N-30D 1 c70796nv30d.txt SEMIANNUAL REPORT Table of Contents OVERVIEW LETTER TO PARTNERS 1 ECONOMIC SNAPSHOT 2 PERFORMANCE SUMMARY RETURN HIGHLIGHTS 4 BY THE NUMBERS YOUR FUND'S INVESTMENTS 5 FINANCIAL STATEMENTS 8 NOTES TO FINANCIAL STATEMENTS 12 VAN KAMPEN INVESTMENTS THE VAN KAMPEN FAMILY OF FUNDS 15 MANAGING GENERAL PARTNERS AND IMPORTANT ADDRESSES 16 RESULTS OF PARTNER VOTES 17
You have a time-tested partner in Van Kampen. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE OVERVIEW LETTER TO PARTNERS July 22, 2002 Dear Partner, Due to events in the markets and the well-publicized controversies surrounding certain companies, the recent months have been challenging for many investors. Against this backdrop, you may be re-evaluating your investments. In this regard, your financial advisor is a particularly valuable resource. Your advisor can help you review your current asset allocation and determine whether it remains appropriate for your goals, risk tolerance and time horizon. You also have a time-tested partner in Van Kampen. With roots extending to 1927, our legacy spans other market downturns and periods of uncertainty. While the causes of turbulence have changed, our generations of experience have taught us the enduring value of patience, discipline and long-term focus. Thank you for your continued trust in Van Kampen. We appreciate the opportunity to help you and your loved ones enjoy life's true wealth--family, friends and life's daily pleasures. Sincerely, [SIG] Richard F. Powers, III President and CEO Van Kampen Asset Management Inc. 1 ECONOMIC SNAPSHOT THE ECONOMY OVERALL ECONOMIC ACTIVITY INCREASED MODESTLY IN JUNE, CONTINUING THE TREND THAT HAS BEEN EVIDENT THROUGHOUT 2002. SIGNS OF GROWTH WERE EVIDENT IN MANY OF THE STATISTICAL MEASURES RELEASED THROUGHOUT THE MONTH. FOR EXAMPLE, MANUFACTURING ACTIVITY, WHICH SLOWLY GAINED MOMENTUM IN RECENT MONTHS, CLIMBED TO ITS HIGHEST LEVEL SINCE JUNE 1999. AND, DESPITE LESS-THAN-ANTICIPATED EMPLOYMENT GROWTH AND INCREASING UNCERTAINTY IN WORLD ECONOMICS AND POLITICS, U.S. CONSUMERS CONTINUED TO SUPPORT DOMESTIC GROWTH THROUGH THE PURCHASE OF HOUSES, CARS AND EVERYDAY MERCHANDISE AND SERVICES. FINALLY, AS IF ACKNOWLEDGING HOW FAR THE ECONOMY HAS COME--AND HOW FAR IT STILL HAS TO GO--THE FEDERAL RESERVE BOARD CHOSE TO LEAVE SHORT-TERM INTEREST RATES AT THE REMARKABLY LOW LEVELS THAT PREVAILED THROUGHOUT THE FIRST HALF OF 2002. 2 U.S. GROSS DOMESTIC PRODUCT SEASONALLY ADJUSTED ANNUALIZED RATES (March 31, 2000--March 31, 2002) [BAR GRAPH]
U.S. GROSS DOMESTIC PRODUCT --------------------------- Mar 00 4.8% Jun 00 5.7% Sep 00 1.3% Dec 00 1.9% Mar 01 1.3% Jun 01 0.3% Sep 01 -1.3% Dec 01 1.7% Mar 02 6.1%
Source: Bureau of Economic Analysis INTEREST RATES AND INFLATION (June 30, 2000--June 30, 2002) [LINE GRAPH]
INTEREST RATES INFLATION -------------- --------- Jun 00 6.5% 3.7% 6.5% 3.7% 6.5% 3.4% Sept 00 6.5% 3.5% 6.5% 3.4% 6.5% 3.4% Dec 00 6.5% 3.4% 5.5% 3.7% 5.5% 3.5% Mar 01 5.0% 2.9% 4.5% 3.3% 4.0% 3.6% Jun 01 3.7% 3.2% 3.7% 2.7% 3.5% 2.7% Sept 01 3.0% 2.6% 2.5% 2.1% 2.0% 1.9% Dec 01 1.7% 1.6% 1.7% 1.1% 1.7% 1.1% Mar 02 1.7% 1.5% 1.7% 1.6% 1.7% 1.2% Jun 02 1.7% 1.1%
Interest rates are represented by the closing midline federal funds target rate on the last day of each month. Inflation is indicated by the annual percentage change of the Consumer Price Index for all urban consumers at the end of each month. Source: Bloomberg 3 PERFORMANCE SUMMARY RETURN HIGHLIGHTS (as of June 30, 2002)
----------------------------------------------------------------------- Six-month total return(1) -14.93% ----------------------------------------------------------------------- One-year total return(1) -14.34% ----------------------------------------------------------------------- Five-year average annual total return(1) 5.48% ----------------------------------------------------------------------- Ten-year average annual total return(1) 12.71% ----------------------------------------------------------------------- Life-of-Fund average annual total return(1) 12.84% ----------------------------------------------------------------------- Commencement date 12/16/76 -----------------------------------------------------------------------
