<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 15
Statement of Operations.......................... 16
Statement of Changes in Net Assets............... 17
Financial Highlights............................. 18
Notes to Financial Statements.................... 20
Report of Independent Accountants................ 23
Dividend Reinvestment Plan....................... 24
</TABLE>
ACB ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG.]
Richard F. Powers, III
Chairman
Van Kampen Asset Management Inc.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Asset Management Inc.
1
<PAGE> 3
ECONOMIC SNAPSHOT
The strength of the domestic economy continued to defy expectations in the
first half of 1999, although it finally began to show signs of slowing down.
Strong growth, healthy employment, and low inflation all contributed to the
favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3
percent during the first quarter of 1999, but fell to 2.3 percent in the second
quarter. The first-quarter expansion was fueled by an increase in consumer
spending, which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in
more than 30 years. Throughout the reporting period, unemployment remained low,
the number of jobs grew, and wages rose. The labor market remained especially
tight in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report (CPI). Following this up-tick, the Federal Reserve raised interest
rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a
series of rate increases, May's tame CPI report prompted it to drop this bias
when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may
continue, bringing the economy back to historically normal growth levels.
Healthy job growth, which has been supporting the consumer confidence and
spending levels, showed signs of faltering toward the end of the reporting
period. However, a renewed optimism for corporate earnings, low unemployment,
and a vibrant housing market should provide some balance against a slower job
growth rate.
INTEREST RATES AND INFLATION
June 30, 1997, through June 30, 1999
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 1997 6.5000 2.3000
6.0000 2.2000
5.5000 2.2000
Sep 1997 6.2500 2.2000
5.7500 2.1000
5.6875 1.8000
Dec 1997 6.5000 1.7000
5.5625 1.6000
5.6250 1.4000
Mar 1998 6.1250 1.4000
5.6250 1.4000
5.6875 1.7000
Jun 1998 6.0000 1.7000
5.5625 1.7000
5.9375 1.6000
Sep 1998 5.7500 1.5000
5.2500 1.5000
4.8750 1.5000
Dec 1998 4.0000 1.6000
4.8125 1.7000
4.8750 1.6000
Mar 1999 5.1250 1.7000
4.9375 2.3000
4.5000 2.1000
Jun 1999 4.0000 2.0000
</TABLE>
Interest rates are represented by the closing midline federal funds 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.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999
VAN KAMPEN BOND FUND NYSE TICKER SYMBOL--VBF
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
One-year total return based on market price(1)............ (2.45%)
One-year total return based on NAV(2)..................... (0.87%)
DISTRIBUTION RATE
Distribution rate as a % of closing common stock
price(3).................................................. 7.94%
SHARE VALUATIONS
Net asset value........................................... $19.59
Closing common stock price................................ $17.8750
One-year high common stock price (10/26/98)............... $20.9375
One-year low common stock price (06/11/99)................ $17.2500
</TABLE>
(1)Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions for
the period in accordance with the Fund's dividend reinvestment plan, and sale of
all shares at the closing stock price at the end of the period indicated.
(2)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 shares at the end of the period, all at NAV.
(3)Distribution rate represents the quarterly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Fund shares,
when sold, may be worth more or less than their original cost.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN BOND FUND
We recently spoke with the management team of the Van Kampen Bond Fund about the
key events and economic forces that shaped the markets during the Fund's fiscal
year. The team includes Kelly Gilbert, portfolio manager, and Peter W. Hegel,
chief investment officer for fixed-income investments. Ms. Gilbert assumed
management responsibilities for the Fund on June 1, 1999. The following excerpts
reflect their views on the Fund's performance during the 12-month reporting
period ended June 30, 1999.
Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND
OPERATED DURING THE PAST 12 MONTHS?
A The second half of 1998 was marked by volatility, as the fixed-income
market was unsettled by global economic weakness and a subsequent flight
to quality. A series of fourth-quarter interest-rate cuts by the Federal
Reserve Board restored order and paved the way for recovery in the first quarter
of 1999, as investors gained confidence in the strength of the economy and
modest inflation. Consequently, yield spreads narrowed between Treasuries and
other fixed-income products (such as corporate, high-yield, and government
securities). However, this good news for fixed-income products was quelled in
the second quarter by a slight surge in inflation and warnings of interference
from the Fed. This prompted yield spreads to widen once again, although not to
the record-high levels seen last fall. The market breathed a sigh of relief at
the end of the reporting period, as the Fed approved a 0.25 percent hike while
reassuring fixed-income investors that additional action seemed unnecessary.
Q HOW DID THE CORPORATE BOND MARKET BEHAVE DURING THIS TIME?
