<PAGE> 1
It is times like these when money-management experience may make a difference.
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
PORTFOLIO AT A GLANCE
TOP TEN HOLDINGS 5
TOP FIVE SECTORS 5
Q&A WITH YOUR PORTFOLIO MANAGERS 6
GLOSSARY OF TERMS 10
BY THE NUMBERS
YOUR FUND'S INVESTMENTS 11
FINANCIAL STATEMENTS 16
NOTES TO FINANCIAL STATEMENTS 22
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 30
FUND OFFICERS AND IMPORTANT ADDRESSES 31
</TABLE>
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
June 20, 2000
Dear Shareholder,
Whether you have held your fund for years or just joined the Van Kampen family
of shareholders in the last few months, you are likely to have questions and
even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your fund is being managed in this
environment.
It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions -- during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the value of investing for
the long term.
As we head into the second half of 2000, count on us to
continue to draw on the wisdom of our 76 years of experience.
Along those lines, Van Kampen's "Generations of Experience" is
the theme of a national advertising campaign that kicked off this spring. The
message emphasizes our depth of investment-management history, as well as our
firm belief that with the right investments, anyone can realize life's true
wealth.
Sincerely,
<TABLE>
<S> <C>
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
</TABLE>
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
ECONOMIC GROWTH CONTINUED TO BE STRONG WITH THE GROSS DOMESTIC PRODUCT (GDP),
THE PRIMARY MEASURE OF ECONOMIC GROWTH, INCREASING TO A 5.4 ANNUALIZED
PERCENTAGE RATE IN THE FIRST QUARTER OF 2000. THIS WAS THE THIRD CONSECUTIVE
QUARTER IN WHICH THE ECONOMY GREW FASTER THAN 5 PERCENT. HIGH LEVELS OF CONSUMER
CONFIDENCE, LOW LEVELS OF UNEMPLOYMENT, AND INCREASING PRODUCTIVITY WERE PRIMARY
FACTORS UNDERLYING THE HEALTHY ECONOMY.
CONSUMER SPENDING AND EMPLOYMENT
INFLATION FEARS CONTINUED TO MOUNT BECAUSE OF STRONG CONSUMER SPENDING AND THE
TIGHT LABOR MARKET. FOR MOST OF THE REPORTING PERIOD, RISING INTEREST RATES DID
LITTLE TO REIN IN ROBUST CONSUMER SPENDING. ALTHOUGH RETAIL SALES GROWTH
MODERATED IN APRIL AND MAY, THE FACTORS UNDERPINNING CONSUMER ACTIVITY--RISING
WAGES AND LOW UNEMPLOYMENT--REMAINED LARGELY UNCHANGED.
IN ADDITION, THE JOBLESS RATE HOVERED NEAR ITS LOWEST LEVEL IN THREE DECADES.
THE EMPLOYMENT COST INDEX ACCELERATED SHARPLY IN THE FIRST QUARTER OF 2000,
REFLECTING RISING WAGES AS EMPLOYERS VIED TO ATTRACT AND RETAIN SKILLED WORKERS.
THESE WAGE PRESSURES, IN TURN, BEGAN TO AFFECT PRICES, AS COMPANIES STARTED TO
RAISE THE COST OF GOODS AND SERVICES TO COMPENSATE FOR HIGHER LABOR COSTS.
INTEREST RATES AND INFLATION
STRONG GDP NUMBERS PROMPTED THE FEDERAL RESERVE BOARD TO RAISE INTEREST RATES
AND REMAIN ACTIVE IN GUARDING AGAINST INFLATION AND TEMPERING ECONOMIC GROWTH.
THE CONSUMER PRICE INDEX (CPI) ALSO ROSE TO HIGHER LEVELS DURING THE REPORTING
PERIOD. BOTH GDP AND CPI DATA WARRANTED AN INCREASE OF SHORT-TERM RATES BY 0.25
PERCENT IN NOVEMBER AND FEBRUARY AND BY 0.50 PERCENT IN MAY.
THE PERSONAL CONSUMPTION EXPENDITURES PRICE INDEX, A MEASURE OF INFLATION
WATCHED BY FEDERAL RESERVE POLICY MAKERS, ROSE TO 3.1 PERCENT IN THE FIRST
QUARTER OF 2000. GIVEN THE FEDERAL RESERVE'S AIM TO ACHIEVE AN ECONOMIC GROWTH
RATE BETWEEN 3 AND 4 PERCENT, A RANGE THAT WOULD BE CONSIDERED LESS LIKELY TO
PROMPT HIGHER INFLATION, FURTHER INTEREST RATE HIKES ARE LIKELY BEFORE THE END
OF THE YEAR.
2
<PAGE> 4
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(March 31, 1998 - March 31, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Mar 98 6.7
Jun 98 2.1
Sep 98 3.8
Dec 98 5.9
Mar 99 3.7
Jun 99 1.9
Sep 99 5.7
Dec 99 7.3
Mar 00 5.5
</TABLE>
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(May 31, 1998 - May 31, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
May 98 5.50 1.70
5.50 1.70
5.50 1.70
Aug 98 5.50 1.60
5.25 1.50
5.00 1.50
Nov 98 4.75 1.50
4.75 1.60
4.75 1.70
Feb 99 4.75 1.60
4.75 1.70
4.75 2.30
May 99 4.75 2.10
5.00 2.00
5.00 2.10
Aug 99 5.25 2.30
5.25 2.60
5.25 2.60
Nov 99 5.50 2.60
5.50 2.70
5.50 2.70
Feb 00 5.75 3.20
6.00 3.70
6.00 3.00
May 00 6.50 3.10
</TABLE>
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 percent
change of the Consumer Price Index for all urban consumers at the end of each
month.
3
<PAGE> 5
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of May 31, 2000)
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six-month total return based on
NAV(1) 9.99% 9.59% 9.59%
-------------------------------------------------------------------------
Six-month total return(2) 3.68% 4.85% 8.64%
-------------------------------------------------------------------------
One-year total return(2) 7.94% 8.76% 12.69%
-------------------------------------------------------------------------
Five-year average annual total
return(2) 18.27% 18.62% 18.75%
-------------------------------------------------------------------------
Ten-year average annual total
return(2) 14.92% N/A N/A
-------------------------------------------------------------------------
Life-of-Fund average annual total
return(2) 10.27% 16.62% 16.66%
-------------------------------------------------------------------------
Commencement date 08/01/46 08/02/93 08/02/93
-------------------------------------------------------------------------
</TABLE>
N/A = Not Applicable
(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge ("CDSC"). On purchases of Class A shares of $1
million or more, a CDSC of 1% may be imposed on certain redemptions made within
one year of purchase. Returns for Class B shares are calculated without the
effect of the maximum 5% CDSC, charged on certain redemptions made within one
year of purchase and declining thereafter to 0% after the fifth year. Returns
for Class C shares are calculated without the effect of the maximum 1% CDSC,
charged on certain redemptions made within one year of purchase. If the sales
charges were included, total returns would be lower.
