<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 15
Statement of Operations.......................... 16
Statement of Changes in Net Assets............... 17
Financial Highlights............................. 18
Notes to Financial Statements.................... 20
Dividend Reinvestment Plan....................... 23
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
January 20, 2000
Dear Shareholder:
As we enter a new century--and millennium--it seems appropriate to take a
look back at the progress that's been made over the last 100 years and how the
world of investing has changed over the generations. Although rapid advances in
technology and science have dramatically altered the world that we live in
today, one of the greatest shifts we've seen is the increasing importance of
investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is
now available to most people. In fact, almost 79 million individuals--who
represent almost half of all U.S. households--own stocks either directly or
through mutual funds. This is even more impressive when considering that just 16
years earlier, only 19 percent of households owned stocks. Another important
shift has been the need for retirement planning beyond a pension plan or Social
Security. The Investment Company Institute, the leading mutual fund industry
association, reports that 77 percent of all mutual fund shareholders earmarked
retirement as their primary financial goal in 1998.
Through all the changes in the investment environment over the past century,
the general principles that have made generations of investors successful remain
the same. Some that have stood the test of time include:
- INVESTING FOR THE LONG-TERM
- BASING INVESTMENT DECISIONS ON SOUND RESEARCH
- BUILDING A DIVERSIFIED PORTFOLIO
- BELIEVING IN THE VALUE OF PROFESSIONAL INVESTMENT ADVICE
While no one can predict the future, at Van Kampen we believe that these
ideas will remain important tenets for investors well into this century. As we
continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we welcome the
new millennium.
Sincerely,
<TABLE>
<S> <C>
/s/ Richard F. Powers, III /s/ Dennis J. McDonnell
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Asset Management Inc. Van Kampen Asset Management Inc.
</TABLE>
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
The nation's brisk rate of economic growth continued throughout 1999,
bringing the United States to the verge of its longest economic expansion on
record. High levels of consumer spending, a host of new jobs, and increasing
productivity kept the economy strong. Gross domestic product, the primary
measure of economic growth, increased 4.2 percent for the year, including an
impressive annualized rate of 5.7 percent for the third quarter and 5.8 percent
in the fourth quarter.
EMPLOYMENT
The job market remained vibrant throughout the year, with more than 2.7
million U.S. jobs created in 1999. In addition, unemployment dropped to 4.1
percent in October--its lowest rate in three decades. With jobs plentiful and
wages on the rise, most Americans were optimistic about the future. At the end
of the year the consumer confidence index hit its highest level since 1968.
Although wage pressures caused some concerns about the potential erosion of
corporate profits, productivity gains helped keep those concerns muted through
the end of the year.
INFLATION AND INTEREST RATES
Although the Consumer Price Index continued to reflect historically low
inflation--rising only 2.7 percent during 1999--concerns about future increases
in inflation were prevalent throughout the reporting period. The Federal Reserve
Board remained active in guarding against inflation and trying to temper
economic growth. The Fed reversed its three interest-rate cuts from the fall of
1998 by raising rates in June, August, and November 1999.
U.S. GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
Third Quarter 1997 through Fourth Quarter 1999
[BAR GRAPH]
<TABLE>
<S> <C>
97Q3 4
97Q4 3.10
98Q1 6.70
98Q2 2.10
98Q3 3.80
98Q4 5.90
99Q1 3.70
99Q2 1.90
99Q3 5.70
99Q4 5.80
</TABLE>
Source: Bureau of Economic Analysis
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED DECEMBER 31, 1999
VAN KAMPEN BOND FUND
NYSE TICKER SYMBOL--VBF
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
Six-month total return based on market price(1)........... (8.45%)
Six-month total return based on NAV(2).................... 0.45%
DISTRIBUTION RATE
Distribution rate as a % of closing common stock
price(3).................................................. 8.90%
SHARE VALUATIONS
Net asset value........................................... $18.98
Closing common stock price................................ $15.6875
Six-month high common stock price (07/02/99).............. $18.6250
Six-month low common stock price (12/16/99)............... $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 does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Fund shares,
when sold, may be worth more or less than their original cost.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN BOND FUND
We recently spoke with representatives of the adviser of the Van Kampen Bond
Fund about the key events and economic forces that shaped the markets during the
past six months. The representatives are led by Kelly Gilbert, portfolio
manager, who has managed the Fund since June 1999 and worked in the investment
industry since 1995. She is joined by Reid Hill, assistant portfolio manager,
and Peter W. Hegel, chief investment officer for fixed-income investments. The
following discussion reflects their views on the Fund's performance during the
six-month period ended December 31, 1999.