(1) Total return based on net asset value (NAV) assumes an investment at the beginning of the period indicated, reinvestment of all distributions for the period, and sale of all units of partnership interest at the end of the period, all at NAV. The returns above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund units. See the Comparative Performance section of the current prospectus. An investment in the Fund is subject to investment risks, and you could lose money on your investment in the Fund. Please review the Risk/Return Summary of the Prospectus for further details on investment risks. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate and Fund units, when redeemed, may be worth more or less than their original cost. As a result of recent market activity, current performance may vary from the figures shown. Market forecasts provided in this report may not necessarily come to pass. 4 BY THE NUMBERS YOUR FUND'S INVESTMENTS June 30, 2002 (Unaudited) THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF THE REPORTING PERIOD.
MARKET DESCRIPTION SHARES VALUE COMMON STOCKS 99.2% AEROSPACE & DEFENSE 0.7% Honeywell International, Inc. .............................. 12,528 $ 441,361 ----------- ALUMINUM 0.6% Alcan, Inc. (Canada)........................................ 10,774 404,241 ----------- AUTO PARTS & EQUIPMENT 0.4% Dana Corp. ................................................. 13,677 253,435 ----------- COMPUTER HARDWARE 1.7% International Business Machines Corp. ...................... 15,016 1,081,152 ----------- CONSTRUCTION & ENGINEERING 0.8% Fluor Corp. ................................................ 12,831 499,768 ----------- CONSUMER FINANCE 1.6% Household International, Inc. .............................. 21,372 1,062,188 ----------- DIVERSIFIED METALS & MINING 0.3% Massey Energy Corp. ........................................ 12,831 162,954 ----------- FOREST PRODUCTS 0.4% Louisiana-Pacific Corp. (a)................................. 25,970 275,022 ----------- HEALTH CARE DISTRIBUTORS & SERVICES 0.2% Cardinal Health, Inc. ...................................... 1,867 114,653 ----------- HEALTH CARE EQUIPMENT 0.7% Baxter International, Inc. ................................. 10,000 444,500 ----------- HEALTH CARE SUPPLIES 0.0% Edwards Lifesciences Corp. (a).............................. 1,000 23,200 ----------- INDUSTRIAL GASES 6.9% Air Products & Chemicals, Inc. ............................. 89,021 4,492,890 -----------
See Notes to Financial Statements 5 YOUR FUND'S INVESTMENTS June 30, 2002 (Unaudited)
MARKET DESCRIPTION SHARES VALUE INDUSTRIAL MACHINERY 1.2% SPX Corp. (a)............................................... 6,824 $ 801,820 ----------- INTEGRATED OIL & GAS 10.7% Amerada Hess Corp. ......................................... 21,200 1,749,000 BP PLC--ADR (United Kingdom)................................ 33,876 1,710,399 Exxon Mobil Corp. .......................................... 86,639 3,545,268 ----------- 7,004,667 ----------- MULTI-LINE INSURANCE 4.4% American International Group, Inc. ......................... 41,688 2,844,372 ----------- OFFICE ELECTRONICS 1.3% IKON Office Solutions, Inc. ................................ 86,993 817,734 ----------- OIL & GAS DRILLING 0.1% Transocean, Inc. ........................................... 3,113 96,970 ----------- OIL & GAS EQUIPMENT & SERVICES 3.2% Baker Hughes, Inc. ......................................... 25,634 853,356 Halliburton Co. ............................................ 30,320 483,301 Schlumberger Ltd. .......................................... 16,080 747,720 ----------- 2,084,377 ----------- OIL & GAS EXPLORATION & PRODUCTION 2.0% Apache Corp. ............................................... 12,546 721,144 Kerr-McGee Corp. ........................................... 10,900 583,695 ----------- 1,304,839 ----------- PACKAGED FOODS 3.8% McCormick & Co., Inc. ...................................... 96,518 2,485,339 ----------- PAPER PRODUCTS 1.4% Georgia-Pacific Group....................................... 37,376 918,702 ----------- PHARMACEUTICALS 37.9% Johnson & Johnson........................................... 92,467 4,832,325 Merck & Co., Inc. .......................................... 50,376 2,551,041 Pfizer, Inc. ............................................... 302,915 10,602,025 Schering-Plough Corp. ...................................... 156,022 3,838,141 Wyeth....................................................... 56,000 2,867,200 ----------- 24,690,732 ----------- REAL ESTATE INVESTMENT TRUSTS 1.2% Plum Creek Timber Co., Inc. ................................ 25,602 785,981 -----------