(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (5.75% for Class A
shares) or contingent deferred sales charge ("CDSC"). On purchases of Class A
shares of $1 million or more, a CDSC of 1% may be imposed on certain redemptions
made within one year of purchase. Returns for Class B shares are calculated with
the effect of the maximum 5% CDSC, charged on certain redemptions made within
one year of purchase and declining thereafter to 0% after the fifth year.
Returns for Class C shares are calculated with the effect of the maximum 1%
CDSC, charged on certain redemptions made within one year of purchase.
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. Fund shares, when redeemed, may be
worth more or less than their original cost. Past performance is no guarantee of
future results. Investment return and net asset value will fluctuate with market
conditions.
Market forecasts provided in this report may not necessarily come to pass.
4
<PAGE> 6
PORTFOLIO AT A GLANCE
TOP TEN HOLDINGS
(as a percentage of long-term investments--May 31, 2000)
<TABLE>
<S> <C> <C>
1. EXXON MOBIL 2.5%
A worldwide leader in the petroleum
and petrochemicals business.
2. MINNESOTA MINING &
MANUFACTURING (3M) 2.5%
Known worldwide for developing
coatings, adhesives, abrasives, and
other materials, including the Scotch
and Post-It brand products.
3. PHARMACIA 2.4%
A global producer of pharmaceutical
and health-care products.
4. EL PASO ENERGY 2.3%
Produces natural gas and other energy
sources throughout the world.
5. DYNEGY 2.3%
Markets natural gas and other energy
sources in the United States, Canada,
and the United Kingdom.
6. BANK OF AMERICA 2.2%
Provides banking and financial
services throughout the United
States.
7. TEXACO 2.1%
A worldwide producer of petroleum and
natural gas.
8. MARSH & MCLENNAN 1.9%
A global provider of risk management
and insurance services.
9. AMERICAN HOME PRODUCTS 1.7%
Develops a diversified line of
health-care and agricultural
products.
10. GTE 1.7%
Provides local, long-distance, and
wireless telephone service, as well
as internetworking capabilities.
</TABLE>
TOP FIVE SECTORS*
(as a percentage of long-term investments)
[BAR GRAPH]
<TABLE>
<CAPTION>
MAY 31, 2000 NOVEMBER 30, 1999
------------ -----------------
<S> <C> <C>
Finance 21.0 16.7
Technology 16.5 19.7
Energy 16.4 8.6
Health Care 10.9 11.3
Utilities 10.6 13.8
</TABLE>
*These sector categories represent broad groupings of related industries
5
<PAGE> 7
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN GROWTH AND INCOME
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST SIX MONTHS. THE TEAM IS LED BY JAMES A. GILLIGAN, SENIOR PORTFOLIO MANAGER,
WHO HAS MANAGED THE FUND SINCE JULY 1990 AND HAS WORKED IN THE INVESTMENT
INDUSTRY SINCE 1985. HE IS JOINED BY SCOTT A. CARROLL AND JAMES O. ROEDER,
PORTFOLIO MANAGERS. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S
PERFORMANCE DURING THE SIX-MONTH PERIOD ENDED MAY 31, 2000.
Q HOW WOULD YOU DESCRIBE THE
MARKET ENVIRONMENT IN WHICH THE FUND OPERATED, AND HOW DID THE FUND PERFORM
IN THAT ENVIRONMENT?
A Overall, it was an extremely volatile
period for the markets, as has been the case for the last six years, it was a
period that generally favored growth, not value, stocks.
The Standard & Poor's 500-Stock Index had a strong start in the beginning of
the reporting period, reaching a new high in December 1999. However, it was
unable to sustain this high as the strength of the economy caused investors to
worry about further interest-rate increases by the Federal Reserve Board (the
Fed). The market subsequently began a decline that continued into February 2000.
Then, in late February, the S&P 500 rocketed upward, along with the
technology-heavy NASDAQ index and the rest of the market. At the same time, the
bond market was continuing a rally that began in January. Both the S&P 500 and
the NASDAQ fell sharply beginning in April, however, due to concerns about
technology stocks' high valuations and the effects of continued interest-rate
increases on U.S. corporate earnings.
Although it has been a difficult market in which to find attractively valued
stocks, the fund profited from some well-positioned holdings that boosted its
return during the reporting period. As a result, for the six-month period ended
May 31, 2000, the fund achieved a total return of 9.99 percent (Class A shares
at net asset value; if the maximum sales charge of 5.75 percent were included,
the return would have been lower). By comparison, the Standard & Poor's
500-Stock Index returned 2.90 percent, and the Russell 1000 Value Index, which
more closely resembles the composition of the fund, returned 0.84 percent for
the same period. Of course, past performance is no guarantee of future results.
The S&P 500 Index is an unmanaged, broad-based index that reflects the general
performance of the stock market, and the Russell 1000 Value Index is an
unmanaged index that
6
<PAGE> 8
reflects the general performance of value stocks. These indexes are statistical
composites that do not include any commissions or sales charges that would be
paid by an investor purchasing the securities represented by these indexes. If
these costs had been included, performance would have been less favorable. It is
not possible to invest directly in an index. Please refer to the chart and
footnotes on page 4 for additional fund performance results.
Through the early part of the last six months, growth stocks continued to
outperform value stocks, with technology stocks in particular dominating the
markets. When technology started to weaken in April and May, there was renewed
enthusiasm for value-oriented areas of the market such as consumer non-durables
and healthcare. Energy stocks, for the most part, also performed well in the
wake of accelerating energy prices.
Q WHAT WAS YOUR STRATEGY FOR
MANAGING THE FUND IN THIS ENVIRONMENT?