A Initially, corporate bonds participated in the cautious recovery of the
fixed-income market. However, yield spreads between investment-grade
corporate bonds and Treasuries widened during the second quarter, erasing
nearly all of the significant tightening that corporate bond yields had achieved
in early 1999. Uncertainty over movement by the Fed coupled with a substantial
increase in new issuance decreased liquidity and put pressure on the sector.
Q HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE CONDITIONS?
A To maintain diversification, enhance liquidity, and seek to reduce risk,
we continued to allocate the Fund's assets across a variety of sectors
within the corporate bond market. Our strategy met with mixed results; all
sectors struggled during the period, although some fared better than others. For
example, we overweighted the utilities sector because of its defensive
characteristics. This decision benefited the Fund because the utilities sector
was one of the best-performing areas of the corporate bond
4
<PAGE> 6
market during the period. Unfortunately, this benefit to the Fund was offset by
our significant weighting in industrial companies, which lagged the market's
recovery. As one of the most prominent sectors among new corporate bond
issuance, the industrial sector was met with low demand and low credit ratings,
and its negative performance was a detriment to the Fund's return.
Q
WHAT WAS THE STRUCTURE OF THE FUND'S PORTFOLIO AT THE END OF THE REPORTING
PERIOD?
A
The Fund's credit quality allocation continued to be concentrated in
medium-quality securities, which are defined as A and BBB rated
securities. At the end of the reporting period, approximately 50 percent
of the portfolio was allocated to BBB rated securities; this position benefited
the Fund during the last six months of the reporting period, as BBB rated
securities outperformed A rated securities by nearly 100 basis points. We also
focused on managing the Fund's duration during the period. Duration, which is
expressed in years, is a measurement of a bond's price sensitivity to changes in
interest rates. For most of the period, the Fund's duration was held equivalent
to or slightly longer than that of its benchmark, the Lehman Brothers Index of
BBB Corporate Bonds. Because interest rates rose for the second half of the
reporting period, the long duration position was negative to the Fund's return
during this time. At the end of the period, the Fund's duration was 6.59 years,
which is longer than our benchmark and reflects our renewed belief that rates
could possible decrease. For additional Fund highlights, please refer to page 8.
Q
HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A
For the 12 months ended June 30, 1999, the Fund generated a total return
of -2.45 percent(1) at market price and -0.87 percent(2) at net asset
value. For the same period, the Lehman Brothers Index of BBB Corporate
Bonds returned 1.77 percent. Keep in mind that this broad-based index reflects
the general performance of corporate bonds. It does not reflect any commissions
that would be paid by an investor purchasing the securities it represents. Of
course, past performance is no guarantee of comparable future results. The
Fund's return reflects a decrease in market price per common share on the New
York Stock Exchange from $19.6875 on June 30, 1998, to $17.875 on June 30, 1999.
Please refer to the chart and footnotes on page 3 for additional Fund
performance results.
Q
WHAT IS YOUR OUTLOOK FOR THE MARKET AND THE FUND OVER THE COMING MONTHS?
A
We anticipate a moderate slowdown in economic growth in the months ahead,
but do not expect this to have a negative effect on the fixed-income
market unless it becomes a significant downturn. We believe strong
corporate bond issuance will continue over the next few months as issuers catch
up from the relatively quiet market of last fall. Because we believe the
near-term outlook for corporate bonds is good, we'll take
5
<PAGE> 7
advantage of this issuance to add new securities to the portfolio. As we manage
the Fund going forward, our focus on fundamental, in-depth research and
assessment of corporate bonds will remain unchanged. We will look beyond the
sector, credit rating, or structure of a bond to identify those issuers that we
believe will remain financially sound and perform well in a range of market
conditions. We'll also search for value in out-of-favor areas of the market in
our quest for opportunities to diversify the portfolio and contribute to the
Fund's performance.
[SIG.]
Kelly Gilbert
Portfolio Manager
[SIG.]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
6
<PAGE> 8
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to 1 percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis-point move.
BOND: A debt security issued by a government or corporation that generally pays
a bondholder a stated rate of interest and repays the principal at maturity
date.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are
two companies that assign bond ratings. Standard & Poor's ratings range from
a high of AAA to a low of D, while Moody's ratings range from a high of Aaa
to a low of C.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates (i.e. a 5-year duration means the bond will fall about 5 percent in
value if interest rates rise by 1 percent). The longer a bond's duration,
the greater the effect of interest rate movements on its price. Typically,
funds with shorter durations perform better in rising rate environments,
while funds with longer durations perform better when rates decline.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system 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.
