<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
PORTFOLIO AT A GLANCE
CREDIT QUALITY 5
TWELVE-MONTH DIVIDEND HISTORY 5
TOP FIVE SECTORS 6
NET ASSET VALUE AND MARKET PRICE 6
Q&A WITH YOUR PORTFOLIO MANAGERS 7
GLOSSARY OF TERMS 9
BY THE NUMBERS
YOUR FUND'S INVESTMENTS 10
FINANCIAL STATEMENTS 15
NOTES TO FINANCIAL STATEMENTS 20
REPORT OF INDEPENDENT AUDITORS 24
DIVIDEND REINVESTMENT PLAN 25
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 26
FUND OFFICERS AND IMPORTANT ADDRESSES 27
RESULTS OF SHAREHOLDER VOTES 28
</TABLE>
It is times like these when money- management experience may make a difference.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
July 20, 2000
Dear Shareholder,
Whether you have held your fund for years or just joined the Van Kampen family
of shareholders in the last few months, you are likely to have questions and
even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your fund is being managed in this
environment.
It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions--during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the value of investing for
the long term.
As we move through the second half of 2000, count on us to
continue to draw on the wisdom of our 74 years of experience.
Along those lines, Van Kampen's "Generations of Experience" is
the theme of a national advertising campaign that we recently kicked off. The
message emphasizes our depth of investment-management history, as well as our
firm belief that with the right investments, anyone can realize life's true
wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
BEGINNING IN THE SECOND QUARTER OF 2000, EVIDENCE OF SLOWER ECONOMIC GROWTH IN
THE UNITED STATES EMERGED. HOWEVER, ANALYSTS BELIEVE IT MAY HAVE BEEN PREMATURE
TO ASSUME THAT THE U.S. ECONOMY HAS SLOWED TO A SUSTAINABLE, NONINFLATIONARY
PACE, WITH THE GROSS DOMESTIC PRODUCT (GDP), A MEASURE OF ECONOMIC GROWTH, UP
5.2 PERCENT ANNUALIZED IN THE SECOND QUARTER OF 2000.
CONSUMER SPENDING AND EMPLOYMENT
CONSUMER SPENDING REMAINED THE MAIN ENGINE OF GROWTH BEHIND THE U.S. ECONOMY.
LIVING STANDARDS AND SPENDING HABITS WERE BOOSTED BY STRONG GAINS IN REAL
INCOME, AND INDIVIDUAL WEALTH INCREASED SUBSTANTIALLY, PRIMARILY DUE TO A
BUOYANT STOCK MARKET. NONETHELESS, DATA RELEASED IN THE SECOND QUARTER OF 2000
REFLECTED A MINOR DECREASE IN THE SPENDING OF INDIVIDUALS. IN JUNE, THE CONSUMER
PRICE INDEX (CPI), THE LEADING INFLATION INDICATOR, ROSE HIGHER THAN
EXPECTED--0.6 PERCENT MORE THAN THE PREVIOUS MONTH. THAT HEIGHTENED CONCERNS
ABOUT INFLATION, AND THE PROSPECT OF ADDITIONAL FEDERAL RESERVE BOARD
INTEREST-RATE INCREASES.
THE U.S. LABOR MARKET WAS STILL ROBUST DURING THIS TIME, AND JOB INSECURITY
CONTINUED TO DECLINE. SOLID EMPLOYMENT GROWTH WAS ACCOMPANIED BY UNUSUALLY LARGE
GAINS IN PRODUCTIVITY, WHICH LIMITED THE RISE IN UNIT LABOR COSTS ACROSS THE
WHOLE ECONOMY. GIVEN THE HIGH EMPLOYMENT NUMBERS AND STRONG LEVELS OF
PRODUCTIVITY, ANALYSTS BELIEVE AN INCREASE IN INTEREST RATES TO WARD OFF
INFLATION AND FURTHER SLOW THE ECONOMY IS POSSIBLE.
INTEREST RATES AND INFLATION
DURING THE PAST FEW MONTHS, PERSISTENT STRENGTH IN CONSUMER SPENDING ACCOMPANIED
BY A VERY TIGHT LABOR MARKET, RESULTED IN SOME INFLATION. THE CPI REACHED A
LEVEL OF 2.7 PERCENT IN JANUARY 2000 AND 3.7 PERCENT IN JUNE 2000, CLEARLY
DEMONSTRATING SIGNS OF INFLATION.
SINCE JUNE 1999, THE FEDERAL RESERVE HAS INCREASED THE FEDERAL FUNDS RATE SIX
TIMES BY A TOTAL OF 175 BASIS POINTS TO LOWER ECONOMIC GROWTH AND DECREASE ANY
FUTURE FEARS OF INFLATION. THESE INCREASES IN INTEREST RATES HELPED SLOW THE
INTEREST-SENSITIVE AUTO AND HOUSING MARKETS.