See Notes to Financial Statements 6 YOUR FUND'S INVESTMENTS June 30, 2002 (Unaudited)
MARKET DESCRIPTION SHARES VALUE RESTAURANTS 0.1% Luby's Cafeterias, Inc. (a)................................. 13,367 $ 87,955 ----------- SEMICONDUCTORS 13.2% Intel Corp. ................................................ 469,757 8,582,460 ----------- SPECIALTY CHEMICALS 4.4% International Flavors & Fragrances, Inc. ................... 49,712 1,615,143 Lubrizol Corp. ............................................. 37,620 1,260,270 ----------- 2,875,413 ----------- TOTAL LONG-TERM INVESTMENTS 99.2% (Cost $6,993,150).................................................... 64,636,725 REPURCHASE AGREEMENT 0.9% State Street Bank & Trust Co. ($613,000 par collateralized by U.S. Government obligations in a pooled cash account, dated 06/28/02, to be sold on 07/01/02 at $613,096) (Cost $613,000)................... 613,000 ----------- TOTAL INVESTMENTS 100.1% (Cost $7,606,150).................................................. 65,249,725 ----------- LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%)........................ (56,133) ----------- NET ASSETS 100.0%................................................... $65,193,592 ===========
(a) Non-income producing security as this stock currently does not declare dividends. ADR--American Depositary Receipt See Notes to Financial Statements 7 FINANCIAL STATEMENTS Statement of Assets and Liabilities June 30, 2002 (Unaudited) ASSETS: Total Investments (Cost $7,606,150)......................... $65,249,725 Cash........................................................ 12 Receivables: Dividends................................................. 69,793 Interest.................................................. 96 Other....................................................... 36,306 ----------- Total Assets............................................ 65,355,932 ----------- LIABILITIES: Payables: Investment Advisory Fee................................... 28,125 Shareholder Reports....................................... 17,911 Affiliates................................................ 2,382 Managing General Partners' Retirement Plan.................. 100,355 Accrued Expenses............................................ 13,567 ----------- Total Liabilities....................................... 162,340 ----------- NET ASSETS.................................................. $65,193,592 =========== NET ASSETS ARE COMPRISED OF: 214,059 units of limited partnership interest............... $64,125,331 3,428 units of non-managing general partnership interest.... 1,026,921 138 units of managing general partnership interest.......... 41,340 ----------- NET ASSETS.................................................. $65,193,592 =========== NET ASSET VALUE PER UNIT ($65,193,592 divided by 217,625 units of partnership interest outstanding)................ $ 299.57 ===========
See Notes to Financial Statements 8 Statement of Operations For the Six Months Ended June 30, 2002 (Unaudited) INVESTMENT INCOME: Dividends (Net of foreign withholding taxes of $3,082)...... $ 540,246 Interest.................................................... 5,833 ------------ Total Income............................................ 546,079 ------------ EXPENSES: Investment Advisory Fee..................................... 201,273 Managing General Partners' Fees and Related Expenses........ 19,232 Custody..................................................... 5,805 Legal....................................................... 1,649 Other....................................................... 46,251 ------------ Total Expenses.......................................... 274,210 ------------ NET INVESTMENT INCOME....................................... $ 271,869 ============ REALIZED AND UNREALIZED GAIN/LOSS: Net Realized Gain on Investments as a result of partner-in-kind redemptions............................... $ 7,009,750 ------------ Unrealized Appreciation/Depreciation: Beginning of the Period................................... 76,814,576 End of the Period......................................... 57,643,575 ------------ Net Unrealized Depreciation During the Period............... (19,171,001) ------------ NET REALIZED AND UNREALIZED LOSS............................ $(12,161,251) ============ NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $(11,889,382) ============
