rating the APS), and the Auction Agent B-14 (if S&P is then rating the APS) as of (i) the fifteenth day of each month (or, if such day is not a Business Day, the next succeeding Business Day) and (ii) the last Business Day of each month, in each case on or before the third Business Day after such day. The Fund will also deliver an APS Basic Maintenance Report to Moody's on any Valuation Date that (i) the Discounted Value of Moody's Eligible Assets is greater than the APS Basic Maintenance Amount by 5% or less or (ii) on any date which the Fund redeems Common Shares. A failure by the Fund to deliver an APS Basic Maintenance Report under subparagraph (b) of this Section 9 shall be deemed to be delivery of an APS Basic Maintenance Report indicating the Discounted Value for all assets of the Fund is less than the APS Basic Maintenance Amount, as of the relevant Valuation Date. Within ten Business Days after the date of delivery of an APS Basic Maintenance Report in accordance with paragraph (b) of this Section 9 relating to a Quarterly Valuation Date, the Fund shall cause the Independent Accountant to confirm in writing to S&P (if S&P is then rating the APS), Moody's (if Moody's is then rating the APS) and the Auction Agent (if either S&P or Moody's is then rating the APS) (i) the mathematical accuracy of the calculations reflected in such Report (and in any other APS Basic Maintenance Report, randomly selected by the Independent Accountant, that was delivered by the Fund during the quarter ending on such Quarterly Valuation Date) and (ii) that, in such Report (and in such randomly selected Report), the Fund determined in accordance with this Certificate of Vote whether the Fund had, at such Quarterly Valuation Date (and at the Valuation Date addressed in such randomly-selected Report), S&P Eligible Assets (if S&P is then raring the APS) of an aggregate Discounted Value at least equal to the APS Basic Maintenance Amount and Moody's Eligible Assets (if Moody's is then rating the APS) of an aggregate Discounted Value at least equal to the APS Basic Maintenance Amount (such confirmation being herein called the "Accountant's Confirmation"). Within ten Business Days after the date of delivery of an APS Basic Maintenance Report in accordance with paragraph (b) of this Section 9 relating to any Valuation Date on which the Fund failed to satisfy the APS Basic Maintenance Amount, and relating to the APS Basic Maintenance Cure Date with respect to such failure to satisfy the APS Basic Maintenance Amount, the Fund shall cause the Independent Accountant to provide to S&P (if S&P is then rating the APS), Moody's (if Moody's is then rating the APS) and the Auction Agent (if either S&P or Moody's is then rating the APS) an Accountant's Confirmation as to such APS Basic Maintenance Report. If any Accountant's Confirmation delivered pursuant to subparagraph (c) or (d) of this Section 9 shows that an error was made in the APS Basic Maintenance Report for a particular Valuation Date for which such Accountant's Confirmation was required to be delivered, or shows that a lower aggregate Discounted Value for the aggregate of all S&P Eligible Assets (if S&P is then rating the APS) or Moody's Eligible Assets (if Moody's is then rating the APS), as the case may be, of the Fund was determined by the Independent Accountant, the calculation or determination made by such Independent Accountant shall be final and conclusive and shall be binding on the Fund, and the Fund shall accordingly amend and deliver the APS Basic Maintenance Report to S&P (if S&P is then rating the APS), Moody's (if Moody's is then rating the APS) and the Auction Agent (if either S&P or Moody's is then rating the APS) promptly following receipt by the Fund of such Accountant's Confirmation. On or before 5:00 p.m., New York City time, on the first Business Day after the Date of Original Issue of the APS, the Fund shall complete and deliver to S&P (if S&P is then rating the APS) and to Moody's (if Moody's is then rating the APS), an APS Basic Maintenance Report as of the close of business on such Date of Original Issue. Within five Business Days of such Date of Original Issue, the Fund shall cause the Independent Accountant to confirm in writing to S&P (if S&P is then rating the APS) and to Moody's (if Moody's is then rating the APS) (i) the mathematical accuracy of the calculations reflected in such Report and (ii) that the amount of S&P Eligible Assets reflected thereon equals or exceeds the APS Basic Maintenance Amount reflected thereon. B-15 Minimum Liquidity Level. So long as S&P is rating the APS, the Fund shall have, as of each Valuation Date, Dividend Coverage Assets, with respect to each then Outstanding share of each series of APS, having a value not less than the Dividend Coverage Amount with respect to such share (the "Minimum Liquidity Level"). If, as of each Valuation Date, the Fund does not have the required Dividend Coverage Assets, the Fund shall, as soon as practicable, adjust its portfolio in order to meet the Minimum Liquidity Level, but only so long as S&P is rating the APS. So long as S&P is rating the APS, the Fund shall notify S&P on any Valuation Date which the Fund does not have the required Dividend Coverage Assets and does not adjust its portfolio as described in the immediately preceding sentence. Restrictions on Certain Distributions. For so long as any of the APS is Outstanding, and except as set forth in Sections 2(e) and 6(d) of this Part I, (A) the Fund shall not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or options, warrants or rights to subscribe for or purchase, Common Shares or other shares, if any, ranking junior to the APS as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up) in respect of the Common Shares or any other shares of the Fund ranking junior to or on a parity with the APS as to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up, or call for redemption, redeem, purchase or otherwise acquire for consideration any Common Shares or any other such junior shares (except by conversion into or exchange for shares of the Fund ranking junior to the APS as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up), or any such parity shares (except by conversion into or exchange for shares of the Fund ranking junior to or on a parity with APS as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up), unless (i) full cumulative dividends on shares of each series of APS through its most recently ended Dividend Period shall have been paid or shall have been declared and sufficient funds for the payment thereof deposited with the Auction Agent and (ii) the Fund has redeemed the full number of shares of each series of APS required to be redeemed by any provision for mandatory redemption pertaining thereto, and (B) if either Moody's or S&P is rating the APS, the Fund shall not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or options, warrants or rights to subscribe for or purchase, Common Shares or other shares, if any, ranking junior to the APS as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up) in respect of Common Shares or any other shares of the Fund ranking junior to the APS as to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up, or call for redemption, redeem, purchase or otherwise acquire for consideration any shares of Common Shares or any other such junior shares (except by conversion into or exchange for shares of the Fund ranking junior to the APS as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up), unless immediately after such transaction the Discounted Value of Moody's Eligible Assets and S&P Eligible Assets would each at least equal the APS Basic Maintenance Amount. Additional Dividends. If the Fund retroactively allocates any net capital gains or other income taxable for federal income tax purposes to the APS without having given advance notice thereof to the Auction Agent as provided in Section 6 of Part II solely by reason of the fact that such allocation is made as a result of the redemption of all or a portion of the outstanding APS or the liquidation of the Fund (such allocation being referred to herein as a "Retroactive Taxable Allocation"), the Fund shall, within 270 days after the end of the Fund's taxable year in which a Retroactive Taxable Allocation is made, provide notice thereof to the Auction Agent and to each Holder of such shares during such taxable year at such Holder's address as the same appears or last appeared on the share books of the Fund. Such Holders of such shares shall be entitled to receive, when, as and if declared by the Board of Trustees, out of funds legally available therefor, dividends in an amount equal to the aggregate Additional Dividends with respect to all Retroactive Taxable Allocations made to such shares during the taxable year in question, such dividends to be payable by the Fund to the Auction Agent, for distribution to such Holders, within 30 days after the notice described above is given to the Auction Agent. B-16 Certain Other Restrictions. (a) For so long as any of the APS is outstanding and Moody's is then rating such shares, the Fund will not, unless it has received written confirmation from Moody's that any such action would not impair the ratings then assigned by Moody's to the APS, engage in any one or more of the following transactions: (a) transactions in options on securities, futures contracts or options on futures contracts except that in connection with Moody's Hedging Transactions: (A) the Fund may buy call or put option contracts on securities; (B) the Fund may write covered call options on securities; (C) the Fund may write put options on securities; (D) the Fund may enter into positions in futures contracts based on the Municipal Index provided that the Fund shall not engage in any such transaction which would cause the Fund at the time of such transaction to own or have sold (1) outstanding futures contracts based on the Municipal Index exceeding in number 10% of the rolling average number of daily traded futures contracts based on the Municipal Index in the 30 calendar days prior to the time of effecting such transaction as reported by The Wall Street Journal or (2) outstanding futures contracts based on the Municipal Index and options on such futures contracts having an aggregate fair market value (taking into account the fair market value of futures contracts based on Treasury Bonds) exceeding the fair market value of Moody's Eligible Assets owned by the Fund; (E) the Fund may enter into futures contracts on Treasury Bonds provided that the Fund shall not engage in any such transaction which would cause the Fund at the time of such transaction to own or have sold (1) outstanding futures contracts based on Treasury Bonds and options on such futures contracts having an aggregate fair market value (taking into account the fair market value of futures contracts based on the Municipal Index) exceeding 40% of the aggregate fair market value of Moody's Eligible Assets owned by the Fund and rated Aa by Moody's (or, if not rated by Moody's but rated by S&P, rated AAA by S&P) or (2) outstanding futures contracts based on Treasury Bonds and options on such futures contracts having an aggregate fair market value (taking into account the fair market value of futures contracts based on the Municipal Index) exceeding 80% of the aggregate fair market value of Moody's Eligible Assets owned by the Fund and rated Baa or A by Moody's (or, if not rated by Moody's but rated by S&P, rated A or AA by S&P); for purposes of the foregoing clauses (D) and (E), the Fund shall be deemed to own the number of futures contracts that underlie any outstanding option written by the Fund; and (F) the Fund may buy call or put options on futures contracts on the Municipal Index or Treasury Bonds, may write put options on such futures contracts (provided, that if the contract would require delivery of a security, that security must be held by the Fund) and may write call options on such futures if it owns the futures contract subject to the option. For so long as the APS are rated by Moody's, the Fund will engage in Closing Transactions to close out any outstanding futures contract based on the Municipal Index if the open interest with respect to such futures contracts based on the Municipal Index as reported by The Wall Street Journal is less than 5,000. For so long as the APS are rated by Moody's, the Fund will engage in a Closing Transaction to close out any outstanding futures contract by no later than the fifth Business Day of the month in which such contract expires and will engage in a Closing Transaction to close out any outstanding option on a futures contract by no later than the first Business Day of the month in which such option expires. For so long as the APS are rated by Moody's, the Fund will engage in transactions with respect to futures contracts or options thereon having only the next settlement date or the settlement date immediately thereafter. For purposes of valuation of Moody's Eligible Assets: (A) if the Fund writes a call option, the underlying asset will be valued as follows: (1) if the option is exchange-traded and may be offset readily or if the option expires before the earliest possible redemption of the APS, at the Discounted Value of the B-17 underlying security of the option or (2) otherwise, it has no value; (B) if the Fund writes a put option, the underlying asset will be valued as follows: the lessor of (1) exercise price and (2) the Discounted Value of the underlying security; (C) if the Fund is a seller under a futures contract, the underlying security will be valued at the lower of (1) settlement price and (2) the Discounted Value of the underlying security; if a contract matures within the Moody's Exposure Period, the security may be valued at the settlement price; (D) if the Fund is the buyer under a futures contract, the underlying security will be valued at the lower of (1) the settlement price and (2) the Discounted Value of the underlying security; if the contract matures within the Moody's Exposure Period, the security may be valued at its Discounted Value and (E) call or put option contracts which the Fund buys have no value. For so long as APS are rated by Moody's: (A) the Fund will not engage in options and futures transactions for leveraging or speculative purposes; (B) the Fund will not write any anticipatory call options pursuant to which the Fund hedges the anticipated purchase of an asset prior to completion of such purchase; (C) the Fund will not enter into an option transaction unless, after giving effect thereto, the Fund would continue to have Moody's Eligible Assets with an aggregate Discounted Value equal to or greater than the APS Basic Maintenance Amount; (D) the Fund will not enter into an option transaction unless after giving effect to such transaction the Fund would continue to be in compliance with the provisions relating to the APS Basic Maintenance Amount; (E) for purposes of the APS Basic Maintenance Amount (1) assets in margin accounts are not Moody's Eligible Assets, (2) 10% of the settlement price of assets sold under a futures contract, the settlement price of assets purchased under a futures contract, the settlement price of an underlying futures contract if the Fund writes put options on futures contracts will constitute liabilities of the Fund and (3) if the Fund writes call options on futures contracts and does not own the underlying futures contract, 105% of the Market Value of the Market Value of the underlying futures contract will constitute a liability of the Fund; (F) the Fund shall enter into only exchange-traded futures and shall write only exchange-traded options on exchanges approved by Moody's; (G) where delivery may be made to the Fund with any of a class of securities, the Fund shall assume for purposes of the APS Basic Maintenance Amount that it takes delivery of that security which yields it the least value; (H) the Fund will not engage in forward contracts; (1) the Fund will enter into futures contracts as seller only if it owns the underlying security; and (J) there shall be a quarterly audit made of the Fund's futures and options transactions by the Fund's independent accountants to confirm that the Fund is in compliance with these standards; or incur any indebtedness in a principal amount in excess of the lesser of $10,000,000 or 10% of the aggregate liquidation preference of APS Outstanding, without prior written approval of Moody's that such indebtedness would not adversely affect the then current rating by Moody's of the APS except that the Fund may, without obtaining the written confirmation described above, incur indebtedness for the purpose of clearing securities transactions if the APS Basic Maintenance Amount would continue to be satisfied after giving effect to such indebtedness; or issue any class or series of shares ranking prior to or on a parity with the APS with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of the Fund, or reissue any APS previously purchased or redeemed by the Fund; or 4. For so long as any of the APS is Outstanding and S&P is rating such shares, the Fund will not, unless the Fund has received written confirmation from S&P that any such action would not impair the rating then assigned by such rating agency to the APS, engage in any one or more of the following transactions: B-18 transactions in any reverse repurchase agreements; or lend portfolio securities; or borrow money, except that the Fund may, without obtaining the written confirmation described above, borrow money for the purposes of clearing securities transactions if the APS Basic Maintenance Amount would continue to be satisfied after giving effect to such borrowing; or issue any class or series of shares ranking prior to or on a parity with the APS with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of the Fund, or reissue any APS previously purchased or redeemed by the Fund, or merge or consolidate with any corporation; or engage in repurchase agreement transactions in which the term of such repurchase obligation is longer than 90 days, in which the underlying security is a security other than United States treasury securities (not inclusive of zero-coupon securities), demand deposits, certificates of deposits or bankers acceptance in which the counter-party or its affiliates have securities rated A1+ by S&P with respect to such underlying security; or engage in short sale transactions; or purchase or sell futures contracts or options thereon or write uncovered put or uncovered call options on portfolio securities except that (A) the Fund may engage in any S&P Hedging Transactions based on the Municipal Index, provided that the Fund shall not engage in any S&P Hedging Transaction based on the Municipal Index (other than Closing Transactions) which would cause the Fund at the time of such transaction to own or have sold the least of (1) more than 1,000 outstanding futures contracts based on the Municipal Index, (2) outstanding futures contracts based on the Municipal Index and on the Treasury Bonds exceeding in number 25% of the quotient of the fair market value of the Fund's total assets divided by 100,000 or (3) outstanding futures contract based on the Municipal Index exceeding in number 10% of the average number of daily traded futures contracts based on the Municipal Index in the month prior to the time of effecting such transaction as reported by The Wall Street Journal and (B) the Fund may engage in S&P Hedging Transactions based on Treasury Bonds, provided that the Fund shall not engage in any S&P Hedging Transaction based on Treasury Bonds (other than Closing Transactions) which would cause the Fund at the time of such transaction to own or have sold the lesser of (1) outstanding futures contracts based on Treasury Bonds and on the Municipal Index exceeding in number 25% of the quotient of the fair market value of the Fund's total assets divided by 100,000 or (2) outstanding futures contracts based on Treasury Bonds exceeding in number 10% of the average number of daily traded futures contracts based on Treasury Bonds in the month prior to the time of effecting such transaction as reported by The Wall Street Journal. For so long as the APS are rated by S&P, the Fund will engage in Closing Transactions to close out any outstanding futures contracts which the Fund owns or has sold or any outstanding option thereon owned by the Fund in the event (A) the Fund does not have S&P Eligible Assets with an aggregate Discounted Value equal to or greater than the APS Basic Maintenance Amount on two consecutive Valuation Dates and (B) the Fund is required to pay Variation Margin on the second such Valuation Date. For so long as the APS are rated by S&P, the Fund will engage in a Closing Transaction to close out any outstanding futures contract or option thereon in the month prior to the delivery month under the terms of such futures contract or option thereon unless the Fund holds securities deliverable under such terms. For purposes of determining S&P Eligible Assets to determine compliance with the APS Basic Maintenance Amount, no amounts on deposit with the B-19 Fund's custodian or broker representing Initial Margin or Variation Margin shall constitute S&P Eligible Assets. For so long as the APS are rated by S&P, when the Fund writes a futures contract or option thereon, it will maintain an amount of cash, cash equivalents or short-term, money market securities in a segregated account with the Fund's custodian, so that the amount so segregated plus the amount of Initial Margin and Variation Margin held in the account of the Fund's broker equals the fair market value of the futures contract, except that in the event the Fund writes a futures contract or option thereon which requires delivery of an underlying security, the Fund shall hold such underlying security. Notice. All notices or communications, unless otherwise specified in the By-Laws of the Fund or this Certificate of Vote, shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid. Notice shall be deemed given on the earlier of the date received or the date seven days after which such notice is mailed. Definitions. As used in Parts I and II hereof, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: 1. "'AA' Composite Commercial Paper Rate," on any date for any Rate Period, shall mean (i) (A) in the case of any Minimum Dividend Period or any Rate Period between 7 and 28 Rate Period Days, the interest equivalent of the 30-day rate; provided, however, in the case of any Minimum Dividend Period of 7 days or any Rate Period with 7 Rate Period Days and the "AA" Composite Commercial Paper Rate is being used to determine the Applicable Rate when all of the Outstanding APS are subject to Submitted Hold Orders, then the interest equivalent of the 7-day rate, and (B) in the case of any Rate Period with more than 28 Rate Period Days, the interest equivalent of the 180-day rate, on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by S&P or the equivalent of such rating by S&P or another rating agency, as made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day immediately preceding such date; or (ii) in the event that the Federal Reserve Bank of New York does not make available any such rate, then the arithmetic average of such rates, as quoted on a discount basis or otherwise, by the Commercial Paper Dealers to the Auction Agent for the close of business on the Business Day next preceding such date. If any Commercial Paper Dealer does not quote a rate required to determine the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Fund to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the Fund does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers. For purposes of this definition, the "interest equivalent" of a rate stated on a discount basis (a "discount rate") for commercial paper of a given days' maturity shall be equal to the quotient (rounded upwards to the next higher one-thousandth (.001) of 1%) of (A) the discount rate divided by (B) the difference between (x) 1.00 and (y) a fraction the numerator of which shall be the product of the discount rate times the number of days in which such commercial paper matures and the denominator of which shall be 360. "Accountant's Confirmation" shall have the meaning set forth in paragraph (c) of Section 9 of this Part I. "Additional Dividends" means payment to a Holder of APS of an amount which, when taken together with the aggregate amount of Retroactive Taxable Allocations made to such Holder with respect to the taxable year in question, would cause such Holder's dividends in dollars (after federal income tax B-20 consequences) from the aggregate of both the Retroactive Taxable Allocations and the Additional Dividends to be equal to the dollar amount of the dividends which would have been received by such Holder if the amount of the aggregate Retroactive Taxable Allocations would have been excludable from the gross income of such Holder. Such Additional Dividends shall be calculated (i) without consideration being given to the time value of money; (ii) assuming that no Holder of APS is subject to the federal alternative minimum tax with respect to dividends received from the Fund; and (iii) assuming that each Retroactive Taxable Allocation would be taxable in the hands of each Holder of APS at the maximum marginal regular federal individual income tax rate applicable to ordinary income or net capital gains, as applicable, or the maximum marginal regular federal corporate income tax rate, whichever is greater, in effect during the taxable year in question. "Anticipation Notes" means the following municipal securities: tax anticipation notes, revenue anticipation notes and tax and revenue anticipation notes. "Applicable Rate" shall have the meaning specified in subparagraph (c)(i) of Section 2 of this Part 1. "APS Basic Maintenance Amount," as of any Valuation Date, shall mean the dollar amount equal to the sum of (i)(A) the product of the number of APS Outstanding on such date multiplied by $50,000; (B) the aggregate amount of dividends that will have accumulated at the Applicable Rate (whether or not earned or declared) to (but not including) the first respective Dividend Payment Dates for each of the APS Outstanding that follow such Valuation Date; (C) the amount equal to the Projected Dividend Amount (based on the number of APS Outstanding on such date); (D) the amount of anticipated expenses of the Fund for the 90 days subsequent to such Valuation Date; (E) the amount of the Fund's Maximum Potential Additional Dividend Liability as of such Valuation Date; (F) the amount of any premium payable pursuant to a Premium Call Period; and (G) any current liabilities as of such Valuation Date to the extent not reflected in any of (i)(A) through (i)(F) (including, without limitation, any amounts described in Section 13 of Part I as required to be treated as liabilities in connection with the Fund's transactions in futures and options and including any payables for municipal securities purchased as of such Valuation Date) less (ii) either (A) the face value of any of the Fund's assets irrevocably deposited by the Fund for the payment of any of (i)(A) through (i)(G) if such assets mature within the Moody's Exposure Period and are either securities issued or guaranteed by the United States Government or have a rating assigned by Moody's of P-1, VMIG-1 or MIG-1 (or, with respect to S&P, SP-1+ or A-1+) or (B) the Discounted Value of such assets. For purposes of the APS Basic Maintenance Amount in connection with S&P's ratings of the APS, with respect to any transactions by the Fund in futures contracts, the Fund shall include as liabilities (i) 30% of the aggregate settlement value, as marked to market, of any outstanding futures contracts based on the Municipal Index which are owned by the Fund plus (ii) 25% of the aggregate settlement value, as marked to market, of any outstanding futures contracts based on Treasury Bonds which contracts are owned by the Fund. For purposes of the APS Basic Maintenance Amount in connection with Moody's rating of the APS, with respect to any transactions by the Fund in securities options, the Fund shall include as liabilities (i) 10% of the exercise price of a call option written by the Fund and (ii) the exercise price of any written put option. "APS Basic Maintenance Cure Date," with respect to the failure by the Fund to satisfy the APS Basic Maintenance Amount (as required by paragraph (a) of Section 9 of this Part I) as of a given Valuation Date, shall mean the third Business Day following such Valuation Date. "APS Basic Maintenance Report" shall mean a report signed by the President, Treasurer or any Senior Vice President or Vice President of the Fund which sets forth, as of the related Valuation Date, the assets of the Fund, the Market Value and the Discounted Value thereof (seriatim and in aggregate), and the APS Basic Maintenance Amount. B-21 "Auction" shall mean each periodic implementation of the Auction Procedures. "Auction Agency Agreement" shall mean the agreement between the Fund and the Auction Agent which provides, among other things, that the Auction Agent will follow the Auction Procedures for purposes of determining the Applicable Rate for each series of APS so long as the Applicable Rate for such series is to be based on the results of an Auction. "Auction Agent" shall mean the entity appointed as such by a resolution of the Board of Trustees in accordance with Section 7 of this Part I. "Auction Date," with respect to any Rate Period, shall mean the Business Day next preceding the first day of such Rate Period. "Auction Procedures" shall mean the procedures for conducting Auctions set forth in Part II hereof. "Board of Trustees" shall mean the Board of Trustees of the Fund or any duly authorized committee thereof. "Business Day" shall mean a day on which the New York Stock Exchange is open for trading and which is neither a Saturday, Sunday nor any other day on which banks in The City of New York, New York, are authorized by law to close. "Closing Transactions" means the termination of a futures contract or option position by taking an equal position opposite thereto in the same delivery month as such initial position being terminated. "Commercial Paper Dealers" shall mean Goldman, Sachs& Co., Lehman Commercial Paper Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Smith Barney, Harris Upham & Co. or, in lieu of any thereof, their respective affiliates or successors, if such entity is a commercial paper dealer. "Common Shares" shall mean the common shares of beneficial interest, par value $.01 per share, of the Fund. "Cure Date" shall mean the APS Basic Maintenance Cure Date or the 1940 Act Cure Date, as the case may be. "Date of Original Issue," with respect to any series of APS, shall mean the date on which the Fund initially issued shares of such series of APS. "Deposit Securities" shall mean cash and municipal securities rated at least A-1+ or SP-1+ by S&P, except that, for purposes of Section 3(a)(iii) of this Part I, such municipal securities shall be considered "Deposit Securities" only if they are also rated P-1, MIG-1 or VMIG-1 by Moody's. "Discounted Value" shall mean (i) with respect to an S&P Eligible Asset, the quotient of the Market Value thereof divided by the applicable S&P Discount Factor and (ii) with respect to a Moody's Eligible Asset, the quotient of the Market Value thereof divided by the applicable Moody's Discount Factor, provided that with respect to a Moody's Eligible Asset, Discounted Value shall not exceed the par value of such Asset at any time. "Dividend Coverage Amount," as of any Valuation Date, shall mean, with respect to each of the APS, (i) the aggregate amount of dividends that will accumulate on such APS to (but not including) the first B-22 Dividend Payment Date for such share that follows such Valuation Date plus any liabilities that will become payable prior to or on such payment date, less (ii) the combined value of Deposit Securities irrevocably deposited for the payment of dividends on such APS. "Dividend Coverage Assets," as of any Valuation Date, shall mean, with respect to each of the APS, Deposit Securities with maturity or tender dates not later than the day preceding the first Dividend Payment Date for such share that follows such Valuation Date and having a value not less than the Dividend Coverage Amount with respect to such share. "Dividend Payment Date," with respect to any series of APS, shall mean any date on which dividends on shares of such series of APS are payable pursuant to the provisions of paragraph (b) of Section 2 of this Part I. "Dividend Period," with respect to any series of APS, shall mean the period from and including the Date of Original Issue of such series to but excluding the initial Dividend Payment Date for such series and any period thereafter from and including one Dividend Payment Date for such series to but excluding the next succeeding Dividend Payment Date for such series. "Fund" shall mean Van Kampen Merritt Municipal Trust, a Massachusetts business trust, which is the issuer of the APS. "Failure to Deposit," with respect to any series of APS, shall mean a failure by the Fund to pay to the Auction Agent, not later than 12:00 noon, New York City time, (A) on the Business Day next preceding any Dividend Payment Date for such series, in funds available on such Dividend Payment Date in The City of New York, New York, the full amount of any dividend (whether or not earned or declared) to be paid on such Dividend Payment Date on any share of such series or (B) on the Business Day next preceding any redemption date in funds available on such redemption date for such series in The City of New York, New York, the Redemption Price to be paid on such redemption date for any share of such series after notice of redemption is given pursuant to paragraph (b) of Section 3 of this Part 1. "Holder," with respect to any series of APS, shall mean the registered holder of shares of such series of APS as the same appears on the share books of the Fund. "Independent Accountant" shall mean a nationally recognized accountant, or firm of accountants, that is with respect to the Fund an independent public accountant or firm of independent public accountants under the Securities Act of 1933, as amended from time to time. "Initial Dividend Period," with respect to any series of APS, shall mean the period from and including the Date of Original Issue thereof to but excluding the initial Dividend Payment Date therefor. "Interest Equivalent" means a yield on a 360-day basis of a discount basis security which is equal to the yield on an equivalent interest-bearing security. "Initial Margin" means the amount of cash or securities deposited with a custodian for the benefit of a futures commission merchant as a good-faith deposit at the time of the initiation of a purchase or sale position with respect to a futures contract or a sale position with respect to an option position thereon. "Market Value" of any asset of the Fund shall mean the market value thereof determined by the Pricing Service designated from time to time by the Board of Trustees. Market Value of any asset shall include any interest accrued thereon. The Pricing Service values portfolio securities at the mean between the quoted bid and asked price or the yield equivalent when quotations are readily available. Securities for B-23 which quotations are not readily available are valued at fair value as determined by the pricing service using methods which include consideration of yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating; indications as to value from dealers; and general market conditions. The pricing service may employ electronic data processing techniques and/or a matrix system to determine valuations. "Mandatory Redemption Price" means $50,000 per share of APS plus an amount equal to accumulated but unpaid dividends thereon to the date fixed for redemption (whether or not earned or declared). "Master Purchaser's Letter" has the meaning specified in Section 1 of Part II hereof. "Maximum Potential Additional Dividends Liability," as of any Valuation Date, shall mean the aggregate amount of Additional Dividends that would be due if the Fund were to make Retroactive Taxable Allocations, with respect to any fiscal year, estimated based upon dividends paid and the amount of undistributed realized net capital gains and other taxable income earned by the Fund, as of the end of the calendar month immediately preceding such Valuation Date, and assuming such Additional Dividends are fully taxable. "Minimum Liquidity Level" shall have meaning set forth in Section 10 of this Part I. "Minimum Dividend Period" shall mean (i) with respect to APS Series A and APS Series C, any Rate Period consisting of 7 Rate Period Days and (ii) with respect to APS Series B and APS Series D, any Rate Period with 28 Rate Period Days, in each case subject to certain exceptions. "Moody's" shall mean Moody's Investors Service, Inc., a Delaware corporation, and its successors. "Moody's Discount Factor" shall mean, for purposes of determining the Discounted Value of any Moody's Eligible Asset, the percentage determined by reference to the rating on such asset and the shortest Exposure Period set forth opposite such rating that is the same length as or is longer than the Moody's Exposure Period, in accordance with the table set forth below:
Rating Category ---------------------------------------------------------------------------------- Exposure Period(4) Aaa Aa(1) A(1) Baa(1) Other(2) (V)MIG-1(3)(4) SP-1+(3) - ------------------ --- --- -- ---- ------ ----------- ------ 7 weeks........................ 151% 159% 168% 202% 229% 136% 148% 8 weeks or less but greater than 154 164 173 205 235 137 149 seven weeks.................... 9 weeks or less but greater than 158 169 179 209 242 138 150 eight weeks....................
(1) Moody's rating. (2) Municipal securities not rated by Moody's but rated BBB by S&P. (3) Municipal securities rated MIG-1 or VMIG-1 or, if not rated by Moody's, rate SP-1+ by S&P which do not mature or have a demand feature at par exercisable within the Moody's Exposure Period and which do not have a long-term rating. (4) For the purposes of the definition of Moody's Eligible Assets, these securities will have an assumed rating of "A" by Moody's. B-24 Notwithstanding the foregoing, (i) the Moody's Discount Factor for short-term municipal securities will be 115%, so long as such municipal securities are rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or have a demand feature at par exercisable within the Moody's Exposure Period or 125% as long as such municipal securities are rated at least A-1-/AA or SP-1+/AA by S&P and mature or have a demand feature at par exercisable within the Moody's Exposure Period and (ii) no Moody's Discount Factor will be applied to cash or to Receivables for Municipal Securities Sold. "Moody's Eligible Asset" shall mean cash, Receivables for Municipal Securities Sold or a municipal security that (i) pays interest in cash, (ii) is publicly rated Baa or higher by Moody's or, if not rated by Moody's but rated by S&P, is rated at least BBB by S&P (provided that, for purposes of determining the Moody's Discount Factor applicable to any such S&P-rated municipal security, such municipal security (excluding any short-term municipal security) shall be deemed to have a Moody's rating which is one full rating category lower than its S&P rating), (iii) does not have its Moody's rating suspended by Moody's; and (iv) is part of an issue of municipal securities of at least $10,000,000. Municipal securities issued by any one issuer and rated BBB by S&P may comprise no more than 4% of total Moody's Eligible Assets; such BBB-rated municipal securities, if any, together with any municipal securities issued by the same issuer and rated Baa by Moody's or A by S&P, may comprise no more than 6% of total Moody's Eligible Assets; such BBB, Baa and A-rated municipal securities, if any, together with any municipal securities issued by the same issuer and rated A by Moody's or AA by S&P, may comprise no more than 10% of total Moody's Eligible Assets; and such BBB, Baa, A and AA rated municipal securities, if any, together with any municipal securities issued by the same issuer and rated Aa by Moody's or AAA by S&P, may comprise no more than 20% of total Moody's Eligible Assets. For purposes of the foregoing sentence, any municipal security backed by the guaranty, letter of credit or insurance issued by a third party shall be deemed to be issued by such third party if the issuance of such third party credit is the sole determinant of the rating on such municipal security. Municipal securities issued by issuers located within a single state or territory and rated BBB by S&P may comprise no more than 12% of total Moody's Eligible Assets; such BBB-rated municipal securities, if any, together with any municipal securities issued by issuers located within the same state or territory and rated Baa by Moody's or A by S&P may comprise no more than 20% of total Moody's Eligible Assets; such BBB, Baa and A rated municipal securities, if any, together with any municipal securities issued by issuers located within the same state or territory and rated A by Moody's or AA by S&P, may comprise no more than 40% of total Moody's Eligible Assets; and such BBB, Baa, A and AA-rated municipal securities, if any, together with any municipal securities issued by issuers located within the same state or territory and rated Aa by Moody's or AAA by S&P, may comprise no more than 60% of total Moody's Eligible Assets. For purposes of applying the foregoing requirements, a municipal security shall be deemed to be rated BBB by S&P if rated BBB or BBB+ by S&P. Moody's Eligible Assets shall be calculated without including cash and municipal securities rated MIG-1 or VMIG-1 or, if not rated by Moody's, rated SP-1+ by S&P, which either mature or have a demand feature at par exercisable within the Moody's Exposure Period. Municipal securities which constitute Moody's Eligible Assets subject to a repurchase agreement will constitute Moody's Eligible Assets. Cash receivable by the Fund pursuant to a repurchase agreement that obligates the other party thereto to repurchase municipal securities will only constitute a Moody's Eligible Asset if the long-term debt of such other party is rated at least A2 by Moody's and such agreement has a term of 30 days or less. Notwithstanding the foregoing, an asset will not be considered a Moody's Eligible Asset to the extent that is has been deposited for the payment of (i)(A) through (i)(G) under the definition of APS Basic Maintenance Amount or it is subject to any material lien, mortgage, pledge, security interest or security agreement of any kind (collectively, "Liens"), except for (a) Liens which are being contested in good faith by appropriate proceedings and which Moody's has indicated to the Fund will not affect the status of such asset as a Moody's Eligible Asset, (b) Liens for taxes that are not then due and payable or that can be paid thereafter without penalty, (c) Liens to secure payment for services rendered or cash B-25 advanced to the Fund by Van Kampen Merritt Investment Advisory Corp., the Administrator, State Street Bank and Trust Company or the Auction Agent and (d) Liens by virtue of any repurchase agreement. "Moody's Exposure Period" shall mean the period commencing on a given Valuation Date and ending 46 days thereafter. "Moody's Hedging Transactions" shall mean transactions in options on securities, futures contracts based on the Municipal Index or Treasury Bonds and options on such futures contracts. "Municipal Index" shall mean The Bond Buyer Municipal Bond Index. "1940 Act" shall mean the Investment Company Act of 1940, as amended from time to time. "1940 Act APS Asset Coverage" shall mean asset coverage, as defined in Section 18(h) of the 1940 Act, of at least 200% with respect to all outstanding senior securities of the Fund which are stock, including all outstanding APS (or such other asset coverage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities which are stock of a closed-end investment company as a condition of declaring dividends on its common stock). "1940 Act Cure Date," with respect to the failure by the Fund to maintain the 1940 Act APS Asset Coverage (as required by Section 8 of this Part I) as of the last Business Day of each month, shall mean the last Business Day of the following month. "Non-call Period" shall have the meaning set forth below under "Specific Redemption Provisions." "Notice of Redemption" shall mean any notice with respect to the redemption of the APS pursuant to Section 3 of this Part I. "Optional Redemption Price" shall mean (i) $50,000 per share of APS in the case of a 7-day or 28-day Dividend Period or a Special Dividend Period of less than 365 days or (ii) with respect to a Special Dividend Period of 365 days or more the Optional Redemption Price set forth in the Specific Redemption Provisions in connection therewith; in each case plus an amount equal to accumulated but unpaid dividends thereon to the date of redemption (whether or not earned or declared). "Preferred Shares" shall mean the authorized preferred shares of beneficial interest, par value $.01 per share, of the Fund, and includes the APS. "Premium Call Period" shall have the meaning set forth below under "Specific Redemption Provisions." "Pricing Service" means Van Kampen Merritt Investment Advisory Corp., acting pursuant to a Fund Pricing Agreement between the Fund and Van Kampen Merritt Investment Advisory Corp. and any successor pricing service approved in writing by Moody's (if Moody's is then rating the APS) and S&P (if S&P is then rating the APS). "Projected Dividend Amount" means, with respect to the shares of any series of APS, on any Valuation Date in the event the then current Dividend Period will end within 47 calendar days of such date, from and after the last day of such Dividend Period until 47 calendar days less the number of days remaining in the current Dividend Period at an Applicable Rate equal to the Maximum Rate for such Dividend Period multiplied by the larger of the factors (currently 304%) that the Fund has been informed B-26 by Moody's and S&P is applicable to the Projected Dividend Amount and designed to take into account increases in dividend rates over such period. "Quarterly Valuation Date" shall mean the last Business Day of each fiscal quarter of the Fund in each fiscal year of the Fund, commencing February 29, 1992. "Rate Period," with respect to any series of APS, shall mean the Initial Dividend Period thereof and any Subsequent Dividend Period, including any Special Dividend Period, for such series. "Rate Period Days," for any Rate Period consisting of less than four Dividend Periods, shall mean the number of days (without giving effect to subparagraph (b)(ii) of Section 2 of this Part 1) in such Rate Period. "Receivables for Municipal Securities Sold" shall mean (A) for purposes of calculation of Moody's Eligible Assets as of any Valuation Date, no more than the aggregate of the following: (i) the book value of receivables for municipal securities sold as of or prior to such Valuation Date if such receivables are due within five business days of such Valuation Date, and if the trades which generated such receivables are (x) settled through clearing house firms with respect to which the Fund has received prior written authorization from Moody's or (y) with counterparties having a Moody's long-term debt rating of at least Baa3; and (ii) the Moody's Discounted Value of municipal securities sold as of or prior to such Valuation Date which generated receivables, if such receivables are due within the Moody's Exposure Period but do not comply with either of the conditions specified in (i) above, and (B) for purposes of calculation of S&P Eligible Assets as of any Valuation Date, the book value of receivables for municipal securities sold as of or prior to such Valuation Date if such receivables are due within five business days of such Valuation Date. "Redemption Price" shall mean the Optional Redemption Price or the Mandatory Redemption Price, as applicable. "Retroactive Taxable Allocation" shall have the meaning set forth in Section 12 hereof. "S&P" shall mean Standard & Poor's Fund, a New York corporation, and its successors. "S&P Discount Factor" shall mean, for purposes of determining the Discounted Value of any S&P Eligible Asset, the percentage determined by reference to the rating on such asset and the shortest Exposure Period set forth opposite such rating that is the same length as or is longer than the S&P Exposure Period, in accordance with the table set forth below:
Rating Category -------------------------------------- Exposure Period AAA* AA* A* BBB* - --------------- --- --- -- ---- 40 Business Days.......................... 190% 195% 210% 250% 22 Business Days.......................... 170 175 190 230 10 Business Days.......................... 155 160 175 215 7 Business Days........................... 150 155 170 210 3 Business Days........................... 130 135 150 190
* S&P rating. Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term municipal securities will be 115%, so long as such municipal securities are rated A-1+ or SP-1+ by S&P and mature or have a B-27 demand feature exercisable within 30 days or less, or 125% if such municipal securities are not rated by S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however, that any such Moody's rated short-term municipal securities which have demand features exercisable within 30 days or less must be backed by a letter of credit, liquidity facility or guarantee from a bank or other financial institution with a short-term rating of at least A-1+ from S&P; and further provided that such Moody's rated short-term municipal securities may comprise no more than 50% of short-term municipal securities that qualify as S&P Eligible Assets and (ii) no S&P Discount Factor will be applied to cash or to Receivables for Municipal Securities Sold. For purposes of the foregoing, Anticipation Notes rated SP1+ or, if not rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do not mature or have a demand feature at par exercisable in 30 days and which do not have a long-term rating, shall be considered to be short-term municipal securities. "S&P Eligible Asset" shall mean cash (excluding any cash irrevocably deposited by the Fund for the payment of any liabilities within the mean of APS Basic Maintenance Amount), Receivables for Municipal Securities Sold or a municipal security owned by the Fund that (i) is interest bearing and pays interest at least semi-annually; (ii) is payable with respect to principal and interest in U.S. Dollars; (iii) is publicly rated BBB or higher by S&P or, if not rated by S&P but rated by Moody's, is rated at least A by Moody's (provided that such Moody's-rated municipal securities will be included in S&P Eligible Assets only to the extent the Market Value of such municipal securities does not exceed 50% of the aggregate Market Value of S&P Eligible Assets; and further provided that, for purposes of determining the S&P Discount Factor applicable to any such Moody's-rated municipal security, such municipal security will be deemed to have an S&P rating which is one full rating category lower than its Moody's rating); (iv) is not part of a private placement of municipal securities; and (v) is part of an issue of municipal securities with an original issue size of at least $20 million or, if an issue with an original issue size below $20 million (but in no event below $10 million), is issued by an issuer with a total of at least $50 million of securities outstanding. Solely for purposes of this definition, the term "municipal securities" means any obligation the interest on which is exempt from regular Federal income taxation and which issued by any of the fifty United States, the District of Columbia or any of the territories of the United States, their subdivisions, counties, cities, towns, villages, school districts and agencies (including authorities and special districts created by the states), and federally sponsored agencies such as local housing authorities. Notwithstanding the foregoing limitations: (1) Municipal securities of any one issuer or guarantor (excluding bond insurers) shall be considered S&P Eligible Assets only to the extent the Market Value of such municipal securities does not exceed 10% of the aggregate Market Value of S&P Eligible Assets provided that 2% is added to the applicable S&P Discount Factor for every 1% by which the Market Value of such municipal securities exceeds 5% of the aggregate Market Value of S&P Eligible Assets; (2) Municipal securities guaranteed or insured by any one bond insurer shall be considered S&P Eligible Assets only to the extent the Market Value of such municipal securities does not exceed 25% of the aggregate Market Value of S&P Eligible Assets; and (3) Long-term municipal securities issued by issuers in any one state or territory shall be considered S&P Eligible Assets only to the extent the Market Value of such municipal securities does not exceed 20% of the aggregate Market Value of S&P Eligible Assets. "S&P Exposure Period" shall mean the maximum period of time following a Valuation Date that the Fund has under this Certificate of Vote to cure any failure to maintain, as of such Valuation Date, the Discounted Value for its portfolio at least equal to the APS Basic Maintenance Amount (as described in paragraph (a) of Section 9 of this Part I). B-28 "S&P Hedging Transactions" means futures contracts based on the Municipal Index or Treasury Bonds, put and call options on such contracts purchased by the Fund and covered call options and secured put options on portfolio securities written by the Fund. "Special Dividend Period," with respect to any series of APS, shall mean any Subsequent Dividend Period commencing on the date designated by the Fund in accordance with Section 4 of this Part I and ending on the last day of the last Dividend Period thereof, with such number of consecutive days or whole years as the Board of Trustees shall specify, including the terms of any Specific Redemption Provisions, if any. "Specific Redemption Provisions" means, with respect to any Special Dividend Period of 365 or more days, either, or any combination of, (i) period (a "Non-Call Period") determined by the Board of Trustees, after consultation with the Broker-Dealers, during which the shares subject to such Special Dividend Period are not subject to redemption at the option of the Fund and (ii) a period (a "Premium Call Period"), consisting of a number of whole years and determined by the Board of Trustees, after consultation with the Broker-Dealers, during each year of which the shares subject to such Special Dividend Period shall be redeemable at the Fund's option at a price per share equal to $50,000 plus accumulated but unpaid dividends plus a premium expressed as a percentage of $50,000 as determined by the Board of Trustees after consultation with the Broker-Dealers; provided, that during any Special Dividend Period of 365 or more days if on the date of determination of the Applicable Rate for such series, such Applicable Rate equaled or exceeded the Treasury Rate, the Fund may redeem APS without regard to any Non-Call Period or Premium Call Period at the Mandatory Redemption Price. "Subsequent Dividend Period," with respect to any series of APS, shall mean the period from and including the first day following the Initial Rate Period thereof to but excluding the next Dividend Payment Date for such series and any period thereafter from and including one Dividend Payment Date for such series to but excluding the next succeeding Dividend Payment Date for such series; provided, however, that if any Subsequent Dividend Period is also a Special Dividend Period, such term shall mean the period commencing on the first day of such Special Dividend Period and ending on the last day of the last Dividend Period thereof. "Substitute Commercial Paper Dealer" shall mean The First Boston Company or Morgan Stanley & Co. Incorporated or their respective affiliates or successors, if such entity is a Commercial Paper Dealer; provided that none of such entities shall be a Commercial Paper Dealer. "Substitute U.S. Government Securities Dealer" shall mean The First Boston Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated or their respective affiliates or successors, if such entity is a U.S. Government securities dealer; provide that none of such entities shall be a U.S. Government Securities Dealer. "Treasury Bonds" shall mean United States Treasury Bonds backed by the full faith and credit of the United States government with remaining maturities of 10 years or more. "Treasury Rate," on any date for any Rate Period, shall mean (i) the yield on the most recently auctioned non-callable direct obligations of the U.S. Government (excluding "flower" bonds) with a remaining maturity within three months of the duration of such Rate Period, as quoted in The Wall Street Journal on such date for the Business Day next preceding such date; or (ii) in the event that any such rate is not published by The Wall Street Journal, then the arithmetic average of the yields (expressed as an interest equivalent in the case of a Rate Period consisting of four Dividend Periods and express as a bond equivalent in the case of any longer Rate Period) on the most recently auctioned non-callable direct obligations of the U.S. Government (excluding "flower" bonds) with a remaining maturity within three B-29 months of the duration of such Rate Period as quoted on a discount basis or otherwise by the U.S. Government Securities Dealers to the Auction Agent for the close of business on the Business Day immediately preceding such date. If any U.S. Government Securities Dealer does not quote a rate required to determine the Treasury Rate, the Treasury Rate shall be determined on the basis of the quotation or quotations furnished by the remaining U.S. Government Securities Dealer or U.S. Government Securities Dealers and any Substitute U.S. Government Securities Dealers selected by the Fund to provide such rate or rates not being supplied by any U.S. Government Securities Dealer or U.S. Government Securities Dealers, as the case may be, or, if the Fund does not select any such Substitute U.S. Government Securities Dealer or Substitute U.S. Government Securities Dealers, by the remaining U.S. Government Securities Dealer or U.S. Government Securities Dealers. "U.S. Government Securities Dealer" shall mean Goldman, Sachs & Co., Lehman Government Securities Incorporated, Smith Barney, Harris Upham & Co. and Morgan Guaranty Trust Company of New York or their respective affiliates or successors, if such entity is a U.S. Government securities dealer. "Valuation Date" shall mean, for purposes of determining whether the Fund is maintaining the APS Basic Maintenance Amount and the Minimum Liquidity Level, each Business Day. "Variation Margin" shall mean, in connection with outstanding purchase or sale positions in futures contracts and outstanding sales positions with respect to options thereon, the amount of cash and securities paid to and received from a futures commission merchant (subsequent to the Initial Margin payment) from time to time as the value of such position fluctuates. "Voting Period" shall have the meaning set forth in paragraph (b) of Section 5 of this Part I. ARTICLE B. Certain Definitions. Capitalized terms not defined in Section 1 of this Part II shall have the respective meaning specified in Part I hereof. As used in this Part II, the following terms shall have the following meanings, unless the context otherwise requires: 1. "Affiliate" shall mean any Person known to the Auction Agent to be controlled by, in control of or under common control with the Fund; provided that no Broker-Dealer controlled by, in control of or under common control with the Fund shall be deemed to be an Affiliate nor shall any fund or any Person controlled by, in control of or under common control with such fund one of the trustees or executive officers of which is also a trustee of the Fund be deemed to be an Affiliate solely because such trustee or executive officer is also a trustee of the Fund. 2. "Agent Member" shall mean a member of or participant in the Securities Depository that will act on behalf of a Bidder and is identified as such in such Bidder's Master Purchaser's Letter. "Applicable Percentage" for any series of APS on any Auction Date shall mean the percentage, determined as set forth below, based on the prevailing rating of such series in effect at the close of business on the Business Day next preceding such Auction Date.
PREVAILING RATING PERCENTAGE ----------------- ---------- "aa3"/AA- or higher............................... 110% "a3"/A-........................................... 125% "baa3"/BBB........................................ 150% "ba3"/BB-......................................... 200% Below "ba3"/BB-................................... 250%
B-30 provided, however, that in the event the Fund has notified the Auction Agent of its intent to allocate income taxable for federal income tax purposes to the APS prior to the Auction establishing the Applicable Rate for such shares the applicable percentage in the foregoing table shall be divided by the quantity 1 minus the maximum marginal regular federal individual income tax rate applicable to ordinary income or the maximum marginal regular federal corporate income tax rate, whichever is greater, provided further, however, that the Applicable Percentage shall be divided in the foregoing manner only to the extent of the portion of the dividend on the APS for such Rate Period that represents the allocation of taxable income to the APS. For purposes of this definition, the "prevailing rating" of shares of a series of APS shall be (i) "aa3"/AA- or higher if shares of such series of APS have a rating of "aa3" or better by Moody's and AA- or better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (ii) if not "aa3"/AA- or higher, then "a3"/A- if the shares of such series of APS have a rating of "a3" or better by Moody's and A- or better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (iii) if not "aa3 "/AA- or higher or "a3"/A-, then "baa3"BBB- if the shares of such series of APS have a rating of "baa3" or better by Moody's and BBB- or better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (iv) if not "aa3"/AA- or higher, "a3"/A- or "baa3"BBB-, then "ba3"BB- if the shares of such series of APS have a rating of "ba3" or better by Moody's and BB- or better by S&P or the equivalent of such ratings by such agencies or substitute rating agency or substitute rating agencies selected as provided below, and (v) if not "aa3"/AA- or higher, "a3"/A-, "baa3"BBB- or "ba3"BB-, then Below "ba3"BB-, provided, however, that if the APS are rated by only one rating agency, the prevailing rating will be determined without reference to the rating of any other rating agency. The Fund shall take all reasonable action necessary to enable either S&P or Moody's to provide a rating for each series of APS. If neither S&P nor Moody's shall make such a rating available, Goldman, Sachs & Co. or Smith Barney, Harris Upham & Co. Incorporated or their successors as Broker-Dealers shall select a nationally recognized statistical rating organization (as that term is used in the rules and regulations of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended from time to time) to act as a substitute rating agency in respect of the APS and the Fund shall take all reasonable action to enable such rating agency or agencies to provide a rating for shares of such series. "Available APS" shall have the meaning specified in paragraph (a) of Section 4 of this Part II. "Bid" and "Bids" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. "Bidder" and "Bidders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. "Broker-Dealer" shall mean any broker-dealer, commercial bank or other entity permitted by law to perform the functions required of a Broker-Dealer in this Part II, that is a member of, or a participant in, the Securities Depository or is an affiliate of such member or participant, has been selected by the Fund and has entered into a Broker-Dealer Agreement that remains effective. "Broker-Dealer Agreement" shall mean an agreement between the Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in this Part II. B-31 "Existing Holder," when used with respect to shares of any series of APS, shall mean a Person who has signed a Master Purchaser's Letter and is listed as the beneficial owner of such APS in the records of the Auction Agent. "Hold Order" and "Hold Orders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. "Master Purchaser's Letter" shall mean a letter, addressed to the Fund, the Auction Agent, a Broker-Dealer and an Agent Member in which a Person agrees, among other things, to offer to purchase, to purchase, to offer to sell and/or to sell APS as set forth in this Part II. "Maximum Rate," for any series of APS on any Auction Date, shall mean: (a) in the case of any Auction Date which is not the Auction Date immediately prior to the first day of any proposed Special Dividend Period designated by the Fund pursuant to Section 4 of Part I of the Certificate of Vote, the product of (A) the "AA" Composite Commercial Paper Rate on such Auction Date for the next Rate Period of such series and (B) the Applicable Percentage on such Auction Date, unless such series has or had a Special Dividend Period (other than a Special Dividend Period of 28 Rate Period Days or less) and an Auction at which Sufficient Clearing Bids existed has not yet occurred for a Minimum Dividend Period of such series after such Special Dividend Period, in which case the higher of: the dividend rate on shares of such series for the then-ending Rate Period, and the product of (1) the higher of (x) the "AA" Composite Commercial Paper Rate on such Auction Date for the then-ending Rate Period of such series, if such Rate Period consists of less than four Dividend Periods, or the Treasury Rate on such Auction Date for such Rate Period, if such Rate Period consists of four or more Dividend Periods, and (y) the "AA" Composite Commercial Paper Rate on such Auction Date for such Special Dividend Period of such series, if such Special Dividend Period consists of less than four Dividend Periods, or the Treasury Rate on such Auction Date for such Special Dividend Period, if such Special Dividend Period consists of four or more Dividend Periods and (2) the Applicable Percentage on such Auction Date; or in the case of any Auction Date which is the Auction Date immediately prior to the first day of any proposed Special Dividend Period designated by the Fund pursuant to Section 4 of Part I of the Certificate of Vote, the product of (A) the highest of (1) the "AA" Composite Commercial Paper Rate on such Auction Date for the then-ending Rate Period of such series, if such Rate Period consists of less than four Dividend Periods, or the Treasury Rate on such Auction Date for such Rate Period, if such Rate Period consists of four or more Dividend Periods, (2) the "AA" Composite Commercial Paper Rate on such Auction Date for the Special Dividend Period for which the Auction is being held if such Special Dividend Period consists of less than four Dividend Periods or the Treasury Rate on such Auction Date for the Special Dividend Period for which the Auction is being held if such Special Dividend Period consists of four or more Dividend Periods, and (3) the "AA" Composite Commercial Paper Rate on such Auction Date for Minimum Dividend Periods and (B) the Applicable Percentage on such Auction Date. "Order" and "Orders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. B-32 "Outstanding" shall mean, as of any Auction Date with respect to shares of any series of APS, the number of shares of such series theretofore issued by the Fund except, without duplication, (i) any shares of such series of APS theretofore cancelled or delivered to the Auction Agent for cancellation or redeemed by the Fund or as to which a notice of redemption shall have been given by the Fund, (ii) any shares of such series of APS as to which the Fund or any Affiliate thereof shall be an Existing Holder and (iii) any shares of such series of APS represented by any certificate in lieu of which a new certificate has been executed and delivered by the Fund. "Person" shall mean and include an individual, a partnership, a fund, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof. "Potential Holder," when used with respect to shares of any series of APS, shall mean any Person, including any Existing Holder of shares of such series of APS, (i) who shall have executed a Master Purchaser's Letter and (ii) who may be interested in acquiring shares of such series of APS (or, in the case of an Existing Holder of shares of such series of APS, additional shares of such series of APS). "Securities Depository" shall mean The Depository Trust Company and its successors and assigns or any other securities depository selected by the Fund which agrees to follow the procedures required to be followed by such securities depository in connection with the APS. "Sell Order" and "Sell Orders" shall have the respective meanings specified in paragraph (a) of Section 2 of this Part II. "Submission Deadline" shall mean 1:30 p.m., New York City time, on any Auction Date or such other time on any Auction Date by which Brokers-Dealers are required to submit Orders to the Auction Agent as specified by the Auction Agent from time to time. "Submitted Bid" and "Submitted Bids" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. "Submitted Hold Order" and "Submitted Hold Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part IL "Submitted Order" and "Submitted Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. "Submitted Sell Order" and "Submitted Sell Orders" shall have the respective meanings specified in paragraph (a) of Section 4 of this Part II. "Sufficient Clearing Bids" shall have the meaning specified in paragraph (a) of Section 4 of this Part 11. "Winning Bid Rate" shall have the meaning specified in paragraph (a) of Section 4 of this Part 11. Orders by Existing Holders and Potential Holders. (a) Prior to the Submission Deadline on each Auction Date: (a) each Existing Holder of shares of any series of APS subject to an Auction on such Auction Date may submit to a Broker-Dealer by telephone or otherwise information as to: B-33 the number of Outstanding shares, if any, of such series of APS held by such Existing Holder which such Existing Holder desires to continue to hold without regard to the Applicable Rate for such series for the next succeeding Rate Period of such series; the number of Outstanding shares, if any, of such series of APS which such Existing Holder offers to sell if the Applicable Rate for such series for the next succeeding Rate Period of such series shall be less than the rate per annum specified by such Existing Holder; and/or the number of Outstanding shares, if any, of such series of APS held by such Existing Holder which such Existing Holder offers to sell without regard to the Applicable Rate for such series for the next succeeding Rate Period of such series; and one or more Broker-Dealers, using lists of Potential Holders, shall in good faith for the purpose of conducting a competitive Auction in a commercially reasonable manner, contact Potential Holders (by telephone or otherwise), including Persons that are not Existing Holders, on such lists to determine the number of shares, if any, of such series of APS which each such Potential Holder offers to purchase if the Applicable Rate for such series for the next succeeding Rate Period of such series shall not be less than the rate per annum specified by such Potential Holder. For the purposes hereof, the communication to a Broker-Dealer of information referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this paragraph (a) is hereinafter referred to as an "Order" and collectively as "Orders" and each Existing Holder and each Potential Holder placing an Order is hereinafter referred to as a "Bidder" and collectively as "Bidders"; an Order containing the information referred to in clause (i)(A) of this paragraph (a) is hereinafter referred to as a "Hold Order" and collectively as "Hold Orders"; an Order containing the information referred to in clause (i)(B) or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and collectively as "Bids"; and an Order containing the information referred to in clause (i)(C) of this paragraph (a) is hereinafter referred to as a "Sell Order" and collectively as "Sell Orders." 2. (i) A bid by an Existing Holder of shares of any series of APS subject to an Auction on any Auction Date shall constitute an irrevocable offer to sell: the number of Outstanding shares of such series of APS specified in such Bid if the Applicable Rate for such series determined on such Auction Date shall be less than the rate specified therein: such number or a lesser number of Outstanding shares of such series of APS to be determined as set forth in clause (iv) of paragraph (a) of Section 5 of this Part II if the Applicable Rate for such series determined on such Auction Date shall be equal to the rate specified therein; or the number of Outstanding shares of such series of APS specified in such Bid if the rate specified therein shall be higher than the Maximum Rate for such series, or such number or a lesser number of Outstanding shares of such series of APS to be determined as set forth in clause (iii) of paragraph (b) of Section 5 of this Part 11 if the rate specified therein shall be higher than the Maximum Rate for such series and Sufficient Clearing Bids for such series do not exist. (b) A Sell Order by an Existing Holder of shares of any series of APS subject to an Auction on any Auction Date shall constitute an irrevocable offer to sell: B-34 (i) the number of Outstanding shares of such series of APS specified in such Sell Order; or such number or a lesser number of Outstanding shares of such series of APS as set forth in clause (iii) of paragraph (b) of Section 5 of this Part II if Sufficient Clearing Bids for such series do not exist. A Bid by a Potential Holder of shares of any series of APS subject to an Auction on any Auction Date shall constitute an irrevocable offer to purchase: the number of Outstanding shares of such series of APS specified in such Bid if the Applicable Rate for such series determined on such Auction Date shall be higher than the rate specified therein; or such number or a lesser number of Outstanding shares of such series of APS as set forth in clause (v) of paragraph (a) of Section 5 of this Part II if the Applicable Rate for such series determined on such Auction Date shall be equal to the rate specified therein. No Order for any number of shares of any series of APS other than whole shares shall be valid. Submission of Orders by Broker-Dealers to Auction Agent. (a) Each Broker-Dealer shall submit in writing to the Auction Agent prior to the Submission Deadline on each Auction Date all Orders for shares of any series of APS subject to an Auction on such Auction Date obtained by such Broker-Dealer and shall specify with respect to each Order for such shares: (b) the name of the Bidder placing such Order; the aggregate number of shares of such series of APS that are the subject of such Order; to the extent that such Bidder is an Existing Holder of shares of such series of APS: the number of shares, if any, of such series of APS subject to any Hold Order placed by such Existing Holder; the number of shares, if any, of such series of APS subject to any Bid placed by such Existing Holder and the rate specified in such Bid; and the number of shares, if any, of such series of APS subject to any Sell Order placed by such Existing Holder; and to the extent such Bidder is a Potential Holder of shares of such series of APS, the rate and number of shares of such series of APS specified in such Potential Holder's Bid. 2. If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Auction Agent shall round such rate up to the next highest one thousandth (.001) of 1%. If an Order or Orders covering all of the Outstanding shares of any series of APS held by any Existing Holder is not submitted to the Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a Hold Order to have been submitted on behalf of such Existing Holder covering the number of B-35 Outstanding shares of such series of APS held by such Existing Holder and not subject to Orders submitted to the Auction Agent. If any Existing Holder submits through a Broker-Dealer to the Auction Agent one or more Orders covering in the aggregate more than the number of Outstanding shares of any series of APS subject to an Auction held by such Existing Holder, such Orders shall be considered valid in the following order of priority: (a) all Hold Orders for shares of such series of APS shall be considered valid, but only up to and including in the aggregate the number of Outstanding shares of such series of APS held by such Existing Holder, and if the number of shares of such series of APS subject to such Hold Orders exceeds the number of Outstanding shares of such series of APS held by such Existing Holder, the number of shares subject to each such Hold Order shall be reduced pro rata to cover the number of Outstanding shares of such series of APS held by such Existing Holder; (A) any Bid for shares of such series of APS shall be considered valid up to and including the excess of the number of Outstanding shares of such series of APS held by such Existing Holder over the number of shares of such series of APS subject to any Hold Orders referred to in clause (i) above; (ii) subject to subclause (A), if more than one Bid for shares of such series of APS with the same rate is submitted on behalf of such Existing Holder and the number of Outstanding shares of such series of APS subject to such Bids is greater than such excess, such Bids shall be considered valid up to and including the amount of such excess, and the number of shares of such series of APS subject to each Bid with the same rate shall be reduced pro rata to cover the number of shares of such series of APS equal to such excess; subject to subclauses (A) and (B), if more than one Bid for shares of such series of APS with different rates is submitted on behalf of such Existing Holder, such Bids shall be considered valid in the ascending order of their respective rates up to and including the amount of such excess; and in any such event, the number, if any, of such Outstanding shares of such series of APS subject to any portion of Bids considered not valid in whole or in part under the clause (ii) shall be treated as the subject of a Bid for shares of such series of APS by a Potential Holder at the rate therein specified; and all Sell Orders for shares of such series of APS shall be considered valid up to and including the excess of the number of Outstanding shares of such series of APS held by such Existing Holder over the sum of the APS subject to valid Hold Orders referred to in clause (i) above and valid Bids by such Existing Holder referred to in clause (ii) above. If more than one Bid for one or more shares of any series of APS is submitted on behalf of any Potential Holder, each such Bid submitted shall be a separate Bid with the rate and number of shares therein specified. An Order submitted by a Broker-Dealer to the Auction Agent prior to the Submission Deadline on any Auction Date shall be irrevocable. B-36 Determination of Sufficient Clearing Bids Winning Bid Rate and Applicable Rate. (a) Not earlier than the Submission Deadline on each Auction Date, the Auction Agent shall assemble all valid Orders submitted or deemed submitted to it by the Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order;" as the case may be, or as a "Submitted Order" and collectively as "Submitted Hold Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted Orders" and shall for each series of APS for which an Auction is being held determine: (a) the excess of the number of Outstanding shares of such series of APS over the number of Outstanding shares of such series of APS subject to Submitted Hold Orders (such excess being hereinafter referred to as the "Available APS" of such series); from the Submitted Orders for such series whether: (i) the number of Outstanding shares of such series of APS subject to Submitted Bids by Potential Holders specifying one or more rates equal to or lower than the Maximum Rate for such series exceeds or is equal to the sum of the number of Outstanding shares of such series of APS subject to Submitted Bids by Existing Holders specifying one or more rates higher than the Maximum Rate for such series; and the number of Outstanding shares of such series of APS subject to Submitted Sell Orders (in the event such excess or such equality exists (other than because the number of shares of such series of APS in subclauses (B) and (C) above is zero because all of the Outstanding shares of such series of APS are subject to Submitted Hold Orders), such Submitted Bids in subclause (A) above being hereinafter referred to collectively as "Sufficient Clearing Bids" for such series); and if Sufficient Clearing Bids for such series exist, the lowest rate specified in such Submitted Bids (the "Winning Bid Rate" for such series) which if: (I) each such Submitted Bid from Existing Holders specifying such lowest rate and (II) all other such Submitted Bids from Existing Holders specifying lower rates were rejected, thus entitling such Existing Holders to continue to hold the shares of such series of APS that are subject to such Submitted Bids; and (J) each such Submitted Bid from Potential Holders specifying such lowest rate and (II) all other such Submitted Bids from Potential Holders specifying lower rates were accepted; would result in such Existing Holders described in subclause (A) above continuing to hold an aggregate number of Outstanding shares of such series of APS which, when added to the number of Outstanding shares of such series of APS to be purchased by such Potential Holders described in subclause (B) above, would equal not less than the Available APS of such series. 2. Promptly after the Auction Agent has made the determinations pursuant to paragraph (a) of this Section 4, the Auction Agent shall advise the Fund of the Maximum Rate for each series of APS for which an Auction is being held on the Auction Date and, based on such determination, the Applicable Rate for each such series for the next succeeding Rate Period thereof as follows: B-37 (b) if Sufficient Clearing Bids for such series exist, that the Applicable Rate for such series for the next succeeding Rate Period thereof shall be equal to the Winning Bid Rate for such series to determined; if Sufficient Clearing Bids for such series do not exist (other than because all of the Outstanding shares of such series of APS are subject to Submitted Hold Orders), that the Applicable Rate for such series for the next succeeding Rate Period thereof shall be equal to the Maximum Rate for such series; or if all of the Outstanding shares of such series of APS are subject to Submitted Hold Orders, that the Applicable Rate for such series for the next succeeding Rate Period thereof shall be equal to the product of (A) (1) the "AA" Composite Commercial Paper Rate on such Auction Date for such Rate Period, if such Rate Period consists of less than four Dividend Periods or (II) the Treasury Rate on such Auction Date for such Rate Period, if such Rate Period consists of four or more Dividend Periods and (B) 1 minus the maximum marginal regular federal individual income tax rate applicable to ordinary income or the maximum marginal regular federal corporate income tax rate, whichever is greater; provided, however, that if the Fund has notified the Auction Agent of its intent to allocate to the APS in such Rate Period any net capital gains or other income taxable for Federal income tax purposes, the Applicable Rate in respect of that portion of the dividend on the APS for such Rate Period that represents the allocation of net capital gains or other income taxable for Federal income tax purposes shall be the rate described in the preceding clause (A)(I) or (II), as applicable, without being multiplied by the factor set forth in the preceding clause (B). Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares. Existing Holders shall continue to hold the APS that are subject to Submitted Hold Orders, and, based on the determinations made pursuant to, paragraph (a) of Section 4 of this Part II, the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Auction Agent shall take such other action as set forth below: 1. If Sufficient Clearing Bids for any series of APS have been made, all Submitted Sell Orders shall be accepted and, subject to the provisions of paragraphs (d) and (e) of this Section 5, Submitted Bids shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids for such series shall be rejected: (a) Existing Holders' Submitted Bids for shares of such series of APS specifying any rate that is higher than the Winning Bid Rate for such series shall be accepted, thus requiring each such Existing Holder to sell the APS subject to such Submitted Bids; Existing Holders' Submitted Bids for shares of such series of APS specifying any rate that is lower than the Winning Bid Rate for such series shall be rejected, thus entitling each such Existing Holder to continue to hold the APS subject to such Submitted Bids; Potential Holders' Submitted Bids for shares of such series of APS specifying any rate that is lower than the Winning Bid Rate shall be accepted; each Existing Holder's Submitted Bid for shares of such series of APS specifying a rate that is equal to the Winning Bid Rate for such series shall be rejected, thus entitling such Existing Holder to continue to hold the APS subject to such Submitted Bid, unless the number of Outstanding shares of such series of APS subject to all such Submitted Bids shall be greater than B-38 the number of shares of such series of APS ("remaining shares") in the excess of the Available APS of such series over the number of the APS subject to Submitted Bids described in clauses (ii) and (iii) of this paragraph (a), in which event such Submitted Bid of such Existing Holder shall be rejected in part, and such Existing Holder shall be entitled to continue to hold the APS subject to such Submitted Bid, but only in an amount equal to the number of shares of such series of APS obtained by multiplying the number of remaining shares by a fraction, the numerator of which shall be the number of Outstanding shares of such series of APS held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding shares of such series of APS subject to such Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate for such series; and each Potential Holder's Submitted Bid for shares of such series of APS specifying a rate that is equal to the Winning Bid Rate for such series shall be accepted but only in an amount equal to the number of shares of such series of APS obtained by multiplying the number of shares in the excess of the Available APS of such series over the number of the APS subject to Submitted Bids described in clauses (ii) through (iv) of this paragraph (a) by a fraction, the numerator of which shall be the number of Outstanding shares of such series of APS subject to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding shares of such series of APS subject to such Submitted Bids made by all such Potential Holders that specified a rate equal to the Winning Bid Rate for such series; and If Sufficient Clearing Bids for any series of APS have not been made (other than because all of the Outstanding shares of such series of APS are subject to Submitted Hold Orders), subject to the provisions of paragraph (d) of this Section 5, Submitted Orders for such series shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids for such series shall be rejected: (a) Existing Holders' Submitted Bids for shares of such series of APS specifying any rate that is equal to or lower than the Maximum Rate for such series shall be rejected, thus entitling such Existing Holders to continue to hold the APS subject to such Submitted Bids; Potential Holders' Submitted Bids for shares of such series of APS specifying any rate that is equal to or lower than the Maximum Rate for such series shall be accepted; and Each Existing Holder's Submitted Bid for shares of such series of APS specifying any rate that is higher than the Maximum Rate of such series and the Submitted Sell Orders for shares of such series of APS of each Existing Holder shall be accepted, thus entitling each Existing Holder that submitted any such Submitted Bid or Submitted Sell Order to sell the shares of such series of APS subject to such Submitted Bid or Submitted Sell Order, but in both cases only in an amount equal to the number of shares of such series of APS obtained by multiplying the number of shares of such series of APS subject to Submitted Bids described in clause (ii) of this paragraph (b) by a fraction, the numerator of which shall be the number of Outstanding shares of such series of APS held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the aggregate number of Outstanding shares of such series of APS subject to all such Submitted Bids and Submitted Sell Orders. If all of the Outstanding shares of any series of APS are subject to Submitted Hold Orders, all Submitted Bids for such series shall be rejected. If, as a result of the procedures described in clause (iv) or (v) of paragraph (a) or clause (iii) of paragraph (b) of this Section 5, any Existing Holder would be entitled or required to sell, or any Potential B-39 Holder would be entitled or required to purchase, a fraction of a share of APS of any series on any Auction Date, the Auction Agent shall, in such manner as it shall determine in its sole discretion, round up or down the number of shares of such series of APS to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date as a result of such procedures so that the number of shares of such series so purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be whole shares of APS. If, as a result of the procedures described in clause (v) of paragraph (a) of this Section 5, any Potential Holder would be entitled or required to purchase less than a whole share of any series of APS on any Auction Date, the Auction Agent shall, in such manner as it shall determine in its sole discretion, allocate shares of such series of APS for purchase among Potential Holders so that only whole shares of such series of APS are purchased on such Auction Date as a result of such procedures by any Potential Holder, even if such allocation results in one or more Potential Holders not purchasing the APS on such Auction Date. Based on the results of each Auction for a series of APS, the Auction Agent shall determine the aggregate number of shares of such series of APS to be purchased and the aggregate number of shares of such series of APS to be sold by Potential Holders and Existing Holders on whose behalf each Broker-Dealer submitted Bids or Sell Orders and, with respect to each Broker-Dealer, to the extent that such aggregate number of shares to be purchased and such aggregate number of shares to be sold differ, determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers of shares of such series of APS such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or more sellers of shares of such series of APS such Broker-Dealer shall receive, as the case may be, shares of such series of APS. Notification of Allocations. Whenever the Fund intends to include any net capital gains or other income taxable for Federal income tax purposes in any dividend on the APS, the Fund will notify the Auction Agent of the amount to be so included 15 days prior to the Auction Date on which the Applicable Rate for such dividend is to be established. Whenever the Auction Agent receives such notice from the Fund, it will in turn notify each Broker-Dealer, who, on or prior to such Auction Date, in accordance with its Broker-Dealer Agreement, will notify its Existing Holders and Potential Holders believed by it to be interested in submitting an Order in the Auction to be held on such Auction Date. Miscellaneous. (a) To the extent permitted by applicable law, the Board of Trustees may interpret or adjust the provisions of this Certificate of Vote to resolve any inconsistency or ambiguity or to remedy any formal defect, and may amend this Certificate of Vote with respect to any series of APS prior to the issuance of such series. 