MANY OBSERVERS BELIEVE INTEREST RATES COULD BE LIFTED FURTHER IN COMING MONTHS.
WHILE MARKETS HAVE EXPERIENCED MUCH SHORT-TERM VOLATILITY, THE MARKET'S OUTLOOK
COULD IMPROVE ONCE INTEREST-RATE HIKES CEASE.
2
<PAGE> 4
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(June 30, 1998 -- June 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Jun 98 2.10
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.20
</TABLE>
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(June 30, 1998 -- June 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 98 5.50 1.70
5.50 1.70
5.50 1.60
Sep 98 5.25 1.50
5.00 1.50
4.75 1.50
Dec 98 4.75 1.60
4.75 1.70
4.75 1.60
Mar 99 4.75 1.70
4.75 2.30
4.75 2.10
Jun 99 5.00 2.00
5.00 2.10
5.25 2.30
Sep 99 5.25 2.60
5.25 2.60
5.50 2.60
Dec 99 5.50 2.70
5.50 2.70
5.75 3.20
Mar 00 6.00 3.70
6.00 3.00
6.50 3.10
Jun 00 6.50 3.70
</TABLE>
Interest rates are represented by the closing midline federal funds target rate
on the last day of each month. Inflation is indicated by the annual percent
change of the Consumer Price Index for all urban consumers at the end of each
month.
3
<PAGE> 5
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of June 30, 2000)
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------
NYSE Ticker Symbol VBF
------------------------------------------------------------------------
One-year total return based on market price(1) 1.88%
------------------------------------------------------------------------
One-year total return based on NAV(2) 2.67%
------------------------------------------------------------------------
Distribution rate as a % of closing common stock
price(3) 8.33%
------------------------------------------------------------------------
Net asset value $18.70
------------------------------------------------------------------------
Closing common stock price $16.7500
------------------------------------------------------------------------
One-year high common stock price (07/02/99) $18.6250
------------------------------------------------------------------------
One-year low common stock price (01/03/00) $15.5625
------------------------------------------------------------------------
</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 is no guarantee of 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.
4
<PAGE> 6
PORTFOLIO AT A GLANCE
CREDIT QUALITY
(as a percentage of long-term investments)
<TABLE>
<CAPTION>
As of June 30, 2000
<S> <C> <C>
- AAA/Aaa............ 3.9%
- AA/Aa.............. 13.1%
- A/A................ 23.7%
- BBB/Baa............ 49.9%
- BB/Ba.............. 9.0%
- B/B................ 0.4%
[PIE CHART]
<CAPTION>
As of June 30, 1999
<S> <C> <C>
- AA/Aa.............. 9.3%
- A/A................ 28.5%
- BBB/Baa............ 49.5%
- BB/Ba.............. 12.1%
- B/B................ 0.6%
[PIE CHART]
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
TWELVE-MONTH DIVIDEND HISTORY
(for the period ended June 30, 2000, for common shares)
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDENDS
---------
<S> <C>
9/99 0.349
12/99 0.349
3/00 0.349
6/00 0.349
"
</TABLE>
The dividend history represents past performance of the fund and is no guarantee
of the fund's future dividends.
5
<PAGE> 7
TOP FIVE SECTORS
(as a percentage of long-term investments)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
JUNE 30, 2000 JUNE 30, 1999
------------- -------------
<S> <C> <C>
Utilities 22.10 24.50
Consumer Services 19.40 18.20
Finance 13.20 2.70
Energy 10.50 8.40
Transportation 9.50 11.20
</TABLE>
NET ASSET VALUE AND MARKET PRICE
(based upon quarter-end values--June 1990 through June 2000)
[INVESTMENT PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NET ASSET VALUE MARKET PRICE
--------------- ------------
<S> <C> <C>
6/90 18.75 16.50
18.28 15.50
18.61 16.75
18.78 18.25
6/91 18.68 18.38
19.34 19.13
19.89 20.13
19.36 19.63
6/92 19.85 19.75
20.41 21.25
20.05 20.25
20.94 20.75
6/93 21.33 20.75
21.95 20.88
21.29 20.38
20.12 18.00
6/94 19.06 18.13
18.79 17.13
18.59 16.75
19.30 18.25
6/95 20.41 19.13
20.57 19.00
21.27 19.63
20.18 19.38
6/96 19.64 18.13
19.96 18.75
20.31 18.75
18.87 18.63
6/97 20.43 19.25
20.77 19.81
20.91 20.81
20.92 20.38
6/98 21.16 19.69
21.35 19.61
21.09 20.06
20.40 19.25
6/99 19.59 17.88
19.31 16.38
18.98 15.69
18.98 16.06
6/00 18.70 16.75
</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.