Q HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND
OPERATED DURING THE PAST SIX MONTHS?
A A robust domestic economy threatened to fuel inflationary pressures at the
beginning of the period, drawing the attention and intervention of the
Federal Reserve Board. Yield spreads widened through the summer as the Fed
implemented a 0.25 percent rate hike in August. This increase seemed to soothe
investors, and yield spreads between Treasuries and other types of bonds (such
as corporate, high-yield, and mortgage-backed securities) began to narrow in
early September. This narrowing trend continued until November, when investors
grew concerned about the potential effects of year 2000 problems on corporate
bond issuance and liquidity. However, a third Fed hike and a
lighter-than-expected new issuance calendar ushered in a relatively smooth
ending to a volatile and difficult year for the fixed-income market.
Q HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE CONDITIONS?
A The volatility and uncertainty that dominated much of the reporting period
underscored the importance of a disciplined investment strategy. As a
result, we looked to the Fund's benchmark, the Lehman Brothers BBB
Corporate Bond Index, as a guide for establishing market weightings within the
sectors held in the Fund's portfolio. Aligning the portfolio with the benchmark
weightings enabled us to maintain diversification among sectors and securities,
which we believe should help reduce risk.
As a result, we decreased the Fund's significant exposure to the industrial
sector--which includes health-care, media and telecommunications, and consumer
cyclical securities--in favor of increased weightings in the finance sector. We
accomplished this by decreasing or eliminating industrial holdings such as Tenet
Healthcare, which was reduced due to concerns about the welfare of health-care
companies. In turn, we added positions like Abbey National and Washington
Mutual, which boosted the Fund's exposure to finance. This strategy was
effective, because the finance sector enjoyed relatively strong performance for
much of the period. In addition, the Fund's slight overweighting in cable and
media securities, which outperformed during the period, contributed positively
to its return.
4
<PAGE> 6
Finally, a change to the Fund's investment policy was approved by the Fund's
Board of Trustees during 1999, to be implemented immediately. The management
team may now invest up to 25 percent of the Fund's total assets in Treasury and
non-Treasury zero-coupon securities. This allocation includes step-up coupon
securities, which provide for a period of interest payment deferral followed by
a period where cash coupon payments are provided. We currently do not plan to
invest such a large percentage of the Fund's assets in these securities;
however, after careful analysis, we have determined that these securities could
add incremental yield to the Fund's portfolio and benefit the shareholder.
Q WHAT WAS THE STRUCTURE OF THE FUND'S PORTFOLIO AT THE END OF THE REPORTING
PERIOD?
A The Fund's credit-quality allocation continued to be weighted in
medium-quality securities, which are defined as A and BBB rated
securities. At the end of the reporting period, approximately 35 percent
of the portfolio's long-term investments were allocated to securities rated A
and higher, and 53 percent were invested in BBB rated securities. The remaining
12 percent was allocated to securities rated BB and lower. This allocation
benefited the Fund during the reporting period, as BBB and BB rated securities
outperformed A rated securities by 140 basis points and 57 basis points,
respectively.
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 equivalent to or slightly longer than that of its
benchmark, the Lehman Brothers BBB Corporate Bond Index. Because interest rates
rose during this time, the long duration was negative to the Fund's return. At
the end of the period, the Fund's duration was 5.75 years, which is slightly
shorter than the benchmark duration of 6.00 years. For additional Fund portfolio
highlights, please refer to page 8.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A Although the Fund's return was supported by its favorable sector
allocations, this benefit was overshadowed by the slow recovery of the
corporate bond market and by our duration strategy. For the six months
ended December 31, 1999, the Fund generated a total return of -8.45 percent(1)
at market price and 0.45 percent(2) at net asset value. For the same period, the
Lehman Brothers BBB Corporate Bond Index returned -0.82 percent. This
broad-based, unmanaged index, which reflects the general performance of
corporate bonds, 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. An investment cannot be made directly in an index. Of
course, past performance is not a guarantee of comparable future results.
The Fund's return reflects a decrease in market price per common share on
the New York Stock Exchange from $17.8750 on June 30, 1999, to $15.6875 on
December 31, 1999, which includes reinvestment of dividends totaling $0.698 per
share. Please refer to the chart and footnotes on page 3 for additional Fund
performance results.
5
<PAGE> 7
Q WHAT IS THE OUTLOOK FOR THE MARKET AND THE FUND OVER THE COMING MONTHS?
A Generally, the picture for the corporate bond market has improved from six
months ago, and certainly from 12 months ago. We'll look for signs of
continued improvement by monitoring the level of new issuance released in
2000 and investors' reaction to this supply.