2. An Existing Holder may sell, transfer or otherwise dispose of the APS only in whole shares and only pursuant to a Bid or Sell Order in accordance with the procedures described in this Part Il or to or through a Broker-Dealer or to a Person that has delivered a signed copy of a Master Purchaser's Letter to the Auction Agent; provided, that in the case of all transfers other than pursuant to Auctions, such Existing Holder, its Broker-Dealer or its Agent Member advises the Auction Agent of such transfer. All of the shares of each series of APS outstanding from time to time shall be represented by one global certificate registered in the name of the Securities Depository or its nominee. Neither the Fund nor any affiliate thereof may submit an Order in any Auction, except that any Broker-Dealer that is an affiliate of the Fund may submit Orders in an Auction, but only if such Orders are not for its own account. B-40 IN WITNESS WHEREOF, the undersigned has caused this Certificate of Vote to be executed as of December 5, 1991. --------------------- Ronald A. Nyberg Secretary State of ) ) ss County of ) Then personally appeared before me Ronald A. Nyberg, who acknowledged the foregoing instrument to be his free act and deed and the free act and deed in his capacity as Secretary of Van Kampen Merritt Municipal Trust. Before me, Notary public My commission Expires: --------------------- B-41 ARTICLES OF AMENDMENT TO THE CERTIFICATE OF VOTE OF TRUSTEES ESTABLISHING FOUR SERIES OF PREFERRED SHARES OF VAN KAMPEN MUNICIPAL TRUST Van Kampen Municipal Trust, a Massachusetts business trust (the "Fund") certifies to the Secretary of State of the Commonwealth of Massachusetts as follows: FIRST: On October 8, 1998, the Board of Trustees, pursuant to the provisions of Article VI of the Amended and Restated Declaration of Trust (the "Declaration of Trust") of the Fund and Section 5 of Part I and Section 7 of Part 11 of the Certificate of Vote of Trustees Establishing Four Series of Preferred Shares (the "Certificate of Vote") of the Fund, authorized and declared a 2-for-1 split of the preferred shares of beneficial Interest of the Fund, par value $.01 per share, liquidation preference $50,000 per share, designated, respectively, Auction Preferred Shares, Series A ("APS Series A"), Auction Preferred Shares, Series B ("APS Series B"), Auction Preferred Shares, Series C ("APS Series C") and Auction Preferred Shares, Series D ("APB Series D") (collectively, the APS Series A, APB Series B, APS Series C and APB Series D are referred to as "APS"). The stock split is to be effected by means of a division of each outstanding share of APS into two preferred shares of beneficial interest, par value $.01 per share, liquidation preference $25,000 per share. SECOND: Pursuant to the provisions of Article VI of the Declaration of Trust and Section 5 of Part I and Section 7 of Part II of the Certificate of Vote, the following amendments to the Certificate of Vote have been duly adopted and approved by a majority of the Trustees of the Fund. (a) The first paragraph of the vote establishing four series of preferred shares of beneficial interest is hereby amended by replacing such paragraph with the following: First: Pursuant to authority expressly vested in the Board of Trustees of the Fund by Article VI of Its Declaration of Trust (which, as amended or restated from time to time is, together with this Certificate of Vote, herein called the "Declaration of Trust"), the Board of Trustees hereby authorizes the issuance of four series of 12,000 shares of Its authorized preferred shares of beneficial interest, par value $.01 per share ("Preferred Shares"), liquidation preference of $25,000 per share, designated, respectively, Auction Preferred Shares, Series A ("APS Series A"), Auction Preferred Shares, Series B ("APB Series B"), Auction Preferred Shares, Series C ("APS Series C") and Auction Preferred Shares, Series D ("APB Series D") (collectively, the APS Series A, APS Series B, APS Series C and APS Series D are referred to as "APB"). (b) The first four paragraphs under the heading "DESIGNATION" of the Certificate of Vote are hereby amended by replacing such paragraphs with the following: APS SERIES A: A series of 3,000 preferred shares of beneficial interest, $.01 par value, liquidation preference $25,000 per share, is hereby designated "Auction Preferred Shares, Series A" (hereinafter, "APB Series A"). Each share of APS Series A shall be issued on December 10, 1991; have an Applicable Rate for its Initial Dividend Period equal to 4.50% per annum, have an Initial Dividend Payment Date of January 7, 1992; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth in Part I and Part II of this Certificate of Vote. The APS Series A shall constitute a separate series of Preferred Shares of B-42 beneficial interest of the Fund, and each share of APS Series A shall be Identical except as provided in Section 3 of Part I of this Certificate of Vote. APS SERIES B: A series of 3,000 preferred shares of beneficial Interest, $.01 par value, liquidation preference $25,000 per share, is hereby designated "Auction Preferred Shares, Series B" (hereinafter, "APS Series B"). Each share of APS Series B shall be issued on December 10, 1991; have an Applicable Rate for its Initial Dividend Period equal to 4.50% per annum, have an Initial Dividend Payment Date of January 15, 1992; and have such other preferences, limitations and relative voting rights, In addition to those required by applicable law or set forth in the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth in Part I and Part II of this Certificate of Vote. The APS Series B shall constitute a separate series of Preferred Shares of beneficial interest of the Fund, and each share of APS Series B shall be Identical except as provided in Section 3 of Part I of this Certificate of Vote. APS SERIES C: A series of 3,000 preferred shares of beneficial Interest, $.01 par value, liquidation preference $25,000 per share, is hereby designated "Auction Preferred Shares, Series C" (hereinafter, "APS Series C"). Each share of APS Series C shall be Issued on December 10, 1991; have an Applicable Rate for its Initial Dividend Period equal to 4.50% per annum, have an Initial Dividend Payment Date of January 9, 1992; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth In the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth in Part I and Part II of this Certificate of Vote. The APS Series C shall constitute a separate series of Preferred Shares of beneficial interest of the Fund, and each share of APS Series C shall be Identical except as provided in Section 3 of Part I of this Certificate of Vote. APS SERIES D: A series of 3,000 preferred shares of beneficial interest, $.01 par value, liquidation preference $25,000 per share, is hereby designated "Auction Preferred Shares, Series D" (hereinafter, "APS Series D"). Each share of APS Series D shall be Issued on December 10, 1991; have an Applicable Rate for Its Initial Dividend Period equal to 4.50% per annum, have an Initial Dividend Payment Date of January 10, 1992; and have such other preferences, limitations and relative voting rights, In addition to those required by applicable law or set forth in the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth In Part I and Part II of this Certificate of Vote. The APS Series D shall constitute a separate series of Preferred Shares of beneficial interest of the Fund, and each share of APS Series D shall be identical except as provided in Section 3 of Part I of this Certificate of Vote. (c) Section 2(c)(ii) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: The amount of dividends per share payable on shares of any series of APS on any date on which dividends shall be payable on shares of such series shall be computed by multiplying the respective Applicable Rate in effect for such series in effect for such Dividend Period or Dividend Periods or part thereof for which dividends have not been paid by a fraction, the numerator of which shall be the number of days in such Dividend Period or Dividend Periods or part thereof and the denominator of which shall be 365 if such Dividend Period is a Rate Period, or is contained in a Rate Period, of less that one year and 360 for all other Dividend Periods, and applying the rate obtained against $25,000. B-43 (d) Section 3(a)(i) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: After the Initial Dividend Period with respect to any series of APB and upon giving a Notice of Redemption, as provided below, the Fund at its option may redeem shares of any series of APS, in whole or in part, on the second Business Day next preceding any Dividend Payment Date applicable to those shares of APS called for redemption, out of funds legally available therefor, at the Optional Redemption Price; provided that during a Special Dividend Period of 365 days or more no share of APS will be subject to optional redemption during any Non-Call Period; provided, that shares of any series of APS may not be redeemed in part of any such partial redemption fewer than 500 shares of such series remain outstanding. (e) Section 5(g) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: Right to Vote with Respect to Certain Other Matters. If the Fund has more than one series of APB outstanding, the affirmative vote of the holders of a majority (unless a higher percentage vote is required under the Declaration of Trust or under this Certificate of Vote) of the outstanding shares of each series of APB, each voting as a separate class, is required with respect to any matter that materially affects the series In a manner different from that of other. series of classes of the Fund's shares, including without limitation any proposal to do the following: (1) increase or decrease the aggregate number of authorized shares of the series; (2) effect any exchange, reclassification, or cancellation of all or part of the shares of the series; (3) effect an exchange, or create a right of exchange, of all or any part of the shares of the series; (4) change the rights or preferences of the shares of the series; (5) change the shares of the series, whether with or without par value, of the same or another class or series; (6) create a new class or series of shares having rights and preferences prior and superior to the shares of the series, or Increase the rights and preferences or the number of authorized shares of a series having rights and preferences prior or superior to the shares of the series; or (7) cancel or otherwise affect distributions on the shares of the series that have accrued but have not been declared. To the extent that the interest of a series of APB affected by a matter are substantially identical to the Interests of another series of APS affected by such matter (e.g., a vote of shareholders required under Section 13(a) of the 1940 Act), each such series shall vote together collectively as one class. The vote of holders of each series of APS described above will in each case be in addition to a separate vote of the requisite percentage of Common Shares and APS necessary to authorize the action in question. (f) Section 6(a) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: Upon the dissolution, liquidation or winding up of the affairs of the Fund, whether voluntary or Involuntary, the Holders of the APS then outstanding shall be entitled to receive and to be paid out of the assets of the Fund available for distribution to its shareholders, before any payment or distribution shall be made on the Common Shares or on any other class of shares of the Fund ranking junior to the APS upon dissolution, liquidation or winding up, an amount equal to the liquidation preference with respect to such shares. The liquidation preference for the APS shall be $25,000 per share, plus an amount equal to all dividends thereon (whether or not earned or declared) accumulated but unpaid to the date of final distribution In same-day funds, together with any payments B-44 required to be made pursuant to Section 12 in connection with the liquidation of the Fund. (g) Section 15(f) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: "APB Basic Maintenance Amount," as of any Valuation Date, shall mean the dollar amount equal to the sum of (i)(A) the product of the number of APS Outstanding on such date multiplied by $25,000; (B) the aggregate amount of dividends that will have accumulated at the Applicable Rate (whether or not earned or declared) to (but not Including) the first respective Dividend Payment Dates for each of the APS Outstanding that follow such Valuation Date; (C) the amount equal to the Projected Dividend Amount (based on the number of APS Outstanding on such date); (D) the amount of anticipated expenses of the Fund for the 90 days subsequent to such Valuation Date; (E) the amount of the Fund's Maximum Potential Additional Dividend Liability as of such Valuation Dale; (F) the amount of any premium payable pursuant to a Premium Call Period; and (G) any current liabilities as of such Valuation Date to the extent not reflected in any of (i)(A) through (i)(F) (including, without limitation, any amounts described in Section 13 of Part I as required to be treated as liabilities in connection with the Fund's transactions in futures and options and including any payables for municipal securities purchased as of such Valuation Date) less (ii) either (A) the face value of any of the Fund's assets Irrevocably deposited by the Fund for the payment of any of (i)(A) thorough (i)(G) if such assets mature within the Moody's Exposure Period and are either securities issued or guaranteed by the United States Government or have a rating assigned by Moody's of P1, VMIG-1 or MIG-1 (or, with respect to S&P, SP-1+ or A-1+) or (B) the Discounted Value of such assets. For purposes of the APS Basic Maintenance Amount In connection with S&P's ratings of the APS, with respect to any transactions by the Fund in futures contracts, the Fund shall include as liabilities (i) 30% of the aggregate settlement value, as marked to market, of any outstanding futures contracts based on the Municipal Index which are owned by the Fund plus (ii) 25% of the aggregate settlement value, as marked to market, of any outstanding futures contracts based on Treasury Bonds which contracts are owned by the Fund. For purposes of the APB Basic Maintenance Amount In connections with Moody's rating of the APS, with respect to any transactions by the Fund in securities options, the Fund shall include as liabilities (i) 10% of the exercise price of a call option written by the Fund and (ii) the exercise price of any written put option. (h) Section 15(ii) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: "Mandatory Redemption Price" means $25,000 per share of APB plus an amount equal to accumulated but unpaid dividends thereon to the date fixed for redemption (whether or not earned or declared). (i) Section 15(yy) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: "Optional Redemption Price" shall mean (i) $25,000 per share of APB in the case of a 7 day or 26-day Dividend Period or a Special Dividend Period of less than 365 days or (ii) with respect to a Special Dividend Period of 365 days or more the Optional Redemption Price set forth in the Specific Redemption Provisions in connection therewith; in each B-45 case plus an amount equal to accumulated but unpaid dividends thereon to the date of redemption (whether or not earned or declared). (j) Section 15(ppp) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: "Specific Redemption Provisions" means, with respect to any Special Dividend Period of 365 or more days, either, or any combination of, (i) a period (a "Non-Call Period") determined by the Board of Trustees, after consultation with the Broker-Dealers, during which the shares subject to such Special Dividend Period are not subject to redemption at the option of the Fund, and (ii) a period (a "Premium Cell Period"), consisting of a number of whole years and determined by the Board of Trustees, after consultation within the Broker-Dealers, during each year of which the shares subject to such Special Dividend Period shall be redeemable at the Fund's option at a price per share equal to $25,000 plus accumulated by unpaid dividends plus a premium expressed as a percentage of $25,000 as determined but the Board of Trustees after consultation with the Broker-Dealers; provided, that during any Special Dividend Period of 365 or more days if, on the date of determination of the Applicable Rate for such series, such Applicable Rate equaled or exceeded the Treasury Rate, the Fund may redeem APB without regard to any Non-Call Period or Premium Call Period at the Mandatory Redemption Price. B-46 ARTICLES OF AMENDMENT TO THE CERTIFICATE OF VOTE OF TRUSTEES ESTABLISHING FOUR SERIES OF PREFERRED SHARES OF VAN KAMPEN MUNICIPAL TRUST Van Kampen Municipal Trust, a Massachusetts business trust (the "Fund"), certifies to the Secretary of State of the Commonwealth of Massachusetts as follows: FIRST: On October 8, 1998, the Board of Trustees, pursuant to the provisions of Article VI of the Amended and Restated Declaration of Trust (the "Declaration of Trust") of the Fund and Section 5 of Part I and Section 7 of Part II of the Certificate of Vote of Trustees Establishing Four Series of Preferred Shares (the "Certificate of Vote") of the Fund, authorized and declared a 2-for-1 split of the preferred shares of beneficial interest of the Fund, par value $.01 per share, liquidation preference $50,000 per share, designated, respectively, Auction Preferred Shares, Series A ("APS Series A"), Auction Preferred Shares, Series B ("APS Series B"), Auction Preferred Shares, Series C ("APS Series C") and Auction Preferred Shares, Series D ("APS Series D") (collectively, the APS Series A, APS Series B, APS Series C and APS Series D are referred to as "APS"). The stock split is to be effected by means of a division of each outstanding share of APS into two preferred shares of beneficial interest, par value $.01 per share, liquidation preference $25,000 per share. SECOND: Pursuant to the provisions of Article VI of the Declaration of Trust and Section 5 of Part I and Section 7 of Part II of the Certificate of Vote, the following amendments to the Certificate of Vote have been duly adopted and approved by a majority of the Trustees of the Fund. (a) The first paragraph of the vote establishing four series of preferred shares of beneficial interest is hereby amended by replacing such paragraph with the following: First: Pursuant to authority expressly vested in the Board of Trustees of the Fund by Article VI of its Declaration of Trust (which, as amended or restated from time to time is, together with this Certificate of Vote, herein called the "Declaration of Trust"), the Board of Trustees hereby authorizes the issuance of four series of 12,000 shares of its authorized preferred shares of beneficial interest, par value $.01 per share ("Preferred Shares"), liquidation preference of $25,000 per share, designated, respectively, Auction Preferred Shares, Series A ("APS Series A"), Auction Preferred Shares, Series B ("APS Series B"), Auction Preferred Shares, Series C ("APS Series C") and Auction Preferred Shares, Series D B-47 ("APS Series D") (collectively, the APS Series A, APS Series B, APS Series C and APS Series D are referred to as "APS"). (b) The first four paragraphs under the heading "DESIGNATION" of the Certificate of Vote are hereby amended by replacing such paragraphs with the following:. APS SERIES A: A series of 3,000 preferred shares of beneficial interest, $.01 par value, liquidation preference $25,000 per share, is hereby designated Auction Preferred Shares, Series A" (hereinafter, "APS Series A"). Each share of APS Series A shall be issued on December 10, 1991; have an Applicable Rate for its Initial Dividend Period equal to 4.50% per annum, have an Initial Dividend Payment Date of January 7, 1992; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth in Part I and Part 11 of this Certificate of Vote. The APS Series A shall constitute a separate series of Preferred Shares of beneficial interest of the Fund, and each share of APS Series A shall be identical except as provided in Section 3 of Part 1 of this Certificate of Vote. APS SERIES B: A series of 3,000 preferred shares of beneficial interest, $.01 par value, liquidation preference $25,000 per share, is hereby designated "Auction Preferred Shares, Series B" (hereinafter, "APS Series B"). Each share of APS Series B shall be issued on December 10, 1991; have an Applicable Rate for its Initial Dividend Period equal to 4.50% per annum, have an Initial Dividend Payment Date of January 15, 1992; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth in Part I and Part II of this Certificate of Vote. The APS Series B shall constitute a separate series of Preferred Shares of beneficial interest of the Fund, and each share of APS Series B shall be identical except as provided in Section 3 of Part I of this Certificate of Vote. APS SERIES C: A series of 3,000 preferred shares of beneficial interest, $.01 par value, liquidation preference $25,000 per share, is hereby designated "Auction Preferred Shares, Series C" (hereinafter, "APS Series C"). Each share of APS Series C shall be issued on December 10, 1991; have an Applicable Rate for its initial Dividend Period equal to 4.50% per annum, have an Initial Dividend Payment Date of January 9, 1992; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth in Part I and Part II of this Certificate of Vote. The APS Series C shall constitute a separate series of Preferred Shares of beneficial B-48 interest of the Fund, and each share of APS Series C shall be identical except as provided in Section 3 of Part I of this Certificate of Vote. APS SERIES D: A series of 3,000 preferred shares of beneficial interest, $.01 par value, liquidation preference $25,000 per share, is hereby designated "Auction Preferred Shares, Series D" (hereinafter, "APS Series D"). Each share of APS Series D shall be issued on December 10, 1991; have an Applicable Rate for Its Initial Dividend Period equal to 4.50% per annum, have an Initial Dividend Payment Date of January 10, 1992; and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Declaration of Trust applicable to preferred shares of beneficial interest of the Fund, as are set forth in Part 1 and Part 11 of this Certificate of Vote. The APS Series D shall constitute a separate series of Preferred Shares of beneficial interest of the Fund, and each share of APS Series D shall be identical except as provided in Section 3 of Part I of This Certificate of Vote. (c) Section 2 (c)(ii) of Part 1 of the Certificate of Vote is hereby amended to replace such section with the following: The amount of dividends per share payable on shares of any series of APS on any date on which dividends shall be payable on shares of such series shall be computed by multiplying the respective Applicable Rate in effect for such series in effect for such Dividend Period or Dividend Periods or part thereof for which dividends have not been paid by a fraction, the numerator of which shall be the number of days in such Dividend Period or Dividend Periods or part thereof and the denominator of which shall be 365 if such Dividend Period is a Rate Period, or is contained in a Rate Period, of less that one year and 360 for all other Dividend Periods, and applying the rate obtained against $25,000. (d) Section 3 (a)(i) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: After the Initial Dividend Period with respect to any series of APS and upon giving a Notice of Redemption, as provided below, the Fund at its option may redeem shares of any series of APS, in whole or in part, on the second Business Day next preceding any Dividend Payment Date applicable to those shares of APS called for redemption, out of funds legally available therefor, at the Optional Redemption Price; provided that during a Special Dividend Period of 365 days or more no share of APS will be subject to optional redemption during any Non-Call Period; provided, that shares of any series of APS may not be redeemed in part of any such partial redemption fewer than 500 shares of such series remain outstanding. B-49 (e) Section 5 (g) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: Right to Vote with Respect to Certain Other Matters. If the Fund has more than one series of APS outstanding, the affirmative vote of the holders of a majority (unless a higher percentage vote is required under the Declaration of Trust or under this Certificate of Vote) of the outstanding shares of each series of APS, each voting as a separate class, is required with respect to any matter that materially affects the series in a manner different from that of other series of classes of the Fund's shares, including without limitation any proposal to do the following: (1) increase or decrease the aggregate number of authorized shares of the series; (2) effect any exchange, reclassification, or cancellation of all or part of the shares of the series; (3) effect an exchange, or create a right of exchange, of all or any part of the shares of the series; (4) change the rights or preferences of the shares of the series; (5) change the shares of the series, whether with or without par value, of the same or another class or series; (6) create a new class or series of shares having rights and preferences prior and superior to the shares of the series, or increase the rights and preferences or the number of authorized shares of a series having rights and preferences prior or superior to the shares of the series; or (7) cancel or otherwise affect distributions on the shares of the series that have accrued but have not been declared. To the extent that the interest of a series of APS affected by a matter are substantially identical to the interests of another series of APS affected by such matter (e.g., a vote of shareholders required under Section 13(a) of the 1940 Act), each such series shall vote together collectively as one class. The vote of holders of each series of APS described above will in each case be in addition to a separate vote of the requisite percentage of Common Shares and APS necessary to authorize the action in question. (f) Section 6 (a) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: Upon the dissolution, liquidation or winding up of the affairs of the Fund, whether voluntary or involuntary, the Holders of the APB then outstanding shall be entitled to receive and to be paid out of the assets of the Fund available for distribution to its shareholders, before any payment or distribution shall be made on the Common Shares or on any other class of shares of the Fund ranking junior to the APB upon dissolution, liquidation or winding up, an amount equal to the liquidation preference with respect to such shares. The liquidation preference for the APB shall be $25,000 per share, plus an amount equal to all dividends thereon (whether or not earned or declared) accumulated but unpaid to the date of final distribution in same-day funds, together with any payments required to be made pursuant to Section 12 in connection with the liquidation of the Fund. B-50 (g) Section 15 (t) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: "APB Basic Maintenance Amount," as of any Valuation Date, shall mean the dollar amount equal to the sum of (i)(A) the product of the number of APB Outstanding on such date multiplied by $25,000; (B) the aggregate amount of dividends that will have accumulated at the Applicable Rate (whether or not earned or declared) to (but not including) the first respective Dividend Payment Dates for each of the APB Outstanding that follow such Valuation Date; (C) the amount, equal to the Projected Dividend Amount (based on the number of APB Outstanding on such date); (D) the amount of anticipated expenses of the Fund for the 90 days subsequent to such Valuation Date; (E) the amount of the Fund's Maximum Potential Additional Dividend Liability as of such Valuation Date; (F) the amount of any premium payable pursuant to a Premium Call Period; and (G) any current liabilities as of such Valuation Date to the extent not reflected in any of (i)(A) through (i)(F) (including, without limitation, any amounts described in Section 13 of Part I as required to be treated as liabilities in connection with the Fund's transactions in futures and options and including any payables for municipal securities purchased as of such Valuation Date) less (ii) either (A) the face value of any of the Fund's assets irrevocably deposited by the Fund for the payment of any of (i)(A) thorough (i)(G) if such assets mature within the Moody's Exposure Period and are either securities issued or guaranteed by the United States Government or have a rating assigned by Moody's of P-1, VMIG-1 or MIG-1 (or, with respect to S&P, SP-1+ or A-1+) or (B) the Discounted Value of such assets. For purposes of the APB Basic Maintenance Amount In connection with S&P's ratings of the APB, with respect to any transactions by the Fund in futures contracts, the Fund shall include as liabilities (i) 30% of the aggregate settlement value, as marked to market, of any outstanding futures contracts based on the Municipal Index which are owned by the Fund plus (ii) 25% of the aggregate settlement value, as marked to market, of any outstanding futures contracts based on Treasury Bonds which contracts are owned by the Fund. For purposes of the APB Basic Maintenance Amount in connections with Moody's rating of the APB, with respect to any transactions by the Fund in securities options, the Fund shall include as liabilities (i) 10% of the exercise price of a call option written by the Fund and (ii) the exercise price of any written put option. (h) Section 15 (ii) of Part l of the Certificate of Vote is hereby amended to replace such section with the following: "Mandatory Redemption Price" means $25,000 per share of APS plus an amount equal to accumulated but unpaid dividends thereon to the date fixed for redemption (whether or not earned or declared). B-51 (i) Section 15 (yy) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: "Optional Redemption Price" shall mean (i) $25,000 per share of APS in the case of a 7-day or 28-day Dividend Period or a Special Dividend Period of less than 365 days or (ii) with respect to a Special Dividend Period of 365 days or more the Optional Redemption Price set forth in the Specific Redemption Provisions in connection therewith; in each case plus an amount equal to accumulated but unpaid dividends thereon to the date of redemption (whether or not earned or declared). (j) Section 15 (ppp) of Part I of the Car Certificate of Vote is hereby amended to replace such section with the following: "Specific Redemption Provisions" means, with respect to any Special Dividend Period of 365 or more days, either, or any combination of, (i) a period (a "Non-Call Period") determined by the Board of Trustees, after consultation with the Broker-Dealers, during which the shares subject to such Special Dividend Period are not subject to redemption at the option of the Fund, and (H) a period. (a "Premium Call Period"), consisting of a number of whole years and determined by the Board of Trustees, after consultation within the Broker-Dealers, during each year of which the shares subject to such Special Dividend Period shall be redeemable at the Fund's option at a price per share equal to $25,000 plus accumulated by unpaid dividends plus a premium expressed as a percentage of $25,000 as determined but the Board of Trustees after consultation with the Broker-Dealers; provided, that during any Special Dividend Period of 365 or more days if, on the date of determination of the Applicable Rate for such series, such Applicable Rate equaled or exceeded the Treasury Rate, the Fund may redeem APS without regard to any Non-Call Period or Premium Call Period at the Mandatory Redemption Price. B-52 ARTICLES OF AMENDMENT TO THE CERTIFICATE OF VOTE OF TRUSTEES CHANGING THE TIME WHEN THE FUND MUST DELIVER A LETTER FROM AN INDEPENDENT ACCOUNTANT TO RATING AGENCIES Van Kampen Municipal Trust, a Massachusetts business trust (the "Fund"), certifies to the Secretary of State of the Commonwealth of Massachusetts as follows: FIRST: On September 25, 2003, the Board of Trustees of the Fund, pursuant to the provisions of Article VI of the Amended and Restated Declaration of Trust (the "Declaration of Trust") of the Fund and Section 5 of Part I of the Certificate of Vote of Trustees Establishing a Class of Preferred Shares (the "Certificate of Vote") of the Fund, authorized an amendment to the Certificate of Vote to change the timing of filing certain reports with rating agencies from quarterly to annually and to make conforming changes to the Certificate of Vote. SECOND: Pursuant to the provisions of Article VI of the Declaration of Trust and Section 5 of Part I of the Certificate of Vote of the Fund, the following amendments to the Certificate of Vote have been duly adopted and approved by a majority of the Trustees of the Fund. 1. Section 5 (d) (ii) of Part I of the Certificate of Vote is hereby amended to replace the term "Quarterly Valuation Date" with the term "Annual Valuation Date." 2. The second and third sentences of Section 9(b) of Part I of the Certificate of Vote are hereby amended to replace such sentences with the following: The Fund shall also deliver to S&P (if S&P is then rating the APS), Moody's (if Moody's is then rating the APS) and the Auction Agent (if either S&P or Moody's is then rating the APS) an APS Basic Maintenance Report as of the last Valuation Date of each month on or before the third Business Day after such day. The Fund shall also deliver to S&P (if S&P is then rating the APS) and Moody's (if Moody's is then rating the APS) an APS Basic Maintenance Report whenever (i) the Fund shall have redeemed APS or Common Shares, (ii) the Fund shall fail to have S&P Eligible Assets or Moody's Eligible Assets with an aggregate Discounted Value at least equal to 105% of the APS Basic Maintenance Amount, or (iii) whenever requested by Moody's or S&P, in each case on or before the third Business Day after such day. 3. Section 9 (c) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: Within ten Business Days after the date of delivery of an APS Basic Maintenance Report in accordance with paragraph (b) of this Section 9 relating to an Annual Valuation Date, the Fund shall cause the Independent Accountant to confirm in writing to S&P (if S&P is then rating the APS), Moody's (if Moody's is then rating the APS) and the Auction Agent (if either S&P or Moody's is then rating the APS) (i) the mathematical accuracy of the calculations reflected in such Report and (ii) that, in such Report, the Fund determined in accordance with this Certificate of Vote whether the Fund had, at such Annual Valuation Date, S&P Eligible Assets (if S&P is then rating the APS) of an aggregate Discounted Value at least equal to the APS Basic Maintenance Amount and Moody's Eligible Assets (if Moody's is then rating the APS) of an aggregate Discounted Value at least equal to the APS Basic Maintenance Amount (such confirmation being herein called the "Accountant's Confirmation"). B-53 4. The final clause of Section 13 (a) (i) of Part I of the Certificate of Vote, which read "there shall be a quarterly audit made of the Fund's futures and options transactions by the Fund's independent accountants to confirm that the Fund is in compliance with these standards; or" is hereby amended to replace such clause with the following: there shall be an annual audit made of the Fund's futures and options transactions by the Fund's independent accountants to confirm that the Fund is in compliance with these standards; or 5. Section 15 (h) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: "APS Basic Maintenance Report" shall mean a report signed by any of the President, Treasurer, any Senior Vice President or any Vice President of the Fund which sets forth, as of the related Valuation Date, the assets of the Fund, the Market Value and the Discounted Value thereof (seriatim and in aggregate), the APS Basic Maintenance Amount, the net asset value and market trading price per Common Share, and the total return percentage for the relevant valuation period. 6. Section 15 (ddd) of Part I of the Certificate of Vote is hereby amended to replace such section with the following: "Annual Valuation Date" shall mean the last Business Day of each fiscal year of the Fund. IN WITNESS WHEREOF, the undersigned has caused this Certificate of Vote to be executed as of March 8, 2004. /s/ A. Thomas Smith III ---------------------------- A. Thomas Smith III Vice President and Secretary State of New York ) ) ss County of New York ) Then personally appeared before me A. Thomas Smith III, who acknowledged the foregoing instrument to be his free act and deed and the free act and deed in his capacity as Vice President and Secretary of Van Kampen Municipal Trust. Before me, /s/ Rosemarie Costagliola ---------------------------- Notary Public My Commission expires 11/9/06 B-54 APPENDIX C ACQUIRING FUND ANNUAL REPORT DATED OCTOBER 31, 2004 C-1 Item 1. Reports to Shareholders. The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Municipal Trust performed during the annual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the trust's financial statements and a list of trust investments as of October 31, 2004. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS INVESTMENT OBJECTIVE. TRUSTS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE TRUST WILL DECLINE AND THAT THE VALUE OF TRUST SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS TRUST. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
C-2 Performance Summary as of 10/31/04
MUNICIPAL TRUST SYMBOL: VKQ - --------------------------------------------------------- AVERAGE ANNUAL BASED ON BASED ON TOTAL RETURNS NAV MARKET PRICE Since Inception (9/27/91) 7.81% 6.93% 10-year 8.36 8.03 5-year 9.46 9.32 1-year 9.03 9.15 - ---------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, NET ASSET VALUE (NAV) AND COMMON SHARE MARKET PRICE WILL FLUCTUATE AND TRUST SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. NAV per share is determined by dividing the value of the trust's portfolio securities, cash and other assets, less all liabilities, by the total number of common shares outstanding. The common share market price is the price the market is willing to pay for shares of the trust at a given time. Common share market price is influenced by a range of factors, including supply and demand and market conditions. Total return assumes an investment at the beginning of the period, reinvestment of all distributions for the period in accordance with the trust's dividend reinvestment plan, and sale of all shares at the end of the period. The Lehman Brothers Municipal Bond Index is a broad-based statistical composite of municipal bonds. The index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index. C-3 Trust Report FOR THE 12-MONTH PERIOD ENDED OCTOBER 31, 2004 Van Kampen Municipal Trust is managed by the Adviser's Municipal Fixed Income team.(1) Current members include Thomas Byron, Vice President; Robert Wimmel, Vice President; and John Reynoldson, Executive Director. MARKET CONDITIONS The interest-rate environment of the 12 months ended October 31, 2004 was marked by two periods of steadily declining yields, with a significant sell-off in the middle. Yields fell steadily through the first half of the period, approaching the historical lows of 2003. This trend persisted until March, at which point yields reversed direction and began an upward march as prices fell. These losses were steepest in April, as a surprisingly strong employment report and signals from members of the Federal Open Market Committee (the Fed) caused investors to expect a near-term rate increase. Rates went on to decline from May through the end of the period as the market digested the Fed's newly hawkish rate stance. Investors were further comforted when, after the Fed raised rates at its June 30, 2004 meeting, its members indicated that the path of future rate increases would be measured. Unusually, longer-maturity securities largely outperformed in this period of Fed tightening. Historically, the typical pattern in periods of tightening policy has seen yields rise across all maturities. During the review period, however, yields of shorter maturity bonds rose while those of bonds with longer maturities declined slightly. Lower-quality municipal bonds also performed strongly in this environment, as the difference in yields (known as the "yield spread") between AAA and BBB rated bonds decreased by roughly 20 basis points for 20-year bonds. As a result, sectors with heavy exposure to lower-rated debt, such as hospitals and industrial-revenue bonds, posted higher total returns than sectors dominated by higher-rated debt. Issuance for the first 10 months of 2004 (the final 10 months of the review period) was roughly six percent lower than in the same period in 2003. That said, 2003 was a record year, and at the current pace of issuance, 2004 could well be one of the largest years in recent memory. The strong supply met with faltering demand from mutual funds, as fund investors withdrew over $15 billion in net cash during the period. The faltering demand was largely offset by increased participation in the market by insurance companies and individual investors. (1)Team members may change without notice at any time. C-4 PERFORMANCE ANALYSIS The trust's return can be calculated based upon either the market price or the net asset value (NAV) of its shares. NAV per share is determined by dividing the value of the trust's portfolio securities, cash and other assets, less all liabilities, by the total number of common shares outstanding, while market price reflects the supply and demand for the shares. As a result, the two returns can differ significantly. On both an NAV basis and a market price basis, the trust outperformed its benchmark index, the Lehman Brothers Municipal Bond Index. (See table below.) The trust uses leverage to enhance its dividend to common shareholders. The trust borrows money at short-term rates through the issuance of preferred shares. The proceeds are reinvested in longer-term securities, taking advantage of the difference between short- and longer-term rates. The Fed's policy of raising interest rates in the final months of the period made the trust's borrowing activity more expensive. These expenses, however, were more than offset by the strong performance of the bonds the trust invested in, leading to the portfolio's outperformance versus its benchmark, which is unleveraged. The historically low level of interest rates led us to maintain the trust's overall interest-rate sensitivity at a level below that of its benchmark. This strategy helped shield the trust from negative returns during those times when yields rose. That said, yields overall declined over the period, and the strategy exerted a drag on performance. The fund experienced significant call activity during the period, as issuers sought to lower their interest costs by refinancing their bonds at lower market rates. This activity involved 23 percent of the total sales activity in the trust. We reinvested the proceeds into bonds that we believed had more favorable prospects for total return. Many of these securities were in the 15- to 20-year segment of the market, which our analysis indicated offered the most appealing combination of value and total-return potential. In keeping with our long-term approach, we bought and sold bonds at the long end of the market as they came into and out of fair value. This strategy entails TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED OCTOBER 31, 2004
- -------------------------------------------------------------- BASED ON BASED ON LEHMAN BROTHERS NAV MARKET PRICE MUNICIPAL BOND INDEX 9.03% 9.15% 6.03% - --------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN, NET ASSET VALUE AND COMMON SHARE MARKET PRICE WILL FLUCTUATE AND TRUST SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. SEE PERFORMANCE SUMMARY FOR ADDITIONAL PERFORMANCE INFORMATION AND INDEX DEFINITION. C-5 purchasing bonds with attractive total-return prospects and selling them once they have reached our performance targets. Many of our purchases in this strategy involved health-care bonds, which offered attractive valuations for much of the period. We remained focused on controlling the trust's risk profile through attention to credit quality and diversification. By the end of the 12-month period, 83 percent of the trust's total investments were invested in bonds rated AAA and AA; these represent the two highest tiers of credit ratings. The portfolio was also well diversified across the major sectors of the municipal bond market. Its three largest sector exposures were general purpose, public education, and transportation. While it is impossible to predict the exact turning point when interest rates will move decisively higher, we believe the trust remains well positioned for the near future. We will continue to search the municipal bond markets for interesting opportunities. There is no guarantee that any securities mentioned will continue to perform well or be held by the trust in the future. C-6
RATINGS ALLOCATION AS OF 10/31/04 AAA/Aaa 72.2% AA/Aa 10.8 A/A 4.5 BBB/Baa 3.4 BB/Ba 1.7 B/B 0.2 Non-Rated 7.2 TOP 5 SECTORS AS OF 10/31/04 General Purpose 20.5% Public Education 10.4 Transportation 9.9 Public Building 9.0 Health Care 8.6 SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 10/31/04 Illinois 10.1% California 9.6 New York 8.6 New Jersey 7.0 Texas 6.7 Florida 6.7 Ohio 4.2 Pennsylvania 4.0 Washington 3.7 Connecticut 3.7 North Carolina 3.1 Louisiana 2.7 Massachusetts 2.7 Georgia 2.5 Michigan 2.4 Alabama 2.2 Missouri 1.8 Kentucky 1.5 Virginia 1.5 Oregon 1.4 Colorado 1.3 Nevada 1.1 Tennessee 1.1 Indiana 1.0 Maryland 0.9 New Hampshire 0.9 West Virginia 0.7 Kansas 0.7 District of Columbia 0.7 Puerto Rico 0.7 Oklahoma 0.6 Wisconsin 0.6 Guam 0.6 Arizona 0.5 South Carolina 0.5 (continued on next page)
C-7
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 10/31/04 (continued from previous page) Arkansas 0.5% Mississippi 0.3 Rhode Island 0.3 South Dakota 0.2 Hawaii 0.2 New Mexico 0.2 Alaska 0.1 Maine 0.1 Nebraska 0.1 ----- Total Investments 100.0%
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. Ratings and summary of investments by state classification are as a percentage of total investments. Sectors are as a percentage of long-term investments. Securities are classified by sectors that represent broad groupings of related industries. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Rating allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. C-8 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen trust provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the trust's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semiannual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Van Kampen also delivers the semiannual and annual reports to trust shareholders, and makes these reports available on its public web site, www.vankampen.com. In addition to the semiannual and annual reports that Van Kampen delivers to shareholders and makes available through the Van Kampen public web site, each trust files a complete schedule of portfolio holdings with the SEC for the trust's first and third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Van Kampen public web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's web site, http://www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. 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. In addition to filing a complete schedule of portfolio holdings with the SEC each fiscal quarter, each Van Kampen trust makes portfolio holdings information available by periodically providing the information on its public web site, www.vankampen.com. Each Van Kampen trust provides a complete schedule of portfolio holdings on the public web site on a calendar-quarter basis approximately 30 days after the close of the calendar quarter. Van Kampen closed-end funds do not presently provide partial lists of their portfolio holdings on a monthly basis, but may do so in the future. You may obtain copies of a trust's fiscal quarter filings, or its monthly or calendar-quarter web site postings, by contacting Van Kampen Client Relations at 1-800-847-2424. PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD The trust's policies and procedures with respect to the voting of proxies relating to the trust's portfolio securities and information on how the trust voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon request, by calling 1-800-847-2424 or by visiting our web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's web site at http://www.sec.gov. C-9 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- MUNICIPAL BONDS 148.1% ALABAMA 3.3% $1,000 Birmingham Baptist Med Ctr AL Baptist Hlth Sys Ser A.......................................... 5.875% 11/15/24 $ 1,042,280 2,695 Gadsden, AL Wts Ser B (AMBAC Insd)............. 5.250 08/01/21 2,955,418 4,000 Jefferson Cnty, AL Swr Rev Cap Impt Wts (Prerefunded @ 08/01/12) (FGIC Insd)........... 5.125 02/01/42 4,506,800 6,215 Jefferson Cnty, AL Swr Rev Cap Impt Wts Ser A (Prerefunded @ 02/01/11) (FGIC Insd)........... 5.000 02/01/41 6,932,025 1,735 Jefferson Cnty, AL Swr Rev Cap Impt Wts Ser A (Prerefunded @ 02/01/11) (FGIC Insd)........... 5.000 02/01/41 1,943,582 2,405 Marshall Cnty, AL Hlthcare Ser C............... 6.000 01/01/32 2,543,865 ------------- 19,923,970 ------------- ALASKA 0.2% 1,000 Alaska St Intl Arpt Rev Ser B (AMBAC Insd)..... 5.750 10/01/17 1,152,230 ------------- ARIZONA 0.7% 1,425 Arizona Cap Fac Fin Corp Student Hsg Rev AZ St Univ Proj...................................... 6.250 09/01/32 1,516,912 1,000 Arizona Hlth Fac Auth Hosp John C Lincoln Hlth Network........................................ 6.375 12/01/37 1,061,500 1,750 Arizona Sch Fac Brd Ctf Part Ser A (MBIA Insd).......................................... 5.250 09/01/17 1,933,102 ------------- 4,511,514 ------------- ARKANSAS 0.7% 2,310 Arkansas St Dev Fin Auth Rev St Agy Fac Donaghey Plaza Proj (FSA Insd)................. 5.000 06/01/34 2,376,389 1,565 Fort Smith, AR Wtr & Swr Rev Ser C (FSA Insd) (f)............................................ 5.000 10/01/21 1,676,459 ------------- 4,052,848 ------------- CALIFORNIA 14.3% 4,000 Anaheim, CA Pub Fin Auth Lease Rev Cap Apprec Sub Pub Impts Proj C (FSA Insd)................ * 09/01/20 1,897,280 350 California Hlth Fac Fin Auth Rev Casa De Las Ser A (MBIA Insd).............................. 5.250 08/01/17 379,634 2,500 California St (AMBAC Insd)..................... 5.000 04/01/21 2,645,100 5,500 California St (AMBAC Insd)..................... 5.125 10/01/27 5,734,135 1,250 California St Dept Wtr Res Pwr Ser A........... 6.000 05/01/15 1,463,350 4,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd) (a)...................................... 5.375 05/01/18 4,436,800 3,705 California St Dept Wtr Res Pwr Ser A (MBIA Insd).......................................... 5.375 05/01/21 4,061,273 2,000 California St Dept Wtr Res Pwr Ser A (MBIA Insd).......................................... 5.375 05/01/22 2,185,520 5,295 California St Econ Rec Ser A................... 5.000 07/01/17 5,680,635 2,500 California St Pub Wks Brd Lease Rev Dept Corrections Ser E Rfdg (XLCA Insd)............. 5.000 06/01/18 2,723,375
See Notes to Financial Statements C-10 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- CALIFORNIA (CONTINUED) $1,000 California St Pub Wks Brd UCLA Replacement Hosp Ser A (FSA Insd)............................... 5.375% 10/01/20 $ 1,097,880 5,000 California St Univ Rev Systemwide Ser A (AMBAC Insd).......................................... 5.000 11/01/23 5,263,650 2,650 California Statewide Cmnty Dev Auth Ctf Part (Acquired 04/12/02, Cost $2,650,000) (b)....... 7.250 11/01/29 2,772,536 5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev (Escrowed to Maturity) (MBIA Insd)............. * 09/01/17 2,735,750 1,000 Davis, CA Pub Fac Fin Auth Mace Ranch Area Ser A.............................................. 6.600 09/01/25 1,052,920 850 Del Mar, CA Race Track Auth Rev Rfdg........... 6.000 08/15/06 875,134 18,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg (MBIA Insd).................... * 01/15/25 5,675,220 27,810 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Rfdg................................ * 01/15/33 5,185,174 6,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap Apprec Sr Lien Ser A (Escrowed to Maturity)...................................... * 01/01/18 3,428,100 2,240 Huntington Park, CA Redev Agy Rev Tax Alloc Santa Fe Redev Rfdg............................ 6.200 10/01/27 2,336,947 2,635 Imperial Irr Dist CA Ctf Part Elec Sys Proj (FSA Insd)..................................... 5.250 11/01/23 2,847,855 2,000 Los Angeles, CA Uni Sch Dist Ser A (MBIA Insd).......................................... 5.375 07/01/18 2,237,820 4,400 Los Angeles, CA Uni Sch Dist Ser A (MBIA Insd).......................................... 5.250 07/01/19 4,855,400 5,585 Sacramento, CA City Fin Auth Rev Comb Proj B (MBIA Insd).................................... * 11/01/14 3,712,685 1,375 San Bernadino, CA Jt Pwrs Fin Auth Alloc Rev Cent City Merged Proj A Rfdg (AMBAC Insd) (f)............................................ 5.750 07/01/20 1,650,412 3,545 San Diego, CA Uni Sch Dist Election 1998 Ser E-1 Rfdg (MBIA Insd)........................... 5.000 07/01/23 3,804,352 5,000 University CA Rev Gen Ser B (AMBAC Insd)....... 5.000 05/15/20 5,364,400 ------------- 86,103,337 ------------- COLORADO 2.0% 1,000 Colorado Hlth Fac Auth Rev Catholic Hlth Initiatives Ser A (Escrowed to Maturity)....... 5.500 03/01/32 1,050,690 1,125 Colorado Hlth Fac Auth Rev Hosp Portercare Adventist Hlth................................. 6.500 11/15/31 1,236,645 2,200 La Plata Cnty, CO Sch Dist 9-R Durango (MBIA Insd) (f)...................................... 5.250 11/01/21 2,382,886 6,365 Platte Riv Pwr Auth CO Pwr Rev Ser EE.......... 5.375 06/01/16 7,167,690 ------------- 11,837,911 ------------- CONNECTICUT 5.5% 1,935 Bridgeport, CT Ser A (MBIA Insd) (f)........... 5.250 08/15/20 2,130,125 2,265 Bridgeport, CT Ser A (MBIA Insd) (f)........... 5.250 08/15/23 2,455,169 7,140 Connecticut St Hlth & Ed Fac Auth Rev Nursing Home Proj AHF/Hartford (Prerefunded @ 11/01/04)...................................... 7.125 11/01/24 7,284,871
See Notes to Financial Statements C-11 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- CONNECTICUT (CONTINUED) $2,840 Connecticut St Spl Oblig Pkg Rev Bradley Intl Arpt Ser A (AMT) (ACA Insd).................... 6.600% 07/01/24 $ 3,077,964 3,540 Mashantucket Western Pequot Tribe CT Spl Rev Ser A, 144-A Private Placement (c)............. 6.400 09/01/11 3,786,526 3,460 Mashantucket Western Pequot Tribe CT Spl Rev Ser A, 144-A Private Placement (Prerefunded @ 09/01/07) (c).................................. 6.400 09/01/11 3,851,568 6,500 Mashantucket Western Pequot Tribe CT Spl Rev Ser B, 144-A Private Placement (c)............. 5.750 09/01/18 6,845,345 3,500 Mashantucket Western Pequot Tribe CT Spl Rev Ser B, 144-A Private Placement (c)............. 5.750 09/01/27 3,609,060 ------------- 33,040,628 ------------- DISTRICT OF COLUMBIA 1.0% 1,000 District of Columbia Hosp Rev Medlantic Hlthcare Group A Rfdg (Escrowed to Maturity) (MBIA Insd).................................... 5.875 08/15/19 1,080,250 5,000 Metropolitan Washington DC Arpt Auth Sys Ser A (AMT) (FGIC Insd).............................. 5.125 10/01/26 5,143,350 ------------- 6,223,600 ------------- FLORIDA 10.0% 3,380 Brevard Cnty, FL Hlth Fac Hlth First Inc Proj (MBIA Insd).................................... 5.125 04/01/31 3,480,758 2,550 Broward Cnty, FL Wtr & Swr Util Rfdg (MBIA Insd).......................................... 5.000 10/01/20 2,746,630 3,040 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC Insd).......................................... 5.950 07/01/20 3,122,870 1,000 Florida St Brd Ed Lottery Rev Ser A (FGIC Insd).......................................... 5.750 07/01/11 1,151,140 3,000 Florida St Dept Environmental Protection Preservation Rev Ser A (FGIC Insd)............. 5.750 07/01/10 3,444,930 3,880 Florida St Dept Trans Right of Way Ser A....... 5.250 07/01/21 4,306,916 1,895 Gulf Breeze, FL Rev Loc Govt (Variable Rate Coupon) (FGIC Insd) (f)........................ 5.625 12/01/20 2,078,550 2,310 Hillsborough Cnty, FL Indl Dev Auth Andl Dev Rev Hlth Fac Proj Univ Cmnty Hosp Ser A........ 5.500 08/15/14 2,412,148 1,000 Hillsborough Cnty, FL Util Jr Lien Rfdg (AMBAC Insd).......................................... 5.000 08/01/06 1,052,750 1,000 Jea, FL Elec Sys Rev Ser 3 Ser A............... 5.500 10/01/41 1,067,250 265 Lakeland, FL Hosp Sys Rev Lakeland Regl Hlth Sys............................................ 5.500 11/15/32 276,419 1,515 Miami Beach, FL Stormwtr Rev (FGIC Insd)....... 5.250 09/01/25 1,622,307 2,000 Miami-Dade Cnty, FL Aviation Rev Miami Intl Arpt (AMT) (FGIC Insd)......................... 5.375 10/01/25 2,107,840 2,700 Miami-Dade Cnty, FL Aviation Rev Miami Intl Arpt (AMT) (FGIC Insd)......................... 5.375 10/01/32 2,808,054 5,000 Miami-Dade Cnty, FL Aviation Ser A (AMT) (FSA Insd).......................................... 5.125 10/01/35 5,093,300
See Notes to Financial Statements C-12 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) $1,855 Miami-Dade Cnty, FL Hlth Fac Miami Childrens Hosp Ser A Rfdg (AMBAC Insd)................... 5.000% 08/15/20 $ 1,958,342 3,750 Orange Cnty, FL Sch Brd Ctf Part Ser A (AMBAC Insd).......................................... 5.250 08/01/14 4,220,550 4,320 Orange Cnty, FL Tourist Dev Tax Rev (AMBAC Insd).......................................... 5.625 10/01/14 4,857,322 4,300 Orange Cnty, FL Tourist Dev Tax Rev (AMBAC Insd).......................................... 5.500 10/01/31 4,674,100 1,000 Osceola Cnty, FL Trans Rev Osceola Pkwy Proj Impt & Rfdg (MBIA Insd)........................ 5.000 04/01/21 1,075,800 2,140 Reedy Creek, FL Impt Dist FL Ser A Rfdg (AMBAC Insd).......................................... 5.500 06/01/12 2,434,057 1,060 Tallahassee, FL Lease Rev FL St Univ Proj Ser A (MBIA Insd) (f)................................ 5.500 08/01/18 1,188,631 2,780 Volusia Cnty, FL Gas Tax Rev (FSA Insd) (d).... 5.000 10/01/22 2,978,687 ------------- 60,159,351 ------------- GEORGIA 3.7% 2,000 Atlanta, GA Arpt Passenger Fac Gen Sub Lien Ser C (FSA Insd)................................... 5.000 01/01/33 2,064,140 2,645 Georgia St Ser D............................... 6.000 10/01/05 2,745,986 3,500 Georgia St Ser D............................... 6.000 10/01/06 3,765,755 1,400 Municipal Elec Auth GA Combustion Turbine Proj Ser A (MBIA Insd).............................. 5.250 11/01/14 1,578,934 8,030 Municipal Elec Auth GA Combustion Turbine Proj Ser A (MBIA Insd).............................. 5.250 11/01/18 8,945,581 1,000 Oconee Cnty, GA Indl Dev Auth Oiit Proj (XLCA Insd).......................................... 5.250 07/01/23 1,067,730 2,000 Royston, GA Hosp Auth Hosp Ctf Rev Ty Cobb Hlthcare Sys Inc Rfdg.......................... 6.500 07/01/27 1,994,600 ------------- 22,162,726 ------------- HAWAII 0.3% 1,465 Honolulu, HI City & Cnty Ser D (AMT) (FGIC Insd).......................................... 4.700 02/01/08 1,562,657 645 Honolulu, HI City & Cnty Wastewtr Sys Rev Cap Apprec (FGIC Insd)............................. * 07/01/12 482,112 ------------- 2,044,769 ------------- ILLINOIS 15.1% 3,400 Carol Stream, IL First Mtg Rev Windsor Pk Mnr Proj (Prerefunded @ 12/01/07).................. 7.000 12/01/13 3,910,680 1,500 Champaign Cnty, IL Cmnty Unit Sch Dist No 116 Urbana Ser C (Prerefunded @ 01/01/10) (FGIC Insd).......................................... * 01/01/16 897,720 1,300 Champaign Cnty, IL Cmnty Unit Sch Dist No 116 Urbana Ser C (Prerefunded @ 01/01/10) (FGIC Insd).......................................... * 01/01/18 688,584
See Notes to Financial Statements C-13 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $1,285 Chicago, IL Brd Ed (Prerefunded @ 12/01/10) (FGIC Insd).................................... 6.000% 12/01/12 $ 1,503,578 1,400 Chicago, IL Brd Ed Ser A (MBIA Insd)........... 5.500 12/01/28 1,521,800 4,000 Chicago, IL Neighborhoods Alive 21 Pgm Ser A (FGIC Insd).................................... 5.750 01/01/40 4,420,040 5,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser A Rfdg (AMT) (MBIA Insd).............. 5.375 01/01/32 5,173,900 2,500 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien Ser C 2 Rfdg (AMT) (FSA Insd)............. 5.250 01/01/30 2,585,325 1,015 Chicago, IL O'Hare Intl Arpt Rev Second Lien Passenger Fac Ser B (AMBAC Insd)............... 5.500 01/01/16 1,133,156 1,980 Chicago, IL Pk Dist Ser C (FGIC Insd).......... 5.500 01/01/19 2,219,976 2,565 Chicago, IL Proj Ser C Rfdg (FGIC Insd) (f).... 5.750 01/01/12 2,936,771 1,000 Cook Cnty, IL Cmnty Cons Sch Dist No 64 Park Ridge (FSA Insd)............................... 5.500 12/01/14 1,162,820 1,000 Cook Cnty, IL Ser A (FGIC Insd)................ 5.500 11/15/31 1,082,670 7,765 Du Page Cnty, IL Forest Preserve Dist.......... * 11/01/17 4,403,143 5,000 Du Page Cnty, IL Trans Rev (FSA Insd).......... 5.750 01/01/15 5,708,700 4,000 Hodgkins, IL Tax Increment Ser A Rfdg.......... 7.625 12/01/13 4,288,080 2,860 Illinois Dev Fin Auth Rev Adventist Hlth Ser A (MBIA Insd) (e) (f)............................ 5.500 11/15/05 2,960,043 2,725 Illinois Dev Fin Auth Rev Cmnty Rehab Providers Fac Ser A...................................... 7.375 07/01/25 2,946,597 2,705 Illinois Dev Fin Auth Rev Loc Govt Pgm Aurora East Sch (MBIA Insd)........................... * 12/01/15 1,694,980 1,565 Illinois Ed Fac Auth Rev DePaul Univ (Prerefunded @ 10/01/10) (AMBAC Insd).......... 5.625 10/01/15 1,809,156 1,740 Illinois Ed Fac Auth Rev Lewis Univ............ 5.900 10/01/14 1,744,437 2,500 Illinois Fin Auth Rev Northwestern Mem Hosp Ser A.............................................. 5.500 08/15/43 2,600,200 1,645 Illinois Hlth Fac Auth Rev Evangelical Hosp Ser C Rfdg (FSA Insd).............................. 6.750 04/15/12 1,956,958 2,500 Illinois St First Ser (MBIA Insd).............. 5.500 12/01/09 2,827,000 1,500 Illinois St First Ser (FGIC Insd).............. 5.375 11/01/14 1,696,260 3,000 Illinois St First Ser (FSA Insd)............... 5.250 12/01/21 3,249,330 3,440 Kendall Kane & Will Cntys, IL Cmnty Sch Dist No 308 Ser B (FGIC Insd) (f)...................... 5.250 10/01/19 3,802,163 870 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev Cap Apprec (Escrowed to Maturity) (FGIC Insd).......................................... * 06/15/14 591,939 3,460 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev Cap Apprec (Unrefunded Balance) (FGIC Insd).......................................... * 06/15/14 2,338,649 2,675 Metropolitan Pier & Expo Auth IL Dedicated St Tax Rev McCormick Pl Expn Ser A (MBIA Insd).... 5.250 06/15/42 2,794,626
See Notes to Financial Statements C-14 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- ILLINOIS (CONTINUED) $1,510 Roselle, IL Multi-Family Hsg Rev Waterbury Apts Ser A Rfdg (GNMA Collateralized)............... 7.000% 01/01/25 $ 1,544,775 2,500 Schaumburg, IL Ser B (FGIC Insd)............... 5.000 12/01/41 2,534,525 3,505 Will Cnty, IL Cmnty Sch Dist No 161 Summit Hill Cap Apprec (FGIC Insd)......................... * 01/01/14 2,404,745 2,010 Will Cnty, IL Cmnty Sch Dist No 161 Summit Hill Cap Apprec (FGIC Insd)......................... * 01/01/16 1,238,703 1,415 Will Cnty, IL Cmnty Sch Dist No 161 Summit Hill Cap Apprec (FGIC Insd)......................... * 01/01/19 737,611 9,660 Will Cnty, IL Fst Presv Dist Ser B (FGIC Insd).......................................... * 12/01/16 5,734,949 ------------- 90,844,589 ------------- INDIANA 1.3% 1,000 Allen Cnty, IN Juvenile Justice Ctr First Mtg (AMBAC Insd)................................... 5.500 01/01/18 1,122,060 1,000 Clark Pleasant, IN Cmnty Sch First Mtg (AMBAC Insd).......................................... 5.500 07/15/13 1,136,810 1,580 Indiana Trans Fin Auth Toll Rd Lease Rev Rfdg (AMBAC Insd)................................... 5.375 07/01/09 1,691,927 1,500 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt (AMT) (e)...................................... 5.950 12/01/29 1,515,630 2,500 Vigo Cnty, IN Sch Bldg Corp First Mtg Impt & Rfdg (FSA Insd)................................ 5.250 07/10/24 2,663,350 ------------- 8,129,777 ------------- KANSAS 1.1% 3,000 Sedgwick Cnty, KS Uni Sch Dist No 259 Wichita (MBIA Insd).................................... 6.000 09/01/09 3,446,280 1,395 Wichita, KS Pub Bldg Comm Rev Wichita St Univ Proj Ser L Rfdg (AMBAC Insd) (f)............... 5.000 02/01/15 1,520,048 1,465 Wichita, KS Pub Bldg Comm Rev Wichita St Univ Proj Ser L Rfdg (AMBAC Insd) (f)............... 5.000 02/01/16 1,587,562 ------------- 6,553,890 ------------- KENTUCKY 2.2% 4,000 Elsmere, KY Indl Dev Rev Courtaulds Pkg Inc Proj Rfdg (Prerefunded @ 04/01/05)............. 6.750 04/01/10 4,159,840 1,500 Kentucky St Ppty & Bldg Commn Proj No 69 Ser A Rfdg (FSA Insd)................................ 5.500 08/01/11 1,718,520 3,500 Kentucky St Tpk Auth Econ Dev Revitalization Proj Rfdg (FSA Insd)........................... 5.500 07/01/07 3,808,980 1,000 Kentucky St Tpk Auth Econ Dev Revitalization Proj Rfdg (Prerefunded @ 01/01/11) (FSA Insd).......................................... 5.625 07/01/14 1,145,950 2,350 Louisville & Jefferson, KY Swr Ser A (MBIA Insd) (f)...................................... 5.500 05/15/15 2,675,334 ------------- 13,508,624 -------------
See Notes to Financial Statements C-15 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- LOUISIANA 3.7% $5,000 Ernest N Morial New Orleans LA Sr Sub Ser A (AMBAC Insd)................................... 5.250% 07/15/21 $ 5,442,150 1,500 Louisiana Hsg Fin Agy Rev Azalea Estates Ser A Rfdg (AMT) (GNMA Collateralized)............... 5.375 10/20/39 1,523,820 1,675 Louisiana Loc Govt Environmental Fac Pkg Fac Corp Garage Proj Ser A (AMBAC Insd) (f)........ 5.200 10/01/19 1,841,847 2,580 Louisiana Loc Govt Environmental Rev Southeastn LA Student Hsg A (MBIA Insd)................... 5.250 08/01/21 2,824,042 3,000 Louisiana St Ser A (FGIC Insd)................. 5.500 11/15/07 3,291,360 8,033 Louisiana St Univ & Agric & Mechanical College Univ Rev Master Agreement (Acquired 11/30/98, Cost $8,032,929) (b)........................... 5.750 10/30/18 7,629,435 ------------- 22,552,654 ------------- MAINE 0.2% 1,000 Maine Vets Homes, ME Rev (Prerefunded @ 10/01/05)...................................... 7.750 10/01/20 1,070,110 ------------- MARYLAND 1.3% 2,300 Baltimore, MD Cap Apprec Cons Pub Ser A Impt & Rfdg (FGIC Insd)............................... * 10/15/06 2,129,869 1,845 Baltimore, MD Cap Apprec Ser A (Unrefunded Balance) (FGIC Insd)........................... * 10/15/07 1,603,342 1,700 Maryland St Trans Auth Arpt Baltimore/WA Intl Arpt B (AMT) (AMBAC Insd)...................... 5.125 03/01/24 1,779,577 2,365 Northeast, MD Waste Disp Auth Rfdg (AMT) (AMBAC Insd).......................................... 5.500 04/01/16 2,603,132 ------------- 8,115,920 ------------- MASSACHUSETTS 4.0% 1,775 Massachusetts Muni Whsl Elec Co Nuclear Proj 5 (MBIA Insd).................................... 5.250 07/01/13 1,990,396 1,745 Massachusetts St Cons Ln Ser B (Prerefunded @ 05/01/09)...................................... 5.250 05/01/13 1,946,076 1,000 Massachusetts St Cons Ln Ser B (Prerefunded @ 08/01/14) (AMBAC Insd)......................... 5.000 08/01/22 1,067,970 5,000 Massachusetts St Cons Ln Ser E (Prerefunded @ 01/01/13) (FSA Insd)........................... 5.250 01/01/20 5,637,800 2,165 Massachusetts St Dev Fin Agy Proj Ser R-2 (MBIA Insd).......................................... 5.125 02/01/34 2,232,548 785 Massachusetts St Dev Fin Agy Rev Boston Architectural Ctr (ACA Insd)................... 6.100 09/01/18 841,481 1,000 Massachusetts St Dev Fin Agy Rev Boston Architectural Ctr (ACA Insd)................... 6.250 09/01/28 1,050,950 1,500 Massachusetts St Fed Hwy Gnt Antic Nt Ser A.... 5.750 06/15/15 1,699,830 3,700 Massachusetts St Hlth & Ed Fac Auth Rev (Variable Rate Coupon) (MBIA Insd)............. 5.000 07/01/13 3,782,621
See Notes to Financial Statements C-16 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- MASSACHUSETTS (CONTINUED) $1,000 Massachusetts St Hlth & Ed Fac Auth Rev Part Hlthcare Sys Ser C............................. 5.750% 07/01/32 $ 1,093,230 2,500 Massachusetts St Spl Oblig Dedicated Tax Rev (FGIC Insd).................................... 5.000 01/01/34 2,574,925 ------------- 23,917,827 ------------- MICHIGAN 3.6% 3,440 Detroit, MI Loc Dev Fin Auth Tax Increment Sr Ser B (Acquired 09/08/97, Cost $3,440,000) (b)............................................ 6.700 05/01/21 3,441,961 850 Detroit, MI Loc Dev Fin Auth Tax Increment Sub Ser C (Acquired 09/08/97, Cost $850,000) (b)... 6.850 05/01/21 834,785 3,860 Detroit, MI Ser A (XLCA Insd) (f).............. 5.250 04/01/21 4,137,804 2,930 Detroit, MI Wtr Supply Sys Rev Sr Lien Ser C Rfdg (MBIA Insd) (f)........................... 5.250 07/01/18 3,221,916 1,180 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale Cmnty Hlth Ctr................................. 5.750 05/15/18 1,221,005 2,000 Michigan Muni Bd Auth Rev Clean Wtr Rev Fd..... 5.250 10/01/18 2,231,480 500 Michigan St Hosp Fin Auth Rev Hosp Genesys Regl Med Ser A Rfdg (Escrowed to Maturity).......... 5.375 10/01/13 557,195 1,550 Michigan St Hsg Dev Rental Hsg Rev Ser A (AMT) (MBIA Insd).................................... 5.300 10/01/37 1,582,798 1,500 Michigan St Strategic Fd Detroit Edison Co Proj C Rfdg (AMT) (XLCA Insd)....................... 5.450 12/15/32 1,570,650 2,500 Michigan St Trunk Line Ser A (Prerefunded @ 11/01/11)...................................... 5.500 11/01/15 2,866,925 ------------- 21,666,519 ------------- MISSISSIPPI 0.5% 2,500 Mississippi Bus Fin Corp MS Pollutn Ctl Rev Sys Energy Res Inc Proj............................ 5.875 04/01/22 2,508,750 480 Mississippi Home Corp Single Family Rev Mtg Ser F (AMT) (GNMA Collateralized).................. 7.550 12/01/27 483,893 ------------- 2,992,643 ------------- MISSOURI 2.7% 1,400 Ellisville, MO Indl Dev Auth Rev Gambrill Gardens Proj Rfdg & Impt....................... 6.100 06/01/20 1,375,626 1,000 Ellisville, MO Indl Dev Auth Rev Gambrill Gardens Proj Rfdg & Impt....................... 6.200 06/01/29 948,690 1,740 Good Shepherd Nursing Home Dist MO Nursing Home Fac Rev (Prerefunded @ 08/15/05)............... 7.625 08/15/15 1,847,897 1,000 Kearney, MO (AMBAC Insd)....................... 5.500 03/01/16 1,116,980 1,415 Missouri St Hlth & Ed Fac Rev Univ MO Columbia Arena Proj..................................... 5.000 11/01/18 1,537,341 3,085 Missouri St Hwys & Trans Commn Rd Rev Ser A.... 5.250 02/01/07 3,305,732 1,000 Missouri St Hwys & Trans Commn Rd Rev Ser A.... 5.125 02/01/17 1,088,300
See Notes to Financial Statements C-17 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- MISSOURI (CONTINUED) $2,810 Perry Cnty, MO Nursing Home Rev Rfdg........... 5.900% 03/01/28 $ 2,509,892 2,505 Saint Louis, MO Arpt Rev Cap Impt Prog Ser A (MBIA Insd) (f)................................ 5.375 07/01/20 2,761,788 ------------- 16,492,246 ------------- NEVADA 1.7% 3,000 Clark Cnty, NV Arpt Rev Sub Lien Ser A-2 (FGIC Insd).......................................... 5.000 07/01/36 3,056,490 3,000 Clark Cnty, NV Indl Dev Rev Southwest Gas Corp Proj Ser A (AMT) (AMBAC Insd).................. 5.250 07/01/34 3,096,000 2,500 Reno, NV Cap Impt Rev (FGIC Insd).............. 5.125 06/01/26 2,603,975 1,500 Reno, NV Sr Lien Retrac Reno Trans Proj (AMBAC Insd).......................................... 5.125 06/01/37 1,542,930 ------------- 10,299,395 ------------- NEW HAMPSHIRE 1.3% 4,800 New Hampshire Higher Ed & Hlth Fac Auth Rev Daniel Webster College Issue................... 6.300 07/01/29 4,685,136 2,000 New Hampshire Higher Ed & Hlth Fac Auth Rev Riverwoods at Exeter Ser A..................... 6.500 03/01/23 1,989,180 1,000 New Hampshire Hlth & Ed Fac Auth Rev Derryfield Sch............................................ 6.750 07/01/20 987,990 ------------- 7,662,306 ------------- NEW JERSEY 10.5% 1,460 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg (FGIC Insd) (f)................................ * 03/01/05 1,451,211 1,465 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg (FGIC Insd) (f)................................ * 03/01/06 1,425,518 1,615 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg (FGIC Insd) (f)................................ * 03/01/07 1,526,724 1,555 Eastern Camden Cnty, NJ Regl Sch Dist Rfdg (FGIC Insd) (f)................................ * 03/01/08 1,423,634 2,895 Essex Cnty, NJ Impt Auth Rev Cnty Gtd Proj Consldtn Rfdg (MBIA Insd)...................... 5.125 10/01/20 3,160,732 1,500 New Jersey Econ Dev Auth Cigarette Tax......... 5.750 06/15/29 1,539,930 3,880 New Jersey Econ Dev Auth Mtr Veh Sur Rev Ser A (MBIA Insd).................................... 5.000 07/01/22 4,141,939 25,000 New Jersey Econ Dev Auth St Contract Econ Recovery (MBIA Insd) (e)....................... 5.900 03/15/21 30,338,250 2,825 New Jersey St Ed Fac Auth Higher Ed Cap Impt Ser A (AMBAC Insd)............................. 5.250 09/01/19 3,127,529 3,500 New Jersey St Tpk Auth Tpk Rev Ser C (FSA Insd).......................................... 6.500 01/01/16 4,318,265 1,000 New Jersey St Trans Corp Capital Grt Antic Nt Ser B (AMBAC Insd)............................. 5.500 02/01/08 1,099,060 3,000 New Jersey St Trans Corp Ctf Fed Trans Admin Grts Ser A (AMBAC Insd)........................ 5.500 09/15/13 3,441,510
See Notes to Financial Statements C-18 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- NEW JERSEY (CONTINUED) $1,000 New Jersey St Trans Tr Fd Auth Trans Sys Ser A.............................................. 5.750% 06/15/18 $ 1,184,160 1,840 New Jersey St Trans Tr Fd Auth Trans Sys Ser A (FGIC Insd).................................... 5.250 06/15/19 2,040,045 3,000 Newark, NJ Hsg Auth Port Auth Newark Marine Terminal (MBIA Insd)........................... 5.000 01/01/37 3,082,440 ------------- 63,300,947 ------------- NEW MEXICO 0.3% 1,500 Jicarilla, NM Apache Nation Adj Ser A (Acquired 10/23/03, Cost $1,514,910) (b)................. 5.000 09/01/18 1,574,220 ------------- NEW YORK 12.8% 1,670 Long Island Pwr Auth, NY Elec Cap Apprec (FSA Insd).......................................... * 06/01/18 951,232 3,000 Metropolitan Trans Auth NY Ser A Rfdg (FGIC Insd).......................................... 5.250 11/15/31 3,188,460 2,500 Nassau Cnty, NY Interim Fin Auth Sales Tax Secured Ser A (Prerefunded @ 11/15/10)......... 5.750 11/15/13 2,899,900 1,000 Nassau Cnty, NY Ser A Rfdg (FGIC Insd)......... 6.000 07/01/10 1,156,770 85 New York City Adj Sub Ser A-1 (e).............. 6.545 08/01/12 85,884 2,625 New York City Hlth & Hosp Corp Rev Hlth Sys Ser A (AMBAC Insd)................................. 5.000 02/15/11 2,904,142 7,000 New York City Ser A............................ 6.250 08/01/08 7,557,410 2,000 New York City Ser H (FGIC Insd)................ 6.000 08/01/12 2,360,280 1,000 New York City Ser H............................ 5.750 03/15/13 1,132,340 2,500 New York City Ser I (MBIA Insd)................ 5.000 08/01/17 2,752,150 1,000 New York City Transitional Future Tax Secd Ser C (AMBAC Insd)................................. 5.250 08/01/22 1,080,160 1,545 New York St Dorm Auth Lease Teachers College (FSA Insd)..................................... 5.250 08/15/15 1,713,065 6,800 New York St Dorm Auth Rev City Univ Sys Cons Ser A.......................................... 5.625 07/01/16 7,936,280 1,250 New York St Dorm Auth Rev Cons City Univ Sys A (FSA Insd)..................................... 5.750 07/01/13 1,468,450 3,000 New York St Dorm Auth Rev Sch Dist Fin Pgm Ser D (MBIA Insd).................................. 5.500 10/01/17 3,423,060 4,200 New York St Dorm Auth Rev Secd Hosp N General Hosp Rfdg...................................... 5.750 02/15/19 4,709,502 2,190 New York St Hsg Fin Agy Econ Dev & Hsg Ser A (f)............................................ 5.250 09/15/20 2,365,747 1,330 New York St Hsg Fin Agy Econ Dev & Hsg Ser A... 5.000 09/15/22 1,391,233 4,000 New York St Twy Auth Svc Cntrct Loc Hwy Brdg (Prerefunded @ 04/01/11)....................... 5.250 04/01/16 4,525,840 3,000 New York, NY City Mun Wtr Fin Ser B............ 5.000 06/15/19 3,258,870 4,630 Plainedge, NY Un Free Sch Dist No. 2063 (Acquired 12/01/00, Cost $4,630,041) (b)....... 6.000 06/01/12 4,906,037
See Notes to Financial Statements C-19 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- NEW YORK (CONTINUED) $5,000 Sales Tax Asset Receivable Corp Ser A (MBIA Insd) (d)...................................... 5.000% 10/15/23 $ 5,333,250 3,000 Triborough Brdg & Tunl Auth Gen Purp Ser A..... 5.000 01/01/27 3,078,870 5,000 Triborough Brdg & Tunl Auth NY Gen Ser B Rfdg........................................... 5.000 11/15/21 5,314,400 2,000 Triborough Brdg & Tunl Auth NY Ser E Rfdg (MBIA Insd).......................................... 5.000 11/15/32 2,056,620 ------------- 77,549,952 ------------- NORTH CAROLINA 4.6% 2,000 Johnston Cnty, NC (FGIC Insd).................. 5.900 03/01/19 2,310,120 7,015 North Carolina Eastern Muni Pwr Agy Pwr Sys Rev Ser A Rfdg (MBIA Insd)......................... 5.500 01/01/05 7,059,475 8,300 North Carolina Muni Pwr Agy No 1 Catawba Elec Rev Rfdg (MBIA Insd) (e)....................... 6.000 01/01/12 9,746,441 6,605 North Carolina Muni Pwr Agy Ser A (MBIA Insd).......................................... 5.250 01/01/20 7,177,720 1,315 University NC Wilmington Rev (AMBAC Insd) (f)............................................ 5.250 01/01/19 1,443,449 ------------- 27,737,205 ------------- OHIO 5.9% 3,950 Cincinnati, OH City Sch Dist Sch Impt (FSA Insd).......................................... 5.250 06/01/18 4,390,544 2,700 Cleveland-Cuyahoga Cnty, OH Dev Port Auth Rev Cleveland Bond Fd Ser B (f).................... 5.375 05/15/18 2,738,394 1,000 Columbus, OH City Sch Dist Sch Fac Constr & Impt (FSA Insd)................................ 5.250 12/01/21 1,105,080 1,000 Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc Proj........................................... 7.500 01/01/30 1,108,460 2,350 Franklin Cnty, OH Convention Fac Auth Tax & Lease Rev Antic Bds Rfdg (AMBAC Insd).......... 5.250 12/01/17 2,622,553 1,200 Franklin Cnty, OH Convention Fac Auth Tax & Lease Rev Antic Bds Rfdg (AMBAC Insd).......... 5.250 12/01/18 1,334,724 4,800 Franklin Cnty, OH Hosp Rev Holy Cross Hlth Sys Ser B Rfdg (MBIA Insd)......................... 5.250 06/01/10 4,908,336 2,000 Lebanon, OH City Sch Dist (FSA Insd)........... 5.500 12/01/16 2,258,500 1,000 Lorain Cnty, OH Hosp Rev Catholic Hlthcare..... 5.375 10/01/30 1,032,490 2,000 Lorain, OH City Sch Dist Classroom Fac Impt (MBIA Insd).................................... 5.250 12/01/20 2,198,140 1,000 Mahoning Cnty, OH Hosp Fac Forum Hlth Oblig Group Ser A.................................... 6.000 11/15/32 1,059,030 1,520 Miami Univ OH Gen Rcpts Rfdg (AMBAC Insd)...... 5.000 12/01/21 1,630,626 1,580 Montgomery Cnty, OH Hosp Rev Grandview Hosp & Med Ctr Rfdg (Escrowed to Maturity)............ 5.375 12/01/05 1,639,645 2,270 Montgomery Cnty, OH Hosp Rev Kettering Med Ctr Impt & Rfdg (MBIA Insd)........................ 6.250 04/01/20 2,813,347 1,000 Ohio St Air Quality Dev Auth Rev JMG Fdg Ltd Part Proj Rfdg (AMT) (AMBAC Insd).............. 6.375 04/01/29 1,023,300
See Notes to Financial Statements C-20 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- OHIO (CONTINUED) $2,500 Ohio St Bldg Auth St Fac Adult Correction Ser A Rfdg (FSA Insd)................................ 5.500% 10/01/12 $ 2,844,450 1,000 Ohio St Higher Ed Cap Fac Ser II A............. 5.250 12/01/05 1,036,740 ------------- 35,744,359 ------------- OKLAHOMA 0.9% 1,240 Kay Cnty, OK Home Fin Auth Rev Single Family Mtg Ser A Rfdg (Escrowed to Maturity) (AMBAC Insd).......................................... 7.000 11/01/11 1,519,744 1,520 Oklahoma Hsg Fin Agy Single Family Rev Mtg Class B (AMT) (GNMA Collateralized)............ 7.997 08/01/18 1,563,472 2,305 Oklahoma St Cap Impt Auth St (MBIA Insd)....... 5.000 06/01/06 2,416,839 ------------- 5,500,055 ------------- OREGON 2.1% 4,000 Oregon Hlth Sciences Univ Insd Ser A (MBIA Insd).......................................... 5.250 07/01/22 4,323,680 1,500 Oregon St Dept Admin Ser C Rfdg (MBIA Insd).... 5.250 11/01/17 1,669,860 1,250 Portland, OR Cmnty College Dist Ser B.......... 5.250 06/01/12 1,403,313 1,500 Washington Multnomah & Yamhill Cntys, OR Sch Dist No 11 (MBIA Insd)......................... 5.000 06/01/13 1,654,335 3,195 Yamhill Cnty, OR Sch Dist No 029J Newberg (MBIA Insd) (f)...................................... 5.250 06/15/18 3,551,882 ------------- 12,603,070 ------------- PENNSYLVANIA 5.9% 2,500 Allegheny Cnty, PA San Auth Swr (MBIA Insd).... 5.500 12/01/30 2,726,100 3,850 Greater Latrobe, PA Sch Auth (FGIC Insd) (f)... 5.250 04/01/16 4,294,945 3,000 Harrisburg, PA Auth Res Gtd Sub Ser D-2 (Variable Rate Coupon) (FSA Insd).............. 5.000 12/01/33 3,291,330 210 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg................... 5.000 12/15/05 210,130 275 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg (f)............... 5.100 12/15/06 276,790 295 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg (f)............... 5.250 12/15/07 298,744 210 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg................... 5.300 12/15/08 212,818 320 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg (f)............... 5.300 12/15/09 320,150 240 Lehigh Cnty, PA Gen Purp Auth Rev First Mtg Bible Fellowship Proj A Rfdg................... 5.400 12/15/10 238,824 2,700 Pennsylvania Econ Dev Fin Auth Res Recovery Rev Colver Proj Ser D (AMT)........................ 7.150 12/01/18 2,764,854
See Notes to Financial Statements C-21 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- PENNSYLVANIA (CONTINUED) $1,000 Pennsylvania St Tpk Commn Rev Ser T Rfdg (FGIC Insd).......................................... 5.500% 12/01/11 $ 1,151,860 1,000 Philadelphia, PA Auth Indl Dev Philadelphia Arpt Sys Proj Ser A (AMT) (FGIC Insd).......... 5.125 07/01/19 1,059,740 2,600 Philadelphia, PA Auth Indl Ser B (FSA Insd).... 5.500 10/01/16 2,939,300 3,200 Philadelphia, PA Gas Wks Rev 1998 Gen Ordinance 4th Ser (FSA Insd)............................. 5.250 08/01/19 3,494,048 4,305 Philadelphia, PA Redev Auth Rev Neighborhood Transformation Ser A (FGIC Insd)............... 5.250 04/15/11 4,850,917 1,500 Philadelphia, PA Sch Dist Ser A (Prerefunded @ 02/01/11) (FSA Insd)........................... 5.750 02/01/12 1,732,500 5,205 Pittsburgh, PA Ser A (AMBAC Insd).............. 5.500 09/01/17 5,721,336 ------------- 35,584,386 ------------- RHODE ISLAND 0.5% 2,495 Rhode Island St Hlth & Ed Higher Ed Johnson & Wales Rfdg (XLCA Insd)......................... 5.375 04/01/18 2,756,002 ------------- SOUTH CAROLINA 0.7% 2,000 Rock Hill, SC Util Sys Rev Comb Ser A Impt & Rfdg (FSA Insd)................................ 5.375 01/01/18 2,218,660 475 Rock Hill, SC Util Sys Rev Comb Ser C Rfdg (FSA Insd).......................................... 5.125 01/01/13 524,742 1,500 South Carolina Jobs Econ Dev Auth Indl Rev Elec & Gas Co Proj Ser A (AMBAC Insd)............... 5.200 11/01/27 1,578,675 ------------- 4,322,077 ------------- SOUTH DAKOTA 0.3% 1,905 Minnehaha Cnty, SD Ctf Ltd Tax (FSA Insd) (d) (f)............................................ 5.000 12/01/19 2,058,695 ------------- TENNESSEE 1.6% 4,000 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev First Mtg Mtn St Hlth Ser A Rfdg (MBIA Insd)... 7.500 07/01/25 5,046,560 2,500 Memphis, TN (Prerefunded @ 10/01/06)........... 5.250 10/01/14 2,680,175
See Notes to Financial Statements C-22 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- TENNESSEE (CONTINUED) $1,000 Metropolitan Nashville Arpt Auth TN Impt Ser A Rfdg (FGIC Insd)............................... 6.600% 07/01/14 $ 1,195,160 990 Tennessee Hsg Dev Agy Home Ownership Pgm 2-A (AMT).......................................... 5.700 07/01/31 1,027,689 ------------- 9,949,584 ------------- TEXAS 10.0% 1,000 Brazos Cnty, TX Hlth Fac Dev Oblig Grp......... 5.375 01/01/32 1,015,840 1,350 Cameron Cnty, TX Ctf Oblig (AMBAC Insd) (f).... 5.750 02/15/14 1,521,828 2,500 Coastal Bend Hlth Fac Dev, TX Ser C (Inverse Fltg) (Escrowed to Maturity) (AMBAC Insd)...... 8.138 11/15/13 3,411,275 2,420 Dallas Cnty, TX Cmnty College Dist Rev Fin Sys (AMBAC Insd) (f)............................... 5.375 02/15/16 2,663,839 2,000 Fort Worth, TX Wtr & Swr Rev Impt Rfdg......... 5.500 02/15/05 2,021,940 1,745 Harris Cnty, TX Perm Impt & Rfdg............... 5.000 10/01/11 1,870,483 3,345 Houston, TX Hotel Occupancy Tax Convtn & Entertnmnt Ser B (AMBAC Insd).................. 5.750 09/01/14 3,848,423 6,790 Houston, TX Indpt Sch Dist Pub Fac Corp Lease Rev Cap Apprec West Side Ser B (AMBAC Insd) (f)............................................ * 09/15/14 4,529,813 130 Houston, TX Pub Impt Rfdg (FSA Insd)........... 5.750 03/01/15 148,227 1,370 Houston, TX Pub Impt Rfdg (Prerefunded 09/01/10) (FSA Insd)........................... 5.750 03/01/15 1,566,253 10,000 Houston, TX Util Sys Rev First Lien Ser A Rfdg (FSA Insd)..................................... 5.250 05/15/21 10,937,800 4,000 Houston, TX Util Sys Rev First Lien Ser A Rfdg (FGIC Insd).................................... 5.250 05/15/23 4,325,760 2,500 Houston, TX Wtr & Swr Sys Rev Jr Lien Ser B Rfdg (Escrowed to Maturity) (FGIC Insd)........ 6.250 12/01/05 2,618,950 1,250 Matagorda Cnty, TX Navig Dist No 1 Rev Coll Centerpoint Energy Proj Rfdg (Variable Rate Coupon)........................................ 5.600 03/01/27 1,289,200 1,000 Mesquite, TX Hlth Fac Dev Christian Care Retirement Fac Ser A........................... 7.625 02/15/28 1,052,370 1,400 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj............................ 7.250 01/01/31 1,353,394 50 North Central, TX Hlth Fac Dev Hosp Baylor Hlth Care Sys Proj A................................ 5.125 05/15/29 50,818 4,000 North Central, TX Hlth Fac Dev Hosp Childrens Med Ctr Dallas (AMBAC Insd).................... 5.250 08/15/32 4,177,200 3,994 Region One Ed Svc Ctr Sub Tech Fac Proj (Acquired 12/30/97, Cost $3,993,700) (b)....... 6.590 12/15/17 4,061,793 4,000 San Antonio, TX Elec & Gas Rev Sys Rfdg........ 5.375 02/01/18 4,466,080 1,123 Texas Gen Svc Comm Part Int (Acquired 03/16/95, Cost $1,222,054) (b)........................... 7.250 08/01/11 1,140,726
See Notes to Financial Statements C-23 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- TEXAS (CONTINUED) $ 75 Texas Muni Pwr Agy Rev (Escrowed to Maturity) (MBIA Insd).................................... * 09/01/15 $ 48,154 3,925 Texas Muni Pwr Agy Rev (Unrefunded Balance) (MBIA Insd).................................... * 09/01/15 2,496,104 ------------- 60,616,270 ------------- VIRGINIA 2.2% 1,320 Fairfax Cnty, VA Ctf Part...................... 5.300% 04/15/23 1,417,654 1,500 Henrico Cnty, VA Indl Dev Auth Pub Fac Lease Rev Henrico Cnty Regl Jail Proj (Prerefunded @ 08/01/05)...................................... 6.500 08/01/10 1,582,710 1,500 Henrico Cnty, VA Indl Dev Auth Pub Fac Lease Rev Henrico Cnty Regl Jail Proj (Prerefunded @ 08/01/05)...................................... 7.125 08/01/21 1,589,715 1,630 Richmond, VA (FSA Insd)........................ 5.125 01/15/08 1,776,814 1,340 Richmond, VA (FSA Insd)........................ 5.500 01/15/10 1,515,620 5,000 Virginia St Pub Sch Auth Sch Fin 1997 Resolution Ser C............................... 5.000 08/01/20 5,383,200 ------------- 13,265,713 ------------- WASHINGTON 5.5% 5,000 Bellevue, WA Convention Ctr Auth Spl Oblig Rev Rfdg (MBIA Insd)............................... * 02/01/24 1,921,050 3,230 Clark Cnty, WA Pub Util Dist No. 001 Gen Sys Rev Rfdg (FSA Insd) (f)........................ 5.500 01/01/07 3,465,112 3,000 Clark Cnty, WA Pub Util Dist No. 001 Gen Sys Rev Rfdg (FSA Insd)............................ 5.625 01/01/12 3,366,150 5,000 Cowlitz Cnty, WA Spl Swr Rev CSOB Wastewtr Treatment Rfdg (FGIC Insd)..................... 5.500 11/01/19 5,843,150 5,000 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg........................................... 5.500 07/01/17 5,589,400 3,000 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd)................................ 5.500 07/01/18 3,372,210 5,000 King Cnty, WA Ser B Rfdg (MBIA Insd)........... 5.250 01/01/34 5,233,000 1,000 Port Seattle, WA Rev Ser B (AMT) (MBIA Insd)... 5.625 02/01/24 1,085,740 1,345 Tacoma, WA Elec Sys Rev Ser A Rfdg (FSA Insd).......................................... 5.750 01/01/15 1,532,103 1,750 Washington St Pub Pwr Supply Sys Nuclear Proj No 1 Rev (MBIA Insd)........................... 5.750 07/01/12 1,885,888 ------------- 33,293,803 -------------
See Notes to Financial Statements C-24 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - -------------------------------------------------------------------------------------------- WEST VIRGINIA 1.1% $6,550 Harrison Cnty, WV Cnty Cmnty Solid Waste Disp Rev Potomac Edison Co Ser A (AMT) (MBIA Insd) (f)............................................ 6.875% 04/15/22 $ 6,575,611 ------------- WISCONSIN 0.9% 5,000 Wisconsin St Hlth & Ed Fac Auth Mercy Hlth Sys Corp (AMBAC Insd).............................. 5.500 08/15/25 5,387,100 ------------- GUAM 0.9% 5,000 Guam Pwr Auth Rev Ser A (AMBAC Insd)........... 5.250 10/01/34 5,285,800 ------------- PUERTO RICO 1.0% 2,000 Puerto Rico Muni Fin Agy Ser A (FSA Insd)...... 5.250 08/01/20 2,228,340 3,500 Puerto Rico Pub Bldgs Auth Rev Govt Facs Ser I (Comwth Gtd)................................... 5.250 07/01/33 3,667,405 ------------- 5,895,745 ------------- TOTAL LONG-TERM INVESTMENTS 148.1% (Cost $832,047,426)....................................................... 894,019,978 SHORT-TERM INVESTMENTS 1.1% (Cost $6,400,000)......................................................... 6,400,000 ------------- TOTAL INVESTMENTS 149.2% (Cost $838,447,426)....................................................... 900,419,978 OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%................................. 3,329,717 PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (49.7%)................. (300,116,361) ------------- NET ASSETS APPLICABLE TO COMMON SHARES 100.0%.............................. $ 603,633,334 =============
Percentages are calculated as a percentage of net assets applicable to common shares. * Zero coupon bond (a) All or a portion of these securities have been physically segregated in connection with open futures contracts. (b) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted Securities comprise 4.4% of net assets applicable to common shares. (c) 144A securities are those which are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in transactions exempt from registration which are normally those transactions with qualified institutional buyers. (d) Securities purchased on a when-issued or delayed delivery basis. (e) Security converts to a fixed coupon rate at a predetermined date. (f) The Trust owns 100% of the bond issuance. ACA--American Capital Access See Notes to Financial Statements C-25 VAN KAMPEN MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued AMBAC--AMBAC Indemnity Corp. AMT--Alternative Minimum Tax Comwth Gtd--Commonwealth of Puerto Rico FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. GNMA--Government National Mortgage Association MBIA--Municipal Bond Investors Assurance Corp. XLCA--XL Capital Assurance Inc. See Notes to Financial Statements C-26 VAN KAMPEN MUNICIPAL TRUST FINANCIAL STATEMENTS Statement of Assets and Liabilities October 31, 2004 ASSETS: Total Investments (Cost $838,447,426)....................... $900,419,978 Cash........................................................ 31,897 Receivables: Interest.................................................. 11,989,459 Investments Sold.......................................... 2,839,753 Other....................................................... 15,611 ------------ Total Assets............................................ 915,296,698 ------------ LIABILITIES: Payables: Investments Purchased..................................... 10,326,321 Investment Advisory Fee................................... 457,720 Income Distributions--Common Shares....................... 138,245 Other Affiliates.......................................... 34,355 Variation Margin on Futures............................... 5,438 Trustees' Deferred Compensation and Retirement Plans........ 369,938 Accrued Expenses............................................ 214,986 ------------ Total Liabilities....................................... 11,547,003 Preferred Shares (including accrued distributions).......... 300,116,361 ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $603,633,334 ============ NET ASSET VALUE PER COMMON SHARE ($603,633,334 divided by 36,365,393 shares outstanding)............................ $ 16.60 ============ NET ASSETS CONSIST OF: Common Shares ($.01 par value with an unlimited number of shares authorized, 36,365,393 shares issued and outstanding).............................................. $ 363,654 Paid in Surplus............................................. 538,413,497 Net Unrealized Appreciation................................. 61,956,652 Accumulated Undistributed Net Investment Income............. 3,813,714 Accumulated Net Realized Loss............................... (914,183) ------------ NET ASSETS APPLICABLE TO COMMON SHARES...................... $603,633,334 ============ PREFERRED SHARES ($.01 par value, authorized 100,000,000 shares, 12,000 issued with liquidation preference of $25,000 per share)........................................ $300,000,000 ============ NET ASSETS INCLUDING PREFERRED SHARES....................... $903,633,334 ============
See Notes to Financial Statements C-27 VAN KAMPEN MUNICIPAL TRUST FINANCIAL STATEMENTS continued Statement of Operations For the Year Ended October 31, 2004 INVESTMENT INCOME: Interest.................................................... $44,193,797 ----------- EXPENSES: Investment Advisory Fee..................................... 5,364,429 Preferred Share Maintenance................................. 801,595 Administrative Fee.......................................... 261,204 Trustees' Fees and Related Expenses......................... 152,106 Legal....................................................... 81,836 Custody..................................................... 50,288 Other....................................................... 387,907 ----------- Total Expenses.......................................... 7,099,365 Less Credits Earned on Cash Balances.................... 508 ----------- Net Expenses............................................ 7,098,857 ----------- NET INVESTMENT INCOME....................................... $37,094,940 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $ (748,208) Futures................................................... (440,822) ----------- Net Realized Loss........................................... (1,189,030) ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 46,947,631 ----------- End of the Period: Investments............................................. 61,972,552 Futures................................................. (15,900) ----------- 61,956,652 ----------- Net Unrealized Appreciation During the Period............... 15,009,021 ----------- NET REALIZED AND UNREALIZED GAIN............................ $13,819,991 =========== DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $(3,258,016) =========== NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS................................................ $47,656,915 ===========
See Notes to Financial Statements C-28 VAN KAMPEN MUNICIPAL TRUST FINANCIAL STATEMENTS continued Statements of Changes in Net Assets
FOR THE FOR THE YEAR ENDED YEAR ENDED OCTOBER 31, 2004 OCTOBER 31, 2003 ------------------------------------ FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income................................... $ 37,094,940 $ 37,242,943 Net Realized Gain/Loss.................................. (1,189,030) 2,809,023 Net Unrealized Appreciation During the Period........... 15,009,021 1,757,060 Distributions to Preferred Shareholders: Net Investment Income................................. (3,180,653) (3,055,413) Net Realized Gain..................................... (77,363) -0- ------------ ------------ Change in Net Assets Applicable to Common Shares from Operations............................................ 47,656,915 38,753,613 Distributions to Common Shareholders: Net Investment Income................................. (34,036,953) (34,036,119) Net Realized Gain..................................... (868,390) -0- ------------ ------------ NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM INVESTMENT ACTIVITIES............................ 12,751,572 4,717,494 NET ASSETS APPLICABLE TO COMMON SHARES: Beginning of the Period................................. 590,881,762 586,164,268 ------------ ------------ End of the Period (Including accumulated undistributed net investment income of $3,813,714 and $3,974,030, respectively)......................................... $603,633,334 $590,881,762 ============ ============
See Notes to Financial Statements C-29 VAN KAMPEN MUNICIPAL TRUST FINANCIAL HIGHLIGHTS THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
------------------------------ 2004 2003 2002 (a) ------------------------------ NET ASSET VALUE, BEGINNING OF THE PERIOD.................... $ 16.25 $ 16.12 $ 16.07 ------- ------- ------- Net Investment Income..................................... 1.03 1.02 1.06 Net Realized and Unrealized Gain/Loss..................... .37 .13 .01 Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income................................... (.09) (.08) (.11) Net Realized Gain....................................... -0-(f) -0- -0- ------- ------- ------- Total from Investment Operations............................ 1.31 1.07 .96 Distributions Paid to Common Shareholders: Net Investment Income................................... (.94) (.94) (.91) Net Realized Gain....................................... (.02) -0- -0- ------- ------- ------- NET ASSET VALUE, END OF THE PERIOD.......................... $ 16.60 $ 16.25 $ 16.12 ======= ======= ======= Common Share Market Price at End of the Period.............. $ 14.90 $ 14.57 $ 14.30 Total Return (b)............................................ 9.15% 8.60% 10.49% Net Assets Applicable to Common Shares at End of the Period (In millions)............................................. $ 603.6 $ 590.9 $ 586.2 Ratio of Expenses to Average Net Assets Applicable to Common Shares (c)................................................ 1.19% 1.23% 1.35% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (c)........................... 6.24% 6.28% 6.70% Portfolio Turnover.......................................... 19% 24% 38% SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares (c)................................................ .79% .81% .89% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (d)........................... 5.70% 5.77% 5.98% SENIOR SECURITIES: Total Preferred Shares Outstanding.......................... 12,000 12,000 12,000 Asset Coverage Per Preferred Share (e)...................... $75,312 $74,245 $73,861 Involuntary Liquidating Preference Per Preferred Share...... $25,000 $25,000 $25,000 Average Market Value Per Preferred Share.................... $25,000 $25,000 $25,000
* Non-Annualized (a)As required, effective November 1, 2001, the Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended October 31, 2002 was to increase net investment income per share by $.01, decrease net realized and unrealized gains and losses per share by $.01 and increase the ratio of net investment income to average net assets applicable to common shares from 6.69% to 6.70%. Per share, ratios and supplemental data for periods prior to October 31, 2002 have not been restated to reflect this change in presentation. (b)Total return assumes an investment at the common share market price at the beginning of the period indicated, reinvestment of all distributions for the period in accordance with the Trust's dividend reinvestment plan, and sale of all shares at the closing common share market price at the end of the period indicated. (c)Ratios do not reflect the effect of dividend payments to preferred shareholders. (d)Ratios reflect the effect of dividend payments to preferred shareholders. (e)Calculated by subtracting the Trust's total liabilities (not including the preferred shares) from the Trust's total assets and dividing this by the number of preferred shares outstanding. (f)Amount is less than $0.01 per share. C-30
TWO MONTHS YEAR ENDED OCTOBER 31, ENDED YEAR ENDED AUGUST 31, - --------------------------------- OCTOBER 31, ----------------------------------------- 2001 2000 1999 1998 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------- $ 14.91 $ 14.60 $ 17.39 $ 17.32 $ 16.60 $ 15.84 $ 15.73 $ 15.56 ------- ------- -------- -------- -------- -------- -------- -------- 1.13 1.17 1.20 .21 1.26 1.28 1.30 1.31 1.12 .42 (2.30) .08 .72 .73 .10 .26 (.27) (.34) (.24) (.02) (.30) (.29) (.30) (.32) -0- -0- (.06) (.04) -0- -0- -0- -0- ------- ------- -------- -------- -------- -------- -------- -------- 1.98 1.25 (1.40) .23 1.68 1.72 1.10 1.25 (.82) (.94) (.96) (.16) (.96) (.96) (.99) (1.08) -0- -0- (.43) -0- -0- -0- -0- -0- ------- ------- -------- -------- -------- -------- -------- -------- $ 16.07 $ 14.91 $ 14.60 $ 17.39 $ 17.32 $ 16.60 $ 15.84 $ 15.73 ======= ======= ======== ======== ======== ======== ======== ======== $ 13.79 $12.625 $13.1875 $16.8125 $16.1875 $ 15.75 $ 14.50 $ 14.25 15.97% 2.80% -14.47% 4.84%* 9.06% 15.87% 8.98% 2.39% $ 584.4 $ 542.1 $ 530.9 $ 630.6 $ 628.2 $ 601.9 $ 574.6 $ 570.7 1.55% 1.67% 1.60% 1.57% 1.57% 1.61% 1.61% 1.65% 7.26% 8.07% 7.43% 7.20% 7.42% 7.86% 8.08% 8.58% 28% 39% 80% 6%* 94% 54% 36% 49% 1.01% 1.07% 1.06% 1.07% 1.06% 1.07% 1.06% 1.07% 5.51% 5.71% 5.95% 6.48% 5.66% 6.04% 6.20% 6.48% 12,000 12,000 12,000 6,000 6,000 6,000 6,000 6,000 $73,700 $70,177 $ 69,241 $155,104 $154,696 $150,322 $145,764 $145,113 $25,000 $25,000 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $25,000 $25,000 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
See Notes to Financial Statements C-31 VAN KAMPEN MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Municipal Trust (the "Trust") is registered as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended. The Trust's investment objective is to seek to provide a high level of current income exempt from federal income tax, consistent with preservation of capital. The Trust will invest in a portfolio consisting substantially of municipal obligations rated investment grade at the time of investment, but may invest up to 20% of its assets in unrated securities which are believed to be of comparable quality to those rated investment grade. The Trust commenced investment operations on September 27, 1991. Effective November 30, 2003, the Trust's investment adviser, Van Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset Management (the "Adviser"). The following is a summary of significant accounting policies consistently followed by the Trust 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 Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Trust may purchase and sell securities on a "when-issued" or "delayed delivery" basis, with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Trust will segregate assets with the custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At October 31, 2004, the Trust had $10,326,321 of when-issued and delayed delivery purchase commitments. C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. D. FEDERAL INCOME TAXES It is the Trust'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 to its shareholders. Therefore, no provision for federal income taxes is required. The Trust 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 October 31, 2004, the Trust had an C-32 VAN KAMPEN MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued accumulated capital loss carryforward for tax purposes of $930,080, which will expire on October 31, 2012. At October 31, 2004, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $837,846,231 ============ Gross tax unrealized appreciation........................... $ 63,518,261 Gross tax unrealized depreciation........................... (944,514) ------------ Net tax unrealized appreciation on investments.............. $ 62,573,747 ============
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly dividends from net investment income to common shareholders. Net realized gains, if any, are distributed annually on a pro rata basis to common and preferred shareholders. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during the years ended October 31, 2004 and 2003 was as follows:
2004 2003 Distribution paid from: Ordinary Income........................................... $ 71,612 $190,906 Long-term capital gain.................................... 945,753 -0- ---------- -------- $1,017,365 $190,906 ========== ========
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 of $37,650 related to book and tax accretion differences was reclassified from accumulated undistributed net investment income to accumulated net realized loss. As of October 31, 2004, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $198,860
Net realized gains or losses may differ for financial and tax reporting purposes primarily as a result of gains or losses recognized for tax purposes on open futures transactions on October 31, 2004. F. EXPENSE REDUCTION During the year ended October 31, 2004, the Trust's custody fee was reduced by $508 as a result of credits earned on cash balances. C-33 VAN KAMPEN MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Trust's Investment Advisory Agreement, the Adviser provides investment advice and facilities to the Trust for an annual fee payable monthly of .60% of the average daily net assets of the Trust. Effective November 1, 2004, the investment advisory fee was reduced from .60% to .55%. In addition, the Trust paid a monthly administrative fee to Van Kampen Investments Inc. or its affiliates (collectively "Van Kampen"), the Trust's Administrator, at an annual rate of .05% of the average daily net assets of the Trust. Effective June 1, 2004, the administrative fee was reduced from .05% to .00%. For the year ended October 31, 2004, the Trust recognized expenses of approximately $55,000 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Trust, of which a trustee of the Trust is a partner who provides legal services to the Trust, and is therefore an affiliated person. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Trust. The Adviser allocates the cost of such services to each trust. For the year ended October 31, 2004, the Trust recognized expenses of approximately $65,400 representing Van Kampen's cost of providing accounting and legal services to the Trust, which are reported as part of "Other" and "Legal" expenses, respectively, in the Statement of Operations. Certain officers and trustees of the Trust are also officers and directors of Van Kampen. The Trust does not compensate its officers or trustees who are also officers of Van Kampen. The Trust 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 to a later date. 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 Trust. The maximum annual benefit per trustee under the plan is $2,500. 3. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $165,364,191 and $164,885,171, respectively. 4. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. In order to seek to manage the interest rate exposure of the Trust's portfolio in a changing interest rate environment, the Trust may purchase or sell financial futures contracts or engage in transactions involving interest rate swaps, caps, floors or collars. The Trust expects to enter into these transactions primarily as a hedge against anticipated interest rate or fixed-income market changes, for duration management or for risk management purposes, but may also enter into these transactions to generate additional income. All of the Trust's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts. C-34 VAN KAMPEN MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued Summarized below are the specific types of derivative financial instruments used by the Fund. A. FUTURES CONTRACTS A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Trust generally invests in exchange traded futures contracts on U.S. Treasury Bonds and Notes and typically closes the contract prior to the delivery date. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Upon entering into futures contracts, the Trust maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a future commission merchant pursuant to rules and regulations promulgated under the 1940 Act, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts for the year ended October 31, 2004, were as follows:
CONTRACTS Outstanding at October 31, 2003............................. 98 Futures Opened.............................................. 104 Futures Closed.............................................. (180) ---- Outstanding at October 31, 2004............................. 22 ====
The futures contracts outstanding as of October 31, 2004, and the descriptions and unrealized appreciation/depreciation are as follows:
UNREALIZED SHORT CONTRACTS CONTRACTS DEPRECIATION U.S. Treasury Notes 10-Year Futures December 2004 (Current Notional Value of $113,563 per contract)............................................... 4 $ (4,578) U.S. Treasury Notes 5-Year Futures December 2004 (Current Notional Value of $111,375 per contract)............................................... 18 (11,322) -- -------- 22 $(15,900) == ========
B. INVERSE FLOATING RATE SECURITIES An Inverse Floating Rate security is one where the coupon is inversely indexed to a short-term floating interest rate multiplied by a specified factor. As the floating rate rises, the coupon is reduced. Conversely as the floating rate declines, the coupon is increased. The price of these securities may be more volatile than the price of a comparable fixed rate security. These instruments are typically used by the Trust to enhance the yield of the portfolio. 5. PREFERRED SHARES The Trust has outstanding 12,000 Auction Preferred Shares ("APS") in four series of 3,000 shares each. Dividends are cumulative and the dividend rate is periodically reset through an auction process. The dividend periods for Series A and C are generally 7 days. C-35 VAN KAMPEN MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued The dividend periods for Series B and D are 28 days. The average rate in effect on October 31, 2004 was 1.538%. During the year ended October 31, 2004, the rates ranged from 0.590% to 1.760%. The Trust pays annual fees equivalent to .25% of the preferred share liquidation value for the remarketing efforts associated with the preferred auctions. These fees are included as a component of "Preferred Share Maintenance" expense in the Statement of Operations. The APS are redeemable at the option of the Trust in whole or in part at the liquidation value of $25,000 per share plus accumulated and unpaid dividends. The Trust is subject to certain asset coverage tests, and the APS are subject to mandatory redemption if the tests are not met. 6. INDEMNIFICATIONS The Trust enters into contracts that contain a variety of indemnifications. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. C-36 VAN KAMPEN MUNICIPAL TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of Van Kampen Municipal Trust We have audited the accompanying statement of assets and liabilities of Van Kampen Municipal Trust (the "Trust"), including the portfolio of investments, as of October 31, 2004, 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 five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The Trust's financial highlights for the periods ended prior to October 31, 2000 were audited by other auditors whose report, dated December 6, 1999, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2004, by correspondence with the Trust's custodian and brokers. 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 Van Kampen Municipal Trust as of October 31, 2004, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Chicago, Illinois December 10, 2004 C-37 VAN KAMPEN MUNICIPAL TRUST DIVIDEND REINVESTMENT PLAN The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which Common Shareholders may elect to have dividends and capital gains distributions reinvested in Common Shares of the Trust. The Trust declares dividends out of net investment income, and will distribute annually net realized capital gains, if any. Common Shareholders may join or withdraw from the Plan at any time. If you decide to participate in the Plan, State Street Bank and Trust Company, as your Plan Agent, will automatically invest your dividends and capital gains distributions in Common Shares of the Trust for your account. HOW TO PARTICIPATE If you wish to participate and your shares are held in your own name, call 1-800-341-2929 for more information and a Plan brochure. If your shares are held in the name of a brokerage firm, bank, or other nominee, you should contact your nominee to see if it would participate in the Plan on your behalf. If you wish to participate in the Plan, but your brokerage firm, bank or nominee is unable to participate on your behalf, you should request that your shares be re-registered in your own name which will enable your participation in the Plan. HOW THE PLAN WORKS Participants in the Plan will receive the equivalent in Common Shares valued on the valuation date, generally at the lower of market price or net asset value, except as specified below. The valuation date will be the dividend or distribution payment date or, if that date is not a trading day on the national securities exchange or market system on which the Common Shares are listed for trading, the next preceding trading day. If the market price per Common Share on the valuation date equals or exceeds net asset value per Common Share on that date, the Trust will issue new Common Shares to participants valued at the higher of net asset value or 95% of the market price on the valuation date. In the foregoing situation, the Trust will not issue Common Shares under the Plan below net asset value. If net asset value per Common Share on the valuation date exceeds the market price per Common Share on that date, or if the Board of Trustees should declare a dividend or capital gains distribution payable to the Common Shareholders only in cash, participants in the Plan will be deemed to have elected to receive Common Shares from the Trust valued at the market price on that date. Accordingly, in this circumstance, the Plan Agent will, as agent for the participants, buy the Trust's Common Shares in the open market for the participants' accounts on or shortly after the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share of the Common Shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value C-38 VAN KAMPEN MUNICIPAL TRUST DIVIDEND REINVESTMENT PLAN continued of the Trust's Common Shares, resulting in the acquisition of fewer Common Shares than if the dividend or distribution had been paid in Common Shares issued by the Trust. All reinvestments are in full and fractional Common Shares and are carried to three decimal places. Experience under the Plan may indicate that changes are desirable. Accordingly, the Trust reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the changes sent to all Common Shareholders of the Trust at least 90 days before the record date for the dividend or distribution. The Plan also may be amended or terminated by the Plan Agent by at least 90 days written notice to all Common Shareholders of the Trust. COSTS OF THE PLAN The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Trust. However, each participant will pay a prorata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. No other charges will be made to participants for reinvesting dividends or capital gains distributions, except for certain brokerage commissions, as described above. TAX IMPLICATIONS You will receive tax information annually for your personal records and to help you prepare your federal income tax return. The automatic reinvestment of dividends and capital gains distributions does not relieve you of any income tax which may be payable on dividends or distributions. RIGHT TO WITHDRAW Plan participants may withdraw at any time by calling 1-800-341-2929 or by writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200. If you withdraw, you will receive, without charge, a share certificate issued in your name for all full Common Shares credited to your account under the Plan and a cash payment will be made for any fractional Common Share credited to your account under the Plan. You may again elect to participate in the Plan at any time by calling 1-800-341-2929 or writing to the Trust at: Van Kampen Funds Inc. Attn: Closed-End Funds 2800 Post Oak Blvd. Houston, TX 77056 C-39 VAN KAMPEN MUNICIPAL TRUST BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, New York 10020 CUSTODIAN AND TRANSFER AGENT STATE STREET BANK AND TRUST COMPANY c/o EquiServe P.O. Box 43011 Providence, Rhode Island 02940-3011 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DELOITTE & TOUCHE LLP 180 North Stetson Avenue Chicago, Illinois 60601 For federal income tax purposes, the following information is furnished with respect to the distributions paid by the Trust during its taxable year ended October 31, 2004. The Trust designated 99.8% of the income distributions as a tax-exempt income distribution. The Trust designated and paid $945,753 as a long-term capital gain distribution. In January, the Trust provides tax information to shareholders for the preceding calendar year. * "Interested persons" of the Trust, as defined in the Investment Company Act of 1940, as amended. C-40 VAN KAMPEN MUNICIPAL TRUST RESULTS OF SHAREHOLDER VOTES The Annual Meeting of the Shareholders of the Trust was held on June 23, 2004, where shareholders voted on the election of trustees. 1) With regard to the election of the following trustees by the common shareholders of the Trust:
# OF SHARES ------------------------------ IN FAVOR WITHHELD - ------------------------------------------------------------------------------------------ R. Craig Kennedy.......................................... 32,083,886 845,041 Jack E. Nelson............................................ 32,063,916 865,011 Richard F. Powers, III.................................... 32,091,066 837,861
2) With regard to the election of the following trustee by the preferred shareholders of the Trust:
# OF SHARES ---------------------------- IN FAVOR WITHHELD - ------------------------------------------------------------------------------------------ Hugo Sonnenschein........................................... 10,306 44
The other trustees of the Trust whose terms did not expire in 2004 are David C. Arch, J. Miles Branagan, Jerry D. Choate, Rod Dammeyer, Linda Hutton Heagy, Howard J Kerr, Mitchell M. Merin, Wayne W. Whalen, and Suzanne H. Woolsey. C-41 VAN KAMPEN MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION The business and affairs of the Trust are managed under the direction of the Trust's Board of Trustees and the Trust's officers appointed by the Board of Trustees. The tables below list the trustees and executive officers of the Trust 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 Asset Management (the "Adviser"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). The term "Fund Complex" includes each of the investment companies advised by the Adviser or its 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE David C. Arch (59) Trustee Trustee Chairman and Chief 85 Trustee/Director/Managing Blistex Inc. since 1991 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. Director of the Heartland Alliance, a nonprofit organization serving human needs based in Chicago. Director of St. Vincent de Paul Center, a Chicago based day care facility serving the children of low income families. Board member of the Illinois Manufacturers' Association. J. Miles Branagan (72) Trustee Trustee Private investor. 83 Trustee/Director/Managing 1632 Morning Mountain Road since 2003 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.