6
<PAGE> 8
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN BOND FUND ABOUT THE
KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS AND INFLUENCED THE FUND'S
RETURN DURING THE 12 MONTHS ENDED JUNE 30, 2000. THE TEAM IS LED BY KELLY
GILBERT, SENIOR PORTFOLIO MANAGER, WHO HAS MANAGED THE FUND SINCE JUNE 1999 AND
HAS WORKED IN THE INVESTMENT INDUSTRY SINCE 1995. THE FOLLOWING DISCUSSION
REFLECTS HER VIEWS ON THE FUND'S PERFORMANCE.
Q WHAT WERE THE MARKET
CONDITIONS IN WHICH THE FUND OPERATED, AND HOW DID THE FUND PERFORM IN THAT
ENVIRONMENT?
A The last few months of 1999 set a
negative tone for the corporate bond market, primarily due to uncertainty about
the extent to which the Federal Reserve Board would continue to increase
interest rates.
The Fed raised rates six times between June 1999 and June 2000. These rate
increases--mixed with volatility and weakness in the equity market, the effects
of the year 2000 computer scare, and concerns that the corporate bond market had
more sellers than buyers--all contributed to the widening of yield spreads
between Treasuries and other types of bonds (such as corporate, high-yield, and
mortgage-backed securities).
During the reporting period, the fund's return was supported by its
favorable sector allocations and continued concentration on credit quality.
However, this benefit was overshadowed by the negative performance of the
corporate bond market.
For the 12 months ended June 30, 2000, the fund generated a total return of
1.88 percent at market price and 2.67 percent at net asset value. As a result of
recent market activity, current performance may vary from figures shown. For the
same period, the Lehman Brothers BBB Corporate Bond Index returned 5.02 percent.
This broad-based, unmanaged index reflects the general performance of corporate
bonds and does not reflect any commissions or fees that would be paid by an
investor purchasing the securities it represents. Such costs would lower the
performance of the index. It is not possible to invest directly in an index. Of
course, past performance is no guarantee of future results. Please refer to the
chart and footnotes on page 4 for additional performance results.
Q HOW DID YOU POSITION THE FUND
IN RESPONSE TO THESE CONDITIONS?
A We began the reporting period
focused on sectors with strong underlying fundamentals, which helped reduce the
fund's volatility and risk in
7
<PAGE> 9
an uncertain environment. We looked to the fund's benchmark, the Lehman Brothers
BBB Corporate Bond Index, as a guide for establishing weightings within the
sectors held in the fund. This enabled us to maintain diversification and credit
quality in different sectors and securities.
As a result, we repositioned the fund's exposure to the industrial sector,
which includes health-care, media and telecommunications, and consumer cyclical
securities. We maintained a slight overweighting in cable and media securities,
which continued to contribute positively to the fund's return. This sector
performed well due to the vigorous level of consumer demand.
We also reduced the fund's exposure in health care. We accomplished this by
selling our position in Tenet Healthcare, due to the concerns about the welfare
and higher default risk of health-care companies. In turn, we added positions in
Yankee bonds, which helped to enhance the fund's potential for a higher yield.
Q WHAT WAS THE CREDIT STRUCTURE
OF THE FUND AT THE END OF THE REPORTING PERIOD?
A The fund's credit-quality allocation
continued to be weighted in medium-quality securities, which are defined as A
and BBB rated securities. At the end of the reporting period, approximately 40.7
percent of the fund's long-term investments were allocated to securities rated A
and higher, and 49.9 percent of the fund's long-term investments were invested
in BBB rated securities. The remaining 9.4 percent was allocated to securities
rated BB and lower. This allocation benefited the fund during the 12 months of
the reporting period, as A and BBB rated securities outperformed BB rated
securities. We also continued to focus 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 neutral to its benchmark. At the end of the period, the
fund's duration was 5.61 years, which is slightly shorter than the benchmark
duration of 5.70 years.
Q WHAT IS THE OUTLOOK FOR THE
MONTHS AHEAD?
A We are optimistic about the
outlook for corporate bonds. As June saw spreads tighten for the first time this
year, we expect that demand for corporate bonds will improve in coming months.
The gradual waning of uncertainty about the Fed's direction, coupled with
tightening yield spreads, an increase in equity valuations, and the increase of
buyers in the corporate bond market, all seem to contribute to the positive tone
in investor sentiment.
Going forward, our focus will continue to be on higher credit-quality
issues, in-depth research, and extensive assessment of corporate bonds. We will
strive to look for opportunities in the market that will add relative value and
perform well in a variety of market conditions. Through these fundamentals, we
will continue to support the fund's objective of current income and preservation
of capital.