As we manage the Fund going forward, our focus on fundamental, in-depth
research and assessment of corporate bonds will remain unchanged. We will
continue to look beyond the sector, credit rating, or structure of a bond to
identify those issuers that we believe will remain financially sound and perform
well in a range of market conditions. We'll also search for value in
out-of-favor areas of the market in our quest to maintain the diversification of
the portfolio and contribute to the Fund's performance.
6
<PAGE> 8
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to 1 percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis-point move.
BOND: A debt security issued by a government or corporation that generally pays
a bondholder a stated rate of interest and repays the principal at maturity
date.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are
two companies that assign bond ratings. Standard & Poor's ratings range from
a high of AAA to a low of D, while Moody's ratings range from a high of Aaa
to a low of C.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates (i.e. a 5-year duration means the bond will fall about 5 percent in
value if interest rates rise by 1 percent). The longer a bond's duration,
the greater the effect of interest rate movements on its price. Typically,
funds with shorter durations perform better in rising rate environments,
while funds with longer durations perform better when rates decline.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its
policy-making committee, called the Federal Open Market Committee, meets
eight times a year to establish monetary policy and monitor the economic
pulse of the United States.
YIELD SPREAD: The difference between the yields of different bonds, due to their
different credit ratings or maturities. When yield spreads between bonds of
different credit quality are narrow, there is less incentive to own the
lower-quality bond. When yield spreads between bonds of different maturities
are narrow, there is less incentive to own the bond with the longer
maturity. In both cases, the investor is not being compensated for the
additional risk.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN BOND FUND
TOP FIVE PORTFOLIO INDUSTRIES*
GRAPH
<TABLE>
<CAPTION>
DECEMBER 31, 1999 JUNE 30, 1999
----------------- -------------
<S> <C> <C>
Utilities 29.40 24.50
Consumer Services 19.50 18.20
Finance 10.50 2.70
Transportation 9.70 11.20
Energy 9.10 8.40
</TABLE>
* As a percentage of long-term investments
NET ASSET VALUE AND MARKET PRICE
(BASED UPON MONTH-END VALUES)
DECEMBER 1989 THROUGH DECEMBER 1999
[GRAPH]
<TABLE>
<CAPTION>
MARKET PRICE NET ASSET VALUE
------------ ---------------
<S> <C> <C>
Dec 1989 17.50 19.26
17.75 19.05
17.63 19.04
17.25 18.59
16.13 18.44
17.00 18.97
16.50 18.75
16.63 19.00
16.00 18.20
15.50 18.28
16.13 18.36
17.25 18.77
Dec 1990 16.75 18.61
17.00 18.71
18.25 18.95
18.25 18.78
18.75 19.01
18.75 19.14
18.38 18.68
18.75 18.93
19.13 19.30
19.13 19.34
19.13 19.47
19.50 19.62
Dec 1991 20.13 19.89
19.63 19.66
19.88 19.78
19.63 19.36
19.75 19.41
20.00 19.98
19.75 19.85
20.50 20.46
20.63 20.67
21.25 20.41
20.00 20.02
20.25 20.08
Dec 1992 20.25 20.05
20.88 20.56
21.25 21.13
20.75 20.94
21.00 21.10
21.00 21.18
20.75 21.33
20.88 21.59
21.00 22.27
20.88 21.95
20.38 21.99
20.63 21.65
Dec 1993 20.38 21.29
20.13 21.66
18.88 21.14
18.00 20.12
18.38 19.78
17.88 19.50
18.13 19.06
17.50 19.57
17.88 19.60
17.13 18.79
17.25 18.71
17.25 18.69
Dec 1994 16.75 18.59
17.63 18.99
17.88 19.48
18.25 19.30
18.00 19.60
18.88 20.66
19.13 20.41
18.88 20.28
19.25 20.67
19.00 20.57
19.38 20.92
19.88 21.28
Dec 1995 19.63 21.27
19.88 21.22