A As always, we continued to look for
attractively valued companies that we believe have a catalyst to drive their
stock prices higher. Recently, we've liked natural gas and energy service stocks
due to rising energy prices. In particular, we added a number of oil service
stocks to the portfolio during the period to capture the upside potential of the
increased spending that we think may occur among oil companies in coming years.
The addition of Schlumberger, Transocean, and Halliburton all supported the
fund's performance. At the same time, we monitored the portfolio for stocks that
no longer met our value criteria. During the reporting period, we decreased the
fund's position in technology stocks due to our concerns about their high
valuations relative to the rest of the market, including a portion of the fund's
holdings in Texas Instruments, Dell, Motorola, Nortel, and Alcatel.
Other top contributors to the fund's performance during the reporting period
were Coastal and El Paso Energy, two gas utilities that have announced a merger.
Coastal's stock price fell in January when the merger was announced, at which
time we increased our stake in Coastal in order to acquire its stock at a low
price. Both stocks have appreciated dramatically from their lows as the market
has recently begun to reward energy stocks, particularly those with heavy
exposure to natural gas. We started selling Coastal stock in April to lock in
this price appreciation but continued to hold El Paso, the surviving company of
the merger, because we like its long-term prospects.
Q YOU MENTIONED RECENT
STRENGTH AMONG HEALTH CARE AND CONSUMER NON-DURABLE STOCKS EARLIER. HOW DID
THOSE SECTORS FACTOR INTO THE FUND'S PERFORMANCE?
A We were well positioned in health
care. In pharmaceuticals, two of the fund's better performers were
Schering-Plough and Pharmacia. We added Schering to the portfolio during the
reporting period after its share price weakened amid concerns about
7
<PAGE> 9
the slowing growth of its largest product. In health care, the fund profited
from its position in UnitedHealth Group, as the shares of most HMOs benefited
from improved revenue growth.
In the consumer non-durables area, the fund's position in beverage and
bottling companies boosted performance. The fund's holding in Pepsi Bottling
appreciated as the company reported strong earnings and offered the potential
for higher growth rates.
Q WHERE ELSE DID YOU SEARCH
FOR VALUE?
A We added to our position in the
financial sector late in the reporting period. We believe that the Fed's rate
hikes are near an end and that investors will again become attracted to
financial stocks. One of the largest additions to the portfolio during the
reporting period was PaineWebber. We think it is an extremely attractive
franchise that is doing very well and could be of takeover interest to others in
the consolidating brokerage industry. The fund's positions in John Hancock and
MetLife, both former mutual insurance companies that have converted to public
ownership, also did well.
Q WHAT WERE SOME OF THE
DISAPPOINTMENTS IN THE PORTFOLIO?
A The single biggest disappointment
was Procter & Gamble. The fund originally held the stock because of its
prospects for higher revenue growth. During the reporting period, the company
announced that it would fall short of forecasted earnings because its sales grew
more slowly than Wall Street analysts expected. The stock declined
substantially, and we took advantage of a small price recovery to sell the
position because the company's future prospects are unclear. H&R Block was also
a poor performer. We added it to the portfolio based on an expected increase in
the number of tax returns the company would be able to process. This predicted
growth did not occur, and the stock suffered as a result. The stock remains in
the portfolio based on our belief in the company's future ability to position
itself as a full-range provider of financial products.
Our Japanese holdings, Nippon Telephone and Bank of Tokyo Mitsubishi, did
not perform well. The entire Japanese market has struggled since April 2000,
when investors began to digest 1999's gains and worry about interest-rate
increases. We feel that this is a temporary situation in the Japanese market and
therefore continue to hold these market-leading companies.
Q WHAT IS YOUR OUTLOOK FOR THE
FUND AND THE MARKET?
A We are more confident since the
market's April correction. Valuations have fallen to what we believe are more
reasonable levels, particularly in the technology sector, and it does not appear
that the economy will slow enough to significantly influence earnings. Interest
rates appear to have stabilized, and we believe the Fed is almost done with its
rate hikes. We would expect that money that has been waiting on the sidelines
will return to the market as earnings growth
8
<PAGE> 10
continues and investors see signs that the worst is behind them with respect to
interest-rate hikes.
As we have previously noted, the financial sector is an area that we expect
to benefit from lower rates going forward, and we have positioned the fund
according to that expectation. In addition, we expect to increase the fund's
exposure to technology as valuations have become more reasonable and earnings
growth is still strong relative to the rest of the market.
9
<PAGE> 11
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
CYCLICAL STOCKS: Stocks within industries where earnings tend to rise quickly
when the economy strengthens and fall quickly when the economy weakens. Examples
of cyclical stocks include housing, automobile, and paper companies. Noncyclical
or defensive stocks are typically less sensitive to changes in the economy.
These include utilities, grocery stores, and pharmaceutical companies.
EARNINGS ESTIMATE: A forecast for a company's net income during a given period.
An earnings estimate can come from the company's management as well as from
independent analysts.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a year to
establish monetary policy and monitor the economic pulse of the United States.
FUNDAMENTALS: Characteristics of a company, such as revenue growth, earnings
growth, financial strength, market share, and quality of management.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing this
amount by the number of shares outstanding. The NAV does not include any initial
or contingent deferred sales charge.
VALUATION: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue, book
value, and cash flow.