8
<PAGE> 10
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
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.
DIVERSIFICATION: A method of portfolio allocation and management aimed at
balancing risk and return; a balanced portfolio may combine stocks, bonds, and
cash equivalents.
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 one
percent change in the price of a bond for every one percent change in interest
rates. 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 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.
RISK: Refers to an investment's vulnerability to fluctuations in value relative
to changing economic or market conditions. Such factors as credit quality,
currency exchange rates, inflation rates, or the direction of interest rates may
increase an investment's volatility. The level of risk incurred by a fund
shareholder varies from fund to fund, depending primarily on the types of
securities in which a fund invests.
VOLATILITY: A measure of the fluctuation in the market price of a security. A
security that is volatile has frequent and large swings in price.
YANKEE BONDS: Foreign bonds denominated in U.S. dollars, issued in the United
States by foreign banks and corporations.
YIELD: The annual rate of return on an investment, expressed as a percentage.
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.
9
<PAGE> 11
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
June 30, 2000
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CORPORATE BONDS 91.1%
CHEMICAL 0.9%
$1,000 Dow Chemical Co. ......................... 7.375% 11/01/29 $ 975,154
1,000 Rohm & Haas Co. .......................... 7.850 07/15/29 1,013,776
------------
1,988,930
------------
CONSUMER DISTRIBUTION 1.7%
500 K Mart Corp. ............................. 8.375 12/01/04 476,875
2,400 Kroger Co. ............................... 7.375 03/01/05 2,342,849
1,000 Pepsi Bottling Group, Inc. ............... 7.000 03/01/29 899,775
------------
3,719,499
------------
CONSUMER DURABLES 0.3%
750 Brunswick Corp. .......................... 7.125 08/01/27 656,653
------------
CONSUMER NON-DURABLES 0.4%
1,000 Westpoint Stevens, Inc. .................. 7.875 06/15/05 835,000
------------
CONSUMER SERVICES 19.0%
1,000 AT&T Canada, Inc. (Canada)................ 7.650 09/15/06 991,415
500 Charter Communication Holdings LLC........ 8.250 04/01/07 443,750
2,500 Clear Channel Commerce, Inc. ............. 7.250 10/15/27 2,229,845
2,000 Comcast Cable Communications.............. 8.125 05/01/04 2,031,204
1,250 CSC Holdings, Inc. ....................... 7.875 12/15/07 1,209,375
2,500 CSC Holdings, Inc. ....................... 7.875 02/15/18 2,312,500
750 Deutsche Telekom International
(Netherlands)............................. 8.000 06/15/10 757,605
1,750 Harcourt General, Inc. ................... 8.875 06/01/22 1,758,463
1,000 Harcourt General, Inc. ................... 7.200 08/01/27 819,470
1,750 Liberty Media Corp. ...................... 8.500 07/15/29 1,657,029
1,000 News America Holdings, Inc. .............. 8.875 04/26/23 1,027,352
2,000 Park Place Entertainment Corp. ........... 7.950 08/01/03 1,973,750
1,000 Qwest Communications International, Inc... 7.250 11/01/08 957,042
1,500 Stewart Enterprises, Inc. ................ 6.400 05/01/13 1,088,901
11,000 Tele Communications, Inc. ................ 9.250 01/15/23 11,740,784
2,000 Time Warner Entertainment Co. ............ 8.375 07/15/33 2,037,294
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
YOUR FUND'S INVESTMENTS
June 30, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CONSUMER SERVICES (CONTINUED)
$1,000 Time Warner, Inc. ........................ 7.975% 08/15/04 $ 1,019,079
1,000 Viacom, Inc. ............................. 7.750 06/01/05 1,010,000
2,000 Vodafone Airtouch PLC, 144A Private
Placement (United Kingdom) (a)............ 7.625 02/15/05 2,004,684
1,500 Walt Disney Co. .......................... 7.300 02/08/05 1,502,217
1,750 Worldcom, Inc. ........................... 8.250 05/15/10 1,794,230
------------
40,365,989
------------
ENERGY 10.3%
