<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................................ 8
Portfolio of Investments......................... 9
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....................... 24
</TABLE>
VXS SAR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG]
Richard F. Powers, III
Chairman
Van Kampen Asset Management Inc.
[SIG]
Dennis J. McDonnell
President
Van Kampen Asset Management Inc.
1
<PAGE> 3
ECONOMIC SNAPSHOT
The strength of the domestic economy continued to defy expectations in the
first half of 1999, although it finally began to show signs of slowing down.
Strong growth, healthy employment, and low inflation all contributed to the
favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3
percent during the first quarter of 1999, but fell to 2.3 percent in the second
quarter. The first-quarter expansion was fueled by an increase in consumer
spending, which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in
more than 30 years. Throughout the reporting period, unemployment remained low,
the number of jobs grew, and wages rose. The labor market remained especially
tight in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report (CPI). Following this up-tick, the Federal Reserve raised interest
rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a
series of rate increases, May's tame CPI report prompted it to drop this bias
when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may
continue, bringing the economy back to historically normal growth levels.
Healthy job growth, which has been supporting the consumer confidence and
spending levels, showed signs of faltering toward the end of the reporting
period. However, a renewed optimism for corporate earnings, low unemployment,
and a vibrant housing market should provide some balance against a slower job
growth rate.
INTEREST RATES AND INFLATION
June 30, 1997, through June 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 1997 6.5000 2.3000
6.0000 2.2000
5.5000 2.2000
Sep 1997 6.2500 2.2000
5.7500 2.1000
5.6875 1.8000
Dec 1997 6.5000 1.7000
5.5625 1.6000
5.6250 1.4000
Mar 1998 6.1250 1.4000
5.6250 1.4000
5.6875 1.7000
Jun 1998 6.0000 1.7000
5.5625 1.7000
5.9375 1.6000
Sep 1998 5.7500 1.5000
5.2500 1.5000
4.8750 1.5000
Dec 1998 4.0000 1.6000
4.8125 1.7000
4.8750 1.6000
Mar 1999 5.1250 1.7000
4.9375 2.3000
4.5000 2.1000
Jun 1999 4.0000 2.0000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999
VAN KAMPEN CONVERTIBLE SECURITIES FUND
NYSE TICKER SYMBOL--VXS
<TABLE>
<S> <C>
TOTAL RETURNS
Six-month total return based on market price(1)........... 10.96%
Six-month total return based on NAV(2).................... 13.01%
DISTRIBUTION RATE
Distribution rate as a % of closing common stock
price(3).................................................. 3.88%
SHARE VALUATIONS
Net asset value........................................... $ 26.55
Closing common stock price................................ $21.6250
Six-month high common stock price (06/30/99).............. $21.6250
Six-month low common stock price (03/24/99)............... $19.6875
</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.
See the Comparative Performance section of the current prospectus. An investment
should be made with an understanding of the risks that an investment in equity
securities entails. These include the risk that the financial condition of the
Issuers of the securities in the portfolio, or the condition of the stock market
in general, may worsen and therefore, the value of Fund shares may decline. Past
performance does not guarantee future results. Investment return and net asset
value will fluctuate with market conditions. Fund shares, when redeemed, may be
worth more or less than their original cost.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN CONVERTIBLE SECURITIES FUND
We recently spoke to the management team of the Van Kampen Convertible
Securities Fund about the key events and economic forces that shaped the markets
during the past six months. The team includes Christine Drusch, senior portfolio
manager, who has been the Fund's lead manager since February 1998 and has worked
in the investment industry since 1985; Matthew Hart and David McLaughlin,
portfolio managers; and Stephen L. Boyd, chief investment officer for equity
investments. The following excerpts reflect their views on the Fund's
performance during the six months ended June 30, 1999.
Q WHAT MARKET FACTORS AFFECTED THE FUND DURING THE REPORTING PERIOD?
A As has been its trademark in recent times, the stock market was volatile
during the first six months of 1999. The Dow Jones Industrial Average
passed two significant milestones during the reporting period--10,000 in
late March and 11,000 in early May. Small-cap stocks, measured by the Russell
2000, performed solidly, if not spectacularly, during the six months.
Investors' anticipation of an interest-rate increase toward the end of the
reporting period placed downward pressure on the stock market, particularly
among large-cap growth stocks. In response to this shift, investors began to
favor a broader range of market offerings, including cyclical stocks and
smaller-company securities. The Federal Reserve did indeed raise interest rates
on the last day of the reporting period, but, because the increase was widely
expected, the effect on stock prices was limited.
Q HOW DID THE CONVERTIBLE SECURITIES MARKET RESPOND?