19.63 20.89
19.38 20.18
18.50 20.15
18.25 20.25
18.13 19.64
17.88 19.90
18.38 20.13
18.75 19.96
18.75 20.24
19.00 20.74
Dec 1996 18.75 20.31
18.75 20.18
19.25 20.61
18.63 18.87
18.75 19.81
19.00 20.38
19.25 20.43
19.88 20.81
19.50 20.64
19.81 20.77
19.75 21.10
20.63 21.19
Dec 1997 20.81 20.91
20.94 21.23
20.88 21.17
20.38 20.92
20.00 21.00
20.38 21.30
19.69 21.16
19.44 21.09
19.44 21.24
19.81 21.35
20.56 21.20
20.25 21.55
Dec 1998 20.06 21.25
20.19 21.26
20.00 20.59
19.25 20.40
18.13 20.45
17.81 20.13
17.88 19.59
17.63 19.49
17.56 19.46
16.38 19.31
16.56 19.42
16.13 19.42
Dec 1999 15.69 18.98
</TABLE>
The solid line above represents the Fund's net asset value (NAV), which
indicates overall changes in value among the Fund's underlying securities. The
Fund's market price is represented by the dashed line, which indicates the price
the market is willing to pay for shares of the Fund at a given time. Market
price is influenced by a range of factors, including supply and demand and
market conditions.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS (CONTINUED)
VAN KAMPEN BOND FUND
CREDIT QUALITY AS A PERCENTAGE OF LONG-TERM CORPORATE DEBT SECURITIES
AS OF DECEMBER 31, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AAA AA A BBB BB
--- -- - --- --
<S> <C> <C> <C> <C> <C>
As of December 31, 1999 0.90 11.30 23.10 53.40 10.50
<CAPTION>
B
-
<S> <C>
As of December 31, 1999 0.80
</TABLE>
AS OF JUNE 30, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AA A BBB BB B
-- - --- -- -
<S> <C> <C> <C> <C> <C>
As of June 30, 1999 9.30 28.50 49.50 12.10 0.60
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DIVIDEND HISTORY
FOR THE PERIOD ENDED DECEMBER 31, 1999
BAR GRAPH
<TABLE>
<CAPTION>
DISTRIBUTIONS
-------------
<S> <C>
Sep 1999 0.349
Dec 1999 0.349
</TABLE>
The dividend history represents past performance of the Fund and does not
predict the Fund's future distributions.
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS 91.9%
CHEMICAL 0.5%
$ 1,000 Rohm & Haas Co...................... 7.850% 07/15/29 $ 1,007,908
------------
CONSUMER DISTRIBUTION 1.1%
2,400 Kroger Co........................... 7.375 03/01/05 2,409,000
------------
CONSUMER DURABLES 0.8%
750 Brunswick Corp...................... 7.125 08/01/27 651,999
1,000 Chrysler Corp....................... 7.450 03/01/27 973,494
------------
1,625,493
------------
CONSUMER NON-DURABLES 0.8%
2,000 Westpoint Stevens, Inc.............. 7.875 06/15/05 1,830,000
------------
CONSUMER SERVICES 18.6%
500 Bresnan Communications Group........ 8.000 02/01/09 501,250
2,500 Clear Channel Commerce, Inc......... 7.250 10/15/27 2,263,982
2,000 Comcast Cable Communications........ 8.125 05/01/04 2,045,312
1,250 CSC Holdings, Inc................... 7.875 12/15/07 1,237,500
2,500 CSC Holdings, Inc................... 7.875 02/15/18 2,400,000
5,000 Harcourt General, Inc............... 9.500 03/15/00 5,023,525
1,750 Harcourt General, Inc............... 8.875 06/01/22 1,841,270
1,000 Harcourt General, Inc............... 7.200 08/01/27 882,915
1,750 Liberty Media Corp., 144A Private
Placement (a)....................... 8.500 07/15/29 1,776,940
1,000 News America Holdings, Inc.......... 8.875 04/26/23 1,057,050
2,000 Park Place Entertainment Corp....... 7.950 08/01/03 1,982,188
250 Premier Parks, Inc.................. 9.250 04/01/06 245,000
100 Premier Parks, Inc.................. 9.750 01/15/07 102,375
200 Premier Parks, Inc.................. 9.750 06/15/07 200,000
375 Premier Parks, Inc. (b)............. 0/10.000 04/01/08 256,875
3,500 Royal Caribbean Cruises Ltd......... 7.500 10/15/27 3,154,910
1,500 Stewart Enterprises, Inc............ 6.400 05/01/03 1,263,192