6,900 Ashland Oil, Inc. ........................ 8.800 11/15/12 7,204,863
750 Barrett Resources Corp. .................. 7.550 02/01/07 707,812
2,000 Conoco, Inc. ............................. 6.950 04/15/29 1,828,090
1,035 Enron Corp. .............................. 7.625 09/10/04 1,040,053
1,000 Enron Corp. .............................. 8.375 05/23/05 1,032,039
2,025 PDV America, Inc. ........................ 7.875 08/01/03 1,916,583
1,500 Petroleum Geo Services ASA................ 7.125 03/30/28 1,244,919
1,500 Petroliam Nasional Berhad, 144A Private
Placement (Malaysia) (a).................. 7.625 10/15/26 1,272,211
250 Pride Petroleum Services, Inc. ........... 9.375 05/01/07 251,250
1,000 R & B Falcon Corp. ....................... 6.500 04/15/03 932,500
1,000 Southern Union Co. ....................... 8.250 11/15/29 986,734
1,500 Tosco Corp. .............................. 8.250 05/15/03 1,527,957
1,000 Transcontinental Gas Pipe Line Corp. ..... 7.250 12/01/26 908,513
1,000 Union Oil Co. ............................ 9.125 02/15/06 1,057,221
------------
21,910,745
------------
FINANCE 12.9%
2,000 Abbey National PLC (United Kingdom)....... 7.350 10/29/49 1,885,272
2,500 American Re Corp. ........................ 7.450 12/15/26 2,294,452
1,000 Americredit Corp. ........................ 9.250 02/01/04 970,000
2,000 AvalonBay Communities, Inc. .............. 7.500 08/01/09 1,903,796
500 Banco Santiago (Chile).................... 7.000 07/18/07 445,821
2,000 Conseco, Inc. ............................ 8.500 10/15/02 1,450,000
1,000 Ford Motor Credit Co. .................... 7.375 10/28/09 970,020
1,500 Household Finance Corp. .................. 8.375 11/15/01 1,518,295
2,500 International Lease Finance Corp. ........ 8.375 12/15/04 2,582,128
1,000 Korea Development Bank (Korea)............ 7.375 09/17/04 974,801
4,000 Lehman Brothers Holdings, Inc. ........... 8.500 05/01/07 4,049,396
1,000 National Australia Bank (Australia)....... 8.600 05/19/10 1,049,530
1,750 Nordbanken AB, 144A Private Placement
(Norway) (a).............................. 7.250 11/12/09 1,708,359
1,000 Paine Webber Group, Inc. ................. 6.375 05/15/04 944,784
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
YOUR FUND'S INVESTMENTS
June 30, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
FINANCE (CONTINUED)
$1,500 PNC Funding Corp. ........................ 6.875% 07/15/07 $ 1,423,741
500 Societe Generale Real Estate Co., LLC ,
144A Private Placement (a)................ 7.640 12/29/49 455,886
2,000 Suntrust Banks, Inc. ..................... 7.250 09/15/06 1,955,208
1,000 Washington Mutual Capital, Inc. .......... 8.375 06/01/27 892,407
------------
27,473,896
------------
HEALTHCARE 0.6%
1,000 Columbia HCA Healthcare Corp. ............ 6.910 06/15/05 914,431
400 Manor Care, Inc. ......................... 7.500 06/15/06 326,042
------------
1,240,473
------------
PRODUCER MANUFACTURING 5.5%
2,000 Daimler Chrysler NA Holding............... 7.750 05/27/03 2,016,140
1,750 IDEX Corp. ............................... 6.875 02/15/08 1,597,572
4,400 ITT Corp. ................................ 6.750 11/15/05 3,971,000
1,000 Lockheed Martin Corp. .................... 8.500 12/01/29 1,021,034
162 Rayovac Corp. ............................ 10.250 11/01/06 167,670
250 U.S. Can Corp. ........................... 10.125 10/15/06 257,500
1,750 USA Waste Services, Inc. ................. 7.000 10/01/04 1,624,537
1,000 USX Marathon Group........................ 6.650 02/01/06 951,166
------------
11,606,619
------------
RAW MATERIALS/PROCESSING INDUSTRIES 7.3%
2,000 Bowater, Inc. ............................ 9.375 12/15/21 2,098,402
1,000 Crown Cork & Seal, Inc. .................. 8.000 04/15/23 770,695
5,000 Federal Paper Board, Inc. ................ 8.875 07/01/12 5,505,985
2,000 Georgia Pacific Corp. .................... 9.950 06/15/02 2,078,032
4,000 IMC Global, Inc. ......................... 6.875 07/15/07 3,676,368
1,000 IMC Global, Inc. ......................... 7.300 01/15/28 849,754
450 Sequa Corp. .............................. 9.000 08/01/09 434,250