A In all, it was a favorable environment for convertible securities. The
convertibles market is composed primarily of securities issued by mid-cap
companies. As a result, convertibles--and the Fund's return--benefited
from the solid performance of small and mid caps during the reporting period as
a whole.
Q GIVEN THIS ENVIRONMENT FOR CONVERTIBLES, WHAT WAS YOUR STRATEGY FOR
MANAGING THE FUND?
A We didn't change our investment strategy in response to market
conditions--we consistently manage the Fund for capital appreciation,
current income, and preservation of capital by investing primarily in
convertible securities. In seeking to meet this objective, we continued to focus
on growth companies and to diversify across market sectors. This approach helped
the Fund's return during the reporting period.
That said, because of the market's volatility, we were careful in selecting
areas of the market in which to invest. Although there were some attractive
opportunities in Internet
4
<PAGE> 6
technology, we sought to moderate our exposure to this area because we believed
that valuations for Internet companies were, in most cases, extremely high. We
did own some Internet names but were selective about our investments. These
securities' prices are especially sensitive to rising interest rates--like we
witnessed during the last few months of the reporting period. The Fund was well
positioned during this time, as many Internet securities underperformed.
Along with limiting our exposure to stocks with high price-to-earnings
ratios, we also sought to take advantage of the market shift mentioned earlier
and slightly increased our exposure to cyclical industries. Our efforts enabled
us to moderate the effects of the market's recent shift away from traditional
growth securities and avoid significant damage to the Fund's return.
Q WHAT WERE SOME OF YOUR MOST SUCCESSFUL INVESTMENTS DURING THE REPORTING
PERIOD?
A For the most part, our investments in technology companies continued to
pay off for the Fund. We were pleased with our holdings in businesses that
have benefited from the growth of the telecommunications
industry--particularly cellular technology, which has enjoyed extremely rapid
growth of late. These holdings included Qualcomm, which develops and markets
communications technologies; Omnipoint, which makes and markets digital wireless
communications products; and Conexant Systems, which develops semiconductors
used in those products. At the end of the reporting period, one of the Fund's
largest holdings was Comverse Technology. This company is the market leader in
its field, and it performed very well for the Fund.
Internet service provider America Online was a successful holding for the
Fund. Toward the end of the reporting period, however, the company's stock
performance declined, and we eliminated our position.
Although many retail companies lagged in April and May, our investments in
women's apparel retailer AnnTaylor and home-products company Home Depot
benefited the Fund. At the end of the reporting period, these companies
continued to show strong same-store sales--often a sign of a healthy business.
Keep in mind that not all securities in the Fund performed as favorably, nor
is there any guarantee they will continue to do so in the future.
Q WERE YOU DISAPPOINTED BY ANY OF YOUR INVESTMENTS?
A Our disappointments were on a security-by-security basis, rather than the
result of underperformance in specific industries. Although other
securities performed below our expectations, these had a significant
impact on the Fund's return for the six-month period:
- Just prior to the start of the reporting period, we sold for a healthy
gain some of our position in convertible bonds issued by SCI, an
electronics contract manufacturer. Its convertibles began a steady decline
thereafter. In early
5
<PAGE> 7
May 1999, SCI called the remaining bonds in our portfolio, forcing us to
convert the bonds into common stock. By the end of the reporting period
the stock closed moderately higher than our conversion price, enabling us
to recover some of our losses of the previous months. We are optimistic
about this stock's future performance and continue to own it.
- Total Renal Care, a company that provides dialysis services to patients
with chronic kidney failure, similarly dragged the Fund's return. After
disappointing earnings in the first quarter, the firm's stock price fell
58 percent and the bonds fell 32 percent in a single day. The stock has
come back somewhat since then, although it is still down considerably for
the reporting period. We've maintained a position in Total Renal Care
because we believe the company will recover due to the industry's
attractive demographics, as aging baby boomers represent a promising
future market.
- Another security that performed poorly was Sunrise Assisted Living, which
provides homelike assisted living accommodations for the elderly. The
assisted living industry faced a difficult reporting period, as political
uncertainty surrounding patient reimbursement led to weak performance. We
eliminated our holdings in Sunrise during the period.
Q HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A For the six months ended June 30, 1999, the Fund generated a total return
of 13.01 percent(2) at net asset value and 10.96 percent(1) at market
price. The Fund's return reflects the change in market price per share on
the New York Stock Exchange from $19.875 on December 31, 1998, to $21.625 on
June 30, 1999, and dividends totaling $0.4200 per share. Please refer to the
chart on page 3 for additional Fund performance results.