VALUE INVESTING: A strategy that seeks to identify stocks that are sound
investments but are temporarily out of favor in the marketplace. As a result,
the stocks trade at prices below what value investors believe they are actually
worth.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
10
<PAGE> 12
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
May 31, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
COMMON STOCKS AND EQUIVALENTS 90.1%
CONSUMER NON-DURABLES 7.7%
Anheuser-Busch Cos., Inc. ............................... 294,780 $ 22,845,450
Colgate-Palmolive Co. ................................... 466,320 24,540,090
Energizer Holdings, Inc. (a)............................. 63,360 1,077,120
Pepsi Bottling Group, Inc. .............................. 952,500 24,884,063
PepsiCo, Inc. ........................................... 542,100 22,056,694
Ralston-Ralston Purina Group............................. 776,100 14,406,356
Seagram Co. Ltd.--ADR (Canada)........................... 276,800 13,199,900
Whitman Corp. ........................................... 603,780 7,132,151
--------------
130,141,824
--------------
CONSUMER SERVICES 1.3%
Equifax, Inc. ........................................... 202,600 5,609,487
H & R Block, Inc. ....................................... 390,000 12,041,250
USA Networks, Inc. (a)................................... 251,000 4,753,313
--------------
22,404,050
--------------
ENERGY 14.9%
Coastal Corp. ........................................... 398,000 24,427,250
Dynegy, Inc., Class A.................................... 458,900 35,392,662
El Paso Energy Corp. .................................... 696,500 35,869,750
Exxon Mobil Corp. ....................................... 464,838 38,726,816
Halliburton Co. ......................................... 384,700 19,619,700
Reliant Energy, Inc. .................................... 401,000 11,428,500
Royal Dutch Petroleum Co.--ADR (Netherlands)............. 166,300 10,383,356
Schlumberger Ltd. ....................................... 213,700 15,720,306
Texaco, Inc. ............................................ 574,700 33,009,331
Tosco Corp. ............................................. 379,500 11,622,188
Transocean Sedco Forex, Inc. ............................ 357,923 17,605,338
--------------
253,805,197
--------------
FINANCE 19.1%
Allstate Corp. .......................................... 255,200 6,762,800
American Express Co. .................................... 226,800 12,204,675
American General Corp. .................................. 254,900 16,329,531
Aon Corp. ............................................... 314,000 11,029,250
AXA Financial, Inc. ..................................... 604,900 23,553,294
Bank of America Corp. ................................... 606,100 33,676,431
Bank of Tokyo Mitsubishi Ltd--ADR (Japan)................ 1,212,800 15,311,600
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
YOUR FUND'S INVESTMENTS
May 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
FINANCE (CONTINUED)
Chubb Corp. ............................................. 273,400 $ 19,138,000
Citigroup, Inc. ......................................... 320,400 19,924,875
Federal National Mortgage Association.................... 284,300 17,093,538
FleetBoston Financial Corp. ............................. 511,000 19,322,187
Franklin Resources, Inc. ................................ 338,300 10,149,000
Jefferson-Pilot Corp. ................................... 209,500 14,376,938
John Hancock Financial Services (a)...................... 639,500 14,268,844
Lincoln National Corp. .................................. 431,400 16,716,750
Marsh & McLennan Cos., Inc. ............................. 267,200 29,408,700
Metlife, Inc. (a)........................................ 735,600 15,079,800
Paine Webber Group, Inc. ................................ 404,700 18,186,206
Washington Mutual, Inc. ................................. 414,500 11,916,875
--------------
324,449,294
--------------
HEALTHCARE 9.9%
American Home Products Corp. ............................ 486,700 26,220,962
Aventis SA, Warrants--ADR (France) (a)................... 239,000 1,762,625
Baxter International, Inc. .............................. 282,800 18,806,200
Beckman Coulter, Inc. ................................... 252,920 15,206,815
Bristol-Myers Squibb Co. ................................ 112,200 6,178,013
HCA-The Healthcare Corp. ................................ 814,010 21,978,270
Lincare Holdings, Inc. (a)............................... 415,900 12,061,100
Pharmacia Corp. ......................................... 711,475 36,952,233
Schering-Plough Corp. ................................... 390,800 18,904,950
UnitedHealth Group, Inc. ................................ 150,000 11,184,375
--------------
169,255,543
--------------
MINING & STEEL 1.5%
Burlington Resources, Inc. .............................. 555,900 25,432,425
--------------
PRODUCER MANUFACTURING 7.1%
Fluor Corp. ............................................. 231,700 7,530,250
Honeywell International, Inc. ........................... 197,900 10,822,656
Ingersoll-Rand Co. ...................................... 515,800 23,501,138
Koninklijke Philips Electronics NV--ADR (Netherlands).... 525,728 23,230,606
Lexmark International Group, Inc., Class A (a)........... 248,000 17,298,000
Minnesota Mining & Manufacturing Co. .................... 446,400 38,278,800
--------------
120,661,450
--------------
RAW MATERIALS/PROCESSING INDUSTRIES 2.9%
Imperial Chemical Industries PLC--ADR (United Kingdom)... 328,800 10,275,000
International Paper Co. ................................. 98,000 3,411,625
Pall Corp. .............................................. 638,100 13,400,100
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
YOUR FUND'S INVESTMENTS
May 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
RAW MATERIALS/PROCESSING INDUSTRIES (CONTINUED)
Rohm & Haas Co. ......................................... 251,300 $ 8,575,613
Sherwin-Williams Co. .................................... 592,900 13,784,925
--------------
49,447,263
--------------
RETAIL 1.1%
Federated Department Stores, Inc. (a).................... 463,400 17,840,900
--------------
TECHNOLOGY 15.0%
3Com Corp. (a)........................................... 154,000 6,439,125
Adobe Systems, Inc. ..................................... 77,720 8,748,357
Alcatel, SA--ADR (France)................................ 139,800 7,627,838
Altera Corp. (a)......................................... 77,400 6,646,725
America Online, Inc. (a)................................. 125,500 6,651,500
BMC Software, Inc. (a)................................... 258,700 11,382,800
Boeing Co. .............................................. 429,300 16,769,531
Cadence Design Systems, Inc. (a)......................... 490,700 7,851,200
Cisco Systems, Inc. (a).................................. 119,200 6,786,950
Compaq Computer Corp. ................................... 610,000 16,012,500
Dell Computer Corp. (a).................................. 156,000 6,727,500
Electronic Data Systems Corp. ........................... 373,000 23,988,562
Electronics for Imaging, Inc. (a)........................ 297,200 10,940,675
EMC Corp. (a)............................................ 56,000 6,513,500
Hewlett-Packard Co. ..................................... 127,000 15,255,875
Intel Corp. ............................................. 62,600 7,805,438
Motorola, Inc. .......................................... 105,200 9,862,500
Nippon Telegraph & Telephone Corp.--ADR (Japan).......... 328,400 19,724,525
Nortel Networks Corp..................................... 214,400 11,644,600
Oracle Corp. (a)......................................... 103,400 7,431,875
Raytheon Co., Class B.................................... 582,800 13,659,375
SunGard Data Systems, Inc. (a)........................... 559,100 18,974,456
Texas Instruments, Inc. ................................. 101,600 7,340,600
--------------
254,786,007
--------------