11,000 Tele Communications, Inc............ 9.250 01/15/23 11,842,083
2,000 Time Warner Entertainment Co........ 8.375 07/15/33 2,084,500
------------
40,160,867
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ENERGY 8.6%
$ 7,400 Ashland Oil, Inc.................... 8.800% 11/15/12 $ 7,764,657
750 Barrett Resources Corp.............. 7.550 02/01/07 701,250
2,025 PDV America, Inc.................... 7.875 08/01/03 1,908,113
1,500 Petroleum Geo Services ASA.......... 7.125 03/30/28 1,312,830
1,500 Petroliam Nasional Berhad, 144A
Private Placement (Malaysia) (a).... 7.625 10/15/26 1,324,916
250 Pride Petroleum Services, Inc....... 9.375 05/01/07 251,875
1,000 R & B Falcon Corp................... 6.500 04/15/03 917,500
1,000 Southern Union Co................... 8.250 11/15/29 1,002,246
1,500 Tosco Corp.......................... 8.250 05/15/03 1,526,502
1,000 Transcontinental Gas Pipe Line
Corp................................ 7.250 12/01/26 886,973
1,000 Union Oil Co........................ 9.125 02/15/06 1,060,038
------------
18,656,900
------------
FINANCE 10.0%
2,000 Abbey National PLC (United
Kingdom)............................ 7.350 10/29/49 1,913,648
2,500 American Re Corp.................... 7.450 12/15/26 2,379,870
1,000 Americredit Corp.................... 9.250 02/01/04 1,007,500
2,000 AvalonBay Communities, Inc.......... 7.500 08/01/09 1,910,626
2,000 Conseco, Inc........................ 8.500 10/15/02 2,024,504
1,500 Household Finance Corp.............. 8.375 11/15/01 1,532,279
2,500 International Lease Finance Corp.... 8.375 12/15/04 2,617,925
1,000 Korea Development Bank (Korea)...... 7.375 09/17/04 982,988
4,000 Lehman Brothers Holdings, Inc....... 8.500 05/01/07 4,109,332
1,750 Nordbanken, 144A Private Placement
(Norway) (a)........................ 7.250 11/12/09 1,714,086
500 Societe Generale Real Estate Co.,
LLC, 144A Private Placement (a)..... 7.640 12/29/49 459,083
1,000 Washington Mutual Capital, Inc...... 8.375 06/01/27 957,914
------------
21,609,755
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HEALTHCARE 1.5%
$ 500 Manor Care, Inc..................... 7.500% 06/15/06 $ 480,586
3,000 Tenet Healthcare Corp............... 8.125 12/01/08 2,857,500
------------
3,338,086
------------
PRODUCER MANUFACTURING 3.4%
1,750 IDEX Corp........................... 6.875 02/15/08 1,575,416
4,400 ITT Corp............................ 6.750 11/15/05 3,850,000
1,000 ITT Corp............................ 7.375 11/15/15 766,317
162 Rayovac Corp........................ 10.250 11/01/06 170,100
250 U.S. Can Corp....................... 10.125 10/15/06 256,250
750 USA Waste Services, Inc............. 7.000 10/01/04 676,773
------------
7,294,856
------------
RAW MATERIALS/PROCESSING INDUSTRIES 8.0%
500 Atlantic Methanol Capital Co. Class
A, 144A Private Placement (a)....... 10.875 12/15/04 502,500
2,000 Bowater, Inc........................ 9.375 12/15/21 2,177,924
1,000 Crown Cork & Seal, Inc.............. 8.000 04/15/23 909,550
5,000 Federal Paper Board, Inc............ 8.875 07/01/12 5,451,610
2,000 Georgia Pacific Corp................ 9.950 06/15/02 2,116,304
4,000 IMC Global, Inc..................... 6.875 07/15/07 3,692,748
1,000 IMC Global, Inc..................... 7.300 01/15/28 863,548
1,250 Owens Illinois, Inc................. 7.150 05/15/05 1,162,500
450 Sequa Corp.......................... 9.000 08/01/09 436,500
------------
17,313,184
------------
TECHNOLOGY 1.2%
2,500 Sun Microsystems, Inc............... 7.500 08/15/06 2,513,415
------------
TRANSPORTATION 9.3%
3,000 AMR Corp............................ 9.500 05/15/01 3,074,397
1,625 Canadian National Railway Co.
