<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 of Investments......................... 8
Statement of Assets and Liabilities.............. 13
Statement of Operations.......................... 14
Statement of Changes in Net Assets............... 15
Financial Highlights............................. 16
Notes to Financial Statements.................... 18
Report of Independent Auditors................... 23
Dividend Reinvestment Plan....................... 24
</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,
/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.
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
GRAPH
<TABLE>
<CAPTION>
97Q3 4
- ---- -
<S> <C>
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 CONVERTIBLE SECURITIES FUND
NYSE TICKER SYMBOL--VXS
<TABLE>
<S> <C>
TOTAL RETURNS
One-year total return based on market price(1)............ 39.22%
One-year total return based on NAV(2)..................... 50.19%
DISTRIBUTION RATE
Distribution rate as a % of closing common stock
price(3).................................................. 3.25%
SHARE VALUATIONS
Net asset value........................................... $ 33.99
Closing common stock price................................ $25.8750
One-year high common stock price (12/31/99)............... $25.8750
One-year 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 with representatives of the adviser of the Van Kampen
Convertible Securities Fund about the key events and economic forces that shaped
the markets during the past 12 months. The representatives include 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. She is
joined by Matthew Hart and David McLaughlin, portfolio managers, and Stephen L.
Boyd, chief investment officer for equity investments. The following discussion
reflects their views on the Fund's performance during the 12 months ended
December 31, 1999.
Q WHAT MARKET FACTORS AFFECTED THE FUND DURING THE REPORTING PERIOD?
A The Dow Jones Industrial Average--perhaps the country's most widely
recognized stock market index--began the reporting period near 9200,
crossing several key milestones in the first half of the year: 10,000 in
March and 11,000 in May. Major fluctuations followed, however, as the index
nearly retreated below 10,000 in the difficult third quarter before once again
lifting to a record high in December. While the Dow performed well overall
during 1999, it was actually the technology-heavy NASDAQ stock index that stole
the show, returning a phenomenal 86 percent for the year. However, these high
returns helped to mask that not all securities shared in the good fortune--the
indices were fueled by the outstanding performance of a relatively small group
of investments.
Q GIVEN THIS ENVIRONMENT, WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND?
A We consistently manage the Fund to seek current income, capital
appreciation, and conservation 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 returns during the reporting period because of the outstanding
performance of many growth investments in 1999.
During the reporting period, the portfolio was weighted heavily in
securities of technology and communications-services companies. This weighting
had an extremely favorable impact on our performance, as these were two of the
market's fastest-growing areas. Of course, there's no guarantee that the factors
that contributed to this strong performance will continue to occur in the
future.
We also decided to decrease our exposure to companies in industries that
have tended to perform poorly in an environment of rising interest rates, as we
experienced in 1999. As a result, we minimized our investments in financial
services, electric utilities, and transportation. This reduction was most
significant with regard to electric utilities, in which the Fund had been
heavily invested early in the reporting period. We opted to eliminate
4
<PAGE> 6
most of our holdings in this area because of poor recent performance and because
we don't see an indication on the horizon that electric utilities will perform
better.
Q WHAT WERE SOME OF YOUR INVESTMENTS THAT HAD THE MOST POSITIVE EFFECT ON
THE FUND'S RETURN?
A The Fund benefited from its investments in companies we believe are
positioned to gain from the exploding demand for wireless communications.
We were most helped by our holding in Qualcomm, which owns the patent on
wireless CDMA technology, widely becoming the standard in U.S. cellular phones.
Qualcomm's stock skyrocketed during the period, especially during the fourth
quarter. Along similar lines, we were helped by the Fund's significant weighting
in Comverse Technology, which makes telecommunications systems such as
voice-mail services; Omnipoint, a cellular-service provider; and LSI Logic, a
maker of semiconductors used in wireless-communications devices.