Q WHAT DO YOU SEE AHEAD FOR THE FUND FOR THE NEXT SIX MONTHS?
A Because the Fund invests primarily in growth-oriented companies, such as
technology businesses, we are vulnerable if interest rates rise--growth
stocks tend to do poorly during periods of rising interest rates. At the
same time, we have increased our weighting in cyclical companies, which have
typically fared well in a rising rate environment. If interest rates rise, as
appears to be the current trend, we would expect to find a supportive
environment for the cyclical convertibles in which we've invested. And, if we
continue to experience favorable economic growth without inflation, then we are
hopeful that the market environment will remain positive for convertibles in
general.
We believe convertibles continue to offer investors a less aggressive way to
invest in growth companies--particularly in emerging industries such as Internet
technology. Investing in this area of the market can be risky, and convertibles
offer investors a way to participate in potential market gains while still
earning income and enjoying the potential
6
<PAGE> 8
for reduced volatility from the convertibles. This is an attractive feature in
uncertain economic times.
[SIG]
Christine Drusch
Senior Portfolio Manager
[SIG]
David McLaughlin
Portfolio Manager
[SIG]
Matthew Hart
Portfolio Manager
[SIG]
Stephen L. Boyd
Chief Investment Officer
Equity Investments
7
<PAGE> 9
GLOSSARY OF TERMS
CLASS A SHARES: When Class A shares of a fund are purchased, the share price
includes the net asset value plus a one-time sales charge (or "load"). In
most cases, there is no redemption fee (contingent deferred sales charge).
CONVERTIBLE SECURITY: A security that can be exchanged for common stock at the
option of the security holder for a specified price or rate. Examples
include convertible bonds and convertible preferred stock.
CYCLICAL INDUSTRIES: Industries where earnings tend to rise quickly when the
economy strengthens and fall quickly when the economy weakens. Examples of
cyclical industries include housing, automobiles, and paper. Noncyclical
industries are typically less sensitive to changes in the economy. These
include utilities, grocery stores, and pharmaceutical companies.
DOW JONES INDUSTRIAL AVERAGE: The oldest and most widely recognized stock market
average, which reflects the performance of 30 actively traded stocks of
well-established, blue-chip companies.
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.
GROWTH INVESTING: An investment strategy that seeks to identify stocks that tend
to offer greater-than-average earnings growth. Growth stocks typically trade
at higher prices relative to their earnings than value stocks, due to their
higher expected earnings growth.
MARKET CAPITALIZATION: The size of a company, as measured by the value of its
issued and outstanding stock.
NET ASSET VALUE (NAV): The value of a fund share, calculated by deducting a
fund's liabilities from the total assets applicable to common Shareholders
in its portfolio and dividing this amount by the number of common shares
outstanding.
PRICE-TO-EARNINGS (P/E) RATIO: The price-to-earnings ratio shows the "multiple"
of earnings at which a stock is selling. The P/E ratio is calculated by
dividing a stock's current price by its current earnings per share. A high
multiple means that investors are optimistic about future growth and have
bid up the stock's price.
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.
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONVERTIBLE DEBT 46.9%
CONSUMER DISTRIBUTION 4.3%
$1,099 AnnTaylor Stores Corp., 144A --
Private Placement (a).................. 3.750% 06/18/19 $ 693,744
840 Costco Cos., Inc. ..................... * 08/19/17 794,850
800 Home Depot, Inc. ...................... 3.250 10/01/01 2,242,000
-----------
3,730,594
-----------
CONSUMER DURABLES 2.7%
1,470 Duetsche Bank Finance BV (Convertible
into 7,645 DaimlerChrysler, AG
shares)................................ * 02/12/17 751,537
3,580 Lennar Corp. .......................... * 07/29/18 1,570,725
-----------
2,322,262
-----------
CONSUMER NON-DURABLES 0.8%
850 Loews Corp. ........................... 3.125 09/15/07 686,375
-----------
CONSUMER SERVICES 4.1%
800 Amazon.com, Inc., 144A -- Private
Placement (a).......................... 4.750 02/01/09 782,000
470 Interpublic Group of Companies, Inc.,
144A -- Private Placement (a).......... 1.870 06/01/06 431,812
1,100 Jacor Communications, Inc., LYON....... * 02/09/18 613,250
880 News America Holdings, Inc., LYON...... * 03/11/13 644,600
200 Omnicom Group, Inc. ................... 4.250 01/03/07 513,000
300 Omnicom Group, Inc. ................... 2.250 01/06/13 508,500
-----------
3,493,162
-----------
ENERGY 0.8%
698 PennzEnergy Co. ....................... 4.950 08/15/08 718,068
-----------
FINANCE 1.1%
