Closed-End Tax Questions and Answers

Q: Do I need to report reinvested dividends and/or capital gain distributions as income?
A: Yes. Income from taxable funds and all capital gain distributions are taxable, regardless of whether you receive them in cash or reinvest them in additional fund shares. You should keep a record of the amount of dividends reinvested because this will increase your cost basis in the fund’s shares. By keeping track of reinvested dividends, you’ll be able to determine the correct taxable gain or loss when you redeem or exchange your fund shares.

Q: Why are some distributions that I received in January 2008 reported as income for 2007?
A: Under current tax law, the taxable income shown on Form 1099-DIV must include distributions declared in 2007, even if the distribution isn’t actually received until January 2008.

Q: What is a qualified dividend?
A: A qualified dividend is paid to the fund by a “qualified” company. This is defined as a domestic company traded on a qualifying exchange or a foreign company where the country of origin has a comprehensive income tax treaty with the United States that includes an exchange of information program. There is also a holding period requirement that must be met for a dividend to be deemed “qualified.” Please read on for more information about qualified dividends.

Q: Will all distributions reported to me as qualified dividends be taxed at 15 percent?
A: Not necessarily. In order to qualify for the reduced tax rate, you must have held the dividend-paying shares for 61 days out of a 121-day span covering the 60 days before and the 60 days after the fund’s ex-dividend date. (Note: the ex-dividend date is a critical factor in determining whether a shareholder is eligible to receive a declared dividend.) When counting the number of days you held the shares, include the day you sold your shares, but not the day you acquired them.

Q: I didn’t redeem any shares this year. Why am I subject to capital gains taxes?
A: If your trust’s manager purchased securities and later sold them for more than the purchase price, your trust earned capital gains. These gains are distributed to shareholders during the year. If you received a capital gain distribution in 2007, you will be required to pay taxes on that amount, regardless of whether you received it in cash or reinvested it in additional shares. The amount can be found on Form 1099-DIV.

Q: Form 1099-DIV reports ordinary dividends and capital gains on separate lines. Are they taxed at different rates?
A: Yes, for ordinary income, the highest marginal tax rate for an individual is 35 percent. Long-term capital gain distributions are taxed at a maximum rate of 15 percent.

General

Q: How can I find out about any state tax exemptions on income my fund earned?
A: Certain states have special exemptions for income earned from U.S. government securities and tax-free municipal securities issued in that state. You can find an income breakdown by state for your trust inside this supplement, which should help you identify any income that may be tax-exempt in your state. Consult your tax advisor or state tax agency about the specific rules in your state.

Q: According to my 1099 forms, federal income tax was withheld from my distributions. Why?
A: Federal law generally requires us to withhold 28 percent of any distribution or redemption if we do not have a correct and certified Social Security or Taxpayer Identification number for your account. The IRS tells us which Social Security or Taxpayer Identification numbers are not correct or certified and requires us to perform this withholding. The withholding amount shown on your 1099 forms should be reported as “federal income tax withheld” on your federal income tax return.

If you have any questions about your account, please call (800) 341-2929. Telecommunications Device for the Deaf (TDD) users, call (800) 421-2833.

You may also send us a secure e-mail by selecting Contact Us.

Van Kampen does not offer tax advice. Please consult your tax advisor for tax-related issues.