(Canada)............................ 7.625 05/15/23 1,578,281
2,000 CSX Corp............................ 8.625 05/15/22 2,088,230
7,000 Union Pacific Corp.................. 8.350 05/01/25 6,753,719
6,000 United Airlines, Inc................ 10.020 03/22/14 6,488,250
------------
19,982,877
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UTILITIES 28.1%
$ 1,000 AES Corp............................ 9.500% 06/01/09 $ 1,012,500
3,000 Arizona Public Service Co........... 9.500 04/15/21 3,144,858
3,500 Arizona Public Service Co........... 8.750 01/15/24 3,562,898
2,000 Arizona Public Service Co........... 8.000 02/01/25 1,904,488
2,000 CMS Energy Corp..................... 6.750 01/15/04 1,870,000
1,000 CMS Energy Corp..................... 7.500 01/15/09 917,500
1,000 Commonwealth Edison Co.............. 8.625 02/01/22 1,001,096
1,500 Edison Mission Energy, 144A Private
Placement (a)....................... 7.730 06/15/09 1,490,841
1,500 El Paso Electric Co................. 8.250 02/01/03 1,526,250
5,000 GTE North, Inc...................... 8.500 12/15/31 5,026,495
3,000 Gulf States Utilities Co............ 8.940 01/01/22 3,038,571
2,500 Houston Lighting & Power Co......... 7.750 03/15/23 2,363,620
500 Israel Electric Corp. Ltd., 144A
Private Placement (Israel) (a)...... 8.250 10/15/09 498,575
1,750 MCI Worldcom, Inc................... 6.950 08/15/28 1,600,891
4,150 Montana Power Co.................... 8.950 02/01/22 4,224,273
1,323 Niagara Mohawk Power Corp........... 7.625 10/01/05 1,329,787
7,000 Public Service Co. of Colorado...... 8.750 03/01/22 7,020,090
2,000 Southern California Gas Co.......... 8.750 10/01/21 2,040,434
5,000 Southern Energy, Inc., 144A Private
Placement (a)....................... 7.900 07/15/09 4,847,020
750 Telefonica De Argentina S.A., 144A
Private Placement (Argentina)(a).... 9.875 07/01/02 748,125
2,500 Texas Utilities Electric Co......... 8.250 04/01/04 2,567,840
5,000 United Telecommunications Kansas.... 9.500 04/01/03 5,332,280
500 UtiliCorp United, Inc............... 6.700 10/15/06 494,804
3,000 UtiliCorp United, Inc............... 8.270 11/15/21 2,955,204
------------
60,518,440
------------
TOTAL CORPORATE BONDS 91.9%.......................................... 198,260,781
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 3.6%
4 Federal Home Loan Mortgage Corp.,
Pool................................ 7.375% 01/01/03 $ 3,722
1 Government National Mortgage Assn.,
Pool................................ 10.000 10/15/16 1,003
7 Government National Mortgage Assn.,
Pool................................ 10.000 07/15/20 7,968
2,500 Quebec Province (Canada)............ 8.800 04/15/03 2,616,800
3,000 Saskatchewan Province (Canada)...... 8.000 07/15/04 3,095,700
1,000 United States Treasury Bonds........ 6.125 08/15/29 953,750
1,000 United States Treasury Notes........ 6.000 08/15/09 969,063
------------
7,648,006
------------
TOTAL LONG-TERM INVESTMENTS 95.5%
(Cost $207,843,104)................................................. 205,908,787
SHORT-TERM INVESTMENTS 1.4%
Bank of America Securities ($3,069,000 par collaterized by U.S.
Government obligations in a pooled cash account, dated 12/31/99, to be
sold on 01/03/00 at $3,069,703) (Cost $3,069,000)..................... 3,069,000
------------
TOTAL INVESTMENTS 96.9%
(Cost $210,912,104)................................................. 208,977,787
OTHER ASSETS IN EXCESS OF LIABILITIES 3.1%........................... 6,711,637
------------
NET ASSETS 100.0%.................................................... $215,689,424
============
</TABLE>
(a) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may only be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
(b) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $210,912,104)....................... $208,977,787
Cash........................................................ 2,111,236
Interest Receivable......................................... 4,785,961
Other....................................................... 56,936
------------
Total Assets.......................................... 215,931,920
============
LIABILITIES:
Payables:
Investment Advisory Fee................................... 82,960
Affiliates................................................ 11,595
Accrued Expenses............................................ 102,309
Trustees' Deferred Compensation and Retirement Plans........ 45,632
------------
Total Liabilities..................................... 242,496
------------
NET ASSETS.................................................. $215,689,424
============
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
Accumulated Undistributed Net Investment Income............. 372,530
Net Unrealized Depreciation................................. (1,934,317)
Accumulated Net Realized Loss............................... (3,913,105)
------------
NET ASSETS.................................................. $215,689,424
============
NET ASSET VALUE PER COMMON SHARE
($215,689,424 divided by 11,362,465 shares outstanding)... $ 18.98
============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 8,868,137
Other....................................................... 48,860
-----------
Total Income............................................ 8,916,997
-----------
EXPENSES:
Investment Advisory Fee..................................... 528,764
Shareholder Services........................................ 40,278
Trustees' Fees and Related Expenses......................... 21,728
Custody..................................................... 11,645
Legal....................................................... 4,479
Other....................................................... 94,542
-----------
Total Expenses.......................................... 701,436
Less Credits Earned on Cash Balances.................... 120
-----------
Net Expenses............................................ 701,316
-----------
NET INVESTMENT INCOME....................................... $ 8,215,681