C-42
VAN KAMPEN MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Jerry D. Choate (66) Trustee Trustee Prior to January 1999, 83 Trustee/Director/Managing 33971 Selva Road since 2003 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.
C-43
VAN KAMPEN MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Rod Dammeyer (64) Trustee Trustee President of CAC, L.L.C., 85 Trustee/Director/Managing CAC, L.L.C. since 1991 a private company General Partner of funds 4350 LaJolla Village Drive offering capital in the Fund Complex. Suite 980 investment and management Director of Stericycle, San Diego, CA 92122-6223 advisory services. Prior Inc., Ventana Medical to February 2001, Vice Systems, Inc., and GATX Chairman and Director of Corporation, and Trustee Anixter International, of The Scripps Research Inc., a global Institute and the distributor of wire, University of Chicago cable and communications Hospitals and Health connectivity products. Systems. Prior to January Prior to July 2000, 2004, Director of Managing Partner of TeleTech Holdings Inc. Equity Group Corporate and Arris Group, Inc. Investment (EGI), a Prior to May 2002, company that makes Director of Peregrine private investments in Systems Inc. Prior to other companies. February 2001, Director of 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).
C-44
VAN KAMPEN MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Linda Hutton Heagy (56) Trustee Trustee Managing Partner of 83 Trustee/Director/Managing Heidrick & Struggles since 2003 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 (52) Trustee Trustee Director and President of 83 Trustee/Director/Managing 1744 R Street, NW since 2003 the German Marshall Fund General Partner of funds Washington, DC 20009 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 (69) Trustee Trustee Prior to 1998, President 85 Trustee/Director/Managing 736 North Western Avenue since 1992 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.
C-45
VAN KAMPEN MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Jack E. Nelson (68) Trustee Trustee President of Nelson 83 Trustee/Director/Managing 423 Country Club Drive since 2003 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 (64) Trustee Trustee President Emeritus and 85 Trustee/Director/Managing 1126 E. 59th Street since 1994 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, Ph.D. Trustee Trustee Chief Communications 83 Trustee/Director/Managing (62) since 2003 Officer of the National General Partner of funds 815 Cumberstone Road Academy of in the Fund Complex. Harwood, MD 20776 Sciences/National Director of Fluor Corp., Research Council, an an engineering, independent, federally procurement and chartered policy construction institution, from 2001 to organization, since November 2003 and Chief January 2004 and Director Operating Officer from of Neurogen Corporation, 1993 to 2001. Director of a pharmaceutical company, the Institute for Defense since January 1998. Analyses, a federally funded research and development center, Director of the German Marshall Fund of the United States, Director of the Rocky Mountain Institute 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.
C-46 VAN KAMPEN MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Mitchell M. Merin* (51) Trustee, Trustee President and Chief 83 Trustee/Director/Managing 1221 Avenue of the Americas President since Executive Officer of General Partner of funds New York, NY 10020 and Chief 2003; funds in the Fund in the Fund Complex. Executive President Complex. Chairman, Officer and Chief President, Chief Executive Executive Officer and Officer Director of the Adviser since 2002 and Van Kampen 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.
C-47
VAN KAMPEN MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Richard F. Powers, III* (58) Trustee Trustee Advisory Director of 85 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* (65) Trustee Trustee Partner in the law firm 85 Trustee/Director/Managing 333 West Wacker Drive since 1991 of Skadden, Arps, Slate, General Partner of funds Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex. 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 Adviser by reason of their current or former positions with Morgan Stanley or its affiliates. C-48 VAN KAMPEN MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued OFFICERS:
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS Stefanie V. Chang (38) Vice President Officer Executive Director of Morgan Stanley Investment Management. 1221 Avenue of the Americas and Secretary since 2003 Vice President of funds in the Fund Complex. New York, NY 10020 Amy R. Doberman (42) Vice President Officer Managing Director and General Counsel, U.S. Investment 1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment New York, NY 10020 Management, Inc., Morgan Stanley Investment Advisers Inc. and the Adviser. Vice President of the Morgan Stanley Institutional and Retail Funds since July 2004 and Vice President of funds in the Fund Complex as of August 2004. Previously, Managing Director and General Counsel of Americas, UBS Global Asset Management from July 2000 to July 2004 and General Counsel of Aeitus Investment Management, Inc. from January 1997 to July 2000. James M. Dykas (38) Chief Financial Officer Executive Director of Van Kampen Asset Management and Morgan 1 Parkview Plaza Officer and since 1999 Stanley Investment Management. Chief Financial Officer and Oakbrook Terrace, IL 60181 Treasurer Treasurer of funds in the Fund Complex. Prior to August 2004, Assistant Treasurer of funds in the Fund Complex. Joseph J. McAlinden (61) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan 1221 Avenue of the Americas President and since 2002 Stanley Investment Advisors Inc., and Morgan Stanley New York, NY 10020 Chief Investment Investment Management Inc. and Director of Morgan Stanley Officer 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 Adviser and Van Kampen Advisors Inc. since December 2002. Ronald E. Robison (65) Executive Vice Officer Principal Executive Officer of the Funds since May 2003. 1221 Avenue of the Americas President and since 2003 Chief Executive Officer and Chairman of Investor Services. New York, NY 10020 Principal Executive Vice President and Principal Executive Officer of Executive funds in the Fund Complex. Managing Director of Morgan Officer Stanley. Chief Administrative Officer, Managing Director and Director of Morgan Stanley Investment Advisors Inc., Morgan Stanley Services Company Inc. and Managing Director and Director of Morgan Stanley Distributors Inc. Chief Executive Officer and Director of Morgan Stanley Trust. Executive Vice President and Principal Executive Officer of the Institutional and Retail Morgan Stanley Funds; Director of Morgan Stanley SICAV; previously Chief Global Operations Officer and Managing Director of Morgan Stanley Investment Management Inc.
C-49
VAN KAMPEN MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS John L. Sullivan (49) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since 1 Parkview Plaza Officer since 1998 August 2004. Director and Managing Director of Van Kampen Oakbrook Terrace, IL 60181 Investments, the Adviser, Van Kampen Advisors Inc. and certain other subsidiaries of Van Kampen Investments. Prior August 2004, Vice President, Chief Financial Officer and Treasurer of funds in the Fund Complex and head of Fund Accounting for Morgan Stanley Investment Management. Prior to December 2002, Executive Director of Van Kampen Investments, the Adviser and Van Kampen Advisors Inc.
C-50 VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, (continued on back) C-51 VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. 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)2004 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. VKQ ANR 12/04 RN04-02826P-Y10/04 C-52 APPENDIX D TARGET FUND ANNUAL REPORT DATED OCTOBER 31, 2004 D-1 Item 1. Report to Shareholders. The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: Welcome, Shareholder In this report, you'll learn about how your investment in Van Kampen Investment Grade Municipal Trust performed during the annual period. The portfolio management team will provide an overview of the market conditions and discuss some of the factors that affected investment performance during the reporting period. In addition, this report includes the trust's financial statements and a list of trust investments as of October 31, 2004. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS INVESTMENT OBJECTIVE. TRUSTS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE TRUST WILL DECLINE AND THAT THE VALUE OF TRUST SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS TRUST. INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT).
--------------------------------------------------------------------------------------- NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE --------------------------------------------------------------------------------------- NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT ---------------------------------------------------------------------------------------
D-2 Performance Summary as of 10/31/04
INVESTMENT GRADE MUNICIPAL TRUST SYMBOL: VIG - --------------------------------------------------------- AVERAGE ANNUAL BASED ON BASED ON TOTAL RETURNS NAV MARKET PRICE Since Inception (11/30/89) 6.34% 4.82% 10-year 6.35 4.34 5-year 8.15 6.66 1-year 7.74 6.85 - ---------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, NET ASSET VALUE (NAV) AND COMMON SHARE MARKET PRICE WILL FLUCTUATE AND TRUST SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. NAV per share is determined by dividing the value of the trust's portfolio securities, cash and other assets, less all liabilities, by the total number of common shares outstanding. The common share market price is the price the market is willing to pay for shares of the trust at a given time. Common share market price is influenced by a range of factors, including supply and demand and market conditions. Total return assumes an investment at the beginning of the period, reinvestment of all distributions for the period in accordance with the trust's dividend reinvestment plan, and sale of all shares at the end of the period. The Lehman Brothers Municipal Bond Index is a broad-based statistical composite of municipal bonds. The index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index. D-3 Trust Report FOR THE 12-MONTH PERIOD ENDED OCTOBER 31, 2004 Van Kampen Investment Grade Municipal Trust is managed by the Adviser's Municipal Fixed Income team.(1) Current members include Thomas Byron, Vice President; Robert Wimmel, Vice President; and John Reynoldson, Executive Director. MARKET CONDITIONS The interest-rate environment of the 12 months ended October 31, 2004 was marked by two periods of steadily declining yields, with a significant sell-off in the middle. Yields fell steadily through the first half of the period, approaching the historical lows of 2003. This trend persisted until March, at which point yields reversed direction and began an upward march as prices fell. These losses were steepest in April, as a surprisingly strong employment report and signals from members of the Federal Open Market Committee (the Fed) caused investors to expect a near-term rate increase. Rates went on to decline from May through the end of the period as the market digested the Fed's newly hawkish rate stance. Investors were further comforted when, after the Fed raised rates at its June 30, 2004 meeting, its members indicated that the path of future rate increases would be measured. Unusually, longer-maturity securities largely outperformed in this period of Fed tightening. Historically, the typical pattern in periods of tightening policy has seen yields rise across all maturities. During the review period, however, yields of shorter maturity bonds rose while those of bonds with longer maturities declined slightly. Lower-quality municipal bonds also performed strongly in this environment, as the difference in yields (known as the "yield spread") between AAA and BBB rated bonds decreased by roughly 20 basis points for 20-year bonds. As a result, sectors with heavy exposure to lower-rated debt, such as hospitals and industrial-revenue bonds, posted higher total returns than sectors dominated by higher-rated debt. Issuance for the first ten months of 2004 (the final ten months of the review period) was roughly six percent lower than in the same period in 2003. That said, 2003 was a record year, and at the current pace of issuance, 2004 could well be one of the largest years in recent memory. The strong supply met with faltering demand from mutual funds, as fund investors withdrew over $15 billion in net cash during the period. This faltering demand was largely offset by increased participation in the market by insurance companies and individual investors. (1)Team members may change without notice at any time. D-4 PERFORMANCE ANALYSIS The trust's return can be calculated based upon either the market price or the net asset value (NAV) of its shares. NAV per share is determined by dividing the value of the trust's portfolio securities, cash and other assets, less all liabilities, by the total number of common shares outstanding, while market price reflects the supply and demand for the shares. As a result, the two returns can differ significantly. On both an NAV basis and a market price basis, the trust outperformed its benchmark index, the Lehman Brothers Municipal Bond Index. (See table below.) The trust uses leverage to enhance its dividend to common shareholders. The trust borrows money at short-term rates through the issuance of preferred shares. The proceeds are reinvested in longer-term securities, taking advantage of the difference between short- and longer-term rates. The Fed's policy of raising interest rates in the final months of the period made the trust's borrowing activity more expensive. These expenses, however, were more than offset by the strong performance of the bonds we invested in, leading to the trust's outperformance versus its benchmark, which is unleveraged. The historically low level of interest rates led us to maintain the trust's overall interest-rate sensitivity at a level below that of its benchmark. This strategy helped shield the trust from negative returns during those times during the period when yields rose. That said, yields overall declined over the period, and the strategy exerted a drag on performance. The fund experienced some significant call activity during the period, as issuers sought to lower their interest costs by refinancing their bonds at lower market rates. We reinvested the proceeds into bonds with more favorable prospects for total return. Many of these securities were in the 15- to 20-year segment of the market, which our analysis indicated offered the most appealing combination of value and total-return potential. In keeping with our long-term approach, we bought and sold bonds at the long end of the market as they came into and out of fair value. This strategy entails purchasing bonds with attractive total-return prospects and selling them once they have reached our performance targets. Many of our purchases in this TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED OCTOBER 31, 2004
- --------------------------------------------------------------- BASED ON BASED ON LEHMAN BROTHERS MUNICIPAL NAV MARKET PRICE BOND INDEX 7.74% 6.85% 6.03% - ---------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. INVESTMENT RETURN, NET ASSET VALUE AND COMMON SHARE MARKET PRICE WILL FLUCTUATE AND TRUST SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. SEE PERFORMANCE SUMMARY FOR ADDITIONAL PERFORMANCE INFORMATION AND INDEX DEFINITION. D-5 strategy involved health-care bonds, which offered attractive valuations for much of the period. We remained focused on controlling the trust's risk profile range through attention to credit quality and diversification. By the end of the 12-month period, more than 76 percent of the trust's total investments were invested in bonds rated AAA and AA; these represent the two highest tiers of credit ratings. The portfolio was also well diversified across the major sectors of the municipal bond market. Its three largest sector exposures were general purpose, public building, and public education. While it is impossible to predict the exact turning point when interest rates will move decisively higher, we believe the trust remains well positioned for the near future. We will continue to search the municipal bond markets for interesting opportunities. There is no guarantee that any securities mentioned will continue to perform well or be held by the trust in the future. D-6
RATINGS ALLOCATION AS OF 10/31/04 AAA/Aaa 68.1% AA/Aa 8.4 A/A 11.5 BBB/Baa 0.7 BB/Ba 0.5 B/B 6.2 Non-Rated 4.6 TOP 5 SECTORS AS OF 10/31/04 General Purpose 15.1% Public Building 13.9 Public Education 11.9 Health Care 10.6 Wholesale Electric 7.1 SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 10/31/04 California 10.8% Illinois 8.3 Texas 8.1 New Jersey 6.7 Kansas 5.8 Florida 5.7 Washington 5.5 Missouri 5.5 Colorado 4.6 New York 3.8 Ohio 3.2 South Carolina 3.2 Massachusetts 3.1 Alaska 3.1 Pennsylvania 2.6 Connecticut 2.0 Nevada 1.9 Arizona 1.6 Georgia 1.5 Indiana 1.5 Oregon 1.5 Alabama 1.5 North Carolina 1.4 Guam 1.4 Puerto Rico 1.4 Tennessee 1.3 New Hampshire 1.2 Maryland 0.7 Arkansas 0.6 Wisconsin 0.5 ----- Total Investments 100.0%
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or securities in the sectors shown above. Ratings and summary of investments by state classification are as a percentage of total investments. Sectors are as a percentage of long-term investments. Securities are classified by sectors that represent broad groupings of related industries. Van Kampen is a wholly owned subsidiary of a global securities firm which is engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Rating allocations based upon ratings as issued by Standard and Poor's and Moody's, respectively. D-7 FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS Each Van Kampen trust provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the trust's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semiannual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Van Kampen also delivers the semiannual and annual reports to trust shareholders, and makes these reports available on its public web site, www.vankampen.com. In addition to the semiannual and annual reports that Van Kampen delivers to shareholders and makes available through the Van Kampen public web site, each trust files a complete schedule of portfolio holdings with the SEC for the trust's first and third fiscal quarters on Form N-Q. Van Kampen does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Van Kampen public web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's web site, http://www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. 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. In addition to filing a complete schedule of portfolio holdings with the SEC each fiscal quarter, each Van Kampen trust makes portfolio holdings information available by periodically providing the information on its public web site, www.vankampen.com. Each Van Kampen trust provides a complete schedule of portfolio holdings on the public web site on a calendar-quarter basis approximately 30 days after the close of the calendar quarter. Van Kampen closed-end funds do not presently provide partial lists of their portfolio holdings on a monthly basis, but may do so in the future. You may obtain copies of a trust's fiscal quarter filings, or its monthly or calendar-quarter web site postings, by contacting Van Kampen Client Relations at 1-800-847-2424. PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD The trust's policies and procedures with respect to the voting of proxies relating to the trust's portfolio securities and information on how the trust voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, upon request, by calling 1-800-847-2424 or by visiting our web site at www.vankampen.com. This information is also available on the Securities and Exchange Commission's web site at http://www.sec.gov. D-8 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- MUNICIPAL BONDS 148.6% ALABAMA 2.2% $1,000 Gadsden, AL Wts Ser B (AMBAC Insd)............... 5.250% 08/01/21 $ 1,096,630 ------------ ALASKA 4.5% 1,000 Alaska St Intl Arpt Rev Ser B (AMBAC Insd)....... 5.750 10/01/17 1,152,230 1,000 Matanuska-Susitna Boro, AK Ctf Part Pub Safety Bldg Lease (FSA Insd)............................ 5.750 03/01/16 1,127,590 ------------ 2,279,820 ------------ ARIZONA 2.4% 1,000 Phoenix, AZ Civic Impt Corp Wastewtr Sys Rev Jr Lien (Prerefunded @ 07/01/10) (FGIC Insd)........ 6.250 07/01/17 1,185,090 ------------ ARKANSAS 0.9% 426 Dogwood Addition PRD Muni Ppty Owners Multi-Purp Imp Dist No 8 Maumelle AK Impt Ser 2001 Rfdg (Acquired 03/14/01, Cost $425,960) (a) (f)....... 7.500 03/01/06 426,092 ------------ CALIFORNIA 16.0% 750 California St Dept Wtr Res Pwr Ser A............. 6.000 05/01/15 878,010 1,000 California St Dept Wtr Res Pwr Ser A (AMBAC Insd)............................................ 5.375 05/01/18 1,109,200 995 California St Pub Wks Brd UCLA Replacement Hosp Ser A (FSA Insd)................................. 5.375 10/01/20 1,092,391 4,290 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev (Escrowed to Maturity) (MBIA Insd) (b)........... * 09/01/17 2,347,273 225 Foothill/Eastern Corridor Agy CA Toll Rd Rev Conv Cap Apprec Sr Lien Ser A (Prerefunded @ 01/01/10) (c).............................................. 0/7.150 01/01/13 271,849 500 Fresno, CA Uni Sch Dist Ser A Rfdg (MBIA Insd)... 6.100 08/01/12 596,285 1,000 Los Angeles, CA Uni Sch Dist Ser A (MBIA Insd)... 5.375 07/01/18 1,118,910 1,000 San Joaquin Hills, CA Transn Corridor Agy Toll Rd Rev Cap Apprec Ser A Rfdg (MBIA Insd)............ * 01/15/27 313,240 1,000 San Joaquin Hills, CA Transn Corridor Agy Toll Rd Rev Cap Apprec Ser A Rfdg (MBIA Insd)............ * 01/15/28 295,280 ------------ 8,022,438 ------------ COLORADO 6.9% 1,000 Colorado Hlth Fac Auth Rev Evangelical Lutheran Ser A............................................ 5.250 06/01/34 1,019,960 180 Jefferson Cnty, CO Residential Mtg Rev (Escrowed to Maturity) (g)................................. 11.500 09/01/05 193,948 205 Jefferson Cnty, CO Residential Mtg Rev (Escrowed to Maturity) (g)................................. 11.500 09/01/06 238,811 235 Jefferson Cnty, CO Residential Mtg Rev (Escrowed to Maturity) (g)................................. 11.500 09/01/07 292,869 265 Jefferson Cnty, CO Residential Mtg Rev (Escrowed to Maturity) (g)................................. 11.500 09/01/08 349,670
See Notes to Financial Statements D-9 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- COLORADO (CONTINUED) $ 300 Jefferson Cnty, CO Residential Mtg Rev (Escrowed to Maturity) (g)................................. 11.500% 09/01/09 $ 413,985 340 Jefferson Cnty, CO Residential Mtg Rev (Escrowed to Maturity) (g)................................. 11.500 09/01/10 487,988 220 Jefferson Cnty, CO Residential Mtg Rev (Escrowed to Maturity)..................................... 11.500 09/01/11 327,510 100 Jefferson Cnty, CO Residential Mtg Rev (Escrowed to Maturity) (g)................................. 9.000 09/01/12 137,182 ------------ 3,461,923 ------------ CONNECTICUT 2.9% 1,360 Bridgeport, CT Ser A (MBIA Insd)................. 5.250 08/15/24 1,468,514 ------------ FLORIDA 8.5% 1,000 Escambia Cnty, FL Hlth Fac Auth Rev (AMBAC Insd)............................................ 5.950 07/01/20 1,027,260 1,000 Highlands Cnty, FL Hlth Fac Auth Rev Hosp Adventist Hlth Sys Ser D......................... 5.375 11/15/35 1,035,450 1,000 Jacksonville, FL Rev Better Jacksonville (MBIA Insd)............................................ 5.250 10/01/21 1,094,720 1,000 West Palm Beach, FL.............................. 5.250 03/01/14 1,095,120 ------------ 4,252,550 ------------ GEORGIA 2.2% 1,000 Municipal Elec Auth GA Combustion Turbine Proj Ser A (MBIA Insd)................................ 5.250 11/01/16 1,122,820 ------------ ILLINOIS 12.3% 150 Bedford Park, IL Tax Increment 71st & Cicero Proj Rfdg............................................. 7.000 01/01/06 152,838 1,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Third Lien C 2 Rfdg (AMT) (FSA Insd)................... 5.250 01/01/30 1,034,130 400 Chicago, IL O'Hare Intl Arpt Spl Fac Rev United Airl Inc Proj Ser B Rfdg (Variable Rate Coupon) (AMT) (d) (e).................................... 6.100 11/01/35 60,000 1,250 Chicago, IL Proj Ser C Rfdg (FGIC Insd).......... 5.500 01/01/40 1,354,225 55 Chicago, IL Single Family Mtg Rev Ser B (AMT) (GNMA Collateralized)............................ 7.625 09/01/27 55,261 510 Cook Cnty, IL Sch Dist No 107 (g)................ 7.150 12/01/08 593,482 575 Cook Cnty, IL Sch Dist No 107 (g)................ 7.200 12/01/09 685,653 625 Cook Cnty, IL Sch Dist No 107.................... 7.000 12/01/10 753,162 500 Hodgkins, IL Tax Increment Ser A Rfdg............ 7.625 12/01/13 536,010 250 Lake Cnty, IL Cmnty Unit (Escrowed to Maturity) (Radian Insd) (b)................................ 7.600 02/01/14 328,982 1,000 McHenry & Kane Cntys, IL Cmnty (FGIC Insd)....... * 01/01/16 616,270 ------------ 6,170,013 ------------
See Notes to Financial Statements D-10 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- INDIANA 2.2% $1,000 MSD Warren Twp IN Vision 2005 First Mtg (FGIC Insd)............................................ 5.500% 07/15/20 $ 1,112,490 ------------ KANSAS 8.6% 1,825 Cowley Cnty, KS Uni Sch Dist Impt Rfdg (MBIA Insd) (g)........................................ 5.250 10/01/22 1,983,994 400 Overland Pk, KS Dev Corp Rev First Tier Overland Park Ser A....................................... 7.375 01/01/32 409,420 1,000 Wyandotte Cnty, KS Sch Dist 500 Rfdg (FSA Insd)............................................ 5.000 09/01/19 1,095,340 740 Wyandotte Cnty/Kansas City, KS Uni Govt Indl Rev Brd Pub Util Bldg Complex Proj (MBIA Insd) (g)... 5.000 05/01/09 812,372 ------------ 4,301,126 ------------ MARYLAND 1.0% 500 Maryland St Econ Dev Corp Student Hsg Rev Univ MD College Pk Proj.................................. 5.625 06/01/35 516,610 ------------ MASSACHUSETTS 4.6% 600 Massachusetts St Dev Fin Agy Rev Proj Ser A (MBIA Insd)............................................ 5.125 02/01/34 618,720 1,500 Massachusetts St Fed Hwy Grant Antic Nt Ser A.... 5.750 06/15/14 1,699,830 ------------ 2,318,550 ------------ MISSOURI 8.2% 1,000 Cape Girardeau Cnty, MO Indl Dev Auth Hlthcare Fac Rev Southeast MO Hosp Assoc.................. 5.625 06/01/27 1,019,470 400 Fenton, MO Tax Increment Rev & Impt Gravois Bluffs Proj Rfdg................................. 7.000 10/01/21 433,400 1,000 Saint Charles, MO Ctf Part Ser B................. 5.500 05/01/18 1,076,240 1,460 Saint Louis, MO Brd Ed Direct Dep Pgm Ser A Rfdg (FSA Insd)....................................... 5.000 04/01/21 1,558,638 ------------ 4,087,748 ------------ NEVADA 2.8% 1,000 Clark Cnty, NV Indl Dev Rev Southwest Gas Corp Proj Ser A (AMT) (AMBAC Insd).................... 5.250 07/01/34 1,032,000 390 Nevada Hsg Div Single Family Mtg Mezz Ser D2 (AMT)............................................ 6.300 04/01/21 391,330 ------------ 1,423,330 ------------ NEW HAMPSHIRE 1.8% 525 New Hampshire Hlth & Ed Fac Auth Rev Derryfield Sch.............................................. 6.750 07/01/20 518,695 350 New Hampshire Hlth & Ed Fac Hlthcare Sys Covenant Hlth............................................. 5.500 07/01/34 358,810 ------------ 877,505 ------------
See Notes to Financial Statements D-11 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- NEW JERSEY 10.0% $1,000 New Jersey Econ Dev Auth Econ Dev Rev Kapkowski Rd Landfill Proj Rfdg............................ 5.750% 04/01/31 $ 989,230 500 New Jersey Econ Dev Auth Rev Cigarette Tax....... 5.750 06/15/34 513,800 1,500 New Jersey Econ Dev Auth Wtr Fac Rev NJ American Wtr Co Inc Ser B (AMT) (FGIC Insd)............... 5.375 05/01/32 1,558,110 1,000 New Jersey St Ed Fac Auth Higher Ed Cap Impt Ser A (AMBAC Insd)................................... 5.250 09/01/21 1,094,190 765 New Jersey St Trans Corp Cap Grant Antic Nt Ser B (AMBAC Insd)..................................... 5.500 02/01/08 840,781 ------------ 4,996,111 ------------ NEW YORK 5.6% 1,000 New York City Ser H.............................. 5.750 03/15/13 1,132,340 1,000 New York St Urban Dev Corp Rev Personal Income Tax Ser C 1 (FGIC Insd).......................... 5.500 03/15/19 1,133,770 500 Yonkers, NY Indl Dev Agy Civic Fac Rev Cmnty Dev Ppty Yonkers Inc Ser A........................... 6.625 02/01/26 539,380 ------------ 2,805,490 ------------ NORTH CAROLINA 2.2% 1,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd).... 5.250 01/01/20 1,086,710 ------------ OHIO 4.8% 1,000 Franklin Cnty, OH Convention Fac Auth Tax & Lease Rev Antic Bds Rfdg (AMBAC Insd).................. 5.250 12/01/19 1,106,070 1,250 Ohio St Bldg Auth St Fac Admin Bldg Fd Proj Ser A (FSA Insd)....................................... 5.000 04/01/22 1,317,650 ------------ 2,423,720 ------------ OREGON 2.2% 1,000 Oregon St Dept Admin Ser C Rfdg (MBIA Insd)...... 5.250 11/01/18 1,109,480 ------------ PENNSYLVANIA 3.8% 1,000 Beaver Cnty, PA Indl Dev Auth Pollutn Ctl Rev Coll Toledo Edison Co Proj Rfdg.................. 7.625 05/01/20 1,042,580 315 Crawford Cnty, PA Hosp Auth Sr Living Fac Rev Wesbury Utd Methodist Cmnty (g).................. 5.875 08/15/10 332,511 500 Harrisburg, PA Res Gtd Sub Ser D 2 (FSA Insd).... 5.000 12/01/33 548,555 ------------ 1,923,646 ------------ SOUTH CAROLINA 4.8% 1,235 Rock Hill, SC Util Sys Rev Ser C Rfdg (FSA Insd) (g).............................................. 5.250 01/01/15 1,362,736 1,000 South Carolina Jobs Econ Elec & Gas Co Proj Ser A (AMBAC Insd)..................................... 5.200 11/01/27 1,052,450 ------------ 2,415,186 ------------
See Notes to Financial Statements D-12 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued
PAR AMOUNT (000) DESCRIPTION COUPON MATURITY VALUE - --------------------------------------------------------------------------------------------- TENNESSEE 2.0% $ 400 Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp First Mtg Ser B Impt & Rfdg............................ 8.000% 07/01/33 $ 475,768 400 Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp Ser B Impt & Rfdg (MBIA Insd).......................... 7.750 07/01/29 518,888 ------------ 994,656 ------------ TEXAS 12.0% 1,000 Dallas-Fort Worth, TX Intl Arpt Rev Impt Jt Ser A Rfdg (AMT) (FGIC Insd)........................... 5.500 11/01/31 1,046,370 1,500 Fort Worth, TX Wtr & Swr Rev Impt Rfdg........... 5.750 02/15/16 1,704,585 1,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (AMT) (FSA Insd)....................................... 5.625 07/01/30 1,062,540 400 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones Mem Hosp Proj.................................... 7.250 01/01/31 386,684 1,000 North Cent TX Hlth Fac Dev Hosp Baylor Hlthcare Sys Proj Ser A................................... 5.125 05/15/29 1,016,360 196 Pecos Cnty, TX Ctf Part (Acquired 06/23/97, Cost $196,000) (a).................................... 6.000 01/12/08 197,128 605 Texas St Pub Ppty Fin Corp Rev Mental Hlth & Retardation Rfdg (FSA Insd)...................... 5.500 09/01/13 617,923 ------------ 6,031,590 ------------ WASHINGTON 8.2% 1,000 Energy Northwest WA Elec Rev Proj No 3 Ser A Rfdg (FSA Insd)....................................... 5.500 07/01/17 1,124,070 1,660 Pierce Cnty, WA (AMBAC Insd) (g)................. 5.750 08/01/16 1,888,765 1,000 Port Seattle, WA Rev Ser B (AMT) (MBIA Insd)..... 5.625 02/01/24 1,085,740 ------------ 4,098,575 ------------ WISCONSIN 0.8% 400 Wisconsin St Hlth & Ed Fac Beaver Dam Cmnty Hosp Inc Ser A........................................ 6.000 08/15/19 396,900 ------------ GUAM 2.1% 1,000 Guam Pwr Auth Rev Ser A (AMBAC Insd)............. 5.250 10/01/34 1,057,160 ------------ PUERTO RICO 2.1% 1,000 Puerto Rico Pub Bldg Auth Rev Gtd Govt Fac Ser I (Comwlth Gtd).................................... 5.250 07/01/33 1,047,830 ------------ TOTAL INVESTMENTS 148.6% (Cost $69,005,907).......................................................... 74,510,303 OTHER ASSETS IN EXCESS OF LIABILITIES 1.3%................................... 643,710 PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (49.9%)................... (25,005,651) ------------ NET ASSETS APPLICABLE TO COMMON SHARES 100.0%................................ $ 50,148,362 ============
See Notes to Financial Statements D-13 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 2004 continued Percentages are calculated as a percentage of net assets applicable to common shares. * Zero coupon bond (a) These securities are restricted and may be resold only in transactions exempt from registration which are normally those transactions with qualified institutional buyers. Restricted securities comprise 1.2% of net assets applicable to common shares. (b) All or a portion of these securities have been physically segregated in connection with open futures contracts. (c) Security is a "step-up" bond where the coupon increases or steps up at a predetermined date. (d) Non-income producing security. (e) This borrower has filed for protection in federal bankruptcy court. (f) Affiliated issuer. See Notes to Financial Statements (g) The Trust owns 100% of the bond issuance. AMBAC--AMBAC Indemnity Corp. AMT--Alternative Minimum Tax Comwth Gtd--Commonwealth of Puerto Rico FGIC--Financial Guaranty Insurance Co. FSA--Financial Security Assurance Inc. GNMA--Government National Mortgage Association MBIA--Municipal Bond Investors Assurance Corp. Radian--Radian Asset Assurance See Notes to Financial Statements D-14 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST FINANCIAL STATEMENTS Statement of Assets and Liabilities October 31, 2004 ASSETS: Total Investments (Cost $69,005,907)........................ $74,510,303 Receivables: Interest.................................................. 1,084,909 Investments Sold.......................................... 35,320 Other....................................................... 1,291 ----------- Total Assets............................................ 75,631,823 ----------- LIABILITIES: Payables: Custodian Bank............................................ 107,931 Investment Advisory Fee................................... 38,079 Variation Margin on Futures............................... 23,438 Income Distributions--Common Shares....................... 15,583 Other Affiliates.......................................... 6,821 Trustees' Deferred Compensation and Retirement Plans........ 204,603 Accrued Expenses............................................ 81,355 ----------- Total Liabilities....................................... 477,810 Preferred Shares (including accrued distributions).......... 25,005,651 ----------- NET ASSETS APPLICABLE TO COMMON SHARES...................... $50,148,362 =========== NET ASSET VALUE PER COMMON SHARE ($50,148,362 divided by 4,839,000 shares outstanding)............................. $ 10.36 =========== NET ASSETS CONSIST OF: Common Shares ($.01 par value with an unlimited number of shares authorized, 4,839,000 shares issued and outstanding).............................................. $ 48,390 Paid in Surplus............................................. 51,562,586 Net Unrealized Appreciation................................. 5,435,875 Accumulated Undistributed Net Investment Income............. (166,136) Accumulated Net Realized Loss............................... (6,732,353) ----------- NET ASSETS APPLICABLE TO COMMON SHARES...................... $50,148,362 =========== PREFERRED SHARES ($.01 par value, authorized 100,000,000 shares, 250 issued with liquidation preference of $100,000 per share)................................................ $25,000,000 =========== NET ASSETS INCLUDING PREFERRED SHARES....................... $75,148,362 ===========
See Notes to Financial Statements D-15 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST FINANCIAL STATEMENTS continued Statement of Operations For the Year Ended October 31, 2004 INVESTMENT INCOME: Interest.................................................... $ 3,715,556 ----------- EXPENSES: Investment Advisory Fee..................................... 446,772 Preferred Share Maintenance................................. 82,351 Trustees' Fees and Related Expenses......................... 57,987 Legal....................................................... 22,073 Custody..................................................... 5,565 Other....................................................... 139,847 ----------- Total Expenses.......................................... 754,595 ----------- NET INVESTMENT INCOME....................................... $ 2,960,961 =========== REALIZED AND UNREALIZED GAIN/LOSS: Realized Gain/Loss: Investments............................................... $(2,213,329) Futures................................................... (640,859) ----------- Net Realized Loss........................................... (2,854,188) ----------- Unrealized Appreciation/Depreciation: Beginning of the Period................................... 1,859,177 ----------- End of the Period: Investments............................................. 5,504,396 Futures................................................. (68,521) ----------- 5,435,875 ----------- Net Unrealized Appreciation During the Period............... 3,576,698 ----------- NET REALIZED AND UNREALIZED GAIN............................ $ 722,510 =========== DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (279,002) =========== NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM OPERATIONS................................................ $ 3,404,469 ===========
See Notes to Financial Statements D-16 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST FINANCIAL STATEMENTS continued Statements of Changes in Net Assets
FOR THE FOR THE YEAR ENDED YEAR ENDED OCTOBER 31, 2004 OCTOBER 31, 2003 ----------------------------------- FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income..................................... $ 2,960,961 $ 3,033,160 Net Realized Gain/Loss.................................... (2,854,188) 841,950 Net Unrealized Appreciation/Depreciation During the Period.................................................. 3,576,698 (334,213) Distributions to Preferred Shareholders: Net Investment Income................................... (279,002) (271,360) ----------- ----------- Change in Net Assets Applicable to Common Shares from Operations.............................................. 3,404,469 3,269,537 Distributions to Common Shareholders: Net Investment Income................................... (2,380,306) (2,380,271) ----------- ----------- NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM INVESTMENT ACTIVITIES................................... 1,024,163 889,266 NET ASSETS APPLICABLE TO COMMON SHARES: Beginning of the Period................................... 49,124,199 48,234,933 ----------- ----------- End of the Period (Including accumulated undistributed net investment income of ($166,136) and ($466,689), respectively)........................................... $50,148,362 $49,124,199 =========== ===========
See Notes to Financial Statements D-17 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST FINANCIAL HIGHLIGHTS THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
-------------------------------- 2004 2003 2002 (a) -------------------------------- NET ASSET VALUE, BEGINNING OF THE PERIOD................. $ 10.15 $ 9.97 $ 10.01 -------- -------- -------- Net Investment Income.................................. .61 .63 .65 Net Realized and Unrealized Gain/Loss.................. .15 .10 (.13) Common Share Equivalent of Distributions Paid to Preferred Shareholders: Net Investment Income................................ (.06) (.06) (.07) -------- -------- -------- Total from Investment Operations......................... .70 .67 .45 Distributions Paid to Common Shareholders: Net Investment Income.................................. (.49) (.49) (.49) -------- -------- -------- NET ASSET VALUE, END OF THE PERIOD....................... $ 10.36 $ 10.15 $ 9.97 ======== ======== ======== Common Share Market Price at End of the Period........... $ 9.07 $ 8.96 $ 8.69 Total Return (b)......................................... 6.85% 8.91% 5.64% Net Assets Applicable to Common Shares at End of the Period (In millions)................................... $ 50.1 $ 49.1 $ 48.2 Ratio of Expenses to Average Net Assets Applicable to Common Shares (c)...................................... 1.53% 1.49% 1.42% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (c)........................ 5.99% 6.19% 6.62% Portfolio Turnover....................................... 19% 36% 37% SUPPLEMENTAL RATIOS: Ratio of Expenses to Average Net Assets Including Preferred Shares (c)................................... 1.01% .99% .93% Ratio of Net Investment Income to Average Net Assets Applicable to Common Shares (d)........................ 5.42% 5.64% 5.87% SENIOR SECURITIES: Total Preferred Shares Outstanding....................... 250 250 250 Asset Coverage Per Preferred Share (e)................... $300,616 $296,504 $292,949 Involuntary Liquidating Preference Per Preferred Share... $100,000 $100,000 $100,000 Average Market Value Per Preferred Share................. $100,000 $100,000 $100,000
(a)As required, effective November 1, 2001, the Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting market discount on fixed income securities. The effect of this change for the year ended October 31, 2002 was to increase net investment income per share by less than $.01, decrease net realized and unrealized gains and losses per share by less than $.01 and increase the ratio of net investment income to average net assets by .01%. Per share, ratios, and supplemental data for periods prior to October 31, 2002 have not been restated to reflect this change in presentation. (b)Total return assumes an investment at the common share market price at the beginning of the period indicated, reinvestment of all distributions for the period in accordance with the Trust's dividend reinvestment plan, and sale of all shares at the closing common share price at the end of the period indicated. (c)Ratios do not reflect the effect of dividend payments to preferred shareholders. (d)Ratios reflect the effect of dividend payments to preferred shareholders. (e)Calculated by subtracting the Trust's total liabilities (not including the preferred shares) from the Trust's total assets and dividing this by the number of preferred shares outstanding. D-18
YEAR ENDED OCTOBER 31, - ------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------- $ 9.43 $ 9.39 $ 10.66 $ 10.66 $ 10.47 $ 10.75 $ 10.50 -------- -------- -------- -------- -------- -------- -------- .67 .76 .83 .86 .96 .88 .88 .59 .09 (1.26) .01 .12 (.19) .40 (.18) (.21) (.17) (.19) (.18) (.19) (.20) -------- -------- -------- -------- -------- -------- -------- 1.08 .64 (.60) .68 .90 .50 1.08 (.50) (.60) (.67) (.68) (.71) (.78) (.83) -------- -------- -------- -------- -------- -------- -------- $ 10.01 $ 9.43 $ 9.39 $ 10.66 $ 10.66 $ 10.47 $ 10.75 ======== ======== ======== ======== ======== ======== ======== $ 8.70 $ 8.08 $ 8.8125 $11.0625 $10.9375 $ 11.00 $ 10.625 14.11% -1.60% -15.09% 7.63% 6.13% 11.02% 2.88% $ 48.4 $ 45.6 $ 45.4 $ 51.6 $ 51.6 $ 50.7 $ 52.0 1.46% 1.52% 1.69% 1.47% 1.47% 1.51% 1.52% 6.77% 8.25% 8.11% 8.14% 9.14% 8.32% 8.22% 45% 41% 46% 33% 25% 39% 50% .96% .98% 1.12% .99% .99% 1.01% 1.02% 4.98% 5.92% 6.41% 6.40% 7.38% 6.55% 6.31% 250 250 250 250 250 250 250 $293,730 $282,465 $281,691 $306,365 $306,303 $302,730 $308,150 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
See Notes to Financial Statements D-19 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Investment Grade Municipal Trust (the "Trust") is registered as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended. The Trust's investment objective is to provide a high level of current income exempt from federal income tax, consistent with preservation of capital. The Trust will normally invest at least 80% of its total assets in tax-exempt municipal securities rated investment grade at the time of investment. The Trust commenced investment operations on November 30, 1989. Effective November 30, 2003, the Trust's investment adviser, Van Kampen Investment Advisory Corp. merged into its affiliate, Van Kampen Asset Management (the "Adviser"). The following is a summary of significant accounting policies consistently followed by the Trust 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 Municipal bonds are valued by independent pricing services or dealers using the mean of the bid and asked prices or, in the absence of market quotations, at fair value based upon yield data relating to municipal bonds with similar characteristics and general market conditions. Securities which are not valued by independent pricing services or dealers are valued at fair value using procedures established in good faith by the Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term securities with remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses are determined on an identified cost basis. The Trust may purchase and sell securities on a "when-issued" or "delayed delivery" basis with settlement to occur at a later date. The value of the security so purchased is subject to market fluctuations during this period. The Trust will segregate assets with its custodian having an aggregate value at least equal to the amount of the when-issued or delayed delivery purchase commitments until payment is made. At October 31, 2004, the Trust had no when-issued or delayed delivery purchase commitments. C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond premium is amortized and discount is accreted over the expected life of each applicable security. D. FEDERAL INCOME TAXES It is the Trust'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 to its shareholders. Therefore, no provision for federal income taxes is required. The Trust 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 October 31, 2004, the Trust had an D-20 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued accumulated capital loss carryforward for tax purposes of $6,800,874, of which $1,930,614 will expire on 10/31/05, $965 will expire on 10/31/07, $196,107 will expire on 10/31/08, $840,184 will expire on 10/31/09, $929,222 will expire on 10/31/10, and $2,903,782 will expire on 10/31/12. At October 31, 2004, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $68,985,823 =========== Gross tax unrealized appreciation........................... $ 5,880,802 Gross tax unrealized depreciation........................... (356,322) ----------- Net tax unrealized appreciation on investments.............. $ 5,524,480 ===========
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly dividends from net investment income to common shareholders. Net realized gains, if any, are distributed annually. Distributions from net realized gains for book purposes may include short-term capital gains and a portion of futures gains, which are included as ordinary income for tax purposes. The tax character of distributions paid during the years ended October 31, 2004 and 2003 were as follows:
2004 2003 Distributions paid from: Ordinary income........................................... $15,735 $3,083 Long-term capital gain.................................... -0- -0- ------- ------ $15,735 $3,083 ======= ======
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 difference relating to book to tax accretion differences totaling $1,100 was reclassified from accumulated undistributed net investment income to accumulated net realized gain. As of October 31, 2004, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income............................... $9,230
Net realized gains or losses differ for financial and tax reporting purposes primarily as a result of gains and losses recognized for tax purposes on open futures transactions on October 31, 2004. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Trust's Investment Advisory Agreement, the Adviser provides investment advice and facilities to the Trust for an annual fee payable monthly of .60% of the D-21 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued average daily net assets of the Trust. Effective November 1, 2004, the investment advisory fee was reduced from .60% to .55%. For the year ended October 31, 2004, the Trust recognized expenses of approximately $5,400 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Trust, of which a trustee of the Trust is a partner who provides legal services to the Trust, and is therefore an affiliated person. Under separate Accounting Services and Legal Services agreements, the Adviser provides accounting and legal services to the Trust. The Adviser allocates the cost of such services to each trust. For the year ended October 31, 2004, the Trust recognized expenses of approximately $26,300 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting and legal services to the Trust, which are reported as part of "Other" and "Legal" expenses, respectively, in the Statement of Operations. Certain officers and trustees of the Trust are also officers and directors of Van Kampen. The Trust does not compensate its officers or trustees who are also officers of Van Kampen. The Trust 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 to a later date. 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 Trust. The maximum annual benefit per trustee under the plan is $2,500. During the period, the Trust owned shares of the following affiliated company. Affiliated companies are defined by the Investment Company Act of 1940, as amended, as those companies in which a fund holds 5% or more of the outstanding voting securities.
MARKET REALIZED INTEREST VALUE NAME PAR GAIN/(LOSS) INCOME 10/31/04 COST Dogwood Addition PRD Muni Ppty Owners Multi-Purp Dist No 8 Maumelle, AK Impt Ser 2001 Rfdg.................. $425,960 $0 $36,710 $426,092 $425,960
3. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $14,941,022 and $13,628,603, respectively. 4. DERIVATIVE FINANCIAL INSTRUMENTS A derivative financial instrument in very general terms refers to a security whose value is "derived" from the value of an underlying asset, reference rate or index. In order to seek to manage the interest rate exposure of the Trust's portfolio in a changing interest rate environment, the Trust may purchase or sell financial futures contracts or engage in transactions involving interest rate swaps, caps, floors or collars. The Trust expects to enter into these transactions primarily as a hedge against anticipated interest rate or fixed-income market changes, for duration management or for risk management purposes, but may also enter into these transactions to generate additional income. All of the Trust's portfolio holdings, including derivative instruments, are marked to market each day with the change in value reflected in the unrealized appreciation/depreciation. Upon disposition, a D-22 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a futures contract. In this instance, the recognition of gain or loss is postponed until the disposal of the security underlying the futures contract. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts. During the period, the Trust invested in futures contracts, a type of derivative. A futures contract is an agreement involving the delivery of a particular asset on a specified future date at an agreed upon price. The Trust generally invests in exchange traded futures on U.S. Treasury Bonds and Notes and typically closes the contract prior to delivery date. Upon entering into futures contracts, the Trust maintains an amount of cash or liquid securities with a value equal to a percentage of the contract amount with either a future commission merchant pursuant to rules and regulations promulgated under the Investment Company Act of 1940, as amended, or with its custodian in an account in the broker's name. This amount is known as initial margin. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). The risk of loss associated with a futures contract is in excess of the variation margin reflected on the Statement of Assets and Liabilities. Transactions in futures contracts, each with a par value of $100,000, for the year ended October 31, 2004, were as follows:
CONTRACTS Outstanding at October 31, 2003............................. 62 Futures Opened.............................................. 418 Futures Closed.............................................. (385) ---- Outstanding at October 31, 2004............................. 95 ====
The futures contracts outstanding as of October 31, 2004 and the descriptions and unrealized appreciation/depreciation are as follows:
UNREALIZED APPRECIATION/ CONTRACTS DEPRECIATION SHORT CONTRACTS: U.S. Treasury Notes 10-Year Futures December 2004 (Current Notional Value of $113,563 per contract)................ 17 $(19,459) U.S. Treasury Notes 5-Year Futures December 2004 (Current Notional Value of $111,375 per contract)................ 78 (49,062) -- -------- 95 $(68,521) == ========
5. PREFERRED SHARES The Trust has outstanding 250 Remarketed Preferred Shares ("RP"). Dividends are cumulative and the dividend rate is currently reset every 28 days through a remarketing process. The rate in effect on October 31, 2004 was 1.650%. During the year ended October 31, 2004, the rates ranged from 0.923% to 1.650%. The Trust pays annual fees equivalent to .25% of the preferred share liquidation value for the remarketing efforts associated with the preferred shares. These fees are included as a component of "Preferred Share Maintenance" expense in the Statement of Operations. D-23 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 continued The RP are redeemable at the option of the Trust in whole or in part at the liquidation value of $100,000 per share plus accumulated and unpaid dividends. The Trust is subject to certain asset coverage tests and the RP are subject to mandatory redemption if the tests are not met. 6. INDEMNIFICATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. D-24 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of Van Kampen Investment Grade Municipal Trust We have audited the accompanying statement of assets and liabilities of Van Kampen Investment Grade Municipal Trust (the "Trust"), including the portfolio of investments, as of October 31, 2004, 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 five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The Trust's financial highlights for the periods ended prior to October 31, 2000 were audited by other auditors whose report, dated December 6, 1999, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2004, by correspondence with the Trust's 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 Van Kampen Investment Grade Municipal Trust as of October 31, 2004, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Chicago, Illinois December 10, 2004 D-25 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST DIVIDEND REINVESTMENT PLAN The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which Common Shareholders may elect to have dividends and capital gains distributions reinvested in Common Shares of the Trust. The Trust declares dividends out of net investment income, and will distribute annually net realized capital gains, if any. Common Shareholders may join or withdraw from the Plan at any time. If you decide to participate in the Plan, State Street Bank and Trust Company, as your Plan Agent, will automatically invest your dividends and capital gains distributions in Common Shares of the Trust for your account. HOW TO PARTICIPATE If you wish to participate and your shares are held in your own name, call 1-800-341-2929 for more information and a Plan brochure. If your shares are held in the name of a brokerage firm, bank, or other nominee, you should contact your nominee to see if it would participate in the Plan on your behalf. If you wish to participate in the Plan, but your brokerage firm, bank or nominee is unable to participate on your behalf, you should request that your shares be re-registered in your own name which will enable your participation in the Plan. HOW THE PLAN WORKS Participants in the Plan will receive the equivalent in Common Shares valued on the valuation date, generally at the lower of market price or net asset value, except as specified below. The valuation date will be the dividend or distribution payment date or, if that date is not a trading day on the national securities exchange or market system on which the Common Shares are listed for trading, the next preceding trading day. If the market price per Common Share on the valuation date equals or exceeds net asset value per Common Share on that date, the Trust will issue new Common Shares to participants valued at the higher of net asset value or 95% of the market price on the valuation date. In the foregoing situation, the Trust will not issue Common Shares under the Plan below net asset value. If net asset value per Common Share on the valuation date exceeds the market price per Common Share on that date, or if the Board of Trustees should declare a dividend or capital gains distribution payable to the Common Shareholders only in cash, participants in the Plan will be deemed to have elected to receive Common Shares from the Trust valued at the market price on that date. Accordingly, in this circumstance, the Plan Agent will, as agent for the participants, buy the Trust's Common Shares in the open market for the participants' accounts on or shortly after the payment date. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value per share of the Common Shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value D-26 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST DIVIDEND REINVESTMENT PLAN continued of the Trust's Common Shares, resulting in the acquisition of fewer Common Shares than if the dividend or distribution had been paid in Common Shares issued by the Trust. All reinvestments are in full and fractional Common shares and are carried to three decimal places. Experience under the Plan may indicate that changes are desirable. Accordingly, the Trust reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the change sent to all Common Shareholders of the Trust at least 90 days before the record date for the dividend or distribution. The Plan also may be amended or terminated by the Plan Agent by at least 90 days written notice to all Common Shareholders of the Trust. COSTS OF THE PLAN The Plan Agent's fees for the handling of the reinvestment of dividends and distributions will be paid by the Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. No other charges will be made to participants for reinvesting dividends or capital gains distributions, except for certain brokerage commissions, as described above. TAX IMPLICATIONS You will receive tax information annually for your personal records and to help you prepare your federal income tax return. The automatic reinvestment of dividends and capital gains distributions does not relieve you of any income tax which may be payable on dividends or distributions. RIGHT TO WITHDRAW Plan participants may withdraw at any time by calling 1-800-341-2929 or by writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200. If you withdraw, you will receive, without charge, a share certificate issued in your name for all full Common Shares credited to your account under the Plan and a cash payment will be made for any fractional Common Share credited to your account under the Plan. You may again elect to participate in the Plan at any time by calling 1-800-341-2929 or writing to the Trust at: Van Kampen Funds Inc. Attn: Closed-End Funds 2800 Post Oak Blvd. Houston, TX 77056 D-27 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST BOARD OF TRUSTEES AND IMPORTANT ADDRESSES BOARD OF TRUSTEES DAVID C. ARCH J. MILES BRANAGAN JERRY D. CHOATE ROD DAMMEYER LINDA HUTTON HEAGY R. CRAIG KENNEDY HOWARD J KERR MITCHELL M. MERIN* JACK E. NELSON RICHARD F. POWERS, III* HUGO F. SONNENSCHEIN WAYNE W. WHALEN* - Chairman SUZANNE H. WOOLSEY INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT 1221 Avenue of the Americas New York, NY 10020 CUSTODIAN AND TRANSFER AGENT STATE STREET BANK AND TRUST COMPANY c/o EquiServe P.O. Box 43011 Providence, Rhode Island 02940-3011 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DELOITTE & TOUCHE LLP 180 North Stetson Avenue Chicago, Illinois 60601 For federal income tax purposes, the following information is furnished with respect to the distributions paid by the Trust during its taxable year ended October 31, 2004. The Trust designated 99.4% of the income distributions as a tax-exempt income distribution. In January, the Trust provides tax information to shareholders for the preceding calendar year. * "Interested persons" of the Trust, as defined in the Investment Company Act of 1940, as amended. D-28 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST RESULTS OF SHAREHOLDER VOTES The Annual Meeting of the Shareholders of the Trust was held on June 23, 2004, where shareholders voted on the election of trustees. With regard to the election of the following trustees by the common shareholders of the Trust:
# OF SHARES ----------------------------- IN FAVOR WITHHELD - ------------------------------------------------------------------------------------------ J. Miles Branagan.......................................... 4,130,248 373,364 Linda Hutton Heagy......................................... 4,131,548 372,064 Mitchell M. Merin.......................................... 4,134,834 368,778 Wayne W. Whalen............................................ 4,130,740 372,872
The other trustees of the Trust whose terms did not expire in 2004 are David C. Arch, Jerry D. Choate, Rod Dammeyer, R. Craig Kennedy, Howard J Kerr, Jack E. Nelson, Richard F. Powers III, Hugo F. Sonnenschein, and Suzanne H. Woolsey. D-29 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION The business and affairs of the Trust are managed under the direction of the Trust's Board of Trustees and the Trust's officers appointed by the Board of Trustees. The tables below list the trustees and executive officers of the Trust 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 Asset Management (the "Adviser"), Van Kampen Funds Inc. (the "Distributor"), Van Kampen Advisors Inc., Van Kampen Exchange Corp. and Van Kampen Investor Services Inc. ("Investor Services"). The term "Fund Complex" includes each of the investment companies advised by the Adviser or its 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE David C. Arch (59) Trustee Trustee Chairman and Chief 85 Trustee/Director/Managing Blistex Inc. since 1989 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. Director of the Heartland Alliance, a nonprofit organization serving human needs based in Chicago. Director of St. Vincent de Paul Center, a Chicago based day care facility serving the children of low income families. Board member of the Illinois Manufacturers' Association. J. Miles Branagan (72) Trustee Trustee Private investor. 83 Trustee/Director/Managing 1632 Morning Mountain Road since 2003 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.
D-30
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Jerry D. Choate (66) Trustee Trustee Prior to January 1999, 83 Trustee/Director/Managing 33971 Selva Road since 2003 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.
D-31
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Rod Dammeyer (64) Trustee Trustee President of CAC, L.L.C., 85 Trustee/Director/Managing CAC, L.L.C. since 1989 a private company General Partner of funds 4350 LaJolla Village Drive offering capital in the Fund Complex. Suite 980 investment and management Director of Stericycle, San Diego, CA 92122-6223 advisory services. Prior Inc., Ventana Medical to February 2001, Vice Systems, Inc., and GATX Chairman and Director of Corporation, and Trustee Anixter International, of The Scripps Research Inc., a global Institute and the distributor of wire, University of Chicago cable and communications Hospitals and Health connectivity products. Systems. Prior to January Prior to July 2000, 2004, Director of Managing Partner of TeleTech Holdings Inc. Equity Group Corporate and Arris Group, Inc. Investment (EGI), a Prior to May 2002, company that makes Director of Peregrine private investments in Systems Inc. Prior to other companies. February 2001, Director of 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).
D-32
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Linda Hutton Heagy (56) Trustee Trustee Managing Partner of 83 Trustee/Director/Managing Heidrick & Struggles since 2003 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 (52) Trustee Trustee Director and President of 83 Trustee/Director/Managing 1744 R Street, NW since 2003 the German Marshall Fund General Partner of funds Washington, DC 20009 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 (69) Trustee Trustee Prior to 1998, President 85 Trustee/Director/Managing 736 North Western Avenue since 1992 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.
D-33
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Jack E. Nelson (68) Trustee Trustee President of Nelson 83 Trustee/Director/Managing 423 Country Club Drive since 2003 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 (64) Trustee Trustee President Emeritus and 85 Trustee/Director/Managing 1126 E. 59th Street since 1994 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, Ph.D. Trustee Trustee Chief Communications 83 Trustee/Director/Managing (62) since 2003 Officer of the National General Partner of funds 815 Cumberstone Road Academy of in the Fund Complex. Harwood, MD 20776 Sciences/National Director of Fluor Corp., Research Council, an an engineering, independent, federally procurement and chartered policy construction institution, from 2001 to organization, since November 2003 and Chief January 2004 and Director Operating Officer from of Neurogen Corporation, 1993 to 2001. Director of a pharmaceutical company, the Institute for Defense since January 1998. Analyses, a federally funded research and development center, Director of the German Marshall Fund of the United States, Director of the Rocky Mountain Institute 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.
D-34 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Mitchell M. Merin* (51) Trustee, Trustee President and Chief 83 Trustee/Director/Managing 1221 Avenue of the Americas President since Executive Officer of General Partner of funds New York, NY 10020 and Chief 2003; funds in the Fund in the Fund Complex. Executive President Complex. Chairman, Officer and Chief President, Chief Executive Executive Officer and Officer Director of the Adviser since 2002 and Van Kampen 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.
D-35
VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued 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 TRUST SERVED DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE Richard F. Powers, III* (58) Trustee Trustee Advisory Director of 85 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* (65) Trustee Trustee Partner in the law firm 85 Trustee/Director/Managing 333 West Wacker Drive since 1989 of Skadden, Arps, Slate, General Partner of funds Chicago, IL 60606 Meagher & Flom LLP, legal in the Fund Complex. 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 Adviser by reason of their current or former positions with Morgan Stanley or its affiliates. D-36 VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued OFFICERS:
TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS Stefanie V. Chang (38) Vice President Officer Executive Director of Morgan Stanley Investment Management. 1221 Avenue of the Americas and Secretary since 2003 Vice President of funds in the Fund Complex. New York, NY 10020 Amy R. Doberman (42) Vice President Officer Managing Director and General Counsel, U.S. Investment 1221 Avenue of the Americas since 2004 Management; Managing Director of Morgan Stanley Investment New York, NY 10020 Management, Inc., Morgan Stanley Investment Advisers Inc. and the Adviser. Vice President of the Morgan Stanley Institutional and Retail Funds since July 2004 and Vice President of funds in the Fund Complex as of August 2004. Previously, Managing Director and General Counsel of Americas, UBS Global Asset Management from July 2000 to July 2004 and General Counsel of Aeitus Investment Management, Inc. from January 1997 to July 2000. James M. Dykas (38) Chief Financial Officer Executive Director of Van Kampen Asset Management and Morgan 1 Parkview Plaza Officer and since 1999 Stanley Investment Management. Chief Financial Officer and Oakbrook Terrace, IL 60181 Treasurer Treasurer of funds in the Fund Complex. Prior to August 2004, Assistant Treasurer of funds in the Fund Complex. Joseph J. McAlinden (61) Executive Vice Officer Managing Director and Chief Investment Officer of Morgan 1221 Avenue of the Americas President and since 2002 Stanley Investment Advisors Inc., and Morgan Stanley New York, NY 10020 Chief Investment Investment Management Inc. and Director of Morgan Stanley Officer 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 Adviser and Van Kampen Advisors Inc. since December 2002. Ronald E. Robison (65) Executive Vice Officer Principal Executive Officer of the Funds since May 2003. 1221 Avenue of the Americas President and since 2003 Chief Executive Officer and Chairman of Investor Services. New York, NY 10020 Principal Executive Vice President and Principal Executive Officer of Executive funds in the Fund Complex. Managing Director of Morgan Officer Stanley. Chief Administrative Officer, Managing Director and Director of Morgan Stanley Investment Advisors Inc., Morgan Stanley Services Company Inc. and Managing Director and Director of Morgan Stanley Distributors Inc. Chief Executive Officer and Director of Morgan Stanley Trust. Executive Vice President and Principal Executive Officer of the Institutional and Retail Morgan Stanley Funds; Director of Morgan Stanley SICAV; previously Chief Global Operations Officer and Managing Director of Morgan Stanley Investment Management Inc.
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VAN KAMPEN INVESTMENT GRADE MUNICIPAL TRUST TRUSTEE AND OFFICER INFORMATION continued TERM OF OFFICE AND POSITION(S) LENGTH OF NAME, AGE AND HELD WITH TIME PRINCIPAL OCCUPATION(S) ADDRESS OF OFFICER TRUST SERVED DURING PAST 5 YEARS John L. Sullivan (49) Chief Compliance Officer Chief Compliance Officer of funds in the Fund Complex since 1 Parkview Plaza Officer since 1998 August 2004. Director and Managing Director of Van Kampen Oakbrook Terrace, IL 60181 Investments, the Adviser, Van Kampen Advisors Inc. and certain other subsidiaries of Van Kampen Investments. Prior August 2004, Vice President, Chief Financial Officer and Treasurer of funds in the Fund Complex and head of Fund Accounting for Morgan Stanley Investment Management. Prior to December 2002, Executive Director of Van Kampen Investments, the Adviser and Van Kampen Advisors Inc.
