<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 3
Glossary of Terms................................ 4
Portfolio Management Review...................... 5
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 18
Dividend Reinvestment Plan....................... 21
</TABLE>
ACB SAR 2/99
<PAGE> 2
LETTER TO SHAREHOLDERS
January 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together, we've
witnessed one of the greatest bull markets in investment history, unprecedented
growth in mutual fund investing, and a surge in personal retirement planning.
The coming millennium promises to hold even more opportunities.
To lead us into this new era of investing, Richard F. Powers III has joined
Van Kampen as Chairman and Chief Executive Officer. He comes to us from our
parent company, Morgan Stanley Dean Witter & Co., where he served as Executive
Vice President and Director of Marketing. He brings 27 years of experience in
the financial services industry, including an extensive background in product
management, strategic planning and brand development.
Although former Chairman Don G. Powell retired on January 1, he will remain
active in the industry and the community. Mr. Powell plans to continue his
service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
Despite a stormy year in the global economy, the United States ended 1998
with only a moderate slowdown in growth. The nation's gross domestic product, a
measure of economic health, grew 3.9 percent during the year, matching 1997's
growth rate and indicating that our nation's economy remains strong. A
continuation of low inflation--only a 1.6 percent increase in the consumer price
index over the last 12 months--also helped sustain the domestic economy and kept
inflation-adjusted interest rates attractive.
Although the year ended on a positive note, the economic environment was
quite unsettled in the third quarter, with the Asian financial crisis
contributing to slowing corporate profits in the United States. Given the
uncertainty surrounding emerging market nations and the near-collapse of a major
U.S. hedge fund, the stock and bond markets experienced significant volatility
during this period. With instability as a backdrop, American and foreign
investors alike pursued a flight to quality--seeking the relative safety of
large-company stocks and government bonds.
In the last few months of the year the global financial situation improved
in conjunction with the Federal Reserve's interest rate decreases. In response
to declining corporate profits and mounting international concerns, the Fed
lowered interest rates three times, with 0.25 percent cuts in September,
October, and November. These rate cuts, coupled with a wave of corporate mergers
and cost-cutting measures, lent the support needed to keep the economy growing.
Dozens of foreign central banks also reduced interest rates in an effort to
stimulate their economies. These actions gave a boost to investor confidence and
encouraged a return to a more diversified range of investments in the last few
months of the year.
Continued on page 2
1
<PAGE> 3
MARKET REVIEW
The bond market continued to rally as interest rates fell during the year,
with U.S. Treasury securities outpacing corporate and municipal bonds in price
appreciation. Investors' desire for safer investments amid the global economic
storm led to strong demand for high-quality bonds. In fact, the U.S. Treasury
bond was considered one of the most attractive places to invest by both domestic
and international investors, propelling the 30-year Treasury yield to 4.71
percent in October--its lowest yield since the federal government began selling
these bonds in 1977. However, higher-yielding bonds suffered--primarily during
the third quarter--as investors' demand for quality increased. Corporate bond
prices, especially among lower-rated issues, fell in conjunction with concerns
about declining corporate profits.
OUTLOOK
Our outlook for the domestic economy is positive, and we anticipate
continued low inflation and healthy economic growth. However, the aftereffects
of the global economic slowdown may continue to put pressure on corporate
earnings in the first half of the year. Internationally, we anticipate that low
interest rates and declining inflation will lead to improvements in troubled
areas such as Asia and Latin America. With the successful launch of the euro,
the new European transnational currency, we believe that many foreign markets
will become increasingly attractive in 1999.
In the long term, we are optimistic that the stock market will continue its
record growth, although we could experience additional volatility in the months
ahead if concerns about high stock valuations and increasing earnings pressure
become more pronounced. Combined with growing questions about corporate and
government reactions to the Year 2000 computer problem, we could see an
increasingly cautious market by mid-year.
Additional details about your fund, including a question-and-answer section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
Sincerely,
[SIG]
Richard F. Powers III
Chairman
Van Kampen Asset Management Inc.