INVESTMENT-GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's Investor Services. Bonds rated below BBB or Baa are
noninvestment grade.
YIELD SPREAD: The difference between the yields of different bonds, due to their
different credit ratings or maturities. When yield spreads between bonds of
different credit quality are narrow, there is less incentive to own the
lower-quality bond. When yield spreads between bonds of different maturities
are narrow, there is less incentive to own the bond with the longer
maturity. In both cases, the investor is not being compensated for the
additional risk.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN BOND FUND
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Utilities 24.5 24.7
Consumer Services 18.2 18
Transportation 11.2 11.4
Health Care 8.4 9.1
Energy 8.4 9
</TABLE>
* As a percentage of long-term investments
NET ASSET VALUE AND MARKET PRICE
(BASED UPON MONTH-END VALUES)
JUNE 1989 THROUGH JUNE 1999
[LINE GRAPH]
<TABLE>
<CAPTION>
MARKET PRICE NET ASSET VALUE
------------ ---------------
<S> <C> <C>
Jun 1989 20.25 20.41
21.63 20.62
21.13 20.23
20.25 19.51
20.13 19.81
20.38 19.89
17.5 19.26
17.75 19.05
17.63 19.04
17.25 18.59
16.13 18.44
17 18.97
Jun 1990 16.5 18.75
16.63 19
16 18.2
15.5 18.28
16.13 18.36
17.25 18.77
16.75 18.61
17 18.71
18.25 18.95
18.25 18.78
18.75 19.01
18.75 19.14
Jun 1991 18.38 18.68
18.75 18.93
19.13 19.3
19.13 19.34
19.13 19.47
19.5 19.62
20.13 19.89
19.63 19.66
19.88 19.78
19.63 19.36
19.75 19.41
20 19.98
Jun 1992 19.75 19.85
20.5 20.46
20.63 20.67
21.25 20.41
20 20.02
20.25 20.08
20.25 20.05
20.88 20.56
21.25 21.13
20.75 20.94
21 21.1
21 21.18
Jun 1993 20.75 21.33
20.88 21.59
21 22.27
20.88 21.95
20.38 21.99
20.63 21.65
20.38 21.29
20.13 21.66
18.88 21.14
18 20.12
18.38 19.78
17.88 19.5
Jun 1994 18.13 19.06
17.5 19.57
17.88 19.6
17.13 18.79
17.25 18.71
17.25 18.69
16.75 18.59
17.63 18.99
17.88 19.48
18.25 19.3
18 19.6
18.88 20.66
Jun 1995 19.13 20.41
18.88 20.28
19.25 20.67
19 20.57
19.38 20.92
19.88 21.28
19.63 21.27
19.88 21.22
19.63 20.89
19.38 20.18
18.5 20.15
18.25 20.25
Jun 1996 18.13 19.64
17.88 19.9
18.38 20.13
18.75 19.96
18.75 20.24
19 20.74
18.75 20.31
18.75 20.18
19.25 20.16
18.63 18.87
18.75 19.81
19 20.38
Jun 1997 19.25 20.43
19.88 20.81
19.5 20.64
19.81 20.77
19.75 21.1
20.63 21.19
20.81 20.19
20.94 21.23
20.88 21.17
20.38 20.92
20 21
20.38 21.3
Jun 1998 19.69 21.16
19.44 21.09
19.44 21.24
19.81 21.35
20.56 21.2
20.25 21.55
20.06 21.25
20.19 21.26
20 20.59
19.25 20.4
18.13 20.45
17.81 20.13
Jun 1999 17.88 19.59
</TABLE>
The solid line above represents the Fund's net asset value (NAV), which
indicates overall changes in value among the Fund's underlying securities. The
Fund's market price is represented by the dashed line, which indicates the price
the market is willing to pay for shares of the Fund at a given time. Market
price is influenced by a range of factors, including supply and demand and
market conditions.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS (CONTINUED)
VAN KAMPEN BOND FUND
CREDIT QUALITY
[PIE CHART]
<TABLE>
<CAPTION>
AA/Aa A/A BBB/Baa BB/Ba B/B
----- --- ------- ----- ---
<S> <C> <C> <C> <C> <C>
As of June 30, 1999 9.30 28.50 49.50 12.10 0.6
</TABLE>
[PIE CHART]
<TABLE>
<CAPTION>
AA/Aa A/A BBB/Baa BB/Ba B/B
----- --- ------- ----- ---
<S> <C> <C> <C> <C> <C>
As of June 30, 1998 2.40 31.50 53.50 11.70 0.9
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DIVIDEND HISTORY
FOR THE PERIOD ENDED JUNE 30, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
MONTHLY DIVIDEND
----------------
<S> <C>
'Sep 1998' 0.355
'Dec 1998' 0.355
'Mar 1999' 0.355
'Jun 1999' 0.355
</TABLE>
The dividend history represents past performance of the Fund and does not
predict the Fund's future distributions.