D-38 VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY We are required by federal law to provide you with a copy of our Privacy Policy annually. The following Policy applies to current and former individual clients of Van Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange Corp., as well as current and former individual investors in Van Kampen mutual funds, unit investment trusts, and related companies. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law. WE RESPECT YOUR PRIVACY We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information." 1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU? To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources. For example: -- We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. -- We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. -- We may obtain information about your creditworthiness and credit history from consumer reporting agencies. -- We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. -- If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, (continued on back) D-39 VAN KAMPEN AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued your use of our Web sites and your product and service preferences, through the use of "cookies." "Cookies" recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. 2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU? To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law. A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law. B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to non-affiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose. 3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU? We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information. 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)2004 Van Kampen Funds Inc. All rights reserved. Member NASD/SIPC. VIG ANR 12/04 RN04-02837P-Y10/04 D-40 APPENDIX E MORGAN STANLEY INVESTMENT MANAGEMENT PROXY VOTING POLICY AND PROCEDURES IV. POLICY STATEMENT Introduction -- Morgan Stanley Investment Management's ("MSIM") policy and procedures for voting proxies ("Proxy Voting Policy and Procedures") with respect to securities held in the accounts of clients apply to those MSIM entities that provide discretionary investment management services and for which a MSIM entity has authority to vote proxies. The policies and procedures and general guidelines in this section will be reviewed and updated, as necessary, to address new or revised proxy voting issues. The MSIM entities covered by these policies and procedures currently include the following: Morgan Stanley Investment Advisors Inc., Morgan Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley Investment Management Limited, Morgan Stanley Investment Management Company, Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan Stanley Investment Management Private Limited, Morgan Stanley Hedge Fund Partners GP LP, Morgan Stanley Hedge Fund Partners LP, Van Kampen Asset Management, and Van Kampen Advisors Inc. (each a "MSIM Affiliate" and collectively referred to as the "MSIM Affiliates"). Each MSIM Affiliate will use its best efforts to vote proxies as part of its authority to manage, acquire and dispose of account assets. With respect to the MSIM registered management investment companies (Van Kampen, Institutional and Advisor Funds) (collectively referred to as the "MSIM Funds"), each MSIM Affiliate will vote proxies pursuant to authority granted under its applicable investment advisory agreement or, in the absence of such authority, as authorized by the Boards of Directors or Trustees of the MSIM Funds. A MSIM Affiliate will not vote proxies if the "named fiduciary" for an ERISA account has reserved the authority for itself, or in the case of an account not governed by ERISA, the Investment Management or Investment Advisory Agreement does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will, in a prudent and diligent manner, vote proxies in the best interests of clients, including beneficiaries of and participants in a client's benefit plan(s) for which the MSIM Affiliates manage assets, consistent with the objective of maximizing long-term investment returns ("Client Proxy Standard"). In certain situations, a client or its fiduciary may provide a MSIM Affiliate with a proxy voting policy. In these situations, the MSIM Affiliate will comply with the client's policy unless to do so would be inconsistent with applicable laws or regulations or the MSIM Affiliate's fiduciary responsibility. Proxy Research Services -- To assist the MSIM Affiliates in their responsibility for voting proxies and the overall global proxy voting process, Institutional Shareholder Services ("ISS") and the Investor Responsibility Research Center ("IRRC") have been retained as experts in the proxy voting and corporate governance area. ISS and IRRC are independent advisers that specialize in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services provided to MSIM Affiliates include in-depth research, global issuer analysis, and voting recommendations. While the MSIM Affiliates may review and utilize the ISS and IRRC recommendations in making proxy voting decisions, they are in no way obligated to follow the ISS and IRRC recommendations. In addition to research, ISS provides vote execution, reporting, and recordkeeping. MSIM's Proxy Review Committee (see Section IV.A. below) will carefully monitor and supervise the services provided by the proxy research services. E-1 Voting Proxies for Certain Non-US Companies -- While the proxy voting process is well established in the United States and other developed markets with a number of tools and services available to assist an investment manager, voting proxies of non-US companies located in certain jurisdictions, particularly emerging markets, may involve a number of problems that may restrict or prevent a MSIM Affiliate's ability to vote such proxies. These problems include, but are not limited to: (i) proxy statements and ballots being written in a language other than English; (ii) untimely and/or inadequate notice of shareholder meetings; (iii) restrictions on the ability of holders outside the issuer's jurisdiction of organization to exercise votes; (iv) requirements to vote proxies in person, (v) the imposition of restrictions on the sale of the securities for a period of time in proximity to the shareholder meeting; and (vi) requirements to provide local agents with power of attorney to facilitate the MSIM Affiliate's voting instructions. As a result, clients' non-U.S. proxies will be voted on a best efforts basis only, after weighing the costs and benefits of voting such proxies, consistent with the Client Proxy Standard. ISS has been retained to provide assistance to the MSIM Affiliates in connection with voting their clients' non-US proxies. III. GENERAL PROXY VOTING GUIDELINES To ensure consistency in voting proxies on behalf of its clients, MSIM Affiliates will follow (subject to any exception set forth herein) these Proxy Voting Policies and Procedures, including the guidelines set forth below. These guidelines address a broad range of issues, including board size and composition, executive compensation, anti-takeover proposals, capital structure proposals and social responsibility issues and are meant to be general voting parameters on issues that arise most frequently. The MSIM Affiliates, however, may, pursuant to the procedures set forth in Section IV. below, vote in a manner that is not in accordance with the following general guidelines, provided the vote is approved by the Proxy Review Committee and is consistent with the Client Proxy Standard. VI. GUIDELINES A. MANAGEMENT PROPOSALS 1. When voting on routine ballot items, unless otherwise determined by the Proxy Review Committee, the following proposals will be voted in support of management. o Selection or ratification of auditors. o Approval of financial statements, director and auditor reports. o General updating/corrective amendments to the chatter. o Approval of the payment of a dividend. o Proposals to limit Directors' liability and/or broaden indemnification of Directors. o Proposals requiring that a certain percentage (up to 66%) of the company's Board members be independent Directors. o Proposals requiring that members of the company's compensation, nominating and audit committees be comprised of independent or unaffiliated Directors. E-2 o Proposals recommending set retirement ages or requiring specific levels of stock ownership by Directors. o Proposals to eliminate cumulative voting. o Proposals to eliminate preemptive rights. o Proposals for confidential voting and independent tabulation of voting results. o Proposals related to the conduct of the annual meeting except those proposals that relate to the "transaction of such other business which may come before the meeting." 2. Election of Directors. In situations where no conflict exists, and where no specific governance deficiency has been noted, unless otherwise determined by the Proxy Review Committee, will be voted in support of nominees of management. Unless otherwise determined by the Proxy Review Committee, a withhold vote will be made where: (i) A nominee has, or any time during the previous three years had, a relationship with the issuer (e.g., investment banker, counsel or other professional service provider, or familial relationship with a senior officer of the issuer) that may impair his or her independence; (ii) A direct conflict exists between the interests of the nominee and the public shareholders; or (iii) Where the nominees standing for election have not taken action to implement generally accepted governance practices for which there is a "bright line" test. These would include elimination of dead hand or slow hand poison pills, requiring Audit, Compensation or Nominating Committees to be composed of independent directors and requiring a majority independent board. 3. The following non-routine proposals, which potentially may have a substantive financial or best interest impact on a shareholder, unless otherwise determined by the Proxy Review Committee, will be voted in support of management. CAPITALIZATION CHANGES o Proposals relating to capitalization changes that eliminate other classes of stock and voting rights. o Proposals to increase the authorization of existing classes of common stock (or securities convertible into common stock) if. (i) a clear and legitimate business purpose is stated; (ii) the number of shares requested E-3 is reasonable in relation to the purpose for which authorization is requested; and (iii) the authorization does not exceed 100% of shares currently authorized and at least 30% of the new authorization will be outstanding. o Proposals to create a new class of preferred stock or for issuances of preferred stock up to 50% of issued capital. o Proposals for share repurchase plans. o Proposals to reduce the number of authorized shares of common or preferred stock, or to eliminate classes of preferred stock. o Proposals to effect stock splits. o Proposals to effect reverse stock splits if management proportionately reduces the authorized share amount set forth in the corporate charter. Reverse stock splits that do not adjust proportionately to the authorized share amount will generally be approved if the resulting increase in authorized shares coincides with the proxy guidelines set forth above for common stock increases. COMPENSATION o Proposals relating to Director fees, provided the amounts are not excessive relative to outer companies in the country or industry. o Proposals for employee stock purchase plans that permit discounts up to 15%, but only for grants that are part of a broad based employee plan, including all non-executive employees. o Proposals for the establishment of Employee Stock Option Plans and other employee ownership plans. ANTI-TAKEOVER MATTERS o Proposals to modify or rescind existing supermajority vote requirements to amend the charters or bylaws. o Proposals relating to the adoption of anti-greenmail provisions provided that the proposal: (i) defines greenmail; (ii) prohibits buyback offers to large block holders not made to all shareholders or not approved by disinterested shareholders; and (iii) contains no anti-takeover measures or other provisions restricting the rights of shareholders. 4. The following non-routine proposals, which potentially may have a substantive financial or best interest impact on the shareholder, unless otherwise determined by the Proxy Review Committee, will be voted against (notwithstanding management support). E-4 o Proposals to establish cumulative voting rights in the election of directors. o Proposals relating to capitalization changes that add classes of stock which substantially dilute the voting interests of existing shareholders. o Proposals to increase the authorized number of shares of existing classes of stock that carry preemptive rights or super-voting rights. o Proposals to create "blank check" preferred stock. o Proposals relating to changes in capitalization by 100% or more. o Compensation proposals that allow for discounted stock options that have not been offered to employees in general. o Proposals to amend bylaws to require a supermajority shareholder vote to pass or repeal certain provisions. o Proposals to indemnify auditors. 5. The following types of non-routine proposals, which potentially may have a substantive financial or best interest impact on an issuer, will be voted as determined by the Proxy Review Committee. CORPORATE TRANSACTIONS o Proposals relating to mergers, acquisitions and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations) will be examined on a case-by-case basis. In all cases, ISS and IRRC research and analysis will be used along with MSIM Affiliates' research and analysis, including, among other things, MSM internal company-specific knowledge. o Proposals relating to change-in-control provisions in non-salary compensation plans, employment contracts, and severance agreements that benefit management and would be costly to shareholders if triggered. o Proposals relating to shareholders rights plans that allow appropriate offers to shareholders to be blocked by the board or trigger provisions that prevent legitimate offers from proceeding. o Proposals relating to Executive/ Director stock option plans. Generally, stock option plans should meet the following criteria: (i) Whether the stock option plan is incentive based; (ii) For mature companies, should be no more than 5% of the issued capital at the time of approval; E-5 (iii) For growth companies, should be no more than 10% of the issued capital at the time of approval. ANTI-TAKEOVER PROVISIONS o Proposals requiring shareholder ratification of poison pills. o Proposals relating to anti-takeover and related provisions that serve to prevent the majority of shareholders from exercising their rights or effectively deter the appropriate tender offers and other offers. B. SHAREHOLDER PROPOSALS 1. The following shareholder proposals will be supported, unless otherwise determined by the Proxy Review Committee: o Proposals requiring auditors to attend the annual meeting of shareholders. o Proposals requiring non-U.S. companies to have a separate Chairman and CEO. o Proposals requiring that members of the company's compensation, nominating and audit committees be comprised of independent or unaffiliated Directors. o Proposals requiring that a certain percentage of the company's members be comprised of independent and unaffiliated Directors. o Proposals requiring confidential voting. o Proposals to reduce or eliminate of supermajority voting requirements. o Proposals requiring shareholder approval for shareholder rights plan or poison pill. o Proposals to require the company to expense stock options. 2. The following shareholder proposals will be voted as determined by the Proxy Review Committee. o Proposals that limit tenure of directors. o Proposals to limit golden parachutes. o Proposals requiring directors to own large amounts of stock to be eligible for election. o Proposals that request or require disclosure of executive compensation in addition to the disclosure required by the Securities and Exchange Commission ("SEC") regulations. E-6 o Proposals that limit retirement benefits or executive compensation. o Proposals requiring shareholder approval for bylaw or charter amendments. o Proposals requiring shareholder approval of executive compensation. o Proposals requiring shareholder approval of golden parachutes. o Proposals to eliminate certain anti-takeover related provisions. o Proposals to prohibit payment of greenmail. 3. The following shareholder proposals will not be supported, unless otherwise determined by the Proxy Review Committee. o Proposals to declassify the Board of Directors (if management supports a classified board). o Proposals requiring a U.S. company to have a separate Chairman and CEO. o Proposals requiring that the company prepare reports that are costly to provide or that would require duplicative efforts or expenditures that are of a non-business nature or would provide no pertinent information from the perspective of institutional shareholders. o Proposals to add restrictions related to social, political or special interest issues that impact the ability of the company to do business or be competitive and that have a significant financial or best interest impact to the shareholders. o Proposals that require inappropriate endorsements or corporate actions. VII. ADMINISTRATION OF PROXY POLICIES AND PROCEDURES A. PROXY REVIEW COMMITTEE 1. The MSIM Proxy Review Committee ("Committee") is responsible for creating and implementing MSIM's Proxy Voting Policy and Procedures and, in this regard, has expressly adopted them. (a) The Committee, which is appointed by MSIM's Chief Investment Officer ("CIO"), consists of senior investment professionals who represent the different investment disciplines and geographic locations of the firm. The Committee is responsible for establishing MSIM's proxy voting policy and guidelines and determining how MSIM will vote proxies on an ongoing basis. E-7 (b) The Committee will periodically review and have the authority to amend, as necessary, these Proxy Voting Policy and Procedures and establish and direct voting positions consistent with the Client Proxy Standard. (c) The Committee will meet at least monthly to (among other matters): (1) address any outstanding issues relating to MSIM's Proxy Voting Policy and Procedures; and (2) review proposals at upcoming shareholder meetings of MSIM portfolio companies in accordance with this Policy including, as appropriate, the voting results of prior shareholder meetings of the same issuer where a similar proposal was presented to shareholders. The Committee, or its designee, will timely communicate to ISS MSIM's Proxy Voting Policy and Procedures (and any amendments to them and/or any additional guidelines or procedures it may adopt). (d) The Committee will meet on an ad hoc basis to (among other matters): (1) authorize "split voting" (i.e., allowing certain shares of the same issuer that are the subject of the same proxy solicitation and held by one or more MSIM portfolios to be voted differently than other shares) and/or "override voting" (i.e., voting all MSIM portfolio shares in a manner contrary to the Proxy Voting Policy and Procedures); (2) review and approve upcoming votes, as appropriate, for matters for which specific direction has been provided in these Policy and Procedures; and (3) determine how to vote matters for which specific direction has not been provided in these Policy and Procedures. Split votes will generally not be approved within a single Global Investor Group team. The Committee may take into account ISS and IRRC recommendations and the research as well as any other relevant information they may request or receive. (e) In addition to the procedures discussed above, if the Committee determines that an issue raises a potential material conflict of interest, or gives rise to the appearance of a potential material conflict of interest, the Committee will request a special committee to review, and recommend a course of action with respect to, the conflict(s) in question ("Special Committee"). The Special Committee shall be comprised of the Chairman of the Proxy Review Committee, the Compliance Director for the area of the firm involved or his/her designee, a senior portfolio manager (if practicable, one who is a member of the Proxy Review Committee) designated by the Proxy Review Committee and MSIM's Chief Investment Officer or his/her designee. The Special Committee may request the assistance of MSIM's General Counsel or his/her designee and will have sole discretion to cast a vote. In addition to the research provided by ISS and IRRC, the Special Committee may request analysis from MSIM Affiliate investment professionals and outside sources to the extent it deems appropriate. (f) The Committee and the Special Committee, or their designee(s), will document in writing all of their decisions and actions, which documentation will be maintained by the Committee and the Special Committee, or their designee(s), for a period of at least 6 years. To the E-8 extent these decisions relate to a security held by a MSIM U.S. registered investment company, the Committee and Special Committee, or their designee(s), will report their decisions to each applicable Board of Trustees/ Directors of those investment companies at each Board's next regularly scheduled Board meeting. The report will contain information concerning decisions made by the Committee and Special Committee during the most recently ended calendar quarter immediately preceding the Board meeting. (g) The Committee and Special Committee, or their designee(s), will timely communicate to applicable portfolio managers, the Compliance Departments and, as necessary, ISS, decisions of the Committee and Special Committee so that, among other things, ISS will vote proxies consistent with their decisions. B. IDENTIFICATION OF MATERIAL CONFLICTS OF INTEREST 1. If there is a possibility that a vote may involve a material conflict of interest, the vote must be decided by the Special Committee in consultation with MSIM's General Counsel or his/her designee. 2. A material conflict of interest could exist in the following situations, among others: (a) The issuer soliciting the vote is a client of MSIM or an affiliate of MSIM and the vote is on a material matter affecting the issuer; (b) The proxy relates to Morgan Stanley common stock or any other security issued by Morgan Stanley or its affiliates; or (c) Morgan Stanley has a material pecuniary interest in the matter submitted for a vote (e.g., acting as a financial advisor to a merger or acquisition for which Morgan Stanley will be paid a success fee if completed). C. PROXY VOTING REPORTS 1. MSIM will promptly provide a copy of these Policy and Procedures to any client requesting it. MSIM will also, upon client request, promptly provide a report indicating how each proxy was voted with respect to securities held in that client's account. 2. MSIM's legal department is responsible for filing an annual Form N-PX on behalf of each registered management investment company for which such filing is required, indicating how all proxies were voted with respect to such investment company's holdings. E-9 PART C: OTHER INFORMATION ITEM 15. INDEMNIFICATION Section 5.3 of the Registrant's Declaration of Trust, a copy of which is filed as an exhibit hereto, provides for indemnification, as set forth below: "Section 5.3 Mandatory Indemnification. (a) Subject to the exceptions and limitations contained in paragraph (b) below: (i) every person who is or has been a Trustee or officer of the Trust shall be indemnified by the Trust to the fullest extent permitted by law against all liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Trustee or officer and against amounts paid or incurred by him in the settlement thereof; (ii) the words, "claim," "action," "suit," or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal, administrative or other, including appeals), actual or threatened; and the words "liability" and "expenses" shall include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities. (b) No indemnification shall be provided hereunder to a Trustee or officer: (i) against any liability to the Trust or its Shareholders by reason of a final adjudication by the court or other body before which the proceeding was brought that he engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office; (ii) with respect to any matter as to which he shall have been finally adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust; (iii) in the event of a settlement or other disposition not involving a final adjudication as provided in paragraph (b)(i) or (b)(ii) resulting in a payment by a Trustee or officer, unless there has been either a determination that such Trustee or officer did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office by the court or other body approving the settlement or other disposition or a reasonable determination, based upon a review of readily available facts (as opposed to a full trial-type inquiry) that he did not engage C-1 in such conduct: (A) by vote of a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter); or (B) by written opinion of independent legal counsel. (C) The rights of indemnification herein provided by be insured against by policies maintained by the Trust, shall be severable, shall not effect any other rights to which any Trustee or officer may now or hereafter be entitled, shall continue as to a Person who has ceased to be such Trustee or officer and shall inure to the benefit of the heirs, executors, administrators, and assigns of such Person. Nothing contained herein shall affect any rights to indemnification to which personnel of the Trust other than Trustees and officers may be entitled by contract or otherwise under law. (D) Expenses of preparation and presentation of a defense to any claim, action, suit, or proceeding of the character described in paragraph (a) of this Section 5.3 shall be advanced by the Trust prior to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Section 5.3, provided that either (i) such undertaking is secured by a surety bond or some other appropriate security or the Trust shall be insured against losses arising out of any such advances; or (ii) a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter) or an independent legal counsel in a written opinion shall determine, based upon a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the recipient ultimately will be found entitled to indemnification. As used in this Section 5.3, a "Disinterested Trustee" is one (i) who is not an "Interested Person" of the Trust (including anyone who has been exempted from being an "Interested Person" by any rule, regulation or order of the Commission), and (ii) against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or had been pending." ITEM 16. EXHIBITS 1. (a) Declaration of Trust of the Registrant and amendments thereto + C-2 (b) Form of Certificate of Vote Establishing Preferred Shares and Amendments thereto+++ 2. Bylaws of the Registrant and amendment thereto+ 3. Not applicable 4. Form of Agreement and Plan of Reorganization ++++ 5. (a) Specimen share certificate for common shares of the Registrant+ (b) Specimen share certificate for preferred shares of the Registrant+ 6. (a) Investment Advisory Agreement+ (b) Amendment to Investment Advisory Agreement+ 7. Not Applicable 8. (a) Form of Amended and Restated Deferred Compensation Agreement+ (b) Form of Retirement Plan for Each Closed End Fund+ 9. (a) Custodian Contract+ (b) Amendment of Custodian Contract+ 10. Not Applicable 11. Opinion and consent of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Registrant+ 12. Tax opinion of Skadden, Arps, Slate, Meagher & Flom LLP+++++ 13. (a) Transfer Agency and Service Agreement+ (b) Auction Agency Agreement+ (c) Form of Broker-Dealer Agreement+ (d)(i) Letter of Representations+ (ii) Form of Letter of Representations+ (e) Administration Agreement+ (f) Amended and Restated Legal Services Agreement+ (g) Fund Accounting Agreement and amendment thereto+ 14. Consent of independent registered public accounting firm for the Registrant and for the Target Fund+ 15. Not Applicable 16. Power of Attorney+ 17. (a) Code of Ethics of the Investment Adviser+ (b) Code of Ethics of the Funds+ 99. Form of Proxy card for the Target Fund+ + Filed herewith. ++ Incorporated by reference to Registrant's Registration Statement on Form N-14 as filed via EDGAR on March 18, 2005 +++ Filed as Appendix B to the Statement of Additional Information and incorporated herein by reference to Registrant's Registration Statement on Form N-14 as filed via EDGAR on March 18, 2005 ++++ Filed as Appendix A to the Statement of Additional Information and incorporated herein by reference to Registrant's Registration Statement on Form N-14 as filed via EDGAR on March 18, 2005 +++++ To be filed by further amendment ITEM 17. UNDERTAKINGS (1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through use of a prospectus which is part of this Registration Statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, as amended, the reoffering prospectus will contain information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by other items of the applicable form. C-3 (2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act of 1933, as amended, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of securities at that time shall be deemed to be the initial bona fide offering of them. (3) The undersigned Registrant agrees that, if the Reorganization discussed in the registration statement close, it shall file by post-effective amendment either a copy of the Internal Revenue Service private letter ruling applied for or an opinion supporting the tax matters discussed in the registration statement. C-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant 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 May 5, 2005. VAN KAMPEN MUNICIPAL TRUST By: /s/ Lou Anne McInnis ------------------------------------ Lou Anne McInnis Assistant Secretary Amendment to the Pursuant to the requirements of the Securities Act of 1933, as amended, this amendment to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated. SIGNATURES TITLE ---------- ----- Principal Executive Officer: /s/ Ronald E. Robison* Executive Vice President - ------------------------------------------- and Principal Executive Officer Ronald E. Robison Principal Financial Officer: /s/ James W. Garrett* - ------------------------------------------- Chief Financial James W. Garrett Officer and Treasurer Trustees: /s/ David C. Arch* Trustee - ------------------------------------------- David C. Arch /s/ Jerry D. Choate* Trustee - ------------------------------------------- Jerry D. Choate /s/ Rod Dammeyer* Trustee - ------------------------------------------- Rod Dammeyer C-5 /s/ Linda Hutton Heagy* Trustee - ------------------------------------------- Linda Hutton Heagy /s/ R. Craig Kennedy* Trustee - ------------------------------------------- R. Craig Kennedy /s/ Howard J Kerr* Trustee - ------------------------------------------- Howard J Kerr /s/ Mitchell M. Merin* Trustee - ------------------------------------------- Mitchell M. Merin /s/ Jack E. Nelson* Trustee - ------------------------------------------- Jack E. Nelson /s/ Richard F. Powers, III* Trustee - ------------------------------------------- Richard F. Powers, III /s/ Hugo F. Sonnenschein* Trustee - ------------------------------------------- Hugo F. Sonnenschein /s/ Wayne W. Whalen* Trustee - ------------------------------------------- Wayne W. Whalen /s/ Suzanne H. Woolsey* Trustee - ------------------------------------------- Suzanne H. Woolsey * Signed by Lou Anne McInnis pursuant to a power of attorney, filed herewith. /s/ Lou Anne McInnis May 5, 2005 - ------------------------------------------- Lou Anne McInnis Attorney-in-Fact C-6 SCHEDULE OF EXHIBITS TO FORM N-14 VAN KAMPEN MUNICIPAL TRUST Exhibit - ------- 1. (a) Declaration of Trust of the Registrant and amendments thereto 2. Bylaws of the Registrant and amendment thereto 5. (a) Specimen share certificate for common shares of the Registrant (b) Specimen share certificate for preferred shares of the Registrant 6. (a) Investment Advisory Agreement (b) Amendment to Investment Advisory Agreement 8. (a) Form of Amended and Restated Deferred Compensation Agreement (b) Form of Retirement Plan for Each Closed End Fund 9. (a) Custodian Contract (b) Amendment to Custodian Contract 11. Opinion and consent of Skadden, Arps, Slate, Meagher & Flom LLP 13. (a) Transfer Agency and Service Agreement (b) Auction Agency Agreement (c) Form of Broker-Dealer Agreement (d)(i) Letter of Representations (ii) Form of Letter of Representations (e) Administration Agreement (f) Amended and Restated Legal Services Agreement (g) Fund Accounting Agreement and amendment thereto 14. Consent of independent registered public accounting firm for the Registrant and for the Target Fund 16. Power of Attorney 17. (a) Code of Ethics of the Investment Adviser (b) Code of Ethics of the Funds 99. Form of Proxy card for the Target Fund EX-99.(1)(A) 2 c93084a1exv99wx1yxay.txt DECLARATION OF TRUST AND AMENDMENTS THERETO EXHIBIT 1(a) AMENDED AND RESTATED DECLARATION OF TRUST OF VAN KAMPEN MERRITT MUNICIPAL TRUST (formerly, Van Kampen Merritt Quality Municipal Trust) DECLARATION OF TRUST made as of July 19, 1991, and as amended and restated as of August 20, 1991 and September 17, 1991 by the undersigned (together with all other persons from time to time duly elected, qualified and serving as Trustees in accordance with the provisions of Article II hereof, the "Trustees"), and by the holders of shares of beneficial interest to be issued hereunder as hereinafter provided; WHEREAS, the Trustees desire to establish a trust for the investment and reinvestment of funds contributed thereto; and WHEREAS, the Trustees desire that the beneficial interest in the trust assets be divided into transferable shares of beneficial interest, as hereinafter provided; NOW, THEREFORE, the Trustees hereby declare that all money and property contributed to the trust established hereunder shall be held and managed in trust for the benefit of holders, from time to time, of the shares of beneficial interest issued hereunder and subject to the provisions hereof. ARTICLE I NAME, PRINCIPAL OFFICE, RESIDENT AGENT AND DEFINITIONS Section 1.1 Name, Principal Office and Resident Agent. The name of the trust created hereby is the "Van Kampen Merritt Municipal Trust," (formerly, Van Kampen Merritt Quality Municipal Trust) (the "Trust"). The post office address of the principal office of the Trust is 1001 Warrenville Road, Lisle, Illinois 60532. The name of the resident agent of the Trust in the Commonwealth of Massachusetts is C T Corporation System, a Delaware corporation, and the post office address of the resident agent is 2 Oliver Street, Boston, Massachusetts 02109. Section 1.2 Definitions. Wherever they are used herein, the following terms have the following respective meanings: (a) "By-Laws" means the By-Laws referred to in Section 3.8 hereof, as from time to time amended. (b) The terms "Commission," "Interested Person" and "Majority Shareholder Vote" (the 67% or 50% requirement of the third sentence of Section 2(a)(42) of the 1940 Act, whichever may be applicable) have the meanings given them in the 1940 Act. (c) "Common Shareholder" means a record owner of outstanding Common Shares. (d) "Common Shares" means the common shares of beneficial interest in the Trust as described in Section 6.1 hereof and includes fractions of Common Shares as well as whole Common Shares. (e) "Custodian" means any person other than the Trust who has custody of any Trust Property as required by Section 17(f) of the 1940 Act, but does not include a system for the central handling of securities described in said Section 17(f). (f) "Declaration" means this Declaration of Trust as amended from time to time. Reference in this Declaration of Trust to "Declaration," "hereof," "herein" and "hereunder" shall be deemed to refer to this Declaration rather than the article or section in which such words appear. (g) "Investment Adviser" means a party furnishing services to the Trust pursuant to the contract described in Section 4.1 hereof. (h) The "1940 Act" means the Investment Company Act of 1940 and the Rules and Regulations thereunder, as amended from time to time. (i) "Person" means and includes individuals, corporations, partnerships, trusts, associations, joint ventures and other entities, whether or not legal entities, and governments and agencies and political subdivisions thereof, whether domestic or foreign. (j) "Preferred Shareholder" means a record owner of outstanding Preferred Shares. (k) "Preferred Shares" means the preferred shares of beneficial interest in the Trust as described in Section 6.1 hereof and includes fractions of Preferred Shares as well as whole Preferred Shares. (l) "Shareholder" means a record owner of outstanding Shares. (m) "Shares" means the units of beneficial interest in the Trust as described in Section 6.1 hereof and includes fractions of Shares as well as whole Shares. (n) "Transfer Agent" means a party furnishing services to the Trust pursuant to the contract described in Section 4.3 hereof. (o) The "Trust" means the trust created hereby. (p) The "Trust Property" means any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of the Trust or the Trustees. 2 (q) The "Trustees" means the persons who have signed the Declaration, so long as they shall continue in office in accordance with the terms hereto, and all other persons who may from time to time be duly elected, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such person or persons in their capacity as trustees hereunder. (r) "Underwriters" means the parties, other than the Trust, to the contract described in Section 4.2 hereof. ARTICLE II TRUSTEES Section 2.1 Number of Trustees. The number of Trustees shall initially be three (3), and after a registration statement under the Securities Act of 1933, as amended, covering the first public offering of securities of the Trust shall have been filed, the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by a majority of the Trustees, provided, however, that, following the date such registration statement shall have become effective (the "effective date"), the number of Trustees shall in no event be less than three (3) nor more than eleven (11), except as such number shall be increased in connection with the rights of the holders of the Preferred Shares to elect a majority of the Trustees, as provided for in Section 2.2 hereof. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term unless the Trustee is specifically removed pursuant to Section 2.2 of this Article II at the time of the decrease. Section 2.2 Term of Office of Trustees. The Board of Trustees shall be divided into three classes. The number of Trustees in each class shall be as nearly equal as practicable, as determined from time to time by resolution of the Board of Trustees. The term of office of the first class shall expire on the date of the first annual meeting of Shareholders or special meeting in lieu thereof following the effective date. The term of office of the second class shall expire on the date of the second annual meeting of Shareholders or special meeting in lieu thereof. The term of office of the third class shall expire on the date of the third annual meeting of Shareholders or special meeting in lieu thereof. Upon expiration of the term of office of each class as set forth above, the number of Trustees in such class, as determined by the Board of Trustees, shall be elected for a term expiring on the date of the third annual meeting of Shareholders or special meeting in lieu thereof following such expiration to succeed the Trustees whose terms in office expire. Subject to the rights of the Preferred Shareholders, the Trustees shall be elected by the Common Shareholders owning of record a plurality of the Common Shares voting as a class at an annual meeting of the Shareholders or special meeting in lieu thereof called for that purpose, except as provided in Section 2.3 of this Article; provided, however, that the Preferred Shareholders owning of record a plurality of the Preferred Shares voting as a class at an annual meeting of the Shareholders or special meeting in lieu thereof called for such purpose, shall elect at least two (2) Trustees at all times, and, provided further, that the Preferred Shareholders owning of record a plurality of the Preferred Shares voting as a class shall elect at least a majority of 3 the Trustees, which number of Trustees shall be increased appropriately in order to effectuate such rights after giving effect to resignations of Trustees, if (i) at any time the dividends on the Preferred Shares shall be unpaid in an amount equal to two (2) full years dividends on the Preferred Shares, with such representation to continue until all dividends in arrears shall have been paid or otherwise provided for, or (ii) pursuant to the designations and powers, preferences and rights, and the qualifications, limitations and restrictions of the Preferred Shares as determined in accordance with Section 6.1 hereof. Each Trustee elected shall hold office until his successor shall have been elected and shall have qualified; except that (a) any Trustee may resign his trust (without need for prior or subsequent accounting) by an instrument in writing signed by him and delivered to the other Trustees, which shall take effect upon such delivery or upon such later date as is specified therein; (b) any Trustee may be removed (provided the aggregate number of Trustees after such removal shall not be less than the number required by Section 2.1 hereof) with cause, at any time by written instrument, signed by at least two-thirds of the remaining Trustees, specifying the date when such removal shall become effective (provided, however, that the Trustees elected by any one class of shares shall have no power to so remove any Trustees elected by another class of Shares); (c) any Trustee who requests in writing to be retired or who has become incapacitated by illness or injury may be retried by written instrument signed by a majority of the other Trustees, specifying the date of his retirement; and (d) any Trustee may be removed at any meeting of Shareholders by a vote of two-thirds of the outstanding shares of the class or classes of shares of beneficial interest that elected such Trustee. Upon the resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver such documents as the remaining Trustees shall require for the purpose of conveying to the Trust or the remaining Trustees any Trust property held in the name of the resigning or removed Trustee. Upon the incapacity or death of any Trustee, his legal representative shall execute and deliver on his behalf such documents as the remaining Trustees shall require as provided in the preceding sentence. Section 2.3 Resignation and Appointment of Trustees. The term of office of a Trustee shall terminate and a vacancy shall occur in the event of the death, declination, resignation, removal, retirement, bankruptcy, adjudicated incompetence or other incapacity to perform the duties of the office of a Trustee. In the case of an existing vacancy, including a vacancy existing by reason of an increase in the number of Trustees, the remaining Trustees shall fill such vacancy by appointing such other person as they in their discretion shall see fit. Such appointment shall be evidenced by a written instrument signed by a majority of the Trustees then in office. Any such appointment shall not become effective, however, until the person named in the written instrument of appointment shall have accepted in writing such appointment and agreed in writing to be bound by the terms of this Declaration. An appointment of a Trustee may be made by the Trustees then in office and notice thereof mailed to Shareholders as aforesaid in anticipation of a vacancy to occur by reason of retirement, resignation or increase in number of Trustees effective at a later date, provided that said appointment shall become effective only at or after the effective date of said retirement, resignation or increase in number of Trustees. The power of appointment is subject to the provisions of Section 16(a) of the 1940 Act. 4 Section 2.4 Vacancies. The death, declination, resignation, retirement, removal, bankruptcy, adjudicated incompetence or incapacity to perform the duties of a Trustee, or any one of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled as provided in Section 2.3, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by the Declaration, subject to the rights of the holders of the Preferred Shares to elect a Trustee to fill such vacancy in accordance with the terms and provisions hereof. A written instrument certifying the existence of such vacancy signed by a majority of the Trustees shall be conclusive evidence of the existence of such vacancy. Section 2.5 Delegation of Power to Other Trustees. Any Trustee may, by power of attorney, delegate his power for a period not exceeding six (6) months at any one time to any other Trustee or Trustees; provided that in no case shall less than two (2) Trustees personally exercise the powers granted to the Trustees under this Declaration except as herein otherwise expressly provided. Nothing in this section 2.5 shall apply to, or limit the ability of any Trustee to grant, any power of attorney for the purpose of executing any registration statement filed with the Commission, or amendment thereto, relating to Shares. Section 2.6 Meetings. Meetings of the Trustees shall be held from time to time upon the call of the Chairman, if any, the President, the Secretary or any two Trustees. Regular meetings of the Trustees may be held without call or notice at a time and place fixed by the By-Laws or by resolution of the Trustees. Notice of any other meeting shall be mailed not less than 48 hours before the meeting or otherwise actually delivered orally or in writing not less than 24 hours before the meeting, but may be waived in writing by any Trustee either before or after such meeting. The attendance of a Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Trustee attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been lawfully called or convened. The Trustees may act with or without a meeting. A quorum for all meetings of the Trustees shall be a majority of the Trustees. Unless provided otherwise in this Declaration of Trust, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present (a quorum being present) or without a meeting by written consent of a majority of the Trustees. Any committee of the Trustees, including an executive committee, if any, may act with or without a meeting. A quorum for all meetings of any such committee shall be a majority of the members thereof. Unless provided otherwise in this Declaration, any action of any such committee may be taken at a meeting by vote of a majority of the members present (a quorum being present) or without a meeting by written consent of a majority of the members. With respect to actions of the Trustees and any committee of the Trustees, Trustees who are Interested Persons in any action to be taken may be counted for quorum 5 purposes under this Section and shall be entitled to vote to the extent not prohibited by the 1940 Act. Section 2.7 Officers. The Trustees shall annually elect a President, a Secretary and a Treasurer and may elect a Chairman. The Trustees may elect or appoint or may authorize the Chairman, if any, or President to appoint such other officers or agents with such powers as the Trustees may deem to be advisable. A Chairman shall, and the President, Secretary and Treasurer may, but need not, be a Trustee. ARTICLE III POWERS OF TRUSTEES Section 3.1 General. The Trustees shall have exclusive and absolute control over the Trust Property and over the business of the Trust to the same extent as if the Trustees were the sole owners of the Trust Property and business in their own right, but with such powers of delegation as may be permitted by the Declaration. The Trustees shall have power to conduct the business of its branches and maintain offices both within and without the Commonwealth of Massachusetts, in any and all states of the United States of America, in the District of Columbia, and in any and all commonwealths, territories, dependencies, colonies, possessions, agencies or instrumentalities of the United States of America and of foreign governments and to do all such other things and execute all such instruments as the Trustees deem necessary, proper or desirable in order to promote the interests of the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of the Declaration, the presumption shall be in favor of a grant of power to the Trustees. The enumeration of any specific power herein shall not be construed as limiting the aforesaid power. Such powers of the Trustees may be exercised without order of or resort to any court. Section 3.2 Investments. (a) The Trustees shall have the power to: (i) operate as and carry on the business of an investment company, and exercise all of the powers necessary or appropriate to the conduct of such operations; (ii) To subscribe for, invest in, hold for investment, or reinvest in, securities, including common and preferred stocks; warrants; bonds, debentures, bills, time notes and all other evidences of indebtedness; negotiable or non-negotiable instruments; government securities, including securities of any state, municipality or other political subdivision thereof, or any governmental or quasigovernmental agency or instrumentality; and money market instruments including bank certificates of deposit, finance paper, commercial paper, bankers acceptances and all kinds of repurchase agreements, of any corporation, company, trust, association, firm or other business organization however established, and of 6 any country, state, municipality or other political subdivision, or any governmental or quasi-governmental agency or instrumentality; (iii) To acquire (by purchase, subscription or otherwise), to hold, to trade in and deal in, to acquire any rights or options to purchase or sell, to sell or otherwise dispose of, to lend, to write (or sell) and purchase put and call options on any such securities and to pledge any such securities and repurchase agreements; (iv) To exercise all rights, powers and privileges of ownership or interest in all securities and repurchase agreements included in the Trust Property, including the right to vote thereon and otherwise act with respect thereto and to do all acts for the preservation, protection, improvement and enhancement in value of all such securities and repurchase agreements; (v) To acquire (by purchase, lease or otherwise) and to hold, use, maintain, develop and dispose of (by sale or otherwise) any property, real or personal, including futures contracts and options thereon, cash, and any interest therein; (vi) To borrow money or otherwise obtain credit and in this connection issue notes or other evidence of indebtedness; to secure borrowings by mortgaging, pledging or otherwise subjecting as security the Trust Property; to endorse, guarantee, or undertake the performance of any obligation, contract or engagement of any other Person and to lend Trust Property; (vii) To aid by further investment any corporation, company, trust, association or firm, any obligation of or interest in which is included in the Trust Property or in the affairs of which the Trustees have any direct or indirect interest; to do all acts and things designed to protect, preserve, improve or enhance the value of such obligation or interest; to guarantee or become surety on any or all other contracts, stocks, bonds, notes, debentures and other obligations of any such corporation, company, trust, association or firm; and (viii) to carry on any other business in connection with or incidental to any of the foregoing powers, to do everything necessary, suitable or proper for the accomplishment of any purpose or the attainment of any object or the furtherance of any power hereinbefore set forth, and to do every other act or thing incidental or appurtenant to or connected with the aforesaid purposes, objects or powers. The foregoing clauses shall be construed both as objects and powers, and the foregoing enumeration of specific powers shall not be held to limit or restrict in any manner the general powers of the Trustees. (b) The Trustees shall not be limited to investing in obligations maturing before the possible termination of the Trust, nor shall the Trustees be limited by any law limiting the investments which may be made by fiduciaries. 7 Section 3.3 Legal Title. Legal title to all the Trust Property shall be vested in the Trustees as joint tenants except that the Trustees shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees, or in the name of the Trust, or in the name of any other Person as nominee, on such terms as the Trustees may determine. The right, title and interest of the Trustees in the Trust Property shall vest automatically in each Person who may hereafter become a Trustee. Upon the termination of the term of office, resignation, removal or death of a Trustee he shall automatically cease to have any right, title or interest in any of the Trust Property, and the right, title and interest of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. Section 3.4 Issuance and Purchase of Securities. The Trustees shall have the power to issue, sell, purchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and subject to the provisions set forth in Articles VI, VII and VIII hereof, to apply to any such repurchase, retirement, cancellation or acquisition of Common Shares or Preferred Shares any funds or property of the Trust whether capital or surplus or otherwise, to the full extent now or hereafter permitted by the laws of the Commonwealth of Massachusetts governing business corporations. Section 3.5 Delegation; Committees. The Trustees shall have power to delegate from time to time to such of their number or to officers, employees or agents of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Trustees or otherwise as the Trustees may deem expedient, to the same extent as such delegation is not prohibited by the 1940 Act. Section 3.6 Collection and Payment. The Trustees shall have power to collect all property due to the Trust; to pay all claims, including taxes, against the Trust Property; to prosecute, defend, compromise or abandon any claims relating to the Trust Property; to foreclose any security interest securing any obligations by virtue of which any property is owed to the Trust; and to enter into releases, agreements and other instruments. Section 3.7 Expenses. The Trustees shall have the power to incur and pay any expenses which in the opinion of the Trustees are necessary or incidental to carry out any of the purposes of the Declaration, and to pay reasonable compensation from the funds of the Trust to themselves as Trustees. The Trustees shall fix the compensation of all officers, employees and Trustees. Section 3.8 Manner of Acting; By-Laws. Except as otherwise provided herein or in the By-laws, any action to be taken by the Trustees may be taken by a majority of the Trustees present at a meeting of Trustees (a quorum being present), including any meeting held by means of a conference telephone circuit or similar communications equipment by means of which all persons participating in the meeting can hear each other, or by written consents of all the Trustees. The Trustees may adopt By-laws to the extent such power is not reserved to the Shareholders. 8 Notwithstanding the foregoing provisions of this Section 3.8 and in addition to such provisions or any other provision of this Declaration or of the By-laws, the Trustees may by resolution appoint a committee consisting of less than the whole number of Trustees then in office, which committee may be empowered to act for and bind the Trustees and the Trust, as if the acts of such committee were the acts of all the Trustees then in office, with respect to the institution, prosecution, dismissal, settlement, review or investigation of any action, suit or proceeding which shall be pending or threatened to be brought before any court, administrative agency or other adjudicatory body. Section 3.9 Miscellaneous Powers. The Trustees shall have the power to: (a) employ or contract with such Persons as the Trustees may deem desirable for the transaction of the business of the Trust; (b) enter into joint ventures, partnerships and any other combinations or associations; (c) remove Trustees or fill vacancies in or add to their number, elect and remove such officers and appoint and terminate such agents or employees as they consider appropriate, and appoint from their own number, and terminate, any one or more committees which may exercise some or all of the power and authority of the Trustees as the Trustees may determine; (d) purchase, and pay for out of Trust Property, insurance policies insuring the Common Shareholders and Preferred Shareholders, Trustees, officers, employees, agents, investment advisers, distributors, selected dealers or independent contractors of the Trust against all claims arising by reason of holding any such position or by reason of any action taken or omitted by any such Person in such capacity, whether or not constituting negligence, or whether or not the Trust would have the power to indemnify such Person against such liability; (e) establish pension, profit sharing, Share purchase and other retirement, incentive and benefit plans for any Trustees, officers, employees or agents of the Trust; (f) make donations, irrespective of benefit to the Trust, for charitable, religious, educational, scientific, civil or similar purposes; (g) to the extent permitted by law, indemnify any person with whom the Trust has dealings, including the Investment Adviser, Underwriter, Transfer Agent, Custodian and selected dealers to such extent as the Trustees shall determine; (h) guarantee indebtedness or contractual obligations of others; (i) determine and change the fiscal year of the Trust and the method by which its accounts shall be kept; and (j) adopt a seal for the Trust but the absence of such seal shall not impair the validity of any instrument executed on behalf of the Trust. Section 3.10 Principal Transactions. Except in transactions permitted by the 1940 Act or rules and regulations adopted by the Commission, or any order of exemption issued by the Commission, the Trustees shall not, on behalf of the Trust, buy any securities (other than Common or Preferred Shares) from or sell any securities (other than Common or Preferred Shares) to, or lend any assets of the Trust to, any Trustee or officer of the Trust or any firm of which any such Trustee or officer is a member acting as principal, or have any such dealings with the Investment Adviser, Underwriter or Transfer Agent or with any Interested Person, or firm or company in which such Person is an Interested Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing agent or custodian. 9 ARTICLE IV INVESTMENT ADVISER, UNDERWRITER AND TRANSFER AGENT Section 4.1 Investment Adviser. Subject to a Majority Shareholder Vote of both the Common Shareholders and the Preferred Shareholders voting without regard to class, the Trustees may in their discretion from time to time enter into one or more investment advisory or management contracts whereby a party to such a contract shall undertake to furnish the Trust such administrative, management, investment advisory, statistical and research facilities and services, and such other facilities and services, if any, as the Trustees shall from time to time consider desirable and all upon such terms and conditions as the Trustees may in their discretion determine. Notwithstanding any provisions of this Declaration, the Trustees may delegate to the Investment Adviser authority (subject to such general or specific instructions as the Trustees may from time to time adopt) to effect purchases, sales, loans or exchanges of assets of the Trust on behalf of the Trustees or may authorize any officer, employee or Trustee to effect such purchases, sales, loan or exchanges pursuant to recommendations of the Investment Adviser (and all without further action by the Trustees). Any such purchases, sales, loans and exchanges shall be deemed to have been authorized by all of the Trustees. Section 4.2 Underwriter. The Trustees may in their discretion enter into a contract providing for the sale of shares of beneficial interest of the Trust whereby the Trust may either agree to sell such Shares to the other parties to the contact or appoint such other party the underwriter for such Shares. The contract shall be on such terms and conditions as the Trustees may in their discretion determine not inconsistent with the provisions of this Article IV or the By-laws; and such contract may also provide for the sale of Shares by such other parties as principal or as agent of the Trust and may provide that such other party may enter into agreements with registered securities dealers to further the purpose of the distribution of such Shares. Section 4.3 Transfer Agent. The Trustees may in their discretion from time to time enter into a transfer agency and Shareholder service contract whereby the other party to such contract shall undertake to furnish transfer agency and Shareholder services to the Trust. The contract shall have such terms and conditions as the Trustees may in their discretion determine not inconsistent with the Declaration or the By-laws. Such services may be provided by one or more Persons. Section 4.4 Parties to Contract. Any contract of the character described in Section 4.1, 4.2 or 4.3 of this Article IV or any Custodian contract, as described in the By-laws, may be entered into with any Person, although one or more of the Trustees or officers of the Trust may be an officer, partner, director, trustee, Shareholder, or member of such other party to the contract, and no such contract shall be invalidated or rendered voidable by reason of the existence of any such relationship; nor shall any Person holding such relationship be disqualified from voting upon or executing any such contract; nor shall any Person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of said 10 contract or accountable for any profit realized directly or indirectly therefrom, provided that the contract when entered into was not inconsistent with the provisions of this Article IV or the By-laws. The same Person may be the other party to contracts entered into pursuant to Sections 4.1, 4.2 and 4.3 above or custodian contracts, and any individual may be financially interested or otherwise affiliated with Persons who are parties to any or all of the contracts mentioned in this Section 4.4. Section 4.5 Compliance with 1940 Act. Any contract entered into pursuant to Sections 4.1 and 4.2 shall be consistent with and subject to the requirements of Section 15 of the Investment Company Act of 1940 (including any amendment thereof or other applicable Act of Congress hereafter enacted) with respect to its continuance in effect, its termination and the method of authorization and approval of such contract or renewal thereof. ARTICLE V LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS Section 5.1 No Personal Liability of Shareholders, Trustees, etc. No Shareholder of the Trust shall be subject to any personal liability whatsoever to any Person in connection with Trust Property or the acts, obligations or affairs of the Trust. No Trustee, officer, employee or agent of the Trust shall be subject to any personal liability whatsoever to any Person, other than the Trust or its Shareholders, in connection with Trust Property or the affairs of the Trust, save only that arising from bad faith, willful misfeasance, gross negligence or reckless disregard for his duty to such Person; and all such Persons shall look solely to the Trust Property for satisfaction of claims of any nature arising in connection with the affairs of the Trust. If any Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is made a party to any suit or proceeding to enforce any such liability, he shall not, on account thereof, be held to any personal liability. The Trust shall indemnify and hold each Shareholder harmless from and against all claims and liabilities to which such Shareholder may become subject by reason of his being or having been a Shareholder, and shall reimburse such Shareholder for all legal and other expenses reasonably incurred by him in connection with any such claim or liability. The rights accruing to a Shareholder under this Section 5.1 shall not exclude any other right to which such Shareholder may be lawfully entitled, nor shall anything herein contained restrict the right of the Trust to indemnify or reimburse a Shareholder in any appropriate situation even though not specifically provided herein. Section 5.2 Non-Liability of Trustees, etc. Subject to Section 5.3 (b) below, no Trustee, officer, employee or agent of the Trust shall be liable to the Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee or agent thereof for any action or failure to act (including without limitation the failure to compel in any way a former or acting Trustee to redress any breach of trust) except for his own bad faith, willful misfeasance, gross negligence or reckless disregard of his duties involved in the conduct of his office. 11 Section 5.3 Mandatory Indemnification. (a) Subject to the exceptions an limitations contained in paragraph (b) below: (i) every person who is or has been a Trustee or officer of the Trust shall be indemnified by the Trust to the fullest extent permitted by law against all liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Trustee or officer and against amounts paid or incurred by him in the settlement thereof; (ii) the words "claim," "action," "suit," or "proceeding shall apply to all claims, actions, suits or proceedings (civil, criminal, administrative or other, including appeals), actual or threatened; and the words "liability" and "expenses" shall include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities. (b) No indemnification shall be provided hereunder to a Trustee or officer: (i) against any liability to the Trust or its Shareholders by reason of a final adjudication by the court or other body before which the proceeding was brought that he engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office; (ii) with respect to any matter as to which he shall have been finally adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust; (iii) in the event of a settlement or other disposition not involving a final adjudication as provided in paragraph (b)(i) or (b)(ii) resulting in a payment by a Trustee or officer, unless there has been either a determination that such Trustee or officer did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his officer by the court or other body approving the settlement or other disposition or a reasonable determination, based upon a review of readily available facts (as opposed to a full trial-type inquiry) that he did not engage in such conduct: (A) by vote of a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter); or (B) by written opinion of independent legal counsel. (c) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not affect any other rights to which any Trustee or officer may now or hereafter be entitled, shall continue as 12 to a Person who has ceased to be such Trustee or officer and shall inure to the benefit of the heirs, executors, administrators, and assigns of such Person. Nothing contained herein shall affect any rights to indemnification to which personnel of the Trust other than Trustees and officers may be entitled by contract or otherwise under law. (d) Expenses of preparation and presentation of a defense to any claim, action, suit, or proceeding of the character described in paragraph (a) of this Section 5.3 shall be advanced by the Trust prior to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Section 5.3, provided that either (i) such undertaking is secured by a surety bond or some other appropriate security or the Trust shall be insured against losses arising out of any such advances; or (ii) a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter) or an independent legal counsel in a written opinion shall determine, based upon a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the recipient ultimately will be found entitled to indemnification. As used in this section 5.3, a "Disinterested Trustee" is one (i) who is not an "Interested Person" of the Trust (including anyone who has been exempted from being an "Interested Person" by any rule, regulation or order of the Commission), and (ii) against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or had been pending. Section 5.4 No Bond Required of Trustees. No Trustee shall be obligated to give any bond or other security for the performance of any of his duties hereunder. Section 5.5 No Duty of Investigation; Notice in Trust Instruments, etc. No purchaser, lender, transfer agent or other Person dealing with the Trustee or any officer, employee or agent of the Trust shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trustee or by said officer, employee or agent or be liable for the application of money or property paid, loaned or delivered to or on the order of the Trustees or of said officer, employee or agent. Every obligation, contract, instrument, certificate, Common Share or Preferred Share, other security of the Trust or undertaking, and every other act or thing whatsoever executed in connection with the Trust shall be conclusively presumed to have been executed or done by the executors thereof only in their capacity as Trustees under the Declaration or in their capacity as officers, employees or agents of the Trust. Every written obligation, contract, instrument, certificate, Common Share or Preferred Share, other security of the Trust or undertaking made or issued by the Trustees shall recite that the same is executed or made by them not individually, but as Trustees under the Declaration, and that the 13 obligations of the Trust under any such instrument are not binding upon any of the Trustees or Shareholders, individually, but bind only the trust estate, and may contain any further recital which they or he may deem appropriate, but the omission of such recital shall not operate to bind the Trustees or Shareholders individually. The Trustees shall seek diligently at all times to maintain insurance for the protection of the Trust Property, its Shareholders, Trustees, officers, employees and agents in such amount as the Trustees shall deem adequate to cover possible tort liability, and such other insurance as the Trustees in their sole judgment shall deem advisable. Section 5.6 Reliance on Experts, etc. Each Trustee and officer or employee of the Trust shall, in the performance of his duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports made to the Trust by any of its officers or employees or by the Investment Adviser, the Distributor, Transfer Agent, selected dealers, accountants, appraisers or other experts or consultants selected with reasonable care by the Trustees, officers or employees of the Trust, regardless of whether such counsel or expert may also be a Trustee. ARTICLE VI SHARES OF BENEFICIAL INTEREST Section 6.1 Beneficial Interest. The interest of the beneficiaries hereunder shall be divided into transferable shares of beneficial interest with par value of $.01 per share (the "Shares"). The Board of Trustees of the Trust may authorize separate classes of shares together with such designations and powers, preferences and rights, qualifications, limitations and restrictions as may be determined from time to time by the Board of Trustees. The number of shares of beneficial interest authorized hereunder is unlimited. All shares issued hereunder including, without limitation, shares issued in connection with a dividend in shares or a split of shares, shall be fully paid and non-assessable. Pursuant to the powers vested in the Board of Trustees by this Section 6.1, the Board of Trustees hereby authorizes the issuance of an unlimited number of Common Shares of beneficial interest, par value $.01 per share (the "Common Shares") together with 100,000,000 shares of beneficial interest, par value of $.01 per share (the "Preferred Shares"). The designations and powers, preferences and rights, and the qualifications, limitations and restrictions of the Common Shares are as set forth in this Declaration of Trust. The designations and powers, preferences and rights, and the qualifications, limitations and restrictions of the Preferred Shares are as follows: 14 The Preferred Shares shall be issued from time to time in one or more series with such distinctive serial designations and (i) may have such voting powers, full or limited; (ii) may be subject to redemption at such time or times and at such price or prices; (iii) may be entitled to receive dividends (which may be cumulative or noncumulative) at such rate or rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes of shares; (iv) may have such preferences or other rights upon the dissolution of, or upon any distribution of the assets of, the Trust; (v) may be made convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of shares of the Trust, at such price or prices or at such rates of exchange and with such adjustments; (vi) shall have such other relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, all as shall hereafter be stated and expressed in the resolution or resolutions providing for the issue of such Preferred Shares from time to time adopted by the Board of Trustees pursuant to authority so to do which is hereby expressly vested in the Board; and are as further set out in this Declaration of Trust. Section 6.2 Rights of Shareholders. The ownership to the Trust Property of every description and the right to conduct any business hereinbefore described are vested exclusively in the Trustees, and the Shareholders shall have no interest conferred by their Shares, and they shall have no right to call for any partition or division of any property, profits, rights or interests of the Trust nor can they be called upon to assume any losses of the Trust or suffer any assessment of any kind by virtue of their ownership of Shares. The Shares shall be personal property giving only the rights in the Declaration specifically set forth. The Shares shall not entitle the holder to preference, preemptive, appraisal, conversion or exchange rights, except as the Trustees may determine with respect to any class or series of Shares. Section 6.3 Trust Only. It is the intention of the Trustees to create only the relationship of Trustee and beneficiary between the Trustees and each Shareholder from time to time. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment or any form of legal relationship other than a trust. Nothing in the Declaration shall be construed to make the Shareholders, either by themselves or with the Trustees, partners and members of a joint stock association. Section 6.4 Issuance of Shares. The Trustees in their discretion may, from time to time without vote of the Shareholders, issue Shares, in addition to the then issued and outstanding Shares and Shares held in the treasury, to such party or parties and for such amount and type of consideration, including cash or property, at such time or times, and on such terms as the Trustees may deem best, and may in such manner acquire other assets (including the acquisition of assets subject to, and in connection with the assumption of liabilities) and businesses. In connection with any issuance of Shares, the Trustees may issue fractional Shares and Shares held in the treasury. The Trustees may from time to time divide or combine the Shares or any class or series into a greater or lesser number of such series without thereby changing the proportionate beneficial 15 interests in the Trust. Contributions to the Trust may be accepted for whole shares and/or 1/1,000ths of a Share or integral multiples thereof. Section 6.5 Register of Shares. A register or registers shall be kept at the principal office of the Trust or at an office of the Transfer Agent which shall contain the names and addresses of the Shareholders and the number of Shares held by them respectively and a record of all transfers thereof. Such register shall be conclusive as to who are the holders of the Common Shares and Preferred Shares and who shall be entitled to receive dividends or distributions or otherwise to exercise or enjoy the rights of Common Shareholders and Preferred Shareholders. No Shareholder shall be entitled to receive payment of any dividend or distribution, nor to have notice given to him as herein or in the By-laws provided, until he has given his address to the Transfer Agent or such other officer or agent of the Trustees as shall keep the said register for entry thereon. The Trustees, in their discretion, may authorize the issuance of Share certificates and promulgate appropriate rules and regulations as to their use. Section 6.6 Transfer of Shares. Shares shall be transferable on the records of the Trust only by the record holder thereof or by his agent thereunto duly authorized in writing, upon delivery to the Trustees or the Transfer Agent of a duly executed instrument of transfer, together with any certificate or certificates (if issued) for such Shares and such evidence of the genuineness of each such execution and authorization and of other matters as may reasonably be required. Upon such delivery the transfer shall be recorded on the register of the Trust. Until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereunder and neither the Trustees nor any Transfer Agent or register nor any officer, employee or agent of the Trust shall be affected by any notice of the proposed transfer. Any person becoming entitled to any Shares in consequence of the death, bankruptcy, or incompetence of any Shareholder or otherwise by operation of law, shall be recorded on the register of Shares as the holder of such Shares upon production of the proper evidence thereof to the Trustees or the Transfer Agent; but until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereunder and neither the Trustees not any Transfer Agent or registrar nor any officer or agent of the Trust shall be affected by any notice of such death; bankruptcy or incompetence, or other operation of law. Section 6.7 Notices. Any and all notices to which any Shareholder may be entitled and any and all communications shall be deemed duly served or given if mailed, postage prepaid, addressed to any Shareholder of record at his last known address as recorded on the register of the Trust. Section 6.8 Treasury Shares. Shares held in the treasury shall, until reissued pursuant to Section 6.4, not confer any voting rights on the Trustees, nor shall such Shares be entitled to any dividends or other distributions declared with respect to the Shares. 16 Section 6.9 Voting Powers. The Shareholders shall have power to vote only (i) for the election of Trustees as provided in Section 2.2 hereof, (ii) with respect to any investment advisory or management contract as provided in Section 4.1, (iii) with respect to termination of the Trust as provided in Section 9.2, (iv) with respect to any amendment of the Declaration to the extent and as provided in Section 9.3, (v) with respect to any merger, consolidation, conversion or sale of assets as provided in Sections 9.4, 9.5, and 9.7, (vi) with respect to incorporation of the Trust to the extent and as provided in Section 9.5, (vii) to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should or should not be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders, (viii) with respect to such additional matters relating to the Trust as may be required by the Declaration, the By-laws or any registration of the Trust as an investment company under the 1940 Act with the commission (or any successor agency) or any state, or as the Trustees may consider necessary or desirable and (ix) with respect to those matters set forth in the designations and powers, preferences and rights, and the qualifications, limitations and restrictions of the Preferred Shares, as determined in accordance with Section 6.1 hereof. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required by law, the Declaration or the By-laws to be taken by Shareholders. The By-laws may include further provisions for Shareholders votes and meetings and related matters. ARTICLE VII DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS The Trustees, in their absolute discretion, may prescribe and shall set forth in the By-laws or in a duly adopted vote of the Trustees such bases and times for determining the per share net asset value of the Common Shares or net income, or the declaration and payment of dividends and distributions, as they may deem necessary or desirable. ARTICLE VIII CUSTODIANS The Trustee shall at all times employ one or more custodians, meeting the qualifications for custodians for portfolio securities of investment companies contained in the 1940 Act, as custodian with respect to the Trust. If so directed by a Majority Shareholder Vote of each the Common Shares and the Preferred Shares voting as separate classes, the custodian shall deliver and pay over all property of the Trust held by it as specified in such vote. 17 The Trustees may also authorize each custodian to employ one or more sub-custodians from time to time to perform such of the acts and services of the custodian and upon such terms and conditions, as may be agreed upon between the custodian and such sub-custodian and approved by the Trustees, provided that in every case such subcustodian shall meet the qualifications for custodians contained in the 1940 Act. ARTICLE IX DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC. Section 9.1 Duration. Subject to possible termination in accordance with the other provisions of Article IX hereof, the trust created hereby shall continue without limitation of time. Section 9.2 Termination of Trust. (a) The Trust may be terminated (I) by the affirmative vote of the holders of not less than seventy-five percent (75%) of each of the Common Shares and the Preferred Shares outstanding and entitled to vote, voting as separate classes, at any meeting of Shareholders, or (II) by an instrument in writing, without a meeting, signed by a majority of the Trustees and consented to by the holders of not less than seventy-five percent (75%) of each of such Common Shares and Preferred Shares. Upon the termination of the Trust: (i) The Trust shall carry on no business except for the purpose of winding up its affairs; (ii) The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under this Declaration shall continue until the affairs of the Trust shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining Trust Property to one or more persons at public or private sale for consideration which may consist in whole or in part of cash, securities or other property of any kind, discharge or pay its liabilities, and to do all other acts appropriate to liquidate its business; provided, that any sale, conveyance, assignment, exchange, transfer or other disposition of all or substantially all of the Trust Property shall require Shareholder approval in accordance with Section 9.4 hereof; and (iii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements as they deem necessary for their protection, the Trustees may distribute the remaining Trust Property, in cash or in kind or partly in cash and partly in kind, among the Shareholders according to their respective rights, including any preferential rights of Preferred Shares to receive such distribution. 18 (b) After termination of the Trust and distribution to the Shareholders as herein provided, a majority of the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the fact of such termination, and the Trustees shall thereupon be discharged from all further liabilities and duties hereunder, and the rights and interests of all Shareholders shall thereupon cease. Section 9.3 Amendment Procedure. (a) Except as provided in paragraph (c) of this Section 9.3, this Declaration may be amended by a Majority Shareholder Vote of each of the Common Shares and the Preferred Shares, voting as separate classes, or by an instrument in writing, without a meeting, signed by a majority of the Trustees and consented to by the holders of not less than a majority of each of the Common Shareholders and the Preferred Shareholders, voting as separate classes. The Trustees may also amend this Declaration without the vote or consent of Shareholders to change the name of the Trust, to supply any omission, to cure, correct or supplement any ambiguous, defective or inconsistent provision hereof, to make any changes deemed necessary to effectuate the designations and powers, preferences and rights, and the qualifications, limitations and restrictions adopted by the Trustees with respect to the Preferred Shares pursuant to Section 6.1 hereof, or if they deem it necessary to conform this Declaration to the requirements of applicable federal laws or regulations or the requirements of the regulated investment company provisions of the Internal Revenue Code, but the Trustees shall not be liable for failing so to do. (b) No amendment, except pursuant to Section 6.1, may be made under this Section 9.3 which would change any rights with respect to any Shares by reducing the amount payable thereon upon liquidation of the Trust or by diminishing or eliminating any voting rights pertaining thereto, except with the vote or consent of the holders of two-thirds of the class of Shares so effected outstanding and entitled to vote. Nothing contained in this Declaration shall permit the amendment of this Declaration to impair the exemption from personal liability of the Shareholders, Trustees, Officers, employees and agents of the Trust or to permit assessment upon Shareholders. (c) No amendment may be made under this Section 9.3 which shall amend, alter, change or repeal any of the provisions of Sections 9.2, 9.3, 9.4, 9.6 and 9.7 unless the amendment effecting such amendment, alteration, change or repeal shall receive the affirmative vote or consent of seventy-five percent (75%) of each the Common Shareholders and the Preferred Shareholders, voting as separate classes. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of Shares otherwise required by law or by the terms of any class or series of Preferred shares, whether now or hereafter authorized, or any agreement between the Trust and any national securities exchange. (d) A certificate signed by a majority of the Trustees setting forth an amendment and reciting that it was duly adopted by the Shareholders or by the Trustees as aforesaid or a copy of the Declaration, as amended, and executed by a majority of the Trustees, shall be conclusive evidence of such amendment when lodged among the records of the Trust. 19 Notwithstanding any other provision hereof, until such time as a Registration Statement under the Securities Act of 1933, as amended, covering the first public offering of securities of the Trust shall have become effective, this Declaration may be terminated or amended in any respect by the affirmative vote of a majority of the Trustees or by an instrument signed by a majority of the Trustees. Section 9.4 Merger, Consolidation and Sale of Assets. Subject to Section 9.7, the Trust may merge or consolidate with any other corporation, association, trust or other organization or may sell, lease or exchange all or substantially all of the Trust Property, including its good will, upon such terms and conditions and for such consideration when and as authorized at any meeting of Shareholders called for the purpose by the affirmative vote of the holders of not less than two-thirds of the Common Shares and the Preferred Shares outstanding and entitled to vote, voting as separate classes or by an instrument or instruments in writing without a meeting, consented to by the holders of not less than two-thirds of each such class of Common Shares and Preferred Shares, provided, however, that if such merger, consolidation, sale, lease or exchange is recommended by the Trustees, the vote or written consent of the holders of a majority of the Common Shares and the Preferred Shares outstanding and entitled to vote, voting as separate classes shall be sufficient authorization and any such merger, consolidation, sale, lease or exchange shall be deemed for all purposes to have been accomplished under and pursuant to the statutes of the Commonwealth of Massachusetts. Section 9.5 Incorporation and Reorganization. Subject to Section 9.7 with the approval of the holders of a majority of the Common Shares and Preferred Shares outstanding and entitled to vote, voting as separate classes the Trustees may cause to be organized or assist in organizing a corporation or corporations under the laws of any jurisdiction, or any other trust, partnership, association or other organization to take over all of the Trust Property or to carry on any business in which the Trust shall directly or indirectly have any interest, and to sell, convey and transfer the Trust Property to any such corporation, trust, partnership, association or organization in exchange for the shares or securities thereof or otherwise and to lend money to, subscribe for the shares or securities of, and enter into any contracts with any such corporation, trust, partnership, association or organization or any corporation, partnership, association, trust, or organization in which the Trust holds or is about to acquire shares or any other interest. The Trustees may also cause a merger or consolidation between the Trust or any successor thereto and any such corporation, trust, partnership, association or other organization if and to the extent permitted by law, as provided under the law then in effect. Nothing contained herein shall be construed as requiring approval of Shareholders for the Trustees to organize or assist in organizing one or more corporations, trusts, partnerships, associations or other organizations and selling, conveying or transferring a portion of the Trust Property to such organization or entities. Section 9.6 Conversion to Open-End Company. Notwithstanding any other provisions of this Declaration or the By-Laws, an amendment to this Declaration that makes the Shares a "redeemable security" (as that term is defined in the 1940 Act) shall be required to be approved by at least (a) a majority of the Trustees, including a majority of the Trustees who are not Interested Persons; and (b) a majority Shareholder 20 Vote of each the Common Shareholders and the Preferred Shareholders, voting as separate classes. The Trust shall notify the holders of all capital securities of the approval, in accordance with the preceding paragraph of this Section 9.6, of any amendment to this Declaration that makes the Shares a "redeemable security" (as that term is defined in the 1940 Act) no later than thirty (30) days prior to the date of filing of such amendment with the Secretary of State of the Commonwealth of Massachusetts; provided, however, that such amendment may not be so filed until the later of ninety (90) days following the date of approval of such amendment by the holders of shares in accordance with the preceding paragraph of this Section 9.6 or thirty (30) days following the date on which notice of the approval of such amendment is first given to Shareholders. Section 9.7 Certain Transactions. (a) Notwithstanding any other provision of this Declaration and subject to the exceptions provided in paragraph (d) of this Section, the types of transactions described in paragraph (c) of this Section shall require the affirmative vote or consent of the holders of sixty-six and two-thirds percent (66 2/3%) of the Common Shares and Preferred Shares outstanding and entitled to vote, voting as separate classes when a Principal shareholder (as defined in paragraph (b) of this Section) is a party to the transaction. Such affirmative vote or consent shall be in addition to the vote or consent of the holders of Shares otherwise required by law or by the terms of any class or series of Preferred Shares, whether now or hereafter authorized, or any agreement between the Trust and any national securities exchange. (b) The term "Principal Shareholder" shall mean any corporation, person or other entity which is the beneficial owner, directly or indirectly, of more than five percent (5%) of the outstanding Shares and shall include any affiliate or associate, as such terms are defined in clause (ii) below, of a Principal Shareholder. For the purposes of this section, in addition to the Shares which a corporation, person or other entity beneficially owns directly, (a) any corporation, person or other entity shall be deemed to be the beneficial owner of any Shares (i) which it has the right to acquire pursuant to any agreement or upon exercise of conversion rights or warrants, or otherwise (but excluding share options granted by the Trust) or (ii) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (i) above), by any other corporation, person or entity with which it or its "affiliate" or "associate" (as defined below) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of Shares, or which is its "affiliate", or "associate" as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect on August 1, 1988, and (b) the outstanding Shares shall include Shares deemed owned through application of clauses (i) and (ii) above but shall not include any other Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights or warrants, or otherwise. 