Internet companies were also big winners in 1999. During the first half of
the reporting period, we avoided many "pure" Internet companies because we saw
their valuations as extremely high and because sales-growth estimates were
falling. As the reporting period went on, we started to increase our exposure to
this area, focusing on high-quality companies whose sales and, possibly,
earnings estimates were again rising. We remain concerned about Internet
valuations, however, and are investing in this area selectively. One extremely
successful Internet company that met our criteria and helped the Fund's return
was America Online, the leading Internet service provider.
Other securities whose performance contributed greatly to our results were
Conexant Systems (semiconductors), Veritas Software (maker of software for data
storage), NTL (an integrated cable and telephone operator in the U.K.), and Home
Depot (home products superstore). Not all securities in the Fund performed as
favorably as these, nor is there any guarantee they will continue to do so.
Q WHICH INVESTMENTS HAD THE MOST NEGATIVE EFFECT ON THE FUND?
A On the down side, Unisys, a major systems integrator for large businesses,
saw its stock price plummet early in the fourth quarter after the company
announced that revenue and earnings for the third quarter would be less
than expected. Other securities whose performance hurt the Fund's return during
1999 were automotive-component manufacturer Tower Automotive, communications
provider AT&T, home-building company Lennar, and holding company Roche Holdings.
5
<PAGE> 7
Q HOW DID THE FUND PERFORM DURING THE LAST 12 MONTHS?
A Thanks to successful security selection and the Fund's substantial
weighting in technology and communications services, the Fund performed
very well during the reporting period. The Fund generated a total return
of 50.19 percent(2) at net asset value and 39.22 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 25.875 on December 31,
1999, and dividends totaling $0.84 per share. Please refer to the chart on page
3 for additional Fund performance results.
Q WHAT IS YOUR SIX-MONTH OUTLOOK FOR THE FUND?
A Barring any unforeseen events, we envision continued worldwide economic
health, low inflation, and strong earnings growth. Of course, our outlook
may in part depend on the timing and frequency of Federal Reserve
interest-rate changes. Although recent rate increases have had only a moderately
negative effect on stock prices, an additional rate hike could have a more
substantial impact. We're also keeping our eye on stock valuations, because the
higher they get, the greater the negative impact on the Fund if investors were
to lose their enthusiasm for growth stocks.
We believe convertibles offer investors a less aggressive means of investing
in growth companies--particularly in emerging industries such as Internet
technology. Investing in this area of the market can be risky, and convertibles
may enable investors to participate in potential market gains and income while
enjoying the potential for reduced volatility. This is an attractive feature in
uncertain economic times.
6
<PAGE> 8
GLOSSARY OF TERMS
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.
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.
EARNINGS ESTIMATES: A forecast for a company's net income during a given period.
Earnings estimates can come from the company's management as well as from
independent analysts.
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.
INFLATION: A persistent and measurable rise in the general level of prices.
Inflation is widely measured by the Consumer Price Index, an economic
indicator that measures the change in the cost of purchased goods and
services.
NET ASSET VALUE (NAV): The value of a trust share, calculated by deducting a
trust's liabilities from the total assets applicable to common shareholders
in its portfolio and dividing this amount by the number of common shares
outstanding.
VALUATION: The estimated or determined worth of a stock, based on financial
measures such as the stock's current price relative to earnings, revenue,
book value, and cash flow.
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.