------------
15,413,486
------------
TECHNOLOGY 1.2%
2,500 Sun Microsystems, Inc. ................... 7.500 08/15/06 2,498,053
------------
TRANSPORTATION 9.4%
3,000 AMR Corp. ................................ 9.500 05/15/01 3,023,319
1,625 Canadian National Railway Co. (Canada) ... 7.625 05/15/23 1,534,371
2,000 CSX Corp. ................................ 8.625 05/15/22 2,004,968
7,000 Union Pacific Corp. ...................... 8.350 05/01/25 6,842,024
6,000 United Airlines, Inc. .................... 10.020 03/22/14 6,494,970
------------
19,899,652
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
YOUR FUND'S INVESTMENTS
June 30, 2000
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
UTILITIES 21.6%
$1,000 AES Corp. ................................ 9.500% 06/01/09 $ 980,000
3,000 Arizona Public Service Co. ............... 9.500 04/15/21 3,103,833
3,500 Arizona Public Service Co. ............... 8.750 01/15/24 3,556,938
2,000 Arizona Public Service Co. ............... 8.000 02/01/25 1,903,722
2,000 CMS Energy Corp. ......................... 6.750 01/15/04 1,870,000
1,000 CMS Energy Corp. ......................... 7.500 01/15/09 902,500
1,000 Commonwealth Edison Co. .................. 8.625 02/01/22 989,514
5,000 GTE North, Inc. .......................... 8.500 12/15/31 4,964,850
3,000 Gulf States Utilities Co. ................ 8.940 01/01/22 3,012,681
500 Israel Electric Corp., Ltd. , 144A Private
Placement (Israel) (a).................... 8.250 10/15/09 498,396
1,323 Niagara Mohawk Power Corp. ............... 7.625 10/01/05 1,303,323
7,000 Public Service Co. of Colorado............ 8.750 03/01/22 7,058,156
2,000 Southern California Gas Co. .............. 8.750 10/01/21 2,058,200
2,000 Southern Energy, Inc. , 144A Private
Placement (a)............................. 7.900 07/15/09 1,831,554
750 Telefonica De Argentina S.A., 144A Private
Placement (Argentina) (a)................. 9.875 07/01/02 765,000
2,500 Texas Utilities Electric Co. ............. 8.250 04/01/04 2,568,028
5,000 United Telecommunications Kansas.......... 9.500 04/01/03 5,296,195
500 UtiliCorp United, Inc. ................... 6.700 10/15/06 493,787
3,000 UtiliCorp United, Inc. ................... 8.270 11/15/21 2,829,201
------------
45,985,878
------------
TOTAL CORPORATE BONDS 91.1%.......................................... 193,594,873
------------
GOVERNMENT AND GOVERNMENT AGENCY
OBLIGATIONS 7.0%
3 Federal Home Loan Mortgage Corp., Pool.... 7.375 01/01/03 2,726
1 Government National Mortgage Assn.,
Pool...................................... 10.000 10/15/16 966
7 Government National Mortgage Assn.,
Pool...................................... 10.000 07/15/20 7,666
2,500 Quebec Province (Canada).................. 8.800 04/15/03 2,583,050
3,000 Saskatchewan Province (Canada)............ 8.000 07/15/04 3,085,800
1,000 United Mexican States (Mexico)............ 10.375 02/17/09 1,033,750
4,000 United States Treasury Bonds.............. 6.125 08/15/29 4,043,752
4,000 United States Treasury Notes.............. 6.625 05/15/07 4,087,640
------------
14,845,350
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
YOUR FUND'S INVESTMENTS
June 30, 2000
<TABLE>
<CAPTION>
MARKET
DESCRIPTION VALUE
<C> <S> <C> <C> <C>
TOTAL LONG-TERM INVESTMENTS 98.1%
(Cost $211,342,978)..................................................... $208,440,223
REPURCHASE AGREEMENT 0.2%
Bank of America Securities ($365,000 par collaterized by U.S. Government
obligations in a pooled cash account, dated 06/30/00, to be sold on
07/03/00 at $365,208) (Cost $365,000)..................................... 365,000
------------
TOTAL INVESTMENTS 98.3%
(Cost $211,707,978)..................................................... 208,805,223
OTHER ASSETS IN EXCESS OF LIABILITIES 1.7%................................ 3,628,312
------------
NET ASSETS 100.0%......................................................... $212,433,535
============
</TABLE>
(a) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally
transactions with qualified institutional buyers.