784 Net.B@nk, Inc. ........................ 4.750 06/01/04 969,220
-----------
HEALTHCARE 6.1%
428 Alpharma, Inc., 144A -- Private
Placement (a).......................... 3.000 06/01/06 526,440
570 Alza Corp. ............................ 5.000 05/01/06 787,312
920 Centocor, Inc. ........................ 4.750 02/15/05 1,022,350
1,300 Elan Finance Corp., Ltd., LYON......... * 12/14/18 666,250
500 IDEC Pharmaceuticals Corp., LYON, 144A
--
Private Placement (a).................. * 02/16/19 271,250
450 Renal Treatment Centers, Inc. ......... 5.625 07/15/06 377,437
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HEALTHCARE (CONTINUED)
$1,450 Roche Holdings, Inc., LYON, 144A --
Private Placement (a).................. * 04/20/10 $ 819,250
541 Total Renal Care Holdings, Inc., 144A
-- Private Placement (a)............... 7.000% 05/15/09 440,239
474 Wellpoint Health Networks, Inc. ....... * 07/02/19 335,948
-----------
5,246,476
-----------
PRODUCER MANUFACTURING 0.9%
730 WMX Technologies, Inc. ................ 2.000 01/24/05 790,225
-----------
TECHNOLOGY 20.8%
930 Adaptec, Inc. ......................... 4.750 02/01/04 882,337
450 At Home Corp., 144A -- Private
Placement (a).......................... 0.525 12/28/18 348,750
370 Automatic Data Processing, Inc.,
LYON................................... * 02/20/12 420,875
1,050 Citrix Systems, Inc., 144A -- Private
Placement (a).......................... * 03/22/19 469,875
2,015 Comverse Technology, Inc., 144A --
Private Placement (a).................. 4.500 07/01/05 3,760,494
1,090 Conexant Systems, Inc., 144A -- Private
Placement (a).......................... 4.250 05/01/06 1,547,800
270 DoubleClick, Inc., 144A -- Private
Placement (a).......................... 4.750 03/15/06 337,500
150 EMC Corp. ............................. 3.250 03/15/02 728,250
2,560 Hewlett Packard Co., LYON.............. * 10/14/17 1,625,600
390 HNC Software, Inc. .................... 4.750 03/01/03 378,300
190 Lam Research Corp. .................... 5.000 09/01/02 173,375
365 Level One Communications, Inc. ........ 4.000 09/01/04 710,381
1,300 LSI Logic Corp., 144A -- Private
Placement (a).......................... 4.250 03/15/04 2,109,250
280 May & Speh, Inc. ...................... 5.250 04/01/03 394,800
294 Mindspring Enterprises, Inc. .......... 5.000 04/15/06 278,014
350 Oak Industries, Inc. .................. 4.875 03/01/08 447,563
400 Quantum Corp. ......................... 7.000 08/01/04 382,000
773 Sanmina Corp., 144A -- Private
Placement (a).......................... 4.250 05/01/04 858,996
940 Solectron Corp., LYON, 144A -- Private
Placement (a).......................... * 01/27/19 547,550
1,190 STMicroelectronics NV, LYON
(Netherlands).......................... * 06/10/08 1,497,912
-----------
17,899,622
-----------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITIES 5.3%
$ 11 MediaOne Group, Inc., PIES............. 6.250% 08/15/01 $ 977,400
700 NTL, Inc., 144A -- Private Placement
(a).................................... 7.000 12/15/08 1,101,625
10 Sprint Corp., DECS..................... 8.250 03/31/00 826,500
1,600 Telefonos de Mexico, SA................ 4.250 06/15/04 1,656,000
-----------
4,561,525
-----------
TOTAL CONVERTIBLE DEBT 46.9%......................................... 40,417,529
-----------
</TABLE>
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK 32.0%
CONSUMER NON-DURABLES 0.9%
Seagram, Ltd., ACES, 7.50% (b)......................... 15,700 784,019
-----------
CONSUMER SERVICES 2.6%
Adelphia Communications Corp., Ser D, 5.50% (b)........ 1,900 366,700
CSC Holdings, Inc., 8.50%.............................. 6,500 702,000
Echostar Communications Corp., Ser C, 6.75%............ 900 279,000
MediaOne Group, Inc., Ser D, 4.50%..................... 6,000 898,875
-----------
2,246,575
-----------
ENERGY 4.3%
Apache Corp., ACES, 6.50%.............................. 11,400 421,800
El Paso Energy Capital Trust I, 4.75%.................. 22,500 1,113,750
Pogo Trust I, QUIPS, 6.50% (b)......................... 9,400 474,112
Tosco Financing Trust, 5.75%........................... 16,800 814,800
Unocal Capital Trust, 6.25%............................ 15,000 845,625
-----------
3,670,087
-----------
FINANCE 5.3%
American General Corp., 7.00%.......................... 6,200 384,400
Amerus Life Holdings, Inc., 7.00%...................... 17,400 474,150
Conseco, Inc., PRIDES, 7.00%........................... 23,200 932,350
General Growth Properties, Inc., 7.25%................. 17,600 422,400
National Australia Bank, Ltd., 7.875%.................. 27,000 820,125
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (CONTINUED)
Philadelphia Consolidated Holdings, PRIDES, 7.00%...... 38,200 $ 398,712
PLC Capital Trust II, 6.50%............................ 4,000 232,000
Southwest Securities Group, Inc., 5.00% (b)............ 15,700 938,075
-----------
4,602,212
-----------
HEALTHCARE 0.5%