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS 93.0%
CONSUMER DISTRIBUTION 1.1%
$ 2,500 Kroger Co., 144A Private
Placement (a)....................... 7.250% 06/01/09 $ 2,492,395
------------
CONSUMER DURABLES 0.8%
750 Brunswick Corp...................... 7.125 08/01/27 681,791
1,000 Chrysler Corp....................... 7.450 03/01/27 1,013,594
------------
1,695,385
------------
CONSUMER NON-DURABLES 4.2%
4,000 Coca Cola Enterprises, Inc.......... 8.500 02/01/12 4,475,900
750 Dimon, Inc.......................... 8.875 06/01/06 663,750
2,500 Pepsi Bottling Group, Inc., 144A
Private Placement (a)............... 7.000 03/01/29 2,343,947
2,000 Westpoint Stevens, Inc.............. 7.875 06/15/05 1,955,000
------------
9,438,597
------------
CONSUMER SERVICES 17.8%
1,250 Belo A.H. Corp...................... 7.125 06/01/07 1,231,126
2,500 Clear Channel Commerce, Inc......... 7.250 10/15/27 2,310,223
2,000 Comcast Cable Communications........ 8.125 05/01/04 2,102,484
3,000 Cox Communications, Inc............. 7.250 11/15/15 2,909,565
1,250 CSC Holdings, Inc................... 7.875 12/15/07 1,239,063
2,500 CSC Holdings, Inc................... 7.875 02/15/18 2,412,500
5,000 Harcourt General, Inc............... 9.500 03/15/00 5,073,685
1,750 Harcourt General, Inc............... 8.875 06/01/22 1,819,277
1,000 Harcourt General, Inc............... 7.200 08/01/27 885,735
1,000 News America Holdings, Inc.......... 8.875 04/26/23 1,091,926
250 Premier Parks, Inc.................. 9.250 04/01/06 248,125
100 Premier Parks, Inc.................. 9.750 01/15/07 104,750
200 Premier Parks, Inc.................. 9.750 06/15/07 203,000
375 Premier Parks, Inc. (b)............. 0/10.000 04/01/08 250,781
3,500 Royal Caribbean Cruises Ltd......... 7.500 10/15/27 3,262,080
1,500 Stewart Enterprises, Inc............ 6.400 05/01/03 1,460,274
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONSUMER SERVICES (CONTINUED)
$11,000 Tele Communications, Inc............ 9.250% 01/15/23 $ 12,044,098
1,000 Washington Post Co.................. 5.500 02/15/09 924,560
------------
39,573,252
------------
ENERGY 8.2%
7,400 Ashland Oil, Inc.................... 8.800 11/15/12 8,235,941
750 Barrett Resources Corp.............. 7.550 02/01/07 694,688
5,025 PDV America, Inc.................... 7.875 08/01/03 4,918,093
1,500 Petroliam Nasional Berhad, 144A
Private Placement (a)............... 7.625 10/15/26 1,205,391
250 Pride Petroleum Services, Inc....... 9.375 05/01/07 250,000
1,000 R & B Falcon Corp................... 6.500 04/15/03 852,500
1,000 Transcontinental Gas Pipe Line
Corp................................ 7.250 12/01/26 937,848
1,000 Union Oil Co........................ 9.125 02/15/06 1,090,112
------------
18,184,573
------------
FINANCE 2.6%
1,000 Americredit Corp.................... 9.250 02/01/04 1,015,000
4,500 Hutchinson Whampoa Finance, 144A
Private Placement (a)............... 7.500 08/01/27 3,869,388
1,000 Royal Bank Scotland Group........... 6.375 02/01/11 944,567
------------
5,828,955
------------
HEALTHCARE 8.2%
2,300 Aetna Services, Inc................. 7.125 08/15/06 2,301,511
1,000 Allegiance Corp..................... 7.800 10/15/16 1,040,014
6,000 Baxter International, Inc........... 6.625 02/15/28 5,428,680
1,500 Beckman Coulter, Inc................ 7.450 03/04/08 1,417,500
500 Manor Care, Inc..................... 7.500 06/15/06 491,173
1,000 Tenet Healthcare Corp............... 8.625 01/15/07 980,000
4,500 Tenet Healthcare Corp............... 8.125 12/01/08 4,275,000
2,500 Tyco International Group S. A....... 6.125 11/01/08 2,333,278
------------
18,267,156
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PRODUCER MANUFACTURING 4.2%
$ 1,750 IDEX Corp........................... 6.875% 02/15/08 $ 1,615,996
4,400 ITT Corp............................ 6.750 11/15/05 4,015,000
1,000 ITT Corp............................ 7.375 11/15/15 861,904
162 Rayovac Corp........................ 10.250 11/01/06 174,150
2,500 Rubbermaid, Inc..................... 6.600 11/15/06 2,480,317
250 U.S. Can Corp....................... 10.125 10/15/06 261,250
------------
9,408,617
------------
RAW MATERIALS/PROCESSING
INDUSTRIES 7.0%
2,000 Bowater, Inc........................ 9.375 12/15/21 2,365,206
1,000 Crown Cork & Seal, Inc.............. 8.000 04/15/23 938,117
5,000 Federal Paper Board, Inc............ 8.875 07/01/12 5,463,000
4,000 IMC Global, Inc..................... 6.875 07/15/07 3,882,284
1,000 IMC Global, Inc..................... 7.300 01/15/28 938,312
1,250 Owens Illinois, Inc................. 7.150 05/15/05 1,187,500
750 Smithfield Foods, Inc............... 7.625 02/15/08 682,500
------------
15,456,919
------------
TECHNOLOGY 4.0%
5,000 Computer Associates International,