21 (c) This Section shall apply to the following transactions: (i) The merger or consolidation of the Trust or any subsidiary of the Trust with or into any Principal Shareholder. (ii) The issuance of any securities of the Trust to any Principal Shareholder for cash. (iii) The sale, lease or exchange of all or any substantial part of the assets of the Trust to any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period). (iv) The sale, lease or exchange to the Trust or any subsidiary thereof, in exchange for securities of the Trust of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month period). (d) The provisions of this Section shall not be applicable to (i) any of the transactions described in paragraph (c) of this Section if the Board of Trustees of the Trust shall by resolution have approved a memorandum of understanding with such Principal Shareholder with respect to and substantially consistent with such transaction, or (ii) any such transaction with any corporation of which a majority of the outstanding shares of all classes of stock normally entitled to vote in elections of directors is owned of record or beneficially by the Trust and its subsidiaries. (e) The Board of Trustees shall have the power and duty to determine for the purposes of this Section on the basis of information known to the Trust, whether (i) a corporation, person or entity beneficially owns more than five percent (5%) of the outstanding Shares, (ii) a corporation, person or entity is an "affiliate" or "associate" (as defined above) of another, (iii) the assets being acquired or leased to or by the Trust or any subsidiary thereof, constitute a substantial part of the assets of the Trust and have an aggregate fair market value of less than $1,000,000, and (iv) the memorandum of understanding referred to in paragraph (d) hereof is substantially consistent with the transaction covered thereby. Any such determination shall be conclusive and binding for all purposes of this Section. ARTICLE X SHAREHOLDERS Section 10.1 Meetings of Shareholders. An annual meeting of the Shareholders for the election of Trustees and for the transaction of such other business as may properly be brought before the meeting shall be held if the holding of such a meeting is required by law or by the rules of any exchange on which Shares are listed for trading, 22 on the second Thursday of May of each year, or at such other date, at such place within or without the Commonwealth of Massachusetts at such time as the Trustees shall designate from time to time. A Special Meeting of Shareholders may be called at any time by a majority of the Trustees and shall be called by any Trustee for any proper purpose upon written request of Shareholders of the Trust holding in the aggregate: with respect to matters not requiring voting by the Common Shareholders and Preferred Shareholders as separate classes, not less than 51% of the outstanding Common Shares and Preferred Shares voting as single class, such request specifying the purpose or purposes for which such meeting is to be called; with respect to matters requiring voting by the Common Shareholders and Preferred Shareholders as separate classes, not less than 51% of the outstanding Common Shares and not less than 51% of the outstanding Preferred Shares, unless some other percentage for the Preferred Shares is set forth in the designation pursuant to Section 6.1 hereof, voting as separate classes, such request specifying the purpose or purposes for which such meeting is to be called; or, in the case of a meeting for the purpose of voting on the question of removal of any Trustee or Trustees, upon written request of the class of Shareholders entitled to vote on the removal of such Trustee or Trustees holding in the aggregate not less than 10% of the outstanding Shares of such class; or, in the case of a meeting for the purpose of voting on the question of removal of the independent public accountants of the Trust, upon written request of Common Shareholders and Preferred Shareholders voting as a single class, holding in the aggregate not less than 10% of the outstanding Common Shares and Preferred Shares. Any Special Meeting shall be held within or without the Commonwealth of Massachusetts on such day and at such time as the Trustees shall designate. Section 10.2 Voting. Shareholders shall have no power to vote on any matter except matters on which a vote of Shareholders is required by applicable law, this Declaration or resolution of the Trustees. There shall be no cumulative voting in the election or removal of Trustees. Section 10.3 Notice of Meeting and Record Date. Notice of all meetings of Shareholders, stating the time, place and purposes of the meeting, shall be given by the Trustees by mail to each Shareholder of record entitled to vote thereat at his registered address, mailed at least 10 days and not more than 60 days before the meeting. Only the business stated in the notice of the meeting shall be considered at such meeting. Any adjourned meeting may be held as adjourned without further notice. For the purposes of determining the Shareholders who are entitled to notice of and to vote at any meeting the Trustees may, without closing the transfer books, fix a date not more than 60 days prior to the date of such meeting of Shareholders as a record date for the determination of the Persons to be treated as Shareholders of record for such purposes. Section 10.4 Quorum and Required Vote. The holders of a majority of outstanding Shares of each class or series or combined class entitled to vote thereat of the Trust present in person or by proxy shall constitute a quorum at any meeting of the Shareholders for purposes of conducting business on which a vote of Shareholders of the Trust is being taken. Subject to any provision of applicable law, this Declaration or resolution of the Trustees specifying a greater or lesser vote requirement for the transaction of any item of business at any meeting of Shareholders, the affirmative vote 23 of a majority of the Shares of any class or series present in person or represented by proxy and entitled to vote on the subject matter shall be the act of the Shareholders of such class or series with respect to such matter. Section 10.5 Proxies, etc. At any meeting of Shareholders, any holder of Shares entitled to vote thereat may vote by properly executed proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Secretary, or with such other officer or agent of the Trust as the Secretary may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of a majority of the Trustees, proxies may be solicited in the name of one or more Trustees or one or more of the officers or employees of the Trust. Only Shareholders of record shall be entitled to vote. Each full Share shall be entitled to one vote and fractional Shares shall be entitled to a vote of such fractions. when any Share is held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Share, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Share. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. If the holder of any such Share is a minor or a person of unsound mind, and subject to guardianship or to the legal control of any other person as regards the charge or management of such Share, he may vote by his guardian or such other person appointed or having such control, and such vote may be given in person or by proxy. Section 10.6 Reports. The Trustees shall cause to be prepared at least annually and more frequently to the extent required by law a report of operations containing a balance sheet and statement of income and undistributed income of the Trust prepared in conformity with generally accepted accounting principles and an opinion of an independent public accountant on such financial statements. Copies of such reports shall be mailed to all Shareholders of record within the time required by the 1940 Act. The Trustees shall, in addition, furnish to the Shareholders at least semi-annually to the extent required by law, interim reports containing an unaudited balance sheet as of the end of such period and an unaudited statement of income and surplus for the period from the beginning of the current fiscal year to the end of such period. Section 10.7 Inspection of Records. The records of the Trust shall be open to inspect on by Shareholders to the same extent as is permitted shareholders of a Massachusetts business corporation. Section 10.8 Shareholder Action by Written Consent. Any action which may be taken by Shareholders by vote may be taken without a meeting if the holders entitled to vote thereon of the proportion of Shares of the class or classes required for approval of such action at a meeting of Shareholders pursuant to Section 10.4 consent to the action in writing and the written consents be filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders. 24 ARTICLE XI MISCELLANEOUS Section 11.1 Filing. This Declaration and any amendment hereto shall be filed in the office of the Secretary of the Commonwealth of Massachusetts and in such other places as may be required under the laws of Massachusetts and may also be filed or recorded in such other places as the Trustees deem appropriate. Each amendment so filed shall be accompanied by a certificate signed and acknowledged by a Trustee stating that such action was duly taken in a manner provided herein, and unless such amendment or such certificate sets forth some later time for the effectiveness of such amendment, such amendment shall be effective upon its filing. A restated Declaration, integrating into a single instrument all of the provisions of the Declaration which are then in effect and operative, may be executed from time to time by a majority of the Trustees and shall upon filing with the Secretary of the Commonwealth of Massachusetts, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration and the various amendments thereto. Section 11.2 Governing Law. This Declaration is executed by the Trustees and delivered in The Commonwealth of Massachusetts and with reference to the laws thereof, and the rights of all parties and the validity and construction of every provision hereof shall be subject to and construed according to the laws of said Commonwealth. Section 11.3 Counterparts. This Declaration may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts, together, shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart. Section 11.4 Reliance by Third Parties. Any certificate executed by an individual who, according to the records of the Trust appears to be a Trustee hereunder, certifying: (a) the number or identity of Trustees or Shareholders, (b) the due authorization of the execution of any instrument or writing, (c) the form of any vote passed at a meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or shareholders present at any meeting or executing any written instrument satisfies the requirements of this Declaration, (e) the form of any By-laws adopted by or the identity of any officers elected by the Trustees, or (f) the existence of any fact or facts which in any manner relate to the affairs of the Trust, shall be conclusive evidence as to the matters so certified in favor of any Person dealing with the Trustees and their successors. Section 11.5 Provisions in Conflict with Law or Regulations. (a) The provisions of the Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code of 1986, or any amendments or successor statute thereto, or with other applicable laws and regulations, the conflicting provision shall be deemed not to constitute and never to have constituted a part of the Declaration; provided, however, that such determination shall not affect any of 25 the remaining provisions of the Declaration or render invalid or improper any action taken or omitted prior to such determination. (b) If any provision of the Declaration shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall apply only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of the Declaration in any jurisdiction. Section 11.6 Use of the Names "Van Kampen Merritt". Van Kampen Merritt Inc. ("Van Kampen") has consented to the use by the Trust of the identifying words or names "Van Kampen Merritt" or "VKM" in the name of the Trust. Such consent is conditioned upon the employment of Van Kampen its successors or any affiliate thereof, as investment advisor or distributor of the Trust. As between the Trust and itself, Van Kampen controls the use of the name of the Trust insofar as such name contains "Van Kampen Merritt" or "VKM". The names or identifying words "Van Kampen Merritt" or "VKM" may be used from time to time in other connections and for other purposes by Van Kampen or affiliated entities. Van Kampen may require the Trust to cease using "Van Kampen Merritt" or "VKM" in the name of the Trust if the Trust ceases to employ, for any reason, Van Kampen, an affiliate, or any successor as investment advisor or distributor of the Trust. IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. /s/ David C. Arch Dennis J. McDonnell - --------------------------------- ------------------- David C. Arch Dennis J. McDonnell /s/ Clyde H. Keith /s/ Wayne W. Whalen - --------------------------------- ------------------- Clyde H. Keith Wayne W. Whalen /s/ John C. Merritt /s/ Theodore A. Myers - --------------------------------- --------------------- John C. Merritt Theodore A. Myers /s/ Rod Dammeyer being all of the members of the Board of - --------------------------------- Trustees of the Trust Rod Dammeyer 26 State of ) ) ss County of ) Then personally appeared before me David C. Arch, Dennis J. McDonnell, Clyde H. Keith, Wayne W. Whalen, John C. Merritt, Theodore A. Myers and Rod Dammeyer who acknowledged the foregoing instrument of be their free act and deed and the free act and deed of the Trustees of Van Kampen Merritt Municipal Trust. Before me, /s/ Jennifer A. Herd ------------------------------------------ Notary Public My Commission Expires: 06/28/93 ------------- The addresses of the Trustees of the Trust are as follows: John C. Merritt 2 Penn Center Suite 1600 Philadelphia, Pennsylvania 19102 Dennis J. McDonnell 1001 Warrenville Road Lisle, Illinois 60532 Theodore A. Myers 321 N. Main Street Hutchinson, Kansas 67504 Rod Dammeyer Two North Riverside Plaza Chicago, Illinois 60606 David C. Arch 1800 Swift Drive Oak Brook, Illinois 60521 Clyde H. Keith 1119 Golfview Lane Glenview, Illinois 60025 Wayne W. Whalen 333 West Wacker Drive Chicago, Illinois 60606 27 CERTIFICATE OF AMENDMENT TO THE DECLARATION OF TRUST OF VAN KAMPEN MUNICIPAL TRUST (THE "TRUST") 1. The Declaration of Trust amended by this document was originally filed with the Secretary of the Commonwealth of Massachusetts on July 19, 1991. 2. Pursuant to this Certificate of Amendment, the principal place of business of the Trust shall be changed to 1221 Avenue of the Americas, New York, New York 10020. To effect the aforesaid amendment, Article 1, Section 1.1, of the Declaration of Trust of the Trust, relating to the principal office of the Trust, is amended to read as follows: ARTICLE I NAME, PRINCIPAL OFFICE, RESIDENT AGENT AND DEFINITIONS Section 1.1 Name, Principal Office and Resident Agent. The name of the trust created hereby is the "Van Kampen Municipal Trust"(the "Trust"). The post office address of the principal office of the Trust is 1221 Avenue of the Americas, New York, New York 10020. The name of the resident agent of the Trust in the Commonwealth of Massachusetts is CT Corporation System, a Delaware corporation, and the post office address of the resident agent is 101 Federal Street, Boston, Massachusetts 02110. ARTICLE II TRUSTEES Section 2.1 of the Declaration of Trust with respect to the names of the Trustees is hereby amended by removing John L. Sullivan, One Parkview Plaza, Oakbrook Terrace, Illinois 60181 and adding Mitchell M. Merin, 1221 Avenue of the Americas, New York, New York 10020. 3. Such amendment shall become effective as of the close of business on June 15, 2004. 4. The amendment herein provided for was authorized in accordance with law. IN WITNESS WHEREOF, the undersigned has signed these presents all on June 15, 2004. /s/ Wayne W. Whalen --------------------------------------- Name: Wayne W. Whalen As Trustee, and not individually ACKNOWLEDGEMENT STATE OF ILLINOIS) ) SS COUNTY OF COOK ) On this 15th day of June, 2004, before me personally appeared Wayne W. Whalen, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. /s/ Kurt Balder -------------------------------------- Notary Public My commission expires: 03/08/06 2 CERTIFICATE OF AMENDMENT TO THE DECLARATION OF TRUST OF Van Kampen Municipal Trust Pursuant to 950 CMR 109.04 of the Massachusetts General Law 1. The name of the trust is Van Kampen Municipal Trust (the "Trust") and its Declaration of Trust was originally filed with the Commonwealth of Massachusetts on August 15, 1988. 2. Pursuant to this Certificate of Amendment, the number of Trustees of the Trust shall be increased to fifteen (15). To effect this change, Article II, Section 2.1 of the Declaration of Trust is hereby amended to read as follows: ARTICLE II TRUSTEES Section 2.1 Number of Trustees. The number of Trustees shall initially be three (3), and after a registration statement under the Securities Act of 1933, as amended, covering the first public offering of securities of the Trust shall have been filed, the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by a majority of the Trustees, provided, however, that, following the date such registration statement shall have become effective (the "effective date"), the number of Trustees shall in no event be less than three (3) nor more than fifteen (15), except as such number shall be increased in connection with the rights of the holders of the Preferred Shares to elect a majority of the Trustees, as provided for in Section 2.2 hereof. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term unless the Trustee is specifically removed pursuant to Section 2.2 of this Article II at the time of the decrease. 3. Such amendment shall become effective as of the close of business on Friday, July 11, 2003. IN WITNESS WHEREOF, this Certificate of Amendment has been duly executed this 11th day of July, 2003. /s/ Wayne W. Whalen -------------------------------------- Name: Wayne W. Whalen As Trustee, and not individually CERTIFICATE OF AMENDMENT TO THE DECLARATION OF TRUST OF Van Kampen American Capital Municipal Trust Pursuant to 950 CMR 109.04 of the Massachusetts General Law 1. The name of the trust is Van Kampen American Capital Municipal Trust (the "Trust") and its Declaration of Trust was originally filed with the Commonwealth of Massachusetts on July 19, 1991. 2. Pursuant to this Certificate of Amendment, the name of the Trust will be changes to "Van Kampen Municipal Trust". To effect this change, Article 1. of the Declaration of Trust is hereby amended to read as follows: 1. The name of the Trust is: Van Kampen Municipal Trust ("Trust"). 3. Such name change shall become effective as of the close of business on Friday, August 28, 1998. IN WITNESS WHEREOF, this Certificate of Amendment has been duly executed this 6th day of August, 1998 /s/ Wayne W. Whalen -------------------------------------- Name: Wayne W. Whalen As Trustee and not individually CERTIFICATE OF AMENDMENT OF DECLARATION OF TRUST Pursuant to Chapter 183 Section 2 of the Massachusetts General Laws Van Kampen Merritt Municipal Trust, a voluntary association with transferable shares organized and existing under and by virtue of the laws of the Commonwealth of Massachusetts (the "Trust"), DOES HEREBY CERTIFY: FIRST: That the Directors considered a proposal to change the Trust's name to delete the word "Merritt" and substitute the words "American Capital." Subsequently, the Directors unanimously adopted a resolution setting forth a proposed amendment to the Declaration of Trust, declaring said amendment to be advisable. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the proper officers of the Trust be, and each of them hereby is authorized and directed, in the name and on behalf of the Trust, to take all actions to cause to be prepared and filed all other documents, to make all expenditures and to execute all instruments by them to be necessary or desirable in effectuating a name change for the Trust to delete the word "Merritt" and substitute the words "American Capital", including without limitation the preparation of an amendment to each Trust's Declaration of Trust, notification to the exchanges, the employment or retention of all such counsel, accountants and experts as may be deemed advisable by them, and the taking of such actions, the execution and filing or delivery of such documents, and the performance of such acts by them shall be conclusive evidence of their approval thereof and the approval thereof and authority therefor by and from such Trust. SECOND: That the proper officers of the Trust have authorized and directed that the Declaration of Trust be amended by changing the first paragraph of Article I thereof so that as amended, said paragraph shall be and read as follows: Section 1.1 Name, Principal Office and Resident Agent. The name of the trust created hereby is the Van Kampen American Capital Municipal Trust. THIRD: That such name change shall become effective as of the close of business on Friday, December 29, 1995. IN WITNESS WHEREOF, Van Kampen Merritt Municipal Trust has caused this Certificate of Amendment to be executed in its name this 29 day of December, 1995. VAN KAMPEN MERRITT MUNICIPAL TRUST /s/ Dennis J. McDonnell -------------------------------------- Name: Dennis J. McDonnell Title: Trustee 2 EX-99.(2) 3 c93084a1exv99wx2y.txt BYLAWS EXHIBIT 2 VAN KAMPEN MERRITT QUALITY MUNICIPAL TRUST BY-LAWS These By-Laws (the "By-Laws") are made and adopted pursuant to Section 3.8 of the Declaration of Trust establishing VAN KAMPEN MERRITT QUALITY MUNICIPAL TRUST, as from time to time amended (hereinafter called the "Declaration"). All words and terms capitalized in these By-Laws shall have the meaning or meanings set forth for such words or terms in the Declaration. ARTICLE I Shareholder Meetings Section 1.1 Chairman. The Chairman, if any, shall act as chairman at all meetings of the Shareholders; in his absence, the Trustee or Trustees present at each meeting may elect a temporary chairman for the meeting, who may be one of themselves. Section 1.2 Proxies; Voting. Shareholders may vote either in person or by duly executed proxy and each full share represented at the meeting shall have one vote, all as provided in Article 10 of the Declaration. No proxy shall be valid after eleven (11) months from the date of its execution, unless a longer period is expressly stated in such proxy. Section 1.3 Closing of Transfer Books and Fixing Record Dates. For the purpose of determining the Shareholders who are entitled to notice of or to vote or act at any meeting, including any adjournment thereof, or who are entitled to participate in any dividends, or for any other proper purpose, the Trustees may from time to time close the transfer bonds or fix a record date in the manner provided in Section 10.3 of the Declaration. If the Trustees do not prior to any meeting of shareholders so fix a record date or close the transfer books, then the date of mailing notice of the meeting or the date upon which the dividend resolution is adopted, as the case may be, shall be the record date. Section 1.4 Inspectors of Election. In advance of any meeting of Shareholders, the Trustees may appoint Inspectors of Election to act at the meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the Chairman, if any, of any meeting of Shareholders may, and on the request of any Shareholder or his proxy shall, appoint Inspectors of Election of the meeting. The number of Inspectors shall be either one or three. If appointed at the meeting on the request of one or more Shareholders or proxies, a majority of Shares present shall determine whether one or three Inspectors are to be appointed, but failure to allow such determination by the Shareholders shall not affect the validity of the appointment of Inspectors of Election. In case any person appointed as Inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Trustees in advance of the convening of the meeting or at the meeting by the person acting as chairman. The Inspectors of Election shall determine the number of shares outstanding, the Shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, shall receive votes, ballots or consents, shall hear and determine all challenges and questions in any way arising in connection with right to vote, shall count and tabulate all votes or consents, determine the results, and do such other acts as may be proper to conduct the election or vote with fairness to all Shareholders. If there are three Inspectors of Election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. On request of the Chairman, if any, of the meeting, or of any Shareholder or his proxy, the Inspectors of Election shall make a report in writing of any challenge or question or matter determined by them and shall execute a certificate of any facts found by them. Section 1.5 Records at Shareholder Meetings. At each meeting of the Shareholders there shall be open for inspection the minutes of the last previous Meeting of Shareholders of the Trust and a list of the Shareholders of the Trust, certified to be true and correct by the Secretary or other proper agent of the Trust, as of the record date of the meeting or the date of closing of transfer books, as the case may be. Such list of Shareholders shall contain the name of each Shareholder in alphabetical order and the address of Shares owned by such Shareholder. Shareholders shall have such other rights and procedures of inspection of the books and records of the Trust as are granted to shareholders of a Massachusetts business corporation. ARTICLE II Trustees Section 2.1 Trustees Meeting. The Trustees shall hold an annual meeting for the election of officers and the transactions of other business which may come before such meeting. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Trustees need be stated in the notice or waiver of notice of such meeting, and no notice need be given of action proposed to be taken by unanimous written consent. Section 2.2 Chairman; Records. The Chairman, if any, shall act as chairman at all meetings of the Trustees; in his absence the Trustees present shall elect one of their number to act as temporary chairman. The results of all actions taken at a meeting of the Trustees, or by unanimous written consent of the Trustees, shall be recorded by the secretary. ARTICLE III Officers Section 3.1 Officers of the Trust. The officers of the Trust shall consist of a Chairman, if any, a President, a Secretary, a Treasurer and such other officer or assistant officers, including Vice Presidents, as may be elected by the Trustees. Any two or more of the offices may be held by the same person, except that the same person may not be both President and Secretary. The Trustees may designate the order in which 2 the other Vice Presidents may act. The Chairman, if any, shall be a Trustee, but no other officer of the Trust need be a Trustee. Section 3.2 Election and Tenure. At the initial organization meeting and thereafter at each annual meeting of the Trustees, the Trustees shall elect the Chairman, if any, President, Secretary, Treasurer and such other officers as the Trustees shall deem necessary, or appropriate in order to carry out the business of the Trust. Such officers shall hold office until the next annual meeting of the Trustees and until their successors have been duly elected and qualified. The Trustees may fill any vacancy in office or add any additional officers at any time. Section 3.3 Removal of Officers. Any officer may be removed at any time, with or without cause, by action of a majority of the Trustees. This provision shall not prevent the making of a contract of employment for a definite term with any officer and shall have no effect upon any cause of action which any officer may have as a result of removal in breach of a contract of employment. Any officer may resign at any time by notice in writing signed by such officer and delivered or mailed to the Chairman, if any, President, or Secretary, and such resignation shall take effect immediately upon receipt by the Chairman, if any, President, or Secretary, or at a later date according to the terms of such notice in writing. Section 3.4 Bonds and Surety. Any officer may be required by the Trustees to be bonded for the faithful performance of his duties in such amount and with such sureties as the Trustee may determine. Section 3.5 Chairman, President, and Vice President. The Chairman, if any, shall, if present, preside at all meetings of the Shareholders and of the Trustees and shall exercise and perform such other powers and duties as may be from time to time assigned to him by the Trustees. Subject to such supervisory powers, if any, as may be given by the Trustees to the Chairman, if any, the President shall be the chief executive officer of the Trust and, subject to the control of the Trustees, shall have general supervision, direction and control of the business of the Trust and of its employees and shall exercise such general powers of management as are usually vested in the office of President of a corporation. Subject to direction of the Trustees, the Chairman, if any, and the President shall each have power in the name and on behalf of the Trust or any of its Series to execute any and all loans, documents, contracts, agreements, deeds, mortgages, registration statements, applications, requests, filings and other instruments in writing, and to employ and discharge employees and agents of the Trust. Unless otherwise directed by the Trustees, the Chairman, if any, and the President shall each have full authority and power, on behalf of all of the Trustees, to attend and to act to vote, on behalf of the Trust at any meetings of business organizations in which the Trust holds an interest, or to confer such powers upon any other persons, by executing any proxies duly authorizing such persons. The Chairman, if any, and the President shall have such further authorities and duties as the Trustees shall from time to time determine. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Trustees or, if more than one and not ranked, the Vice President designated by the Trustees, shall perform all of the duties of the President, and when so acting shall have all 3 the powers of and be subject to all of the restrictions upon the President. Subject to the direction of the Trustees, and of the President, each Vice President shall have the power in the name and on behalf of the Trust to execute any and all instruments in writing, and, in addition, shall have such other duties and powers as shall be designated from time to time by the Trustees or by the President. Section 3.6 Secretary. The Secretary shall keep the minutes of all meetings of, and record all votes of, Shareholders, Trustees and the Executive Committee, if any. He shall be custodian of the seal of the Trust, if any, and he (and any person so authorized by the Trustees) shall affix the seal or, if permitted, facsimile thereof, to any instrument executed by the Trust which would be sealed by a Massachusetts business corporation executing the same or a similar instrument and shall attest the seal and the signature or signatures of the officer or officers executing any other duties commonly incident to such office in a Massachusetts business corporation, and shall have such other authorities and duties as the Trustees shall from time to time determine. Section 3.7 Treasurer. Except as otherwise directed by the Trustees, the Treasurer shall have the general supervision of the monies, funds, securities, notes receivable and other valuable papers and documents of the Trust, and shall have and exercise under the supervision of the Trustees and of the President all powers and duties normally incident to his office. He may endorse for deposit or collection all notes, checks and other instruments payable to the Trust or to its order. He shall deposit all funds of the Trust in such depositories as the Trustee shall designate. He shall be responsible for such disbursement of the funds of the Trust as may be ordered by the Trustees or the President. He shall keep accurate account of the books of the Trust's transactions which shall be the property of the Trust, and which together with all other property of the Trust in his possession, shall be subject at all times to the inspection and control of the Trustees. Unless the Trustees shall otherwise determine, the Treasurer shall be the principal accounting officer of the Trust and shall also be the principal financial officer of the Trust. He shall have such other duties and authorities as the Trustees shall from time to time determine. Notwithstanding anything to the contrary herein contained, the Trustees may authorize any adviser, administrator, manager or transfer agent to maintain bank accounts and deposit and disburse funds of the Trust. Section 3.8 Other Officers and Duties. The Trustees may elect such other officers and assistant officers as they shall from time to time determine to be necessary or desirable in order to conduct the business of the Trust. Assistant officers shall act generally in the absence of the officer whom they assist and shall assist that officer in the duties of his office. Each officer, employee and agent of the Trust shall have such other duties and authority as may be conferred upon him by the Trustees or delegated to him by the President. 4 ARTICLE IV Miscellaneous Section 4.1 Depositories. In accordance with Section 8.1 of the Declaration, the funds of the Trust shall be deposited in such depositories as the Trustees shall designate and shall be drawn out on checks, drafts or other orders signed by such officer, officers, agent or agents (including the adviser, administrator or manager), as the Trustees may from time to time authorize. Section 4.2 Signatures. All contracts and other instruments shall be executed on behalf of the Trust by its properly authorized officers, agent or agents, as provided in the Declaration or By-Laws or as the Trustees may from time to time by resolution provide. Section 4.3 Seal. The seal of the Trust, if any, may be affixed to any instrument, and the seal and its attestation may be lithographed, engraved or otherwise printed on any document with the same force and effect as if it had been imprinted and affixed manually in the same manner and with the same force and effect as if done by a Massachusetts business corporation. ARTICLE V Stock Transfers Section 5.1 Transfer Agents, Registrars and the Like. As provided in Section 4.3 of the Declaration, the Trustees shall have authority to employ and compensate such transfer agents and registrars with respect to the Shares of the Trust as the Trustees shall deem necessary or desirable. In addition, the Trustees shall have power to employ and compensate such dividend disbursing gents, warrant agents and agents for the reinvestment of dividends as they shall deem necessary or desirable. Any of such agents shall have such power and authority as is delegated to any of them by the Trustees. Section 5.2 Transfer of Shares. The Shares of the Trust shall be transferable on the books of the Trust only upon delivery to the Trustees or a transfer agent of the Trust of proper documentation as provided in Section 6.6 of the Declaration. The Trust, or its transfer agents, shall be authorized to refuse any transfer unless and until presentation of such evidence as may be reasonably required to show that the requested transfer is proper. Section 5.3 Registered Shareholders. The Trust may deem and treat the holder of record of any Shares the absolute owner thereof for all purposes and shall not be required to take any notice of any right or claim of right of any other person. 5 ARTICLE VI Amendment of By-Laws Section 6.1 Amendment and Repeal of By-Laws. In accordance with Section 3.8 of the Declaration, the Trustees shall have the power to alter, amend or repeal the By-Laws or adopt new By-Laws at any time; provided, however, that By-Laws adopted by the Shareholders may, if such By-Laws so state, be altered, amended or repealed only by the Shareholders and not the Trustees. Action by the Trustees with respect to the By-Laws shall be taken by an affirmative vote of a majority of the Trustees. The Trustees shall in no event adopt By-Laws which are in conflict with the Declaration, and any apparent inconsistency shall be construed in favor of the related provisions in the Declaration. The Declaration of Trust establishing the Van Kampen Merritt Quality Municipal Trust, dated as of July 19, 1991, a copy of which, together with all amendments thereto, is on file in the office of the Secretary of the Commonwealth of Massachusetts, provides that the name Van Kampen Merritt Quality Municipal Trust refers to the Trustees under the Declaration collectively as Trustees, but not as individuals or personally; and no Trustee, Shareholder, officer, employee or agent of the Van Kampen Merritt Quality Municipal Trust shall be held to any personal liability, nor shall resort be had to their private property for the satisfaction of any obligation or claim or otherwise in connection with the affairs of said Van Kampen Merritt Quality Municipal Trust but the Trust Property only shall be liable. 6 ARTICLES OF AMENDMENT FIRST: On April 21, 2005, the Board of Trustees of each of the closed-end funds listed in Exhibit A hereto (each a "Fund"), pursuant to the provisions of Section 6.1 of the By-Laws of each Fund, authorized an amendment to each Fund's By-Laws to allow for certain telephone and electronic voting of proxies. SECOND: Pursuant to the provisions of Section 6.1 of the By-Laws, the following amendments to the By-Laws have been duly adopted and approved by a majority of the Trustees of the Fund. Section 1.2 of each Fund's By-Laws is hereby amended to add the following sentence at the end of such Section 1.2: The placing of a shareholder's name on a proxy pursuant to telephone or electronically transmitted instructions obtained pursuant to procedures reasonably designed to verify that such instructions have been authorized by such shareholder shall constitute execution of such proxy by or on behalf of such shareholder. Exhibit A 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 Senior Loan Fund Van Kampen Senior Income Trust 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 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 Municipal Opportunity Trust Van Kampen Advantage 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 Municipal Opportunity Trust II Van Kampen Advantage Municipal Income Trust II Van Kampen Select Sector Municipal Trust Van Kampen Pennsylvania Value Municipal Income Trust Van Kampen Trust for Investment Grade Pennsylvania Municipals Van Kampen Pennsylvania Quality Municipal Trust Van Kampen Advantage Pennsylvania Municipal Income Trust EX-99.(5)(A) 4 c93084a1exv99wx5yxay.txt SPECIMEN SHARE CERTIFICATE - COMMON SHARES EXHIBIT 5(a) =================================GRAPHIC OMITTED================================ SPECIMEN SPECIMEN NBN Co NBN Co COMMON SHARES COMMON SHARES NUMBER ============ ============= VKQ ============ ============= SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP 920919-107 THIS CERTIFICATE IS TRANSFERABLE IN BOSTON OR IN NEW YORK CITY Van Kampen Municipal Trust Organized Under the Laws of the Commonwealth of Massachusetts - -------------------------------------------------------------------------------- This certifies that is the owner of - -------------------------------------------------------------------------------- Common Shares of beneficial interest of $0.01 par value per share of Van Kampen Municipal Trust CERTIFICATE OF STOCK (hereinafter called the "Trust") transferable on the books of the Trust by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar. Witness the facsimile seal of the Trust and the facsimile signatures of its duly authorized officers. Van Kampen Municipal Trust MASSACHUSETTS SEAL TRUST * Dated: /s/ Stefanie V. Chang Yu /s/ Ronald E. Robison Vice President and Executive Vice President Secretary COUNTERSIGNED AND REGISTERED: STATE STREET BANK AND TRUST COMPANY TRANSFER AGENT AND REGISTRAR, BY: Authorized Signature (c) NORTHERN BANK NOTE COMPANY ================================================================================ THE TRUST WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF SHARES OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. ANY SUCH REQUEST SHOULD BE MADE TO THE SECRETARY OF THE TRUST. - -------------------------------------------------------------------------------- The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM- as tenants in common UNIF GIFT MIN ACT-______Custodian_______ (Cust) (Minor) TEN ENT- as tenants by the entireties under Uniform Gifts to Minors JT TEN- as joint tenants with Act _________________________ right of survivorship and (State) not as tenants in common Additional abbreviations may also be used though not in the above list. For value received, ___________ hereby sell, assign and transfer unto ______________________________________________________________________________ PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ------------------------------------ ______________________________________________________________________________ ______________________________________________________________________________ PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________ Shares of the Trust represented by the within Certificate, and do hereby irrevocably constitute and appoint _________________________________________________________ ______________________________________________________________________ Attorney to transfer the said shares on the books of the within-named Trust with full power of substitution in the premises. Dated, ________________ X _______________________________________________ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER. SIGNATURE(S) GUARANTEED: _____________________________________ THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. EX-99.(5)(B) 5 c93084a1exv99wx5yxby.txt SPECIMEN SHARE CERTIFICATE - PREFERRED SHARES EXHIBIT 5(b) Specimen Certificate Number of Number Shares 1 3,000 Van Kampen Municipal Trust Organized as a Massachusetts Business Trust Auction Preferred Shares $25,000 Liquidation Preference Cusip No. This certifies that Cede & Co. is the owner of three thousand (3,000) fully paid and non-assessable preferred shares of beneficial interest, par value $.01 per shares, liquidation preference $25,000 per share, designated Auction Preferred Shares, of Van Kampen Municipal Trust (the "Fund") transferable only on the books of the Fund by the holder hereof in person by Attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid unless countersigned by the registrar and transfer agent. In witness whereof the said Fund has caused this Certificate to be signed by its duly authorized officer and its corporate seal to be hereunto affixed this 18th day of April, A.D. 2005. Deutsche Bank Van Kampen Municipal Trust As Registrar and Transfer Agent Stefanie V. Chang Yu Ronald E. Robison - --------------------- -------------------------- ------------------------ Authorized Signature Vice President & Secretary Executive Vice President TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE RESTRICTIONS SPECIFIED IN THE CERTIFICATE OF VOTE OF THE FUND AND IN THE MASTER PURCHASER'S LETTER, COPIES OF WHICH ARE FILED WITH THE SECRETARY OF THE FUND. THE FUND WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF SHARES OR SERIES THEREOF WHICH IT IS AUTHORIZED TO ISSUE AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. SUCH REQUEST SHOULD BE ADDRESSED TO THE SECRETARY OF THE FUND. NOTICE IS HEREBY GIVEN THAT THIS CERTIFICATE REPRESENTING THE AUCTION PREFERRED SHARES, AND TO THE OBLIGATIONS ARISING OUT OF THE ISSUANCE AND SALE OF THE AUCTION PREFERRED SHARES, ARE NOT BINDING UPON ANY OF THE TRUSTEES, OFFICERS OR SHAREHOLDERS INDIVIDUALLY BUT ARE BINDING ONLY UPON THE ASSETS AND PROPERTY OF THE FUND. For value received, ________ does hereby sell, assign and transfer unto ____________ shares of the Auction Preferred Shares, represented by the within Certificate, and does hereby irrevocably constitute and appoint __________ Attorney to transfer the said shares of beneficial interest on the books of the within named Fund with full power of substitution in the premises. Date: ___________, 20 In presence of ________________________________ _____________________________________ EX-99.(6)(A) 6 c93084a1exv99wx6yxay.txt INVESTMENT ADVISORY AGREEMENT EXHIBIT 6(a) INVESTMENT ADVISORY AGREEMENT THIS INVESTMENT ADVISORY AGREEMENT, dated as of May 31, 1997 (the "Agreement"), by and between VAN KAMPEN AMERICAN CAPITAL MUNICIPAL TRUST (the "Fund"), a Massachusetts business trust (the "Trust"), and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. (the "Adviser"), a Delaware corporation. 1. (a) RETENTION OF ADVISER BY FUND. Subject to the terms and conditions set forth herein, the Fund hereby employs the Adviser to act as the investment adviser for and to manage the investment and reinvestment of the assets of the Fund in accordance with the Fund's investment objective and policies and limitations, and to administer its affairs to the extent requested by, and subject to the review and supervision of, the Board of Trustees of the Fund for the period and upon the terms herein set forth. The investment of funds shall be subject to all applicable restrictions of applicable law and of the Declaration of Trust and By-laws of the Trust, and resolutions of the Board of Trustees of the Fund as may from time to time be in force and delivered or made available to the Adviser. (b) ADVISER'S ACCEPTANCE OF EMPLOYMENT. The adviser accepts such employment and agrees during such period to render such services, to supply investment research and portfolio management (including without limitation the selection of securities for the Fund to purchase, hold or sell and the selection of brokers through whom the Fund's portfolio transactions are executed, in accordance with the affairs of the Fund, to furnish offices and necessary facilities and equipment to the Fund, to provide administrative services for the Fund, to render periodic reports to the Board of Trustees of the Fund, and to permit any of its officers or employees to serve without compensation as trustees or officers of the Fund if elected to such positions. (c) ESSENTIAL PERSONNEL. For a period of one year commencing on the effective date of this Agreement, the Adviser and the Fund agree that the retention of (i) the chief executive officer, president, chief financial officer and secretary of the Adviser and (ii) each director, officer and employee of the Adviser or any of its Affiliates (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) who serves as an officer of the Fund (each person referred to in (i) or (ii) hereinafter being referred to as an "Essential Person"), in his or her current capacities, is in the best interest of the Fund and the Fund's shareholders. In connection with the Adviser's acceptance of employment hereunder, the Adviser hereby agrees and covenants for itself and on behalf of its Affiliates that neither the Adviser nor any of its Affiliates shall make any material or significant personnel changes or replace or seek to replace any Essential Person or cause to be replaced any Essential Person, in each case without first informing the Board of Trustees of the Fund in a timely manner. In addition, neither the Adviser nor any Affiliate of the Adviser shall change or seek to change or cause to be changed, in any material respect, the duties and responsibilities of any Essential Person, in each case without first informing the Board of Trustees of the Fund in a timely manner. (d) INDEPENDENT CONTRACTOR. The Advisor shall be deemed to be an independent contractor under this Agreement and, unless otherwise expressly provided or authorized, shall have no authority to act for or represent the Fund in any way or otherwise be deemed as agent of the Fund. (e) NON-EXCLUSIVE AGREEMENT. The services of the Adviser to the Fund under this Agreement are not to be deemed exclusive, and the Adviser shall be free to render similar services or other services to others so long as its services hereunder are not impaired thereby. 2. (a) FEE. For the services and facilities described in Section 1, the Fund will accrue daily and pay to the Advisor at the end of each calendar month an investment management fee equal to seventy one-hundredths of one percent (.70 of 1%) of the average daily managed assets of the Fund (which for purposes of determining such fee, shall mean the average daily value of the Fund, minus the sum of accrued liability other than the aggregate amount of any borrowings undertaken by the Fund). (b) DETERMINATION OF NET ASSET VALUE. The net asset value of the Fund shall be calculated as of the close of the New York Stock Exchange on the last day the Exchange is open for trading in each calendar week or such other time or times as the trustees may determine in accordance with the provisions of applicable law and the Declaration of Trust and By-Laws of the Trust, and resolutions of the Board of Trustees of the Fund as from time to time in force. For the purpose of the foregoing computations, on each such day when net asset value is not calculated, the net asset value of a share of beneficial interest of the Fund shall be deemed to be the net asset value of such share as of the close of business of the last day on which such calculation was made. (c) PRORATION. For the month and year in which this Agreement becomes effective or terminates, there shall be an appropriate proration of the Adviser's fee on the basis of the number of days that the Agreement is in effect during such month and year, respectively. 3. EXPENSES. In addition to the fee of the Adviser, the Fund shall assume and pay any expenses for services rendered by a custodian for the safekeeping of the Fund's securities or other property, for keeping its books of account, for any other charges of the custodian and for calculating the net asset value of the Fund as provided above. The Adviser shall not be required to pay, and the Fund shall assume and pay, the charges and expenses of its operations, including compensation of the trustees (other than those who are interested persons of the Adviser), charges and expenses of independent accountants, of legal counsel and of any transfer or dividend disbursing agent, costs of acquiring and disposing of portfolio securities, cost of listing shares of the New York Stock Exchange or other exchange, interest (if any) on obligations incurred by the Fund, costs of share certificates, membership dues in the Investment Company Institute or any similar organization, costs of reports and securities laws, miscellaneous expenses and all taxes and fees to federal, state or other governmental agencies on account of the registration of securities issues by the Fund, filing of corporate documents or otherwise. The Fund shall not pay or incur any obligation for any management or administrative expenses for which 2 the Fund intends to seek reimbursement from the Adviser without first obtaining the written approval of the Adviser. The Adviser shall arrange, if desired by the Fund, for officers or employees of the Adviser to serve, without compensation from the Fund, as trustees, officers or agents of the Fund if duly elected or appointed to such positions and subject to their individual consent and to any limitations imposed by the law. 4. INTERESTED PERSONS. Subject to applicable statutes and regulations, it is understood that trustees, officers, shareholders and agents of the Fund are or may be interested in the Adviser as directors, officers, shareholders, agents or otherwise and that the directors, officers, shareholders and agents of the Adviser may be interested in the Fund as trustees, officers, shareholders, agents or otherwise. 5. LIABILITY. The Adviser shall not be liable for any error of judgment or of law, or for any loss suffered by the Fund in connection with the matters in which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its obligations and duties, or by reason of its reckless disregard of its obligations and duties under this Agreement. 6. (a) TERM. This Agreement shall become effective on the date hereof and shall remain in full force until May 31, 1999 unless sooner terminated as hereinafter provided. This Agreement shall continue in force from year to year thereafter, but only for so long as such continuance is specifically approved as least annually, in the manner required by the 1940 Act. (b) TERMINATION. This Agreement shall automatically terminate in the event of its assignment. This Agreement may be terminated at any time without the payment of any penalty by the Fund or by the Adviser on sixty (60) days written notice to the other party. The Fund may effect termination by action of the Board of Trustees or by vote of a majority of the outstanding shares of stock of the Fund, accompanied by appropriate notice. This Agreement may be terminated at any time without the payment of any penalty and without advance notice by the Board of Trustees or by vote of a majority of the outstanding shares of the Fund in the event that it shall have been established by a court of competent jurisdiction that the Adviser or any officer or director of the Adviser has taken any action which results in a breach of the covenants of the Adviser set forth herein. (c) PAYMENT UPON TERMINATION. Termination of this Agreement shall not affect the right of the Adviser to receive payment on any unpaid balance of the compensation described in Section 2 earned prior to such termination. 7. SEVERABILITY. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder shall not thereby affected. 8. NOTICES. Any notice under this Agreement shall be in writing, addressed and delivered or mailed, postage prepaid, to the other party at such address as such other party may designate for the receipt of such notice. 3 9. DISCLAIMER. The Adviser acknowledges and agrees that, as provided by Section 5.5 of the Declaration of Trust of the Trust, the shareholders, trustees, officers, employees and other agents of the Trust and the Fund shall not personally be bound by or liable hereunder, nor shall resort be had to their private property for the satisfaction of any obligation or claim hereunder. 10. GOVERNING LAW. All questions concerning the validity, meaning and effect of this Agreement shall be determined in accordance with the laws (without giving effect to the conflict-of-law principles thereof) of the State of Delaware applicable to contracts made and to be performed in that state. 11. NAME. In connection with its employment hereunder, the Adviser hereby agrees and covenants not to change its name without the prior consent of the Board of Trustees of the Fund. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written. VAN KAMPEN AMERICAN CAPITAL VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. MUNICIPAL TRUST By: /s/ Dennis J. McDonnell By: /s/ Ronald A. Nyberg --------------------------- ---------------------------------- Name: Dennis J. McDonnell Name: Ronald A. Nyberg Title: President Title: Secretary 4 EX-99.(6)(B) 7 c93084a1exv99wx6yxby.txt AMENDMENT TO THE INVESTMENT ADVISORY AGREEMENT EXHIBIT 6(b) AMENDMENT NUMBER ONE TO THE INVESTMENT ADVISORY AGREEMENT This Amendment Number One, dated November 1, 2004, to the Investment Advisory Agreement, dated May 31, 1997 (the "Agreement"), by and between Van Kampen Municipal Trust (the "Fund"), a Massachusetts business trust (the "Trust"), and Van Kampen Asset Management (the "Adviser," successor in interest of Van Kampen Investment Advisory Corp.), a Delaware statutory trust, hereby amends the terms and conditions of the Agreement in the manner specified herein. W I T N E S S E T H WHEREAS, the Board of Trustees of the Fund at a meeting held on September 23, 2004 has approved a reduction in the investment management fee payable by the Fund to the Adviser; and WHEREAS, the parties desire to amend and restate Section 2.(a) of the Agreement relating to the investment management fee. NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the parties hereby agree to amend the Agreement, as follows: Section 2.(a) of the Agreement is hereby deleted in its entirety and replaced with the following: 2.(a) Fee. For the services and facilities described in Section 1, the Fund will accrue daily and pay to the Adviser at the end of each calendar month an investment management fee equal to 0.55% of the average daily managed assets of the Fund (which for purposes of determining such fee, shall mean the average daily value of the Fund, minus the sum of accrued liability other than the aggregate amount of any borrowings undertaken by the Fund). IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written. VAN KAMPEN MUNICIPAL TRUST VAN KAMPEN ASSET MANAGEMENT By: /s/ Ronald E. Robison By: /s/ Edward C. Wood, III ----------------------------------- ------------------------------ Ronald E. Robison Edward C. Wood, III Executive Vice President Managing Director and Principal Executive Officer EX-99.(8)(A) 8 c93084a1exv99wx8yxay.txt FORM OF AMENDED AND RESTATED DEFERRED COMPENSATION PLAN EXHIBIT 8(a) FORM OF AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT AGREEMENT, made on this 11th day of August, 1994, and as amended and restated as of [Date], by and between each of the funds listed on Schedule A attached hereto as may be amended from time to time, each a registered investment company having its principal offices at 1 Parkview Plaza, P.O. Box 5555, Oakbrook Terrace, Illinois 60181-5555 (collectively the "Funds" or individually the "Fund"), and [Trustee Name], residing at [Trustee Address] (the "Trustee"). WHEREAS, the Fund and the Trustee desire to enter into an agreement whereby the Fund will provide to the Trustee a vehicle under which the Trustee can defer receipt of trustees' fees payable by the Fund. NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the Fund and the Trustee hereby agree as follows: 1. DEFINITION OF TERMS AND CONSTRUCTION 1.1 Definitions. Unless a different meaning is plainly implied by the context, the following terms as used in this Agreement shall have the following meanings: (a) "Beneficiary" shall mean such person or persons designated pursuant to Section 4.3 hereof to receive benefits after the death of the Trustee. (b) "Board of Trustees" shall mean the Board of Trustees of the Fund. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. (d) "Compensation" shall mean the amount of trustee's fees paid by the Fund to the Trustee during a Deferral Year prior to reduction for Compensation Deferrals made under this Agreement. (e) "Compensation Deferral" shall mean the amount or amounts of the Trustee's Compensation deferred under the provisions of Section 3 of this Agreement. (f) "Deferral Account" shall mean the account maintained to reflect the Trustee's Compensation Deferral made pursuant to Section 3 hereof and any other credits or debits thereto. (g) "Deferral Year" shall mean each calendar year during which the Trustee makes, or is entitled to make, a Compensation Deferral under Section 3 hereof. (h) "Valuation Date" shall mean any day upon which the Fund makes a valuation of the Deferral Account and shall, at a minimum, be the last business day of each calendar quarter. 1.2 Plurals and Gender. Where appearing in this Agreement the singular shall include the plural and the masculine shall include the feminine, and vice versa, unless the context clearly indicates a different meaning. 1.3 Headings. The headings and subheadings in this Agreement are inserted for the convenience of reference only and are to be ignored in any construction of the provisions hereof. 2. PERIOD DURING WHICH COMPENSATION DEFERRALS ARE PERMITTED 2.1 Commencement of Compensation Deferrals. The Trustee may elect, on a form provided by, and submitted to, the President of the Fund, to commence Compensation Deferrals under Section 3 hereof for the period beginning on the later of (i) the date this Agreement is executed or (ii) the date such form is submitted to the President of the Fund. 2.2 Termination of Deferrals. The Trustee shall not be eligible to make Compensation Deferrals after the earlier of the following dates: (a) The date of which he ceases to serve as a Trustee of the Fund; or (b) The effective date of the termination of this Agreement. 3. COMPENSATION DEFERRALS 3.1 Compensation Deferral Elections. (a) On or prior to the first day of any Deferral Year, the Trustee may elect, on the form described in Section 2.1 hereof, to defer the receipt of all or a portion of the Compensation for such Deferral Year. Such writing shall set forth the amount of such Compensation Deferral (in whole percentage amounts). Such election shall continue in effect for all subsequent Deferral Years unless it is canceled or modified as provided below. (b) Compensation Deferrals shall be withheld from each payment of Compensation by the Fund to the Trustee based upon the percentage amount elected by the Trustee under Section 3.1(a) hereof. (c) The Trustee may cancel or modify the amount of his Compensation Deferrals on a prospective basis by submitting to the President of the Fund a revised Compensation Deferral election form. Such change will be effective as of the first day of the Deferral Year following the date such revision is submitted to the President of the Fund. 3.2 Valuation of Deferral Account. (a) The Fund shall establish a bookkeeping Deferral Account to which will be credited an amount equal to the Trustee's Compensation Deferrals under this Agreement. Compensation Deferrals shall be allocated to the Deferral Account on the first business day following the date such Compensation Deferrals are withheld from the Trustee's Compensation. The Deferral Account shall be debited to reflect any distributions from such Account. Such debits shall be debited to the Deferral Account as of the date such distributions are made. (b) As of each Valuation Date, income, gain and loss equivalents (determined as if the Deferral Account is invested in the manner set forth under Section 3.3 below) attributable to the period following the next preceding Valuation Date shall be credited to and/or deducted from the Trustee's Deferral Account. 3.3 Investment of Deferral Account Balance. (a) (1) The Trustee may select, from various options made available by the Fund, the investment media in which all or part of his Deferral Account shall be deemed to be invested. (2) The Trustee shall make an investment designation on a form provided by the President of the Fund which shall remain effective until another valid direction has been made by the Trustee as herein provided. The Trustee may amend the investment designation as of the end of each calendar quarter by giving written direction to the President of the Fund at least 30 days prior to the end of such calendar quarter. A timely change in a Trustee's investment designation shall become effective on the first day of the calendar quarter following receipt by the President of the Fund. (3) The investment media deemed to be made available to the Trustee, and any limitation on the maximum or minimum percentages of the Trustee's Deferral Account that may be invested in any particular medium, shall be the same as from time to time communicated to the Trustee by the President of the Fund. (b) Except as provided below, the Trustee's Deferral Account shall be deemed to be invested in accordance with the investment designations, provided such designations conform to the provisions of this Section. If: (1) the Trustee does not furnish the President of the Fund with written investment instructions, (2) the written investment instructions from the Trustee are unclear, or (3) less than all of the Trustee's Deferral Account is covered by such written investment instructions, then the Trustee's Deferral Account shall be deemed to be invested in the Fund until such time as the Trustee shall provide the President of the Fund with complete investment instructions. Notwithstanding the above, the Board of Directors, in its sole discretion, may disregard the Trustee's election and determine that all Compensation Deferrals shall be deemed to be invested in the Fund. The Fund shall provide an annual statement to the Trustee showing such information as is appropriate, including the aggregate amount in the Deferral Account, as of a reasonably current date. 4. DISTRIBUTIONS FROM DEFERRAL ACCOUNT 4.1 In General. Distributions from the Trustee's Deferral Account shall be paid in cash, in generally equal annual installments over a period of five (5) years beginning on the date of the Trustee's retirement or disability, except that the Board of Directors may, in its sole discretion, accelerate or, with the consent of the Trustee, extend the distribution of such Deferral Account. Notwithstanding the foregoing, in the event of the liquidation, dissolution or winding up of the Fund or the distribution of all or substantially all of the Fund's assets and property relating to one or more series of its shares to the shareholders (for this purpose a sale, conveyance or transfer of the Fund's assets to a trust, partnership, association or corporation in exchange for cash, shares or other securities with the transfer being made subject to, or with the assumption by the transferee of, the liabilities of the Fund shall not be deemed a termination of the Fund or such a distribution), all unpaid amounts in the Deferral Account as of the effective date thereof shall be paid in a lump sum on such effective date. 4.2 Death Prior to Distribution of Deferral Account. Upon the death of the Trustee prior to the commencement of the distribution of the amounts credited to the Deferral Account, the Deferral Account shall be distributed to the Beneficiary over a period of five (5) years beginning as soon as practicable after the Trustee's death. In the event of the death of the Trustee after the commencement of such distribution, but prior to the complete distribution of the Deferral Account, the balance of the amounts in the Deferral Account shall be distributed to the Beneficiary over the remaining period during which such amounts were distributable to the Trustee under Section 4.1 hereof. In the event the Trustee survives the designated Beneficiary, the balance of such Deferral Account shall be paid in a lump sum to such Trustee's estate. Notwithstanding the above, the Board of Directors may, in its sole discretion, accelerate or, with the consent of the Beneficiary or the Trustee's estate, as applicable, extend the distribution of the Deferral Account. 4.3 Designation of Beneficiary. For purposes of Section 4.2 hereof, the Trustee's Beneficiary shall be the person or persons so designated by the Trustee in a written instrument submitted to the President of the Fund. In the event the Trustee fails to properly designate a Beneficiary, the balance of such Trustee's Deferred Account shall be paid in a lump sum to such Trustee's estate. 4.4 Payments Due Missing Persons. The Fund shall make a reasonable effort to locate all persons entitled to benefits under this Agreement. However, notwithstanding any provisions of this Agreement to the contrary, if, after a period of five (5) years from the date such benefit shall be due, any such persons entitled to benefits have not been located, their rights under this Agreement shall stand suspended. Before this provision becomes operative, the Fund shall send a certified letter to all such persons to their last known address advising them that their benefits under this Agreement shall be suspended. Any such suspended amounts shall be held by the Fund for a period of three (3) additional years (or a total of eight (8) years from the time the benefits first become payable) and thereafter, if unclaimed, such amounts shall be forfeited. 5. AMENDMENTS AND TERMINATION 5.1 Amendments. (a) The Fund and the Trustee may, by a written instrument signed by both such parties, amend this Agreement at any time and in any manner. (b) The Fund reserves the right to amend, in whole or in part, and in any manner, any or all of the provisions of this Agreement by action of its Board of Trustees for the purposes of complying with any provision of the Code or any other technical or legal requirements, provided that: (1) No such amendment shall make it possible for any part of the Trustee's Deferral Account to be used for, or diverted to, purposes other than for the exclusive benefit of the Trustee or the Beneficiaries, except to the extent otherwise provided in this Agreement; and (2) No such amendment may reduce the amount of the Trustee's Deferral Account as of the effective date of such amendment. 5.2 Termination. The Trustee and the Fund may, by written instrument signed by both such parties, terminate this Agreement at any time. The rights of the Trustee to the Deferral Account shall become payable as of the Valuation Date next following the effective date of the termination of this Agreement. 6. MISCELLANEOUS. 6.1 Rights of Creditors. (a) This Agreement is unfunded. Neither the Trustee nor any other persons shall have any interest in any specific asset or assets of the Fund by reason of any Deferral Account hereunder, nor any rights to receive distribution of the Deferral Account except and as to the extent expressly provided hereunder. The Fund shall not be required to purchase, hold or dispose of any investments pursuant to this Agreement; however, if in order to cover its obligations hereunder the Fund elects to purchase any investments the same shall continue for all purposes to be a part of the general assets and property of the Fund, subject to the claims of its general creditors and no person other than the Fund shall by virtue of the provisions of this Agreement have any interest in such assets other than an interest as a general creditor. (b) The rights of the Trustee and the Beneficiaries to the amounts held in the Deferral Account are unsecured and shall be subject to the creditors of the Fund. With respect to the payment of amounts held under the Deferral Account, the Trustee and the Beneficiaries have the status of unsecured creditors of the Fund. This Agreement is executed on behalf of the Fund by an officer of the Fund as such and not individually. Any obligation of the Fund hereunder shall be an unsecured obligation of the Fund and not of any other person. 6.2 Agents. The Fund may employ agents and provide for such clerical, legal, actuarial, accounting, advisory or other services as it deems necessary to perform its duties under this Agreement. The Fund shall bear the cost of such services and all other expenses it incurs in connection with the administration of this Agreement. 6.3 Liability and Indemnification. Except for its own gross negligence, willful misconduct or willful breach of the terms of this Agreement, the Fund shall be indemnified and held harmless by the Trustee against liability or losses occurring by reason of any act or omission of the Fund or any other person. 6.4 Incapacity. If the Fund shall receive evidence satisfactory to it that the Trustee or any Beneficiary entitled to receive any benefit under the Agreement is, at the time when such benefit becomes payable, a minor, or is physically or mentally incompetent to receive such benefit and to give a valid release therefor, and that another person or an institution is then maintaining or has custody of the Trustee or Beneficiary and that no guardian, committee or other representative of the estate of the Trustee or Beneficiary shall have been duly appointed, the Fund may make payment of such benefit otherwise payable to the Trustee or Beneficiary to such other person or institution, including a custodian under the Uniform Gifts to Minors Act or corresponding legislation (such custodian shall be an adult, a guardian of the minor or a trust company), and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit. 6.5 Cooperation of Parties. All parties to this Agreement and any person claiming any interest hereunder agree to perform any and all acts and execute any and all documents and papers which are necessary or desirable for carrying out this Agreement or any of its provisions. 6.6 Governing Law. This Agreement is made and entered into in the State of Illinois, and all matters concerning its validity, construction and administration shall be governed by the laws of the State of Illinois. 6.7 Nonguarantee of Trusteeship. Nothing contained in this Agreement shall be construed as a contract or guarantee of the right of the Trustee to be, or remain as, a trustee of the Fund or to receive any, or any particular rate of, Compensation. 6.8 Counsel. The Fund may consult with legal counsel with respect to the meaning or construction of this Agreement or its obligations or duties hereunder or with respect to any action or proceeding or any question of law, and it shall be fully protected with respect to any action taken or omitted by it in good faith pursuant to the advice of legal counsel. 6.9 Spendthrift Provision. The Trustee's and Beneficiaries' interests in the Deferral Account may not be anticipated, sold, encumbered, pledged, mortgaged, charged, transferred, alienated, assigned nor become subject to execution, garnishment or attachment, and any attempt to do so by any person shall render the Deferral Amount immediately forfeitable. 6.10 Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally or mailed by United States registered or certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight delivery service providing for a signed return receipt, addressed to the Trustee at the home address set forth in the Fund's records and to the Fund at the address set forth on the first page of this Agreement, provided that all notices to the Fund shall be directed to the attention of the President of the Fund or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 6.11 Entire Agreement. This Agreement contains the entire understanding between the Fund and the Trustee with respect to the payment of non-qualified elective deferred compensation by the Fund to the Trustee. 6.12 Interpretation of Agreement. Interpretations of, and determinations related to, this Agreement made by the Fund in good faith, including any determinations of the amounts of the Deferral Account, shall be conclusive and binding upon all parties; and the Fund shall not incur any liability to the Trustee for any such interpretation or determination so made or for any other action taken by it in connection with this Agreement in good faith. 6.13 Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of, the Fund and its successors and assigns and to the Trustee and such Trustee's heirs, executors, administrators and personal representatives. 6.14 Severability. In the event any one or more provisions of this Agreement are held to be invalid or unenforceable, such illegality or unenforceability shall not affect the validity or enforceability of the other provisions thereof and such other provisions shall remain in full force and effect unaffected by such invalidity or unenforceability. 6.15 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Deferred Compensation Agreement to be executed as of the day and year first above written. On behalf of the Funds listed on Schedule A attached hereto: By: ____________________________ Name: __________________________ Title: _________________________ On behalf of the Trustee listed on page 1 hereto _________________________ [Trustee Name] SCHEDULE A DEFERRED COMPENSATION AGREEMENT PARTICIPATING VAN KAMPEN FUNDS AS OF APRIL 22, 1998 Updated as of July 1, 2003 Van Kampen Municipal Income Trust ("Municipal Income Trust") Van Kampen California Municipal Trust ("California Municipal Trust") Van Kampen High Income Trust ("High Income Trust") Van Kampen High Income Trust II ("High Income Trust II") Van Kampen Investment Grade Municipal Trust ("Investment Grade Municipal Trust") Van Kampen Senior Loan Fund ("Senior Loan Fund") (f/k/a Van Kampen Prime Rate Income Trust) Van Kampen Municipal Trust ("Municipal Trust") Van Kampen California Quality Municipal Trust ("California Quality Municipal Trust") Van Kampen Florida Quality Municipal Trust ("Florida Quality Municipal Trust") Van Kampen New York Quality Municipal Trust ("New York Quality Municipal Trust") Van Kampen Ohio Quality Municipal Trust ("Ohio Quality Municipal Trust") Van Kampen Pennsylvania Quality Municipal Trust ("Pennsylvania Quality Municipal Trust") Van Kampen Trust for Insured Municipals ("Trust for Insured Municipals") Van Kampen Trust for Investment Grade Municipals ("Trust for Investment Grade Municipals") Van Kampen Trust for Investment Grade California Municipals ("Trust for Investment Grade California Municipals") Van Kampen Trust for Investment Grade Florida Municipals ("Trust for Investment Grade Florida Municipals") Van Kampen Trust for Investment Grade New Jersey Municipals ("Trust for Investment Grade New Jersey Municipals") Van Kampen Trust for Investment Grade New York Municipals ("Trust for Investment Grade New York Municipals") Van Kampen Trust for Investment Grade Pennsylvania Municipals ("Trust for Investment Grade Pennsylvania Municipals") Van Kampen Municipal Opportunity Trust ("Municipal Opportunity Trust") Van Kampen Advantage Municipal Income Trust ("Advantage Municipal Income Trust") Van Kampen Advantage Pennsylvania Municipal Income Trust ("Advantage Pennsylvania Municipal Income Trust") Van Kampen Strategic Sector Municipal Trust ("Strategic Sector Municipal Trust") Van Kampen Value Municipal Income Trust ("Value Municipal Income Trust") Van Kampen California Value Municipal Income Trust ("California Value Municipal Income Trust") Van Kampen Massachusetts Value Municipal Income Trust ("Massachusetts Value Municipal Income Trust") Van Kampen New York Value Municipal Income Trust ("New York Value Municipal Income Trust") Van Kampen Ohio Value Municipal Income Trust ("Ohio Value Municipal Income Trust") Van Kampen Pennsylvania Value Municipal Income Trust ("Pennsylvania Value Municipal Income Trust") Van Kampen Municipal Opportunity Trust II ("Municipal Opportunity Trust II") Van Kampen Advantage Municipal Income Trust II ("Advantage Municipal Income Trust II") Van Kampen Select Sector Municipal Trust ("Select Sector Municipal Trust") Van Kampen Senior Income Trust ("Senior Income Trust") Van Kampen Income Trust ("Income Trust") Van Kampen Bond Fund ("Bond Fund") Note: Van Kampen Exchange Fund does not have any deferred compensation arrangements or provides a retirement plan. EX-99.(8)(B) 9 c93084a1exv99wx8yxby.txt FORM OF RETIREMENT PLAN EXHIBIT 8(b) FORM OF RETIREMENT PLAN FOR EACH CLOSED END FUND Van Kampen ___________________________, a registered investment company having its principal offices at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181 (the "Fund"), has adopted this Retirement Plan, effective August 1, 1994 (the "Plan"), for its Eligible Trustees (as defined herein) in order to recognize and reward the valued services provided by such trustees to the Fund. 1. DEFINITION OF TERMS AND CONSTRUCTION 1.1 Definitions. Unless a different meaning is plainly implied by the context, the following terms as used in this Plan shall have the following meanings: (a) "Beneficiary" shall mean such person or persons designated pursuant to Section 6.4 hereof to receive benefits after the death of the Eligible Trustee. (b) "Board of Trustees" shall mean the Board of Trustees of the Fund. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. (d) "Compensation" shall mean an amount equal to the annual retainer (excluding any fees relating to attending meetings) paid to an Eligible Trustee by the Fund during the Fund's fiscal year preceding such trustee's termination of service. (e) "Disability" shall have the meaning described in Section 5.1. (f) "Early Retirement Benefit" shall have the meaning described in Section 3.3. (g) "Effective Date" shall mean August 1, 1994. (h) "Effective Date Trustee" means a person who is a 1 trustee of the Fund on the Effective Date. (i) "Eligible Retirement Age" shall have the meaning described in Section 4.1. (j) "Eligible Trustee" shall mean a person who: (i) is or becomes a trustee of the Fund on or after the Effective Date, and (ii) is, prior to the time of such trustee's termination of service, receiving trustee's fees from the Fund. (k) "Mandatory Retirement Age" shall have the meaning described in Section 4.1. (l) "Normal Distribution" shall have the meaning described in Section 6.1. (m) "Normal Retirement Benefit" shall have the meaning described in Section 3.2. (n) "Plan Committee" shall have the meaning described in Section 8.2. (o) "Service Requirement" shall have the meaning described in Section 2.1. (p) "Years of Service" shall mean full years of service as a trustee for the Fund prior to such trustee's termination of service, including such service performed prior to the adoption of this Plan. 1.2 Plurals and Gender. Where appearing in this Plan the singular shall include the plural and the masculine shall include the feminine, and vice versa, unless the context clearly indicates a different meaning. 1.3 Headings. The headings and subheadings in this Plan are inserted for the convenience of reference only and are to be ignored in any construction of the provisions hereof. 2 2. SERVICE REQUIREMENT 2.1 Service Requirement. Each Eligible Trustee that has completed five (5) Years of Service as a trustee for the Fund shall be entitled to receive retirement benefits from the Fund. An Eligible Trustee is not entitled to benefits pursuant to the Plan merely because such trustee is an Eligible Trustee; a trustee must meet the Years of Service requirement. 3. RETIREMENT BENEFIT 3.1 In General. The retirement benefit amount for an Eligible Trustee meeting the Service Requirement is determined at the time of such trustee's termination of service as a trustee. An Eligible Trustee terminating service as a trustee to the Fund prior to attaining the Eligible Retirement Age is eligible for the Early Retirement Benefit as described in Section 3.3. An Eligible Trustee terminating service as a trustee to the Fund after attaining the Eligible Retirement Age is eligible for the Normal Retirement Benefit as described in Section 3.2. An Eligible Trustee terminating service as a trustee to the Fund after the Mandatory Retirement Age forfeits and is not entitled to any retirement benefit under the Plan. 3.2 Normal Retirement Benefit. The Normal Retirement Benefit shall be 50% of the Compensation and such benefit shall increase by 10% for each Year of Service by such trustee in excess of five (5) Years of Service up to a maximum amount of 100% of the Compensation for any trustee who has completed ten (10) or more Years of Service.
Years of Service Percentage Of Compensation - ---------------- -------------------------- Less than 5 0% 5 50% 6 60% 7 70% 8 80% 9 90% 10 or more 100%
3 3.3 Early Retirement Benefit. The Early Retirement Benefit shall be the Normal Retirement Benefit for such trustee based upon such trustee's Years of Service at the time of such trustee's termination of service reduced by 3% for each year prior to the Eligible Retirement Age. 4. RETIREMENT AGE 4.1 Retirement Age. The Eligible Retirement Age shall be upon attaining the age of 60. A trustee may elect to continue to serve as a trustee beyond the Eligible Retirement Age to a Mandatory Retirement Age of December 31st in the year such trustee reaches the age of 72; provided, however, that for an Effective Date Trustee who was 67 years of age or more on the Effective Date of the Plan, the Mandatory Retirement Age shall be December 31 of the year in which such trustee attains the age of 75. 5. DISABILITY 5.1 Disability. Disability shall have the meaning as set forth in the Code under Section 22(e)(3). An Eligible Trustee who becomes disabled, as defined herein, may be eligible to receive the applicable retirement benefit calculated as described in Section 3 using the Disability date as the date of such trustee's termination of service. 6. PAYMENT OF RETIREMENT BENEFITS 6.1 Retirement or Disability Terminating Trustee's Service. Subject to Sections 6.2 and 6.3, an Eligible Trustee shall receive the amount of the applicable Retirement Benefit calculated pursuant to Section 3 for each of the ten (10) years commencing in the fiscal year of such trustee's termination of service (the "Normal Distribution"). Payment of benefits to an Eligible Trustee shall commence, and be paid quarterly thereafter, at the end of each calendar quarter. In the event of such Eligible Trustee's death prior to complete distribution under the Plan, such trustee's Beneficiary shall receive the remaining retirement benefits based upon the Normal Distribution. In the event the Eligible Trustee survives the Beneficiary or no Beneficiary has been named, the Fund shall pay a lump sum amount equal to the actuarial present value of the remaining retirement benefits to the Eligible Trustee's estate. 4 6.2 Death Terminating Trustee's Service. Subject to Section 6.3, in the event an Eligible Trustee's death causes the termination of service, the Eligible Trustee's Beneficiary shall receive the amount of the applicable Normal Retirement Benefit or Early Retirement Benefit calculated pursuant to Section 3 for each of the ten (10) years commencing in the fiscal year of such trustee's death. Payment of benefits to such Beneficiary shall commence, and be paid annually thereafter, at the end of the Fund's fiscal year. In the event the Eligible Trustee survived the Beneficiary or no Beneficiary was named, the Fund shall pay a lump sum amount equal to the actuarial present value of the applicable retirement benefits to the Eligible Trustee's estate. 6.3 Liquidation, Dissolution, Winding Up or Distribution of Substantially All of the Assets of the Fund. Notwithstanding Sections 6.1 or 6.2, in the event of a liquidation, dissolution or winding up of the Fund or distribution of all or substantially all of the Fund's assets and property, the Fund shall pay to each Eligible Trustee serving as a trustee of the Fund on the effective date of such liquidation, dissolution, winding up or distribution a lump sum amount equal to the actuarial present value of the applicable Normal Retirement Benefit or Early Retirement Benefit calculated pursuant to Section 3 using the effective date of such liquidation, dissolution, winding up or distribution as the date of such trustee's termination of services. In the event an Eligible Trustee terminates services prior to such liquidation, dissolution, winding up or distribution and such trustee (or such trustee's Beneficiary) is then receiving payment of benefits pursuant to either Section 6.1 or 6.2 at the time of such liquidation, dissolution, winding up or distribution, the Fund shall pay to such trustee (or Beneficiary) on the effective date of such liquidation, dissolution, winding up or distribution a lump sum amount equal to the actuarial present value of the remaining retirement benefits due to such trustee (or Beneficiary). 6.4 Designation of Beneficiary. The Eligible Trustee's Beneficiary shall be the person or persons so designated by such trustee in a written instrument submitted to the President of the Fund. In the event the Eligible Trustee fails to properly designate a Beneficiary, the Fund shall pay a lump sum amount equal to the actuarial present value of the applicable retirement benefits to the Eligible Trustee's estate. 5 6.5 Payments Due Missing Persons. The Fund shall make a reasonable effort to locate all persons entitled to benefits under this Plan. However, notwithstanding any provisions of this Plan to the contrary, if, after a period of five (5) years from the date such benefit shall be due, any such persons entitled to benefits have not been located, their rights under this Plan shall stand suspended. Before this provision becomes operative, the Fund shall send a certified letter to all such persons to their last known address advising them that their benefits under this Plan shall be suspended. Any such suspended amounts shall be held by the Fund for a period of three (3) additional years (or a total of eight (8) years from the time the benefits first become payable) and thereafter, if unclaimed, such amounts shall be forfeited. 6.6 Actuarial Present Value Calculations. For purposes of this Plan, the "actuarial present value" of any benefits shall be computed using interest factors and other reasonable assumptions chosen by the Plan Committee. The Plan Committee shall have sole and uncontrolled discretion with respect to the application of the provisions of this paragraph and such exercise of discretion shall be conclusive and binding on the Eligible Trustee, any Beneficiary or other person. 7. AMENDMENTS AND TERMINATION 7.1 Amendments. The Fund anticipates the Plan to be permanent but the Fund reserves the right to amend any or all of the provisions of this Plan by action of its Board of Trustees when, in the sole opinion of the Board of Trustees, such amendment is advisable, including for the purposes of complying with any provision of the Code or any other technical or legal requirements. 7.2 Termination. The Fund may by action of its Board of Trustees terminate this Plan at any time. 8. MISCELLANEOUS. 8.1 Forfeiture of Benefits. Notwithstanding any other provision of the Plan, future payment of any retirement benefit hereunder to an Eligible Trustee, Beneficiary or other person will, at the discretion of the Plan Committee, be discontinued and forfeited, and the Fund will have no further obligation hereunder to such Eligible Trustee, Beneficiary or other person, if any of the following circumstances occur: 6 (a) The Eligible Trustee is discharged from the Fund's Board of Trustee for cause; (b) The Eligible Trustee engages in competition with the Fund following such trustee's termination of service with the Fund prior to such trustee attaining the Normal Retirement Age; or (c) The Eligible Trustee performs an act or acts of willful malfeasance or reckless disregard of duties in connection with the service as a trustee for the Fund. The Plan Committee shall have the sole and uncontrolled discretion with respect to the application of the provisions of this paragraph and such exercise of discretion shall be conclusive and binding on the Eligible Trustee, any Beneficiary or other person. 8.2 Administration. The Plan shall be administered by a Plan Committee which shall be composed of three non-affiliated trustees and the controller of the Fund. 8.3 Agents. The Fund may employ agents and provide for such clerical, legal, actuarial, accounting, advisory or other services as it deems necessary to perform its duties under this Plan. The Fund shall bear the cost of such services and all other expenses it incurs in connection with the administration of this Plan. 8.4 Funding and Rights of Creditors. The obligations of the Fund under this Agreement are unfunded. Neither the Eligible Trustees, the Beneficiaries nor any other persons shall have any interest in any specific asset or assets of the Fund for the benefits hereunder, nor any rights to receive distribution of the benefits except and as to the extent expressly provided hereunder. The rights of the Eligible Trustees, the Beneficiaries or any other person to the benefits hereunder are unsecured and shall have no priority over the other creditors of the Fund. Any obligation of the Fund hereunder shall be an unsecured obligation of the Fund and not of any other person in relation to this Plan. 8.5 Liability and Indemnification. Except for its own gross negligence, willful misconduct or willful breach of the terms of this Plan, the Fund shall be indemnified and held harmless by the Eligible Trustee against liability or losses occurring by reason of any act or omission of the Fund or any other person. 7 8.6 Incapacity. If the Fund shall receive evidence satisfactory to it that the Eligible Trustee or any Beneficiary entitled to receive any benefit under the Plan is, at the time when such benefit becomes payable, a minor, or is physically or mentally incompetent to receive such benefit and to give a valid release therefor, and that another person or an institution is then maintaining or has custody of the Eligible Trustee or Beneficiary and that no guardian, committee or other representative of the estate of the Eligible Trustee or Beneficiary shall have been duly appointed, the Fund may make payment of such benefit otherwise payable to the Trustee or Beneficiary to such other person or institution, including a custodian under the Uniform Gifts to Minors Act or corresponding legislation (such custodian shall be an adult, a guardian of the minor or a trust company), and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit. 8.7 Governing Law. This Plan is established under laws of the State of Illinois, and all matters concerning its validity, construction and administration shall be governed by the laws of the State of Illinois. 8.8 Nonguarantee of Trusteeship. Nothing contained in this Plan shall be construed as a contract or guarantee of the right of the Eligible Trustee to be, or remain as, a trustee of the Fund or to receive any, or any particular rate of, Compensation. 8.9 Spendthrift Provision. The Eligible Trustee's and Beneficiaries' interests in the benefits hereunder may not be anticipated, sold, encumbered, pledged, mortgaged, charged, transferred, alienated, assigned nor become subject to execution, garnishment or attachment, and any attempt to do so by any person shall render the benefits immediately forfeitable. 8.10 Disclosure and Notices. The rights and benefits of Eligible Trustees under the Plan shall not be represented or evidenced by any form of certificate or other instrument. Each Eligible Trustee shall receive a copy of the Plan and the Plan Committee will make available for inspection by any Eligible Trustee a copy of the rules and regulations used by the Plan Committee in administering the Plan. For purposes of this Plan, all notices and other communications provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered personally or mailed by United States registered or certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight delivery service providing for a signed return receipt, addressed to the Eligible Trustee at the home address set forth in the Fund's records and to the Fund at the address set forth on the first page of this Plan, provided that all notices 8 to the Fund shall be directed to the attention of the President of the Fund or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 8.11 Interpretation of Plan. Interpretations of, and determinations related to, this Plan made by the Plan Committee in good faith, including any determinations of the amounts of the benefits, shall be conclusive and binding upon all parties; and the Fund shall not incur any liability to the Eligible Trustee for any such interpretation or determination so made or for any other action taken by it in connection with this Plan in good faith. 8.12 Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of, the Fund and its successors and assigns and to the Eligible Trustees and such trustees' heirs, executors, administrators and personal representatives. 9 EX-99.(9)(A) 10 c93084a1exv99wx9yxay.txt CUSTODIAN CONTRACT EXHIBIT 9(a) CUSTODIAN CONTRACT BETWEEN EACH OF THE PARTIES LISTED ON APPENDIX A AND STATE STREET BANK AND TRUST COMPANY Master.cus GlobalSeriesCorp 21N TABLE OF CONTENTS
Page ---- 1. Employment of Custodian and Property to be Held By It..................... 1 2. Duties of the Custodian with Respect to Property of the Fund Held by the Custodian in the United States.................................... 2 2.1 Holding Securities.............................................. 2 2.2 Delivery of Securities.......................................... 2 2.3 Registration of Securities...................................... 4 2.4 Bank Accounts .................................................. 5 2.5 Availability of Federal Funds................................... 5 2.6 Collection of Income............................................ 5 2.7 Payment of Fund Moneys.......................................... 5 2.8 Liability for Payment in Advance of Receipt of Securities Purchased....................................................... 7 2.9 Appointment of Agents........................................... 7 2.10 Deposit of Fund Assets in U.S. Securities System................ 7 2.11 Fund Assets Held in the Custodian's Direct Paper System......... 8 2.12 Segregated Account.............................................. 9 2.13 Ownership Certificates for Tax Purposes......................... 10 2.14 Proxies......................................................... 10 2.15 Communications Relating to Fund Securities...................... 10 3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States.............................................. 11 3.1 Appointment of Foreign Sub-Custodians........................... 11 3.2 Assets to be Held............................................... 11 3.3 Foreign Securities Systems...................................... 11
3.4 Holding Securities ............................................. 11 3.5 Agreements with Foreign Banking Institutions ................... 12 3.6 Access of Independent Accountants of the Fund .................. 12 3.7 Reports by Custodian ........................................... 12 3.8 Transactions in Foreign Custody Account ........................ 12 3.9 Liability of Foreign Sub-Custodians ............................ 13 3.10 Liability of Custodian ......................................... 13 3.11 Reimbursement for Advances ..................................... 13 3.12 Monitoring Responsibilities .................................... 14 3.13 Branches of U.S. Banks ......................................... 14 3.14 Tax Law ........................................................ 14 4. Payments for Sales or Repurchase or Redemptions of Shares of the Fund ... 14 5. Proper Instructions ..................................................... 15 6. Actions Permitted Without Express Authority ............................. 15 7. Evidence of Authority ................................................... 16 8. Duties of Custodian With Respect to the Books of Account and Calculation of Net Asset Value and Net Income ........................... 16 9. Records ................................................................. 16 10. Opinion of Fund's Independent Accountants ............................... 17 11. Reports to Fund by Independent Public Accountants ....................... 17 12. Compensation of Custodian ............................................... 17 13. Responsibility of Custodian ............................................. 17 14. Effective Period, Termination and Amendment ............................. 19 15. Successor Custodian ..................................................... 19 16. Interpretive and Additional Provisions .................................. 20 17. Additional Funds ........................................................ 20 18. Massachusetts Law to Apply .............................................. 21 19. Prior Contracts ......................................................... 21 20. Reproduction of Documents ............................................... 21 21. Shareholder Communications .............................................. 21 22. Limitation of Liability .................................................