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE DEBT 58.5%
CONSUMER DISTRIBUTION 1.7%
$1,099 AnnTaylor Stores Corp., 144A --
Private Placement (a).................. 0.550% 06/18/19 $ 589,339
590 Costco Companies, Inc. ................ * 08/19/17 628,350
969 eToys, Inc., 144A -- Private Placement
(a) ................................... 6.250 12/01/04 592,301
-----------
1,809,990
-----------
CONSUMER DURABLES 0.2%
240 CommScope, Inc., 144A -- Private
Placement (a).......................... 4.000 12/15/06 257,654
-----------
CONSUMER NON-DURABLES 1.4%
850 Loews Corp. ........................... 3.125 09/15/07 697,000
850 Swiss Life Finance Co., 144A -- Private
Placement (a).......................... 2.000 05/20/05 845,750
-----------
1,542,750
-----------
CONSUMER SERVICES 4.3%
1,130 EchoStar Communications Corp., 144A --
Private Placement (a).................. 4.875 01/01/07 1,379,877
470 Interpublic Group of Companies, Inc.,
144A -- Private Placement (a).......... 1.870 06/01/06 534,038
1,100 Jacor Communications, Inc., LYON....... * 02/09/18 739,750
300 Omnicom Group, Inc..................... 2.250 01/06/13 612,546
200 Omnicom Group, Inc. ................... 4.250 01/03/07 637,920
1,760 Times Mirror Co., LYON ................ * 04/15/17 860,200
-----------
4,764,331
-----------
ENERGY 1.7%
398 Advanced Energy Industries, Inc. ...... 5.250.. 11/15/06 475,610
698 Devon Energy Corp. .................... 4.950.. 08/15/08 684,040
800 Kerr-McGee Co. ........................ 7.500 05/15/14 743,000
-----------
1,902,650
-----------
HEALTHCARE 3.5%
428 Alpharma, Inc., 144A --
Private Placement (a).................. 3.000 06/01/06 461,170
570 Alza Corp. ............................ 5.000 05/01/06 599,925
920 Centocor, Inc. ........................ 4.750 02/15/05 1,229,350
550 Human Genome Sciences, Inc............. 5.000 12/15/06 662,750
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<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 $ 876,351
-----------
3,829,546
-----------
TECHNOLOGY 41.1%
1,000 ASM Lithography Holding, NV, 144A --
Private Placement (a) ................. 4.250% 11/30/04 1,209,710
930 Adaptec, Inc........................... 4.750 02/01/04 1,010,213
2,019 America Online, Inc.................... * 12/06/19 1,159,916
147 America Online, Inc.................... 4.000 11/15/02 1,703,627
370 Automatic Data Processing, Inc.,
LYON................................... * 02/20/12 516,150
706 BEA Systems, Inc., 144A --
Private Placement (a).................. 4.000 12/15/06 825,300
105 BEA Systems, Inc....................... 4.000 06/15/05 557,550
320 CheckFree Holdings Corp., 144A --
Private Placement (a).................. 6.500 12/01/06 509,600
2,015 Comverse Technology, Inc., 144A --
Private Placement (a).................. 4.500 07/01/05 6,873,669
1,090 Conexant Systems, Inc., 144A --
Private Placement (a).................. 4.250 05/01/06 3,197,788
360 Conexant Systems, Inc. ................ 4.250 05/01/06 1,056,150
760 Cypress Semiconductor Corp. ........... 6.000 10/01/02 1,097,250
935 DSC Communications Corp. .............. 7.000 08/01/04 981,750
270 DoubleClick, Inc., 144A -- Private
Placement (a).......................... 4.750 03/15/06 839,025
200 EMC Corp. ............................. 3.250 03/15/02 1,931,500
969 Exodus Communications, Inc., 144A --
Private Placement (a) ................. 4.750 07/15/08 1,341,949
1,960 Hewlett Packard Co., LYON ............. * 10/14/17 1,349,950
390 HNC Software, Inc. .................... 4.750 03/01/03 948,675
476 i2 Technologies, Inc., 144A -- Private
Placement (a).......................... 5.250 12/15/06 683,655
1,040 Lam Research Corp...................... 5.000 09/01/02 1,428,700
318 Lattice Semiconductor Corp., 144A --
Private Placement (a).................. 4.750 11/01/06 416,977
1,300 LSI Logic Corp., 144A -- Private
Placement (a) ......................... 4.250 03/15/04 2,952,625
350 Micron Technology, Inc. ............... 7.000 07/01/04 451,937
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TECHNOLOGY (CONTINUED)
$ 695 Nextel Communications, Inc., 144A --
Private Placement (a) ................. 4.750% 07/01/07 $ 1,576,781
200 Oak Industries, Inc. .................. 4.875 03/01/08 559,570
203 Sanmina Corp., 144A -- Private
Placement (a) ......................... 4.250 05/01/04 268,467
800 Siebel Systems, Inc., 144A -- Private
Placement (a) ......................... 5.500 09/15/06 1,551,000
940 Solectron Corp., LYON, 144A -- Private