Inc................................. 6.375 04/15/05 4,747,275
2,000 Lucent Technologies, Inc............ 6.450 03/15/29 1,833,214
1,750 Raytheon Co......................... 6.150 11/01/08 1,649,100
750 Raytheon Co......................... 7.200 08/15/27 728,740
------------
8,958,329
------------
TRANSPORTATION 10.9%
3,000 AMR Corp............................ 9.500 05/15/01 3,140,970
4,250 CSX Corp............................ 8.625 05/15/22 4,648,140
2,500 Kansas City Southern Industries,
Inc................................. 7.875 07/01/02 2,558,855
7,000 Union Pacific Corp.................. 8.350 05/01/25 7,131,516
6,000 United Airlines, Inc................ 10.020 03/22/14 6,852,090
------------
24,331,571
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UTILITIES 24.0%
$ 1,000 AES Corp............................ 9.500% 06/01/09 $ 1,030,000
3,000 Arizona Public Service Co........... 9.500 04/15/21 3,161,712
3,500 Arizona Public Service Co........... 8.750 01/15/24 3,615,948
2,000 Arizona Public Service Co........... 8.000 02/01/25 1,999,622
2,000 CMS Energy Corp..................... 6.750 01/15/04 1,885,000
1,000 CMS Energy Corp..................... 7.500 01/15/09 935,000
1,000 Commonwealth Edison Co.............. 8.625 02/01/22 1,031,477
5,000 GTE North, Inc...................... 8.500 12/15/31 5,157,395
3,000 Gulf States Utilities Co............ 8.940 01/01/22 3,162,165
4,750 MCI Worldcom, Inc................... 6.950 08/15/28 4,490,978
4,150 Montana Power Co.................... 8.950 02/01/22 4,471,862
1,750 Niagara Mohawk Power Corp........... 7.625 10/01/05 1,763,125
7,000 Public Service Co. of Colorado...... 8.750 03/01/22 7,251,335
2,000 Southern California Gas Co.......... 8.750 10/01/21 2,090,612
1,500 Sprint Capital Corp................. 6.125 11/15/08 1,400,349
750 Telefonica De Argentina S A, 144A
Private Placement (a) (Argentina)... 9.875 07/01/02 745,312
5,000 United Telecommunications Kansas.... 9.500 04/01/03 5,469,605
500 UtiliCorp United, Inc............... 6.700 10/15/06 509,927
3,000 UtiliCorp United, Inc............... 8.270 11/15/21 3,164,484
------------
53,335,908
------------
TOTAL CORPORATE BONDS 93.0%................................ 206,971,657
------------
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 4.7%
5 Federal Home Loan Mortgage Corp.,
Pool................................ 7.375 01/01/03 5,054
1 Government National Mortgage Assn.,
Pool................................ 10.000 10/15/16 1,026
7 Government National Mortgage Assn.,
Pool................................ 10.000 07/15/20 8,153
4,000 Newfoundland Province Canada (US
$).................................. 9.000 10/15/21 4,654,000
5,500 Saskatchewan Province Canada (US
$).................................. 8.000 02/01/13 5,903,700
------------
10,571,933
------------
TOTAL LONG-TERM INVESTMENTS 97.7%
(Cost $214,025,401)................................................. 217,543,590
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
- --------------------------------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENT 0.7%
BA Securities ($1,470,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 06/30/99, to be sold on
07/01/99 at $1,470,203)
(Cost $1,470,000)................................................... $ 1,470,000
------------
TOTAL INVESTMENTS 98.4%
(Cost $215,495,401)................................................. 219,013,590
OTHER ASSETS IN EXCESS OF LIABILITIES 1.6%........................... 3,602,113
------------
NET ASSETS 100.0%.................................................... $222,615,703
============
</TABLE>
(a) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
(b) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $215,495,401)....................... $219,013,590
Cash........................................................ 1,101
Interest Receivable......................................... 4,805,052
Other....................................................... 82,284
------------
Total Assets.......................................... 223,902,027
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 745,762
Income Distributions...................................... 254,934
Investment Advisory Fee................................... 88,827
Affiliates................................................ 6,761
Accrued Expenses............................................ 148,080
Trustees' Deferred Compensation and Retirement Plans........ 41,960
------------
Total Liabilities..................................... 1,286,324
------------
NET ASSETS.................................................. $222,615,703
============
NET ASSETS CONSIST OF:
Common Shares ($1.00 par value with 15,000,000 shares