[SIG]
Dennis J. McDonnell
President
Van Kampen Asset Management Inc.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1998
VAN KAMPEN BOND FUND
NYSE TICKER SYMBOL--VBF
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
Six-month total return based on market price(1)........... 5.47%
Six-month total return based on NAV(2).................... 3.03%
DISTRIBUTION RATE
Distribution rate as a % of closing common stock
price(3).................................................. 7.08%
SHARE VALUATIONS
Net asset value........................................... $21.09
Closing common stock price................................ $20.0625
Six-month high common stock price (10/26/98).............. $20.9375
Six-month low common stock price (09/11/98)............... $19.1875
</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
GLOSSARY OF TERMS
BOND: A debt security issued by a government or corporation that pays a
bondholder a stated rate of interest and repays the principal at the
maturity date.
CALL FEATURE: Allows the issuer to buy back a bond on specific dates at set
prices before maturity. These dates and prices are set when the bond is
issued. To compensate the bondholder for the potential loss of income and
ownership, a bond's call price is usually higher than the face value of the
bond. Bonds are usually called when interest rates drop so significantly
that the issuer can save money by issuing new bonds at lower rates.
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.
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.
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. The longer a bond's duration, the greater the effect of interest rate
movements on net asset value. 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.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
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: The annual rate of return on an investment, expressed as a percentage.
For bonds and notes, the yield is the annual interest divided by the market
price.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.
4
<PAGE> 6
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 past six
months. The team includes David R. Troth, portfolio manager, and Peter W. Hegel,
chief investment officer for fixed-income investments. The following excerpts
reflect their views on the Fund's performance during the six-month period ended
December 31, 1998.
Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND
OPERATED DURING THE PAST SIX MONTHS?
A The primary backdrop for the domestic fixed-income market was the
lingering cloud of global volatility. Economic weakness in Asia spilled
into other economies, including Russia and South America, during the third
quarter. This environment further fueled the flight to quality that emerged in
the first half of the year. As investors flocked to the relative safety of U.S.
Treasury securities, the yield for the benchmark 30-year Treasury dropped below
its second-quarter trading range.
The biggest boost for the bond market came late in the third quarter and
early in the fourth quarter, when the market was inspired by a string of
interest rate cuts by the Federal Reserve Board. By year end, the yield for the
30-year Treasury bond--which, like all bond yields, moves in the opposite
direction of its price--had fallen to 5.09 percent, near the record low level
for long-term Treasuries set in the mid-1960s. For the first time since 1990,
the returns for high-quality, low-risk bonds soundly exceeded those for higher-
risk bonds.
Q HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE CONDITIONS?
A In your June report, we discussed our emphasis on increasing
diversification in the Fund's portfolio. During the last six months of
1998, our focus expanded to include maintaining a defensive portfolio
profile, given the volatile nature of the domestic market. Approximately
one-third of the Fund's assets are allocated to the non-cyclical sectors of
consumer services (18.7 percent) and electric utilities (15.1 percent). We feel
that the securities we hold in these sectors help provide the Fund with
defensive characteristics that have the potential to serve the portfolio well
despite economic ups and downs. At the same time, we held negligible positions
in commodity issues, such as copper, steel, mining, and paper companies.
Before adding securities to the portfolio, we also considered how they might
be affected by a slowing economy. As a result, we were drawn to companies like
Tyco International Ltd., which manufactures and distributes fire protection and
electronic security equipment and medical supplies. We also added positions in
Sprint, a telecommunications company whose growth pattern is independent of
cyclical effects; Raytheon, a diversified technology company with operations in
aircraft, engineering, and consumer and defense
5
<PAGE> 7
electronics; Westpoint Stevens, a textiles company; and Niagara Mohawk, a New
York utilities company.
At the end of the reporting period, the portfolio was comprised of 85
issues. During the fourth quarter, a few of the Fund's holdings were tendered
for very attractive prices relative to Treasury securities. This trend may
continue through the new year, as companies take advantage of lower interest
rates to refinance and reduce their debts in this favorable rate environment.
Affected securities included Owens Corning, Keyspan Lighting, and Time Warner.
In addition, we received an announcement that our preferred stock in
Commonwealth Edison would be called in mid-January 1999. Fortunately, a supply
of new issuance has enabled us to immediately recommit the assets from these
sales into new securities.