See Notes to Financial Statements 9 Statements of Changes in Net Assets (Unaudited)
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2002 DECEMBER 31, 2001 ------------------------------------ FROM INVESTMENT ACTIVITIES: Operations: Net Investment Income.............................. $ 271,869 $ 593,407 Net Realized Gain on Investments as a result of partner-in-kind redemptions...................... 7,009,750 2,264,172 Net Unrealized Depreciation During the Period...... (19,171,001) (8,665,443) ------------ ------------ Change in Net Assets from Operations............... (11,889,382) (5,807,864) Distributions from Net Investment Income........... (151,319) (316,831) ------------ ------------ NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES....................................... (12,040,701) (6,124,695) ------------ ------------ FROM PARTNERSHIP UNIT TRANSACTIONS: Proceeds From Units Issued Through Dividend Reinvestment..................................... 29,899 50,245 Cost of Units Repurchased.......................... (7,471,904) (4,057,376) ------------ ------------ NET CHANGE IN NET ASSETS FROM PARTNERSHIP UNIT TRANSACTIONS..................................... (7,442,005) (4,007,131) ------------ ------------ TOTAL DECREASE IN NET ASSETS....................... (19,482,706) (10,131,826) NET ASSETS: Beginning of the Period............................ 84,676,298 94,808,124 ------------ ------------ End of the Period.................................. $ 65,193,592 $ 84,676,298 ============ ============ CHANGE IN PARTNERSHIP UNITS OUTSTANDING: Units Issued Through Dividend Reinvestment......... 86 139 Units Repurchased.................................. (22,495) (11,914) ------------ ------------ Decrease in Partnership Units Outstanding...... (22,409) (11,775) ============ ============
See Notes to Financial Statements 10 Financial Highlights (Unaudited) THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE UNIT OF THE FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, (a) JUNE 30, ----------------------------------------------- 2002 (a) 2001 2000 1999 1998 1997 ------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF THE PERIOD................. $352.77 $376.51 $348.41 $313.59 $243.54 $205.35 ------- ------- ------- ------- ------- ------- Net Investment Income...... 1.16 2.40 1.85 1.77 2.01 1.91 Net Realized and Unrealized Gain/Loss................ (53.72) (24.86) 28.06 34.82 69.32 37.56 ------- ------- ------- ------- ------- ------- Total from Investment Operations................. (52.56) (22.46) 29.91 36.59 71.33 39.47 ------- ------- ------- ------- ------- ------- Less: Distributions from Net Investment Income........ .64 1.28 1.28 1.28 1.28 1.28 Distributions from Net Realized Gain............ -0- -0- .53 .49 -0- -0- ------- ------- ------- ------- ------- ------- Total Distributions.......... .64 1.28 1.81 1.77 1.28 1.28 ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF THE PERIOD..................... $299.57 $352.77 $376.51 $348.41 $313.59 $243.54 ======= ======= ======= ======= ======= ======= Total Return (b)............. -14.93%* -5.97% 8.56% 11.48% 29.36% 19.23% Net Assets at End of the Period (In millions)....... $ 65.2 $ 84.7 $ 94.8 $ 94.2 $ 87.9 $ 70.3 Ratio of Expenses to Average Net Assets................. .68% .64% .65% .75% .74% .75% Ratio of Net Investment Income to Average Net Assets..................... .68% .68% .45% .53% .73% .80% Portfolio Turnover........... 0%* 0% 0% 0% 0% 0%