Placement (a) ......................... * 01/27/19 718,893
1,000 Solectron Corp., LYON ................. * 01/27/19 756,250
2,040 STMicroelectronics NV, LYON ........... * 09/22/09 2,811,446
1,449 VERITAS Software Corp. ................ 1.856 08/13/06 3,931,586
-----------
45,217,659
-----------
UTILITIES 4.6%
743 CoreComm Ltd., 144A -- Private
Placement (a) ......................... 6.000 10/01/06 1,162,795
700 NTL, Inc., 144A -- Private Placement
(a) ................................... 7.000 12/15/08 1,851,500
1,600 Telefonos de Mexico, SA ............... 4.250 06/15/04 2,086,000
-----------
5,100,295
-----------
TOTAL CONVERTIBLE DEBT 58.5%......................................... 64,424,875
-----------
</TABLE>
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK 20.4%
CONSUMER SERVICES 3.9%
Adelphia Communications Corp., Ser D, 5.50%........... 1,900 357,912
Echostar Communications Corp., Ser C, 6.75%........... 1,400 1,161,956
Entercom Communications Corp., TIDES, 6.25%........... 8,000 649,000
McLeodUSA, Inc., Ser A, 6.75%......................... 2,550 1,313,250
UnitedGlobalCom, Inc., Ser D, 7.00% (b)............... 12,900 788,513
------------
4,270,631
------------
ENERGY 3.7%
Apache Corp., ACES, 6.50%............................. 39,400 1,398,700
El Paso Energy Capital Trust I, 4.75%................. 17,500 881,563
Kerr-McGee Corp., DECS, 5.50%......................... 15,800 521,400
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
ENERGY (CONTINUED)
Pogo Trust I, QUIPS, 6.50% (b)........................ 9,400 $ 462,950
Tosco Financing Trust, 5.75%.......................... 16,800 800,100
------------
4,064,713
------------
FINANCE 0.3%
American General Corp., 7.00%......................... 6,200 375,100
------------
RAW MATERIALS/PROCESSING INDUSTRIES 0.3%
Monsanto Co., ACES, 6.50%............................. 10,150 336,219
------------
TECHNOLOGY 6.3%
Amdox Ltd., TRACES, 6.75%............................. 12,000 385,500
Nextlink Communications, Inc., 6.50%, 144A --
Private Placement (a)................................. 1,400 270,595
PSINet, Inc., Ser C, 6.75%............................ 9,200 537,050
Qualcomm Financial Trust, 5.75%....................... 5,400 5,314,950
Verio Inc., 6.75%, 144A -- Private Placement (a)...... 5,800 327,700
------------
6,835,795
------------
UTILITIES 5.9%
Calpine Corp., TIDES, 5.75%........................... 17,400 1,141,875
Cox Communications, Inc., PRIDES, 7.00%............... 12,300 836,400
MCI WorldCom, Inc., Ser C............................. 11,250 577,266
Omnipoint Corp., 7.00%, 144A -- Private Placement
(a)................................................. 14,000 2,759,750
Winstar Communications, Inc., Ser D, 7.00%............ 15,500 1,230,323
------------
6,545,614
------------
TOTAL PREFERRED STOCK 20.4%...................................... 22,428,072
------------
COMMON STOCKS 11.8%
CONSUMER DISTRIBUTION 3.2%
Home Depot, Inc....................................... 52,079 3,570,632
------------
CONSUMER NON-DURABLES 0.0%
Jazztel, PLC -- ADR (United Kingdom) (b).............. 700 45,588
------------
CONSUMER SERVICES 1.1%
Cablevision Systems Corp. (b)......................... 9,638 727,669
Royal Caribbean Cruises, Ltd.......................... 9,800 483,262
------------
1,210,931
------------
FINANCE 1.6%
American Express Co. ................................. 4,200 698,250
Citigroup, Inc. ...................................... 19,500 1,083,469
------------
1,781,719
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
- ----------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE 1.9%
Genentech, Inc. (b) .................................. 15,400 $ 2,071,300
------------
TECHNOLOGY 4.0%
Lam Research Corp. (b) ............................... 10,000 1,115,625
Motorola, Inc. ....................................... 9,500 1,398,875
SCI Systems, Inc. (b) ................................ 12,656 1,040,165
Texas Instruments, Inc. .............................. 8,400 813,750
------------
4,368,415
------------
TOTAL COMMON STOCKS 11.8%........................................ 13,048,585
------------
TOTAL LONG-TERM INVESTMENTS 90.7%
(Cost $60,599,589).............................................. 99,901,532
------------
SHORT-TERM INVESTMENTS 7.6%
REPURCHASE AGREEMENTS 6.7%
BA Securities ($7,442,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 12/31/99, to be sold
on 01/01/2000 at $7,443,705) (c)................................ 7,442,000
U.S. GOVERNMENT AGENCY OBLIGATIONS 0.9%