The majority of our holdings, specifically among the investment-grade
securities, are noncallable securities. These securities, which dominated the
field of new issuance during the period, typically move closely with Treasuries,
whereas callable securities tend to lag the market in a falling rate environment
such as this one. Noncallable securities contributed to the Fund's return, as
Treasuries, which were boosted by high demand, performed well during the period.
Q WHAT WAS THE STRUCTURE OF THE FUND'S PORTFOLIO AT THE END OF THE REPORTING
PERIOD?
A The credit quality allocation among the portfolio is little changed from
the beginning of the reporting period, with the exception of a slight
decrease in A-rated bonds. The portfolio is still concentrated in
medium-quality securities, which are defined as A- and BBB-rated securities. At
the end of the reporting period, approximately 83 percent of the portfolio was
comprised of medium-quality securities, which represented a slight decrease from
the June-end allocation of 85 percent.
At the end of the period, the Fund's duration was 6.3 years, which is
comparable to its June 30, 1998 duration of 6.1 years, as well as to the 6.3
year duration of its benchmark, the Lehman Brothers Corporate Bond Index. The
slight lengthening since mid-year is due mostly to the new, longer-term
purchases that were added to the portfolio during this time. When interest rates
fall, as they did throughout most of the reporting period, the duration of bonds
tends to fall because many bonds begin to trade to their call dates rather than
maturity dates. We purchased long-duration bonds in order to offset this decline
in the duration of portfolio holdings.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A For the six months ended December 31, 1998, the Fund generated a total
return of 5.47 percent(1) at market price and 3.03 percent(2) at net asset
value. For the same period, the Lehman Brothers Corporate Bond Index
returned 3.01 percent. Keep in mind that this index is a broad-based unmanaged
index that reflects the general performance of corporate bonds. It does not
reflect any commissions or fees that would be paid by an investor purchasing the
securities it represents.
6
<PAGE> 8
The Fund's return reflects an increase in market price per common share on
the New York Stock Exchange from $19.6875 on June 30, 1998, to $20.0625 on
December 31, 1998, which includes reinvestment of dividends totaling $.710 per
share. Please refer to the chart 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 expect that the U.S. economy will slow in 1999 due to a combination of
factors, including difficulties in many foreign economies, a slowdown in
consumer spending, dwindling corporate profits, and the Year 2000 computer
problem. We also expect inflation to remain low--in the 1.5 percent range.
However, a full-fledged recession seems unlikely at this time. The fundamentals
underpinning the U.S. bond market are as healthy as at any time in recent
memory, and we expect the market to remain strong in the months ahead. We
believe the Fund's emphasis on high-quality investment-grade bonds and its
relatively short duration will help to dampen potential price volatility due to
changing market conditions.
[SIG]
David R. Troth
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
Please see footnotes on page 3
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN BOND FUND
TOP TEN PORTFOLIO SECTORS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998 AS OF JUNE 30, 1998
<S> <C> <S> <C>
Utilities.................... 24% Utilities.................... 25%
Consumer Services............ 18% Consumer Services............ 18%
Transportation............... 11% Transportation............... 11%
Health Care.................. 10% Health Care.................. 9%
Energy....................... 8% Raw Materials/Processing
Raw Materials/Processing Industries................. 9%
Industries................. 7% Energy....................... 8%
Government................... 5% Government................... 5%
Producer Manufacturing....... 4% Producer Manufacturing....... 4%
Consumer Non-Durables........ 3% Finance...................... 4%
Technology................... 3% Consumer Non-Durables........ 3%
</TABLE>
PORTFOLIO COMPOSITION BY CREDIT QUALITY AS A PERCENTAGE OF
LONG-TERM DEBT INVESTMENTS
[PIE CHART]
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998 AS OF JUNE 30, 1998
<S> <C> <C> <C>
AA.......... 3.60% AA.......... 2.40%
A........... 28.70% A........... 31.50%
BBB......... 54.40% [PIE CHART] BBB......... 53.50% [PIE CHART]
BB.......... 12.80% BB.......... 11.70%
B........... 0.50% B........... 0.90%
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's.