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Net Realized Loss........................................... $(1,758,599)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 3,518,189
End of Period............................................. (1,934,317)
-----------
Net Unrealized Depreciation During the Period............... (5,452,506)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(7,211,105)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 1,004,576
===========
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended December 31, 1999 and
the Year Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1999 June 30, 1999
- ------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 8,215,681 $ 16,091,356
Net Realized Gain/Loss........................... (1,758,599) 1,987,296
Net Unrealized Depreciation During the Period.... (5,452,506) (19,721,303)
------------ ------------
Change in Net Assets from Operations............. 1,004,576 (1,642,651)
Distributions from Net Investment Income:........ (7,930,855) (16,134,129)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... (6,926,279) (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 $372,530 and $87,704,
respectively).................................. $215,689,424 $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. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended --------------------------------------
December 31, 1999 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period....... $ 19.592 $21.157 $ 20.259 $ 19.97 $ 20.41
----------- ------- -------- ------- -------
Net Investment Income......... .723 1.416 1.476 1.556 1.54
Net Realized and Unrealized
Gain/Loss................... (.634) (1.561) .932 .273 (.44)
----------- ------- -------- ------- -------
Total from Investment
Operations.................... .089 (0.145) 2.408 1.829 1.10
Less Distributions from Net
Investment Income............. .698 1.420 1.510 1.540 1.54
----------- ------- -------- ------- -------
Net Asset Value, End of the
Period........................ $ 18.983 $19.592 $ 21.157 $20.259 $ 19.97
=========== ======= ======== ======= =======
Market Price Per Share at End of
the Period.................... $ 15.6875 $17.875 $19.6875 $19.250 $18.125
Total Investment Return at
Market Price (a)(d)........... (8.45%)* (2.45%) 10.08% 15.06% 2.61%
Total Return at Net Asset
Value (b)(d).................. 0.45%* (0.87%) 12.19% 9.46% 5.94%
Net Assets at End of the Period
(In millions) (d)............. $ 215.7 $ 222.6 $ 240.4 $ 230.2 $ 226.9
Ratio of Operating Expenses to
Average Net Assets............ .63% .66% .65% .68% .67%
Ratio of Convertible Note
Expenses to Average Net
Assets (c).................... -- -- -- -- --
Ratio of Net Investment Income
to Average Net Assets......... 7.39% 6.79% 7.04% 7.70% 7.47%
Portfolio Turnover.............. 41%* 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>
* Non-Annualized
(a) Total Investment Return at Market Price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Fund's dividend reinvestment plan.
(b) Total Return at Net Asset Value (NAV) reflects the change in value of the
Fund's assets with reinvestment of dividends based upon NAV.
(c) On January 3, 1995, the Fund paid off its outstanding convertible extendible
note.
(d) Prior to fiscal year end 1992, this item was not a required disclosure.
18
<PAGE> 20
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
- -----------------------
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 1.575 1.735 1.76
1.36 (2.28) 1.55 1.115 (.03)
------- ------- ------- ------- -------
2.88 (.72) 3.125 2.85 1.73
1.54 1.54 1.645 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
December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Bond Fund (the "Fund") is registered as a diversified closed-end
management investment company under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to provide current income with the
preservation of capital through investing primarily in a diversified portfolio
of debt securities.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION--Fixed income investments are stated at value using market
quotations or indications of value obtained from an independent pricing service.
Investments in securities listed on a securities exchange are valued at their
sale price as of the close of such securities exchange. Unlisted securities and
listed securities for which the last sales price is not available are valued at
the mean of the bid and asked prices. For those securities where quotations or
prices are not available, valuations are determined in accordance with
procedures established in good faith by the Board of Trustees. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At December 31, 1999, there were no
when issued or delayed delivery purchase commitments.
The Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
independently in repurchase agreements, or transfer uninvested cash balances
into a pooled cash account along with other investment companies advised by Van
Kampen Asset Management Inc. (the "Adviser") or its affiliates, the daily
aggregate of which is invested in repurchase agreements. Repurchase agreements
are fully collateralized by the underlying debt security. The Fund will make
payment for such securities only upon physical delivery or evidence of book
entry transfer to the account of the custodian bank. The seller is required to
maintain the value of the underlying security at not less than the repurchase
proceeds due the Fund.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Discounts are amortized
over the expected life of each applicable security. Premiums on debt securities
are not amortized.
D. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset these losses against any future realized capital
gains. At June 30, 1999, the Fund had an accumulated capital loss carryforward
for tax purposes of $2,154,506, which will expire on June 30, 2000.