UTILITIES 9.6%
AT&T Corp. .............................................. 257,900 8,945,906
DQE, Inc. ............................................... 219,700 9,282,325
GTE Corp. ............................................... 414,400 26,210,800
Niagara Mohawk Holdings, Inc. (a)........................ 1,674,500 24,594,219
Northeast Utilities...................................... 1,037,400 22,952,475
NSTAR.................................................... 454,000 19,550,375
PECO Energy Co. ......................................... 265,400 11,661,012
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR FUND'S INVESTMENTS
May 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
UTILITIES (CONTINUED)
SBC Communications, Inc. ................................ 464,400 $ 20,288,475
Sprint Corp. ............................................ 340,050 20,573,025
--------------
164,058,612
--------------
TOTAL COMMON STOCKS AND EQUIVALENTS 90.1%............... 1,532,282,565
--------------
PREFERRED STOCK 0.0%
Fresenius National Med Care, Inc. (convertible into
common stock) (a)...................................... 10,000 290
--------------
CONVERTIBLE CORPORATE OBLIGATIONS 0.9%
Hewlett-Packard Co. LYON--144A Private Placement
($8,375,000 par, 0% coupon, 10/14/17 maturity) (b)..... 8,375,000 6,228,906
Roche Holdings, Inc. LYON (Switzerland) ($17,000,000 par,
0% coupon, 04/20/10 maturity).......................... 17,000,000 9,498,750
--------------
TOTAL CONVERTIBLE CORPORATE OBLIGATIONS............................... 15,727,656
--------------
TOTAL LONG-TERM INVESTMENTS 91.0%
(Cost $1,294,278,533)............................................. 1,548,010,511
--------------
SHORT TERM INVESTMENTS 9.0%
COMMERCIAL PAPER 5.8%
Prudential Funding Corp. ($50,000,000 par, yielding 6.540%, 06/01/00
maturity)........................................................... 50,000,000
General Electric Capital Corp. ($50,000,000 par, yielding 6.813%,
06/01/00 maturity).................................................... 50,000,000
--------------
TOTAL COMMERCIAL PAPER................................................ 100,000,000
--------------
REPURCHASE AGREEMENT 2.6%
DLJ Mortgage Acceptance Corp. ($44,025,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 05/31/00, to
be sold on 06/01/00 at $44,032,796)................................. 44,025,000
--------------
U.S. GOVERNMENT AGENCY OBLIGATIONS 0.6%
Federal National Mortgage Association Discount Notes ($10,000,000 par,
yielding 6.011%, 07/13/00 maturity) (c)............................. 9,929,183
--------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
YOUR FUND'S INVESTMENTS
May 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION VALUE
<S> <C> <C>
TOTAL SHORT-TERM INVESTMENTS
(Cost $153,954,183)................................................. $ 153,954,183
--------------
TOTAL INVESTMENTS 100.0%
(Cost $1,448,232,716)............................................. 1,701,964,694
FOREIGN CURRENCY 0.0%
(Cost $13,681).................................................... 13,872
OTHER ASSETS IN EXCESS OF LIABILITIES 0.0%........................... 96,090
--------------
NET ASSETS 100.0%.................................................... $1,702,074,656
==============
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
(b) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may be resold
only in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(c) Assets segregated for open futures transactions.
ADR--American Depository Receipt.
LYON--Liquid Yield Option Note.
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
May 31, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $1,448,232,716)..................... $1,701,964,694
Foreign Currency (Cost $13,681)............................. 13,872
Cash........................................................ 18,498
Receivables:
Fund Shares Sold.......................................... 5,612,909
Investments Sold.......................................... 3,467,939
Dividends................................................. 2,954,074
Interest.................................................. 7,797
Other....................................................... 88,686
--------------
Total Assets............................................ 1,714,128,469
--------------
LIABILITIES:
Payables:
Investments Purchased..................................... 6,497,053
Fund Shares Repurchased................................... 3,477,412
Distributor and Affiliates................................ 675,605
Investment Advisory Fee................................... 527,109
Variation Margin on Futures............................... 176,250
Income Distributions...................................... 79,784
Accrued Expenses............................................ 341,909
Trustees Deferred Compensation and Retirement Plans......... 278,691
--------------
Total Liabilities....................................... 12,053,813
--------------
NET ASSETS.................................................. $1,702,074,656
==============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $1,322,318,951
Net Unrealized Appreciation................................. 253,995,930
Accumulated Net Realized Gain............................... 121,305,762
Accumulated Undistributed Net Investment Income............. 4,454,013
--------------
NET ASSETS.................................................. $1,702,074,656
==============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $1,121,174,530 and 58,915,003 shares of
beneficial interest issued and outstanding)............. $ 19.03
Maximum sales charge (5.75%* of offering price)......... 1.16
--------------
Maximum offering price to public........................ $ 20.19
==============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $504,749,329 and 26,743,103 shares of
beneficial interest issued and outstanding)............. $ 18.87
==============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $76,150,797 and 4,034,321 shares of
beneficial interest issued and outstanding)............. $ 18.88
==============
</TABLE>
* On sales of $50,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
16
<PAGE> 18
Statement of Operations
For the Six Months Ended May 31, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $143,792).... $ 11,117,613
Interest.................................................... 4,696,675
------------
Total Income............................................ 15,814,288
------------
EXPENSES:
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $1,228,817, $2,412,567 and $369,701,
respectively)............................................. 4,011,085
Investment Advisory Fee..................................... 2,976,046
Shareholder Services........................................ 1,417,605
Trustees' Fees and Related Expenses......................... 65,072
Custody..................................................... 48,114
Legal....................................................... 30,982
Other....................................................... 368,108
------------
Total Expenses.......................................... 8,917,012
Less Credits Earned on Overnight Cash Balances.......... 1,664
------------
Net Expenses............................................ 8,915,348
------------
NET INVESTMENT INCOME....................................... $ 6,898,940
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $126,985,315
Futures................................................... 1,881,732
Foreign Currency Transactions............................. (82,961)
------------
Net Realized Gain........................................... 128,784,086
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 238,674,434
------------
End of the Period:
Investments............................................. 253,731,978
Futures................................................. 263,761
Foreign Currency Translation............................ 191
------------
253,995,930
------------