authorized, 11,362,465 shares issued and outstanding)..... $ 11,362,465
Capital..................................................... 209,801,851
Net Unrealized Appreciation................................. 3,518,189
Accumulated Undistributed Net Investment Income............. 87,704
Accumulated Net Realized Loss............................... (2,154,506)
------------
NET ASSETS.................................................. $222,615,703
============
NET ASSET VALUE PER COMMON SHARE
($222,615,703 divided by 11,362,465 shares outstanding)... $ 19.59
============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 17,452,002
Dividends................................................... 206,804
------------
Total Income............................................ 17,658,806
------------
EXPENSES:
Investment Advisory Fee..................................... 1,142,466
Shareholder Services........................................ 111,389
Reports to Shareholders..................................... 82,447
Trustees' Fees and Related Expenses......................... 47,329
Custody..................................................... 29,881
Legal....................................................... 6,023
Other....................................................... 148,150
------------
Total Expenses.......................................... 1,567,685
Less Credits Earned on Cash Balances.................... 235
------------
Net Expenses............................................ 1,567,450
------------
NET INVESTMENT INCOME....................................... $ 16,091,356
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 1,987,296
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 23,239,492
End of Period............................................. 3,518,189
------------
Net Unrealized Depreciation During the Period............... (19,721,303)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(17,734,007)
============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $ (1,642,651)
============
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended June 30, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.............................. $ 16,091,356 $ 16,774,523
Net Realized Gain.................................. 1,987,296 1,867,201
Net Unrealized Appreciation/Depreciation During the
Period........................................... (19,721,303) 8,710,798
------------ ------------
Change in Net Assets from Operations............... (1,642,651) 27,352,522
Distributions from Net Investment Income:.......... (16,134,129) (17,157,454)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES....................................... (17,776,780) 10,195,068
NET ASSETS:
Beginning of the Period............................ 240,392,483 230,197,415
------------ ------------
End of the Period (Including accumulated
undistributed net
investment income of $87,704 and $145,160,
respectively).................................... $222,615,703 $240,392,483
============ ============
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period...... $21.157 $ 20.259 $ 19.97 $ 20.41 $ 19.07
------- -------- ------- ------- -------
Net Investment Income........ 1.416 1.476 1.556 1.54 1.52
Net Realized and Unrealized
Gain/Loss.................. (1.561) .932 .273 (.44) 1.36
------- -------- ------- ------- -------
Total from Investment
Operations................... (0.145) 2.408 1.829 1.10 2.88
Less Distributions from Net
Investment Income............ 1.420 1.510 1.540 1.54 1.54
------- -------- ------- ------- -------
Net Asset Value, End of the
Period....................... $19.592 $ 21.157 $20.259 $ 19.97 $ 20.41
======= ======== ======= ======= =======
Market Price Per Share at End
of the Period................ $17.875 $19.6875 $19.250 $18.125 $19.125
Total Investment Return at
Market Price (a)(d).......... (2.45%) 10.08% 15.06% 2.61% 14.89%
Total Return at Net Asset
Value (b)(d)................. (0.87%) 12.19% 9.46% 5.94% 16.54%
Net Assets at End of the Period
(In millions) (d)............ $ 222.6 $ 240.4 $ 230.2 $ 226.9 $ 231.9
Ratio of Operating Expenses to
Average Net Assets........... .66% .65% .68% .67% .68%
Ratio of Convertible Note
Expenses to Average Net
Assets (c)................... -- -- -- -- .39%
Ratio of Net Investment Income
to Average Net Assets........ 6.79% 7.04% 7.70% 7.47% 7.92%
Portfolio Turnover............. 10% 27% 8% 11% 8%
Assuming full dilution of
debt (c):
Net Asset Value, End of the
Period..................... -- -- -- -- --
Number of Shares Outstanding,
End of Period (000)........ -- -- -- -- --
</TABLE>
(a) Total Investment Return at Market Price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Fund's dividend reinvestment plan.