* Non-annualized (a) Based on average units outstanding. (b) Total return based on net asset value (NAV) assumes an investment at the beginning of the period indicated, reinvestment of all distributions for the period, and sale of all units at the end of the period, all at NAV. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund units. See Notes to Financial Statements 11 NOTES TO FINANCIAL STATEMENTS June 30, 2002 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES Van Kampen Exchange Fund (the "Fund"), a California limited partnership, is a partnership registered under the Investment Company Act of 1940, as amended, as a diversified open-end investment management company. The Fund seeks long-term growth of capital. The production of current income is a secondary objective. The Fund commenced investment operations on December 16, 1976. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. SECURITY VALUATION Investments in securities listed on a securities exchange are valued at their sale price as of the close of such securities exchange. Listed securities and unlisted securities for which the last sales price is not available are valued at the mean between the last reported bid and ask price. For those securities where quotations or prices are not available, valuations are determined in accordance with procedures established in good faith by the Managing General Partners. 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 Fund may invest in repurchase agreements which are short-term investments whereby the Fund acquires ownership of a debt security and the seller agrees to repurchase the security at a future time and specified price. The Fund may invest independently in repurchase agreements, or transfer uninvested cash balances into a pooled cash account along with other investment companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its affiliates, the daily aggregate of which is invested in repurchase agreements. Repurchase agreements are fully collateralized by the underlying debt security. The Fund will make payment for such securities only upon physical delivery or evidence of book entry transfer to the account of the custodian bank. The seller is required to maintain the value of the underlying security at not less than the repurchase proceeds due the Fund. 12 NOTES TO FINANCIAL STATEMENTS June 30, 2002 (Unaudited) C. INVESTMENT INCOME Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. D. FEDERAL INCOME TAXES The Fund has met the qualifications to be classified as a partnership for federal income tax purposes and intends to maintain this qualification in the future. A partnership is not subject to federal income tax. At June 30, 2002, the cost and related gross unrealized appreciation and depreciation are as follows: Cost of investments for tax purposes........................ $ 3,559,129 ----------- Gross tax unrealized appreciation........................... $61,693,279 Gross tax unrealized depreciation........................... (2,684) ----------- Net tax unrealized appreciation on investments.............. $61,690,595 ===========
E. DISTRIBUTION OF INCOME AND GAINS Quarterly distributions to partners are recorded on the record date. Net investment income is allocated daily to each partner, relative to the total number of units held. Capital gains or losses will be allocated equally among units outstanding on the day recognized. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of the Fund's Investment Advisory Agreement, the Adviser will provide facilities and investment advice to the Fund for an annual fee payable monthly of .50% based on the average daily net assets of the Fund. For the six months ended June 30, 2002, the Fund recognized expenses of approximately $1,600 representing legal services provided by Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the Fund is an affiliated person. Under an Accounting Services agreement, the Adviser provides accounting services to the Fund. The Adviser allocates the cost of such services to each fund. For the six months ended June 30, 2002, the Fund recognized expenses of approximately $5,600 representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van Kampen") cost of providing accounting services to the Fund, which is reported as part of "Other" expense in the Statement of Operations. Van Kampen Investor Services Inc. (VKIS), an affiliate of the Adviser, serves as the shareholder servicing agent for the Fund. For the six months ended June 30, 2002, the Fund recognized expenses of approximately $7,200 representing transfer agent fees paid to VKIS. Transfer agency fees are determined through negotiations with the Fund's Managing General Partners and are based on competitive benchmarks. 