Net Unrealized Appreciation During the Period............... 15,321,496
------------
NET REALIZED AND UNREALIZED GAIN............................ $144,105,582
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $151,004,522
============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
Statement of Changes in Net Assets
For the Six Months Ended May 31, 2000 and the Year Ended
November 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, 2000 NOVEMBER 30, 1999
------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................. $ 6,898,940 $ 12,289,596
Net Realized Gain................................. 128,784,086 204,496,777
Net Unrealized Appreciation/Depreciation During
the Period...................................... 15,321,496 (32,991,506)
--------------- --------------
Change in Net Assets from Operations.............. 151,004,522 183,794,867
--------------- --------------
Distributions from Net Investment Income:
Class A Shares.................................. (5,108,280) (8,418,833)
Class B Shares.................................. (660,384) (950,792)
Class C Shares.................................. (98,982) (104,377)
--------------- --------------
(5,867,646) (9,474,002)
--------------- --------------
Distributions from Net Realized Gain:
Class A Shares.................................. (131,847,536) (52,930,734)
Class B Shares.................................. (62,769,901) (26,140,406)
Class C Shares.................................. (7,014,441) (2,709,502)
--------------- --------------
(201,631,878) (81,780,642)
--------------- --------------
Total Distributions............................... (207,499,524) (91,254,644)
--------------- --------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES...................................... (56,495,002) 92,540,223
--------------- --------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold......................... 359,362,471 1,886,202,018
Net Asset Value of Shares Issued Through Dividend
Reinvestment.................................... 191,992,815 83,957,309
Cost of Shares Repurchased........................ (324,823,301) (1,919,937,889)
--------------- --------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS.................................... 226,531,985 50,221,438
--------------- --------------
TOTAL INCREASE IN NET ASSETS...................... 170,036,983 142,761,661
NET ASSETS:
Beginning of the Period........................... 1,532,037,673 1,389,276,012
--------------- --------------
End of the Period (Including accumulated
undistributed net investment income of
$4,454,013 and $3,422,719, respectively)........ $ 1,702,074,656 $1,532,037,673
=============== ==============
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
CLASS A SHARES SIX MONTHS ENDED --------------------------------------
MAY 31, 2000 (A) 1999(A) 1998 1997 1996
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD.................. $ 20.049 $ 18.882 $18.716 $16.786 $ 14.81
-------- -------- ------- ------- -------
Net Investment Income....... .104 .211 .200 .226 .243
Net Realized and Unrealized
Gain/Loss................. 1.600 2.235 2.441 3.032 2.851
-------- -------- ------- ------- -------
Total from Investment
Operations.................. 1.704 2.446 2.641 3.258 3.094
-------- -------- ------- ------- -------
Less:
Distributions from Net
Investment Income......... .095 .169 .230 .230 .250
Distributions from Net
Realized Gain............. 2.628 1.110 2.245 1.098 .868
-------- -------- ------- ------- -------
Total Distributions........... 2.723 1.279 2.475 1.328 1.118
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF THE
PERIOD...................... $ 19.030 $ 20.049 $18.882 $18.716 $16.786
======== ======== ======= ======= =======
Total Return (b).............. 9.99%* 13.79% 16.21% 21.27% 22.35%
Net Assets at End of the
Period (In millions)........ $1,121.2 $1,003.9 $ 901.3 $ 773.3 $ 584.6
Ratio of Expenses to Average
Net Assets (c).............. .85% .88% .92% .94% 1.04%
Ratio of Net Investment Income
to Average Net Assets (c)... 1.13% 1.11% 1.13% 1.33% 1.68%
Portfolio Turnover............ 45%* 93% 76% 94% 110%
</TABLE>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge of 5.75% or contingent deferred
sales charge ("CDSC"). On purchases of $1 million or more, a CDSC of 1% may
be imposed on certain redemptions made within one year of purchase. If the
sales charges were included, total returns would be lower.
(c) For the years ended November 30, 1996 through 1997, the impact on the Ratios
of Expenses and Net Investment Income to Average Net Assets due to Van
Kampen's reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
19
<PAGE> 21
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
CLASS B SHARES SIX MONTHS ENDED ----------------------------------------
MAY 31, 2000 (A) 1999(A) 1998 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF THE PERIOD............ $19.909 $18.772 $18.630 $16.721 $ 14.77
------- ------- ------- ------- -------
Net Investment Income.... .033 .061 .071 .097 .142
Net Realized and
Unrealized Gain/Loss... 1.586 2.225 2.426 3.020 2.827
------- ------- ------- ------- -------
Total from Investment
Operations............... 1.619 2.286 2.497 3.117 2.969
------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income...... .026 .039 .110 .110 .150
Distributions from Net
Realized Gain.......... 2.628 1.110 2.245 1.098 .868
------- ------- ------- ------- -------
Total Distributions........ 2.654 1.149 2.355 1.208 1.018
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................... $18.874 $19.909 $18.772 $18.630 $16.721
======= ======= ======= ======= =======
Total Return (b)........... 9.59%* 12.93% 15.38% 20.37% 21.38%
Net Assets at End of the
Period (In millions)..... $ 504.7 $ 475.6 $ 442.4 $ 340.8 $ 210.3
Ratio of Expenses to
Average Net Assets (c)... 1.62% 1.64% 1.69% 1.72% 1.83%
Ratio of Net Investment
Income to Average Net
Assets (c)............... .36% .32% .36% .55% .89%
Portfolio Turnover......... 45%* 93% 76% 94% 110%
</TABLE>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 5%, charged on certain redemptions
made within one year of purchase and declining thereafter to 0% after the
fifth year. If the sales charge was included, total returns would be lower.
(c) For the years ended November 30, 1996 through 1997, the impact on the Ratios
of Expenses and Net Investment Income to Average Net Assets due to Van
Kampen's reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
20
<PAGE> 22
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE SHARE OF THE FUND
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
CLASS C SHARES SIX MONTHS ENDED ----------------------------------------
MAY 31, 2000 (A) 1999(A) 1998 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF THE PERIOD............ $19.918 $18.779 $18.643 $16.734 $ 14.78
------- ------- ------- ------- -------
Net Investment Income.... .037 .065 .072 .096 .139
Net Realized and
Unrealized Gain/Loss... 1.575 2.223 2.419 3.021 2.833
------- ------- ------- ------- -------
Total from Investment
Operations............... 1.612 2.288 2.491 3.117 2.972
------- ------- ------- ------- -------
Less:
Distributions from Net
Investment Income...... .026 .039 .110 .110 .150
Distributions from Net
Realized Gain.......... 2.628 1.110 2.245 1.098 .868
------- ------- ------- ------- -------
Total Distributions........ 2.654 1.149 2.355 1.208 1.018
------- ------- ------- ------- -------
NET ASSET VALUE, END OF THE
PERIOD................... $18.876 $19.918 $18.779 $18.643 $16.734
======= ======= ======= ======= =======
Total Return (b)........... 9.59%* 12.92% 15.37% 20.28% 21.43%
Net Assets at End of the
Period (In millions)..... $ 76.2 $ 52.5 $ 45.6 $ 35.5 $ 22.1
Ratio of Expenses to
Average Net Assets (c)... 1.61% 1.65% 1.69% 1.72% 1.83%
Ratio of Net Investment
Income to Average Net
Assets (c)............... .39% .34% .36% .55% .89%
Portfolio Turnover......... 45%* 93% 76% 94% 110%
</TABLE>
* Non-Annualized
(a) Based on average shares outstanding.