Alkermes, Inc., 6.50%.................................. 9,000 431,438
-----------
PRODUCER MANUFACTURING 1.4%
Coltec Capital Trust, 5.25%, 144A -- Private Placement
(a).................................................. 8,100 378,675
Ingersoll-Rand Co., PRIDES, 6.75%...................... 28,500 855,000
-----------
1,233,675
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 0.5%
Monsanto Co., ACES, 6.50%.............................. 10,150 407,269
-----------
TECHNOLOGY 3.9%
Intermedia Communications, Inc., Ser E, 7.00% (b)...... 24,200 692,725
Nextlink Communications, Inc., 6.50%, 144A -- Private
Placement (a)........................................ 1,400 126,350
PSINet, Inc., Ser C, 6.75% (b)......................... 19,200 880,800
Qualcomm Financial Trust, 5.75%........................ 6,085 1,227,649
Tribune Co., DECS, 6.25%............................... 15,200 427,500
-----------
3,355,024
-----------
TRANSPORTATION 4.4%
Canadian National Railway Co., 5.25% (b)............... 4,600 246,100
Tower Automotive Capital Trust, 6.75%.................. 18,000 924,750
Tower Automotive Capital Trust, 6.75%, 144A -- Private
Placement (a)........................................ 20,000 1,027,500
Union Pacific Capital Trust, 6.25%..................... 31,000 1,592,625
-----------
3,790,975
-----------
UTILITIES 8.2%
CalEnergy Capital Trust III, 6.50%..................... 20,000 945,000
Global TeleSystems Group, Inc., 7.25%, 144A -- Private
Placement (a)(b)....................................... 23,700 1,587,900
Houston Industries, Inc., ACES, 7.00%.................. 4,650 554,512
Omnipoint Corp., 7.00%, 144A -- Private Placement
(a).................................................. 20,000 1,097,500
Skytel Communications, Inc., 2.25%..................... 11,250 420,469
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES (CONTINUED)
Texas Utilities Co., PRIDES, 9.25%..................... 13,000 $ 715,000
Winstar Communications, Inc., Ser D, 7.00%............. 30,000 1,702,500
-----------
7,022,881
-----------
TOTAL PREFERRED STOCK 32.0%....................................... 27,544,155
-----------
COMMON STOCKS 13.9%
CONSUMER DISTRIBUTION 2.3%
AnnTaylor Stores Corp. (b)............................. 33,594 1,511,730
Sunglass Hut International, Inc. (b)................... 25,000 429,688
-----------
1,941,418
-----------
CONSUMER NON-DURABLES 0.3%
Jones Apparel Group, Inc. (b).......................... 7,500 257,344
-----------
CONSUMER SERVICES 0.5%
Comcast Corp., Class A................................. 11,200 430,500
-----------
ENERGY 1.2%
Mobil Corp. ........................................... 10,300 1,019,700
-----------
FINANCE 2.5%
American Express Co. .................................. 4,200 546,525
Citigroup, Inc. ....................................... 19,500 926,250
Equitable Cos., Inc. .................................. 5,300 355,100
Washington Mutual, Inc. ............................... 9,707 343,385
-----------
2,171,260
-----------
PRODUCER MANUFACTURING 0.9%
Tyco International Ltd................................. 8,308 787,183
-----------
TECHNOLOGY 4.1%
Applied Materials, Inc. (b)............................ 5,500 406,312
Copper Mountain Networks, Inc. (b)..................... 1,000 77,250
Lam Research Corp. (b)................................. 10,000 466,875
Motorola, Inc. ........................................ 5,500 521,125
SCI Systems, Inc. (b).................................. 14,356 681,910
Texas Instruments, Inc. ............................... 4,200 609,000
Unisys Corp. (b)....................................... 20,000 778,750
-----------
3,541,222
-----------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- -----------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES 2.1%
AT & T Corp. .......................................... 19,500 $ 1,088,344
Intermedia Communications, Inc. ....................... 463 13,890
MCI Worldcom, Inc. .................................... 7,610 654,935
Winstar Communications, Inc. .......................... 484 23,595
-----------
1,780,764
-----------
TOTAL COMMON STOCKS 13.9%......................................... 11,929,391
-----------
TOTAL LONG-TERM INVESTMENTS 92.8%
(Cost $68,411,421)............................................... 79,891,075
-----------
SHORT-TERM INVESTMENTS 5.2%
REPURCHASE AGREEMENT 2.9%
BA Securities ($2,468,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 06/30/99, to be sold
on 07/01/99 at $2,468,346)
(Cost $2,468,000)................................................ 2,468,000
U.S. GOVERNMENT AGENCY OBLIGATION 2.3%
Federal Home Loan Bank Discount Notes ($2,000,000 par, yielding
4.783%, 08/13/99 maturity)....................................... 1,988,726
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $4,456,726)................................................ 4,456,726
-----------