PORTFOLIO HOLDINGS AS A PERCENTAGE OF LONG-TERM INVESTMENTS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOP TEN HOLDINGS THESE INVESTMENTS
AS OF DECEMBER 31, 1998 SIX MONTHS AGO
<S> <C> <C>
Tele Communications,
Inc. .................. 5.7% ......... 5.5%
Ashland Oil, Inc. ....... 3.9% ......... 3.9%
Tenet Healthcare
Corp. ................. 3.8% ......... 3.6%
Union Pacific Corp. ..... 3.3% ......... 3.4%
Public Service Co. of
Colorado ............. 3.3% ......... 3.5%
United Airlines, Inc. ... 3.1% ......... 3.3%
Saskatchewan Province
Canada ............... 2.9% ......... 2.8%
Federal Paper Board,
Inc. .................. 2.6% ......... 2.6%
Baxter International,
Inc. .................. 2.6% ......... 2.6%
United Telecommunications
Kansas ............... 2.5% ......... 2.4%
</TABLE>
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Market
(000) Description Coupon Maturity Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS 90.6%
CONSUMER DURABLES 0.8%
$ 750 Brunswick Corp.............................. 7.125% 08/01/27 $ 738,030
1,000 Chrysler Corp............................... 7.450 03/01/27 1,161,800
------------
1,899,830
------------
CONSUMER NON-DURABLES 3.2%
4,000 Coca Cola Enterprises, Inc.................. 8.500 02/01/12 5,010,040
750 Dimon, Inc.................................. 8.875 06/01/06 708,750
2,000 Westpoint Stevens, Inc...................... 7.875 06/15/05 2,042,500
------------
7,761,290
------------
CONSUMER SERVICES 17.4%
1,250 Belo A H Corp............................... 7.125 06/01/07 1,316,475
2,500 Clear Channel Commerce, Inc................. 7.250 10/15/27 2,706,750
2,000 Comcast Cable Communications................ 8.125 05/01/04 2,200,160
3,000 Cox Communications, Inc..................... 7.250 11/15/15 3,318,000
1,250 CSC Holdings, Inc........................... 7.875 12/15/07 1,321,875
2,500 CSC Holdings, Inc........................... 7.875 02/15/18 2,537,500
5,000 Harcourt General, Inc....................... 9.500 03/15/00 5,211,200
1,750 Harcourt General, Inc....................... 8.875 06/01/22 2,060,818
1,000 Harcourt General, Inc....................... 7.200 08/01/27 943,830
1,000 News America Holdings, Inc.................. 8.875 04/26/23 1,214,500
250 Premier Parks, Inc.......................... 9.250 04/01/06 259,375
100 Premier Parks, Inc.......................... 9.750 01/15/07 109,000
375 Premier Parks, Inc. (b)..................... 0/10.00 04/01/08 255,000
3,500 Royal Caribbean Cruises Ltd................. 7.500 10/15/27 3,489,500
1,500 Stewart Enterprises, Inc.................... 6.400 05/01/03 1,521,030
11,000 Tele Communications, Inc.................... 9.250 01/15/23 13,295,700
------------
41,760,713
------------
ENERGY 8.1%
7,400 Ashland Oil, Inc............................ 8.800 11/15/12 9,115,912
750 Barrett Resources Corp...................... 7.550 02/01/07 746,250
5,025 PDV America, Inc............................ 7.875 08/01/03 5,083,893
1,500 Petroliam Nasional Berhad, 144A Private
Placement (a)............................... 7.625 10/15/26 1,078,650
250 Pride Petroleum Services, Inc............... 9.375 05/01/07 235,000
1,000 R & B Falcon Corp........................... 6.500 04/15/03 971,400
1,000 Transcontinental Gas Pipe Line Corp......... 7.250 12/01/26 1,053,080
1,000 Union Oil Co................................ 9.125 02/15/06 1,156,090
------------
19,440,275
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Market
(000) Description Coupon Maturity Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCE 2.5%
$ 1,000 Americredit Corp............................ 9.250% 02/01/04 $ 970,000
4,500 Hutchinson Whampoa Finance, 144A Private
Placement (a)............................... 7.500 08/01/27 3,971,250
1,000 Royal Bank Scotland Group................... 6.375 02/01/11 1,016,475
------------
5,957,725
------------
HEALTHCARE 10.0%
2,300 Aetna Services, Inc......................... 7.125 08/15/06 2,367,804
1,000 Allegiance Corp............................. 7.800 10/15/16 1,094,560
6,000 Baxter International, Inc................... 6.625 02/15/28 6,132,420
1,500 Beckman Coulter, Inc........................ 7.450 03/04/08 1,545,000
500 Manor Care, Inc............................. 7.500 06/15/06 527,825
1,000 Tenet Healthcare Corp....................... 8.625 01/15/07 1,052,500
8,500 Tenet Healthcare Corp., 144A Private
Placement (a)............................... 8.125 12/01/08 8,797,500