(b) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum CDSC of 1%, charged on certain redemptions
made within one year of purchase. If the sales charge was included, total
returns would be lower.
(c) For the years ended November 30, 1996 through 1997, the impact on the Ratios
of Expenses and Net Investment Income to Average Net Assets due to Van
Kampen's reimbursement of certain expenses was less than 0.01%.
See Notes to Financial Statements
21
<PAGE> 23
NOTES TO
FINANCIAL STATEMENTS
May 31, 2000 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Growth and Income Fund (the "Fund") is organized as a Delaware
business trust, and is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to seek income and long-term growth of capital by
investing principally in income-producing equity securities including common
stocks and convertible securities (although investments are also made in
non-convertible preferred stocks and debt securities). The Fund commenced
investment operations on August 1, 1946. The distribution of the Fund's Class B
and Class C shares commenced on August 2, 1993.
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 generally accepted
accounting principles 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.
Fixed income investments are stated at value using market quotations or
indications of value obtained from an independent pricing service. Unlisted
securities and listed securities for which the last sales price is not available
are valued at the mean of bid and asked prices. For those securities where
quotations or prices are not available, valuations are determined in accordance
with 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
Fund 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 Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when-issued or delayed delivery
purchase commitments until payment is made. At May 31, 2000, there were no
when-issued or delayed delivery purchase commitments.
22
<PAGE> 24
NOTES TO
FINANCIAL STATEMENTS
May 31, 2000 (Unaudited)
The Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements, or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. INCOME AND EXPENSES Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Original issue discounts on
debt securities purchased are accreted over the expected life of each applicable
security. Premiums on debt securities are not amortized. Income and expenses of
the Fund are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses for tax purposes
relating to wash sale transactions.
At May 31, 2000, for federal income tax purposes the cost of long- and
short-term investments is $1,451,306,869; the aggregate gross unrealized
appreciation is $294,562,656 and the aggregate gross unrealized depreciation is
$43,904,831, resulting in net unrealized appreciation on long- and short-term
investments of $250,657,825.
E. DISTRIBUTION OF INCOME AND GAINS The Fund declares and pays dividends
quarterly from net investment income. Net realized gains, if any, are
distributed annually. Distributions from net realized gains for book purposes
may include short-term capital gains and gains on option and futures
transactions. All short-term capital gains and a portion of option and futures
gains are included in ordinary income for tax purposes.
23
<PAGE> 25
NOTES TO
FINANCIAL STATEMENTS
May 31, 2000 (Unaudited)
F. FOREIGN CURRENCY TRANSLATION The market values of foreign securities, forward
currency exchange contracts and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars based on quoted exchange rates
as of noon Eastern Standard Time. The cost of securities is determined using
historical exchange rates. Income and expenses are translated at prevailing
exchange rates when accrued or incurred. Gains and losses on the sale of
securities are not segregated for financial reporting purposes between amounts
arising from changes in exchange rates and amounts arising from changes in the
market prices of securities. Realized gain and loss on foreign currency includes
the net realized amount from the sale of currency and the amount realized
between trade date and settlement date on security transactions.
G. EXPENSE REDUCTIONS During the six months ended May 31, 2000, the Fund's
custody fee was reduced by $1,664 as a result of credits earned on overnight
cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND
OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
<S> <C>
First $150 million.......................................... .50 of 1%
Next $100 million........................................... .45 of 1%
Next $100 million........................................... .40 of 1%
Over $350 million........................................... .35 of 1%
</TABLE>
For the six months ended May 31, 2000, the Fund recognized expenses of
approximately $31,000 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.
For the six months ended May 31, 2000, the Fund recognized expenses of
approximately $36,200 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the six months ended May 31,
2000, the Fund recognized expenses of approximately $1,021,700. Transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks.
24
<PAGE> 26
NOTES TO
FINANCIAL STATEMENTS
May 31, 2000 (Unaudited)
Certain officers and trustees of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or trustees who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable for a ten-year period
and are based upon each trustee's years of service to the Fund. The maximum
annual benefit per trustee under the plan is $2,500.
For the six months ended May 31, 2000, the Fund paid brokerage commissions
to Morgan Stanley Dean Witter & Co., an affiliate of Van Kampen, totaling
$85,335.
3. CAPITAL TRANSACTIONS
At May 31, 2000, capital aggregated $840,511,478, $417,267,660 and $64,539,813
for Classes A, B, and C, respectively. For the six months ended May 31, 2000,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................... 11,524,082 $ 208,797,847
Class B............................................... 4,764,043 85,461,775
Class C............................................... 3,696,243 65,102,849
----------- -------------
Total Sales............................................. 19,984,368 $ 359,362,471
=========== =============
Dividend Reinvestment:
Class A............................................... 7,386,526 $ 126,935,407
Class B............................................... 3,449,293 58,833,584
Class C............................................... 364,570 6,223,824
----------- -------------
Total Dividend Reinvestment............................. 11,200,389 $ 191,992,815
=========== =============
Repurchases:
Class A............................................... (10,069,219) $(181,157,015)
Class B............................................... (5,361,009) (95,979,137)
Class C............................................... (2,661,364) (47,687,149)
----------- -------------
Total Repurchases....................................... (18,091,592) $(324,823,301)
=========== =============
</TABLE>
25
<PAGE> 27
NOTES TO
FINANCIAL STATEMENTS
May 31, 2000 (Unaudited)
At November 30, 1999, capital aggregated $685,935,239, $368,951,438 and
$40,900,289 for Classes A, B, and C, respectively. For the year ended November
30, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Sales:
Class A............................................ 89,784,236 $ 1,706,465,007
Class B............................................ 5,588,850 105,674,545
Class C............................................ 3,921,115 74,062,466
------------ ---------------
Total Sales.......................................... 99,294,201 $ 1,886,202,018
============ ===============
Dividend Reinvestment:
Class A............................................ 3,145,788 $ 56,609,202
Class B............................................ 1,401,003 24,942,043
Class C............................................ 135,051 2,406,064
------------ ---------------
Total Dividend Reinvestment.......................... 4,681,842 $ 83,957,309
============ ===============
Repurchases:
Class A............................................ (90,588,724) $(1,721,779,691)
Class B............................................ (6,663,340) (125,422,520)
Class C............................................ (3,851,970) (72,735,678)
------------ ---------------
Total Repurchases.................................... (101,104,034) $(1,919,937,889)
============ ===============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares purchased
on or after June 1, 1996 and any dividend reinvestment plan Class B shares
received on such shares, automatically convert to Class A shares eight years
after the end of the calendar month in which the shares were purchased. Class B
shares purchased before June 1, 1996, and any dividend reinvestment plan Class B
shares received on such shares, automatically convert to Class A shares six
years after the end of the calendar month in which the shares were purchased.