(b) Total Return at Net Asset Value (NAV) reflects the change in value of the
Fund's assets with reinvestment of dividends based upon NAV.
(c) On January 3, 1995, the Fund paid off its outstanding convertible extendible
note.
(d) Prior to fiscal year end 1992, this item was not a required disclosure.
18
<PAGE> 20
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
- -----------------------------------------------------
1994 1993 1992 1991 1990
- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 21.33 $ 19.85 $ 18.68 $ 18.72 $ 20.34
------- ------- ------- ------- -------
1.56 1.575 1.735 1.76 2.07
(2.28) 1.55 1.115 (.03) (1.615)
------- ------- ------- ------- -------
(.72) 3.125 2.85 1.73 .455
1.54 1.645 1.68 1.77 2.075
------- ------- ------- ------- -------
$ 19.07 $ 21.33 $ 19.85 $ 18.68 $ 18.72
======= ======= ======= ======= =======
$18.125 $20.750 $19.750 $18.375 $16.500
(5.59%) 13.76% 17.12% -- --
(3.37%) 16.35% 15.79% -- --
$ 216.6 $ 235.6 $ 218.5 -- --
.68% .71% .71% .72% .71%
.82% .98% 1.05% 1.09% 1.55%
7.29% 7.65% 8.90% 9.42% 10.65%
2% 19% 39% 18% 14%
$ 19.07 $ 21.09 $ 19.78 $ 18.74 $ 18.78
12,411 12,411 12,372 12,304 12,304
</TABLE>
19
See Notes to Financial Statements
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Bond Fund (the "Fund") is registered as a diversified closed-end
management investment company under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to provide current income with the
preservation of capital through investing primarily in a diversified portfolio
of debt securities.
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--Fixed income investments are stated at value using market
quotations or indications of value obtained from an independent pricing service.
Investments in securities listed on a securities exchange are valued at their
sale price as of the close of such securities exchange. Unlisted securities and
listed securities for which the last sales price is not available are valued at
the mean of the 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.
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 June 30, 1999, there were no when
issued or delayed delivery purchase commitments.
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
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
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. INVESTMENT INCOME--Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Discounts are amortized
over the expected life of each applicable security. Premiums on debt securities
are not amortized.
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.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset these losses against any future realized capital
gains. At June 30, 1999, the Fund had an accumulated capital loss carryforward
for tax purposes of $2,154,506, which will expire on June 30, 2000.
At June 30, 1999, for federal income tax purposes, cost of long- and
short-term investments is $215,495,401, the aggregate gross unrealized
appreciation is $8,586,576 and the aggregate gross unrealized depreciation is
$5,068,387, resulting in net unrealized appreciation on long- and short-term
investments of $3,518,189.
E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares and pays quarterly
dividends 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.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
for the 1999 fiscal year have been identified and appropriately reclassified.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999
- --------------------------------------------------------------------------------
For the year ended June 30, 1999, a permanent book and tax basis difference
relating to the recognition of net realized gains on paydowns of mortgage pool
obligations totaling $317 was reclassified from accumulated net realized loss to
accumulated undistributed net investment income. Also, a permanent book and tax
basis difference relating to consent fee income totaling $15,000 was
reclassified from accumulated undistributed net investment income to accumulated
net realized loss.
F. EXPENSE REDUCTIONS--During the year ended June 30, 1999, the Fund's custody
fee was reduced by $235 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 year ended June 30, 1999, the Fund recognized expenses of
approximately $6,000 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 year ended June 30, 1999, the Fund recognized expenses of
approximately $68,800 representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
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.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $23,357,079 and $23,417,478,
respectively.