See Notes to Financial Statements
14
<PAGE> 16
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2000
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $211,707,978)....................... $208,805,223
Cash........................................................ 4,118
Interest Receivable......................................... 4,542,422
Other....................................................... 49,270
------------
Total Assets............................................ 213,401,033
============
LIABILITIES:
Payables:
Investments Purchased..................................... 747,428
Investment Advisory Fee................................... 77,950
Affiliates................................................ 2,935
Accrued Expenses............................................ 90,549
Trustees' Deferred Compensation and Retirement Plans........ 48,636
------------
Total Liabilities....................................... 967,498
------------
NET ASSETS.................................................. $212,433,535
============
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..................................................... 207,645,504
Accumulated Undistributed Net Investment Income............. 470,562
Net Unrealized Depreciation................................. (2,902,755)
Accumulated Net Realized Loss............................... (4,142,241)
------------
NET ASSETS.................................................. $212,433,535
============
NET ASSET VALUE PER COMMON SHARE
($212,433,535 divided by 11,362,465 shares outstanding)... $ 18.70
============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
Statement of Operations
For the Year Ended June 30, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 17,623,887
Other....................................................... 4,860
------------
Total Income............................................ 17,628,747
------------
EXPENSES:
Investment Advisory Fee..................................... 1,044,972
Shareholder Services........................................ 106,198
Trustees' Fees and Related Expenses......................... 44,368
Custody..................................................... 15,290
Legal....................................................... 7,389
Other....................................................... 169,384
------------
Total Expenses.......................................... 1,387,601
Less Credits Earned on Cash Balances.................... 1,653
------------
Net Expenses............................................ 1,385,948
------------
NET INVESTMENT INCOME....................................... $ 16,242,799
============
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $ (4,142,167)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 3,518,189
End of Period............................................. (2,902,755)
------------
Net Unrealized Depreciation During the Period............... (6,420,944)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(10,563,111)
============
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 5,679,688
============
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
Statement of Changes in Net Assets
For the Years Ended June 30, 2000, and 1999
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999
------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................ $ 16,242,799 $ 16,091,356
Net Realized Gain/Loss............................... (4,142,167) 1,987,296
Net Unrealized Depreciation During the Period........ (6,420,944) (19,721,303)
------------ ------------
Change in Net Assets from Operations................. 5,679,688 (1,642,651)
Distributions from Net Investment Income:............ (15,861,856) (16,134,129)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.. (10,182,168) (17,776,780)
NET ASSETS:
Beginning of the Period.............................. 222,615,703 240,392,483
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $470,562 and
$87,704, respectively)............................. $212,433,535 $222,615,703
============ ============
</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>
----------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
THE PERIOD................... $ 19.59 $ 21.16 $ 20.26 $ 19.97 $ 20.41
------- ------- -------- ------- -------
Net Investment Income........ 1.43 1.41 1.48 1.56 1.54
Net Realized and Unrealized
Gain/Loss.................. (.93) (1.56) .93 .27 (.44)
------- ------- -------- ------- -------
Total from Investment
Operations................... .50 (0.15) 2.41 1.83 1.10
Less Distributions from Net
Investment Income............ 1.39 1.42 1.51 1.54 1.54
------- ------- -------- ------- -------
NET ASSET VALUE, END OF THE
PERIOD....................... $ 18.70 $ 19.59 $ 21.16 $ 20.26 $ 19.97
======= ======= ======== ======= =======
Market Price Per Share at End
of the Period................ $16.750 $17.875 $19.6875 $19.250 $18.125
Total Investment Return at
Market Price (a)(d).......... 1.88% -2.45% 10.08% 15.06% 2.61%
Total Return at Net Asset
Value (b)(d)................. 2.67% -0.87% 12.19% 9.46% 5.94%
Net Assets at End of the Period
(In millions) (d)............ $ 212.4 $ 222.6 $ 240.4 $ 230.2 $ 226.9
Ratio of Operating Expenses to
Average Net Assets........... .64% .66% .65% .68% .67%
Ratio of Convertible Note
Expenses to Average Net
Assets (c)................... -- -- -- -- --
Ratio of Net Investment Income
to Average Net Assets........ 7.48% 6.79% 7.04% 7.70% 7.47%
Portfolio Turnover............. 71% 10% 27% 8% 11%
Assuming full dilution of
debt (c):
Net Asset Value, End of the
Period..................... -- -- -- -- --
Number of Shares Outstanding,
End of Period (000)........ -- -- -- -- --
</TABLE>
(a) 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 Trust's dividend reinvestment plan,
and sale of all shares at the closing common stock price at the end of the
period indicated.
(b) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at 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,
----------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 19.07 $ 21.33 $ 19.85 $ 18.68 $ 18.72
------- ------- ------- ------- -------
1.52 1.56 1.58 1.74 1.76
1.36 (2.28) 1.55 1.11 (.03)
------- ------- ------- ------- -------
2.88 (.72) 3.13 2.85 1.73
1.54 1.54 1.65 1.68 1.77
------- ------- ------- ------- -------
$ 20.41 $ 19.07 $ 21.33 $ 19.85 $ 18.68
======= ======= ======= ======= =======
$19.125 $18.125 $20.750 $19.750 $18.375
14.89% -5.59% 13.76% 17.12% --
16.54% -3.37% 16.35% 15.79% --
$ 231.9 $ 216.6 $ 235.6 $ 218.5 --
.68% .68% .71% .71% .72%
.39% .82% .98% 1.05% 1.09%
7.92% 7.29% 7.65% 8.90% 9.42%
8% 2% 19% 39% 18%
-- $ 19.07 $ 21.09 $ 19.78 $ 18.74
-- 12,411 12,411 12,372 12,304
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000
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, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when-issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when-issued or delayed delivery
purchase commitments until payment is made. At June 30, 2000, 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 pooled cash account along with other investment
companies
20
<PAGE> 22
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000
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 accreted 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, 2000, the Fund had an accumulated capital loss carryforward
for tax purposes of $636,020, which will expire on June 30, 2008. Net realized
gains or losses may differ for financial reporting and tax purposes primarily as
a result of the deferral of losses relating to wash sale transactions and
post-October losses which may not be recognized for tax purposes until the first
day of the following fiscal year.