For the six months ended May 31, 2000 and the year ended November 30, 1999,
1,678,512 and 1,533,651 Class B shares automatically converted to Class A
shares, respectively, and are shown in the above table as sales of Class A
shares and repurchases of Class B shares. Class C shares purchased before
January 1, 1997, and any dividend reinvestment plan C shares received thereon,
automatically convert to Class A shares ten years after the end of the calendar
month in which the shares were purchased. Class C shares purchased on or after
January 1, 1997 do not possess a conversion feature. For the six months ended
May 31, 2000 and year ended November 30, 1999, no Class C shares converted to
Class A shares. The CDSC will
26
<PAGE> 28
NOTES TO
FINANCIAL STATEMENTS
May 31, 2000 (Unaudited)
be imposed on most redemptions made within five years of the purchase for Class
B and one year of the purchase for Class C as detailed in the following
schedule.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENTAGE OF
DOLLAR AMOUNT
SUBJECT TO CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
<S> <C> <C>
First...................................................... 5.00% 1.00%
Second..................................................... 4.00% None
Third...................................................... 3.00% None
Fourth..................................................... 2.50% None
Fifth...................................................... 1.50% None
Sixth and Thereafter....................................... None None
</TABLE>
For the six months ended May 31, 2000, Van Kampen, as Distributor for the Fund,
received net commissions on sales of the Fund's Class A shares of approximately
$309,600 and CDSC on the redeemed shares of Classes B and C of approximately
$422,600. Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $665,903,999 and $656,206,635,
respectively.
5. 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.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when exercising a call
option contract or taking delivery of a security underlying a futures contract.
In these instances the recognition of gain or loss is postponed until the
disposal of the security underlying the option or futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a
27
<PAGE> 29
NOTES TO
FINANCIAL STATEMENTS
May 31, 2000 (Unaudited)
specified future date at an agreed upon price. The Fund generally invests in
stock index futures. These contracts are generally used as a substitute for
purchasing and selling specific securities. Upon entering into futures
contracts, the Fund maintains, in a segregated account with its custodian, cash
or liquid securities with a value equal to its obligation under the futures
contracts. 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 six months ended May 31, 2000,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
<S> <C>
Outstanding at November 30, 1999............................ 172
Futures Opened............................................ 314
Futures Closed............................................ (345)
----
Outstanding at May 31, 2000................................. 141
====
</TABLE>
The futures contracts outstanding as of May 31, 2000, and the description
and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION/DEPRECIATION
<S> <C> <C>
LONG CONTRACTS:
S&P 500 Index Futures June 2000 (Current Notional
Value of $355,550 per contract)................ 141 $ 263,761
=== ==========
</TABLE>
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended, and a service plan
(collectively the "Plans"). The Plans govern payments for the distribution of
the Fund's shares, ongoing shareholder services and maintenance of shareholder
accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the six months ended May 31, 2000, are payments retained by Van Kampen of
approximately $2,068,800.
28
<PAGE> 30
NOTES TO
FINANCIAL STATEMENTS
May 31, 2000 (Unaudited)
7. BORROWINGS
In accordance with its investment policies, the Fund may borrow from banks for
temporary purposes and is subject to certain other customary restrictions.
Effective November 30, 1999, the Fund, in conjunction with certain other funds
of Van Kampen, entered in to a $650,000,000 committed line of credit facility
with a group of banks which expires on November 28, 2000, but is renewable with
the consent of the participating banks. Each fund is permitted to utilize the
facility in accordance with the restrictions of its prospectus. In the event the
demand for the credit facility meets or exceeds $650 million on a complex-wide
basis, each fund will be limited to its pro-rata percentage based on the net
assets of each participating fund. Interest on borrowings is charged under the
agreement at a rate of 0.50% above the federal funds rate per annum. An annual
commitment fee of 0.09% per annum is charged on the unused portion of the credit
facility, which each fund incurs based on its pro-rata percentage of quarterly
net assets. The Fund has not borrowed against the credit facility during the
period.
29
<PAGE> 31
VAN KAMPEN FUNDS
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 Value
Tax Managed Equity Growth
Technology
Growth and Income
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
International Magnum
Latin American
Strategic Income
Tax Managed Global Franchise
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
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
Tax Free High Income
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. 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
WWW.VANKAMPEN.COM--
to view a prospectus, select
Download Prospectus [COMPUTER ICON]
- call us at 1-800-341-2911
weekdays from 7:00 a.m. to 7:00 p.m.
Central time. Telecommunications
Device for the Deaf users, call
1-800-421-2833.
[PHONE ICON]
- e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
* Closed to new investors
** Open to new investors for a limited time
30
<PAGE> 32
FUND OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN GROWTH AND INCOME FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 418256
Kansas City, Missouri 64141-9256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS(1)
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606
(1) Independent auditors for the Fund perform an annual audit of the Fund's
financial statements. The Board of Trustees has engaged Ernst & Young LLP
to be the Fund's independent auditors.
PricewaterhouseCoopers LLP has ceased being the Fund's independent auditors
effective May 18, 2000. The cessation of the client-auditor relationship
between the Fund and PricewaterhouseCoopers was based solely on a possible
future business relationship by PricewaterhouseCoopers with an affiliate of
the Fund's Investment Adviser.
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charges on
shares of the Fund, and other pertinent
data. After December 31, 2000, the report, if used with prospective investors,
must be accompanied by a quarterly performance update, if applicable.
31