2,500 Tyco International Group, 144A Private
Placement (a)............................... 6.125 11/01/08 2,527,750
------------
24,045,359
------------
PRODUCER MANUFACTURING 4.1%
1,750 IDEX Corp................................... 6.875 02/15/08 1,759,730
4,400 ITT Corp.................................... 6.750 11/15/05 4,092,000
1,000 ITT Corp.................................... 7.375 11/15/15 890,640
162 Rayovac Corp................................ 10.250 11/01/06 173,340
2,500 Rubbermaid, Inc............................. 6.600 11/15/06 2,691,300
250 U.S. Can Corp............................... 10.125 10/15/06 263,125
------------
9,870,135
------------
RAW MATERIALS/PROCESSING INDUSTRIES 7.0%
2,000 Bowater, Inc................................ 9.375 12/15/21 2,549,540
1,000 Crown Cork & Seal, Inc...................... 8.000 04/15/23 1,020,330
5,000 Federal Paper Board, Inc.................... 8.875 07/01/12 6,147,350
4,000 IMC Global, Inc............................. 6.875 07/15/07 4,080,400
1,000 IMC Global, Inc............................. 7.300 01/15/28 973,400
1,250 Owens Illinois, Inc......................... 7.150 05/15/05 1,262,500
750 Smithfield Foods, Inc....................... 7.625 02/15/08 757,500
------------
16,791,020
------------
TECHNOLOGY 3.2%
5,000 Computer Associates International, Inc...... 6.375 04/15/05 4,991,700
1,750 Raytheon Co................................. 6.150 11/01/08 1,798,650
750 Raytheon Co................................. 7.200 08/15/27 819,713
------------
7,610,063
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Market
(000) Description Coupon Maturity Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION 10.9%
$ 3,000 AMR Corp.................................... 9.500% 05/15/01 $ 3,215,595
4,250 CSX Corp.................................... 8.625 05/15/22 5,174,630
2,500 Kansas City Southern Industries, Inc........ 7.875 07/01/02 2,658,825
7,000 Union Pacific Corp.......................... 8.350 05/01/25 7,802,900
6,000 United Airlines, Inc........................ 10.020 03/22/14 7,226,400
------------
26,078,350
------------
UTILITIES 23.4%
1,000 AES Corp.................................... 10.250 07/15/06 1,083,750
3,000 Arizona Public Service Co................... 9.500 04/15/21 3,361,860
3,500 Arizona Public Service Co................... 8.750 01/15/24 3,910,760
2,000 Arizona Public Service Co................... 8.000 02/01/25 2,196,180
1,000 Commonwealth Edison Co...................... 8.625 02/01/22 1,099,420
5,000 GTE North, Inc.............................. 8.500 12/15/31 5,616,900
3,000 Gulf States Utilities Co.................... 8.940 01/01/22 3,203,250
4,150 Montana Power Co............................ 8.950 02/01/22 4,682,320
1,750 Niagara Mohawk Power Corp................... 7.625 10/01/05 1,826,563
7,000 Public Service Co. of Colorado.............. 8.750 03/01/22 7,722,400
2,000 Southern California Gas Co.................. 8.750 10/01/21 2,233,120
1,500 Sprint Capital Corp......................... 6.125 11/15/08 1,539,975
2,500 Texas Utilities Electric Co................. 8.875 02/01/22 2,810,325
5,000 United Telecommunications Kansas............ 9.500 04/01/03 5,751,300
500 UtiliCorp United, Inc....................... 6.700 10/15/06 525,095
3,000 UtiliCorp United, Inc....................... 9.000 11/15/21 3,339,300
4,750 Worldcom, Inc............................... 6.950 08/15/28 5,141,542
------------
56,044,060
------------
TOTAL CORPORATE BONDS 90.6%............................................... 217,258,820
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount Market
(000) Description Coupon Maturity Value
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 5.0%
$ 6 Federal Home Loan Mortgage Corp., Pool...... 7.375% 01/01/03 $ 6,236
1 Government National Mortgage Assn., Pool.... 10.000 10/15/16 1,037
8 Government National Mortgage Assn., Pool.... 10.000 07/15/20 8,249
4,000 Newfoundland Province Canada (US$).......... 9.000 10/15/21 5,158,280
5,500 Saskatchewan Province Canada (US$).......... 8.000 02/01/13 6,745,750
------------
11,919,552
------------
PREFERRED STOCK 1.9%
Commonwealth Edison Co. (44,830 preferred shares, 8.38% coupon)............ 4,547,443
------------
TOTAL LONG-TERM INVESTMENTS 97.5%
(Cost $212,840,759)...................................................... 233,725,815
REPURCHASE AGREEMENT 0.7%
BA Securities ($1,530,000 par collateralized by U.S.