Federal Home Loan Bank Discount Notes ($1,000,000 par, yielding
5.441%, 03/10/00 maturity)...................................... 989,420
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $8,431,420)............................................... 8,431,420
------------
TOTAL INVESTMENTS 98.3%
(Cost $69,031,009).............................................. 108,332,952
OTHER ASSETS IN EXCESS OF LIABILITIES 1.7%....................... 1,863,310
------------
NET ASSETS 100.0%................................................ $110,196,262
============
</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.
(c) Assets segregated as collateral for open futures.
ACES -- Automatically convertible equity securities
DECS -- Debt exchangeable for common stock, traded in shares
LYON -- Liquid yield option note
PRIDES -- Preferred redeemable interest dividend equity security, traded in
shares
QUIPS -- Quarterly income preferred securities
TIDES -- Term income deferrable equity securities
TRACES -- Trust automatic common exchange securities
See Notes to Financial Statements
12
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $69,031,009)........................ $108,332,952
Cash........................................................ 545,457
Receivables:
Investments Sold.......................................... 1,084,842
Interest.................................................. 321,536
Dividends................................................. 17,447
Variation Margin on Futures............................... 11,050
Other....................................................... 37,964
------------
Total Assets.......................................... 110,351,248
------------
LIABILITIES:
Payables:
Investment Advisory Fee................................... 42,624
Affiliates................................................ 2,402
Income Distributions...................................... 607
Accrued Expenses............................................ 78,781
Trustees' Deferred Compensation and Retirement Plans........ 30,572
------------
Total Liabilities..................................... 154,986
------------
NET ASSETS.................................................. $110,196,262
============
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............................................. 68,036,694
Net Unrealized Appreciation................................. 39,307,011
Accumulated Undistributed Net Investment Income............. 359,245
Accumulated Net Realized Loss............................... (748,512)
------------
NET ASSETS.................................................. $110,196,262
============
NET ASSET VALUE PER SHARE ($110,196,262 divided by 3,241,824
shares outstanding)....................................... $ 33.99
============
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 1,949,698
Dividends................................................... 1,316,551
-----------
Total Income............................................ 3,266,249
-----------
EXPENSES:
Investment Advisory Fee..................................... 428,479
Shareholder Reports......................................... 53,089
Trustees' Fees and Related Expenses......................... 29,522
Custody..................................................... 28,767
Legal....................................................... 1,223
Other....................................................... 117,987
-----------
Total Expenses.......................................... 659,067
Less Credits Earned on Cash Balances.................... 2,030
-----------
Net Expenses............................................ 657,037
-----------
NET INVESTMENT INCOME....................................... $ 2,609,212
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 1,894,734
Futures................................................... 540,227
-----------
Net Realized Gain........................................... 2,434,961
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 6,226,819
End of the Period:
Investments............................................. 39,301,943
Futures................................................. 5,068
-----------
39,307,011
-----------
Net Unrealized Appreciation During the Period............... 33,080,192
-----------
NET REALIZED AND UNREALIZED GAIN............................ $35,515,153
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $38,124,365
===========
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income.......................... $ 2,609,212 $ 2,904,812