CUSTODIAN CONTRACT This Contract 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 Contract (each such Fund is individually hereinafter referred to as the "Fund") and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the "Custodian", WITNESSETH: WITNESSETH THAT, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows: 1. Employment of Custodian and Property to be Held by It The Fund hereby employs the Custodian as the custodian of the assets of the Fund, including securities which the Fund desires to be held in places within the United States ("domestic securities") and securities it desires to be held outside the United States ("foreign securities") pursuant to the provisions of the Fund's governing documents. The Fund agrees to deliver to the Custodian all securities and cash of the Fund, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Fund from time to time, and the cash consideration received by it for such new or treasury shares of capital stock, beneficial interest or partnership interest, as applicable, of the Fund ("Shares") as may be issued or sold from time to time. The Custodian shall not be responsible for any property of a Fund held or received by the Fund and not delivered to the Custodian. Upon receipt of "Proper Instructions" (within the meaning of Article 5), the Custodian shall on behalf of the applicable Fund(s) from time to time employ one or more sub-custodians, located in the United States but only in accordance with an applicable vote by the Board of Trustees of the Fund, and provided that the Custodian shall have no more or less responsibility or liability to the Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian may employ as sub-custodian for the Fund's foreign securities the foreign banking institutions and foreign securities depositories designated in Schedule A hereto but only in accordance with the provisions of Article 3. 2. Duties of the Custodian with Respect to Property of the Fund Held By the Custodian in the United States 2.1 Holding Securities. The Custodian shall hold and physically segregate for the account of each Fund all non-cash property to be held by it in the United States including all domestic securities owned by such Fund other than (a) securities which are maintained pursuant to Section 2.10 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies (collectively referred to herein as a "U.S. Securities System") and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which is deposited and/or maintained in the Direct Paper System of the Custodian (the "Direct Paper System") pursuant to Section 2.11. 2.2 Delivery of Securities. The Custodian shall release and deliver domestic securities owned by a Fund held by the Custodian or in a U.S. Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions from the Fund, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities for the account of the Fund and receipt of payment therefor; 2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund; 3) In the case of a sale effected through a U.S. Securities System. in accordance with the provisions of Section 2.10 hereof; 4) To the depository agent in connection with tender or other similar offers for securities of the Fund; 5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian; 7) Upon the sale of such securities for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the 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 Custodian's own negligence or willful misconduct; 8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such 2 securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 9) In the case of warrants, rights or similar 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; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 10) For delivery in connection with any loans of securities made by the Fund, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral; 11) For delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the Fund, but only against receipt of amounts borrowed; 12) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund; 13) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund; 14) Upon receipt of instructions from the transfer agent ("Transfer Agent") for the Fund, for delivery to such Transfer Agent or to the holders of shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund ("Prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption; 3 15) For any other proper corporate purpose, but only upon receipt of, in addition to Proper Instructions from the Fund, a certified copy of a resolution of the Board of Trustees, specifying the securities of the Fund to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made; and 16) Upon termination of the Contract. 2.3 Registration of Securities. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Custodian which nominee shall be assigned exclusively to the Fund, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.9 or in the name or nominee name of any sub-custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Fund under the terms of this Contract shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers. 2.4 Bank Accounts. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for a Fund may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Fund be approved by vote of a majority of the Board of Trustees of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity. 2.5 Availability of Federal Funds. Upon mutual agreement between the Fund and the Custodian, the Custodian shall, upon the receipt of Proper Instructions from the Fund, make 4 federal funds available to such Fund as of specified times agreed upon from time to time by the Fund and the Custodian in the amount of checks received in payment for Shares of such Fund which are deposited into the Fund's account. 2.6 Collection of Income. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to such Fund's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due each Fund on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Fund is properly entitled. 2.7 Payment of Fund Moneys. Upon receipt of Proper Instructions from the Fund, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out moneys of a Fund in the following cases only: 1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Fund but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Fund or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.10 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.11; (d) in the case of repurchase agreements entered into between the Fund and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Fund of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Fund or (e) for transfer to a time deposit account of the Fund in 5 any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined in Article 5; 2) In connection with conversion, exchange or surrender of securities owned by the Fund as set forth in Section 2.2 hereof; 3) For the redemption or repurchase of Shares issued by the Fund as set forth in Article 4 hereof; 4) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 5) For the payment of any dividends on Shares of the Fund declared pursuant to the governing documents of the Fund; 6) For payment of the amount of dividends received in respect of securities sold short; 7) For any other proper purpose, but only upon receipt of, in addition to Proper Instructions from the Fund, a certified copy of a resolution of the Board of Trustees, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made; and 8) Upon termination of this Contract. 2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except as specifically stated otherwise in this Contract, in any and every case where payment for purchase of domestic securities for the account of a Fund is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund to so pay in advance, the Custodian shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by the Custodian. 2.9 Appointment of Agents. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the Investment Company Act of 1940, as amended, to act as a custodian, as its agent to carry out such of the provisions of this Article 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. 6 2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may deposit and/or maintain securities owned by a Fund in a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "U.S. Securities System" in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, if any, and subject to the following provisions: 1) The Custodian may keep securities of the Fund in a U.S. Securities System provided that such securities are represented in an account ("Account") of the Custodian in the U.S. Securities System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Custodian with respect to securities of the Fund which are maintained in a U.S. Securities System shall identify by book-entry those securities belonging to the Fund; 3) The Custodian shall pay for securities purchased for the account of the Fund upon (i) receipt of advice from the U.S. Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund upon (i) receipt of advice from the U.S. Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the U.S. Securities System of transfers of securities for the account of the Fund shall identify the Fund, be maintained for the Fund by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transactions in the U.S. Securities System for the account of the Fund. 4) The Custodian shall provide the Fund with any report obtained by the Custodian on the U.S. Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the U.S. Securities System; 5) The Custodian shall have received from the Fund the initial or annual certificate, as the case may be, required by Article 14 hereof; 7 6) Anything to the contrary in this Contract notwithstanding, the Custodian shall be liable to the Fund for any loss or damage to the Fund resulting from use of the U.S. Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the U.S. Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the U.S. Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Fund has not been made whole for any such loss or damage. 2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may deposit and/or maintain securities owned by a Fund in the Direct Paper System of the Custodian subject to the following provisions: 1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions from the Fund; 2) The Custodian may keep securities of the Fund in the Direct Paper System only if such securities are represented in an account of the Custodian in the Direct Paper System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 3) The records of the Custodian with respect to securities of the Fund which are maintained in the Direct Paper System shall identify by book-entry those securities belonging to the Fund; 4) The Custodian shall pay for securities purchased for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such payment and transfer of securities to the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Fund; 5) The Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund, in the form of a written advice or notice, of Direct Paper on the next business day following such transfer and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transaction in the U.S. Securities System for the account of the Fund; 6) The Custodian shall provide the Fund with any report on its system of internal accounting control as the Fund may reasonably request from time to time. 8 2.12 Segregated Account. The Custodian shall upon receipt of Proper Instructions from the Fund establish and maintain a segregated account or accounts for and on behalf of each such Fund, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper corporate purposes, but only, in the case of clause (iv), upon receipt of, in addition to Proper Instructions from the Fund, a certified copy of a resolution of the Board of Trustees setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes. 2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of each Fund held by it and in connection with transfers of securities. 2.14 Proxies. The Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Fund or a nominee of the Fund, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities. 2.15 Communications Relating to Fund Securities. Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund and the maturity of futures contracts purchased or sold by the Fund) received by the Custodian from issuers of the securities being held for the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund all written information received by the Custodian from issuers of the securities whose tender or exchange is sought 9 and from the party (or his agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify the Custodian at least three business days prior to the date on which the Custodian is to take such action. 3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States 3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and instructs the Custodian to employ as sub-custodians for the Fund's securities and other assets maintained outside the United States the foreign banking institutions and foreign securities depositories designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions", as defined in Section 5 of this Contract, together with a certified resolution of the Fund's Board of Trustees, the Custodian and the Fund may agree to amend Schedule A hereto from time to time to designate additional foreign banking institutions and foreign securities depositories to act as sub-custodian. Upon receipt of Proper Instructions, the Fund may instruct the Custodian to cease the employment of any one or more such sub-custodians for maintaining custody of the Fund's assets. 3.2 Assets to be Held. The Custodian shall limit the securities and other assets maintained in the custody of the foreign sub-custodians to: (a) "foreign securities", as defined in paragraph (c)(l) of Rule 17f-5 under the Investment Company Act of 1940, and (b) cash and cash equivalents in such amounts as the Custodian or the Fund may determine to be reasonably necessary to effect the Fund's foreign securities transactions. The Custodian shall identify on its books as belonging to the Fund, the foreign securities of the Fund held by each foreign sub-custodian. 3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in writing by the Custodian and the Fund, assets of the Funds shall be maintained in a clearing agency which acts as a securities depository or in a book-entry system for the central handling of securities located outside of the United States (each a "Foreign Securities System") only through arrangements implemented by the foreign banking institutions serving as sub-custodians pursuant to the terms hereof (Foreign Securities Systems and U.S. Securities Systems are collectively referred to herein as the "Securities Systems"). Where possible, such arrangements shall include entry into agreements containing the provisions set forth in Section 3.5 hereof. 3.4 Holding Securities. The Custodian may hold cash, securities and other non-cash property for all of its customers, including the Fund, with a foreign sub-custodian in a single 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 cash, securities and other non-cash property of the Fund which are maintained in such account shall identify by book- 10 entry the cash, securities and other non-cash property belonging to the Fund and (ii) the Custodian shall require that cash, securities and other non-cash property so held by the foreign sub-custodian be held separately from any assets of the Custodian, the foreign sub-custodian or of others. 3.5 Agreements with Foreign Banking Institutions. Each agreement with a foreign banking institution shall provide that: (a) the assets of each Fund will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the foreign banking institution or its creditors or agent, except a claim of payment for their safe custody or administration; (b) beneficial ownership for the assets of each Fund will be freely transferable without the payment of money or value other than for custody or administration; (c) adequate records will be maintained identifying the assets as belonging to each applicable Fund; (d) officers of or auditors employed by, or other representatives of the Custodian, including to the extent permitted under applicable law the independent public accountants for the Fund, will be given access to the books and records of the foreign banking institution relating to its actions under its agreement with the Custodian; and (e) assets of the Funds held by the foreign sub-custodian will be subject only to the instructions of the Custodian or its agents. 3.6 Access of Independent Accountants of the Fund. Upon request of the Fund, the Custodian will use its best efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any foreign banking institution employed as a foreign sub-custodian insofar as such books and records relate to the performance of such foreign banking institution under its agreement with the Custodian. 3.7 Reports by Custodian. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of the Fund(s) held by foreign sub-custodians, including but not limited to an identification of entities having possession of the Fund(s) securities and other assets and advices or notifications of any transfers of securities to or from each custodial account maintained by a foreign banking institution for the Custodian on behalf of each applicable Fund indicating, as to securities acquired for a Fund, the identity of the entity having physical possession of such securities. 3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to the foreign securities of the Fund held outside the United States by foreign sub-custodians. (b) Notwithstanding any provision of this Contract to the contrary, settlement and payment for securities received for the account of each applicable Fund and delivery of securities maintained for the account of each applicable Fund may be effected in accordance with the customary established securities trading or securities processing practices and 11 procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivering securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. In addition, and whether or not such practice is a customary established trading practice in the relevant jurisdictions, the Custodian will, upon Proper Instructions from the Fund, deliver cash to securities brokers in foreign jurisdictions who will effect securities trades for the Fund and cause the securities purchased to be delivered to the applicable foreign sub-custodian at some later date. (c) Securities maintained in the custody of a foreign sub-custodian may be maintained in the name of such entity's nominee to the same extent as set forth in Section 2.3 of this Contract, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such securities. 3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the Custodian employs a foreign banking institution as a foreign sub-custodian shall require the institution to exercise reasonable care in the performance of its duties and to indemnify, and hold harmless, the Custodian and each Fund from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the institution's performance of such obligations. At the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a foreign banking institution as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund has not been made whole for any such loss, damage, cost, expense, liability or claim. 3.10 Liability of Custodian. The Custodian shall be liable for the acts or omissions of a foreign banking institution to the same extent as set forth with respect to sub-custodians generally in this Contract and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.13 hereof, 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 loss where the sub-custodian has otherwise exercised reasonable care. Notwithstanding the foregoing provisions of this paragraph 3.10, in delegating custody duties to State Street London Ltd., the Custodian shall not be relieved of any responsibility to the Fund for any loss due to such delegation. except such loss as may result from (a) political risk (including, but not limited to, exchange control restrictions, confiscation, expropriation, nationalization, insurrection, civil strife or armed hostilities) or (b) other losses (excluding a bankruptcy or insolvency of State Street London Ltd. not caused by political risk) due to Acts of God, nuclear incident or other losses under circumstances where the Custodian and State Street London Ltd. have exercised reasonable care. 12 3.11 Reimbursement for Advances. If the Fund requires the Custodian to advance cash or securities for any purpose for the benefit of a Fund including the purchase or sale of foreign exchange or of contracts for foreign exchange, or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Fund shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Fund's assets to the extent necessary to obtain reimbursement. 3.12 Monitoring Responsibilities. The Custodian shall furnish annually to the Fund, during the month of June, information concerning the foreign sub-custodians employed by the Custodian. Such information shall be similar in kind and scope to that furnished to the Fund in connection with the initial approval of this Contract. In addition, the Custodian will promptly inform the Fund in the event that the Custodian learns of a material adverse change in the financial condition of a foreign sub-custodian or any material loss of the assets of the Fund or in the case of any foreign sub-custodian not the subject of an exemptive order from the Securities and Exchange Commission is notified by such foreign sub-custodian that there appears to be a substantial likelihood that its shareholders' equity will decline below $200 million (U.S. dollars or the equivalent thereof) or that its shareholders' equity has declined below $200 million (in each case computed in accordance with generally accepted U.S. accounting principles). 3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this Contract, the provisions hereof shall not apply where the custody of the Funds' assets are maintained in a foreign branch of a banking institution which is a "bank" as defined by Section 2(a)(5) of the Investment Company Act of 1940 meeting the qualification set forth in Section 26(a) of said Act. The appointment of any such branch as a sub-custodian shall be governed by paragraph 1 of this Contract. (b) Cash held for each Fund in the United Kingdom shall be maintained in an interest bearing account established for the Fund with the Custodian's London branch, which account shall be subject to the direction of the Custodian, State Street London Ltd. or both. 3.14 The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund or the Custodian as custodian of the Fund by the tax law of the United States of America or 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 or the Custodian as custodian of the Fund by the tax law of jurisdictions 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 13 efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of jurisdictions for which the Fund has provided such information. 4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund The Custodian shall receive from the distributor for the Shares or from the Transfer Agent of the Fund and deposit into the account of the appropriate Fund such payments as are received for Shares of that Fund issued or sold from time to time by the Fund. The Custodian will provide timely notification to the Fund on behalf of each such Fund and the Transfer Agent of any receipt by it of payments for Shares of such Fund. From such funds as may be available for the purpose but subject to the limitations of the applicable Fund's governing documents and any applicable votes of the Board of Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares of a Fund, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between the Fund and the Custodian. 5. Proper Instructions Proper Instructions as used throughout this Contract means a writing signed or initialed by one or more person or persons as the Board of Trustees shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. Upon receipt of a certificate of the Secretary or an Assistant Secretary as to the authorization by the Board of Trustees of the Fund accompanied by a detailed description of procedures approved by the Board of Trustees, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Board of Trustees and the Custodian are satisfied that such procedures afford adequate safeguards for the Funds' assets. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three-party agreement which requires a segregated asset account in accordance with Section 2.12. 14 6. Actions Permitted without Express Authority The Custodian may in its discretion, without express authority from the Fund: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, provided that all such payments shall be accounted for to the Fund; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund except as otherwise directed by the Board of Trustees of the Fund. 7. Evidence of Authority The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a certified copy of a vote of the Board of Trustees of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Trustees pursuant to the governing documents of the Fund as described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary. 8. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset Value and Net Income The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Trustees of the Fund to keep the books of account of each Fund and/or compute the net asset value per share of the outstanding shares of the Fund or, if the Custodian and the Fund execute the applicable Price Source Authorization (the "Authorization"), the Custodian shall keep such books of account and/or compute the net asset value per share pursuant to the terms of the Authorization and the attachments thereto. If so directed, the Custodian shall also calculate daily the net income of the Fund as described in the Fund's currently effective Prospectus related to such Fund and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various 15 components. The calculations of the net asset value per share and the daily income of each Fund shall be made at the time or times described from time to time in the Fund's currently effective Prospectus related to such Fund. 9. RECORDS The Custodian shall with respect to each Fund create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Fund under the Investment Company Act of 1940, with particular attention to Section 31 thereof and Rules 31 a-1 and 31 a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by each Fund and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. 10. Opinion of Fund's Independent Accountant The Custodian shall take all reasonable action, as the Fund may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission. 11. Reports to Fund by Independent Public Accountants The Custodian shall provide the Fund, at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a Securities System, relating to the services provided by the Custodian under this Contract; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. 12. Compensation of Custodian The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund and the Custodian. 16 13. Responsibility of Custodian So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a sub-custodian or agent, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by: (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, nationalization or expropriation, imposition of currency controls or restrictions, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, acts of war or terrorism, riots, revolutions, work stoppages, natural disasters or other similar events or acts; (ii) errors by the Fund or its investment adviser in their instructions to the Custodian provided such instructions have been in accordance with this Contract; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodian's sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (v) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vi) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (vii) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction. The Custodian shall be liable for the acts or omissions of a foreign banking institution to the same extent as set forth with respect to sub-custodians generally in this Contract. 17 If the Fund requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund being liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Fund shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Fund's assets to the extent necessary to obtain reimbursement. 14. Effective Period, Termination and Amendment This Contract shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; provided, however that the Custodian shall not with respect to a Fund act under Section 2.10 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of the Fund has approved the initial use of a particular Securities System by such Fund and the receipt of an annual certificate of the Secretary or Assistant Secretary that the Board of the Fund has reviewed any subsequent change regarding the use by such Fund of such Securities System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended and that the Custodian shall not with respect to a Fund act under Section 2.11 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board has approved the initial use of the Direct Paper System by such Fund and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of the Fund has reviewed the use by such Fund of the Direct Paper System; provided further, however, that the Fund shall not amend or terminate this Contract in contravention of any applicable federal or state regulations, or any provision of the Fund's governing documents, and further provided, that the Fund on behalf of one or more of the Funds may at any time by action of its Board (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Contract in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. 18 Upon termination of the Contract, the Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements. 15. Successor Custodian If a successor custodian for a Fund shall be appointed by the Board of Trustees of such Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities, funds and other properties of each applicable Fund then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Fund held in a Securities System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Trustees of the Fund, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such vote. In the event that no written order designating a successor custodian or certified copy of a vote of the Board of Trustees shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Fund and all instruments held by the Custodian relative thereto and all other property held by it under this Contract on behalf of each applicable Fund and to transfer to an account of such successor custodian all of the securities of each such Fund held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract. In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Trustees to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect. 16. Interpretive and Additional Provisions In connection with the operation of this Contract, the Custodian and the Fund may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any 19 applicable federal or state regulations or any provision of the governing documents of the Fund. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract. 17. Additional Funds In the event that Van Kampen American Capital Distributors, Inc. establishes any funds in addition to the Funds listed on Appendix A with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such fund shall become a Fund hereunder, subject to the delivery by the new Fund of resolutions authorizing the appointment of the Custodian and such other supporting or related documentation as the Custodian may request. All references herein to the "Fund" are to each of the Funds listed on Appendix A individually, as if this Contract were between each such individual Fund and the Custodian. With respect to any Fund which issues shares in separate classes or series, each class or series of such Fund shall be treated as a separate Fund hereunder. 18. Massachusetts Law to Apply This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts. 19. Prior Contacts This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Funds and the Custodian relating to the custody of the Funds' assets. 20. Reproduction of Documents This Contract and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. 21. Shareholder Communications Securities and Exchange Commission Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial 20 owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Fund to indicate whether the Fund authorizes the Custodian to provide the Fund's name, address, and share position to requesting companies whose stock the Fund owns. If the Fund tells the Custodian "no", the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian "yes" or do not check either "yes" or "no" below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For the Fund's protection, the Rule prohibits the requesting company from using the Fund's name and address for any purpose other than corporate communications. Please indicate below whether the Fund consent or object by checking one of the alternatives below. YES [_] The Custodian is authorized to release the Fund's name, address, and share positions of each Fund listed on Exhibit A. NO [X] The Custodian is not authorized to release the Fund's name, address, and share positions of each Fund listed on Exhibit A. 21. Limitation of Liability. The execution of this Contract has been authorized by each Fund's Board of Trustees. This Contract is executed on behalf of each Fund or the trustees of such Fund as trustees and not individually and the obligations of the Fund under this Contract are not binding upon any of the Fund's trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund. 21 IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the 1st day of August, 1997. ATTEST EACH OF THE FUNDS LISTED ON APPENDIX A /s/ [Illegible] By /s/ [Illegible] - ---------------------------------- ------------------------------------- Vice President & Secretary ATTEST STATE STREET BANK AND TRUST COMPANY /s/ [Illegible] By /s/ [Illegible] - ---------------------------------- ------------------------------------- Executive Vice President Schedule A The following foreign banking institutions and foreign securities depositories have been approved by the Board of Trustees of for use as sub-custodians for the Fund's securities and other assets: (Insert banks and securities depositories) Certified: /s/ [Illegible] Fund's Authorized Officer Date: August 1, 1997 SCHEDULE A STATE STREET BANK AND TRUST COMPANY GLOBAL CUSTODY NETWORK FOR MUTUAL FUND CLIENTS 1997 Country Subcustodian Central Depository Argentina Citibank, N.A. Caja de Valores S.A. Australia Westpac Banking Austraclear Limited; Corporation Reserve Bank Information and Transfer System (RITS) Austria GiroCredit Bank Oesterreichische Aktiengesellschaft Kontrollbank AG der Sparkassen (Wertpapiersammelbank Division) Bangladesh Standard Chartered Bank None Belgium Generale Bank Caisse Interprofessionnelle de Depots et de Virements de Titres S.A. (CIK); Banque Nationale de Belgique Botswana Barclays Bank of Botswana Limited None Brazil Citibank, N.A. Bolsa de Valores de Sao Paulo (Bovespa); Banco Central do Brasil, Systema Especial de Liquidacao e Custodia (SELIC) Canada Canada Trustco The Canadian Depository Mortgage Company for Securities Limited (CDS) Chile Citibank, N.A. None STATE STREET BANK AND TRUST COMPANY GLOBAL CUSTODY NETWORK FOR MUTUAL FUND CLIENTS 1997 Country Subcustodian Central Depository People's Republic of China The Hongkong and Shanghai Shanghai Securities Central Banking Corporation Limited, Clearing and Registration Shanghai and Shenzhen branches Corporation (SSCCRC); Shenzhen Securities Central Clearing Co., Ltd. (SSCC) Colombia Cititrust Colombia S.A. None Sociedad Fiduciaria Cyprus Barclays Bank PLC None Cyprus Offshore Banking Unit Czech Republic Ceskoslovenska Obchodni Stredisko Cennych Papiru (SCP); Banka A.S. Czech National Bank (CNB) Denmark Den Danske Bank Vaerdipapircentralen - The Danish Securities Center (VP) Ecuador Citibank, N.A. None Egypt National Bank of Egypt None Finland Merita Bank Limited The Central Share Register of Finland France Banque Paribas Societe Interprofessionnelle pour la Compensation des Valeurs Mobilieres (SICOVAM); Banque de France, Saturne System Germany Dresdner Bank A.G. The Deutscher Kassenverein AG Ghana Barclays Bank of Ghana Limited None STATE STREET BANK AND TRUST COMPANY GLOBAL CUSTODY NETWORK FOR MUTUAL FUND CLIENTS 1997 Country Subcustodian Central Depository Greece National Bank of The Central Securities Depository Greece S.A. (Aporhetirion Titlon A.E.) Hong Kong Standard Chartered Bank The Central Clearing and Settlement System (CCASS) Hungary Citibank Budapest Rt. The Central Depository and Clearing House (Budapest) Ltd. India Deutsche Bank AG None The Hongkong and Shanghai None Banking Corporation Limited Indonesia Standard Chartered Bank None Ireland Bank of Ireland None; The Central Bank of Ireland, The Gilt Settlement Office (GSO) Israel Bank Hapoalim B.M. The Clearing House of the Tel Aviv Stock Exchange Italy Banque Paribas Monte Titoli S.p.A.; Banca d'Italia Ivory Coast Societe Generale de Banques None en Cote d'Ivoire Bank of Japan Net System The Fuji Bank, Limited Japan Securities Depository Center (JASDEC); Bank of Japan Net System STATE STREET BANK AND TRUST COMPANY GLOBAL CUSTODY NETWORK FOR MUTUAL FUND CLIENTS 1997 Country Subcustodian Central Depository Japan (cont.) The Sumitomo Trust Japan Securities Depostiory & Banking Co., Ltd. Center (JASDEC); Bank of Japan Net System Jordan The British Bank of the Middle East None Kenya Barclays Bank of Kenya Limited None Republic of Korea SEOULBANK Korea Securities Depository (KSD) Malaysia Standard Chartered Bank Malaysian Central Depository Sdn. Malaysia Berhad Bhd. (MCD) Mauritius The HongKong and Shanghai None Banking Corporation Limited Mexico Citibank Mexico, S.A. S.D. INDEVAL, S.A. de C.V. (Instituto para el Deposito de Valores); Banco de Mexico Morocco Banque Commerciale du Maroc None Netherlands MeesPierson N.V. Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (NECIGEF) New Zealand ANZ Banking Group New Zealand Central Securities (New Zealand) Limited Depository Limited (NZCSD) Norway Christiania Bank og Verdipapirsentralen - Kreditkasse The Norwegian Registry of Securities (VPS) STATE STREET BANK AND TRUST COMPANY GLOBAL CUSTODY NETWORK FOR MUTUAL FUND CLIENTS 1997 Country Subcustodian Central Depository Pakistan Deutsche Bank AG None Peru Citibank, N.A. Caja de Valores (CAVAL) Philippines Standard Chartered Bank None Poland Citibank Poland S.A. The National Depository of Securities (Centrum Krajowy Depozytu Papierow Wartos'ciowych); National Bank of Poland Portugal Banco Comercial Portugues Central de Valores Mobiliarios (Central) Russia Credit Suisse First Boston, Zurich via None Credit Suisse First Boston (Moscow) Limited Singapore The Development Bank The Central Depository of Singapore Ltd. (Pte) Limited (CDP) Slovak Republic Ceskoslovenska Obchadna Stredisko cennych Banka A.S. papierov (SCP); National Bank of Slovakia South Africa Standard Bank of The Central Depository Limited South Africa Limited Spain Banco Santander, S.A. Servicio de Compensacion y Liquidacion de Valores (SCLV); Banco de Espana, Anotaciones en Cuenta Sri Lank The Hongkong and Shanghai The Central Depository Banking Corporation Limited System (Pvt) Limited Swaziland Barclays Bank of Swaziland Limited None Sweden Skandinaviska Enskilda Vardepapperscentralen VPC AB - Banken The Swedish Central Securities Depository STATE STREET BANK AND TRUST COMPANY GLOBAL CUSTODY NETWORK FOR MUTUAL FUND CLIENTS 1997 Country Subcustodian Central Depository Switzerland Union Bank of Switzerland Schweizerische Effekten - Giro AG (SEGA) Taiwan-R.O.C. Central Trust of China The Taiwan Securities Central Depository Company, Ltd.(TSCD) Thailand Standard Chartered Bank Thailand Securities Depository Company Limited (TSD) Turkey Citibank, N.A. Takas ve Saklama Bankasi A.S. (TAKASBANK) Central Bank of Turkey United Kingdom State Street Bank and None; Trust Company The Bank of England, The Central Gilts Office (CGO); The Central Moneymarkets Office (CMO) Uruguay Citibank, N.A. None Venezuela Citibank, N.A. None Zambia Barclays Bank of Zambia Limited Lusaka Central Depository (LCD) Zimbabwe Barclays Bank of Zimbabwe Limited None Euroclear (The Euroclear System)/ State Street London Limited Cedel (Cedel Bank societe anonyme)/ State Street London Limited Appendix A Van Kampen American Capital Comstock Fund Van Kampen American Capital Corporate Bond Fund Van Kampen American Capital Emerging Growth Fund Van Kampen American Capital Enterprise Fund Van Kampen American Capital Equity Income Fund Van Kampen American Capital Global Managed Assets Fund Van Kampen American Capital Government Securities Fund Van Kampen American Capital Government Target Fund Van Kampen American Capital Growth and Income Fund Van Kampen American Capital Harbor Fund Van Kampen American Capital High Income Corporate Bond Fund Van Kampen American Capital Life Investment Trust on behalf of its series Asset Allocation Portfolio Domestic Income Portfolio Emerging Growth Portfolio Enterprise Portfolio Global Equity Portfolio Government Portfolio Growth and Income Portfolio Money Market Portfolio Morgan Stanley Real Estate Securities Portfolio Van Kampen American Capital Limited Maturity Government Fund Van Kampen American Capital Pace Fund Van Kampen American Capital Real Estate Securities Fund Van Kampen American Capital Reserve Fund Van Kampen American Capital Small Capitalization Fund Van Kampen American Capital Tax-Exempt Trust on behalf of its series Van Kampen American Capital High Yield Municipal Fund Van Kampen American Capital U.S. Government Trust for Income 1 Van Kampen American Capital World Portfolio Series Trust on behalf of its series Van Kampen American Capital Global Equity Fund Van Kampen American Capital Global Government Securities Fund Van Kampen American Capital U.S. Government Trust Van Kampen American Capital U.S. Government Fund Van Kampen American Capital Tax Free Trust Van Kampen American Capital Insured Tax Free Income Fund Van Kampen American Capital Tax Free High Income Fund Van Kampen American Capital California Insured Tax Free Fund Van Kampen American Capital Municipal Income Fund Van Kampen American Capital Intermediate Term Municipal Income Fund Van Kampen American Capital Florida Insured Tax Free Income Fund Van Kampen American Capital New Jersey Tax Free Income Fund Van Kampen American Capital New York Tax Free Income Fund Van Kampen American Capital Trust Van Kampen American Capital High Yield Fund Van Kampen American Capital Short-Term Global Income Fund Van Kampen American Capital Strategic Income Fund Van Kampen American Capital Equity Trust Van Kampen American Capital Utility Fund Van Kampen American Capital Value Fund Van Kampen American Capital Great American Companies Fund Van Kampen American Capital Growth Fund Van Kampen American Capital Prospector Fund Van Kampen American Capital Aggressive Growth Fund Van Kampen American Capital Pennsylvania Tax Free Income Fund Van Kampen American Capital Tax Free Money Fund Van Kampen American Capital Foreign Securities Fund The Explorer Institutional Trust Explorer Institutional Active Core Fund Explorer Institutional Limited Duration Fund Van Kampen American Capital Navigator Funds Emerging Markets Equity Portfolio Emerging Markets Fixed Income Portfolio U.S. Quality Equity Portfolio 2 Van Kampen American Capital Exchange Fund Van Kampen American Capital Municipal Income Trust Van Kampen American Capital California Municipal Trust Van Kampen American Capital High Income Trust Van Kampen American Capital High Income Trust II Van Kampen American Capital Investment Grade Municipal Trust Van Kampen American Capital Prime Rate Income Trust Van Kampen American Capital Municipal Trust Van Kampen American Capital California Quality Municipal Trust Van Kampen American Capital Florida Quality Municipal Trust Van Kampen American Capital New York Quality Municipal Trust Van Kampen American Capital Ohio Quality Municipal Trust Van Kampen American Capital Pennsylvania Quality Municipal Trust Van Kampen American Capital Trust for Insured Municipals Van Kampen American Capital Trust for Investment Grade Municipals Van Kampen American Capital Trust for Investment Grade California Municipals Van Kampen American Capital Trust for Investment Grade Florida Municipals Van Kampen American Capital Trust for Investment Grade New Jersey Municipals Van Kampen American Capital Trust for Investment Grade New York Municipals Van Kampen American Capital Trust for Pennsylvania Municipals Van Kampen American Capital Municipal Opportunity Trust Van Kampen American Capital Advantage Municipal Income Trust Van Kampen American Capital Advantage Pennsylvania Municipal Income Trust Van Kampen American Capital Strategic Sector Municipal Trust Van Kampen American Capital Value Municipal Income Trust Van Kampen American Capital California Value Municipal Income Trust Van Kampen American Capital Massachusetts Value Municipal Income Trust Van Kampen American Capital New Jersey Value Municipal Income Trust Van Kampen American Capital New York Value Municipal Income Trust Van Kampen American Capital Ohio Value Municipal Income Trust Van Kampen American Capital Pennsylvania Value Municipal Income Trust Van Kampen American Capital Municipal Opportunity Trust II 3 Van Kampen American Capital Florida Municipal Opportunity Trust Van Kampen American Capital Advantage Municipal Income Trust II Van Kampen American Capital Select Sector Municipal Trust Van Kampen American Capital Bond Fund Van Kampen American Capital Convertible Securities Fund Van Kampen American Capital Income Trust 4 EX-99.(9)(B) 11 c93084a1exv99wx9yxby.txt AMENDMENT TO CUSTODIAN AGREEMENT EXHIBIT (9)(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.(11) 12 c93084a1exv99wx11y.txt OPINION AND CONSENT OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP EXHIBIT 11 [LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP] May 5, 2005 Van Kampen Municipal Trust 1221 Avenue of the Americas New York, New York 10020 Re: Van Kampen Municipal Trust Registration Statement on Form N-14 Ladies and Gentlemen: We have acted as special counsel to Van Kampen Municipal Trust, a voluntary association with transferable shares organized and existing under and by virtue of the laws of The Commonwealth of Massachusetts (commonly referred to as a "Massachusetts business trust") (the "Fund"), in connection with the preparation of the Fund's Registration Statement on Form N-14 (the "Registration Statement") filed under the Securities Act of 1933, as amended (the "1933 Act"), with the Securities and Exchange Commission (the "Commission"). The Registration Statement relates to the registration under the 1933 Act of common shares of beneficial interest of the Fund, par value $0.01 per share (the "Common Shares"), and auction preferred shares of the Fund, par value $0.01 per share, liquidation preference $25,000 per share (the "Preferred Shares"), to be issued pursuant to an Agreement and Plan of Reorganization (the "Agreement and Plan of Reorganization") between the Fund, and Van Kampen Investment Grade Municipal Trust, a Massachusetts business trust (collectively, the "Shares"). This opinion is delivered in accordance with the requirements of Item 16 of Form N-14 under the 1933 Act. In connection with this opinion, we have examined the originals or copies, certified or otherwise identified to our satisfaction, of (i) Registration Statement, as filed with the Commission on March 18, 2005 and as it is proposed to be amended by Pre-Effective Amendment No. 1 to be filed on or about May 5, 2005, under the 1933 Act, (ii) the Declaration of Trust (the "Declaration of Trust"), By-Laws and Certificate of Vote of Trustees Establishing Preferred Shares of the Fund, each as amended to date, (iii) a specimen certificate representing the Common Shares, (iv) a specimen certificate representing the Preferred Shares, (v) the resolutions adopted by the Board of Trustees of the Fund relating to the Agreement and Plan of Reorganization, the authorization and issuance of the Shares pursuant to the Agreement and Plan of Reorganization, the filing of the Registration Statement and any amendments or supplements thereto and related matters, (vi) a draft of the Agreement and Plan of Reorganization and (vii) such other documents as we have deemed necessary or appropriate as a basis for the opinions set forth herein. In such examination we have assumed the legal capacity of natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed, photostatic, or other copies and the authenticity of the originals of such latter documents. As to any facts material to such opinion which were not independently established, we have relied on statements or representations of officers and other representatives of the Fund or others. Based upon and subject to the foregoing, we are of the opinion that when (i) the Registration Statement shall have become effective and (ii) the issuance of Shares by the Fund pursuant to the Agreement and Plan of Reorganization has been validly authorized and, assuming certificates therefor have been duly executed, countersigned, registered and delivered, or the shareholders' accounts have been duly credited, and the Shares represented thereby have been fully paid for, such Shares will be validly issued, fully paid and, subject to the statements set forth below regarding the liability of a shareholder of a Massachusetts business trust, nonassessable. Pursuant to certain decisions of the Supreme Judicial Court of The Commonwealth of Massachusetts, shareholders of a Massachusetts business trust may, in certain circumstances, be assessed or held personally liable as partners for the obligations of a Massachusetts business trust. Even if the Fund were held to be a partnership, however, the possibility of the holders of Shares incurring personal liability for financial losses of the Fund appears remote because (A) Article V, Section 5.1 of the Declaration of Trust contains an express disclaimer of liability for holders of shares of beneficial interest of the Fund, including the Shares, for the obligations of the Fund and provides that the Fund shall hold each holder of such shares harmless from, and shall indemnify such holder against, all loss and expense arising solely from being or having been a holder of such shares and (B) Article V, Section 5.5 of the Declaration of Trust requires that a recitation of such disclaimer be included in every written obligation, contract, instrument, certificate, share, other security of the Fund or undertaking made or issued by the trustees of the Fund. We hereby consent to the filing of this opinion with the Commission as Exhibit 11 to the Registration Statement. We also consent to the reference to our firm under the heading "Legal Matters" 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 1933 Act or the rules and regulations of the Commission. Very truly yours, /s/ Skadden, Arps, Slate, Meagher & Flom LLP 2 EX-99.(13)(A) 13 c93084a1exv99wx13yxay.txt TRANSFER AGENCY AND SERVICE AGREEMENT EXHIBIT 13(a) Transfer Agency and Service Agreement Between Certain Van Kampen Closed-End Funds and EquiServe Trust Company .A. and EquiServe Inc. Table of Contents Section 1. Certain Definitions............................................................ 4 Section 2. Appointment of Agent........................................................... 5 Section 3. Standard Services.............................................................. 6 Section 4. Dividend Disbursing Services................................................... 7 Section 5. Optional Services and Standards................................................ 8 Section 6. Fees and Expenses.............................................................. 8 Section 7. Representations and Warranties of Transfer Agent............................... Section 8. Representations and Warranties of Customers.................................... Section 9. Indemnification/Limitation of Liability........................................ 11 Section 10. Damages........................................................................ 13 Section 11. Standard Care.................................................................. 13 Section 12. Responsibilities of the Transfer Agent......................................... 13 Section 13. Covenants of the Customers and Transfer Agent.................................. 15 Section 14. Data Access and Propreitary Information........................................ Section 15. Confidentiality................................................................ 16 Section 16. Term and Termination 17 Section 7. Assignment..................................................................... 18 Section 18. Unaffiliated Third Parties..................................................... 19
Section 19. Miscellaneous. Section 19.1 Notice Section 19.2 Successors..................................................................... 20 Section 19.3 Amendments..................................................................... 20 Section 19.4 Severability................................................................... 20 Section 19.5 Governing Law.................................................................. 20 Section 19.6 Force Majeure.................................................................. 20 Section 19.7 Descriptive Headings........................................................... 20 Section 19.8 Third Party Beneficiaries Section 19.9 Survival Section 19.10 Priorities..................................................................... 21 Section 19.11 Merger of Agreement. Section 19.12 Counterparts................................................................... 21
3 AGREEMENT made as of the 1st day of January, 2002, by and among Certain Van Kampen Closed-End Funds as set forth in Appendix A, having their principal office and place of business at One Parkview Plaza, Oakbrook Terrace, Illinois 60181 (collectively, the "Customers," or individually, the "Customer"), and EquiServe Trust Company, N .A. and EquiServe Limited Partnership (collectively, the "Transfer Agent"). NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. (a) "Account" or "Accounts" shall mean the account of each Shareholder which account shall hold any full or fractional shares of Stock held by such Shareholder and/or outstanding funds or tax reporting to be done. (b) "Additional Services" shall mean any and all services which are not Services as set forth in the Fee and Service Schedule, but performed by Transfer Agent upon request of Customers. (c) "Agreement" shall mean this agreement and any and all exhibits or schedules attached hereto and any and all amendments or modifications, which may from time to time be executed. (d) "Annual Period" shall mean each twelve (12) month period commencing on the Effective Date and, thereafter, on each anniversary of the Effective Date. (e) "Closed Account" shall mean an account with a zero share balance, no outstanding funds or no reportable tax information. (f) "Dividend Reinvestment Plan" and "Direct Stock Purchase Plan shall mean the services as set forth in Section 4 and in the Fee and Service Schedule. (g) "Effective Date" shall mean the date first stated above. (h) "Enrollment Materials" shall mean the Plan brochure, enrollment card and other materials prepared by Transfer Agent for distribution to Participants. (i) "Fee and Service Schedule" shall mean the fees and services set forth in the "Fee and Service Schedule" attached hereto. (j) "Optional Services" shall mean all services described in Section 5. (k) "Services" shall mean any and all services as further described herein and in the "Fee and Service Schedule" or other schedules attached hereto. 4 (l) "Shares" shall mean common stock of the Customer authorized by the Customer's Declaration of Trust. 2. APPOINTMENT OF AGENT 2.1 The Customers hereby appoints the Transfer Agent to act as sole transfer agent and registrar for all Shares in accordance with the terms and conditions hereof, and the Transfer Agent accepts said appointment. 2.2 In connection with the appointing of Transfer Agent as the transfer agent and registrar for the Customers, the Customers has previously filed the following documents with the Transfer Agent: Copies of Registration Statements and amendments thereto, filed with the Securities and Exchange Commission for initial public offerings; Specimens of all forms of outstanding stock certificates, in forms approved by the Boards of Trustees of the Customers, with a certificate of the Secretary of each Customer as to such approval; Specimens of the Signatures of the officers of the Customers authorized to sign stock certificates and individuals authorized to sign written instructions and requests; and (d) An opinion of counsel for each Customer with respect to: (i) Each Customer's organization and existence under the laws of its state of organization. (ii) The status of all Shares of stock of each Customer covered by the appointment under the Securities Act of 1933, as amended, and any other applicable federal or state statute; and (iii) That all issued Shares are, and all unissued shares will be, when issued, validly issued, fully paid and non-assessable. 2.3 Transfer Agent may adopt as part of its records all lists of holders, records of each Customer's stock, books, documents and records which have been employed by any former agent of the Customer for the maintenance of the ledgers for such shares, provided such ledger is certified by an officer of Customer or the prior transfer agent to be true, authentic and complete. 2.4 Customers shall, if applicable, inform Transfer Agent as to (i) the existence or termination of any restrictions on the transfer of Shares and in the application to or removal from any certificate of stock of any legend restricting the transfer of such Shares 5 or the substitution for such certificate of a certificate without such legend, (ii) any authorized but unissued Shares reserved for specific purposes, (iii) any outstanding shares which are exchangeable for Shares and the basis for exchange, (iv) reserved Shares subject to option and the details of such reservation and (v) special instructions regarding dividends and information of foreign holders. 2.5 Transfer Agent represents that it is engaged in an independent business and will perform its obligations under this Agreement as an agent of Customers. 2.6 Customers shall deliver to Transfer Agent an appropriate supply of stock certificates, which certificates shall provide a signature panel for use by an officer of or authorized signor for Transfer Agent to sign as transfer agent and registrar, and which shall state that such certificates are only valid after being countersigned and registered. 3. STANDARD SERVICES. 3.1 The Transfer Agent will perform the following services: In accordance with the procedures established form time to time by agreement between the Customers and the Transfer Agent, the Transfer Agent shall: (a) issue and record the appropriate number of Shares as authorized and hold such shares in the appropriate shareholder ("Shareholder") account; (b) effect transfers of Shares by the registered owners thereof upon receipt of appropriate documentation; (c) prepare and transmit payments for dividends and distributions declared by the respective Customer, provided good funds for said dividends or distributions are received by the Transfer Agent prior to or on the scheduled mailing date for said dividends or distributions; (d) act as agent for Shareholders pursuant to the dividend reinvestment plan, and other investment programs as amended from time to time in accordance with the terms of the agreements relating thereto to which the Transfer Agent is or will be a party; and (e) issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed upon receipt by the Transfer Agent of an open penalty surety bond satisfactory to it and holding it, the Customers harmless, absent notice to the Customers and the Transfer Agent that such certificates have been acquired by a bona fide purchaser. The Transfer Agent, at its option, may issue replacement certificates in place of mutilated stock certificates upon presentation thereof without such indemnity. Further, the Transfer Agent may at its sole option accept indemnification from a Customers to issue replacement certificates for those 6 certificates alleged to have been lost, stolen or destroyed in lieu of an open penalty bond. (f) issue replacement checks and place stop on original checks based on shareholder's representation that a check was not received or was lost. Such stops and replacement will be deemed to have been made at the request of Customers and Customers shall be responsible for all losses or claims resulting from such replacement. 3.2 Customary Services. The Transfer Agent shall perform all the customary services of a transfer agent, dividend disbursing agent, agent of dividend reinvestment plan, cash purchase plan and other investment programs as described in Section 3.1 consistent with those requirements in effect as of the date of this Agreement and in compliance with applicable laws as set forth in Section 3.3; provided, however, the Transfer Agent shall not be required to take shareholder telephone calls or respond to written shareholder inquiries. All such shareholder inquiries in writing or by telephone shall be handled by Customers. Any correspondence or telephone inquiries from shareholders received by the Transfer Agent will be forwarded to Customers. The detailed services and definition, frequency, limitations and associated costs (if any) are set out in the attached fee and service schedule ("Fee and Service Schedule"). 3.3 Compliance with Laws. The Customers agrees the Transfer Agent is obligated to comply with all applicable federal, state and local laws and regulations, codes, order and government rules in the performance of its duties hereunder this Agreement. 3.4 Unclaimed Property and Lost Shareholders. The Transfer Agent shall report unclaimed property to each state in compliance with state law and Section 17Ad-17 of the Exchange Act of 1934 as amended (the "Exchange Act") for lost shareholders. If the Customers are not in compliance with applicable state laws, there will be no charge for the first two years for this service; provided that after the first two years, the Transfer Agent will charge Customers its then standard fee plus any out-of-pocket expenses. 3.5 Compliance with Office of Foreign Asset Control ("OFAC") Regulation. Ensure compliance with OFAC laws. 4. DIVIDEND DISBURSING SERVICES. 4.1 Upon receipt of a written notice from the President, any Vice President, Assistant Secretary, Treasurer or Assistant Treasurer of a Customer declaring the payment of a dividend, Transfer Agent shall disburse such dividend payments provided that on or before the mail date for such payment, Customers furnishes Transfer Agent with sufficient funds. The payment of such funds to Transfer Agent for the purpose of being available for the payment of dividend checks from time to time is not intended by Customers to confer any rights in such funds on Customer shareholders whether in trust or in contract or otherwise. 7 4.2 Customers hereby authorizes Transfer Agent to stop payment of checks issued in payment of dividends, but not presented for payment, when the payees thereof allege either that they have not received the checks or that such checks have been mislaid, lost, stolen, destroyed or, through no fault of theirs, are otherwise beyond their control and cannot be produced by them for presentation and collection, and Transfer Agent shall issue and deliver duplicate checks in replacement thereof, and Customers shall indemnify Transfer Agent against any loss or damage resulting from reissuance of the checks. 4.3 Transfer Agent is hereby authorized to deduct from all dividends declared by Customers and disbursed by Transfer Agent, as dividend disbursing agent, the tax required to be withheld pursuant to Sections 1441, 1442 and 3406 of the Internal Revenue Code of 1986, as amended, or by any Federal or State statutes subsequently enacted, and to make the necessary return and payment of such tax in connection therewith. 5. OPTIONAL SERVICES AND STANDARDS. 5 Optional Services To the extent that a Customer elects to engage the Transfer Agent to provide the services listed below the Customers shall engage the Transfer Agent to provide such services upon terms and fees to be agreed upon by the parties: a. Employee Plan Services; b. Employee Share Purchase Programs; c. Corporate Actions (including inter alia, odd lot buy backs, exchanges, mergers, redemptions, subscriptions, capital reorganization, coordination of post-merger services and special meetings); and d. Shareholder written and telephone inquiry services. 6. FEES AND EXPENSES. 6.1 Fee and Service Schedules. Customers agrees to pay Transfers Agent fees for services performed pursuant to this Agreement as set forth in the Fee and Service Schedule attached hereto, for the Initial Term of the Agreement. 6.2 COLA. After the Initial Term of the Agreement, providing that service mix and volumes remain constant, the fees listed in the Fee and Service Schedule shall be increased by the accumulated change in the National Employment Cost Index for Service Producing Industries (Finance, Insurance, Real Estate) for the preceding years of the contract, as published by the Bureau of Labor Statistics of the United States Department of Labor. Fees will be increased on this basis on each successive contract anniversary thereafter. 8 6.3 Adjustments. Notwithstanding Section 6.1 above, fees, and the out-of-pocket expenses and advances identified under Section 6.4 below, may be changed from time to time as agreed upon in writing between the Transfer Agent and the Customers. 6.4 Out-of-Pocket Expenses. In addition to the fees paid under Section 6.1 above, the Customer agrees to reimburse the Transfer Agent for out-of-pocket expenses, including but not limited to postage, forms, telephone, microfilm, microfiche, taxes, records storage, exchange and broker fees, or advances incurred by the Transfer Agent for the items set out in Exhibit A attached hereto. Out-of-pocket expenses may include the costs to Transfer Agent of administrative expenses. In addition, any other expenses incurred by the Transfer Agent at the request or with the consent of the Customers, will be reimbursed by the applicable Customer. 6.5 Conversion Funds. Conversion funding required by any out of proof condition caused by a prior agents' services shall be advanced to Transfer Agent prior to the commencement of services. 6.6 Postage. Postage for mailing of dividends, proxies, Customers reports and other mailings to all shareholder accounts shall be advanced to the Transfer Agent by the Customers prior to commencement of the mailing date of such materials. 6.7 Invoices. The Customers agrees to pay all fees and reimbursable expenses upon receipt of the respective billing notice, except for any fees or expenses that are subject to good faith dispute. In the event of such a dispute, the Customers may only withhold that portion of the fee or expense subject to the good faith dispute. The Customers shall notify the Transfer Agent in writing within twenty-one (21) calendar days following the receipt of each billing notice if the Customer disputing any amounts in good faith. If the Customer does not provide such notice of dispute within the required time, the billing notice will be deemed accepted by the Customer. The Customer shall settle such disputed amounts within five (5) days of the day on which the parties agree on the amount to be paid by payment of the agreed amount. If no agreement is reached, then such disputed amounts shall be settled as may be required by law or legal process. 6.8 Taxes. Customers shall pay all sales or use taxes in lieu thereof with respect to the Services (if applicable) provided by Transfer Agent under this Agreement. 6.9 Late Payments. (a) If any undisputed amount in an invoice of the Transfer Agent (for fees or reimbursable expenses) is not paid when due, the Customers shall pay the Transfer Agent interest thereon (from the due date to the date of payment) at a per annum rate equal to one percent (1.0%) plus the Prime Rate (that is, the base rate on corporate loans posted by large domestic Transfer Agents) published by The Wall Street Journal (or, in the event such rate is not so published, a reasonably equivalent published rate selected by Customers on the first day of publication during the month when such amount was due. 9 Notwithstanding any other provision hereof, such interest rate shall be no greater than permitted under applicable provisions of Massachusetts or New Jersey law. (b) The failure by Customers to pay an invoice within 90 days after receipt of such invoice or the failure by the Customers to timely pay two consecutive invoices shall constitute a material breach pursuant to Section 16.2(a)(i) below. The Transfer Agent may terminate this Agreement for such material breach immediately and shall not be obligated to provide the Customers with 30 days to cure such breach. 6.10 Services Required by Legislation. Services required by legislation or regulatory mandate that become effective after the effective date of this Agreement shall not be part of the standard services, and shall be billed by appraisal. 6.11 Overtime Charges. Overtime charges will be assessed in the event of a late delivery to the Transfer Agent of Customers material for mailings to shareholders, unless the mail date is rescheduled. Such material includes, but is not limited to, proxy statements, quarterly and annual reports, dividend enclosures and news releases. REPRESENTATIONS AND WARRANTIES OF TRANSFER AGENT. The Transfer Agent represents and warrants to the Customers that: 7.1 EquiServe Trust Company, N.A. is a federally chartered limited purpose national bank duly organized under the laws of the United States and EquiServe Limited Partnership is a limited partnership validly existing and in good standing under the laws of the State of Delaware; 7.2 It is duly qualified to carry on its business in The Commonwealth of Massachusetts; 7.3 It is empowered under applicable laws and by its Charter and/or By-Laws to enter into and perform this Agreement; 7.4 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement; and 7.5 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. 7.6 It will comply with all applicable sections of the Securities Exchange Act of 1934 necessary to enter into and perform this Agreement. 7.7 It has and will continue to have a disaster recovery plan which may be reviewed by Customers upon request. 10 8. REPRESENTATIONS AND WARRANTIES OF CUSTOMERS. The Customers represents and warrants to the Transfer Agent that: 8.1 Customers are duly organized, existing and in good standing under the laws of Massachusetts; 8.2 It is empowered under applicable laws and by its Declaration of Trust and By-Laws to enter into and perform this Agreement; 8.3 All corporate proceedings required by said Declaration of Trust, and By-Laws and applicable law have been taken to authorize it to enter into and perform this Agreement; and 8.4 A registration statement under the Securities Act of 1933, as amended (the "1933 Act") was filed prior to the initial offering of any Shares, and all appropriate state securities law filings were made within respect to all Shares of the Customers; information to the contrary will result in immediate notification to the Transfer Agent. 9. INDEMNIFICATION. 9.1 The Transfer Agent shall not be responsible for, and the applicable Customer shall indemnify and hold the Transfer Agent harmless from and against, any and all losses, claims, damages, costs, charges, counsel fees and expenses, payments, expenses and liability arising out of or attributable to: (a) All actions of the Transfer Agent or its agents or subcontractors required to be taken pursuant to this Agreement, provided such actions are taken in good faith and without negligence or willful misconduct; (b) The Customer's lack of good faith, negligence or willful misconduct or the breach of any representation or warranty of the Customers hereunder; (c) The reliance or use by the Transfer Agent or its agents or subcontractors of information, records and documents which (i) are received by the Transfer Agent or its agents or subcontractors and furnished to it by or on behalf of the Customer, and (ii) have been prepared and/or maintained by the Customer or any other person or firm on behalf of the Customer. Such other person or firm shall include any former transfer agent or former registrar, or co-transfer agent or co-registrar or any current registrar where the Transfer Agent is not the current registrar; (d) The reliance or use by the Transfer Agent or its agents or subcontractors of any paper or document reasonably believed to be genuine and to have been signed by the proper person or persons including Shareholders; 11 (e) The reliance on, or the carrying out by the Transfer Agent or its agents or subcontractors of any instructions or requests of the Customer's or Customer's representatives; (f) The offer or sale of Shares in violation of any federal or state securities laws requiring that such shares be registered or in violation of any stop order or other determination or ruling by any federal or state agency with respect to the offer or sale of such Shares; (g) The negotiations and processing of checks, including checks made payable to prospective or existing shareholders which are tendered to the Transfer Agent for the purchase of shares (commonly known as "third party checks"); (h) Any actions taken or omitted to be taken by any former agent of Customer and arising from Transfer Agent's reliance on the certified list of holders; and (i) The negotiation, presentment, delivery or transfer of shares through the Direct Registration System Profile System. 9.2 At any time the Transfer Agent may apply to any officer of the applicable Customer for instruction, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by the Transfer Agent under this Agreement, and Transfer Agent and its agents and subcontractors shall not be liable and shall be indemnified by such Customer for any action taken or omitted by it in reliance upon such instructions or upon the advice or opinion of such counsel. The Transfer Agent, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided the Transfer Agent or its agents or subcontractors by telephone, in person, machine readable input, telex, CRT data entry or similar means authorized by such Customer, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Customer. The Transfer Agent, its agents and subcontractors shall also be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of officers of the Customer, and the proper countersignature of any former transfer agent or former registrar, or of a co-transfer agent or co-registrar. 9.3 In order that the indemnification provisions contained in this Section shall apply, upon the assertion of a claim for which the Customer may be required to indemnify the Transfer Agent, the Transfer Agent shall promptly notify the Customer of such assertion, and shall keep the Customer advised with respect to all developments concerning such claim. The Customer shall have the option to participate with the Transfer Agent in the defense of such claim or to defend against said claim in its own 12 name or the name of the Transfer Agent. The Transfer Agent shall in no case compromise any claim or make any compromise in any case in which the Customer may be required to indemnify it except with the Customer's prior written consent. 10. DAMAGES. NEITHER PARTY SHALL BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER, INCLUDING, BUT NOT LIMITED TO, LOSS OF ANTICIPATED PROFITS, OCCASIONED BY A BREACH OF ANY PROVISION OF THIS AGREEMENT EVEN IF APPRISED OF THE POSSIBILITY OF SUCH DAMAGES. 11. STANDARD OF CARE. The Transfer Agent shall at all times act in good faith and agrees to use its best efforts within reasonable time limits to insure the accuracy of all services performed under this Agreement, but assumes no responsibility and shall not be liable for loss or damage due to errors unless said errors are caused by its negligence, bad faith or willful misconduct or that of its employees, agents or subcontractors. 12. RESPONSIBILITIES OF THE TRANSFER AGENT. The Transfer Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Customers, by its acceptance hereof, shall be bound: 12.1 Whenever in the performance of its duties hereunder the Transfer Agent shall deem it necessary or desirable that any fact or matter be proved or established prior to taking or suffering any action hereunder, such fact or matter may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant treasurer, the Secretary or any Assistant Secretary of the applicable Customer and delivered to the Transfer Agent. Such certificate shall be full authorization to the Transfer Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. 12.2 The Customers agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Transfer Agent for the carrying out, or performing by the Transfer Agent of the provisions of this Agreement. 12.3 Transfer Agent, any of its affiliates or subsidiaries, and any stockholder, director, officer or employee of the Transfer Agent may buy, sell or deal in the securities of the Customers or become pecuniary interested in any transaction in which the Customers may be interested, or contract with or lend money to the Customers or otherwise act as fully and freely as though it were not appointed as agent under this 13 Agreement. Nothing herein shall preclude the Transfer Agent from acting in any other capacity for the Customers or for any other legal entity. 12.4 No provision of this Agreement shall require the Transfer Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if it shall believe in good faith that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. 13. COVENANTS OF THE CUSTOMERS AND TRANSFER AGENT. 13.1 Customers Corporate Authority. The Customers have previously furnished or will furnish to the Transfer Agent the following: (a) A copy of the Declaration of Trust and By-Laws of each Customer; (b) Copies of all material amendments to each Customer's Declaration of Trust or By-Laws made after the date of this Agreement, promptly after such amendments are made; and (c) A certificate of each Customer as to the Shares authorized issued and outstanding as well as a description of all reserves of unissued shares relating to the exercise of options warrants or a conversion of debentures or otherwise. 13.2 Transfer Agent Facilities. The Transfer Agent hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Customers for the safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any, and for the preparation, use, and recordkeeping of such certificates, forms and devices. 13.3 Records. The Transfer Agent shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. The Transfer Agent agrees that all such records prepared or maintained by it relating to the services performed hereunder are the property of the Customers and will be preserved, maintained and made available in accordance with the requirements of law, and will be surrendered promptly to the Customers on and in accordance with its request. 13.4 Confidentiality. The Transfer Agent and the Customers agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law. If disclosure is requested upon alleged authority of law, the party to whom disclosure is requested shall provide prompt notice of such request to the other party to enable such other party to seek appropriate protective order or other remedy. If, in the absence of a protective order or other remedy or waiver of the 14 terms of this provision, the party to whom disclosure is requested determines in good faith that it is required by law to disclose any books, records, information or data pertaining to the business of the other party, it may do so without any liability. 13.5 Non-Solicitation of Transfer Agent Employees. Customers shall not attempt to hire or assist with the hiring of an employee of EquiServe or affiliated companies or encourage any employee to terminate their relationship with EquiServe or its affiliated companies. 13.6 Notification. Customers shall notify Transfer Agent as soon as possible in advance of any stock split, stock dividend similar event which may affect the Stock, and any bankruptcy, insolvency, moratorium or other proceeding regarding Customers affecting the enforcement of creditors' rights. Notwithstanding any other provision of the Agreement to the contrary, Transfer Agent will have no obligation to perform any Services under the Agreement subsequent to the commencement of any bankruptcy, insolvency, moratorium or other proceeding regarding Customers affecting the enforcement of creditor' rights unless Transfer Agent receives assurance satisfactory to it that it will receive full payment for such services. Further, Customers may not assume the Agreement after the filing of a bankruptcy petition without Transfer Agent's written consent. 14. DATA ACCESS AND PROPRIETARY INFORMATION. 14.1 The Customers acknowledge that the data bases, computer programs, screen formats, report formats, interactive design techniques, and documentation manuals furnished to the Customers by the Transfer Agent as part of the ability to access certain related data ("Customers Data") maintained by the Transfer Agent on data bases under the control and ownership of the Transfer Agent or other third party ("Data Access Services") constitute copyrighted, trade secret, or other proprietary information (collectively, "Proprietary Information") of substantial value to the Transfer Agent or other third party. In no event shall Proprietary Information be deemed Customers Data. The Customers agree to treat all Proprietary Information as proprietary to the Transfer Agent and further agree that it shall not divulge any Proprietary Information to any person or organization except as may be provided hereunder. Without limiting the foregoing, the Customers agree for themselves and its employees and agents: (a) to access Customers Data solely from locations as may be designated in writing by the Transfer Agent and solely in accordance with the Transfer Agent's applicable user documentation; (b) to refrain from copying or duplicating in any way the Proprietary Information; (c) to refrain from obtaining unauthorized access to any portion of the 15 Proprietary Information, and if such access is inadvertently obtained, to inform the Transfer Agent in a timely manner of such fact and dispose of such information in accordance with the Transfer Agent's instructions; (d) to refrain from causing or allowing the data acquired hereunder from being retransmitted to any other computer facility or other location, except with the prior written consent of the Transfer Agent; (e) that the Customers shall have access only to those authorized transactions agreed upon by the parties; and (f) to honor all reasonable written requests made by the Transfer Agent to protect at the Transfer Agent's expense the rights of the Transfer Agent in Proprietary Information at common law, under federal copyright law and under other federal or state law. Each party shall take reasonable efforts to advise its employees of their obligations pursuant to this Section 14. 14.2 If any Customer notifies the Transfer Agent that any of the Data Access Services do not operate in material compliance with the most recently issued user documentation for such services, the Transfer Agent shall endeavor in a timely manner to correct such failure. Organizations from which the Transfer Agent may obtain certain data included in the Data Access Services are solely responsible for the contents of such data and the Customers agrees to make no claim against the Transfer Agent arising out of the contents of such third party data, including, but not limited to, the accuracy thereof. DATA, ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE TRANSFER AGENT EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 14.3 If the transactions available to the Customers include the ability to originate electronic instructions to the Transfer Agent in order to (i) effect the transfer or movement of cash or shares or (ii) transmit Shareholder information or other information, then in such event the Transfer Agent shall be entitled to rely on the validity and authenticity of such instructions without undertaking any further inquiry as long as such instructions are undertaken in conformity with security procedures established by the Transfer Agent from time to time. 15. CONFIDENTIALITY. 15.1 The Transfer Agent and the Customers agree that they will not, at any time during the term of this Agreement or after its termination, reveal, divulge, or make known to any person, firm, corporation or other business organization, any Customers' 16 lists, trade secrets, cost figures and projections, profit figures and projections, or any other secret or confidential information whatsoever, whether of the Transfer Agent, the Customers, used or gained by the Transfer Agent or the Customers during performance under this Agreement. The Customers and the Transfer Agent further covenant and agree to retain all such knowledge and information acquired during and after the term of this Agreement respecting such lists, trade secrets, or any secret or confidential information whatsoever in trust for the sole benefit of the Transfer Agent or the Customers and their successors and assigns. The above prohibition of disclosure shall not apply to the extent that the Transfer Agent must disclose such data to its sub-contractor or Customers agent for purposes of providing services under this Agreement. 15.2 In the event that any requests or demands are made for the inspection of the Shareholder records of the Customers, other than request for records of Shareholders pursuant to standard subpoenas from state or federal government authorities (e.g., in divorce and criminal actions), the Transfer Agent will endeavor to notify the Customers and to secure instructions from an authorized officer of the Customers as to such inspection. The Transfer Agent expressly reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by counsel that it may be held liable for the failure to exhibit the Shareholder records to such person or if required by law or court order. 15.3 PRIVACY ACT INFORMATION DEFINITION: (a) DEFINITION: Transfer Agent may receive information from Customer or may come into possession of information that Customer is required to protect under Title V of the Graham-Leach-Bliley Act of 1999 ("Privacy Act") in connection with providing services to Customer under this Agreement. For purposes of this Agreement, "Privacy Act Information" shall mean the following types of information and other information of a similar nature (whether or not reduced to writing): Shareholder information, non public personal information including "personally identifiable financial information" whether provided directly by the Shareholder in connection with obtaining a service or obtained from other sources, Shareholder financial information, Shareholder names and other information related to Shareholders. (b) OWNERSHIP: All notes, data, reference, materials, memoranda, documentation and records, in any way incorporating or reflecting any of the Privacy Act Information shall belong exclusively at all times to Customer and Transfer Agent agrees to turn over all copies of such materials in Transfer Agent's control or possession to Customer upon request or upon termination of this Agreement, subject to applicable law. (c) CONFIDENTIALITY: Transfer Agent agrees during the term of this Agreement and thereafter to hold in confidence and not to directly or indirectly reveal, report, publish, disclose or transfer any of the Privacy Act Information to any person or entity, or utilize any of the Privacy Act Information for any purpose, except in connection with providing services hereunder or as required by law; provided, however, Transfer Agent may disclose such Privacy Act Information to its third-party vendors for purposes of 17 performing services for Customer provides such third party vendors are contractually bound to keep such information confidential. 16. TERM AND TERMINATION. 16.1 Term. The initial term of this Agreement (the "Initial Term") shall be for the period January 1, 2002 until July 31, 2004, unless terminated pursuant to the provisions of this Section 16. Unless a terminating party gives written notice to the other party one hundred twenty (120) days before the expiration of the Initial Term this Agreement will renew automatically from year to year ("Renewal Term"). If after the Initial Term, any party to this Agreement may terminate this Agreement by providing notice to the other parties one hundred twenty (120) days prior to the anticipated termination date. One hundred twenty (120) days before the expiration of the Initial Term or a Renewal Term the parties to this Agreement will agree upon a Fee Schedule for the upcoming Renewal Term. 16.2 Early Termination. Notwithstanding anything contained in this Agreement to the contrary, should a Customer desire to move any of the services provided by the Transfer Agent for the Customers hereunder to a successor service provider prior to the expiration of the then current Initial or Renewal Term, or without the required notice period, the Transfer Agent shall make a good faith effort to facilitate the conversion on such prior date, however, there can be no guarantee that the Transfer Agent will be able to facilitate a conversion of services on such prior date. In connection with the foregoing, should services be converted to a successor service provider, or if the Customer is liquidated or its assets merged or purchased or the like with another entity which does not utilize the services of the Transfer Agent, the fees payable to the Transfer Agent shall be calculated as if the services had remained with the Transfer Agent until the expiration of the then current Initial or Renewal Term and calculated at existing rates on the date notice of termination was given to the Transfer Agent, and the payment of fees to the Transfer Agent as set forth herein shall be accelerated to the date prior to the conversion or termination of services. Section 16.2 shall not apply if the Transfer Agent is terminated for cause under Section 16.4(a) of this Agreement. 16.3 Expiration of Term. After the expiration of the Initial Term or Renewal Term whichever currently in effect, should either party exercise its right to terminate, all reasonable out-of-pocket expenses or costs associated with the movement of records and material will be borne by the Customer. Additionally, the Transfer Agent reserves the right to charge for any other reasonable expenses associated with such termination and a de-conversion/transition fee in an amount equal to 10% of the aggregate fees incurred by Customer during the immediately preceding twelve (12) month period, provided, however, such fee shall in no event be less one thousand dollars. 16.4 Termination. This Agreement may be terminated in accordance with the following: 18 (a) at any time by the parties upon a material breach of the representation and warranties of Section 7, or of a covenant or term of this Agreement by the other which is not cured within a period not to exceed thirty (30) days after the date of written notice thereof by the other party; (b) by Transfer Agent, at any time, in the event that during the term if this Agreement, a bankruptcy or insolvency proceeding is filed by or against a Customer or a trustee or receiver is appointed for any substantial part of Customer's property (and in a case of involuntary bankruptcy, insolvency or receivership proceeding, there is entered an order for relief, or order appointing a receiver or some similar order or decree and Customer does not succeed in having such order lifted or stayed within sixty (60) days from the date of its entry), or Customer makes an assignment of all or substantially all of its property for the benefit of creditors or ceases to conduct its operations in the normal course or business. 16.5 Records. Upon receipt of written notice of termination, the parties will use commercially practicable efforts to effect an orderly termination of this Agreement. Without limiting the foregoing, Transfer Agent will deliver promptly to Customers, in machine readable form on media as reasonably requested by Customers, all stockholder and other records, files and data supplied to or compiled by Transfer Agent on behalf of Customers. 17. ASSIGNMENT. 17.1 The Transfer Agent may, without further consent of the Customers assign its right and obligations hereunto to any affiliated and registered transfer agent under Section 17(A)(c)(2) of the Securities and Exchange Act. The Transfer Agent may not assign its rights or obligation without the written consent of the Customer. 17.2 The Transfer Agent may, without further consent on the part of Customers, subcontract with other subcontractors for telephone and mailing services as may be required from time to time; provided, however, that the Transfer Agent shall be as fully responsible to the Customers for the acts and omissions of any subcontractor as it is for its acts and omissions. 17.3 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. 18. UNAFFILIATED THIRD PARTIES. Nothing herein shall impose any duty upon the Transfer Agent in connection with or make the Transfer Agent liable for the actions or omissions to act of unaffiliated third parties such as, by way of example and not limitation, airborne services, the U.S. mails 19 and telecommunication companies, provided, if the Transfer Agent selected such company, the Transfer Agent shall have exercised due care in selecting the same. 19. MISCELLANEOUS. Notices. Any notice or communication by the Transfer Agent or the Customers to the other is duly given if in writing and delivered in person or mailed by first class mail, postage prepaid, telex, telecopier or overnight air courier guaranteeing next day delivery, to the other's address: If to the Customers: Van Kampen Closed-End Funds C/O Van Kampen Investments Inc. One Parkview Plaza Oakbrook Terrace, IL 60181 Telecopy No.: ( ) xxx-xxxx Attn: General Counsel If to the Transfer Agent: EquiServe Trust Company, N.A. c/o EquiServe Limited Partnership 150 Royall Street Canton, MA 02021 Telecopy No.: (781) 575-4188 Attn: President The Transfer Agent and the Customers may, by notice to the other, designate additional or different addresses for subsequent notices or communications. Successors. All the covenants and provisions of this agreement by or for the benefit of the Customers or the Transfer Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Amendments. This Agreement may be amended or modified by a written amendment executed by both parties hereto and authorized or approved by a resolution of the Board of Directors of the Customers. 20 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provision, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Governing Law. This Agreement shall be governed by the laws of The Commonwealth of Massachusetts. Force Majeure. Notwithstanding anything to the contrary contained herein, Transfer Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest. Descriptive Headings. Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. Third Party Beneficiaries. The provisions of this Agreement are intended to benefit only the Transfer Agent and their respective permitted successors and assigns. No rights shall be granted to any other person by virtue of this agreement, and there are no third party beneficiaries hereof. Survival. All provisions regarding indemnification, warranty, liability and limits thereon, and confidentiality and protection of proprietary rights and trade secrets shall survive the termination of this Agreement. 19.10 Priorities. In the event of any conflict, discrepancy, or ambiguity between the terms and conditions contained in this Agreement and any schedules or attachments hereto, the terms and conditions contained in this Agreement shall take precedence. 21 Kampen America Capital, Inc. dated November 12, 1997 and May 14, 1998 (attached as Exhibit C), which shall be part of this Agreement for all Customers. 19.12 Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by one of its officers thereunto duly authorized, all as of the date first written above. CERTAIN VAN KAMPEN CLOSED END FUNDS By: /s/ John L Sullivan --------------------------------- Name: John L Sullivan Title: Treasurer EQUISERVE, INC. EQUISERVE TRUST COMPANY, N.A. ON BEHALF OF BOTH ENTITIES: By: /s/ Dennis V. Moccia --------------------------------- Name: Dennis V. Moccia Title: Managing Director 22 FEE AND SERVICE SCHEDULE FOR STOCK TRANSFER SERVICES BETWEEN CERTAIN VAN KAMPEN CLOSED END FUNDS AND EQUISERVE, INC. AND EQUISERVE TRUST COMP ANY, N.A. TERM This Fee and Service Schedule is by and between, EquiServe, Inc. and EquiServe Trust Company" N.A. (collectively, the "Transfer Agent") and Certain Van Kampen Closed End Funds (hereinafter referred to collectively as the ("Customers"), or individually as the Customer), whereby the Transfer Agent will perform the following services for the Common Stock of each Customer. The term of this Fee and Service Schedule shall be for a period commencing from January 1, 2002, the effective date of this Fee and Service Schedule, for a period of two years and seven months, ending July 31, 2004. FEES AND SERVICES Transfer Agent and Registrar Fee $ 750.00 Per Month Per Customer $ 6.00 Per Open Registered Shareholder Account Per Annum $ 0.00 Per Closed Shareholder Account Per Annum, up to 20,000 closed accounts per year. Closed accounts maintained in excess of 20,000 will be billed at $5.00 per account per annum. $ 0.50 Per Participant Dividend Reinvestment or Cash Investment Transaction Includes the standard Transfer Agent and Registrar services as stated in the following sections: Administrative Services - Annual administrative services as Transfer Agent and Registrar for Customers Assignment of Account Administrator and Administrative Support Coordinator - Remote inquiry access to shareholder records (technology and access charges to be billed separately as out-of-pocket pass-through expenses) Page 1 ACCOUNT MAINTENANCE - Maintaining record shareholder accounts to include the following services: - Processing of new shareholder accounts - Posting address changes and other routine file maintenance adjustments - Posting all transactions, including debit and credit certificates to the stockholder file - Researching and responding to registered shareholder inquiries (former American Capital funds only) - Purging closed accounts on an annual basis CERTIFICATE ISSUANCE - Issuance, cancellation and registration of up to 5,000 certificates per fund per annum, additional to be billed at $1.25 each, to include the following services: - Production and mailing of daily transfer reports - Processing of all legal transfers including New York window and mail items - Combining certificates into large and/or smaller denominations - Replacing lost certificates - Placing, maintaining and removing stop-transfer notations ANNUAL MEETING SERVICES - Preparing a full stockholder list as of the Annual Meeting Record Date - Printing and addressing proxy cards for all registered shareholders - Enclosing and mailing proxy card, proxy statement, return envelope and Annual Report to all registered shareholders - Receiving, opening and examining returned proxies - Tabulating returned proxies - Attending Annual Meeting as Inspector of Election (Travel expenses billed as incurred) - Preparing a final Annual Meeting List reflecting how each account has voted on each proposal MAILING AND REPORTING SERVICES - Preparing a set of mailing labels for registered shareholders per fund three (3) times per annum - Preparing three (3) standard reports per Customer at the Customer's discretion per annum DIVIDEND SERVICES As Dividend Disbursing Agent and Paying Agent (checks to be drawn on State Street Bank and funding must be via ACH on the mail date), State Street will perform the following dividend related services: Page 2 - Preparing and mailing up to 12 dividend checks per annum (check includes address change feature) with an additional enclosure with each dividend check - Direct deposit of dividends via ACH (Additional fee of $150.00 per fund per dividend will be billed for ACH services) - Preparing a hardcopy dividend list as of each dividend record date - Preparing and filing Federal Information Returns (Form 1099) of dividends paid in a year and mailing a statement to each stockholder - Preparing and filing State Information Returns of dividends paid in a year to stockholders resident within such state - Preparing and filing annual withholding return (Form 1042) and payments to the government of income taxes withheld from Non-Resident Aliens - Replacing lost dividend checks - Providing photocopies of canceled checks when requested - Reconciling paid and outstanding checks Coding "undeliverable" accounts to suppress mailing dividend checks to same, per SEC regulations Processing and recordkeeping of accumulated uncashed dividends Furnishing requested dividend information to stockholders Performing the duties as required by the Interest and Dividend Tax Compliance Act of 1983 DIVIDEND REINVESTMENT SERVICES - Processing reinvestment and/or cash investment transactions of Dividend Reinvestment Plan (DRP) participant accounts - Preparing and mailing up to 12 dividend reinvestment/ cash investment statements annually with an additional enclosure to each DRP participant - Maintaining DRP accounts and establishing new participant accounts Processing termination/sale requests - Processing withdrawal requests - Supplying summary reports for each reinvestment/investment to Fund Preparing and mailing Form 1099, Form 1042, and Form 1099B to participants and related filings with the IRS Page 3 ITEMS NOT COVERED ADDITIONAL SERVICES Items not included in the fees and services set forth in this Fee and Service Schedule including, but not limited to, services associated with the payment of a stock dividend, rights offering, corporate reorganization, or any services associated with a special project are to be billed separately, on an appraisal basis. Services required by legislation or regulatory fiat which become effective after the date of acceptance of this Fee and Service Schedule shall not be a part of the Standard Services and shall be billed by appraisal. All additional services not specifically covered under this Fee and Service Schedule will be billed by appraisal, as applicable. OUT OF POCKET EXPENSES All direct out-of-pocket expenses will be billed as incurred. A list of applicable out-of-pocket expenses is attached as Exhibit A. ACCEPTANCE In witness whereof, the parties hereto have caused this Fee and Service Schedule to be executed by their respective officers, hereunto duly agreed and authorized, as of the effective date of this Fee and Service Schedule. EQUISERVE, INC. CERTAIN VAN KAMPEN CLOSED END EQUISERVE TRUST COMPANY, N.A. FUNDS On Behalf of Both Entities: By: /s/ Dennis V. Moccia By: /s/ John L Sullivan --------------------------- ------------------------------- Name: Dennis V. Moccia Name: John L Sullivan Title: Managing Director Title: Treasurer THIS FEE AND SERVICE SCHEDULE SHALL SERVE AS AN ATTACHMENT TO THE TRANSFER AGENCY AND STOCK TRANSFER SERVICES AGREEMENT BETWEEN THE PARTIES. Page 4 EXHIBIT A OUT OF POCKET EXPENSES Out of pocket expenses associated with, but not limited to, the following are NOT included in the fees quoted in this Fee and Service Schedule and are billable as incurred. POSTAGE (Outgoing and Business Reply) ENVELOPES LABELS FORMS, STATIONERY AND PROXY CARDS FULFILLMENT PROXY PROOF SET-UP RECORD RETENTION INSURANCE PREMIUMS (Mailing certificates) DELIVERY AND FREIGHT CHARGES (including overnight delivery; Airborne Express, FedEx, etc.) TYPESETTING (proxy cards, due diligence mailings, etc.) DESTRUCTION OF EXCESS/OBSOLETE MATERIAL DTC TRADE TRANSACTIONS EXPENSES (Treasury buybacks, etc.) CUSTODY SETTLEMENT CHARGES TELEPHONE USAGE AND LINE EXPENSES LOST SHAREHOLDER PROGRAM DATABASE SEARCH PLEASE NOTE: Other out of pocket expenses could be incurred depending on the services utilized. Good funds to cover postage expenses in excess of $5,000 for shareholder mailings must be received in full by 12:00 p.m. Eastern Time on the scheduled mailing date. Postage expenses less than $5,000 will be billed as incurred. SKU numbers are required on all material received for mailing. A special handling fee of $10.00 per box will be assessed for all material not marked with a SKU number. Such material includes, but is not limited to: proxy statements, annual and quarterly reports, and news releases. Overtime charges will be assessed in the event of late delivery of material for mailings to shareholders unless the mail date is rescheduled. Please see attached Exhibit B regarding packaging and shipping materials to EquiServe. Page 5 EXHIBIT B SPECIFICATIONS FOR PACKING AND SHIPPING MATERIALS TO EQUISERVE PLEASE FOLLOW THESE PACKING AND SHIPPING GUIDELINES TO HELP US HANDLE YOUR MATERIALS MOST EFFICIENTLY. FOR SPECIFICS CONCERNING YOUR COMPANY'S MAILING, PLEASE CONTACT YOUR CLIENT SERVICES TEAM. DELIVERY TIMING: Please ship your materials to arrive according to the schedule listed below. Some larger mailings will require more time. If more time is needed, our client service team will work with you to schedule the appropriate amount of time for processing your mailing. 1 -10,000 Noon 2 business days prior to the mail date 10,000 -25,000 By 5 p.m. 3 business days prior to the mail date 25,000 -50,000 By 5 p.m. 4 business days prior to the mail date 50,001 + Acct. Manager will establish delivery schedule with Client and Output Services - - SHIPPING ADDRESSES: EQUISERVE: Raritan Center, 118 Fernwood Avenue, Edison NJ 08837-3857 OUTPUT TECHNOLOGY SOLUTIONS: Eastern Region, 46 Harvard Street, Westwood MA 02090-2398 OUTPUT TECHNOLOGY SOLUTIONS: Hartford Region, 125 Ellington Road So. Windsor CT 06074-4112 CIC: 130 Commerce Road, Carlstadt NJ 07072 STANDARD REGISTER: Affiliated Warehouse, Inc., 353 Howard St, Brockton MA 02302 - - RECEIVING HOURS: Monday through Friday, 8:00 a.m. to 4:00 p.m. WITH ADVANCE NOTICE, WE OFFER EXTENDED DOCK HOURS DURING PROXY SEASON. TO ARRANGE EXTENDED HOURS (AFTER 4:00 P.M. AND WEEKENDS) PLEASE CONTACT YOUR CLIENT SERVICES TEAM. - - DOCUMENTATION: Every shipment, including courier deliveries, needs proper documentation: a delivery receipt AND a packing list. Both should include the following information: 1. NAME OF CLIENT 2. DESCRIPTION OF MATERIAL 3. SKU OR FORM NUMBER (SEE ATTACHED) 4. TOTAL NUMBER OF BOXES/PACKAGES DELIVERED 5. QUANTITY PER BOX/PACKAGE 6. TOTAL NUMBER OF PIECES DELIVERED/VOLUME 7. IDENTIFICATION OF PARTIAL SHIPMENT 8. PURCHASE ORDER NUMBER IF AVAILABLE Page 6 You can prepare one document and make copies to use for both purposes. Attach the packing list to the outside of one box in an envelope or plastic pouch. PACKING POINTERS: DO NOT SHRINK-WRAP MATERIALS INDIVIDUALLY OR IN BUNDLES. THIS INCLUDES ANNUAL REPORTS. Use Only paper bands if sending banded material. Please do not use string, strapping or rubber bands. When bundling or grouping material, please make sure that ALL pieces in the bundle or group face in the same direction. Box or package each type of enclosure separately. DO NOT MIX ENCLOSURES IN CARTONS. Label cartons to show the type of material and number of pieces. Attach a sample of the material to the outside of each carton. Maximum weight per carton should not exceed 50 lbs. - - QUARTERLY REPORTS, FOLDED PROXY STATEMENTS AND NEWSLETTERS: Paper-band material in groups of 50 to 100. Use paper bands that are at least 2-1/2 to 3 inches wide. Place cardboard sheets between each layer. To eliminate the need for cardboard, you can crisscross the groups of reports or statements. - - ANNUAL REPORTS AND FLAT PROXY STATEMENTS: Layer in groups of 50 Annual Reports. DO NOT SHRINK-WRAP INDIVIDUAL PIECES OR GROUPS OF PIECES. Place cardboard sheets between each layer. To eliminate the need for cardboard, you can crisscross the groups of reports or statements. DO NOT PLACE LAYERS OF PAPER OR CARDBOARD BETWEEN INDIVIDUAL REPORTS. - - USING SKIDS: Place only one type of material on each skid. If you load cartons on a skid, each carton should contain the same number of pieces. Maximum skid size: 40" x 48" Maximum height: 54" - including pallet Maximum weight: 3,000 lbs. Pallet must be forklift accessible on the 40" side. Pallet and contents should be shrink-wrapped to prevent spillage - - USING SKID PACKS OR POWER PACKS: Most printers are able to wrap material neatly and securely on skids without using cartons. We strongly recommend this packing method, especially for clients with shareholder bases of more than 40,000. Skid packs, also known as Power packs or Gaylords, cut expenses and processing time. Unnecessary cartons cost money, delay processing and must be disposed of for recycling. Skid packs can be used for nearly any kind of mailing enclosure, including quarterly and annual reports, proxy statements and newsletters. Using skid packs or Power packs (continued): Page 7 Ship only 90% of your material on skid packs. Ship the remaining 10% in cartons. We will use the skid packs first for better inventory control and easier return shipping of leftover material. Have your printer shrink-wrap the cardboard sides of each skid pack for added protection against inclement weather. (Don't shrink-wrap individual items or bundles of items.) SURPLUS MATERIAL: We regret that we do not have warehousing facilities to store surplus material after your mail date. Please let your client service team know BEFORE your mailing whether you would like us to dispose of your material or ship it back at your expense. Special arrangements can be made by contacting your client services team. Page 8 SKU NUMBER INFORMATION WHAT IS A SKU NUMBER? A SKU number is a unique Stock Keeping Unit Number assigned and printed on each different type of material mailed. It is anticipated that all print vendors will begin incorporating unique and different Stock Keeping Unit Numbers on all material delivered to Print/Mail locations. WHY UTILIZE SKU NUMBERS? In an effort to continuously improve service to our mutual clients, enhanced quality control practices for inventory tracking purposes have been implemented at Print/Mail locations. Improved client specific inventory tracking is made possible through the identification of a unique stock tracking number by printers. WHO ASSIGNS THE SKU NUMBER? The recommended SKU Number pattern is as follows: Company number or Issue ID (client identification numbers) followed by the specific material abbreviation, and the current year. This number will be communicated by the client for whom the material is being printed, and assigned by the Account Administrator at EquiServe. If you need additional information on a SKU Number, please contact the Account Administrator at EquiServe (781) 575-2000. SAMPLE SKU NUMBER PATTERNS: THE ABC COMPANY 1998 ANNUAL REPORT "0707-AR-98" XYZ Financial 1998 Proxy Statement "XYZCM- PS- 98" ARE THERE SPECIFIC LIMITATIONS AND PRINTING CONSIDERATIONS? YES! CHARACTER LIMITATION OF 15 SPACES. - DASHES RECOMMENDED (TO BETTER SEPARATE KEY INFORMATION). - EACH DASH REPRESENTS A CHARACTER LIMITATION. - POSITION OF NUMBER: Booklet style material; reverse side of document, lower right corner. One page material; front of document, lower right corner. Page 9 APPENDIX A Van Kampen Advantage Municipal Income Trust Van Kampen Advantage Municipal Income Trust II Van Kampen Advantage Pennsylvania Municipal Income Trust Van Kampen Bond Van Kampen California Municipal Trust Van Kampen California Quality Municipal Trust Van Kampen California Value Municipal Income Trust Van Kampen Florida Quality Municipal Trust Van Kampen High Income Trust Van Kampen High Income Trust II Van Kampen Income Trust Van Kampen Investment Grade Municipal Trust Van Kampen Massachusetts Value Municipal Income Trust Van Kampen Municipal Income Trust Van Kampen Municipal Opportunity Trust Van Kampen Municipal Opportunity Trust II Van Kampen Municipal Trust Van Kampen New York Quality Municipal Trust Van Kampen New York Value Municipal Income Trust Van Kampen Ohio Quality Municipal Trust Van Kampen Ohio Value Municipal Income Trust Van Kampen Pennsylvania Quality Municipal Trust Van Kampen Pennsylvania Value Municipal Income Trust Van Kampen Select Sector Municipal Trust Van Kampen Strategic Sector Municipal Trust Van Kampen Trust for Investment Grade California Municipals Van Kampen Trust for Investment Grade Florida Municipals Van Kampen Trust for Investment Grade 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 Trust for Insured Municipals Van Kampen Value Municipal Income Trust Van Kampen Senior Income Trust EX-99.(13)(B) 14 c93084a1exv99wx13yxby.txt AUCTION AGENCY AGREEMENT EXHIBIT 13(b) - -------------------------------------------------------------------------------- AUCTION AGENCY AGREEMENT between VAN KAMPEN MERRITT MUNICIPAL TRUST and BANKERS TRUST COMPANY Dated as of December 10, 1991 Relating to Auction Preferred Shares, Series A, B, C and D of VAN KAMPEN MERRITT MUNICIPAL TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE SECTION 1 DEFINITIONS AND RULES OF CONSTRUCTION..........................................................1 1.1 Terms Defined by Reference to APS Provisions......................................................................1 1.2 Terms Defined Herein..................................................................1 1.3 Rules of Construction.................................................................3 SECTION 2 THE AUCTION....................................................................................3 2.1 Purpose; Incorporation by Reference of Auction Procedures and Settlement Procedures................................................3 2.2 Preparation of Each Auction; Maintenance of Registry of Beneficial Owners.......................................................4 2.3 Information Concerninq Rates..........................................................7 2.4 Auction Schedule......................................................................11 2.5 Designation of Special Dividend Period................................................12 2.6 Allocation of Taxable Income..........................................................14 2.7 Failure to Deposit....................................................................15 2.8 Broker-Dealers........................................................................17 2.9 Ownership of Shares of APS............................................................18 2.10 Access to and Maintenance of Auction Records.....................................................................18 2.11 Dividend and Redemption Price Deposit.................................................19 SECTION 3 THE AUCTION AGENT AS DIVIDEND AND REDEMPTION PRICE DISBURSING AGENT........................................................19 SECTION 4 THE AUCTION AGENT AS TRANSFER AGENT AND REGISTRAR................................................................................20 4.1 Issue Of Share Certificates...........................................................20
i 4.2 Registration of Transfer of Shares....................................................20 4.3 Removal of Legend on Restricted Shares................................................20 4.4 Lost Share Certificates...............................................................20 4.5 Disposition of Cancelled Certificates; Record Retention......................................................20 4.6 Share Transfer Books..................................................................21 4.7 Return of Funds.......................................................................21 SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE FUND.....................................................21 SECTION 6 THE AUCTION AGENT..............................................................................23 6.1 Duties and Responsibilities...........................................................23 6.2 Rights of the Auction Agent...........................................................23 6.3 Auction Agent's Disclaimer............................................................24 6.4 Compensation, Expenses and Indemnification.....................................................................24 SECTION 7 MISCELLANEOUS..................................................................................25 7.1 Term of Agreement.....................................................................25 7.2 Communications........................................................................25 7.3 Entire Agreement......................................................................26 7.4 Benefits..............................................................................27 7.5 Amendment; Waiver.....................................................................27 7.6 Successors and Assigns................................................................27 7.7 Limitation of Liability...............................................................27 7.8 Severability..........................................................................27 7.9 Execution in Counterparts.............................................................27 7.10 Governing Law.........................................................................28
ii EXHIBITS EXHIBIT A - Broker-Dealer Agreement EXHIBIT B - Form of Master Purchaser's Letter EXHIBIT C - Settlement Procedures EXHIBIT D - Form of APS Provisions EXHIBIT E - Form of Notice of Auction Dates EXHIBIT F - Form of Notice of Proposed Change of Length of Rate Period EXHIBIT G - Form of Notice of Change of Length of Rate Period EXHIBIT H - Form of Notice of Determination Not to Change Length of Rate Period EXHIBIT I - Form of Notice of Cure of Failure to Deposit EXHIBIT J - Form of Notice of Subsequent Cure of Failure to Deposit EXHIBIT K - Form of Notice of Capital Gain and Taxable Ordinary Income Dividend iii AUCTION AGENCY AGREEMENT dated as of December 10, 1991 between VAN KAMPEN MERRITT MUNICIPAL TRUST, a Massachusetts business trust (the "Fund"), and Bankers Trust Company, a New York banking corporation (the "Auction Agent"). WHEREAS, the Fund proposes to issue four series of preferred shares of beneficial interest, par value $.01 per share, liquidation preference $50,000 per share, designated Auction Preferred Shares (the "APS") pursuant to the APS Provisions (as hereinafter defined) and desires that the Auction Agent perform certain duties in connection with the APS upon the terms and subject to the conditions of this Agreement, and hereby appoints the Auction Agent to act in the capacities set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Fund and the Auction Agent agree as follows: 1. Definitions and Rules of Construction. 1.1 Terms Defined by Reference to APS Provisions. Capitalized terms not defined herein shall have the respective meanings specified in the APS Provisions. 1.2 Terms Defined Herein. As used herein and in the Settlement Procedures, the following terms shall have the following meanings, unless the context otherwise requires: (a) "Agent Member" of any Person shall mean the member of, or participant in, the Securities Depository that will act on behalf of a Bidder and is identified as such in such Bidder's Master Purchaser's Letter. (b) "APS Provisions" shall mean the Certificate of Vote of the Fund's Board of Trustees establishing the series of shares of APS pursuant to the Amended and Restated Declaration of Trust of the Fund and attached hereto as Exhibit D. (c) "Auction" shall have the meaning specified in Section 2.1 hereof. (d) "Auction Procedures" shall mean the auction procedures constituting Part II of the form of APS provisions. (e) "Authorized Officer" shall mean each Senior Vice President, Vice President, Assistant Vice President, Assistant Treasurer and Assistant Secretary of the Auction Agent and every other officer or employee of the Auction Agent designated as an "Authorized Officer" for purposes hereof in a communication to the Fund. (f) "Broker-Dealer" shall mean any broker-dealer, commercial bank or other entity permitted by law to perform the functions of a Broker-Dealer that is a member of, or a participant in, the Securities Depository or is an affiliate of such member or participant, has been selected by the Fund and has entered into a Broker-Dealer Agreement that remains effective. (g) "Broker-Dealer Agreement" shall mean each agreement among the Fund, the Auction Agent and a Broker-Dealer substantially in the form attached hereto as Exhibit A. (h) "Existing Holder," when used with respect to shares of any series of APS, shall mean a Person who has signed a Master Purchaser's Letter and is listed as the beneficial owner of such shares of APS in the records of the Auction Agent. (i) "Fund Officer" shall mean the Chairman of the Board of Trustees of the Fund, the President, each Vice President (whether or not designated by a number or word or words added before or after the title "Vice President"), the Secretary, the Treasurer, each Assistant Secretary and each Assistant Treasurer of the Fund and every other officer or employee of the Fund designated as a "Fund Officer" for purposes hereof in a notice to the Auction Agent. (j) "Master Purchaser's Letter" shall mean a letter addressed to the Fund, the Auction Agent, a Broker-Dealer and an Agent Member, substantially in the form attached hereto as Exhibit B. (k) "Potential Holder," when used with respect to shares of any series of APS, shall mean any Person, including any Existing Holder of shares of such 2 series of APS, (i) who shall have executed a Master Purchaser's Letter and (ii) who may be interested in acquiring shares of such series of APS (or, in the case of an Existing Holder of shares of such series of APS, additional shares of such series of APS). (l) "Settlement Procedures" shall mean the Settlement Procedures attached hereto as Exhibit C. (m) "Underwriters" shall mean Goldman, Sachs & Co., Smith Barney, Harris Upham & Co., PaineWebber Incorporated, Prudential Securities Incorporated and any other person named as an underwriter of the APS in the Underwriting Agreement or any schedule thereto. (n) "Underwriting Agreement" shall mean the Underwriting Agreement dated December 5, 1991 among the Fund and the Underwriters. 1.3 Rules of Construction. Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement: (a) Words importing the singular number shall include the plural number and vice versa. (b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect. (c) The words "hereof", "herein", "hereto" and other words of similar import refer to this Agreement as a whole. (d) All references herein to a particular time of day shall be to New York City time. 2. The Auction. 2.1 Purpose; Incorporation by Reference of Auction Procedures and Settlement Procedures. (a) The APS Provisions provide that the Applicable Rate per annum for each series of APS for each Subsequent Dividend Period after the Initial Dividend Period with respect to each series of APS shall, except under certain conditions, be equal to the rate per annum that a bank or trust company 3 appointed by the Fund advises has resulted on the Business Day preceding the first day of such Subsequent Dividend Period from implementation of the Auction Procedures for such series. Each periodic implementation of the Auction Procedures is hereinafter referred to as an "Auction." The Board of Trustees has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures for each series of the APS. The Auction Agent accepts such appointment and agrees to follow the procedures set forth in this Section 2 and the Auction Procedures for the purpose of determining the Applicable Rate for each series of APS for each Subsequent Dividend Period thereof for which the Applicable Rate is to be determined by an Auction. (b) All of the provisions contained in the Auction Procedures and the Settlement Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part hereof to the same extent as if such provisions were fully set forth herein. 2.2 Preparation of Each Auction; Maintenance of Registry of Beneficial Owners. (a) Not later than seven days prior to the first Auction Date for the first series of APS, the Fund shall provide the Auction Agent with a list of the Broker-Dealers and a manually signed copy of each Broker-Dealer Agreement for execution by the Auction Agent. Not later than seven days prior to any Auction Date for any series of APS for which any change in such list of Broker-Dealers is to be effective, the Fund will notify the Auction Agent in writing of such change and, if any such change involves the addition of a Broker-Dealer to such list, shall cause to be delivered to the Auction Agent for execution by the Auction Agent a Broker-Dealer Agreement signed by such Broker-Dealer; provided, however, that if the Fund proposes to designate any Special Dividend Period of any series of APS pursuant to Section 4 of Part I of the APS Provisions, not later than 11:00 A.M., New York City time, on the Business Day next preceding the Auction next preceding the first day of such Special Dividend Period, the Fund shall provide the Auction Agent with a list of the Broker-Dealers for such series and a manually signed copy of each Broker-Dealer Agreement or a new Schedule A to the Broker-Dealer Agreement (which Schedule A shall replace and supersede any previous Schedule A to such Broker-Dealer Agreement) with each Broker-Dealer for such series. The Auction Agent and the Fund shall have entered into a Broker- 4 Dealer Agreement with each Broker-Dealer prior to the participation of any such Broker-Dealer in any Auction. (b) In the event that any Auction Date for any series of APS shall be changed after the Auction Agent shall have given the notice referred to in clause (vi) of paragraph (a) of the Settlement Procedures, or after the notice referred to in Section 2.5(a) hereof, if applicable, the Auction Agent, by such means as the Auction Agent deems practicable, shall give notice of such change to the Broker-Dealers for such series not later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date. (c) (i) The Auction Agent shall maintain a registry of the beneficial owners of the shares of each series of APS who shall constitute Existing Holders of shares of such series of APS for purposes of Auctions and shall indicate thereon the identity of the respective Broker-Dealer of each Existing Holder, if any, on whose behalf such Broker-Dealer submitted the most recent Order in any Auction which resulted in such Existing Holder continuing to hold or purchasing shares of such series of APS. The Auction Agent shall keep such registry current and accurate. The Fund shall provide or cause to be provided to the Auction Agent at or prior to the Date of Original Issue of each series of APS a list of the initial Existing Holders of the shares of each such series, the number of shares purchased by each such Existing Holder and the respective Broker-Dealer of each such Existing Holder or the affiliate thereof through which each such Existing Holder purchased such shares. The Auction Agent shall advise the Fund in writing whenever the number of Existing Holders is 500 or more. The Auction Agent may rely upon, as conclusive evidence of the identities of the Existing Holders of shares of any series of APS, (A) such list, (B) the results of Auctions and (C) notices from any Existing Holder, the Agent Member of any Existing Holder or the Broker-Dealer of any Existing Holder as described in the first sentence of Section 2.2(c)(iii) hereof. 5 (ii) In the event of any partial redemption of any series of APS, the Auction Agent shall, at least two Business Days prior to the next Auction for such series, request the Agent Member of each Existing Holder of shares of APS of such series to disclose to the Auction Agent (upon selection by such Agent Member of the Existing Holders whose shares of APS of such series are to be redeemed) the number of shares of APS of such series, if any, of such Existing Holder which are subject to such redemption, provided the Auction Agent has been furnished with the name and telephone number of a person or department at such Agent Member from which it shall request such information. Upon any refusal of an Agent Member to release such information, the Auction Agent shall deliver to such Agent Member a facsimile copy of the Existing Holder's Master Purchaser's Letter, which authorizes and instructs such Agent Member to release such information to the Auction Agent. In the absence of receiving any such information with respect to an Existing Holder, from such Existing Holder's Agent Member or otherwise, the Auction Agent may continue to treat such Existing Holder as the beneficial owner of the number of shares of APS of such series shown in the Auction Agent's registry. (iii) The Auction Agent shall be required to register a transfer of shares of APS of any series from an Existing Holder of such shares of APS to another Person only if such transfer is made to a Person that has delivered, or on whose behalf has been delivered, a signed Master Purchaser's Letter to the Auction Agent and if (A) such transfer is pursuant to an Auction or (B) the Auction Agent has been notified in writing (I) in a notice substantially in the form of Exhibit D to the Broker-Dealer Agreements by such Existing Holder, the Agent Member of such Existing Holder or the Broker-Dealer of such Existing Holder of such transfer or (II) in a notice substantially in the form of Exhibit E to the Broker-Dealer Agreements by the Broker-Dealer of any Person that purchased or sold such APS in an Auction 6 of the failure of such shares of APS to be transferred as a result of such Auction. The Auction Agent is not required to accept any such notice for an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day preceding such Auction. (iv) The Auction Agent is not required to accept the Master Purchaser's Letter of any Potential Holder who wishes to submit a Bid for the first time in an Auction or of any Potential Holder or Existing Holder who wishes to amend its Master Purchaser's Letter unless such letter or amendment is received by the Auction Agent by 3:00 P.M. on the Business Day preceding such Auction. (d) The Auction Agent may request the Broker-Dealers, as set forth in the Broker-Dealer Agreements, to provide the Auction Agent with a list of their respective customers that such Broker-Dealers believe are Existing Holders of shares of any series of APS. The Auction Agent shall keep confidential such registry of Existing Holders and shall not disclose the identities of the Existing Holders of such shares of APS to any Person other than the Fund and the Broker-Dealer that provided such information. 2.3 Information Concerninq Rates. (a) The Applicable Percentage on the date of this Agreement for APS is 110%. If there is any change in the credit rating of APS by either of the rating agencies (or substitute or successor rating agencies) referred to in the definition of "Applicable Percentage" resulting in any change in the Applicable Percentage for APS after the date of this Agreement, the Fund shall notify the Auction Agent in writing of such change in the Applicable Percentage prior to 12:00 Noon on the Business Day prior to the next Auction Date for any series of APS succeeding such change. If the Fund designates all or a portion of any dividend on shares of any series of APS to consist of net capital gains or other income taxable for federal income tax purposes, it will indicate, in its notice in the form of Exhibit K hereto to the Auction Agent pursuant to Section 2.6 hereof, the Applicable Percentage for such series to be in effect for the Auction Date on which the dividend rate for such dividend is to be fixed. In determining the Maximum Rate for any series of APS on any Auction 7 Date as set forth in Section 2.3(b)(i) hereof, the Auction Agent shall be entitled to rely on the last Applicable Percentage for APS of which it has most recently received notice from the Fund (or, in the absence of such notice, the percentage set forth in the first sentence of this paragraph (a)), except that if the Fund shall have notified the Auction Agent of an Applicable Percentage to be in effect for an Auction Date in accordance with the preceding sentence, the Applicable Percentage in effect for the next succeeding Auction Date of any series of APS shall be, unless the Fund notifies the Auction Agent of a change in the Applicable Percentage for such succeeding Auction Date pursuant to this Section 2.3(a), the Applicable Percentage that was in effect on the first preceding Auction Date for APS with respect to which the dividend, the rate for which was fixed on such Auction Date, did not include any net capital gains or other income taxable for federal income tax purposes. (b) (i) On each Auction Date for any series of APS, the Auction Agent shall deter-mine the Maximum Rate for such series. The Maximum Rate for any series of APS on any Auction Date shall be: (A) in the case of any Auction Date which is not the Auction Date immediately prior to the first day of any proposed Special Dividend Period designated by the Fund pursuant to Section 4 of Part I of the APS Provisions, the product of (1) the "AA" Composite Commercial Paper Rate on such Auction Date for the next Rate Period of such series and (2) the Applicable Percentage on such Auction Date, unless such series has or had a Special Dividend Period (other than a Special Dividend Period of 28 Rate Period Days or less) and an Auction at which Sufficient Clearing Bids existed has not yet occurred for a Minimum Dividend Period of such series after such Special Dividend Period, in which case the higher of: (1) the dividend rate on shares of such series for the then-ending Rate Period, and 8 (2) the product of x) the higher of (I) the "AA" Composite Commercial Paper Rate on such Auction Date for the then-ending Rate Period of such series, if such Rate Period consists of less than four Dividend Periods, or the Treasury Rate on such Auction Date for such Rate Period, if such Rate Period consists of four or more Dividend Periods and (II) the "AA" Composite Commercial Paper Rate on such Auction Date for such Special Dividend Period of such series, if such Special Dividend Period is less than four Dividend Periods, or the Treasury Rate on such Auction Date for such Special Dividend Period, if such Special Dividend Period consists of four or more Dividend Periods, and (y) the Applicable Percentage on such Auction Date; or (B) in the case of any Auction Date which is the Auction Date immediately prior to the first day of any proposed Special Dividend Period designated by the Fund pursuant to Section 4 of Part I of the APS Provisions, the product of (1) the highest of (x) the "AA" Composite Commercial Paper Rate on such Auction Date for the then-ending Rate Period of such series, if such Rate Period consists of four or more Dividend Periods, or the Treasury Rate on such Auction Date for such Rate Period, if such Rate Period consists of four or more Dividend Periods, (y) the "AA" Composite Commercial Paper Rate on such Auction Date for such Special Dividend Period of such series for which the Auction is being held, if such Special Dividend Period consists of less than four Dividend Periods, or the Treasury Rate on such Auction Date for such Special Dividend Period of such series for which the Auction is being held, if such Special Dividend Period consists of less than four Dividend Periods, and (z) the "AA" Composite 9 Commercial Paper Rate on such Auction Date for Minimum Dividend Periods and (2) the Applicable Percentage on such Auction Date. Not later than 9:30 A.M. on each Auction Date, the Auction Agent shall notify the Fund and the Broker-Dealers of the Maximum Rate so determined and the "AA" Composite Commercial Paper Rate(s) and Treasury Rate(s), as the case may be, used to make such determination. (ii) From and after a Failure to Deposit by the Fund during any Rate Period of any series of APS, until such failure is cured and a late charge, if applicable, is paid, in accordance with subparagraph (c)(i) of Section 2 of Part I of the APS Provisions, on the first day of each Rate Period of such series the Auction Agent shall determine the Treasury Rate for such Rate Period with four or more Dividend Periods and the "AA" Composite Commercial Paper Rate for Minimum Dividend Periods and Rate Periods with less than four Dividend Periods. Not later than 9:30 A.M. on each such first day, the Auction Agent shall notify the Fund of the applicable "AA" Composite Commercial Paper Rate and Treasury Rate. (iii) If any "AA" Composite Commercial Paper Rate or Treasury Rate, as the case may be, is not quoted on an interest basis, the Auction Agent shall convert the quoted rate to the interest equivalent thereof as set forth in the definition of such rate in the APS Provisions if the rate obtained by the Auction Agent is quoted on a discount basis, or if such rate is quoted on a basis other than an interest or discount basis the Auction Agent shall convert the quoted rate to an interest rate after consultation with the Fund as to the method of such conversion. (iv) If any "AA" Composite Commercial Paper Rate is to be based on rates supplied by Commercial Paper Dealers and one or more of the Commercial Paper Dealers shall not provide a quotation for the determination of 10 such "AA" Composite Commercial Paper Rate, the Auction Agent shall immediately notify the Fund so that the Fund can determine whether to select a Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers to provide the quotation or quotations not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers. The Fund shall promptly advise the Auction Agent of any such selection. (v) If any Treasury Rate is to be based on rates supplied by U.S. Government Securities Dealers and one or more of the U.S. Government Securities Dealers shall not provide a quotation for the determination of such Treasury Rate, the Auction Agent shall immediately notify the Fund so that the Fund can determine whether to select a Substitute U.S. Government Securities Dealer or Substitute U.S. Government Securities Dealers to provide the quotation or quotations not being supplied by any U.S. Government Securities Dealer or U.S. Government Securities Dealers. The Fund shall promptly advise the Auction Agent of any such selection. (c) The greater of the maximum marginal regular federal individual income tax rate applicable to ordinary income or the maximum marginal regular federal corporate income tax rate (the "Highest Marginal Rate") on the date of this Agreement is 34%. If there is any change in the Highest Marginal Rate, the Fund shall notify the Auction Agent in writing of such change prior to 12:00 Noon on the Business Day prior to the next Auction Date for APS succeeding such change. In determining the Maximum Rate for any series of APS on any Auction Date, the Auction Agent shall be entitled to rely on the Highest Marginal Rate of which it has most recently received notice from the Fund (or, in the absence of such notice, the percentage set forth in the first sentence of this paragraph (c)). 2.4 Auction Schedule. The Auction Agent shall conduct Auctions in accordance with the schedule set forth below. Such schedule may be changed by the Auction Agent with the consent of the Fund, which consent shall not be unreasonably withheld. The Auction Agent shall give written notice of any such change to each Broker-Dealer. Such notice shall be given prior to the close of 11 business on the Business Day next preceding the first Auction Date on which any such change shall be effective.