22
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Van Kampen Bond Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of Investments of Van Kampen Bond Fund, as of June 30, 1999 and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the ten years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Funds management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with the custodian. An audit includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Bond Fund at June 30, 1999, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the ten years in the
period then ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
July 23, 1999
23
<PAGE> 25
DIVIDEND REINVESTMENT PLAN
The Fund pays distributions in cash, but if you own more than 100 shares in
your own name, you may elect to participate in the Fund's dividend reinvestment
plan (the "Plan"). Under the Plan, shares will be issued by the Fund at net
asset value on a date determined by the Board of Trustees between the record and
payable dates on each distribution; however, if the market price including
brokerage commissions, is less than the net asset value, the amount of the
distribution will be paid to the Plan Agent, which will buy such shares as are
available at prices below the net asset value. (If the market price is not
significantly less than the net asset value, it is possible that open market
purchases of shares may increase the market price so that such price plus
brokerage commissions would equal or exceed the net asset value of such shares)
if Plan Agent cannot buy the necessary shares at less than net asset value
before the distribution date, the balance of the distribution will be made in
authorized but unissued shares of the Fund at net asset value. The cost per
share will be the average cost, including brokerage commissions, of all shares
purchased. Since all shares purchased from the Fund are at net asset value,
there will be no dilution, and no brokerage commissions are charged on such
shares.
You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gain distributions does not relieve you of any income tax
which may be payable (or required to be withheld) on dividends or distributions.
You may begin or discontinue participation in the Plan at any time by
written notice to the address below. If you withdraw from the Plan, you may
rejoin at any time if you own the required 100 shares. Elections and
terminations will be effective for distributions declared after receipt. If you
withdraw from the Plan, a certificate for the whole shares and a check for the
fractional shares, if any, credited to your Plan account will be sent as soon as
practicable after receipt of your election to withdraw. Except for brokerage
commissions, if any, which are borne by Plan participants, all costs of the Plan
are borne by the Fund. The Fund reserves the right to amend or terminate the
Plan on 30 days' written notice prior to the record date of the distribution for
which such amendment or termination is effective.
Record stockholders should address all notices, correspondence, questions or
other communications about the Plan to:
EQUISERVE LLP
P.O. BOX 8200
BOSTON, MA 02266-8200
1-800-821-1238
If your shares are not held directly in your name, you should contact your
brokerage firm, bank or other nominee for more information and to see if your
nominee will participate in the Plan on your behalf. If you participate through
your broker and choose to move your account to another broker, you will need to
re-enroll in the Plan through your new broker.
24
<PAGE> 26
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
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
Capital Preservation
Reserve
Tax Free Money
Senior Loan Funds
Prime Rate Income Trust
Senior Floating Rate
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 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
- - 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.
- - e-mail us by visiting WWW.VANKAMPEN.COM and selecting Contact Us
25
<PAGE> 27
VAN KAMPEN BOND FUND
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL* - Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
STATE STREET BANK
AND TRUST CO.
225 Franklin Street
Boston, Massachusetts 02105
SHAREHOLDER SERVICING AGENT
EQUISERVE LLP
P.O. Box 8200
Boston, Massachusetts 02266-8200
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
ERNST & YOUNG LLP
1221 McKinney Suite 2400
Houston, Texas 77010
* "Interested" persons of the Fund, as defined in
the Investment Company Act of 1940.
(C) Van Kampen Funds Inc., 1999. All rights reserved.
(SM) denotes a service mark of
Van Kampen Funds Inc.
INQUIRIES ABOUT AN INVESTOR'S ACCOUNT SHOULD BE REFERRED TO THE FUND'S TRANSFER
AGENT EQUISERVE LLP P.O. BOX 8200 BOSTON, MASSACHUSETTS 02266-8200 TELEPHONE:
(800) 821-1238 ALASKA AND HAWAII CALL COLLECT: (781) 575-2000 ASK FOR CLOSED-END
FUND ACCOUNT SERVICES
26
<PAGE> 28
RESULTS OF SHAREHOLDER VOTES
An Annual Meeting of Shareholders of the Fund was held on June 16, 1999, where
shareholders voted on the election of trustees and the selection of independent
public accountants.
1) With regard to the election of the following trustees:
<TABLE>
<CAPTION>
# OF SHARES
---------------------
IN FAVOR WITHHELD
- ------------------------------------------------------------------------
<S> <C> <C>
David C. Arch.................................... 8,894,392 113,960
Howard J Kerr.................................... 8,894,262 114,091
Dennis J. McDonnell.............................. 8,895,243 113,110
</TABLE>
The other trustees of the Fund whose terms did not expire in 1999 were Rod
Dammeyer, Steven Muller, Theodore A. Myers, Don G. Powell, Hugo F. Sonnenschein,
and Wayne W. Whalen.
2) With regards to the ratification of Ernst & Young LLP as independent
public accountants for the Fund, 8,880,049 shares voted in favor of the
proposal, 31,223 shares voted against and 97,081 shares abstained.
27
<PAGE> 29
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
28
<TABLE> <S> <C>
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<NUMBER> 11
<NAME> BOND FUND
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<S> <C>
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<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
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