13 NOTES TO FINANCIAL STATEMENTS June 30, 2002 (Unaudited) Managing general partners of the Fund who are not affiliated with the Adviser are compensated by the Fund at the annual rate of approximately $500 plus a fee of $250 per board meeting attended. The Managing General Partners of the Fund instituted a Retirement Plan effective April 1, 1996. The Plan is not funded, and obligations under the Plan will be paid solely out of the Fund's general accounts. The Fund will not reserve or set aside funds for the payment of its obligations under the Plan by any form of trust or escrow. For the current Managing General Partners not affiliated with the Adviser, the annual retirement benefit payable per year for a ten year period is based upon the highest total annual compensation received in any of the three calendar years preceding retirement. Managing General Partners with more than five but less than ten years service at retirement will receive a prorated reduced benefit. Under the Plan, for the Managing General Partners retiring with the effectiveness of the Plan, the annual retirement benefit payable per year for a ten year period is equal to 75% of the total compensation received from the Fund during the 1995 calendar year. At June 30, 2002, Van Kampen Funds Inc. and Van Kampen Exchange Corp., as nonmanaging general partners of the Fund, owned 340 and 3,088 units of partnership interest, respectively. 3. PARTNERSHIP UNIT TRANSACTIONS Partners of the Fund may redeem units at any time. The net asset value of units redeemed, other than redemptions under a systematic withdrawal plan, may be paid in cash or securities, at the option of the Fund, and will ordinarily be paid in whole or in part in securities. The Fund's valuation will determine the quantity of securities tendered. The Fund will select securities for tender in redemptions based on tax or investment considerations. 4. INVESTMENT TRANSACTIONS During the period, the cost of purchases and proceeds from sales of investments, excluding short-term investments, were $-0- and $7,204,082, respectively. 5. NET ASSETS At June 30, 2002, net assets include the following: Net paid in capital on units of beneficial interest......... $ 7,550,017 Net unrealized appreciation on investments.................. 57,643,575 ----------- Total net assets............................................ $65,193,592 ===========
14 VAN KAMPEN INVESTMENTS THE VAN KAMPEN FAMILY OF FUNDS Growth Aggressive Growth American Value Emerging Growth Enterprise Equity Growth Focus Equity Growth Mid Cap Growth Pace Select Growth Small Cap Growth Small Cap Value Tax Managed Equity Growth Technology Growth and Income Comstock Equity and Income Growth and Income Harbor Real Estate Securities Utility Value Value Opportunities Global/International Asian Equity Emerging Markets European Value Equity Global Equity Allocation Global Franchise Global Value Equity International Advantage International Magnum Latin American Worldwide High Income Income Corporate Bond Government Securities High Income Corporate Bond High Yield Limited Maturity Government U.S. Government U.S. Government Trust for Income* Capital Preservation Reserve Tax Free Money Senior Loan Prime Rate Income Trust Senior Floating Rate Tax Free California Insured Tax Free Florida Insured Tax Free Income* High Yield Municipal** Insured Tax Free Income Intermediate Term Municipal Income Municipal Income New York Tax Free Income Pennsylvania Tax Free Income Strategic Municipal Income For more complete information, including risk considerations, fees, sales charges and ongoing expenses, please contact your financial advisor for a prospectus. Please read it carefully before you invest or send money. To view a current Van Kampen fund prospectus or to receive additional fund information, choose from one of the following: - visit our Web site at VANKAMPEN.COM-- to view a prospectus, select Download Prospectus [COMPUTER ICON] - call us at (800) 847-2424 Telecommunications Device for the Deaf (TDD) users, call (800) 421-2833. [PHONE ICON] - e-mail us by visiting VANKAMPEN.COM and selecting Contact Us [MAIL ICON] * Closed to new investors ** Open to new investors for a limited time 15 MANAGING GENERAL PARTNERS AND IMPORTANT ADDRESSES VAN KAMPEN EXCHANGE FUND (A CALIFORNIA LIMITED PARTNERSHIP) MANAGING GENERAL PARTNERS DAVID C. ARCH ROD DAMMEYER HOWARD J KERR THEODORE A. MYERS RICHARD F. POWERS, III* - Chairman HUGO F. SONNENSCHEIN WAYNE W. WHALEN* INVESTMENT ADVISER VAN KAMPEN ASSET MANAGEMENT INC. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 SHAREHOLDER SERVICING AGENT VAN KAMPEN INVESTOR SERVICES INC. P.O. Box 218256 Kansas City, Missouri 64121-8256 CUSTODIAN STATE STREET BANK AND TRUST COMPANY 225 Franklin Street P.O. Box 1713 Boston, Massachusetts 02110 NON-MANAGING GENERAL PARTNERS VAN KAMPEN EXCHANGE CORP. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 VAN KAMPEN FUNDS INC. 1 Parkview Plaza P.O. Box 5555 Oakbrook Terrace, Illinois 60181-5555 LEGAL COUNSEL SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 West Wacker Drive Chicago, Illinois 60606 INDEPENDENT AUDITORS DELOITTE & TOUCHE LLP 180 North Stetson Avenue Chicago, Illinois 60601 * "Interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended. 16 RESULTS OF PARTNER VOTES An Annual Meeting of the Partners of the Fund was held on June 12, 2002, where partners voted on the election of Managing General Partners. With regard to the election of the following Managing General Partners of the Fund:
# OF SHARES ---------------------------- IN FAVOR WITHHELD -------------------------------------------------------------------------------------- David C. Arch........................................... 161,067 5,303 Rod Dammeyer............................................ 161,067 5,303 Howard J Kerr........................................... 161,067 5,303 Theodore A. Myers....................................... 161,067 5,303 Richard F. Powers, III.................................. 151,232 15,138 Hugo F. Sonnenschein.................................... 161,067 5,303 Wayne W. Whalen......................................... 151,232 15,138
17 Van Kampen Privacy Notice The Van Kampen companies and investment products* respect your right to privacy. We also know that you expect us to conduct and process your business in an accurate and efficient manner. To do so, we must collect and maintain certain nonpublic personal information about you. This is information we collect from you on applications or other forms, and from the transactions you make with us, our affiliates, or third parties. We may also collect information you provide when using our web site, and text files (a.k.a. "cookies") may be placed on your computer to help us to recognize you and to facilitate transactions you initiate. We do not disclose any nonpublic personal information about you or any of our former customers to anyone, except as permitted by law. For instance, so that we may continue to offer you Van Kampen investment products and services that meet your investing needs, and to effect transactions that you request or authorize, we may disclose the information we collect to companies that perform services on our behalf, such as printers and mailers that assist us in the distribution of investor materials. These companies will use this information only for the services for which we hired them, and are not permitted to use or share this information for any other purpose. To protect your nonpublic personal information internally, we permit access to it only by authorized employees, and maintain physical, electronic and procedural safeguards to guard your nonpublic personal information. * Includes Van Kampen Investments Inc., Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., Van Kampen Advisors Inc., Van Kampen Management Inc., Van Kampen Funds Inc., Van Kampen Investor Services Inc., Van Kampen Trust Company, Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the many Van Kampen mutual funds and Van Kampen unit investment trusts. Van Kampen Funds Inc. 1 Parkview Plaza, P.O. Box 5555 Oakbrook Terrace, IL 60181-5555 www.vankampen.com [VAN KAMPEN INVESTMENTS LOGO] Copyright (C)2002 Van Kampen Funds Inc. All rights reserved. EXCH SAR 8/02 Member NASD/SIPC. 6963H02-AP-8/02