Net Realized Gain.............................. 2,434,961 910,780
Net Unrealized Appreciation During the
Period....................................... 33,080,192 805,481
------------ -----------
Change in Net Assets from Operations........... 38,124,365 4,621,073
------------ -----------
Distributions from Net Investment Income....... (2,724,759) (2,851,284)
Distributions from Net Realized Gain........... (2,579,925) (3,056,743)
------------ -----------
Total Distributions............................ (5,304,684) (5,908,027)
------------ -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................... 32,819,681 (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 $359,245 and
$258,861, respectively)...................... $110,196,262 $77,376,581
============ ===========
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Fund outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------
1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the Period...... $23.868 $24.265 $24.451
------- ------- -------
Net Investment Income....................... .804 .896 1.006
Net Realized and Unrealized Gain/Loss....... 10.954 .530 3.014
------- ------- -------
Total from Investment Operations.............. 11.758 1.426 4.020
------- ------- -------
Less:
Distributions from and in Excess of Net
Investment Income......................... .840 .880 1.179
Distributions from and in Excess of Net
Realized Gain............................. .794 .943 3.027
------- ------- -------
Total Distributions........................... 1.634 1.823 4.206
------- ------- -------
Net Asset Value, End of the Period............ $33.992 $23.868 $24.265
======= ======= =======
Market Price Per Share at End of the Period... $25.875 $19.875 $21.125
Total Investment Return at Market Price (a)... 39.22% 2.05% 19.48%
Total Return at Net Asset Value (b)........... 50.19% 5.90% 18.57%
Net Assets at End of the Period (In
millions)................................... $ 110.2 $ 77.4 $ 78.7
Ratio of Expenses to Average Net Assets....... .76% .83% .76%
Ratio of Net Investment Income to Average Net
Assets...................................... 3.03% 3.75% 3.86%
Portfolio Turnover............................ 107% 157% 181%
</TABLE>
(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.
16
<PAGE> 18
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------
<S> <C> <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.
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
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 stocks 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 48% 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 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
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
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 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 December 31, 1999, for federal income tax purposes the cost of long- and
short-term investments is $69,031,009, the aggregate gross unrealized
appreciation is $40,104,235 and the aggregate gross unrealized depreciation is
$802,292, resulting in net unrealized appreciation on long- and short-term
investments of $39,301,943. Net realized gains or losses may differ for
financial reporting and tax purposes primarily as a result of post October 31
losses and the mark to market of open futures contracts at December 31, 1999.
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.
19
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
Distributions from net realized gains for book purposes may include short-term
capital gains which are included in ordinary income for tax purposes.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under generally accepted accounting principles and federal
income tax purposes, permanent differences between book and tax basis reporting
have been identified and appropriately reclassified. During 1999, permanent book
and tax basis differences relating to market discount on bonds sold totaling
$218,723 have been reclassified from accumulated net realized loss to
accumulated undistributed net investment income. A permanent book and tax basis
difference relating to capital gain distributions totaling $7,699 has been
reclassified from accumulated undistributed net investment income to accumulated
net realized loss. Additionally, a permanent difference relating to excise tax
totaling $4,907 has been reclassified from paid in surplus to accumulated
undistributed net investment income.