Time Event ---- ----- By 9:30 A.M. Auction Agent advises the Fund and Broker-Dealers of the applicable Maximum Rate and the "AA" Composite Commercial Paper Rate(s) and Treasury Rate(s), as the case may be, used in determining such Maximum Rate as set forth in Section 2.3(b)(i) hereof. 9:30 A.M. -- 1:30 P.M. Auction Agent assembles information communicated to it by Broker-Dealers as provided in Section 2(a) of the Auction Procedures. Submission Deadline is 1:30 P.M. Not earlier than 1:30 P.M. Auction Agent makes determinations pursuant to Section 3(a) of the Auction Procedures. By approximately 3:00 P.M. Auction Agent advises Fund of results of Auction as provided in Section 3(b) of the Auction Procedures. Submitted Bids and Submitted Sell Orders are accepted and rejected and shares of APS allocated as provided in Section 4 of the Auction Procedures. Auction Agent gives notice of Auction results as set forth in paragraph (a) of the Settlement Procedures.
2.5 Designation of Special Dividend Period. (a) The APS Provisions will provide that, subject to the Fund's option to designate a Special Dividend Period as 12 referred to in paragraph (b) of this section 2.5, (i) each Rate Period of any series of APS will be a Minimum Dividend Period (a duration of 7 Rate Period Days, subject to certain exceptions with respect to APS Series A and Aps Series C and a duration of 28 Rate Period Days, subject to certain exceptions with respect to APS Series B and APS Series D) and (ii) each Rate Period following a Rate Period of any series of APS that is other than a Minimum Dividend Period will be a Minimum Dividend Period. Not less than 10 nor more than 20 days prior to the last day of any such Rate Period that is not a Minimum Dividend Period, (i) the Fund shall deliver to the Auction Agent a notice of the Auction Date of the next succeeding Auction for such series in the form of Exhibit E hereto and (ii) the Auction Agent shall deliver such notice by first-class mail, postage prepaid, to each Existing Holder of shares of such series at the address specified in such Existing Holder's Master Purchaser's Letter and to the Broker-Dealers for such series as promptly as practicable after its receipt of such notice from the Fund. (b) Pursuant to the APS Provisions, the Fund may, at its option, designate a Special Dividend Period for any series of APS in the manner described in Section 4 of Part I of the APS Provisions. (i) If the Fund proposes to designate any succeeding Subsequent Dividend Period of any series of APS as a Special Dividend Period, (A) the Fund shall deliver to the Auction Agent a notice of such proposed Special Dividend Period in the form of Exhibit F hereto not less than 20 nor more than 30 days prior to the first day of such proposed Special Dividend Period and (B) the Auction Agent on behalf of the Fund shall deliver such notice by first-class mail, postage prepaid, to each Existing Holder of shares of such series of APS at the address specified in such Existing Holder's Master Purchaser's Letter and to the Broker-Dealers for such series as promptly as practicable after its receipt of such notice from the Fund. (ii) If the Board of Trustees determines to designate such succeeding Subsequent Dividend Period as a Special Dividend 13 Period, (A) the Fund shall deliver to the Auction Agent a notice of such determination in the form of Exhibit G hereto not later than 11:00 A.M. on the second Business Day next preceding the first day of such proposed Special Dividend Period and (B) the Auction Agent shall deliver such notice to the Broker-Dealers for such series not later than 3:00 P.M. on such second Business Day. (iii) If the Fund shall deliver to the Auction Agent a notice stating that the Fund has determined not to exercise its option to designate such succeeding Subsequent Dividend Period as a Special Dividend Period with respect to which it has delivered a notice in the form of Exhibit F hereto not later than 11:00 A.M. on the second Business Day next preceding the first day of such proposed Special Dividend Period, or shall fail to timely deliver either such notice or a notice in the form of Exhibit G hereto, the Auction Agent shall deliver a notice in the form of Exhibit H hereto to the Broker-Dealers for such series not later than 3:00 P.M. on such second Business Day. Such change in the length of any Rate Period shall not occur if (a) on the Auction Date next preceding the first day of such Special Dividend Period Sufficient Clearing Bids shall not exist or (b) a Failure to Deposit shall have occurred prior to such change with respect to shares of such series of APS and shall not have been cured in accordance with the APS Provisions. 2.6 Allocation of Taxable Income. The Fund may, at its option, designate all or a portion of any dividend on shares of any series of APS to consist of net capital gains or other income taxable for federal income tax purposes by delivering to the Auction Agent a notice in the form of Exhibit K hereto of such designation 15 days prior to the Auction Date on which the Applicable rate for such dividend is to be fixed. The Auction Agent will deliver such notice to the Broker-Dealers for such series on the Business Day following its receipt of such notice from the Fund. Within two Business Days after any Auction Date involving the allocation of income taxable for federal income tax purposes, the Auction Agent shall 14 notify each Broker-Dealer for the related series as to the dollar amount per share of such taxable income and income exempt from federal income taxation included in the related dividend. 2.7 Failure to Deposit. (a) If: (i) any Failure to Deposit shall have occurred with respect to shares of any series of APS during any Rate Period thereof (other than any Special Dividend Period consisting of four or more Dividend Periods or any Rate Period succeeding any Special Dividend Period consisting of four or more Dividend Periods during which a Failure to Deposit occurred that has not been cured); and (ii) prior to 12:00 Noon, New York City time, on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall have been cured in accordance with the next succeeding sentence and the Fund shall have paid to the Auction Agent a late charge equal to the sum of (A) if such Failure to Deposit consisted of the failure timely to pay to the Auction Agent the full amount of dividends with respect to any Dividend Period on the shares of such series, an amount computed by multiplying (1) 200% of the "AA" Composite Commercial Paper Rate for the Rate Period during which such Failure to Deposit occurs on the Dividend Payment Date for such Dividend Period by (2) a fraction, the numerator of which shall be the number of days for which such Failure to Deposit has not been cured in accordance with the next succeeding sentence (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator of which shall be 365, and applying the rate obtained against the aggregate liquidation preference of the outstanding shares of such series of APS and (B) if such Failure to Deposit consisted of the failure timely to pay to the Auction Agent the Optional Redemption Price or Mandatory Redemption Price, as the case may be, of the shares of such series of APS, if any, for which Notice of Redemption 15 has been given by the Fund pursuant to paragraph (b) of Section 3 of Part I of the APS Provisions, an amount computed by multiplying (x) 200% of the "AA" Composite Commercial Paper Rate for the Rate Period during which such Failure to Deposit occurs on the redemption date by (y) a fraction, the numerator of which shall be the number of days for which such Failure to Deposit was not cured in accordance with the next succeeding sentence (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit was cured) and the denominator of which shall be 365, and applying the rate obtained against the aggregate liquidation preference of the outstanding shares of such series of APS to be redeemed, then the Auction Agent shall deliver a notice in the form of Exhibit I hereto by first-class mail, postage prepaid, to the Broker-Dealers for such series not later than one Business Day after its receipt of the payment from the Fund curing such Failure to Deposit and such late charge. A Failure to Deposit with respect to any series of APS shall have been cured (if such Failure to Deposit is not solely due to the willful failure of the Fund to make the required payment to the Auction Agent) with respect to any Rate Period thereof if, not later than 12:00 Noon, New York City time, on the fourth Business Day preceding the Auction Date for the Rate Period subsequent to such Rate Period, the Fund shall have paid to the Auction Agent (A) all accumulated and unpaid dividends on the shares of such series of APS and (B) without duplication, the Optional Redemption Price or Mandatory Redemption Price, as the case may be, for the shares of such series of APS, if any, for which Notice of Redemption has been given by the Fund pursuant to paragraph (b) of Section 3 of Part I of the APS Provisions. (b) If: (i) any Failure to Deposit shall have occurred with respect to shares of any series of APS during a Rate Period thereof (other than any Special Dividend Period consisting of four or more Dividend Periods or any Rate Period succeeding any Special Dividend Period consisting of four or more Dividend 16 periods during which a Failure to Deposit occurred that has not been cured), and, prior to 12:00 Noon on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall not have been cured within the meaning of the last sentence of Section 2.7(a) hereof and the Fund shall not have paid to the Auction Agent the late charge described in such Section 2.7(a), but such Failure to Deposit shall subsequently be so cured; or (ii) any Failure to Deposit shall have occurred with respect to shares of any series of APS during a Special Dividend Period consisting of four or more Dividend Periods, or during any Rate Period succeeding any Special Dividend Period consisting of four or more Dividend Periods during which a Failure to Deposit occurred, and such Failure to Deposit shall subsequently have been cured within the meaning of the last sentence of Section 2.7(a) hereof, then the Auction Agent shall deliver a notice in the form of Exhibit J hereto to the Broker-Dealers for such series not later than one Business Day after the receipt of the payment from the Fund during such Failure to Deposit. Notwithstanding the foregoing, the Auction Agent shall conduct an Auction on an Auction Date which occurs simultaneously with the date of commencement of a Failure to Deposit. 2.8 Broker-Dealers. (a) Not later than 12:00 Noon on each Auction Date for any series of APS, the Fund shall pay to the Auction Agent an amount in cash equal to the aggregate fees payable to the Broker-Dealers for such series pursuant to Section 2.8 of the Broker-Dealer Agreements for such series. The Auction Agent shall apply such moneys as set forth in Section 2.8 of each such Broker-Dealer Agreement. (b) The Fund shall obtain the consent of the Auction Agent prior to selecting any Person to act as a Broker-Dealer, which consent shall not be unreasonably withheld. 17 (c) The Auction Agent shall terminate any Broker-Dealer Agreement as set forth therein if so directed by the Fund, provided that at least one Broker-Dealer Agreement would be in effect for each series of APS after such termination. (d) Subject to the Auction Agent's having consented to the selection of the relevant Broker-Dealer pursuant to Section 2.8(b) hereof, the Auction Agent shall from time to time enter into such Broker-Dealer Agreements with one or more Broker-Dealers as the Fund shall request, and shall enter into such schedules to any such Broker-Dealer Agreements as the Fund shall request, which schedules, among other things, shall set forth the series of APS to which such Broker-Dealer Agreement relates. 2.9 Ownership of Shares of APS. The Fund shall notify the Auction Agent if the Fund or any affiliate of the Fund acquires any shares of APS of any series. Neither the Fund nor any affiliate of the Fund shall submit any Order in any Auction for APS, except as set forth in the next sentence. Any Broker-Dealer that is an affiliate of the Fund may submit Orders in Auctions, but only if such Orders are not for its own account. For purposes of this Section 2.9, a Broker-Dealer shall not be deemed to be an affiliate of the Fund solely because one or more of the directors or executive officers of such Broker-Dealer or of any Person controlled by, in control of or under common control with such Broker-Dealer is also a trustee of the Fund. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 2.9. 2.10 Access to and Maintenance of Auction Records. The Auction Agent shall, upon the receipt of prior written notice from the Fund, afford to the Fund access at reasonable times during normal business hours to all books, records, documents and other information concerning the conduct and results of Auctions. The Auction Agent shall maintain records relating to any Auction for a period of six years after such Auction, and such records shall, in reasonable detail, accurately and fairly reflect the actions taken by the Auction Agent hereunder. 18 2.11 Dividend and Redemption Price Deposit. The Fund shall pay to the Auction Agent, not later than 12:00 noon, New York City time, (A) on the Business Day next preceding any Dividend Payment Date for such series, in funds available on such Dividend Payment Date in The City of New York, New York, the full amount of any dividend (whether or not earned or declared) to be paid on such Dividend Payment Date on any share of such series (B) on the Business Day next preceding any redemption date in funds available on such redemption date for such series in The City of New York, New York, the Redemption Price to be paid on such redemption date for any share of such series after notice of redemption is given as set forth in the Certificate of Vote. 3. The Auction Agent as Dividend and Redemption Price Disbursing Agent. The Auction Agent, as dividend and redemption price disbursing agent, shall pay to the Holders of shares of APS of any series (i) on each Dividend Payment Date for such series, dividends on the shares of APS of such series, (ii) on any date fixed for redemption of shares of APS of any series, the Redemption Price of any shares of such series called for redemption and (iii) any late charge related to any payment of dividends or Redemption Price, in each case after receipt of the necessary funds from the Fund with which to pay such dividends, Redemption Price or late charge. The amount of dividends for any Rate Period for any series of APS to be paid by the Auction Agent to the Holders of such shares of such series will be determined by the Fund as set forth in Section 2 of Part I of the APS Provisions with respect to such series. The Redemption Price of any shares to be paid by the Auction Agent to the Holders will be determined by the Fund as set forth in Section 3 of Part I of the APS Provisions with respect to such series. The Fund shall notify the Auction Agent in writing of a decision to redeem shares of any series of APS at least five days prior to the date a notice of redemption is required to be mailed to the Holders of the shares to be redeemed by paragraph (b) of Section 3 of Part I of the APS Provisions. Such notice by the Fund to the Auction Agent shall contain the information required by paragraph (b) of Section 3 of Part I of the APS Provisions to be stated in the notice of redemption required to be mailed by the Fund to such Holders. 19 4. The Auction Agent as Transfer Agent and Registrar. 4.1 Issue of Share Certificates. Upon the Date of Original Issue of each series of APS, one certificate representing all of the shares of such series issued on such date shall be issued by the Fund and, at the request of the Fund, registered in the name of Cede & Co. and Countersigned by the Auction Agent. 4.2 Registration of Transfer of Shares. Shares of each series of APS shall be registered solely in the name of the Securities Depository or its nominee. 4.3 Removal of Legend on Restricted Shares. All requests for removal of legends on shares of any series of APS indicating restrictions on transfer shall be accompanied by an opinion of counsel stating that such legends may be removed and such shares freely transferred, such opinion to be delivered under cover of a letter from a Fund Officer authorizing the Auction Agent to remove the legend on the basis of said opinion. 4.4 Lost Share Certificates. The Auction Agent shall issue and register replacement certificates for certificates represented to have been lost, stolen or destroyed upon the fulfillment of such requirements as shall be deemed appropriate by the Fund and the Auction Agent, subject at all times to provisions of law, the By-Laws of the Fund governing such matters and resolutions adopted by the Fund with respect to lost securities. The Auction Agent may issue new certificates in exchange for and upon the cancellation of mutilated certificates. Any request by the Fund to the Auction Agent to issue a replacement or new certificate pursuant to this Section 4.4 shall be deemed to be a representation and warranty by the Fund to the Auction Agent that such issuance will comply with such provisions of law and the By-Laws and resolutions of the Fund. 4.5 Disposition of Cancelled Certificates; Record Retention. The Auction Agent shall retain all share certificates which have been cancelled in transfer or exchange and all accompanying documentation in accordance with applicable rules and regulations of the Securities and Exchange Commission for two calendar years. Upon the expiration of this two-year period, the Auction Agent shall deliver to the Fund the cancelled certificates and accompanying documentation. The Fund also 20 shall undertake to furnish to the Securities and Exchange Commission and to the Board of Governors of the Federal Reserve System, upon demand, at either the principal office or at any regional office, complete, correct and current hard copies of any and all such records. There-after such records shall not be destroyed by the Fund without the concurrence of the Auction Agent. 4.6 Share Transfer Books. For so long as the Auction Agent, Bankers Trust Company is acting as the transfer agent for any series of APS pursuant to this Agreement, it shall maintain a share transfer book containing a list of the Holders of the shares of each series of APS, the number of shares of each series held by such Holders and the address of each Holder. The Auction Agent shall record in such share transfer books any change of address of a Holder upon notice by such Holder. In case of any request or demand for the inspection of the share transfer books of the Fund or any other books in the possession of the Auction Agent, the Auction Agent will notify the Fund and secure instructions as to permitting or refusing such inspection. The Auction Agent reserves the right, however, to exhibit the share transfer books or other books to any Person in case it is advised by its counsel that its failure to do so would be unlawful. 4.7 Return of Funds. Any funds deposited with the Auction Agent hereunder by the Fund for any reason, including but not limited to redemption of shares of APS of any series, that remain unpaid after ninety days shall be repaid to the Fund upon the written request of the Fund, together with interest, if any, earned thereon. 5. Representations and Warranties of the Fund. The Fund represents and warrants to the Auction Agent that: (a) the Fund has been duly organized and is subsisting as a voluntary association with transferable shares (commonly referred to as a business trust) under the laws of The Commonwealth of Massachusetts and has all necessary power and authority to execute and deliver this Agreement and to authorize, create and issue the shares of each series of APS; 21 (b) this Agreement has been duly and validly authorized, executed and delivered by the Fund and, assuming due authorization, execution and delivery by the Auction Agent, constitutes the legal, valid and binding obligation of the Fund subject, as to enforceability, to bankruptcy, insolvency, reorganization, moratorium, receivership or similar laws, whether statutory or decisional, relating to or affecting creditors' rights and to general equitable principles (regardless of whether enforcement is sought in equity or at law); (c) the form of the certificate evidencing the shares of APS complies with all applicable laws of The Commonwealth of Massachusetts; (d) the shares of APS, when issued, delivered and paid for on the Date of Original Issue as contemplated by the Underwriting Agreement, will have been duly authorized, validly issued, fully paid and nonassessable, except as provided under Massachusetts law: (e) assuming the Underwriters comply with their obligations under the Underwriting Agreement and that the purchasers of the APS comply with their obligations in the Master Purchaser's Letter, no consent, authorization or order of, or filing or registration with, any court, governmental agency or official (except such as have been obtained and such as may be required under the Securities Act of 1933, as amended, or the Investment Company Act of 1940, as amended, or under the blue sky or state securities laws) is required in connection with the execution and delivery of this Agreement or the issuance of the shares of the APS; and (f) the issuance and sale of the APS, the execution, delivery and performance of this Agreement, compliance by the Fund with all provisions hereof, and the consummation of the transactions contemplated hereby or by the Underwriting Agreement or the Broker-Dealer Agreements, will not conflict with, constitute a breach of any of the terms or provisions of, or a default under, or result in the creation or imposition of any material lien, charge or encumbrance upon any of the assets of the Fund pursuant to the terms of any agreement, indenture or instrument to which the Fund is a party or by which the Fund is bound, or result in a violation of the Declaration of Trust, APB Provisions or By-Laws of the Fund or 22 of any order, rule or regulation of any court or governmental agency having jurisdiction over the Fund or its property which conflict, breach, default, lien or violation, individually or in the aggregate, would have a material adverse effect on the business, financial position or results of operations of the Fund. 6. The Auction Agent. 6.1 Duties and Responsibilities. (a) The Auction Agent is acting solely as agent for the Fund hereunder and owes no fiduciary duties to any other Person by reason of this Agreement. (b) The Auction Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement and the Broker-Dealer Agreements, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent. (c) In the absence of bad faith or gross negligence on its part, the Auction Agent shall not be liable for any action taken, suffered, or omitted or for any error of judgment made by it in the performance of its duties under this Agreement except that the Auction Agent shall be liable for any error of judgment made in good faith if the Auction Agent shall have been grossly negligent in ascertaining the pertinent facts. (d) Any funds deposited with the Auction Agent hereunder by the Fund for any reason, including the payment of dividends or the redemption of shares of APS of any series, that remain with the Auction Agent after 90 days shall be repaid to the Fund upon the written request of the Fund, together with interest, if any, earned thereon. 6.2 Rights of the Auction Agent. (a) The Auction Agent may rely and shall be protected in acting or refraining from acting upon any communication authorized hereby and upon any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized hereby which the Auction Agent believes in good faith to have been given by the Fund or by any Broker-Dealer. 23 The Auction Agent may record telephone communications with the Fund or with any Broker-Dealer. (b) The Auction Agent may consult with counsel reasonably acceptable to the Fund and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Auction Agent shall not be required to advance, expend or risk its own funds or other-wise incur or become exposed to financial liability in the performance of its duties hereunder. (d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys and shall not be responsible for any misconduct on the part of any agent or attorney appointed by it with due care hereunder except as set forth above in Section 6.1(c). 6.3 Auction Agent's Disclaimer. The Auction Agent makes no representation as to the validity or adequacy of this Agreement (except as to the Auction Agent's duties hereunder and as to the due authorization, execution and delivery of this Agreement), the Broker-Dealer Agreements (except as to the Auction Agent's duties thereunder) or the shares of any series of APS. 6.4 Compensation, Expenses and Indemnification. (a) The Fund shall pay the Auction Agent from time to time reasonable compensation for all services rendered by it under this Agreement and the Broker-Dealer Agreements in such amounts as may be agreed to by the Fund and the Auction Agent from time to time. (b) The Fund shall reimburse the Auction Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Auction Agent in accordance with any provision of this Agreement and the Broker-Dealer Agreements (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any expense or disbursement attributable to its gross negligence or bad faith. 24 (c) The Fund shall indemnify the Auction Agent for and hold it harmless against, any loss, liability or expense incurred without gross negligence or bad faith on its part, arising out of or in connection with its agency under this Agreement and the Broker-Dealer Agreements, including the costs and expenses of defending itself against any claim or liability in connection with its exercise or performance of its duties hereunder and thereunder for which indemnification is provided by this subsection. 7. Miscellaneous. 7.1 Term of Agreement. (a) The term of this Agreement is unlimited unless it shall be terminated as provided in this Section 7.1. The Fund may terminate this Agreement any time by so notifying the Auction Agent in writing, provided that the Fund has entered into an agreement in substantially the form of this Agreement with a successor auction agent. The Auction Agent may terminate this Agreement upon written notice to the Fund, such termination to be effective on the earlier of (i) the date specified in such notice which shall not be earlier than 90 days after the giving of such notice or (ii) the date on which a successor trust company is appointed by the Fund pursuant to an agreement containing substantially the same terms and conditions as this Agreement. (b) Except as otherwise provided in this paragraph (b), the respective rights and duties of the Fund and the Auction Agent under this Agreement shall cease upon termination of this Agreement. The Fund's obligations under Section 6.4 hereof and its representations and warranties contained in Section 5 hereof and the Auction Agent's obligations and liabilities under Sections 2.10 and 4.5 hereof shall survive the termination hereof. Upon termination of this Agreement, the Auction Agent shall, at the Fund's request, promptly deliver to the Fund copies of all books and records maintained by it in connection with its duties hereunder. 7.2 Communications. Except for (a) communications authorized to be by telephone pursuant to this Agreement or the Auction Procedures and (b) communications in connection with Auctions (other than those expressly required to be in writing) and unless otherwise specified by the terms of this Agreement all notices, 25 requests and other communications to any party hereunder shall be in writing (including telecopy or similar writ- ing) given to such person at its address or telecopy number set forth below: If to the Company, Van Kampen Merritt addressed: Municipal Trust One Parkview Plaza Oakbrook Terrace, Illinois 60181 Attention: Treasurer Telephone No.: (708) 684-6000 With a copy sent to: Dennis McDonnell One Parkview Plaza Oakbrook Terrace, Illinois 60181 Telephone No.: (708) 684-6330 Telecopier No.: (708) 684-5967 If to the Auction Bankers Trust Company Agent, addressed: Corporate Trust and Agency Group Four Albany Street New York, New York 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6215 Telephone No.: (212) 250-6850 or to such other address as the party to whom the communication is addressed shall have previously communicated to the other party. Communications shall be given on behalf of the Fund by a Fund Officer and on behalf of the Auction Agent by an Authorized Officer. Communications shall be effective when received at the proper address. 7.3 Entire Agreement. This Agreement contains the entire agreement among the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or inferred, between the parties. 26 7.4 Benefits. Nothing herein, express or implied, shall give to any Person, other than the Fund, the Auction Agent and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim hereunder. 7.5 Amendment; Waiver. (a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, cancelled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. The Fund shall notify the Auction Agent and each Broker-Dealer of any change in the Fund's Declaration of Trust, as amended and restated as of the date hereof, prior to the effective date of any such change. (b) Failure of either party hereto to exercise any right or remedy hereunder in the event of a breach hereof by the other party shall not constitute a waiver of any such rights or remedies with respect to any subsequent breach. 7.6 Successors and Assigns. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors of each of the Fund and the Auction Agent. 7.7 Limitation of Liability. Pursuant to the provisions of Article V, Section 5.5 of the Fund's Declaration of Trust, as amended or restated as of the date hereof, this Agreement is entered into by the trustees of the Fund not individually, but as trustees under such Declaration of Trust and the obligations of the Fund hereunder are not binding upon any such trustees or shareholders of the Fund, individually, but bind only the trust estate. 7.8 Severability. If any clause, provision or section hereof shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any of the remaining clauses, provisions or sections hereof. 7.9 Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 27 7.10 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 28 IN WITNESS WHEREOF, the parties hereto have caused this Auction Agency Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written. VAN KAMPEN MERRITT MUNICIPAL TRUST By /s/ Dennis J. McDonnell ------------------------ Name: Dennis J. McDonnell Title: President BANKERS TRUST COMPANY By /s/ Anne Hartnett --------------------------------- Name: Anne Hartnett Title: Assistant Treasurer EXHIBIT A FORM OF BROKER-DEALER AGREEMENT EXHIBIT B FORM OF MASTER PURCHASER'S LETTER EXHIBIT C SETTLEMENT PROCEDURES EXHIBIT D FORM OF APS PROVISIONS EXHIBIT E VAN KAMPEN MERRITT MUNICIPAL TRUST NOTICE OF AUCTION DATE FOR AUCTION PREFERRED SHARES ("APS") NOTICE IS HEREBY GIVEN that the Auction Date of the next Auction for the APS Series __ of VAN KAMPEN MERRITT MUNICIPAL TRUST (the "Fund") is scheduled to be __ and the next Dividend Payment Date for the Fund's APS Series __ will be __. [A Failure to Deposit in respect of the APS Series __ currently exists. If such Failure to Deposit is not cured prior to 12:00 Noon on the fourth Business Day prior to the next scheduled Auction Date of the APS Series __ as defined, the next Auction will not be held. Notice of the next Auction for the APS Series ___ will be delivered when such Failure to Deposit is cured.(1) VAN KAMPEN MERRITT MUNICIPAL TRUST - -------- (1) Include this language if a Failure to Deposit exists. EXHIBIT F VAN KAMPEN MERRITT MUNICIPAL TRUST NOTICE OF PROPOSED CHANGE OF LENGTH OF RATE PERIOD OF ACTION PREFERRED SHARES ("APS") NOTICE IS HEREBY GIVEN that VAN KAMPEN MERRITT MUNICIPAL TRUST (the "Fund") may exercise its option to designate the Rate Period of its APS Series ___ commencing [the first day of the proposed Special Dividend Period] as a Special Dividend Period. By 11:00 A.M. on the second Business Day next preceding the first day of such proposed Special Dividend Period, the Fund will notify Bankers Trust Company of either (a) its determination to exercise such option, designating the length of such Special Dividend Period and the terms of the Specific Redemption Provisions, if any, for such series or (b) its determination not to exercise such option. VAN KAMPEN MERRITT MUNICIPAL TRUST Dated: --------------------- EXHIBIT G VAN KAMPEN MERRITT MUNICIPAL TRUST NOTICE OF CHANGE OF LENGTH OF RATE PERIOD OF AUCTION PREFERRED SHARES ("APS") NOTICE IS HEREBY GIVEN that VAN KAMPEN MERRITT MUNICIPAL TRUST (the "Fund") has determined to designate the Rate Period of its APS Series __ commencing on [the first day of the Special Dividend Period] as a Special Dividend Period. The Special Dividend Period will be __ [days] [year[s]]. The Auction Date for the Special Dividend Period is (the Business Day next preceding the first day of such Special Dividend Period). [Specific Redemption Provisions, if applicable.] As a result of the Special Dividend Period designation, the amount of dividends payable on APS Series __ during the Special Dividend Period will be based on a 360-day year. The Special Dividend Period shall not commence if (a) on such Auction Date Sufficient Clearing Bids shall not exist or (b) if a Failure to Deposit shall have occurred prior to the first day thereof with respect to shares of such series of APS. The scheduled Dividend Payment Dates for such series of APS during such Special Dividend Period will be ___________________________. VAN KAMPEN MERRITT MUNICIPAL TRUST Dated: --------------------- EXHIBIT H VAN KAMPEN MERRITT MUNICIPAL TRUST NOTICE OF DETERMINATION NOT TO CHANGE LENGTH OF RATE PERIOD OF AUCTION PREFERRED SHARES ("APS") NOTICE IS HEREBY GIVEN that VAN KAMPEN MERRITT MUNICIPAL TRUST (the "Fund") has determined not to exercise its option to designate a Special Dividend Period of its APS Series __ and the next succeeding Dividend Period of such series will be a Minimum Rate Period of __ days. VAN KAMPEN MERRITT MUNICIPAL TRUST Dated: --------------------- EXHIBIT I VAN KAMPEN MERRITT MUNICIPAL TRUST NOTICE OF CURE OF FAILURE TO DEPOSIT ON AUCTION PREFERRED SHARES ("APS") NOTICE IS HEREBY GIVEN that VAN KAMPEN MERRITT MUNICIPAL TRUST (the "Fund") has cured its Failure to Deposit with respect to its APS Series __. The dividend rate on the shares of APS Series __ for the current Dividend Period is __% per annum, the Dividend Payment Date for the current Dividend Period is scheduled to be __ and the next Auction Date is scheduled to be __________________. VAN KAMPEN MERRITT MUNICIPAL TRUST Dated: --------------------- EXHIBIT J VAN KAMPEN MERRITT MUNICIPAL TRUST NOTICE OF SUBSEQUENT CURE OF FAILURE TO DEPOSIT ON AUCTION PREFERRED SHARES ("APS") NOTICE IS HEREBY GIVEN that VAN KAMPEN MERRITT MUNICIPAL TRUST (the "Fund") has cured its Failure to Deposit with respect to its APS Series __. The next Auction Date for the APS Series __ is scheduled to be on _____________. VAN KAMPEN MERRITT MUNICIPAL TRUST Dated: --------------------- EXHIBIT K VAN KAMPEN MERRITT MUNICIPAL TRUST NOTICE OF [CAPITAL GAINS] [AND] [TAXABLE ORDINARY INCOME](1) DIVIDEND FOR AUCTION PREFERRED SHARES ("APS") NOTICE IS HEREBY GIVEN that the amount of the dividend payable on ______________ for the APS Series __ of VAN KAMPEN MERRITT MUNICIPAL TRUST (the "Fund") will be determined by the Auction to be held on . Up to [$__A__](2) [$__B__](3) per share of the dividend payable on such date as determined by such Auction will consist of [capital gains](2) [ordinary income taxable for federal income tax purposes].(3) If the dividend amount payable on such date as determined by such Auction is less than [$__A__]2 [$__B__](3) per share, the entire amount of the dividend will consist of [capital gains](2) - ------------------ (1) Include language with respect to capital gains, taxable ordinary income or both, depending on the character of the designation to be made with respect to the dividend(s). (2) Include bracketed material if a portion of the dividend will be designated capital gains. (3) Include bracketed material if a portion of the dividend will be designated ordinary income taxable for Federal income tax purposes and no portion of the dividend will be designated capital gains. [ordinary income taxable for federal income tax purposes](3). [To the extent such dividend amount exceeds [$__A__] per share, any excess up to [$__B__] per share will consist of ordinary income taxable for Federal income tax purposes].(4) Accordingly, the aforementioned composition of the dividend payable on ___________________________ should be considered in determining Orders to be submitted with respect to the Auction to be held on _____________________ . The Applicable Percentage in effect for such Auction will be __%. VAN KAMPEN MERRITT MUNICIPAL TRUST - ----------------- (4) Include bracketed material if a portion of the dividend will be designated capital gains and a portion will be designated ordinary income taxable for Federal income tax purposes. A = the maximum amount of capital gains allocated to such series of APS to be included in such dividend, divided by the number of shares of APS. B = the maximum amount of ordinary income taxable for Federal income tax purposes allocated to such series of APS to be included in such dividend, divided by the number of shares in such series. 2 EX-99.(13)(C) 15 c93084a1exv99wx13yxcy.txt FORM OF BROKER-DEALER AGREEMENT EXHIBIT 13(c) ------------------------------------------------------------------------ FORM OF BROKER-DEALER AGREEMENT Between BANKERS TRUST COMPANY and [ ] Dated as of [ ] Relating to AUCTION PREFERRED SHARES of VAN KAMPEN [ ] ------------------------------------------------------------------------ BROKER-DEALER AGREEMENT dated as of [ ] between BANKERS TRUST COMPANY (the "Auction Agent"), a New York banking corporation (not in its individual capacity but solely as agent of Van Kampen [ ] (the "Fund") pursuant to authority granted it in the Auction Agency Agreement, and [ ] (together with its successors and assigns, ("BD"). The Fund has issued in four series of shares of Auction Preferred Shares, par value $.01 per share, liquidation preference $[ ] per share (the "APS") pursuant to its Declaration of Trust, as amended by the Certificate of Vote (the "Certificate"). The Certificate will provide that, for each Subsequent Dividend Period of any series of APS then outstanding, the Applicable Rate for such series for such Subsequent Dividend Period shall, under certain conditions, be the rate per annum that a bank or trust company appointed by the Fund advises results from implementation of the Auction Procedures for such series. The Board of Trustees has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures for each series of APS. The Auction Procedures require the participation of one or more Broker-Dealers for each series of APS. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein the Auction Agent and BD agree as follows: 1. Definitions and Rules of Construction. 1.1 Terms Defined by Reference to Statement. Capitalized terms not defined herein shall have the respective meanings specified in the Certificate. 1.2 Terms Defined Herein. As used herein and in the Settlement Procedures, the following terms shall have the following meanings, unless the context otherwise requires: (a) "Auction" shall have the meaning specified in Section 2.1 hereof. (b) "Auction Agency Agreement" shall mean the Auction Agency Agreement, dated as of [ ], between the fund and the Auction Agent relating to the APS. (c) "Auction Procedures" shall mean the auction procedures constituting Part II of the Certificate. (d) "Authorized officer" shall mean each Senior Vice President, Vice President, Assistant Vice President, Trust Officer, Assistant Treasurer and Assistant Secretary of the Auction Agent assigned to its Corporate Trust and Agency Group and every other officer or employee of the Auction Agent designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD. (e) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent. (f) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer. (g) "Certificate" shall mean the Certificate of Vote of Trustees Establishing [ ] Series of Preferred Shares authorizing the issuance of APS filed by the Fund with the office of the Secretary of The Commonwealth of Massachusetts. (h) "Master Purchaser's Letter" shall mean a letter addressed to the Fund, the Auction Agent, a Broker-Dealer and an Agent Member, substantially in the form attached hereto as Exhibit A. (i) "Settlement Procedures" shall mean the Settlement Procedures attached hereto as Exhibit B. 1.3 Rules of Construction. Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement: (a) Words importing the singular number shall include the plural number and vice versa. (b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect. (c) The words "hereof", "herein", "hereto", and other words of similar import refer to this Agreement as a whole. (d) All references herein to a particular time of day shall be to New York City time. 2. The Auction. 2.1 Purpose; Incorporation by Reference of Auction Procedures and Settlement Procedures. 3 (a) The provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for any Subsequent Dividend Period of any series of APS for which the Applicable Rate is to be determined by an Auction. Each periodic operation of such procedures is hereinafter referred to as an "Auction." (b) All of the provisions contained in the Auction Procedures and the Settlement Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part hereof to the same extent as if such provisions were fully set forth herein. (c) BD agrees to act as, and assumes the obligations of, and limitations and restrictions placed upon, a Broker-Dealer under this Agreement for each series of APS. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in the Auction Procedures may execute Broker-Dealer Agreements and Master Purchaser's Letters and participate as Broker-Dealers in Auctions. 2.2 Preparation for Each Auction. (a) Not later than [ ] A.M. on each Auction Date for the APS, the Auction Agent shall advise the Broker-Dealers for such series by telephone of the Maximum Rate therefor and the "AA" Composite Commercial Paper Rate(s) and Treasury Rate(s), as the case may be, used in determining such Maximum Rate. (b) In the event that any Auction Date for the APS shall be changed after the Auction Agent has given the notice referred to in clause (vi) of paragraph (a) of the Settlement Procedures, or after the notice referred to in Section 2.5(a) hereof, if applicable, the Auction Agent, by such means as the Auction Agent deems practicable, shall give notice of such change to BD not later than the earlier of [ ] A.M. on the new Auction Date or [ ] A.M. on the old Auction Date. (c) The Auction Agent from time to time may request the Broker-Dealers to provide the Auction Agent with a list of their respective customers that such Broker-Dealers believe are Existing Holders of shares of APS. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information so provided by BD and shall not disclose any information so provided by BD to any Person other than the Fund and BD. (d) BD agrees to maintain a list of Potential Holders and to use its best efforts to contact the Potential Holders on such list whom BD believes may be interested in participating in such Auction on each Auction Date for the purposes set forth in the Auction Procedures. (e) The Auction Agent is not required to accept the Master Purchaser's Letter of any Potential Holder who wishes to submit a Bid for the first time in an Auction or of any Potential Holder or Existing Holder who wishes to amend its Master 4 Purchaser's Letter unless such letter or amendment is received by the Auction Agent by [ ] P.M. on the Business Day preceding such Auction. 2.3 Auction Schedule: Method of Submission of Orders. (a) The Fund and the Auction Agent shall conduct Auctions for APS in accordance with the schedule set forth below. Such schedule may be changed by the Auction Agent with the consent of the Fund, which consent shall not be unreasonably withheld. The Auction Agent shall give written notice of any such change to each Broker-Dealer. Such notice shall be given prior to the close of business on the Business Day next preceding the first Auction Date on which such change shall be effective.
TIME EVENT ---- ----- By [ ] A.M. Auction Agent advises the Fund and the Broker-Dealers of the applicable Maximum Rate and the "AA" Composite Commercial Paper Rate(s) and Treasury Rate(s), as the case may be, used in determining such Maximum Rate as set forth in Section 2.2 (a) hereof. [ ] A.M. - [ ] P.M. Auction Agent assembles information communicated to it by Broker-Dealers as provided in Section 3(a) of the Auction Procedures. Submission Deadline is [ ] P.M. Not earlier than [ ] P.M. Auction Agent makes determinations pursuant to Section 4(a) of the Auction Procedures. By approximately [ ] P.M. Auction Agent advises Fund of results of Auction as provided in Section 4(b) of the Auction Procedures. Submitted Bids and Submitted Sell Orders are accepted and rejected and shares of APS allocated as provided in Section 5 of the Auction Procedures. Auction Agent gives notice of Auction results as set forth in Section 2.4 (a) hereof.
5 (b) BD agrees not to sell, assign or dispose of any share of APS to any Person who has not delivered, or on whose behalf a Broker-Dealer has not delivered, a signed Master Purchaser's Letter to the Auction Agent. (c) BD shall submit Orders to the Auction Agent in writing substantially in the form attached hereto as Exhibit C. BD shall submit a separate Order to the Auction Agent for each Potential Holder or Existing Holder on whose behalf BD is submitting an order and shall not net or aggregate the orders of different Potential Holders or Existing Holders on whose behalf BD is submitting orders. (d) BD shall deliver to the Auction Agent (i) a written notice in substantially the form attached hereto as Exhibit D or transfers of shares of APS made through BD by an Existing Holder to another Person other than pursuant to an Auction and shall deliver or cause to be delivered the related Master Purchaser's Letter executed by such Person if such Person has not previously so delivered a Master Purchaser's Letter and (ii) a written notice substantially in the form attached hereto as Exhibit E, of the failure of any shares of APS to be transferred to or by any Person that purchased or sold shares of APS through BD pursuant to an Auction. The Auction Agent is not required to accept any such notice for an Auction unless it is received by the Auction Agent by [ ] P.M. on the Business Day preceding such Auction. (e) BD has delivered to the Auction Agent its executed Master Purchaser's Letter. BD and other Broker-Dealers which have delivered duly executed Master Purchaser's Letters may submit orders in Auctions for their own accounts unless the Fund shall have notified BD and all other Broker-Dealers that they may no longer do so, in which case Broker-Dealers may continue to submit Hold Orders and Sell Orders for their own accounts. (f) BD agrees to handle its customers' Orders in accordance with its duties under applicable securities laws and rules. 2.4 Notices of Auction Results. (a) On each Auction Date for APS, the Auction Agent shall notify BD by telephone of the results of the Auction as set forth in paragraph (a) of the Settlement Procedures. By approximately [ ] A.M., on the Business Day next succeeding such Auction Date, the Auction Agent shall confirm to BD in writing the disposition of all orders submitted by BD in such Auction. (b) BD shall notify each Existing Holder or Potential Holder on whose behalf BD has submitted an Order as set forth in paragraph (b) of the Settlement Procedures and take such other action as is required of BD pursuant to the Settlement Procedures. 2.5 Designation of Special Dividend Period. (a) If the Fund delivers to the Auction Agent a notice of the Auction Date for APS for a Rate Period thereof that next succeeds a Rate Period that is 6 not a Minimum Dividend Period in the form of Exhibit E to the Auction Agency Agreement; the Auction Agent shall deliver such notice to BD as promptly as practicable after its receipt of such notice from the Fund. (b) If the Board of Trustees proposes to designate any succeeding Subsequent Dividend Period of any series of APS as a Special Dividend Period and the Fund delivers to the Auction Agent a notice of such proposed Special Dividend Period in the form of Exhibit F to the Auction Agency Agreement, the Auction Agent shall deliver such notice to BD as promptly as practicable after its receipt of such notice from the Fund. (c) If the Board of Trustees determines to designate such succeeding Subsequent Dividend Period as a Special Dividend Period, and the Fund delivers to the Auction Agent a notice of such special Dividend Period in the form of Exhibit G to the Auction Agency Agreement not later than [ ] A.M. on the second Business Day next preceding the first day of such Rate Period, the Auction Agent shall deliver such notice to BD not later than [ ] P.M. on such second Business Day. (d) If the Fund shall deliver to the Auction Agent a notice not later than [ ] A.M. on the second Business Day next preceding the first day of any Rate Period stating that the Fund has determined not to exercise its option to designate such succeeding Subsequent Dividend Period as a Special Dividend Period, in the form of Exhibit H to the Auction Agency Agreement, or shall fail to timely deliver either such notice or a notice in the form of Exhibit G to the Auction Agency Agreement, the Auction Agent shall deliver a notice in the form of Exhibit H to the Auction Agency Agreement to BD not later than [ ] P.M. on such second Business Day. 2.6 Allocation of Taxable Income. If the Fund delivers to the Auction Agent a notice in the form of Exhibit K to the Auction Agency Agreement designating all or a portion of any dividend on shares of any series of APS to consist of net capital gains or other income taxable for Federal income tax purposes, the Auction Agent shall deliver such notice to BD on the Business Day following its receipt of such notice from the Fund. On or prior to the Auction Date referred to in such notice, BD will contact each of its customers that BD believes to be an Existing Holder of shares of APS or a Potential Holder interested in submitting an order with respect to the Auction to be held on such Auction Date, and BD will notify such customer of the contents of such notice. BD will be deemed to have notified such Existing Holders and Potential Holders if, for each such Holder, (i) it makes a reasonable effort to contact such Holder by telephone, and (ii) upon failing to contact such Holder by telephone it mails written notification to such Holder at the mailing address indicated in such Holder's most recently submitted Master Purchaser's Letter or at such other address as is indicated in the account records of BD. The Auction Agent shall be required to notify BD within two Business Days after each Auction that involves an allocation of income taxable for Federal income 7 tax purposes as to the dollar amount per share of such taxable income and income exempt from Federal income taxation included in the related dividend. 2.7 Failure to Deposit. (a) If: (i) any Failure to Deposit shall have occurred with respect to shares of APS during any Rate Period thereof (other than any Special Dividend Period consisting of [ ] or more Dividend Periods or any Rate Period succeeding any Special Dividend Period consisting of [ ] or more Dividend Periods during which a Failure to Deposit occurred that has not been cured); and (ii) prior to [ ] Noon on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall have been cured as described in Section 2.7(a) of the Auction Agency Agreement and the Fund shall have paid to the Auction Agent a late charge as described in such Section 2.7(a); then, the Auction Agent shall deliver a notice in the form of Exhibit I to the Auction Agency Agreement by first-class mail, postage prepaid, to BD not later than one Business Day after its receipt of the payment from the Fund curing such Failure to Deposit and such late charge. (b) If: (i) any Failure to Deposit shall have occurred with respect to shares of any series of APS during a Rate Period thereof (other than any Special Dividend Period consisting of [ ] or more Dividend Periods or any Rate Period succeeding any Special Dividend Period consisting of [ ] or more Dividend Periods during which a Failure to Deposit occurred that has not been cured), and, prior to [ ] on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall not have been cured as described in Section 2.7(a) of the Auction Agency Agreement and the Fund shall not have paid to the Auction Agent the late charge described in such Section 2.7(a), but such Failure to Deposit shall subsequently be so cured; or (ii) any Failure to Deposit shall have occurred with respect to shares of APS during a Special Dividend Period consisting of [ ] or more Dividend Periods, or during any Rate Period succeeding any Special Dividend Period consisting of [ ] or more Dividend Periods during which a Failure to Deposit occurred, and such Failure to Deposit shall subsequently have been cured within the meaning of Section 2.7(a) of the Auction Agency Agreement, 8 then the Auction Agent shall deliver a notice in the form of Exhibit J to the Auction Agency Agreement to the Broker-Dealers for such series not later than one Business Day after the receipt of the payment from the Fund curing such Failure to Deposit. 2.8 Service Charge to be Paid to BD. On the Business Day next succeeding each Auction Date, the Auction Agent shall pay to BD from moneys received from the Fund an amount equal to the product of (a) (i) in the case of any Auction Date immediately preceding a Rate Period of such series consisting of less than [ ] Dividend Periods, [ ] %, or (ii) in the case of any Auction Date immediately preceding a Rate Period of such series consisting of [ ] or more Dividend Periods, a percentage agreed upon in writing by the Fund and the Broker-Dealers times (b) a fraction, the numerator of which is the number of days in the Rate Period therefor beginning on such Business Day and the denominator of which is 365 if such Rate Period is less than one year and 360 for all other Rate Periods, times (c) $[ ] times (d) the sum of (1) the aggregate number of shares of such series placed by BD in such Auction that were (A) the subject of Submitted Bids of Existing Holders submitted by BD and continued to be held as a result of such submission and (B) the subject of Submitted Bids of Potential Holders submitted by BD and purchased as a result of such submission plus (ii) the aggregate number of shares of such series subject to valid Hold Orders (determined in accordance with paragraph (d) of Section 3 of the Auction Procedures) submitted to the Auction Agent by BD plus (iii) the number of shares of APS deemed to be subject to Hold Orders by Existing Holders pursuant to paragraph (c) of Section 3 of the Auction Procedures that were acquired by such Existing Holders through BD. For purposes of subclause (d)(iii) of the foregoing paragraph, if any Existing Holder who acquired shares of any series of APS through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD; provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares. 2.9 Settlement. (a) If any Existing Holder on whose behalf BD has submitted a Bid or Sell Order for shares of APS that was accepted in whole or in part fails to instruct its Agent Member to deliver the shares of APS subject to such Bid or Sell Order against payment therefor, BD shall instruct such Agent Member to deliver such shares against payment therefor and BD may deliver to the Potential Holder on whose behalf BD submitted a Bid for shares of APS that was accepted in whole or in part a number of shares of APS of such series that is less than the number of shares of APS of such series specified in such Bid to be purchased by such Potential Holder. Notwithstanding the foregoing terms of this Section, any delivery or non-delivery of shares of APS which represents any departure from the results of an Auction for such series, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the terms of Section 9 2.3(d)(ii) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 2.9. (b) Neither the Auction Agent nor the Fund shall have any responsibility or liability with respect to the failure of an Existing Holder, a Potential Holder or its respective Agent Member to deliver shares of APS of any series or to pay for shares of APS of any series sold or purchased pursuant to the Auction Procedures or otherwise. 3. The Auction Agent. 3.1 Duties and Responsibilities. (a) The Auction Agent is acting solely as agent for the Fund hereunder and owes no fiduciary duties to any other Person, other than the Fund, by reason of this Agreement. (b) The Auction Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent. (c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered, or omitted or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error or judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining the pertinent facts. 3.2 Rights of the Auction Agent. (a) The Auction Agent may rely and shall be protected in acting or refraining from acting upon any communication authorized hereby and upon any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document believed in good faith by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent believes in good faith to have been given by the Fund or by a Broker-Dealer. The Auction Agent may record telephone communications with the Broker-Dealers. (b) The Auction Agent may consult with counsel of its choice and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder. 3.3 Auction Agent's Disclaimer. 10 The Auction Agent makes no representation as to the validity or adequacy of this Agreement, the Auction Agency Agreement or the shares of APS of any series. 4. Miscellaneous. 4.1 Termination. Either party may terminate this Agreement at any time on five days' notice to the other party, provided that neither BD nor the Auction Agent may terminate this Agreement without first obtaining prior written consent of the Fund to such termination, which consent shall not be unreasonably withheld. This Agreement shall automatically terminate upon the termination of the Auction Agency Agreement. 4.2 Participant in Securities Depository; Payment of Dividends in Same-Day Funds. (a) BD is, and shall remain for the term of this Agreement, a member of, or participant in, the Securities Depository (or an affiliate of such a member or participant). (b) BD represents that it (or if such BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the APS available in same-day funds on each Dividend Payment Date to customers that use such BD or affiliate as Agent Member. 4.3 Communications. Except for (i) communications authorized to be by telephone by this Agreement or the Auction Procedures and (ii) communications in connection with Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below:
If to BD, [Attention: ] addressed: Telecopier No.: ( ) Telephone No.: ( ) If to the Auction Bankers Trust Company Agent, addressed: Corporate Trust and Agency Group Four Albany Street New York, New York 10006 Attention: Auction Rate/ Remarketed Securities
11 Telecopier No.: ( ) Telephone No.: ( )
or such other address or telecopy number as such party may hereafter specify for such purpose by notice to the other parties. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent. 4.4 Entire Agreement. This Agreement contains the entire agreement among the parties hereto relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, among the parties hereto relating to the subject matter hereof. 4.5 Benefits. Nothing in this Agreement, express or implied, shall give to any person, other than the Fund, the Auction Agent, BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim hereunder. 4.6 Amendment; Waiver. (a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, cancelled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. (b) Failure of any party hereto to exercise any right or remedy hereunder in the event of a breach hereof by any other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach. 4.7 Successors and Assigns. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and assigns of each of the Auction Agent and BD. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Fund without the consent of BD. 4.8 Severability. If any clause, provision or section hereof shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any of the remaining clauses, provisions or sections hereof. 12 4.9 Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 4.10 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said State. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written. [ ] By ----------------------------------------- Name: Title: [ ] By ----------------------------------------- Name: Title:
13 EX-99.(13)(D)(I) 16 c93084a1exv99wx13yxdyxiy.txt LETTER OF REPRESENTATIONS EXHIBIT 13(d)(i) December 10, 1991 The Depository Trust Company 55 Water Street New York, New York 10041 Attention: General Counsel's Office Re: Van Kampen Merritt Municipal Trust Auction Preferred Shares of Beneficial Interest ("APS") Gentlemen: The purpose of this letter is to set forth certain matters relating to the issuance and sale by Van Kampen Merritt Municipal Trust (the "Fund") of 1500 shares of each series of its preferred shares of beneficial interest, par value $.01 per share, liquidation preference $50,000 per share, designated as Auction Preferred Shares, Series A ("APS Series A"), Auction Preferred Shares, Series B ("APS Series B"), Auction Preferred shares, series C ("APS Series C"), and Auction Preferred Shares, Series D ("APS Series D") (collectively, the APS Series A, APS Series B, APS Series C and APS Series D are referred to herein as the "APS"), pursuant to the Fund's Declaration of Trust (as defined below). Pursuant to the auction agency agreement, dated as of December 10, 1991 (the "Auction Agency Agreement"), between the Fund and Bankers Trust Company ("Bankers Trust"), Bankers Trust will act as the auction agent, transfer agent, registrar and dividend and redemption price disbursing agent and agent for certain notifications for the Fund in connection with the shares of each series of APS (hereinafter referred to, when acting in any such capacity, as the "Auction Agent"). Pursuant to an underwriting agreement, dated December 5, 1991 ("AB Underwriting Agreement"), among Goldman, Sachs & Co., Smith Barney, Harris Upham & Co., PaineWebber Incorporated and Prudential Securities Incorporated (the "Underwriters"), the Fund and Van Kampen Merritt Investment Advisory Corp. (the "Adviser"), the Underwriters have agreed to purchase from the Fund, and the Fund has agreed to issue and sell to the Underwriters, the shares of each of APS Series A and APS Series B. Pursuant to a separate underwriting agreement, dated December 5, 1991 ("CD Underwriting Agreement"), among the Underwriters, the Fund and the Adviser, the Underwriters have agreed to purchase from the Fund, and the Fund has agreed to issue and sell to the Underwriters, the shares of each of APS Series C and APS Series D. The Depository Trust Company December 10, 1991 Page 2 Pursuant to the requirements of the Securities Act of 1933, as amended, the Fund has filed with the Securities and Exchange Commission a Registration Statement on Form N-2 and a prospectus contained therein (the "Prospectus") concerning the issuance of the APS, which includes, among other things, a description of the role of The Depository Trust Company ("DTC") with respect to such APS. Attached hereto is a copy of the Prospectus. Capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Declaration of Trust (as defined below), a copy of which is attached hereto, unless the context otherwise requires. To induce DTC to accept the APS as eligible for deposit at DTC and to act in accordance with its rules with respect to the APS, the Fund and the Auction Agent agree with DTC as follows: 1. The Fund shall cause the Underwriters to deliver at the closings with respect to the AB Underwriting Agreement and the CD Underwriting Agreement, each of which is scheduled for December 10, 1991, for deposit with DTC one share certificate with respect to each series of APS (each an "APS Certificate"), which certificate will represent the total number of shares of each respective series of APS issued and registered in the name of DTC's nominee, Cede & Co. ("Cede"), and each such APS Certificate shall remain in DTC's custody as provided herein. 2. The Fund's Declaration of Trust, as amended, including the Certificate of Vote (sometimes referred to herein together with the Fund's Declaration of Trust as the "Declaration of Trust") establishing the rights and preferences of the shares of each series of APS, provides for the solicitation of consents from and voting by Holders of the shares of each series of APS under certain circumstances. The Fund shall establish a record date for such purposes and give DTC notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. 3. If fewer than all of the shares of any series of APS are to be redeemed pursuant to Part I, Section 4 of the Certificate of Vote, the number of shares of such series of APS to be redeemed shall be determined by the Board of Trustees of the Fund and the Fund shall notify the Auction Agent and DTC by 1:00 p.m., New York City time, (A) in the case of an optional redemption at least 30 days prior to the earliest date on which such redemption shall occur and (B) in the case of a mandatory redemption, if the Fund shall have received the relief from the Securities and Exchange Commission described in the Prospectus with respect to mandatory redemptions, on the second Business Day preceding the redemption date established by the Board of Trustees and specified in such notice. By the close of business on the day on which the Auction Agent receives a Notice of Redemption from the Fund, the Auction Agent will give telephonic notice to The Depository Trust Company December 10, 1991 Page 3 DTC, and the Auction Agent shall give DTC a hand delivered copy of such notice which will be marked "TIME CRITICAL" and shall include a copy addressed to Vice President, Reorganization Department (which call notice shall include the aggregate number of shares of such series of APS to be redeemed). Unless certificates representing the shares of such series of APS are held by Holders other than DTC or its nominee, DTC, upon receipt of a Notice of Redemption from the Auction Agent, will determine by lot the number of shares of such series of APS to be redeemed from the account of each Agent Member. DTC shall use its best efforts to complete such lottery and notify the Auction Agent of the results of such lottery by 10:00 a.m., New York City time, on the Business Day following the date on which DTC receives the call notice from the Auction Agent. DTC shall notify the Auction Agent by such time of each Agent Member that has credited to its DTC account shares of such series of APS that are selected for redemption by DTC and shall, using its best efforts, provide the Auction Agent with the names of the persons or departments at each such Agent Member to be contacted regarding such redemption. The Auction Agent will in turn determine by lot the number of shares of such series of APS to be redeemed from the accounts of the Existing Holders of shares of such series of APS whose Agent Members have been selected in sufficient time to enable the Auction Agent to notify the Broker-Dealer and such Existing Holders as provided in the Auction Agency Agreement. 4. The Declaration of Trust provides that the dividend rate for the shares of each series of APS may vary from time to time based upon the results of the implementation of the Auction Procedures set forth in Part II of the Certificate of Vote. The Auction Agent shall telecopy notice to Manager, Announcements, Dividends Department, The Depository Trust Company, at (212) 709-1264, of the Applicable Rate and the Dividend Payment Date with respect to the shares of each series of APS (the "Dividend Rate Notices") no later than the day following each Auction after implementation of such procedures and shall verify receipt by DTC of such notice by contacting the Supervisor, Announcements, Dividends Department, The Depository Trust Company, at (212) 709-1270. The Auction Agent shall make available, by telecopy, facsimile or other similar means, to Interactive Data Services, Inc., or any other announcement service to which DTC may subscribe, the Applicable Rate and the Dividend Payment Date on each Auction Date after implementation of such procedures. 5. The Prospectus indicates that each purchaser of shares of any series of APS or its Broker-Dealer must sign a Master Purchaser's Letter which contains provisions restricting transfer of such APS. The Fund and the Auction Agent acknowledge that so long as Cede is the sole record owner of shares of any series of APS, it shall be entitled to all voting rights applicable to such APS and to receive the full amount of all dividends, liquidation proceeds and redemption proceeds payable with respect to such APS. The Fund and the Auction Agent acknowledge that DTC shall treat any Agent Member having shares of any series The Depository Trust Company December 10, 1991 Page 4 of APS credited to its DTC account as entitled to the full benefits of ownership of such APS even if the crediting of shares of such APS to the DTC accounts of such Agent Member results from transfers or failures to transfer in violation of the provisions of the Master Purchaser's Letter. Without limiting the generality of the preceding sentence, the Fund and the Auction Agent acknowledge that DTC shall treat any Agent Member having shares of any series of APS credited to its DTC account as entitled to receive dividends, distributions and voting rights, if any, in respect of such APS and, subject to section 11 hereof, to receive certificates evidencing such APS if such certificates are to be issued in accordance with the Fund's Declaration of Trust. (The treatment by DTC of the effects of the crediting by it of shares of such series of APS to the accounts of Agent Members described in the preceding two sentences shall not affect the rights of the Fund, participants in Auctions relating to shares of such series of APS or purchasers, sellers or Holders of shares of such series of APS against any Agent Member.) DTC shall have no responsibility to ascertain that any transfer of shares of any series of APS is made in accordance with the provisions of the Master Purchaser's Letter. 6. All notices and payment advices sent to DTC shall contain the CUSIP number set forth in the respective APS Certificate. 7. Notices to DTC by facsimile transmission shall be sent to (212) 709-1093 or (212) 709-1094. Notices to DTC by any other means shall be sent to: Manager, Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square, 23rd Floor New York, New York 10004 8. Dividend payments shall be received by Cede, as nominee of DTC, or its registered assigns in same-day funds on each payment date (or the equivalent in accordance with existing arrangements between the Fund or the Auction Agent and DTC). Such payments shall be made payable to the order of "Cede & Co." Absent any other existing arrangements such payments shall be addressed as follows: Manager, Cash Receipts, Dividends The Depository Trust Company 7 Hanover Square, 24th Floor New York, New York 10004 9. Redemption payments shall be made in same-day funds by the Auction Agent in the manner set forth in the SDFS Paying Agent Operating Procedures (a copy of which previously has been furnished to the Auction Agent). The Depository Trust Company December 10, 1991 Page 5 10. DTC may direct the Auction Agent to use any other telephone number for facsimile transmission, address or department of DTC as the number, address or department to which payments of dividends, redemption proceeds or notices may be sent. 11. In the event of a partial redemption necessitating a reduction in the number of outstanding shares of any series of APS, DTC, in its discretion, (a) may request the Fund to direct the Auction Agent to issue and authenticate a new APS Certificate with respect to the shares of the respective series of APS in exchange for surrender of the old APS Certificate with respect to such series or (b) shall make an appropriate notation on the APS Certificate with respect to such series indicating the date and amounts of such reduction in the outstanding shares of such series of APS, except in the case of a final redemption of shares of such series of APS in which case the APS Certificate with respect to such series must be surrendered to the Auction Agent prior to payment. 12. In the event that beneficial owners of shares of any series of APS shall be able to obtain certified shares, the Auction Agent may notify DTC of the availability of certificates representing the ownership of shares of such series of APS. In such event, the Auction Agent will issue, transfer and exchange APS Certificates with respect to such series as required by DTC and others in appropriate amounts. 13. Whenever DTC requests the Fund and the Auction Agent to do so, the Auction Agent and the Fund will cooperate with DTC in taking appropriate action to make available one or more separate certificates evidencing shares of any series of APS to any Agent Member having shares of such series of APS credited to its DTC account. 14. DTC may determine to discontinue providing its services as securities depository with respect to shares of any series of APS at any time by giving 90 days written notice to the Fund and the Auction Agent (at which time DTC will confirm with the Auction Agent the aggregate amount of outstanding shares of such series of APS). Under such circumstances, at DTC's request the Fund or the Auction Agent will cooperate with DTC in taking appropriate action to make available one or more separate certificates evidencing shares of such series of APS to any Agent Member having shares of such series of APS credited to its DTC account. 15. The Fund hereby authorizes DTC to provide to the Auction Agent position listings of its Agent Members with respect to shares of any series of APS from time to time at the request of the Auction Agent, and also authorizes DTC in the event of a partial redemption of shares of any series of APS to provide the Auction Agent, upon request, with the names of those Agent Members whose position in such APS has been selected for redemption by DTC. DTC agrees to The Depository Trust Company December 10, 1991 Page 6 use its best efforts to notify the Auction Agent of those Agent Members whose position in shares of such series of APS has been selected for redemption by DTC and to provide the Auction Agent with the names of the person or department at such Agent Members to contact regarding such redemption. The Fund authorizes the Auction Agent to provide DTC with such signatures, examples of signatures and authorizations to act as may be deemed necessary to DTC to permit DTC to discharge its obligations to its Agent Members and appropriate regulatory authorities. This authorization, unless revoked by the Fund, shall continue with respect to shares of each series of APS while shares of each such series of APS are on deposit at DTC, until and unless the Auction Agent shall no longer be acting. In such event, the Fund shall provide DTC with similar evidence of authorization of any successor thereto to so act. 16. (a) The Prospectus indicates that the Fund may at any time designate a Special Dividend Period with respect to shares of any series of APS prior to the commencement of such Special Dividend Period. In the event of such designation, the Fund will notify DTC in writing at least seven days prior to the Auction Date relating to such Special Dividend Period of all details concerning the Special Dividend Period. If the new dividend for a Special Dividend Period is to be payable on more than one Dividend Payment Date, such notice shall state all such Dividend Payment Dates and payment factors associated with such Dividend Period. The Auction Agent shall also notify DTC of each upcoming Dividend Payment Date on the business day after the preceding Dividend Payment Date. (b) The Fund will notify DTC, at least 10 business days prior to the payment date for an Additional Dividend (as defined in the Prospectus) in respect of shares of any series of APS, of (i) the record date for Holders of shares of such series of APS entitled to receive Additional Dividends, (ii) the amount of Additional Dividends payable on a per share basis to such Holders and (ii) the CUSIP number set forth on the share certificate representing shares of such series of APS. The Depository Trust Company December 10, 1991 Page 7 If you are in agreement with the terms of this Letter Agreement, please execute the Letter Agreement in the space provided below. Very truly yours, VAN KAMPEN MERRITT MUNICIPAL TRUST By:/s Dennis J. McDonnell ----------------------------------- Name: Dennis J. McDonnell Title: President BANKERS TRUST COMPANY as auction agent By:/s/ Anne Hartnett ----------------------------------- Name: Anne Hartnett Title: Assistant Treasurer Accepted as of the date first written above THE DEPOSITORY TRUST COMPANY By: /s/ Richard B. Nesson --------------------------------- Name: Richard B. Nesson Title: (enclosures) cc: Goldman, Sachs & Co. Smith Barney, Harris Upham & Co. PaineWebber Incorporated Prudential Securities Incorporated EX-99.(13)(D)(II) 17 c93084a1exv99wx13yxdyxiiy.txt FORM OF LETTER OF REPRESENTATIONS EXHIBIT 13(d)(ii) THE DEPOSITORY TRUST COMPANY A subsidiary of The Depository Trust & Clearing Corporation ISSUER LETTER OF REPRESENTATIONS [To be Completed by Issuer and Co-Issuer(s), if applicable] ------------------------------------------------------------------ [Name of Issuer and Co-Issuer(s), if applicable] ------------------------------------------------------------------ [Security Description, including series designation if applicable] ------------------------------------------------------------------ [CUSIP Number of the Securities] ---------------------- [Date] [For Municipal Issues: Underwriting Department--Eligibility; 25th Floor] [For Corporate Issues: General Counsel's Office; 22nd Floor] THE DEPOSITORY TRUST COMPANY 55 Water Street New York, NY 10041-0099 Ladies and Gentlemen: This letter sets forth our understanding with respect to the Securities represented by the CUSIP number referenced above (the "Securities"). Issuer requests that The Depository Trust Company ("DTC") accept the Securities as eligible for deposit at DTC. The DTC Participant, ---------------------------- (manager, underwriter, or placement agent) will distribute the securities through DTC. To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accordance with DTC's Rules with respect to the Securities, Issuer represents to DTC that Issuer will comply with the requirements applicable to it stated in DTC's Operational Arrangements (found at WWW.DTCC.COM and WWW.DTC.ORG), as they may be amended from time to time. Very truly yours, Note: - ---- Schedule A contains statements that DTC believes accurately describe DTC, ---------------------------------- the method of effecting book-entry (Issuer) transfers of securities distributed By: through DTC, and certain related ---------------------------------- matters. (Authorized Officer's Signature) Received and Accepted: ---------------------------------- THE DEPOSITORY TRUST COMPANY (Print Name) By: ---------------------------------- ---------------------------------- (Street Address) ---------------------------------- (City) (State) (Country) (Zip Code) ( ) ---------------------------------- (Phone Number) ---------------------------------- [DTCC THE DEPOSITORY TRUST & (E-mail Address) CLEARING CORPORATION] Additional Signature Page to DTC Issuer Letter of Representation for use with Co-Issuers -------------------------------------------- [Name of Issuer and Co-issuer(s)] In signing this Issuer letter of Representations dated as of Co-Issuer -----------------------------, ------------------------ agrees to and shall be bound by all "Issuer" representations. ------------------------------------------------- (Co-Issuer) By: ------------------------------------------------- (Authorized Officer's Signature) ------------------------------------------------- (Print Name) ------------------------------------------------- (Street Address) ------------------------------------------------- (City) (State) (Country) (Zip Code) ( ) ------------------------------------------------- (Phone Number) ------------------------------------------------- (E-mail Address) [03/05] SCHEDULE A (TO ISSUER LETTER OF REPRESENTATIONS) SAMPLE OFFERING DOCUMENT LANGUAGE DESCRIBING BOOK-ENTRY-ONLY ISSUANCE ----------------------------------- (PREPARED BY DTC--BRACKETED MATERIAL MAY BE APPLICABLE ONLY TO CERTAIN ISSUES) 1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the securities (the "Securities"). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue,and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at WWW.DTCC.COM and WWW.DTC.ORG. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner")is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity [03/05] of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.] [6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.] 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. [9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent's DTC account.] 10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. [03/05] EX-99.(13)(E) 18 c93084a1exv99wx13yxey.txt ADMINISTRATION AGREEMENT EXHIBIT 13(e) ADMINISTRATION AGREEMENT Agreement made as of May 31, 1997, as amended May 15, 2002 and June 1, 2004, between VAN KAMPEN MUNICIPAL TRUST, a Massachusetts business trust (the "Fund"), and VAN KAMPEN FUNDS INC., a Delaware corporation (the "Administrator). WHEREAS, the Fund intends to operate as a closed-end management investment company, and is so registered under the Investment Company act of 1940, as amended (the "1940 Act"); WHEREAS, the Fund has authorized the issuance of its common shares of beneficial interest, par value $.01 per share (the "Common Shares") and a class of preferred shares of beneficial interest with preference rights, the relative rights, terms and preferences of which are to be determined by the Board of Trustees of the Fund (the "Preferred Shares") (holders of the Common Shares and Preferred Shares are referred to collectively herein as the "Shareholders"); WHEREAS, the Fund wishes to retain the Administrator to provide certain administrative services to the Fund, under the terms and conditions stated below, and the Administrator is willing to provide such services for the compensation set forth below; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties agree as follows: 1. Appointment. The Fund hereby appoints the Administrator to administer the Fund, and the Administrator accepts such appointment and agrees that it will furnish the services set forth in paragraph 2 below. 2. Services and Duties of the Administrator. Subject to the supervision of the Fund's Board of Trustees (the "Board"), the Administrator will: (a) Prepare and assemble all reports required to be sent to the Fund Shareholders, and arrange for the printing and dissemination of such reports to Shareholders; (b) Assemble all reports required to be filed with the Securities and Exchange Commission (the "SEC") on Form N-SAR, or such other form as the SEC may substitute for Form N-SAR, and file such completed form with the SEC; (c) Arrange for the dissemination to Shareholders of the Fund's proxy materials and oversee the tabulation of proxies by the Fund's transfer agent; (d) Negotiate the terms and conditions under which custodian services will be provided to the Fund and the fees to be paid by the Fund to its custodian (which may or may not be an affiliate of the Fund's investment adviser) in connection therewith; (e) Negotiate the terms and conditions under which dividend disbursing services will be provided to the Fund, and the fees to be paid by the Fund in connection therewith; review the provision of dividend disbursing services to the Fund; (f) Determine the amounts available for distribution as dividends and distributions to be paid by the Fund to its Shareholders; prepare and arrange for the printing of dividend notices to Shareholders; and provide the Fund's dividend disbursing agent and custodian with such information as is required for such parties to effect the payment of dividends and distributions and to implement the Fund's dividend reinvestment plan; (g) Provide Shareholder services to holders or potential holders of the Fund's securities including but not limited to responding to Shareholder requests for information; (h) Assist in providing to the Fund's independent accountants such information as is necessary for such accountants to prepare and file the Fund's federal income and excise tax returns and the Fund's state and local tax returns; (i) Assist the Fund's investment adviser in monitoring compliance of the Fund's operations with the 1940 Act and with its investment policies and limitations as currently in effect; (j) In connection with the issuance of the Preferred Shares, calculate, monitor and provide the rating agencies such asset coverage and liquidity reports as the Board deems advisable with respect to obtaining a rating on the Preferred Shares; (k) Oversee the maintenance of the Fund's books and records under Rule 31a-1 under the 1940 Act by the custodians and accounting agent, as applicable; and (l) Make such reports and recommendations to the Board as the Board reasonably requests or deems appropriate. 3. Public Inquiries. The Fund and the Administrator agree that the Administrator will not be responsible for replying to questions or requests for information concerning the Fund from Shareholders, brokers or the public. The Fund will inform the Administrator of the party or parties to whom any such questions or requests should be directed, and the Administrator will refer such questions and requests to such party or parties. 4. Compliance with the Fund's Governing Documents and Applicable Law. In all matters relating to the performance of this Agreement, the Administrator will act in conformity with the Declaration of Trust, By-Laws and registration statements of the Fund and with the directions of the Board and Fund executive officers and will conform to and comply with the requirements of the 1940 Act and all other applicable federal or state laws and regulations. 5. Service Not Exclusive. The Administrator's services hereunder are not deemed to be exclusive, and the Administrator is free to render administrative or other services to other funds or clients so long as the Administrator's services under this Agreement are not impaired thereby. 6. Use of Employees of the Investment Adviser. The Fund acknowledges and agrees that the Administrator may, at its own cost, use employees of Van Kampen Asset Management, the Fund's investment adviser, to perform a portion of or all of the services required to be performed by the Administrator hereunder. 7. Limitation of Liability of the Administrator. The Administrator will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund or its Shareholders in connection with the performance of its duties under this Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its duties under this Agreement. 8. Limitation of Liability of the Trustees and Shareholders of the Fund. Pursuant to the provisions of Article V, Section 5.5 of the Fund's Declaration of Trust as amended or restated as of the date hereof, this Agreement is entered into by the Board not individually, but as trustees under such Declaration of Trust and the obligations of the Fund hereunder are not binding upon any such trustees or Shareholders of the Fund, but bind only the trust estate. 9. Duration and Termination. This Agreement will become effective upon the date hereabove written and shall continue in effect thereafter until terminated without penalty by the Administrator or the Fund upon 30 days written notice to the other and shall automatically terminate in the event of its assignment as the term is defined in the 1940 Act. 10. Amendment of this Agreement. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver or discharge or termination is sought. 11. Governing Law. This Agreement shall be construed in accordance with the laws of the Commonwealth of Massachusetts and 1940 Act, without giving effect to the principles of conflicts of law thereof. To the extent that the applicable laws of the Commonwealth of Massachusetts conflict with the applicable provisions of the 1940 Act, the latter shall control. 12. Miscellaneous. The captions of this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below, as amended on June 1, 2004. VAN KAMPEN MUNICIPAL TRUST /s/ Stefanie V. Chang By: /s/ Ronald E. Robison Executive Vice President and Principal Executive Officer VAN KAMPEN FUNDS INC. /s/ Mary E. Mullin By: /s/ John L. Sullivan Managing Director EX-99.(13)(F) 19 c93084a1exv99wx13yxfy.txt AMENDED AND RESTATED LEGAL SERVICES AGREEMENT EXHIBIT 13(f) AMENDED AND RESTATED LEGAL SERVICES AGREEMENT THIS AGREEMENT, dated as of September 1, 2002, by and between the parties as set forth in Schedule 1, attached hereto and incorporated by reference (designated collectively hereafter as the "Funds"), and VAN KAMPEN INVESTMENTS INC., a Delaware corporation ("Van Kampen"). W I T N E S S E T H : WHEREAS, each of the Funds is registered as an investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, Van Kampen and its affiliates have the capability of providing certain legal services to the Funds; and WHEREAS, each Fund desires to utilize Van Kampen and its affiliates in the provision of such legal services; and WHEREAS, Van Kampen and its affiliates intend to provide staff in order to accommodate the provision of all such services. NOW, THEREFORE, in consideration of the premises and the mutual covenants spelled out herein, it is agreed between the parties hereto as follows: 1. Appointment of Van Kampen. Van Kampen and/or personnel of affiliates of Van Kampen under the direction of Van Kampen shall provide each of the Funds the legal services (the "Legal Services") as set forth in Paragraph 2 of this Agreement. Van Kampen accepts such appointments and agrees to furnish the Legal Services in return for the compensation provided in Paragraph 3 of this Agreement. 2. Legal Services to be Provided. Van Kampen and/or personnel of affiliates of Van Kampen will provide to the Funds the following legal services, including without limitation: accurate maintenance of the Funds' corporate minute books and records, preparation and oversight of each Fund's regulatory reports and other information provided to shareholders as well as responding to day-to-day legal issues on behalf of the Funds. Van Kampen shall hire persons and/or supervise personnel of affiliates of Van Kampen (collectively the "Legal Services Group") as needed to provide such Legal Services and in such numbers as may be agreed from time to time. 3. Expenses and Reimbursement. The Legal Services expenses (the "Legal Services Expenses") for which Van Kampen may be reimbursed are salary and salary related benefits, including but not limited to bonuses, group insurance and other regular wages paid to the personnel of the Legal Services Group. Each member of the Legal Services Group will complete as of the last business day of each month, a time allocation sheet indicating the monthly time spent (reflected as a percentage) on matters relating to the Funds, on matters relating to other funds for which Van Kampen or its subsidiaries act as investment adviser and distributor ("Van Kampen Non-Participating Funds") and for other matters. The aggregate of time spent on matters for the Funds and Van Kampen Non-Participating Funds is referred to herein as the "Fund Percentage". Each member's Fund Percentage shall be multiplied by each member's individual Legal Service Expense; the resulting product for each member shall then be aggregated to arrive at the Legal Services Expenses that can be allocated as set forth in Paragraph 4 ("Allocable Legal Services Expenses"). The Legal Services Expenses will be paid by Van Kampen (or the affiliate of Van Kampen employing such Legal Services Group persons) and that portion of such Legal Services Expenses allocated to the Funds as set forth in Paragraph 4 shall be reimbursed by the Funds. Van Kampen will tender to each Fund a monthly invoice within five business days of the last business day of each month which shall certify the total Legal Service Expenses expended and allocated to such Fund. Except as provided herein, Van Kampen will receive no other compensation in connection with Legal Services rendered in accordance with this Agreement, and Van Kampen and its affiliates will be responsible for all other expenses relating to the providing of Legal Services. 4. Payment for Allocable Legal Services Expense Among the Funds. Each month, one half (50%) of the Allocable Legal Services Expenses incurred under the Agreement shall be attributable equally to each respective Fund and Van Kampen Non-Participating Fund. Van Kampen shall assume the costs of Legal Services Expenses for the Van Kampen Non-Participating Funds for which reimbursement is not received. The remaining one half (50%) of the Allocable Legal Services Expenses shall be in allocated (a) in the event services are attributable to specific funds (including the Van Kampen Non-Participating Funds) based on such specific time allocations; and (b) in the 2 event services are attributable only to types of funds (i.e. closed-end and open-end funds), the relative amount of time spent on each type of fund and then further allocated between funds of that type on the basis of relative net assets at the end of the period. 5. Maintenance of Records. All records maintained by Van Kampen in connection with the performance of its duties under this Agreement will remain the property of each respective Fund and will be preserved by Van Kampen for the periods prescribed in Section 31 of the 1940 Act and the rules thereunder or such other applicable rules that may be adopted from time to time under the 1940 Act. In the event of termination of the Agreement, such records will be promptly delivered to the respective Funds. Such records may be inspected by the respective Funds at reasonable times. 6. Liability of Van Kampen. Van Kampen shall not be liable to any Fund for any action taken or thing done by it or its agents or contractors on behalf of the Fund in carrying out the terms and provisions of the Agreement if done in good faith and without negligence or misconduct on the part of Van Kampen, its agents or contractors. 7. Indemnification By Funds. Each Fund will indemnify and hold Van Kampen harmless from all loss, cost, damage and expense, including reasonable expenses for legal counsel, incurred by Van Kampen resulting from (a) any claim, demand, action or suit in connection with Van Kampen's acceptance of this Agreement; (b) an action or omission by Van Kampen in the performance of its duties hereunder; (c) Van Kampen's acting upon instructions believed by it to have been executed by a duly authorized officer of the Fund; or (d) Van Kampen's acting upon information provided by the Fund in form and under policies agreed to by Van Kampen and the Fund. Van Kampen shall not be entitled to such indemnification in respect of action or omissions constituting negligence or willful misconduct of Van Kampen or its agents or contractors. Prior to admitting any claim against it which may be subject to this indemnification, Van Kampen shall give the Fund reasonable opportunity to defend against said claim on its own name or in the name of Van Kampen. 3 8. Indemnification By Van Kampen. Van Kampen will indemnify and hold harmless each Fund from all loss, cost, damage and expense, including reasonable expenses for legal counsel, incurred by the Fund resulting from any claim, demand, action or suit arising out of Van Kampen's failure to comply with the terms of this Agreement or which arises out of the negligence or willful misconduct of Van Kampen or its agents or contractors; provided, that such negligence or misconduct is not attributable to the Funds, their agents or contractors. Prior to admitting any claim against it which may be subject to this indemnification, the Fund shall give Van Kampen reasonable opportunity to defend against said claim in its own name or in the name of such Fund. 9. Further Assurances. Each party agrees to perform such further acts and execute such further documents as necessary to effectuate the purposes hereof. 10. Dual Interests. It is understood that some person or persons may be directors, trustees, officers, or shareholders of both the Funds and Van Kampen (including Van Kampen's affiliates), and that the existence of any such dual interest shall not affect the validity hereof or of any transactions hereunder except as otherwise provided by a specific provision of applicable law. 11. Execution, Amendment and Termination. The term of this Agreement shall begin as of the date first above written, and unless sooner terminated as herein provided, this Agreement shall remain in effect thereafter from year to year if such continuation is specifically approved at least annually by the Board of Trustees of each Fund, including a majority of the independent Trustees of each Fund. The Agreement may be modified or amended from time to time by mutual agreement between parties, and the Funds shall reimburse Van Kampen for its costs, expenses and disbursements payable under this Agreement to such date. This Agreement may be amended in the future to include as additional parties to the Agreement other investment companies for which Van Kampen, any subsidiary or affiliate serves as investment advisor or distributor. 12. Assignment. Any interest of Van Kampen under this Agreement shall not be assigned or transferred, either voluntarily or involuntarily, by operation of 4 law or otherwise, without the prior written consent of the Fund. This Agreement shall automatically and immediately terminate in the event of its assignment without the prior written consent of the Fund. 13. Notice. Any notice under this agreement shall be in writing, addressed and delivered or sent by registered or certified mail, postage prepaid, to the other party at such address as such other party may designate for the receipt of such notices. Until further notice to the other parties, it is agreed that for this purpose the address of each Fund is 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attention: Treasurer and the address of Van Kampen, for this purpose is 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attention: Treasurer. 