Government obligations in a pooled cash account, dated 12/31/98,
to be sold on 01/04/99 at $1,530,833)
(Cost $1,530,000)........................................................ 1,530,000
------------
TOTAL INVESTMENTS 98.2%
(Cost $214,370,759)...................................................... 235,255,815
OTHER ASSETS IN EXCESS OF LIABILITIES 1.8%................................ 4,414,136
------------
NET ASSETS 100.0%......................................................... $239,669,951
------------
</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) Securities bond is a "step-up" bond where the coupon increases or steps up
at a predetermined date.
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $214,370,759)....................... $235,255,815
Cash........................................................ 3,774,436
Interest Receivable......................................... 4,808,651
Other....................................................... 69,087
------------
Total Assets.......................................... 243,907,989
------------
LIABILITIES:
Payables:
Income Distributions...................................... 4,033,545
Investment Advisory Fee................................... 99,292
Affiliates................................................ 4,000
Accrued Expenses............................................ 59,660
Trustees' Deferred Compensation and Retirement Plans........ 41,541
------------
Total Liabilities..................................... 4,238,038
------------
NET ASSETS.................................................. $239,669,951
============
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................................. 20,885,056
Accumulated Undistributed Net Investment Income............. 130,694
Accumulated Net Realized Loss............................... (2,510,115)
------------
NET ASSETS.................................................. $239,669,951
============
NET ASSETS VALUE PER COMMON SHARE
($239,669,951 divided by 11,362,465 shares outstanding)... $ 21.09
============
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 8,727,008
Dividends................................................... 124,361
-----------
Total Income............................................ 8,851,369
-----------
EXPENSES:
Investment Advisory Fee..................................... 584,831
Shareholder Services........................................ 62,535
Trustees' Fees and Expenses................................. 13,020
Custody..................................................... 11,848
Legal....................................................... 3,978
Other....................................................... 122,542
-----------
Total Expenses............................................ 798,754
-----------
NET INVESTMENT INCOME....................................... $ 8,052,615
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Gain........................................... $ 1,646,370
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 23,239,492
End of Period............................................. 20,885,056
-----------
Net Unrealized Depreciation During the Period............... (2,354,436)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $ (708,066)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 7,344,549
===========
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1998 and
the Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1998 June 30, 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income..................................... $ 8,052,615 $ 16,774,523
Net Realized Gain......................................... 1,646,370 1,867,201
Net Unrealized Appreciation/Depreciation During the
Period.................................................. (2,354,436) 8,710,798
------------ ------------
Change in Net Assets from Operations...................... 7,344,549 27,352,522
Distributions from Net Investment Income.................. (8,067,081) (17,157,454)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES....... (722,532) 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 $130,694 and $145,160, respectively).......... $239,669,951 $240,392,483
============ ============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share
of the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended --------------------------------------
December 31, 1998 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............... .709 1.476 1.556 1.54 1.52
Net Realized and Unrealized
Gain/Loss......................... (.063) .932 .273 (.44) 1.36
-------- -------- ------- ------- -------
Total from Investment Operations.... .646 2.408 1.829 1.10 2.88
Less Distributions from Net
Investment Income................. .710 1.510 1.540 1.54 1.54
-------- -------- ------- ------- -------
Net Asset Value, End of the
Period............................ $ 21.093 $ 21.157 $20.259 $ 19.97 $ 20.41
======== ======== ======= ======= =======
Market Price Per Share at End of the
Period............................ $20.0625 $19.6875 $19.250 $18.125 $19.125
Total Investment Return at Market
Price (a)(d)...................... 5.47%* 10.08% 15.06% 2.61% 14.89%
Total Return at Net Asset
Value (b)(d)...................... 3.03%* 12.19% 9.46% 5.94% 16.54%
Net Assets at End of the Period (In
millions) (d)..................... $ 239.7 $ 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................ 6.63% 7.04% 7.70% 7.47% 7.92%
Portfolio Turnover.................. 4%* 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.