F. EXPENSE REDUCTIONS--During the year ended December 31, 1999, the Fund's
custody fee was reduced by $2,030 as a result of credits earned on overnight
cash balances.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Fund's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Fund for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ---------------------------------------------------------------------
<S> <C>
First $150 million....................................... .50 of 1%
Next $100 million........................................ .45 of 1%
Next $100 million........................................ .40 of 1%
Over $350 million........................................ .35 of 1%
</TABLE>
For the year ended December 31, 1999, the Fund recognized expenses of
approximately $1,200, representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the year ended December 31, 1999, the Fund recognized expenses of
approximately $31,300, representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
20
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
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 $83,517,216 and $89,482,463,
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 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
21
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1999
- --------------------------------------------------------------------------------
variation margin). The risk of loss associated with a futures contract is in
excess of the variation margin reflected on the Statement of Assets and
Liabilities.
Transactions in futures contracts, each with a par value of $250,000, for
the year ended December 31, 1999, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ---------------------------------------------------------------------
<S> <C>
Outstanding at December 31, 1998.......................... 15
Futures Opened.......................................... 13
Futures Closed.......................................... (15)
---
Outstanding at December 31, 1999.......................... 13
===
</TABLE>
The futures contracts outstanding at December 31, 1999 and the description
and unrealized appreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION
- -------------------------------------------------------------------------
<S> <C> <C>
LONG CONTRACTS -- March 2000 S&P 500 Index
Futures (Current Notional Value of $371,050
per contract)................................ 13 $5,068
== ======
</TABLE>
22
<PAGE> 24
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of
Van Kampen Convertible Securities Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Van Kampen Convertible Securities
Fund as of December 31, 1999, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the ten
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1999, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Convertible Securities Fund at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the ten years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, IL
February 15, 2000
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
GROWTH
Aggressive Growth*
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Small Cap Value
Technology
GROWTH AND INCOME
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Fixed Income*
Global Franchise
Global Government Securities*
Global Managed Assets*
International Magnum
Latin American
Strategic Income
Worldwide High Income
INCOME
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN
Prime Rate Income Trust
Senior Floating Rate
TAX FREE
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal**
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
To find out more about any of these
funds, ask your financial advisor for
a prospectus, which contains more
complete information, including sales
charges, risks, and ongoing expenses.
Please read it carefully before you
invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional
fund information, choose from one of
the following:
- - visit our Web site at
WWW.VANKAMPEN.COM--to view a prospectus, select Download Prospectus
- - 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
* Closed to new investors
** Open to new investors for a limited time
25
<PAGE> 27
VAN KAMPEN CONVERTIBLE SECURITIES 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
STEPHEN L. BOYD*
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, 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
233 South Wacker Drive
Chicago, Illinois 60606-6301
For Federal Income tax purposes, the following information is furnished
with respect to the distributions paid by the Fund during its taxable year ended
December 31, 1999. The Fund designated and paid $2,016,092 as a 20% rate gain
distribution. The distributions, where applicable, were included on 1999's Form
1099-Div which was mailed to shareholders in January of 2000.
---------------------------------------
INQUIRES ABOUT AN INVESTOR'S
ACCOUNT SHOULD BE REFERRED TO THE
FUND'S TRANSFER AGENT
EQUISERVE LP
P.O. BOX 8200
BOSTON, MASSACHUSETTS 02266-8200
TELEPHONE: (800) 821-1238
ALASKA, CALIFORNIA AND HAWAII CALL
COLLECT: (713) 993-0500
EXTENSION: 2223
---------------------------------------
TAX NOTICE TO CORPORATE SHAREHOLDERS
For 1999, 36.34% of the dividends taxable as ordinary income qualified for the
70% dividends received deduction for corporations.
* "Interested" persons of the Trust, as defined in the Investment Company Act
of 1940.
(C) Van Kampen Funds Inc., 2000
All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
26
<PAGE> 28
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.
27
<PAGE> 29
VAN KAMPEN FUNDS
YOUR NOTES:
28