TOTAL INVESTMENTS 98.0%
(Cost $72,868,147)............................................... 84,347,801
OTHER ASSETS IN EXCESS OF LIABILITIES 2.0%........................ 1,706,717
-----------
NET ASSETS 100.0%................................................. $86,054,518
===========
</TABLE>
* Zero coupon bond
(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) Non-income producing security as this security currently does not declare
dividends.
ACES -- Automatically convertible equity securities
DECS -- Debt exchangeable for common stock, traded in shares
LYON -- Liquid yield option note
PIES -- Premium income exchangeable securities, traded in shares
PRIDES -- Preferred redeemable interest dividend equity security, traded in
shares
QUIPS -- Quarterly income preferred securities
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $72,868,147)........................ $84,347,801
Receivables:
Investments Sold.......................................... 2,376,735
Interest.................................................. 248,040
Dividends................................................. 50,803
Other....................................................... 54,493
-----------
Total Assets.......................................... 87,077,872
-----------
LIABILITIES:
Payables:
Investments Purchased..................................... 774,640
Income Distributions...................................... 117,838
Investment Advisory Fee................................... 34,406
Affiliates................................................ 2,994
Custodian Bank............................................ 96
Accrued Expenses............................................ 66,827
Trustees' Deferred Compensation and Retirement Plans........ 26,553
-----------
Total Liabilities..................................... 1,023,354
-----------
NET ASSETS.................................................. $86,054,518
===========
NET ASSETS CONSIST OF:
Common Shares ($1.00 par value with 12,500,000 shares
authorized, 3,251,324 shares issued, of which 9,500 are
held in treasury and 3,241,824 are outstanding)........... $ 3,241,824
Paid in Surplus............................................. 68,041,601
Net Unrealized Appreciation................................. 11,479,654
Accumulated Net Realized Gain............................... 2,966,383
Accumulated Undistributed Net Investment Income............. 325,056
-----------
NET ASSETS.................................................. $86,054,518
===========
NET ASSET VALUE PER SHARE ($86,054,518 divided by 3,241,824
shares outstanding)....................................... $ 26.55
===========
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 1,026,757
Dividends................................................... 728,496
-----------
Total Income............................................ 1,755,253
-----------
EXPENSES:
Investment Advisory Fee..................................... 201,473
Shareholder Reports......................................... 33,309
Custody..................................................... 17,474
Accounting.................................................. 16,402
Trustees' Fees and Related Expenses......................... 14,466
Shareholder Services........................................ 14,291
Legal....................................................... 362
Other....................................................... 32,496
-----------
Total Expenses.......................................... 330,273
Less Credits Earned on Overnight Cash Balances.......... 2,538
-----------
Net Expenses............................................ 327,735
-----------
NET INVESTMENT INCOME....................................... $ 1,427,518
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 2,818,680
Futures................................................... 540,227
-----------
Net Realized Gain........................................... 3,358,907
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 6,226,819
End of the Period:
Investments............................................. 11,479,654
-----------
Net Unrealized Appreciation During the Period............... 5,252,835
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 8,611,742
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $10,039,260
===========
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1999
and the Year Ended December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 1,427,518 $ 2,904,812
Net Realized Gain................................ 3,358,907 910,780
Net Unrealized Appreciation During the Period.... 5,252,835 805,481
----------- -----------
Change in Net Assets from Operations............. 10,039,260 4,621,073
----------- -----------
Distributions from Net Investment Income......... (1,361,323) (2,851,284)
Distributions from Net Realized Gain............. -0- (3,056,743)