14. Personal Liability. As provided for in the Declaration of Trust of the various Funds, under which the Funds are organized as unincorporated trusts under the laws of the State of Delaware, Massachusetts or Pennsylvania, as the case may be, the shareholders, trustees, officers, employees and other agents of the Fund shall not personally be bound by or liable for the matters set forth hereunder, nor shall resort be had to their private property for the satisfaction of any obligation or claim hereunder. 15. Interpretative Provisions. In connection with the operations of this agreement, Van Kampen and the Funds may agree from time to time on such provisions interpretative of or in addition to the provisions of this Agreement as may in their opinion be consistent with the general tenor of this Agreement. 16. State Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Illinois. 17. Captions. The captions in the Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction effect. 5 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written. ALL OF THE PARTIES SET FORTH IN SCHEDULE 1 ATTACHED HERETO By: /s/ John Sullivan ---------------------------------- John Sullivan Vice President and Treasurer VAN KAMPEN INVESTMENTS INC. By: /s/ A. Thomas Smith ---------------------------------- A. Thomas Smith Managing Director 6 SCHEDULE 1 OPEN END FUNDS VAN KAMPEN SERIES FUND, INC. Van Kampen American Value Fund Van Kampen Asian Equity 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 Franchise Fund Van Kampen Global Value Equity Fund Van Kampen International Magnum Fund Van Kampen Latin American Fund Van Kampen Mid Cap Growth Fund Van Kampen Value Fund Van Kampen Worldwide High Income Fund VAN KAMPEN U.S. GOVERNMENT TRUST Van Kampen U.S. Government Fund VAN KAMPEN TAX FREE TRUST Van Kampen California Insured Tax Free Fund Van Kampen Insured Tax Free Income Fund Van Kampen Intermediate Term Municipal Income Fund Van Kampen Municipal Income Fund Van Kampen New York Tax Free Income Fund Van Kampen Strategic Municipal Income Fund Van Kampen Pennsylvania Tax Free Income Fund VAN KAMPEN EQUITY TRUST Van Kampen Aggressive Growth Fund Van Kampen Growth Fund Van Kampen Select 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 TRUST Van Kampen High Yield Fund VAN KAMPEN EQUITY TRUST II Van Kampen Technology Fund Van Kampen Tax Managed Equity Growth Fund Van Kampen International Advantage Fund Van Kampen Tax Free Money Fund VAN KAMPEN LIFE INVESTMENT TRUST Aggressive Growth Portfolio 7 CLOSED END FUNDS Van Kampen Advantage Municipal Income Trust Van Kampen Advantage Municipal Income Trust II Van Kampen Advantage Pennsylvania Municipal Income Trust Van Kampen California Municipal Trust Van Kampen California Quality Municipal Trust Van Kampen California Value Municipal Income Trust Van Kampen Florida Quality Municipal Trust Van Kampen High Income Trust Van Kampen High Income Trust II Van Kampen Investment Grade Municipal Trust Van Kampen Massachusetts Value Municipal Income Trust Van Kampen Municipal Income Trust Van Kampen Municipal Opportunity Trust Van Kampen Municipal Opportunity Trust II Van Kampen Municipal Trust Van Kampen New York Quality Municipal Trust Van Kampen New York Value Municipal Income Trust Van Kampen Ohio Quality Municipal Trust Van Kampen Ohio Value Municipal Income Trust Van Kampen Pennsylvania Quality Municipal Trust Van Kampen Pennsylvania Value Municipal Income Trust Van Kampen Prime Rate Income Trust Van Kampen Select Sector Municipal Trust Van Kampen Senior Floating Rate Fund Van Kampen Senior Income Trust Van Kampen Strategic Sector Municipal Trust Van Kampen Trust for Insured Municipals Van Kampen Trust for Investment Grade California Municipals Van Kampen Trust for Investment Grade Florida Municipals Van Kampen Trust for Investment Grade 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 Value Municipal Income Trust 8 EX-99.(13)(G) 20 c93084a1exv99wx13yxgy.txt FUND ACCOUNTING AGREEMENT AND AMENDMENT THERETO EXHIBIT 13(g) FUND ACCOUNTING AGREEMENT THIS AGREEMENT, dated May 31, 1997, by and between the parties set forth in Schedule A hereto (designated collectively hereafter as the "Funds") and VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP., a Delaware corporation ("Advisory Corp."). W I T N E S S E T H: WHEREAS, each of the Funds is registered as a management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, Advisory Corp. has the capability of providing certain accounting services to the Funds; and WHEREAS, each desires to utilized Advisory Corp. in the provision of such accounting services; and WHEREAS, Advisory Corp. intends to maintain its staff in order to accommodate the provision of all such services. NOW THEREFORE, in consideration of the premises and the mutual covenants spelled out herein, it is agreed between the parties hereto as follows: 1. Appointment of Advisory Corp.. As agent, Advisory Corp. shall provide each of the Funds the accounting services ("Accounting Services") as set forth in Paragraph 2 of this Agreement. Advisory Corp. accepts such appointment and agrees to furnish the Accounting Services in return for the compensation provided in Paragraph 3 of this Agreement. 2. Accounting Services to be Provided. Advisory Corp. will provide to each respective Fund accounting related services in connection with the maintenance of the financial records of such Fund, including without limitation: (i) maintenance of the general ledger and other financial books and records; (ii) processing of portfolio transactions; (iii) coordination of the valuation of portfolio securities; (iv) calculation of the Fund's net asset value; (v) coordination of financial and regulatory reporting; (vi) preparation of financial reports for each Fund's Board of Trustees; (vii) coordination of tax and financial compliance issues; (viii) the establishment and maintenance of accounting policies; (ix) recommendations with respect to dividend policies; (x) preparation of each Fund's financial reports and other accounting and tax related notice information to shareholders; and (xi) the assimilation and interpretation of accounting data for meaningful management review. Advisory Corp. shall provide accurate maintenance of each Fund's financial books and records as required by the applicable securities statutes and regulations, and shall hire persons (collectively the "Accounting Service Group") as needed to provide such Accounting Services. 1 3. Expenses and Reimbursements. Advisory Corp. shall be reimbursed by the Funds for all costs and services incurred in connection with the provision of the aforementioned Accounting Services ("Accounting Service Expenses"), including but not limited to all salary and related benefits paid to the personnel of the Accounting Service Group, overhead and expenses related to office space and related equipment and out-of-pocket expenses. The Accounting Services Expenses will be paid by Advisory Corp. and reimbursed by the Funds. Advisory Corp. will tender to each Fund a monthly invoice as of the last business day of each month which shall certify the total support service expenses expended. Except as provided herein, Advisory Corp. will receive no other compensation in connection with Accounting Services rendered in accordance with this Agreement. 4. Payment for Accounting Service Expenses Among the Funds. As to one quarter (25%) of the Accounting Service Expenses incurred under the Agreement, the expense shall be allocated between all Funds based on the number of classes of shares of beneficial interest that each respective Fund has issued. As to the remaining three quarters (75%) of the Accounting Service Expenses incurred under the Agreement, the expense shall be allocated between all Funds based on their relative net assets. For purposes of determining the percentage of expenses to be allocated to any Fund, the liquidation preference of any preferred shares issued by any such Fund shall not be considered a liability of such Fund for the purposes of calculating relative net assets of such Fund. 5. Maintenance of Records. All records maintained by Advisory Corp. in connection with the performance of its duties under this Agreement will remain the property of each respective Fund and will be preserved by Advisory Corp. for the periods prescribed in Section 31 of the 1940 Act and the rules thereunder or such other applicable rules that may be adopted from time to time under the act. In the event of termination of the Agreement, such records will be promptly delivered to the respective Funds. Such records may be inspected by the respective Funds at reasonable times. 6. Liability of Advisory Corp. Advisory Corp. shall not be liable to any Fund for any action taken or thing done by it or its agents or contractors on behalf of the fund in carrying out the terms and provisions of the Agreement if done in good faith and without gross negligence or misconduct on the part of Advisory Corp., its agents or contractors. 7. Indemnification By Funds. Each Fund will indemnify and hold Advisory Corp. harmless from all lost, cost, damage and expense, including reasonable expenses for legal counsel, incurred by Advisory Corp. resulting from: (a) any claim, demand, action or suit in connection with Advisory Corp.'s acceptance of this Agreement; (b) any action or omission by Advisory Corp. in the performance of its duties hereunder; (c) Advisory Corp.'s acting upon instructions believed by it to have been executed by a duly authorized officer of the Fund; or (d) Advisory Corp.'s acting upon information provided by the Fund in form and under policies agreed to by Advisory Corp. and the Fund. Advisory Corp. shall not be entitled to such indemnification in respect of actions or omissions constituting gross negligence or willful misconduct of Advisory Corp. or its agents or contractors. Prior to confessing any claim against it which may be subject 2 to this indemnification, Advisory Corp. shall give the Fund reasonable opportunity to defend against said claim in its own name or in the name of Advisory Corp. 8. Indemnification By Advisory Corp. Advisory Corp. will indemnify and hold harmless each Fund from all loss, cost, damage and expense, including reasonable expenses for legal counsel, incurred by the Fund resulting from any claim, demand, action or suit arising out of Advisory Corp.'s failure to comply with the terms of this Agreement or which arises out of the gross negligence or willful misconduct of Advisory Corp. or its agents or contractors; provided that such negligence or misconduct is not attributable to the Funds, their agents or contractors. Prior to confessing any claim against it which may be subject to this indemnification, the Fund shall give Advisory Corp. reasonable opportunity to defend against said claim in its own name or in the name of such Fund. 9. Further Assurances. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 10. Dual Interests. It is understood that some person or persons may be directors, trustees, officers or shareholders of both the Funds and Advisory Corp. (including Advisory Corp.'s affiliates), and that the existence of any such dual interest shall not affect the validity hereof or of any transactions hereunder except as otherwise provided by a specific provision of applicable law. 11. Execution, Amendment and Termination. The term of this Agreement shall begin as of the date first above written, and unless sooner terminated as herein provided, this Agreement shall remain in effect through May, 1998, and thereafter from year to year, if such continuation is specifically approved at least annually by the Board of Trustees of each Fund, including a majority of the independent Trustees of each Fund. This Agreement may be modified or amended from time to time by mutual agreement between the parties hereto and may be terminated after May, 1998, by at least sixty (60) days' written notice given by one party to the others. Upon termination hereof, each Fund shall pay to Advisory Corp. such compensation as may be due as of the date of such termination and shall likewise reimburse Advisory Corp. for its costs, expenses and disbursements payable under this Agreement to such date. This Agreement may be amended in the future to include as additional parties to the Agreement other investment companies for with Advisory Corp., any subsidiary or affiliate serves as investment advisor or distributor if such amendment is approved by the President of each Fund. 12. Assignment. Any interest of Advisory Corp. under this Agreement shall not be assigned or transferred, either voluntarily or involuntarily, by operation of law or otherwise, without the prior written consent of the Funds. This Agreement shall automatically and immediately terminate in the event of its assignment without the prior written consent of the Funds. 13. Notice. Any notice under this Agreement shall be in writing, addressed and delivered or sent by registered or certified mail, postage prepaid, to the other party at such address as such other party may designate for the receipt of such notices. Until further notice to the other parties, it is agreed that for this purpose the address of each Fund is One Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attention: President and that of Advisory Corp. for this purpose is One 3 Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attention: President. 14. Personal Liability. As provided for in the Agreement and Declaration of Trust of the various Funds, under which the Funds are organized as unincorporated trusts, the shareholders, trustees, officers, employees and other agents of the Fund shall not personally be found by or liable for the matters set forth hereto, nor shall resort be had to their private property for the satisfaction of any obligation or claim hereunder. 15. Interpretative Provisions. In connection with the operation of this Agreement, Advisory Corp. and the Funds may agree from time to time on such provisions interpretative of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. 16. State Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Illinois. 17. Captions. The captions in this Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. IN WITNESS WHEREOF, the parties have caused this amended and restated Agreement to be executed as of the day and year first above written. ALL OF THE PARTIES SET FORTH IN SCHEDULE A By: /s/ Ronald A. Nyberg -------------------------------- Ronald A. Nyberg, Vice President VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. By: /s/ Dennis J. McDonnell ------------------------------ Dennis J. McDonnell, President 4 SCHEDULE A I. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. ("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"): CLOSED END FUNDS Van Kampen American Capital Municipal Income Trust Van Kampen American Capital California Municipal Trust Van Kampen American Capital High Income Trust Van Kampen American Capital High Income Trust II Van Kampen American Capital Investment Grade Municipal Trust Van Kampen American Capital Municipal Trust Van Kampen American Capital California Quality Municipal Trust Van Kampen American Capital Florida Quality Municipal Trust Van Kampen American Capital New York Quality Municipal Trust Van Kampen American Capital Ohio Quality Municipal Trust Van Kampen American Capital Pennsylvania Quality Municipal Trust Van Kampen American Capital Trust For Insured Municipals Van Kampen American Capital Trust For Investment Grade Municipals Van Kampen American Capital Trust For Investment Grade California Municipals Van Kampen American Capital Trust For Investment Grade Florida Municipals Van Kampen American Capital Trust For Investment Grade New Jersey Municipals Van Kampen American Capital Trust For Investment Grade New York Municipals Van Kampen American Capital Trust For Investment Grade Pennsylvania Municipals Van Kampen American Capital Municipal Opportunity Trust Van Kampen American Capital Advantage Municipal Income Trust Van Kampen American Capital Advantage Pennsylvania Municipal Income Trust Van Kampen American Capital Strategic Sector Municipal Trust Van Kampen American Capital Value Municipal Income Trust Van Kampen American Capital California Value Municipal Income Trust Van Kampen American Capital Massachusetts Value Municipal Income Trust Van Kampen American Capital New Jersey Value Municipal Income Trust Van Kampen American Capital New York Value Municipal Income Trust Van Kampen American Capital Ohio Value Municipal Income Trust Van Kampen American Capital Pennsylvania Value Municipal Income Trust Van Kampen American Capital Municipal Opportunity Trust II Van Kampen American Capital Florida Municipal Opportunity Trust Van Kampen American Capital Advantage Municipal Income Trust II Van Kampen American Capital Select Sector Municipal Trust 1 INSTITUTIONAL FUNDS II. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC. ("MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"): The Explorer Institutional Trust on behalf of its series Explorer Institutional Active Core Fund Explorer Institutional Limited Duration Fund OPEN END FUNDS III. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC. ("ASSET MANAGEMENT, INC.") (COLLECTIVELY, THE "FORMER AMERICAN CAPITAL FUNDS"): Van Kampen American Capital Comstock Fund ("Comstock Fund") Van Kampen American Capital Corporate Bond Fund ("Corporate Bond Fund") Van Kampen American Capital Emerging Growth Fund ("Emerging Growth Fund") Van Kampen American Capital Enterprise Fund ("Enterprise Fund") Van Kampen American Capital Equity Income Fund ("Equity Income Fund") Van Kampen American Capital Global Managed Assets Fund ("Global Managed Assets Funds") Van Kampen American Capital Government Securities Fund ("Government Securities Fund") Van Kampen American Capital Government Target Fund ("Government Target Fund") Van Kampen American Capital Growth and Income Fund ("Growth and Income Fund") Van Kampen American Capital Harbor Fund ("Harbor Fund") Van Kampen American Capital High Income Corporate Bond Fund ("High Income Corporate Bond Fund") Van Kampen American Capital High Income Corporate Bond Fund ("High Income Corporate Bond Fund") Van Kampen American Capital Life Investment Trust ("Life Investment Trust" or "LIT") on behalf of its Series Enterprise Portfolio ("LIT Enterprise Portfolio") Domestic Income Portfolio ("LIT Domestic Income Portfolio") Emerging Growth Portfolio ("LIT Emerging Growth Portfolio") Government Portfolio ("LIT Government Portfolio") Asset Allocation Portfolio ("LIT Asset Allocation Portfolio") Money Market Portfolio ("LIT Money Market Portfolio") Real Estate Securities Portfolio ("LIT Real Estate Securities Portfolio") Growth and Income Portfolio ("LIT Growth and Income Portfolio") Van Kampen American Capital Limited Maturity Government Fund ("Limited Maturity Government Fund") Van Kampen American Capital Pace Fund ("Pace Fund") Van Kampen American Capital Real Estate Securities Fund ("Real Estate Securities Fund") Van Kampen American Capital Reserve Fund ("Reserve Fund") Van Kampen American Capital Small Capitalization Fund ("Small Capitalization Fund") 2 Van Kampen American Capital Tax-Exempt Trust ("Tax-Exempt Trust") on behalf of its Series Van Kampen American Capital High Yield Municipal Fund ("High Yield Municipal Fund") Van Kampen American Capital U.S. Government Trust for Income ("U.S. Government Trust for Income") IV. FUNDS ADVISED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP. ("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "FORMER VAN KAMPEN FUNDS"): Van Kampen American Capital U.S. Government Trust ("U.S. Government Trust") on behalf of its series Van Kampen American Capital U.S. Government Fund ("U.S. Government Fund") Van Kampen American Capital Tax Free Trust ("Tax Free Trust") on behalf of its series Van Kampen American Capital Insured Tax Free Income Fund ("Insured Tax Free Income Fund") Van Kampen American Capital Tax Free High Income Fund ("Tax Free High Income Fund") Van Kampen American Capital California Insured Tax Free Fund ("California Insured Tax Free Fund") Van Kampen American Capital Municipal Income Fund ("Municipal Income Fund") Van Kampen American Capital Intermediate Term Municipal Income Fund (Intermediate Term Municipal Income Fund") Van Kampen American Capital Florida Insured Tax Free Income Fund ("Florida Insured Tax Free Income Fund") Van Kampen American Capital New Jersey Tax Free Income Fund ("New Jersey Tax Free Income Fund") Van Kampen American Capital New York Tax Free Income Fund ("New York Tax Free Income Fund") Van Kampen American Capital California Tax Free Income Fund ("California Tax Free Income Fund") Van Kampen American Capital Michigan Tax Free Income Fund ("Michigan Tax Free Income Fund") Van Kampen American Capital Missouri Tax Free Income Fund ("Missouri Tax Free Income Fund") Van Kampen American Capital Ohio Tax Free Income Fund ("Ohio Tax Free Income Fund") Van Kampen American Capital Trust ("VKAC Trust") Van Kampen American Capital High Yield Fund ("High Yield Fund") Van Kampen American Capital Short-Term Global Income Fund ("Short-Term Global Income Fund") Van Kampen American Capital Strategic Income Fund ("Strategic Income Fund") Van Kampen American Capital Equity Trust ("Equity Trust") 3 on behalf of its series Van Kampen American Capital Utility Fund ("Utility Fund") Van Kampen American Capital Growth Fund ("Growth Fund") Van Kampen American Capital Value Fund ("Value Fund") Van Kampen American Capital Great American Companies Fund ("Great American Companies Fund") Van Kampen American Capital Prospector Fund ("Prospector Fund") Van Kampen American Capital Aggressive Growth Fund ("Aggressive Growth Fund") Van Kampen American Capital Foreign Securities Fund ("Foreign Securities Fund") Van Kampen American Capital Pennsylvania Tax Free Income Fund ("Pennsylvania Tax Free Income Fund") Van Kampen American Capital Tax Free Money Fund ("Tax Free Money Fund") 4 AMENDMENT NUMBER SIX TO THE FUND ACCOUNTING AGREEMENT THIS AMENDMENT NUMBER SIX, dated May 31, 2000, to the Fund Accounting Agreement dated May 31, 1997 (the "Agreement") by and between the parties set forth in Schedule A, attached hereto and incorporated by reference and Van Kampen Investment Advisory Corp., a Delaware corporation ("Advisory Corp."). W I T N E S S E T H WHEREAS, the Funds wish to amend the current Fund Accounting Agreement in accordance with the terms set forth by the Boards of Trustees/Directors of the Van Kampen Open End Funds at a Meeting held on April 17, 2000 and the Boards of Trustees of the Van Kampen Closed End Funds at a Meeting held on May 30, 2000; NOW, THEREFORE, in consideration of the promises and mutual covenants spelled out in the Agreement and herein, it is hereby agreed that the Agreement be amended to add Section 13 and renumber the remaining Sections of the Agreement as follows: 13. Delegation of Accounting Services. Advisory Corp. may delegate the provision of all or a portion of the Advisory Services contemplated herein to such other parties as may be approved by the Board of each Fund. In the event of any such delegation, the Funds shall reimburse Advisory Corp. for expense related to those Accounting Services provided by Advisory Corp., and shall pay such sub-accounting agents such compensation as may be agreed from time to time by the Funds and the sub-accounting agent. In the event of such delegation, Advisory Corp. shall oversee the activities of such sub-accounting agent on behalf of the Funds. 14. Notice. Any notice under this Agreement shall be in writing, addressed and delivered or sent by registered or certified mail, postage prepaid, to the other party at such address as such other party may designate for the receipt of such notices. Until further notice to the other parties, it is agreed that for this purpose the address of each Fund is One Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attention: President and that of Advisory Corp. for this purpose is One Parkview Plaza, Oakbrook Terrace, Illinois 60181, Attention: President. 1 15. Personal Liability. As provided for in the Agreement and Declaration of Trust of the various Funds, under which the Funds are organized as unincorporated trusts, the shareholders, trustees, officers, employees and other agents of the Fund shall not personally be found by or liable for the matters set forth hereto, nor shall resort be had to their private property for the satisfaction of any obligation or claim hereunder. 16. Interpretative Provisions. In connection with the operation of this Agreement, Advisory Corp. and the Funds may agree from time to time on such provisions interpretative of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. 17. State Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Illinois. 18. Captions. The captions in this Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written. ALL OF THE PARTIES SET FORTH IN SCHEDULE A By: /s/ A. Thomas Smith III ------------------------------- A. Thomas Smith III Vice President and Secretary VAN KAMPEN INVESTMENT ADVISORY CORP. By: /s/ John L. Sullivan --------------------------- John L. Sullivan Senior Vice President 2 SCHEDULE A I. FUNDS ADVISED BY VAN KAMPEN INVESTMENT ADVISORY CORP. ("INVESTMENT ADVISORY CORP.") (COLLECTIVELY, THE "INVESTMENT ADVISORY CORP. FUNDS") CLOSED END FUNDS 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 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 Jersey 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 Florida Municipal Opportunity Trust Van Kampen Advantage Municipal Income Trust II Van Kampen Select Sector Municipal Trust OPEN END FUNDS Van Kampen U.S. Government Trust ("U.S. Government Trust") on behalf of its series Van Kampen U.S. Government Fund ("U.S. Government Fund") Van Kampen Tax Free Trust ("Tax Free Trust") 3 on behalf of its series Van Kampen Insured Tax Free Income Fund ("Insured Tax Free Income Fund") Van Kampen Tax Free High Income Fund ("Tax Free High Income Fund") Van Kampen California Insured Tax Free Fund ("California Insured Tax Free Fund") Van Kampen Municipal Income Fund ("Municipal Income Fund") Van Kampen Intermediate Term Municipal Income Fund (Intermediate Term Municipal Income Fund") Van Kampen Florida Insured Tax Free Income Fund ("Florida Insured Tax Free Income Fund") Van Kampen New York Tax Free Income Fund ("New York Tax Free Income Fund") Van Kampen California Municipal Income Fund ("California Municipal Income Fund") Van Kampen Michigan Tax Free Income Fund ("Michigan Tax Free Income Fund") Van Kampen Missouri Tax Free Income Fund ("Missouri Tax Free Income Fund") Van Kampen Ohio Tax Free Income Fund ("Ohio Tax Free Income Fund") Van Kampen Trust ("VK Trust") on behalf of its series Van Kampen High Yield Fund ("High Yield Fund") Van Kampen Strategic Income Fund ("Strategic Income Fund") Van Kampen Managed Short Term Income Fun d ("Managed Short Term Income Fund") Van Kampen Equity Trust ("Equity Trust") on behalf of its series Van Kampen Utility Fund ("Utility Fund") Van Kampen Growth Fund ("Growth Fund") Van Kampen Aggressive Growth Fund ("Aggressive Growth Fund") Van Kampen Small Cap Value Fund ("Small Cap Value Fund") Van Kampen Small Company Growth Fund ("Small Company Growth Fund") Van Kampen Select Growth Fund ("Select Growth Fund") Van Kampen Small Cap Growth Fund ("Small Cap Growth Fund") Van Kampen Equity Trust II ("Equity Trust II") on behalf of its Series Van Kampen Tax Managed Equity Growth Fund Van Kampen Pennsylvania Tax Free Income Fund ("Pennsylvania Tax Free Income Fund") Van Kampen Tax Free Money Fund ("Tax Free Money Fund") II. FUNDS ADVISED BY VAN KAMPEN ASSET MANAGEMENT INC. (COLLECTIVELY, THE "ASSET MANAGEMENT FUNDS") Van Kampen Comstock Fund ("Comstock Fund") Van Kampen Corporate Bond Fund ("Corporate Bond Fund") Van Kampen Emerging Growth Fund ("Emerging Growth Fund") Van Kampen Enterprise Fund ("Enterprise Fund") Van Kampen Equity Income Fund ("Equity Income Fund") 4 Van Kampen Global Managed Assets Fund ("Global Managed Assets Funds") Van Kampen Government Securities Fund ("Government Securities Fund") Van Kampen Growth and Income Fund ("Growth and Income Fund") Van Kampen Harbor Fund ("Harbor Fund") Van Kampen High Income Corporate Bond Fund ("High Income Corporate Bond Fund") Van Kampen Life Investment Trust ("Life Investment Trust" or "LIT") on behalf of its Series Enterprise Portfolio ("LIT Enterprise Portfolio") Domestic Income Portfolio ("LIT Domestic Income Portfolio") Emerging Growth Portfolio ("LIT Emerging Growth Portfolio") Global Equity Portfolio ("LIT Global Equity Portfolio") Government Portfolio ("LIT Government Portfolio") Asset Allocation Portfolio ("LIT Asset Allocation Portfolio") Money Market Portfolio ("LIT Money Market Portfolio") Morgan Stanley Real Estate Securities Portfolio ("LIT Morgan Stanley Real Estate Securities Portfolio") Growth and Income Portfolio ("LIT Growth and Income Portfolio") Strategic Stock Portfolio ("LIT Strategic Stock Portfolio") Comstock Portfolio ("LIT Comstock Portfolio") Van Kampen Limited Maturity Government Fund ("Limited Maturity Government Fund") Van Kampen Pace Fund ("Pace Fund") Van Kampen Real Estate Securities Fund ("Real Estate Securities Fund") Van Kampen Reserve Fund ("Reserve Fund") Van Kampen Tax-Exempt Trust ("Tax-Exempt Trust") on behalf of its Series Van Kampen High Yield Municipal Fund ("High Yield Municipal Fund") Van Kampen Equity Trust II ("Equity Trust II") on behalf of its Series Van Kampen Technology Fund Van Kampen U.S. Government Trust for Income ("U.S. Government Trust for Income") 5 EX-99.(14) 21 c93084a1exv99wx14y.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM EXHIBIT 14 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the use in this Pre-Effective Amendment No. 1 to Registration Statement No. 333-123451 on Form N-14 under the Securities Act of 1933, of our reports dated December 10, 2004, appearing in the Annual Reports of Van Kampen Municipal Trust and Van Kampen Investment Grade Municipal Trust, for the year ended October 31, 2004, included in the Statement of Additional Information which is part of such Registration Statement, and to the references to us under the headings "Independent Registered Public Accounting Firm" and "Form of Agreement and Plan of Reorganization" included in the Statement of Additional Information. /S/ DELOITTE & TOUCHE LLP Chicago, Illinois May 3, 2005 EX-99.(16) 22 c93084a1exv99wx16y.txt POWER OF ATTORNEY EXHIBIT 16 POWER OF ATTORNEY ----------------- The undersigned, 1) being officers and trustees/directors of: a) each of the Van Kampen Open-End Trusts (the "Delaware Open-End Trusts") as indicated on Schedule 1 attached hereto and incorporated by reference, each a Delaware statutory trust, b) the Van Kampen Pennsylvania Tax Free Income Fund (the "Pennsylvania Open-End Trust"), a Pennsylvania trust, and c) the Van Kampen Series Fund, Inc. (the "Corporation"), a Maryland corporation, (collectively, the Delaware Open-End Trusts, Pennsylvania Open-End Trust, and the Corporation are referred to herein as the "Open-End Funds"); d) each of the Van Kampen Closed-End Trusts (the "Massachusetts Closed-End Trusts") as indicated on Schedule 2 attached hereto and incorporated by reference, each a Massachusetts business trust, e) each of the Van Kampen Income Trust and Van Kampen Bond Fund (the "Delaware Closed-End Trusts"), each a Delaware statutory trust, f) each of the Van Kampen Pennsylvania Quality Municipal Trust, Van Kampen Trust for Investment Grade Pennsylvania Municipals, Van Kampen Advantage Pennsylvania Municipal Income Trust and Van Kampen Pennsylvania Value Municipal Income Trust (the "Pennsylvania Closed-End Trusts"), each a Pennsylvania trust (collectively, the Massachusetts Closed-End Trusts, Delaware Closed-End Trusts and Pennsylvania Closed-End Trusts are referred to herein as the "Closed-End Funds"); 2) being officers and trustees, with the exception of Jerry D. Choate, Linda Hutton Heagy, R. Craig Kennedy, Mitchell M. Merin (Mr. Merin is president but not a trustee), Jack E. Nelson and Suzanne H. Woolsey, of: a) each of the Van Kampen Senior Income Trust and Van Kampen Senior Loan Fund (the "Senior Loan Funds"), each a Massachusetts business trust; 3) being officers and managing general partners of: a) the Van Kampen Exchange Fund (the "Exchange Fund"), a California Limited Partnership (collectively, the Open-End Funds, Closed-End Funds, Senior Loan Funds and Exchange Fund are referred to herein as the "Funds") do hereby, in the capacities shown below, appoint Stefanie Chang Yu, Amy Doberman and Lou Anne McInnis each of New York, New York, as agents and attorneys-in-fact with full power of substitution and resubstitution, for each of the undersigned, as fully to all intents as he or she might or could do in person, for the purposes to execute and deliver, for and on behalf of the undersigned, any Registration Statement on Form N-1A of the Open-End Funds or Exchange Fund (including any and all amendments thereto), any Registration Statement on Form N-2 of the Closed-End Funds or Senior Loan Funds (including any and all amendments thereto), any Registration Statement on Form N-14 of the Funds (including any and all amendments thereto) and any other document, upon the advice of counsel, filed by each Fund 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. 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: January 26, 2005
Signature Title --------- ----- /s/ Mitchell M. Merin - ------------------------------ President and Trustee/Director/Managing General Partner Mitchell M. Merin /s/ Ronald E. Robison - ------------------------------ Executive Vice President and Principal Executive Officer Ronald E. Robison /s/ James W. Garrett - ------------------------------ Chief Financial Officer and Treasurer James W. Garrett /s/ David C. Arch - ------------------------------ Trustee/Director/Managing General Partner David C. Arch /s/ Jerry D. Choate - ------------------------------ Trustee/Director/Managing General Partner Jerry D. Choate /s/ Rod Dammeyer - ------------------------------ Trustee/Director/Managing General Partner Rod Dammeyer /s/ Linda Hutton Heagy - ------------------------------ Trustee/Director/Managing General Partner Linda Hutton Heagy /s/ R. Craig Kennedy - ------------------------------ Trustee/Director/Managing General Partner R. Craig Kennedy /s/ Howard J Kerr - ------------------------------ Trustee/Director/Managing General Partner Howard J Kerr /s/ Jack E. Nelson - ------------------------------ Trustee/Director/Managing General Partner Jack E. Nelson /s/ Richard F. Powers, III - ------------------------------ Trustee/Director/Managing General Partner Richard F. Powers, III /s/ Hugo F. Sonnenschein - ------------------------------ Trustee/Director/Managing General Partner Hugo F. Sonnenschein /s/ Wayne W. Whalen - ------------------------------ Trustee/Director/Managing General Partner Wayne W. Whalen /s/ Suzanne H. Woolsey - ------------------------------ Trustee/Director/Managing General Partner 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 YIELD FUND VAN KAMPEN LIFE INVESTMENT TRUST VAN KAMPEN LIMITED DURATION FUND VAN KAMPEN PACE FUND VAN KAMPEN REAL ESTATE SECURITIES FUND VAN KAMPEN RESERVE FUND VAN KAMPEN TAX-EXEMPT TRUST SCHEDULE 2 ---------- 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 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 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 MUNICIPAL OPPORTUNITY TRUST VAN KAMPEN ADVANTAGE 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 MUNICIPAL OPPORTUNITY TRUST II VAN KAMPEN ADVANTAGE MUNICIPAL INCOME TRUST II VAN KAMPEN SELECT SECTOR MUNICIPAL TRUST APPENDIX A Approval of Authorization RESOLVED, that Mr. Ronald E. Robison and Mr. James W. Garrett, Principal Executive Officer and Chief Financial Officer, respectively, be and they hereby are authorized to sign any registration statement or any supplement or amendment thereto (a "Registration Statement") on behalf of the Funds pursuant to a power of attorney, dated January 26, 2005, granted to each of the attorneys-in-fact referenced therein; and FURTHER RESOLVED, that the execution and filing of any Registration Statement and the performance of such acts by such attorneys-in-fact shall be conclusive evidence of approval thereof and authority therefore from each Fund and the approval by each Fund of the documents so filed or action so taken. Pursuant to the requirement of Rule 483 of the Securities Act of 1933, as amended, the undersigned hereby certifies that the above resolutions were approved by the Board of Trustees or Directors of the Funds on March 3, 2005. /s/ Stefanie Chang Yu - --------------------- Stefanie Chang Yu Secretary EX-99.(17)(A) 23 c93084a1exv99wx17yxay.txt CODE OF ETHICS OF THE INVESTMENT ADVISOR EXHIBIT 17(a) [MORGAN STANLEY LOGO] MORGAN STANLEY INVESTMENT MANAGEMENT CODE OF ETHICS Effective June 15, 2004 - --------------------------- (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) make certain 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"), and the Morgan Stanley Code of Ethics and Business Practices, which can be found on the Law Portal of the Morgan Stanley Today intranet site. 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 [MORGAN STANLEY LOGO] TABLE OF CONTENTS
Page ---- I. Policy Highlights..................................................................1 II. General Principles.................................................................2 A. Shareholder and Client Interests Come First.................................2 B. Avoid Actual and Potential Conflicts of Interest............................3 III. Definitions........................................................................3 A. Access Persons..............................................................3 B. Covered Accounts............................................................3 C. Covered Securities..........................................................4 D. Investment Personnel........................................................4 IV. Grounds for Disqualification from Employment.......................................4 V. Personal Securities Transactions...................................................5 A. Prohibited Conduct..........................................................5 B. Restrictions and Limitations on Personal Securities Transactions............5 C. Exempt Securities...........................................................9 D. Pre-Clearance Requirement..................................................10 E. Permitted Brokerage Accounts and Accounts Holding Morgan Stanley/ Van Kampen Funds.........................................................13 VI. Reporting Requirements............................................................15 A. Report of Transactions.....................................................15 B. Form of Reporting..........................................................17 C. Responsibility to Report...................................................18 D. Leave of Absence...........................................................18 E. Where to File Report.......................................................18 F. Responsibility to Review...................................................18 VII. Code of Ethics Review Committee...................................................19 VIII. Service as a Director and Outside Business Activities.............................19 IX. Gifts.............................................................................19 X. Sanctions.........................................................................20 XI. Employee Certification............................................................20
ii [MORGAN STANLEY LOGO] I. Policy Highlights The Code is designed so 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. Compliance with the Code is a matter of understanding the basic requirements and making sure the steps the employee takes with respect to each personal securities transaction and his/her personal investment is in accordance with these requirements. This Section sets forth selected rules that frequently raise questions. These are by no means comprehensive and Employees must examine the specific sections of the Code for more details and are strongly urged to consult Compliance when questions arise: o Shares of Morgan Stanley/Van Kampen open-end investment companies ("Affiliated Mutual Funds"), whether purchased, sold or exchanged in a brokerage account, directly through a transfer agent or in a 401(k) or other retirement plan, including the Morgan Stanley 401(k) plan, are exempt from pre-clearance requirements but are subject to holding and reporting requirements. AFFILIATED MUTUAL FUNDS MAY NOT BE SOLD, REDEEMED OR EXCHANGED UNTIL AT LEAST 60 CALENDAR DAYS FROM THE PURCHASE TRADE DATE. SHARES IN THE SAME MUTUAL FUND MAY NOT BE REPURCHASED UNTIL AT LEAST 60 CALENDAR DAYS FROM THE SALE TRADE DATE. INVESTMENT PERSONNEL, DEFINED HEREIN, MAY NOT SELL, REDEEM OR EXCHANGE AFFILIATED MUTUAL FUNDS UNTIL AT LEAST 90 CALENDAR DAYS FROM THE PURCHASE TRADE DATE AND ARE SUBJECT TO THE REPURCHASE RESTRICTIONS ABOVE; o Purchases and sales of shares in money market funds, including Morgan Stanley/Van Kampen money market funds, continue to be exempt from preclearance, minimum holding period and reporting requirements of the Code; o Employees must maintain brokerage accounts at Morgan Stanley unless an exception is granted. All accounts for the purchase of Affiliated Mutual Funds must be pre-approved by the Compliance Department before opening; o All Personal Securities Transactions must be pre-cleared through Compliance, except as set forth herein; o Employees may only transact in MWD stock during designated window periods and all transactions must be pre-cleared. The 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; o Exchange Traded Funds ("ETFs") and closed-end mutual funds must be pre-cleared and are subject to all other holding and reporting requirements; 1 [MORGAN STANLEY LOGO] o Employees are prohibited from acquiring any security in an initial public offering (IPO) or any other public underwriting; o Private placements, participation on the Board of any company and any outside business activities must be pre-approved by the Code of Ethics Review Committee; o Employees may not sell Covered Securities under any circumstances unless they have been held for at least 30 days and they may not be sold at a profit until at least 60 calendar days from the purchase trade date; o Employees may not repurchase any security sold by the Employee within the previous 30 days and may not repurchase such security within the previous 60 days if the purchase price is lower than any sale price within the 60-day period; o Portfolio managers and research analysts and those who report to them, may 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; o Employees are required to submit an Initial Holdings Report upon hire, Quarterly Transactions Reports and an Annual Report and Compliance Certification. 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. 2 [MORGAN STANLEY LOGO] 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 an 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 be conducted in a manner consistent with both the letter and spirit of the Code to avoid any such conflict of interest and to prevent abuse of an Employee's position of trust and responsibility. III. Definitions A. "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 Investment Management and who meet the following criteria: (i) directors and officers of Morgan Stanley Distributors Inc., Morgan Stanley Distribution Inc., 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 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. B. "Covered Accounts" shall include any account in which an Employee has, or acquires any direct or indirect beneficial ownership in a security held in the account. Generally, an employee is regarded as having beneficial ownership of securities held in an account in the name of: (1) the individual; (2) a husband, wife or minor child; (3) a relative sharing the same house; (4) another person if the Employee obtains benefits substantially equivalent to ownership of the 3 [MORGAN STANLEY LOGO] 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. In addition, as described in the Code, certain circumstances constitute Beneficial Ownership by an Employee of securities held by a trust. C. "Covered Securities" shall include all securities, any option to purchase or sell, and any security convertible into or exchangeable for such securities. For example, Covered Securities also include, but are not limited to individual securities, open-end mutual funds, exchange traded funds, closed-end funds and unit investment trusts. Exemption from certain requirements of the Code may apply to designated Covered Securities, as set forth below. In addition, certain securities, such as money market funds, are exempt from the definition of "Covered Security" as explained in the Code. D. "Investment Personnel" shall mean any Investment Management Employee who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities or anyone who, in connection with their job functions, has real-time knowledge of such recommendations. This includes, but is not limited to, portfolio managers, research analysts, and all persons reporting to portfolio managers and research analysts and personnel in the trading department, among others. 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, as listed in Schedule A 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: o 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 o 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, 4 [MORGAN STANLEY LOGO] 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 (with the exception of those described in sub-section C. below) for a Covered Account (referred to herein as a "Personal Securities Transaction") unless: 1. pre-clearance of the transaction has been obtained; and the 2. 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 Personal Securities Transaction: 1. Covered Securities purchased may not be sold until at least 30 calendar days from the purchase trade date and may not be sold at a profit until at least 60 calendar days from the purchase trade date. Covered Securities sold may not be repurchased until at least 30 calendar days from the sale trade date. In addition, Covered Securities sold may not be purchased at a lower price until at least 60 calendar days from the sale trade date. Any violation may result in disgorgement of all profits from the transactions as well as other possible sanctions. 2. Morgan Stanley/Van Kampen open-end Mutual Funds (excluding money market funds), whether purchased in a brokerage account, directly through a transfer agent or in a 401(k) or other retirement plan, may not be sold, redeemed or exchanged until at least 60 calendar days from the purchase trade date. They may not be repurchased until at least 60 calendar days from the sale trade date. Investment Personnel may not sell, redeem or exchange such mutual funds until at least 90 calendar days from the purchase trade date and are subject to the repurchase restrictions above; 5 [MORGAN STANLEY LOGO] In the event of financial hardship, exceptions to this section of the Code may be granted, but only with the prior written approval of a Compliance Officer and the Employee's supervisor and if the transaction is consistent with each Fund prospectus. 3. No short sales are permitted. 4. 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. 5. No Employee may acquire any security in an initial public offering (IPO) or any other public underwriting. No Employee shall purchase shares of a Fund that is managed by a Covered Company if such Fund 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. 6a. 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 monitoring by the Local Compliance Group. Any Employee wishing to request approval for private placements must complete a Private Placement Approval Request Form and submit the form to the Local Compliance Group. A copy of the Private Placement Approval Request Form, which may be revised from time to time, is attached as EXHIBIT A. Where the Code of Ethics Review Committee approves any acquisition of a private placement, its decision and reasons for supporting the decision will be documented in a written report, which is to be kept for five years by the Local Compliance Group after the end of the fiscal year in which the approval was granted. 6b. Any Employee who has a personal position in an issuer through a private placement must affirmatively disclose that interest if such employee is involved in considering any subsequent investment decision by a Fund or Managed Account regarding any security of that issuer or its affiliate(s). 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. 6 [MORGAN STANLEY LOGO] Restrictions 7.a. and 7.b. apply only to portfolio managers and research analysts (and all persons reporting to portfolio managers and research analysts) of Investment Management. 7a. 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. 7b. 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. Restriction 7.c. applies only to personnel in the trading department of each Covered Company. 7c. 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. 7d. Any transaction by persons described in sub-sections 7.a., 7.b., and 7.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 [MORGAN STANLEY LOGO] 8. 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. 9. If a Personal Securities 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 pre-cleared each day until the transaction is effected).(1) 10. Employees shall not participate in investment clubs. 11. Employees may only transact in MWD stock during designated window periods. Also, such transactions must be pre-cleared with Compliance. Holdings and transactions in MWD stock 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(2). The 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. Employees receiving MWD stock or options through EICP and other plans may be subject to certain trading restrictions and exemptions. Employees should check Employment documents and consult with compliance to address any questions. Important: Regardless of the limited applicability of Restrictions 7.a., 7.b., and 7.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 - ---------- (1) In the case of trades in institutional markets where the market has already closed, transactions must be executed by the next close of trading in that market. (2) In connection with the sale of MWD stock, periodic purchases through employee sponsored equity purchase plans shall not be counted when calculating the 30-day holding period restriction or the 60-day short swing profit restriction. 8 [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. Exempt Securities 1. The securities listed below are exempt from: (i) the holding period and other restrictions of this Section V., sub-sections B.1., B.2., B. 7a-d. and B.8.; (ii) the pre-clearance requirements; and (iii) the initial, quarterly and annual reporting requirements. Accordingly, it is not necessary to obtain pre-clearance for Personal Securities Transactions in any of the following securities, nor is it necessary to report such securities in the quarterly Transaction Reports or the Initial Holdings Report and Annual Compliance Certification: (a) Direct obligations of the United States Government(3); (b) Bank Certificates of Deposit; (c) Bankers' Acceptances; (d) Commercial Paper; and (e) High Quality Short-Term Debt Instruments (which for these purposes are repurchase agreements and any instrument that has a maturity at issuance of fewer than 366 days that is rated in one of the two highest categories by a Nationally Recognized Statistical Rating Organization). (f) Shares held in money market funds, including Morgan Stanley/Van Kampen money market funds. (g) Shares held in non-affiliated open-end Mutual Funds. 2. Transactions in redeemable Unit Investment Trusts are exempt from the restrictions contained in this Section V., sub-sections B.1. and B.7 and the pre-clearance requirement of Section V., sub-section A., but are subject to the reporting requirements of Section VI., sub-section A. 3. Shares of Morgan Stanley/Van Kampen open-end mutual funds are exempt from the pre-clearance requirement of Section V, sub-section A, but are subject to the account opening restrictions of Section V, sub-section E, initial, quarterly and annual reporting requirements of Section VI, - ---------- (3) Includes securities that carry full faith and credit of the U.S. Government for the timely payment of principal and interest, such as Ginnie Maes, U.S. Savings Bonds, and U.S. Treasuries. For international offices, the equivalent shares in fixed income securities issued by the government of their respective jurisdiction; however such securities are subject to the initial and annual reporting requirements of sub-section D. 9 [MORGAN STANLEY LOGO] and the holding period restrictions contained in Section V, sub-section B. Exchange Traded Funds ("ETFs") and closed-end funds must be pre-cleared and are subject to all other reporting requirements. 4. 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-cleared. Purchases under an issuer's direct stock purchase plan or automatic dividend reinvestment plan are exempt from the restrictions contained in this Section V, sub-sections B.1., B.7a-d. and B.8. and the pre-clearance requirement but are subject to the reporting requirements. 5. Transactions in Morgan Stanley and Van Kampen mutual funds within the Morgan Stanley 401(k) Plan(4) are exempt from the pre-clearance requirement of Section V. sub-section A, but are subject to the initial, quarterly and annual reporting requirements of Section VI. and the holding period restrictions contained in Section V, sub-section B. 6. Employees may maintain fully discretionary managed accounts 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 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. D. Pre-Clearance Requirement 1. Personal Securities Transactions (a) From Whom Obtained - ---------- (4) This includes Morgan Stanley Retirement Plans that are equivalent to 401(k) Plans in jurisdictions outside the United States. 10 [MORGAN STANLEY LOGO] All Employees are required to obtain pre-clearance of Personal Securities Transactions in Covered Securities. Employees must complete the required Form, as described below, and submit it to the Compliance Department for approval. A copy of the Personal Securities Transaction Approval Form, which may be revised from time to time, is attached as EXHIBIT B. (b) Personal Securities Transaction Approval Process Pre-clearance must be obtained by completing and signing the Personal Securities Transaction Approval Form 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 Covered Account, the Employee must indicate for which Covered Account the trade is intended on the Personal Securities Transaction Approval Form. Employees are required to have duplicate copies of their trade confirmations and Covered Account statements (which can be electronically transmitted) sent to the Local Compliance Group for each Covered Account the Employee has, or as a result of the transaction acquires, any direct or indirect beneficial ownership (as defined in sub-section E.3. below). Employees are required to: (i) confirm 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) have 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 pre-clearance for a Personal Securities Transaction must obtain an additional signature from a designated Senior Portfolio Manager (prior to pre-clearance from the Local Compliance Group). Trading desk personnel at any Covered Company seeking pre-clearance for a Personal Securities Transaction must obtain an additional signature from their immediate supervisor prior to pre-clearance from the Local Compliance Group. (c) Filing and Approval 11 [MORGAN STANLEY LOGO] After all required signatures are obtained, the Personal Securities Transaction Approval Form must be filed with the Local Compliance Group. The Employee should retain a copy for his/her records. Compliance will act on the request and notify the Employee whether the request has been approved or denied. If pre-clearance of a request is approved, it is effective only for a transaction completed prior to the close of business on the day of approval. Any transaction not completed will require a new approval. Each Local Compliance Group has implemented procedures reasonably designed to monitor purchases and sales effected pursuant to these pre-clearance procedures. 2. Factors Considered in Pre-Clearance of Personal Securities Transactions In reviewing any Personal Securities Transaction for pre-clearance, the following factors, among others, will generally be considered: o Whether the amount or the nature of the transaction, or the Employee making it, is likely to affect the price or market of security that is held by a Fund or a Managed Account Client. o 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. o 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. o Whether the transaction is non-volitional on the part of the Employee. o Whether the transaction is conducted in a manner that is consistent with the Code to avoid any 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. 12 [MORGAN STANLEY LOGO] E. Permitted Brokerage Accounts and Accounts Holding Morgan Stanley/Van Kampen Funds 1. Brokerage Accounts All securities transactions must be made through a Morgan Stanley brokerage account(5). No other brokerage accounts, including mutual fund accounts with brokerage capabilities, are permitted unless special permission is obtained from the Local Compliance 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 within 30 days). 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 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 attached as EXHIBIT C is submitted to the Local Compliance Group for approval. Employees are responsible for reporting their Morgan Stanley account number to the Local Compliance Group. 2. Accounts Holding Affiliated Mutual Funds The opening of an account for purchase of Affiliated Mutual Funds (other than participation in the Morgan Stanley 401(k) Plan) must be pre-approved by the Local Compliance Group. Duplicate confirmations of all transactions and statements must be sent to the Local Compliance Group. (See EXHIBIT C). 3. 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 - ---------- (5) Morgan Stanley brokerage account shall mean an account with an affiliated Morgan Stanley broker in the Employee's local jurisdiction. 13 [MORGAN STANLEY LOGO] 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 (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 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. 4. Accounts Exempt from Pre-approval Requirement Pre-approval is not required for any account where the Employee does not have direct or indirect beneficial ownership. In case of doubt as to whether 14 [MORGAN STANLEY LOGO] an account is a Covered Account, Employees must consult with their Local Compliance Group. VI. Reporting Requirements A. Report of Transactions Employees are subject to several reporting requirements including an Initial Listing of Securities Holdings and Accounts when an Employee commences employment with Investment Management, Quarterly Securities Transactions and New Accounts Reports and an Annual Listing of Securities Holdings Report and Certification of Compliance. It is the responsibility of Employees to submit their reports in a timely manner. Compliance will notify Employees of their Quarterly and Annual Reporting obligations under the Code. 1. Initial Listing of Securities Holdings and Brokerage and Morgan Stanley/Van Kampen Mutual Fund Accounts Report When an Employee begins employment with Investment Management he or she must provide an Initial Listing of Securities Holdings and Brokerage Accounts Report to their Local Compliance Group disclosing: (i) all Covered Securities, including Affiliated Mutual Funds, and 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, bank or financial institution where the Employee maintains a personal account; and (iii) the date the report is submitted by the Employee. 2. Quarterly Securities Transactions and New Brokerage and Morgan Stanley/Van Kampen Mutual Fund Accounts Reports Quarterly Securities Transactions and New Brokerage and Mutual Fund Accounts Reports must be submitted by Employees within 10 calendar days after the end of each calendar quarter. Any new brokerage account, any account opened for the purchase of Morgan Stanley/Van Kampen mutual funds, or any mutual fund account(s) with brokerage capabilities opened during the quarter without their Local Compliance Group's prior approval must also be reported within 10 calendar days after the end of each calendar quarter. (See EXHIBIT E.) (a) All Personal Securities Transactions in Covered Securities, and all securities transactions in Morgan Stanley/Van Kampen open-end mutual funds must be reported in the next quarterly transaction report after the transaction is effected. Please note exceptions to 15 [MORGAN STANLEY LOGO] this in sub-section (b) below. 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, bank or other financial institution 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, any account opened for the purchase of Morgan Stanley/Van Kampen mutual funds, or any mutual fund account with brokerage capabilities opened during the quarter without approval from the Local Compliance Group must be reported. The report must contain the following information: (i) The name of the broker, dealer, bank or other financial institution with whom the account was established; and (ii) The date the account was established. (b) Exemption from Filing Quarterly Report - An Employee need not make a quarterly transaction report if he/she: (i) maintains only a Morgan Stanley brokerage account, Morgan Stanley/Van Kampen direct account for the purchase of mutual funds and/or Morgan Stanley 401(k) Plan and the report would duplicate information contained in the trade confirms, system generated reports or account statements received by the Local Compliance Group. In addition, the Employee must not have opened any new brokerage accounts or mutual fund accounts without obtaining approval from their Local Compliance Group during the quarter. 16 [MORGAN STANLEY LOGO] 3. 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 and all Morgan Stanley/Van Kampen open-end mutual funds (excluding money market accounts), 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, bank or financial institution where the account(s) in which these Covered Securities were maintained, as of December 31 of the preceding year; and (iii) the date the report is submitted. This report must be provided no later than 30 calendar days after December 31 each year. In the case of Employees maintaining a Morgan Stanley brokerage account(s),Morgan Stanley/Van Kampen open-end mutual funds, and/or Morgan Stanley 401(k) Plan for which 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. B. Form of Reporting The Initial Listing of Securities Holdings and Brokerage Accounts Report, Quarterly Securities Transactions and New Brokerage Accounts 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 and Mutual Fund Accounts Report, Quarterly Securities Transactions and New Brokerage and Mutual Fund Accounts 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. 17 [MORGAN STANLEY LOGO] C. Responsibility to Report The responsibility for reporting is imposed on each Employee 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. D. 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. E. Where to File Report All reports must be filed by Employees with their Local Compliance Group. F. Responsibility to Review Each Local Compliance Group will review all Initial Listing of Securities Holdings and Brokerage and Mutual Fund Accounts Reports, Quarterly Securities Transactions and New Brokerage and Morgan Stanley/Van Kampen Mutual Fund Accounts 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. 18 [MORGAN STANLEY LOGO] VII. Code of Ethics Review Committee A Code of Ethics Review Committee, consisting of the President/Chief Operating Officer, Chief Investment Officer, Chief Legal Officer, Chief Compliance 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. VIII. Service as a Director and Outside Business Activities A. Approval to Serve 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. B. Approval to Engage in Outside Business Activities No Employee may engage in any outside business activities without prior approval of the Code of Ethics Review Committee. If such approval is granted, it is the responsibility of the Employee to notify Compliance immediately if any conflict or potential conflict of interest arises in the course of such activity. C. Approval Process A copy of a Form for approval to serve as a Director and to engage in Outside Business Activities is attached as EXHIBIT G. This form should be completed and submitted to Compliance for processing. IX. Gifts No Employee shall accept directly or indirectly anything of value, including gifts and gratuities, in excess of $100 per year from any person or entity that does business with any Fund or Managed Account, not including occasional meals or tickets to theater or sporting events or other similar entertainment. Client entertainment expenses generally are not considered gifts if: (i) Firm personnel are present; (ii) a Firm client is present; and (iii) the entertainment is not so regular or frequent that it creates the appearance of impropriety. 19 [MORGAN STANLEY LOGO] X. 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 Chief Compliance Officer together, are authorized to determine the choice of sanctions to be imposed in specific cases, including termination of employment. XI. 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. 20 [MORGAN STANLEY LOGO] SCHEDULE A MORGAN STANLEY INVESTMENT ADVISORS INC. MORGAN STANLEY INVESTMENT MANAGEMENT INC. MORGAN STANLEY INVESTMENT MANAGEMENT LIMITED MORGAN STANLEY INVESTMENT MANAGEMENT COMPANY MORGAN STANLEY ASSET & INVESTMENT TRUST MANAGEMENT CO., LIMITED MORGAN STANLEY INVESTMENT MANAGEMENT PRIVATE LIMITED MORGAN STANLEY ALTERNATIVE INVESTMENT PARTNERS LP MORGAN STANLEY AIP GP LP MORGAN STANLEY HEDGE FUND PARTNERS GP LP MORGAN STANLEY HEDGE FUND PARTNERS LP MORGAN STANLEY SERVICES COMPANY INC. MORGAN STANLEY DISTRIBUTORS INC. MORGAN STANLEY DISTRIBUTION INC. MORGAN STANLEY & CO. INCORPORATED VAN KAMPEN ASSET MANAGEMENT VAN KAMPEN ADVISORS INC. VAN KAMPEN INVESTMENTS, INC. VAN KAMPEN FUNDS INC. VAN KAMPEN TRUST COMPANY VAN KAMPEN INVESTOR SERVICES INC. 21 EX-99.(17)(B) 24 c93084a1exv99wx17yxby.txt CODE OF ETHICS OF THE FUND EXHIBIT 17(b) CODE OF ETHICS I. INTRODUCTION Each of the Van Kampen Open-End Funds currently offering shares to the public, each Van Kampen Unit Investment Trust ("UIT") currently offering units to the public, and each Van Kampen Closed-End Fund (each a "Fund" and collectively the "Funds"), Van Kampen Asset Management Inc. ("Asset Management"), Van Kampen Investment Advisory Corp. ("Advisory Corp."), Van Kampen Advisors Inc. ("Advisors Inc."), and Van Kampen Management Inc. ("Management Inc.") (each of Asset Management, Advisory Corp., Advisors Inc. and Management Inc. are sometimes referred herein as the "Adviser" or collectively as the "Advisers") and Van Kampen Funds Inc. (the "Distributor") (the Advisers and the Distributor are collectively referred to as "Van Kampen") has adopted this Code of Ethics. The Advisers are fiduciaries that provide investment advisory services to the Funds and private investment management accounts, and the Distributor acts as the principal underwriter for the Funds and the sponsor of Funds that are UITs, as the case may be. I. GENERAL PRINCIPLES A. Shareholder and Client Interests Come First Every trustee/director, officer and employee of a Fund and every director, officer and employee of Van Kampen owes a fiduciary duty to the investment account and the respective investors of such Fund or private investment management account (collectively, the "Clients"). This means that in every decision relating to investments, such persons must recognize the needs and interests of the Client and be certain that at all times the Clients' interests are placed ahead of any personal interest of such person. B. Avoid Actual and Potential Conflicts of Interest The restrictions and requirements of this Code are designed to prevent behavior that conflicts, potentially conflicts or raises the appearance of an actual or potential conflict with the interests of Clients. It is of the utmost importance that the personal securities transactions of trustee/directors, officers and employees of a Fund and directors, officers and employees of Van Kampen be conducted in a manner consistent with both the letter and spirit of 1 the Code, including these principles, to avoid any actual or potential conflict of interest or any abuse of such person's position of trust and responsibility. C. Avoiding Personal Benefit 1. Trustee/directors, officers and employees of the Funds and directors, officers and employees of Van Kampen should ensure that they do not acquire personal benefit or advantage as a result of the performance of their normal duties as they relate to Clients. Consistent with the principle that the interests of Clients must always come first is the fundamental standard that personal advantage deriving from management of Clients' money is to be avoided. II. OBJECTIVE Section 17(j) of the Investment Company Act of 1940, as amended (the "Investment Company Act"), makes it unlawful for certain persons associated with investment companies to engage in conduct which is deceitful, fraudulent or manipulative, or which involves false or misleading statements, in connection with the purchase or sale of a security held or proposed to be acquired by an investment company. In addition, Section 204A of the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), requires investment advisers to establish, maintain and enforce written policies and procedures designed to prevent misuse of material non-public information. The objective of this Code is to require trustee/directors, officers and employees of the Funds and directors, officers and employees of Van Kampen to conduct themselves in accordance with the general principles set forth above, as well as to prevent trustee/directors, officers and employees of the Funds or the Distributor from engaging in conduct prohibited by the Investment Company Act and directors, officers and employees of the Advisers from engaging in conduct prohibited by the Investment Company Act and the Investment Advisers Act. III. DEFINITIONS A. "Access Person," means (i) with respect to the Van Kampen Open-End and Closed-End Funds, (a) any trustee/director or officer of a Fund, (b) any director or officer of a Fund's Adviser, (c) any employee of a Fund or the Fund's Adviser (or any company in a control relationship to the Fund or Adviser) who, in connection with such person's regular functions or duties, makes, participates 2 in, or obtains information regarding the purchase or sale of a Covered Security by a Client, or whose functions relate to the making of any recommendations with respect to such purchases or sales; (d) any natural person in a control relationship to the Fund or the Fund's Adviser who obtains information concerning recommendations made to a Client with regard to the purchase or sale of a Covered Security by such Client, and (e) any director or officer of the Distributor, who, in the ordinary course of business, makes, participates in or obtains information regarding, the purchase or sale of a Covered Security by a Client for which it acts as principal underwriter, or whose functions relate to the making of any recommendations with respect to such purchases or sales and (ii) with respect to UITs, (a) any officer, director or employee of the Distributor, when the Distributor is acting as the sponsor of a Fund that is a UIT, who, in connection with such person's regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a Covered Security by a Client or whose functions relate to the making of any recommendations with respect to the composition of the Fund; and (b) and natural person in a control relationship to the Distributor who obtains information concerning recommendations made to a Client with regard to the purchase or sale of a Covered Security by such Client or the composition of the Fund. B. "Beneficial Ownership" is interpreted in the same manner as it is under Rule 16a-1(a)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in determining whether a person is the beneficial owner of a security for purposes of Section 16 of the 1934 Act and the rules and regulations thereunder, which includes "any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in" a security. The term "pecuniary interest" is further defined to mean "the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the subject securities." "Beneficial ownership" includes (i) securities held by members of a person's immediate family sharing the same household and includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law" and includes adoptive relationships and (ii) a right to acquire securities through the exercise or conversion of any derivative security, whether or not presently exercisable. 3 Any report required to be made by this Code may contain a statement that the report shall not be construed as an admission by the person making such report that he has any direct or indirect Beneficial Ownership in the security to which the report relates. C. "Board of Directors/Trustees" means the directors/trustees of each Fund, or with respect to a Fund that is a UIT, the Fund's principal underwriter or sponsor. D. "Chief Compliance Officer" is the individual set forth in Exhibit A. E. "Client" means each Fund and each private management account or investment account over which Van Kampen exercises investment discretion. F. "Code of Ethics Review Committee" consists of the individuals set forth in Exhibit A. G. "Control" has the same meaning as in Section 2(a)(9) of the Investment Company Act. H. "Covered Security" refers not only to the instruments set forth in Section 2(a)(36) of the Investment Company Act but to any instrument into which such instrument may be converted or exchanged, any warrant of any issuer that has issued the instrument and any option written relating to such instrument, provided, however, that it does not include: (a) any direct obligation of the United States Government, (b) banker's acceptances, bank certificates of deposit, commercial paper and high quality short- term debt instruments, including repurchase agreements, and (c) shares issued by any open-end investment companies registered under the Investment Company Act. I. "Disinterested Trustee/Director" means a trustee or director of a Fund who is not an "interested person" of such Fund within the meaning of Section 2(a)(19) of the Investment Company Act. J. "Employee Account" means any brokerage account or unit investment trust account in which the Van Kampen Employee has any direct or indirect beneficial ownership. K. "General Counsel" is the individual set forth in Exhibit A. 4 L. "Initial Public Offering" means an offering of securities registered under the Securities Act of 1933, as amended (the "Securities Act"), the issuer of which, immediately before the registration, was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). M. "Limited Offering" is an offering that is exempt from registration under the Securities Act pursuant to Section 4(2) or Section 4(6) of the Securities Act or pursuant to Rule 504, Rule 505 or Rule 506 under the Securities Act. N. "Portfolio Manager" means any person who exercises investment discretion on behalf of an Adviser for a Client, including those persons who are involved in determining, or have knowledge concerning, the composition of the portfolios of Funds that are UITs prior to deposit. O. "Van Kampen Employee" includes any director, officer or employee of Van Kampen. IV. STANDARDS OF CONDUCT FOR PERSONAL SECURITIES TRANSACTIONS A. Van Kampen Employee Brokerage Accounts 1. All brokerage accounts of Van Kampen Employees must be maintained through Morgan Stanley Dean Witter ("MSDW") and/or Morgan Stanley Dean Witter Online ("MSDWO"). No other brokerage accounts are permitted unless permission is granted by the Chief Compliance Officer or General Counsel. If any Van Kampen Employee maintains accounts outside MSDW or MSDWO, such person must transfer such accounts to a MSDW branch or MSDWO as soon as practicable from their date of hire. If the transfer is not completed within 120 days, no trading will be permitted in the account. a) Each Van Kampen Employee must identify and disclose on his or her date of hire to the appropriate person in the compliance department as set forth in Exhibit A, in writing, of their MSDW and MSDWO brokerage accounts, or, if applicable, their outside 5 brokerage accounts. The Van Kampen compliance department shall direct, and the employee shall consent in writing to such direction, the brokerage firm to provide duplicate confirmations and account statements to the Van Kampen compliance department. (1) Van Kampen Employees shall obtain written consent from the appropriate person in the Van Kampen compliance department as set forth in Exhibit A before opening a brokerage account. B. Pre-Clearance 1. Except as set forth below, all Van Kampen Employees must pre- clear purchases or sales of Covered Securities in their Employee Accounts with the appropriate person in the Van Kampen compliance department as set forth in Exhibit A. 2. Exceptions from the Pre-Clearance Requirement a) Persons otherwise subject to pre-clearance are not required to pre- clear the acquisition of the following Covered Securities: (1) Covered Securities acquired through automatic reinvestment plans. (2) Covered Securities acquired through employee purchase plans. (3) Covered Securities acquired through the exercise of rights issued by an issuer pro- rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired. (4) A purchase or sale of Covered Securities which is non-volitional on the part of the Employee (for example, a purchase or sale effected by an investment manager for a pension or retirement 6 plan, other than an individual retirement account, in which an Employee is a beneficiary).(3) (5) Morgan Stanley Dean Witter & Co. common stock (including exercise of stock option grants), (a) The restrictions imposed by Morgan Stanley Dean Witter & Co. on senior management and other persons in connection with transactions in such stock are not affected by this exemption. (b) Transactions by Access Persons in Morgan Stanley Dean Witter & Co. common stock remain subject to the initial, quarterly and annual reporting requirements of Part V(D) of the Code. (6) Units in unit investment trusts. Transactions by Access Persons in units of unit investment trusts remain subject to the initial, quarterly and annual reporting requirements of Part V(D) of the Code. 3. Pre-cleared securities transactions must be effected on a timely basis. a) All approved Covered Securities transactions must take place between the hours of 9:30 a.m. and 4:00 p.m. (New York time). Trading after hours is prohibited. If the transaction is not completed between 9:30 a.m. and 4:00 p.m. on the date of pre-clearance, a new pre-clearance must be obtained. b) Purchases through an issuer direct purchase plan must be pre- cleared on the date the purchaser writes the check to the issuer's agent. (1) Authorization for purchases through an issuer direct purchase plan are effective until the issuer's agent purchases the Covered Securities. 7 4. Pre-Clearance Procedure a) Van Kampen Employees shall pre- clear their transactions by submitting a Trade Authorization Form (a copy of which is attached as Exhibit B) to the appropriate persons in the compliance department as set forth in Exhibit A. (1) The compliance department shall pre- clear the purchase or sale of a Covered Security if the transaction does not violate the Code. (a) The compliance department shall verify that the transaction is in compliance with the Code. (b) The compliance department shall sign the Trade Authorization Form. (c) The compliance department shall communicate authorization of the trade to the Van Kampen Employee. (d) The time at which the trade authorization is communicated to the Van Kampen Employee shall be documented on the Trade Authorization Form by the Legal and Compliance Department. (e) The compliance department shall maintain the originally executed Trade Authorization Form. A copy of the executed Trade Authorization Form will be forwarded to the Van Kampen Employee. (f) The compliance department shall review all Van Kampen Employee duplicate confirmations and statements to verify that all personal transactions in Covered Securities have been properly pre-cleared. 8 C. Other Restrictions 1. Van Kampen Employees shall not purchase or sell a Covered Security on a day during which a Client, with the exception of a UIT, has a pending purchase or sale order in that same Covered Security, or with respect to a UIT Client, on the initial date of deposit when the UIT Client has a pending order in that same Covered Security. 2. Van Kampen Employee trades for which pre- clearance has been obtained, including short sales and permissible option trades, are subject to a 30- day holding period from the trade date. 3. Van Kampen Employees are prohibited from trading in futures, options on futures, and forward contracts. Van Kampen Employees may trade listed equity and index options and equity warrants, however, there is a 30- day holding period from the trade date. In addition, Van Kampen Employees are also prohibited from trading in warrants or options (with the exception of listed warrants or options) on physical commodities and currencies. 4. Van Kampen Employees shall not enter into limit orders that extend beyond one day. 5. Van Kampen Employees shall not participate in an investment club. 6. Van Kampen Employees shall not purchase shares of an investment company that is managed by Van Kampen if such investment company is not generally available to the public. 7. Van Kampen Employees shall not purchase shares of an open end investment company that is managed by Van Kampen if as a result of such purchase the Van Kampen Employee shall own 1% or more of the assets of such investment company. 8. Van Kampen Employees are prohibited from the following activities unless they have obtained prior written approval from the Code of Ethics Review Committee: 9 a) Van Kampen Employees may not purchase a Covered Security in a private placement or any other Limited Offering. b) Van Kampen Employees may not serve on the boards of directors of a public or private company. Requests to serve on the board of a religious, charitable or educational organization as set forth in Section 503(c) of the IRS Code will generally be approved. 9. Van Kampen Employees shall not purchase Covered Securities during an initial or secondary public offering. 10. Annual Reporting: a) Van Kampen Employees shall furnish to the Chief Compliance Officer an annual affirmation that he/she has received, read and understood the Van Kampen Code of Ethics. D. Responsibilities of Access Persons The following prohibitions and reporting obligations are applicable to Access Persons. 1. Access Persons, with the exception of a Disinterested Trustee/Director, shall not sell a Covered Security purchased within the previous 60 calendar days from the trade date, except that a Covered Security held for at least 30 days from the trade date may be sold at a loss or no gain. Any profits realized on trades executed within the 60-day holding period shall be disgorged to the Client or a charitable organization as determined by the Chief Compliance Officer. 2. Initial/Annual Reporting: Within ten days after becoming an Access Person and thereafter, annually at the end of the calendar year, each Access Person must furnish a report to the Chief Compliance Officer showing (i) the date of the report, (ii) the title, number of shares and principal amount of each Covered Security in which the Access Person has direct or indirect Beneficial Ownership on the date such person 10 become an Access Person (for initial reports) or as of a date no more than 30 days prior to the date of the report (for annual reports) and (iii) the name of any broker, dealer or bank with an account holding any securities for the direct or indirect benefit of the Access Person as of the date such person became an Access Person (for initial reports) or as of a date no more than 30 days prior to the date of the report (for annual reports). a) Exclusion: A Disinterested Trustee/Director who would be required to make this report solely by reason of being a Fund trustee/director is excluded from the initial and annual reporting requirement for Access Persons. 3. Quarterly Reporting: On a calendar quarterly basis, each Access Person must furnish a report to the Chief Compliance Officer within ten days after the end of each calendar quarter, on forms sent to the Access Person each quarter: a) With respect to any transactions in Covered Securities that the Employee has made in the previous calendar quarter in which the Access Person had direct or indirect Beneficial Ownership, a report showing (i) the date of the report; (ii) the date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares, and the principal amount of each Covered Security involved; (iii) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); (iv) the price at which the transaction was effected; and (v) the name of the broker, dealer or bank with or through which the transaction was effected; and b) With respect to any account established by the Access Person in which any securities were held during the quarter for direct or indirect benefit of the Access Person, a report showing (i) the date of the report; (ii) the name of the broker, dealer or bank with which established the account; and (iii) the date the account was established. 11 c) Exclusion: A Disinterested Trustee/Director who would be required to make this report solely by reason of being a Fund trustee/director is excluded from the quarterly reporting requirement for Access Persons unless the trustee/director knew or, in the ordinary course of fulfilling his or her official duties as a Fund trustee/director, should have known that during the 15- day period immediately before or after the trustee/director's transaction in a Covered Security, the Fund purchased or sold the Covered Security, or the Fund or its investment adviser considered purchasing or selling the Covered Security. d) Exclusion: An Access Person need not make a quarterly transaction report if the report would duplicate information contained in broker trade confirmations or account statements received by the Fund, the Adviser and the Distributor with respect to the Access Person in the time period required above if all of the information required by that paragraph is contained in the broker trade confirmations or account statements, or in the records of the Fund, the Adviser and the Distributor. An Access Person may rely on this exclusion only if he/she (1) maintains a MSDW and/or MSDWO account, or outside account for which the Access Person has a written exception; and (2) has not opened any new brokerage account during the quarter. A. Additional Responsibilities of Portfolio Managers In addition to the requirements set forth above for Van Kampen Employees and Access Persons, the following additional requirements are applicable to Portfolio Managers. 1. A Portfolio Manager, including individuals involved in determining the composition of the portfolios of Funds that are UITs or who have knowledge of a composition of a UIT portfolio before deposit (a "UIT Portfolio Manager"), may not buy or sell a Covered Security within 7 calendar days before or after any Client, over which such Portfolio Manager exercises investment discretion, trades in such Covered Security. 12 2. A Portfolio Manager may not purchase shares of a closed-end investment company over which such Portfolio Manager exercises investment discretion. A. Insiders 1. Each Van Kampen Employee shall comply with all laws and regulations, and prohibitions against insider trading. Trading on or communicating material non-public information, or "inside information," of any sort, whether obtained in the course of research activities, through a Client relationship or otherwise, is strictly prohibited. 2. Van Kampen Employees shall not disclose any non-public information relating to a Client's account portfolio or transactions or to the investment recommendations of Van Kampen, nor shall any Van Kampen Employee disclose any non-public information relating to the business or operations of the members of Van Kampen, unless properly authorized to do so by the Chief Compliance Officer or General Counsel. 3. No Van Kampen Employee who is required to file a statement of ownership pursuant to Section 16 of the Exchange Act may purchase or sell or sell and purchase a company- sponsored closed-end investment company within a six month period and realize a profit on such transaction. B. Exceptions 1. Notwithstanding the foregoing, the Chief Compliance Officer or his or her designee, in keeping with the general principles and objectives of this Code, may refuse to grant clearance of a personal transaction in their sole discretion without being required to specify any reason for the refusal. 2. Upon proper request by a Van Kampen Employee, a Code of Ethics Review Committee (the "Committee") will consider for relief or exemption from any restriction, limitation or procedure contained herein, which restriction, limitation or procedure is claimed to cause a hardship for such Van 13 Kampen Employee. The Chief Compliance Officer will in his sole discretion determine whether the request is appropriate for consideration by the Committee. The Committee shall meet on an ad hoc basis, as deemed necessary upon the Van Kampen Employee's written request outlining the basis for his or her request for relief. The decision regarding such relief or exemption is within the sole discretion of the Committee. I. ADMINISTRATION OF THE CODE A. The administration of this Code shall be the responsibility of the Chief Compliance Officer or his or her designee whose duties shall include: 1. Continuously maintaining a list of all current Access Persons who are under a duty to make reports or pre-clear transactions under this Code. 2. Providing each such person with a copy of this Code and informing them of their duties and obligations hereunder. 3. Reviewing all quarterly securities transactions and holdings reports required to be filed pursuant to this Code, and maintaining a record of such review, including the name of the compliance personnel performing the review. 4. Reviewing all initial and annual securities position reports required to be filed pursuant to this Code, and maintaining a record of such review, including the name of the compliance personnel performing the review. 5. Preparing listings of all transactions effected by persons subject to reporting requirements under the Code and comparing all reported personal securities transactions with completed portfolio transactions of the Client to determine whether a violation of this Code may have occurred. 6. Conducting such inspections or investigations as shall reasonably be required to detect and report any apparent violations of this Code to any person or persons appointed by Van Kampen to deal with such information and to the Fund's Board of Directors/Trustees. 14 7. Submitting a written report, no less frequently than annually, to the Board of Directors/Trustees of each Fund and sponsor of Funds that are UITs containing a description of issues arising under the Code or procedures since the last report, including, but not limited to, material violations of the Code or procedures and sanctions imposed in response to material violations. 8. Submitting a certification, no less frequently than annually, to the Board of Directors/Trustees of each Fund from the Fund, the respective Adviser and the Distributor that it has adopted procedures reasonably necessary to prevent Access Persons from violating the Code. II. RECORDS The Fund, the Advisers and the Distributor shall, at its principal places of business, maintain records of the following: A. A copy of any code of ethics adopted by such entity that is and has been in effect during the past five years must be maintained in an easily accessible place; B. A copy of any record or report of any violation of the code of ethics of such entity and any action taken thereon maintained in an easily accessible place for at least five years after the end of the fiscal year in which the violation occurs; C. A copy of each report made by an Access Person as required by this Code, including any information provided in lieu of the reports and all Trade Authorization Forms, must be maintained for at least five years after the end of the fiscal year in which the report is made or the information is provided, the first two years in an easily accessible place; D. A record of all persons, currently or within the past five years, who are or were required to make reports under this Code, or who are or were responsible for reviewing these reports, must be maintained in an easily accessible place; and E. A copy of each written report required to be provided to the Board of Directors/Trustees of each Fund containing a description of issues arising under the Code or procedures since the last report, 15 including, but not limited to, material violations of the Code or procedures and sanctions imposed in response to material violations must be maintained for at least five years after the end of the fiscal year in which it is made, the first two years in an easily accessible place. F. A Fund or investment adviser must maintain a record of any decision, and the reasons supporting the decision, to approve the acquisition by an Access Person of securities in an Initial Public Offering or in a Limited Offering. G. A copy of any decision and reasons supporting such decision to approve a pre-clearance transaction pursuant to this Code, made within the past five years after the end of the fiscal year in which such approval is granted. I. SANCTIONS Upon discovering a violation of this Code, Van Kampen may impose such sanctions as it deems appropriate, including, but not limited to, a reprimand (orally or in writing), fine, demotion, and suspension or termination of employment. The General Counsel of Van Kampen, in his sole discretion, is authorized to determine the choice of sanctions to be imposed in specific cases, including termination of employment of any Employee. II. APPROVAL OF CODE OF ETHICS A. Van Kampen shall provide to the Board of Directors/Trustees of each Fund and sponsor of Funds that are UITs the following: 1. A copy of the Fund's Code, the Adviser's Code and the Distributor's Code for such Board's review and approval. 2. Promptly, a copy of any amendments to such Codes. 3. Upon request, copies of any reports made pursuant to the Code by any person as to an investment company client. 4. Immediately, without request by an investment company client, all material information regarding any violation of the Code by any person as to such investment company client. 16 5. Certification, no less frequently than annually, to the Board of Directors/Trustees of each Fund from the Fund, the respective Adviser and the Distributor that it has adopted procedures reasonably necessary to prevent Access Persons from violating the Code. B. Prior to adopting this Code, the Board of Trustees/Directors of each Fund, including a majority of Disinterested Trustee/Directors, if applicable, reviewed and approved this Code with respect to the Fund, each adviser of the Fund and the Distributor of the Fund, including all procedures or provisions related to the enforcement of this Code. The Board based its approval of this Code on, among other things, (i) certifications from the Fund, the respective Adviser and the Distributor that it has adopted procedures reasonably necessary to prevent violations of the Code and (ii) a determination that such Code is adequate and contains provisions reasonably necessary to prevent Access Persons from engaging in any conduct prohibited by Rule 17j-1(b). III. EFFECTIVE DATE All Van Kampen Employees are required to sign a copy of this Code indicating their agreement to abide by the terms of the Code. In addition, Van Kampen 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 the Code. Effective this 14th day of February, 2001. 17 EX-99.(99) 25 c93084a1exv99wx99y.txt FORM OF PROXY CARD FOR THE TARGET FUND EXHIBIT 99 EVERY SHAREHOLDER'S VOTE IS IMPORTANT YOUR PROXY VOTE IS IMPORTANT! AND NOW YOU CAN VOTE YOUR PROXY ON THE PHONE, OR THE INTERNET. IT SAVES MONEY! TELEPHONE, FACSIMILE AND INTERNET VOTING SAVES POSTAGE COSTS. SAVINGS WHICH CAN HELP MINIMIZE EXPENSES. IT SAVES TIME! TELEPHONE AND INTERNET VOTING IS INSTANTANEOUS - 24 HOURS A DAY. IT'S EASY! JUST FOLLOW THESE SIMPLE STEPS: 1. READ YOUR PROXY STATEMENT AND HAVE IT AT HAND. 2. CALL TOLL-FREE 1-866-241-6192, OR GO TO WEBSITE: HTTPS://VOTE.PROXY-DIRECT.COM 3. FOLLOW THE RECORDED OR ON-SCREEN DIRECTIONS. 4. DO NOT MAIL YOUR PROXY CARD WHEN YOU VOTE BY PHONE, OR INTERNET. Please detach at perforation before mailing. PROXY VAN KAMPEN XXXXXXXXX FUND PROXY NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 22, 2005 Notice is hereby given that a joint special meeting of shareholders (the "Special Meeting") of Van Kampen XXXXXXX (the "Target Fund") will be held at the offices of Van Kampen Investments Inc., 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555 on June 22, 2005 at X:XX a.m. THIS PROXY IS SOLICITED ON BEHALF OF THE TARGET FUND'S BOARD OF TRUSTEES. THE BOARD OF TRUSTEES OF THE TARGET FUND REQUESTS THAT YOU VOTE YOUR SHARES BY INDICATING YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATING AND SIGNING SUCH PROXY CARD AND RETURNING IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES, OR BY RECORDING YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET. VOTE VIA THE TELEPHONE: 1-866-241-6192 VOTE VIA THE INTERNET: HTTPS://VOTE.PROXY-DIRECT.COM 999 9999 9999 999 NOTE: Please sign exactly as your name appears on this proxy card. All joint owners should sign. When signing as executor, administrator, attorney, trustee or guardian or as custodian for a minor, please give full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, sign in the partnership name. -------------------------------------- Signature -------------------------------------- Signature (if held jointly) -------------------------------------- Date XXX XXXX EVERY SHAREHOLDER'S VOTE IS IMPORTANT PLEASE SIGN, DATE AND RETURN YOUR PROXY TODAY Please detach at perforation before mailing. THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THE PROPOSALS. PLEASE MARK VOTES AS IN THIS EXAMPLE: [X]
FOR AGAINST ABSTAIN 1. To approve an Agreement and Plan of Reorganization [ ] [ ] [ ] between the Target Fund and the Acquiring Fund, the termination of Target Fund's registration under the Investment Company Act of 1940, as amended, and the dissolution of the Target Fund under applicable state law; 2. To transact such other business as may properly be presented at the Special Meeting or any adjournment thereof.
YOUR VOTE IS IMPORTANT. PLEASE VOTE PROMPTLY BY SIGNING AND RETURNING THE ENCLOSED PROXY CARD OR BY RECORDING YOUR VOTING INSTRUCTIONS BY TELEPHONE OR VIA THE INTERNET NO MATTER HOW MANY SHARES YOU OWN. XXX XXXX -----END PRIVACY-ENHANCED MESSAGE-----