* Non-Annualized
See Notes to Financial Statements
16
<PAGE> 18
- --------------------------------------------------------------------------------
<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>
See Notes to Financial Statements
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Bond Fund, formerly known as Van Kampen American Capital 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. 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 December 31, 1998, 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
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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, 1998, the Fund had an accumulated capital loss carryforward
for tax purposes of $4,156,485 which will expire between June 30, 1999 and June
30, 2000. Of this amount, $953,175 will expire on June 30, 1999.
At December 31, 1998, for federal income tax purposes, cost of long- and
short-term investments is $214,370,759, the aggregate gross unrealized
appreciation is $22,137,204 and the aggregate gross unrealized depreciation is
$1,252,148, resulting in net unrealized appreciation on long- and short-term
investments of $20,885,056.
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 certain expenses under
generally accepted accounting principles and federal income tax purposes, the
amount of net investment income may differ between book and federal income tax
purposes for a
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
particular period. These differences are temporary in nature, but may result in
book basis distributions in excess of net investment income for certain periods.
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 December 31, 1998, the Fund recognized expenses of
approximately $4,000 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 December 31, 1998, the Fund recognized expenses of
approximately $36,500 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 $10,431,083 and $11,322,910,
respectively.
20
<PAGE> 22
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:
BOSTON EQUISERVE LP
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.
21
<PAGE> 23
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
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
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
22
<PAGE> 24
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
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
BOSTON EQUISERVE LP
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
TAX NOTICE TO CORPORATE SHAREHOLDERS
For 1998, 2.60% of the dividends taxable as ordinary income qualified for
the 70% dividends received deduction for corporations.
---------------------------------------
INQUIRIES ABOUT AN INVESTOR'S
ACCOUNT SHOULD BE REFERRED
TO THE FUND'S TRANSFER AGENT
BOSTON EQUISERVE
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
---------------------------------------
* "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.
23
<PAGE> 25
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.
24
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> BOND FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 214,370,759
<INVESTMENTS-AT-VALUE> 235,255,815
<RECEIVABLES> 4,808,651
<ASSETS-OTHER> 69,087
<OTHER-ITEMS-ASSETS> 3,774,436
<TOTAL-ASSETS> 243,907,989
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,238,038
<TOTAL-LIABILITIES> 4,238,038
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 221,164,316
<SHARES-COMMON-STOCK> 11,362,465
<SHARES-COMMON-PRIOR> 11,362,465
<ACCUMULATED-NII-CURRENT> 130,694
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,510,115)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,885,056
<NET-ASSETS> 239,669,951
<DIVIDEND-INCOME> 124,361
<INTEREST-INCOME> 8,727,008
<OTHER-INCOME> 0
<EXPENSES-NET> (798,754)
<NET-INVESTMENT-INCOME> 8,052,615
<REALIZED-GAINS-CURRENT> 1,646,370
<APPREC-INCREASE-CURRENT> (2,354,436)
<NET-CHANGE-FROM-OPS> 7,344,549
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,067,081)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (722,532)
<ACCUMULATED-NII-PRIOR> 145,160
<ACCUMULATED-GAINS-PRIOR> 4,156,485
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 584,831
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 798,754
<AVERAGE-NET-ASSETS> 241,067,658
<PER-SHARE-NAV-BEGIN> 21.157
<PER-SHARE-NII> 0.709
<PER-SHARE-GAIN-APPREC> (0.063)
<PER-SHARE-DIVIDEND> (0.710)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 21.093
<EXPENSE-RATIO> 0.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