----------- -----------
Total Distributions.............................. (1,361,323) (5,908,027)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... 8,677,937 (1,286,954)
NET ASSETS:
Beginning of the Period.......................... 77,376,581 78,663,535
----------- -----------
End of the Period (Including accumulated
undistributed net investment income of $325,056
and $258,861, respectively).................... $86,054,518 $77,376,581
=========== ===========
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months
Ended --------------------
June 30, 1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period..... $23.868 $24.265 $24.451
------- ------- -------
Net Investment Income...................... .440 .896 1.006
Net Realized and Unrealized Gain/Loss...... 2.657 .530 3.014
------- ------- -------
Total from Investment Operations............. 3.097 1.426 4.020
------- ------- -------
Less:
Distributions from and in Excess of Net
Investment Income........................ .420 .880 1.179
Distributions from and in Excess of Net
Realized Gain............................ -0- .943 3.027
------- ------- -------
Total Distributions.......................... .420 1.823 4.206
------- ------- -------
Net Asset Value, End of the Period........... $26.545 $23.868 $24.265
======= ======= =======
Market Price Per Share at End of the
Period..................................... $21.625 $19.875 $21.125
Total Investment Return at Market Price
(a,c)...................................... 10.96%* 2.05% 19.48%
Total Return at Net Asset Value (b,c)........ 13.01%* 5.90% 18.57%
Net Assets at End of the Period (In
millions).................................. $ 86.1 $ 77.4 $ 78.7
Ratio of Expenses to Average Net Assets...... .81% .83% .76%
Ratio of Net Investment Income to Average Net
Assets..................................... 3.54% 3.75% 3.86%
Portfolio Turnover........................... 59%* 157% 181%
</TABLE>
* Non-Annualized
(a) Total Investment Return at Market Price reflects the change in market value
of the 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) This disclosure was not required in fiscal years prior to 1992.
18
<PAGE> 20
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 24.41 $ 21.62 $ 24.88 $ 23.64 $ 22.23 $ 19.41 $ 22.73
------- ------- ------- ------- ------- ------- -------
.968 1.14 1.09 1.15 1.175 1.32 1.47
1.768 3.5325 (2.56) 2.01 1.415 2.90 (3.2475)
------- ------- ------- ------- ------- ------- -------
2.736 4.6725 (1.47) 3.16 2.59 4.22 (1.7775)
------- ------- ------- ------- ------- ------- -------
1.005 1.15 1.10 1.12 1.18 1.40 1.40
1.690 .7325 .69 .80 -0- -0- .1425
------- ------- ------- ------- ------- ------- -------
2.695 1.8825 1.79 1.92 1.18 1.40 1.5425
------- ------- ------- ------- ------- ------- -------
$24.451 $ 24.41 $ 21.62 $ 24.88 $ 23.64 $ 22.23 $ 19.41
======= ======= ======= ======= ======= ======= =======
$21.125 $21.375 $18.125 $22.375 $20.375 $19.250 $16.625
11.67% 28.88% (11.71%) 19.43% 12.31% 24.68% (10.39%)
11.51% 23.42% (5.29%) 14.50% 12.84% 23.32% (7.37%)
$79.3 $79.1 $70.1 $80.7 $76.6 $72.1 $62.9
.88% .80% .82% .87% .88% .89% .86%
3.88% 4.82% 4.70% 4.60% 5.28% 6.41% 7.01%
140% 127% 111% 128% 87% 168% 95%
</TABLE>
See Notes to Financial Statements.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Convertible Securities 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, capital appreciation and conservation of capital through
investment in a portfolio consisting mainly of convertible bonds and preferred
stocks.
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 and preferred stock 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 sales 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.
Fund investments include lower rated debt securities which may be more
susceptible to adverse economic conditions than other investment grade holdings.
These securities are often subordinated to the prior claims of other senior
lenders and uncertainties exist as to an issuer's ability to meet principal and
interest payments. Debt securities rated below investment grade and comparable
unrated securities represented approximately 29% of the investment portfolio at
the end of the period.
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 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)
June 30, 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.
At June 30, 1999, for federal income tax purposes the cost of long- and
short-term investments is $72,877,301, the aggregate gross unrealized
appreciation is $13,007,787 and the aggregate gross unrealized depreciation is
$1,537,287, resulting in net unrealized appreciation on long- and short-term
investments of $11,470,500. 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.
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 which are included in ordinary income for
tax purposes.