At June 30, 2000, for federal income tax purposes, cost of long- and
short-term investments is $211,878,134, the aggregate gross unrealized
appreciation is $3,375,579 and the aggregate gross unrealized depreciation is
$6,448,490, resulting in net unrealized depreciation on long- and short-term
investments of $3,072,911.
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 gain/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between financial and tax basis
reporting for the 2000 fiscal year have been identified and appropriately
21
<PAGE> 23
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000
reclassified. Permanent differences relating to expenses which are not
deductible for tax purposes totaling $1,841 were reclassified from capital to
accumulated undistributed net investment income, $2,154,506 relating to a
portion of the capital loss carryforward that expired during the period was
reclassified from capital to accumulated net realized loss and $74 relating to
the recognition of net realized losses on paydowns of mortgage pool obligations
was reclassified from accumulated net realized loss to accumulated undistributed
net investment income.
F. EXPENSE REDUCTIONS During the year ended June 30, 2000, the Fund's custody
fee was reduced by $1,653 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, 2000, the Fund recognized expenses of
approximately $7,400 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, 2000, the Fund recognized expenses of
approximately $30,300 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.
22
<PAGE> 24
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $151,705,092 and $150,297,868,
respectively.
23
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of Van Kampen Bond Fund
We have audited the accompanying statement of assets and liabilities of Van
Kampen Bond Fund (the "Fund"), including the portfolio of investments, as of
June 30, 2000, and the related statements of operations, changes in net assets
and the financial highlights for the year then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The Fund's financial statements and
financial highlights for the periods ended prior to June 30, 2000, were audited
by other auditors whose report, dated July 23, 1999, expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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, 2000, by correspondence with the Fund's
custodian and brokers. An audit also 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
audit provides 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 as of June 30, 2000, the results of its operations, the changes
in its net assets and the financial highlights for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
August 7, 2000
24
<PAGE> 26
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 the 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.
25
<PAGE> 27
VAN KAMPEN FUNDS
THE VAN KAMPEN
FAMILY OF FUNDS
Growth
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Select Growth
Small Cap Value
Tax Managed Equity Growth
Technology
Growth and Income
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
International Magnum
Latin American
Strategic Income
Tax Managed Global Franchise
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return*
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
Tax Free
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal**
Insured Tax Free Income
Intermediate Term Municipal
Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. Please read it carefully before you invest or send
money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- visit our Web site at
WWW.VANKAMPEN.COM--
to view a prospectus, select
Download Prospectus [COMPUTER ICON]
- call us at 1-800-341-2911
weekdays from 7:00 a.m. to 7:00 p.m.
Central time. Telecommunications
Device for the Deaf users, call
1-800-421-2833.
[PHONE ICON]
- e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
* Closed to new investors
** Open to new investors for a limited time
26
<PAGE> 28
FUND OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN BOND FUND
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
THEODORE A. MYERS
RICHARD F. POWERS, III* - Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
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 AUDITORS
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
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
* "Interested persons" of the Fund, as defined in the Investment Company Act of
1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
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<PAGE> 29
RESULTS OF
SHAREHOLDER VOTES
An Annual Meeting of Shareholders of the Fund was held on June 21, 2000, where
shareholders voted on the election of trustees and the selection of independent
auditors.
1) With regard to the election of the following trustees:
<TABLE>
<CAPTION>
# OF SHARES
-----------------------------
IN FAVOR WITHHELD
<S> <C> <C>
Rod Dammeyer........................................... 9,579,111 219,712
Wayne W. Whalen........................................ 9,588,792 210,031
</TABLE>
The other trustees of the Fund whose terms did not expire in 2000 were David C.
Arch, Howard J Kerr, Theodore A. Myers, Richard F. Powers, III, and Hugo F.
Sonnenschein.
2) With regards to the ratification of Deloitte & Touche LLP as independent
auditors for the Fund, 9,603,241 shares voted in favor of the proposal, 54,156
shares voted against and 141,426 shares abstained.
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