At December 31, 1999, for federal income tax purposes, cost of long- and
short-term investments is $210,912,104, the aggregate gross unrealized
appreciation is $3,553,943 and the aggregate gross unrealized depreciation is
$5,488,260, resulting in net unrealized depreciation on long- and short-term
investments of $1,934,317.
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
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999 (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.
F. EXPENSE REDUCTIONS--During the six months ended December 31, 1999, the Fund's
custody fee was reduced by $120 as a result of credits earned on overnight cash
balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $150 million....................................... .50 of 1%
Next $100 million........................................ .45 of 1%
Next $100 million........................................ .40 of 1%
Over $350 million........................................ .35 of 1%
</TABLE>
For the six months ended December 31, 1999, the Fund recognized expenses of
approximately $4,500 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, 1999, the Fund recognized expenses of
approximately $28,200 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 $87,433,763 and $91,887,408,
respectively.
22
<PAGE> 24
DIVIDEND REINVESTMENT PLAN
The Fund pays distributions in cash, but if you own more than 100 shares in
your own name, you may elect to participate in the Fund's dividend reinvestment
plan (the "Plan"). Under the Plan, shares will be issued by the Fund at net
asset value on a date determined by the Board of Trustees between the record and
payable dates on each distribution; however, if the market price including
brokerage commissions, is less than the net asset value, the amount of the
distribution will be paid to the Plan Agent, which will buy such shares as are
available at prices below the net asset value. (If the market price is not
significantly less than the net asset value, it is possible that open market
purchases of shares may increase the market price so that such price plus
brokerage commissions would equal or exceed the net asset value of such shares)
if Plan Agent cannot buy the necessary shares at less than net asset value
before the distribution date, the balance of the distribution will be made in
authorized but unissued shares of the Fund at net asset value. The cost per
share will be the average cost, including brokerage commissions, of all shares
purchased. Since all shares purchased from the Fund are at net asset value,
there will be no dilution, and no brokerage commissions are charged on such
shares.
You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gain distributions does not relieve you of any income tax
which may be payable (or required to be withheld) on dividends or distributions.
You may begin or discontinue participation in the Plan at any time by
written notice to the address below. If you withdraw from the Plan, you may
rejoin at any time if you own the required 100 shares. Elections and
terminations will be effective for distributions declared after receipt. If you
withdraw from the Plan, a certificate for the whole shares and a check for the
fractional shares, if any, credited to your Plan account will be sent as soon as
practicable after receipt of your election to withdraw. Except for brokerage
commissions, if any, which are borne by Plan participants, all costs of the Plan
are borne by the Fund. The Fund reserves the right to amend or terminate the
Plan on 30 days' written notice prior to the record date of the distribution for
which such amendment or termination is effective.
Record stockholders should address all notices, correspondence, questions or
other communications about the Plan to:
EQUISERVE LLP
P.O. BOX 8200
BOSTON, MA 02266-8200
1-800-821-1238
If your shares are not held directly in your name, you should contact your
brokerage firm, bank or other nominee for more information and to see if your
nominee will participate in the Plan on your behalf. If you participate through
your broker and choose to move your account to another broker, you will need to
re-enroll in the Plan through your new broker.
23
<PAGE> 25
VAN KAMPEN BOND FUND
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*
THEODORE A. MYERS
RICHARD F. POWERS, III*--Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
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
PETER W. HEGEL*
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
STATE STREET BANK
AND TRUST CO.
225 Franklin Street
Boston, Massachusetts 02105
SHAREHOLDER SERVICING AGENT
EQUISERVE LLP
P.O. Box 8200
Boston, Massachusetts 02266-8200
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, Illinois 60606-6301
<TABLE>
<C> <S>
---------------------------------------
INQUIRIES ABOUT AN INVESTOR'S
ACCOUNT SHOULD BE REFERRED * "Interested" persons of the
TO THE FUND'S TRANSFER AGENT Fund, as defined in the
EQUISERVE LLP Investment Company Act of
P.O. BOX 8200 1940.
BOSTON, MASSACHUSETTS 02266-8200
TELEPHONE: (800) 821-1238 (C) Van Kampen Funds Inc., 2000.
ALASKA AND HAWAII All rights reserved.
CALL COLLECT: (781) 575-2000
ASK FOR CLOSED-END FUND ACCOUNT (SM) denotes a service mark of
SERVICES Van Kampen Funds Inc.
---------------------------------------
</TABLE>
24
<PAGE> 26
YEAR 2000 UPDATE
As we enter the new century, it's "business as usual" for Van Kampen. Thank you
for the confidence you showed in us during the changeover on January 1, 2000,
and for entrusting us with your investment portfolio. We look forward to
continuing to serve your investment needs.