F. EXPENSE REDUCTIONS--During the six months ended June 30, 1999, the Fund's
custody fee was reduced by $2,538 as a result of credits earned on overnight
cash balances.
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 June 30, 1999, the Fund recognized expenses of
approximately $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 six months ended June 30, 1999, the Fund recognized expenses of
approximately $16,400, 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 $45,188,735 and $43,520,255,
respectively.
4. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio or generate potential gain. All of the Fund's portfolio holdings,
including derivative instruments, are marked to market each day with the change
in value reflected in
22
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
unrealized appreciation/depreciation. Upon disposition, a realized gain or loss
is recognized accordingly, except when taking delivery of a security underlying
a futures contract. In this instance, the recognition of gain or loss is
postponed until the disposal of the security underlying the futures contract.
During the period, the Fund invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Fund
generally invests in stock index futures. These contracts are generally used to
provide the return of an index without purchasing all of the securities
underlying the index or to manage the Fund's overall exposure to the equity
markets.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, cash or liquid securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin).
Transactions in futures contracts, each with a par value of $100,000, for
the six months ended June 30, 1999, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1998............................ 15
Futures Opened............................................ -0-
Futures Closed............................................ (15)
---
Outstanding at June 30, 1999................................ -0-
===
</TABLE>
23
<PAGE> 25
DIVIDEND REINVESTMENT PLAN
The Fund pays distributions in cash, but if you own more than 100 shares in your
own name, you may elect to participate in the Fund's dividend reinvestment plan
(the "Plan"). Under the Plan, shares will be issued by the Fund at net asset
value on a date determined by the Board of Trustees between the record and
payable dates on each distribution; however, if the market price, including
brokerage commissions, is less than the net asset value, the amount of the
distribution will be paid to State Street Bank and Trust Company ("State
Street"), 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 State Street 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 form 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 LP
P.O. BOX 8200
BOSTON, MA 02266-8200
800-341-2929
If your shares are not held directly in your name, you should contact your
brokerage firm, bank or other nominee for more information and to see if your
nominee will participate in the Plan on your behalf. If you participate through
your broker and choose to move your account to another broker, you will need to
re-enroll in the Plan through your new broker.
24
<PAGE> 26
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and expenses. Please read it carefully before you invest or send money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM--to view a prospectus, select Download
Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Deaf users, call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM and selecting Contact Us
25
<PAGE> 27
VAN KAMPEN CONVERTIBLE SECURITIES FUND
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL* - Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
---------------------------------------
INQUIRES ABOUT AN INVESTOR'S
ACCOUNT SHOULD BE REFERRED TO THE
FUND'S TRANSFER AGENT
EQUISERVE
P.O. BOX 8200
BOSTON, MASSACHUSETTS 02266-8200
TELEPHONE: (800) 821-1238
ALASKA, CALIFORNIA AND HAWAII CALL
COLLECT: (713) 993-0500
EXTENSION: 2223
---------------------------------------
INVESTMENT ADVISER
VAN KAMPEN
ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
CUSTODIAN
STATE STREET BANK AND TRUST CO.
225 Franklin Street
Boston, Massachusetts 02105
SHAREHOLDER SERVICING AGENT
EQUISERVE LP
P.O. Box 8200
Boston, Massachusetts 02266-8200
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
ERNST & YOUNG LLP
1221 McKinney Suite 2400
Houston, Texas 77010
* "Interested" persons of the Trust, as defined in the Investment Company Act
of 1940.
(C) Van Kampen Funds Inc., 1999 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
26
<PAGE> 28
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Fund was held on June 16, 1999, where
shareholders voted on the election of trustees and the selection of independent
public accountants.
1) With regard to the election of the following trustees by shareholders of
the Fund:
<TABLE>
<CAPTION>
# OF SHARES
--------------------
IN FAVOR WITHHELD
- ------------------------------------------------------------------------
<S> <C> <C>
Wayne W. Whalen.................................... 2,573,676 65,738
Steve Muller....................................... 2,572,876 66,538
Rod Dammeyer....................................... 2,573,786 65,628
</TABLE>
The other trustees of the Fund whose terms did not expire in 1999 are David
C. Arch, Howard J Kerr, Dennis J. McDonnell, Theodore A. Myers, Don G. Powell
and Hugo F. Sonnenschein.
2) With regard to the ratification of Ernst & Young LLP as independent
public accountants for the Fund, 2,596,597 shares voted in favor of the
proposal, 18,599 shares voted against and 24,218 shares abstained.
27
<PAGE> 29
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
28
<TABLE> <S> <C>
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<NUMBER> 11
<NAME> CONVERTIBLE SECS
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
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