<PAGE> 1
<TABLE>
<S> <C>
Table of Contents
OVERVIEW
LETTER TO SHAREHOLDERS 1
ECONOMIC SNAPSHOT 2
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS 4
PORTFOLIO AT A GLANCE
Q&A WITH YOUR PORTFOLIO MANAGERS 5
GLOSSARY OF TERMS 7
BY THE NUMBERS
YOUR FUND'S INVESTMENTS 8
FINANCIAL STATEMENTS 13
NOTES TO FINANCIAL STATEMENTS 18
DIVIDEND REINVESTMENT PLAN 22
VAN KAMPEN FUNDS
THE VAN KAMPEN FAMILY OF FUNDS 23
FUND OFFICERS AND IMPORTANT ADDRESSES 24
</TABLE>
It is times like these when money-management experience may make a difference.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 2
OVERVIEW
LETTER TO SHAREHOLDERS
July 20, 2000
Dear Shareholder,
Whether you have held your fund for years or just joined the Van Kampen family
of shareholders in the last few months, you are likely to have questions and
even some concerns about how recent market volatility has affected your
investment. I encourage you to review the following Q&A in which your portfolio
manager provides an update on how your fund is being managed in this
environment.
It is times like these when money-management experience may make a difference.
Toward that end, you should know that Van Kampen is one of the nation's oldest
investment-management firms, with a history of money management dating back to
1926. Our portfolio managers have invested in all types of market
conditions--during bull and bear markets, periods of inflation and rising
interest rates, and now a technology revolution. We have managed money long
enough to understand short-term market volatility and the value of investing for
the long term.
As we move through the second half of 2000, count on us to
continue to draw on the wisdom of our 74 years of experience.
Along those lines, Van Kampen's "Generations of Experience" is
the theme of a national advertising campaign that we recently kicked off. The
message emphasizes our depth of investment-management history, as well as our
firm belief that with the right investments, anyone can realize life's true
wealth.
Sincerely,
[SIG]
Richard F. Powers, III
President and CEO
Van Kampen Investments
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
BEGINNING IN THE SECOND QUARTER OF 2000, EVIDENCE OF SLOWER ECONOMIC GROWTH IN
THE UNITED STATES EMERGED. HOWEVER, ANALYSTS BELIEVE IT MAY HAVE BEEN PREMATURE
TO ASSUME THAT THE U.S. ECONOMY HAS SLOWED TO A SUSTAINABLE, NONINFLATIONARY
PACE, WITH THE GROSS DOMESTIC PRODUCT (GDP), A MEASURE OF ECONOMIC GROWTH, UP
5.2 PERCENT ANNUALIZED IN THE SECOND QUARTER OF 2000.
CONSUMER SPENDING AND EMPLOYMENT
CONSUMER SPENDING REMAINED THE MAIN ENGINE OF GROWTH BEHIND THE U.S. ECONOMY.
LIVING STANDARDS AND SPENDING HABITS WERE BOOSTED BY STRONG GAINS IN REAL
INCOME, AND INDIVIDUAL WEALTH INCREASED SUBSTANTIALLY, PRIMARILY DUE TO A
BUOYANT STOCK MARKET. NONETHELESS, DATA RELEASED IN THE SECOND QUARTER OF 2000
REFLECTED A MINOR DECREASE IN THE SPENDING OF INDIVIDUALS. IN JUNE, THE CONSUMER
PRICE INDEX (CPI), THE LEADING INFLATION INDICATOR, ROSE HIGHER THAN
EXPECTED--0.6 PERCENT MORE THAN THE PREVIOUS MONTH. THAT HEIGHTENED CONCERNS
ABOUT INFLATION, AND THE PROSPECT OF ADDITIONAL FEDERAL RESERVE BOARD
INTEREST-RATE INCREASES.
THE U.S. LABOR MARKET WAS STILL ROBUST DURING THIS TIME, AND JOB INSECURITY
CONTINUED TO DECLINE. SOLID EMPLOYMENT GROWTH WAS ACCOMPANIED BY UNUSUALLY LARGE
GAINS IN PRODUCTIVITY, WHICH LIMITED THE RISE IN UNIT LABOR COSTS ACROSS THE
WHOLE ECONOMY. GIVEN THE HIGH EMPLOYMENT NUMBERS AND STRONG LEVELS OF
PRODUCTIVITY, ANALYSTS BELIEVE AN INCREASE IN INTEREST RATES TO WARD OFF
INFLATION AND FURTHER SLOW THE ECONOMY IS POSSIBLE.
INTEREST RATES AND INFLATION
DURING THE PAST FEW MONTHS, PERSISTENT STRENGTH IN CONSUMER SPENDING ACCOMPANIED
BY A VERY TIGHT LABOR MARKET, RESULTED IN SOME INFLATION. THE CPI REACHED A
LEVEL OF 2.7 PERCENT IN JANUARY 2000 AND 3.7 PERCENT IN JUNE 2000, CLEARLY
DEMONSTRATING SIGNS OF INFLATION.
SINCE JUNE 1999, THE FEDERAL RESERVE HAS INCREASED THE FEDERAL FUNDS RATE SIX
TIMES BY A TOTAL OF 175 BASIS POINTS TO LOWER ECONOMIC GROWTH AND DECREASE ANY
FUTURE FEARS OF INFLATION. THESE INCREASES IN INTEREST RATES HELPED SLOW THE
INTEREST-SENSITIVE AUTO AND HOUSING MARKETS.
MANY OBSERVERS BELIEVE INTEREST RATES COULD BE LIFTED FURTHER IN COMING MONTHS.
WHILE MARKETS HAVE EXPERIENCED MUCH SHORT-TERM VOLATILITY, THE MARKET'S OUTLOOK
COULD IMPROVE ONCE INTEREST-RATE HIKES CEASE.
2
<PAGE> 4
U.S. GROSS DOMESTIC PRODUCT
SEASONALLY ADJUSTED ANNUALIZED RATES
(June 30, 1998 -- June 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
U.S. GROSS DOMESTIC PRODUCT
---------------------------
<S> <C>
Jun 98 2.10
Sep 98 3.80
Dec 98 5.90
Mar 99 3.50
Jun 99 2.50
Sep 99 5.70
Dec 99 8.30
Mar 00 4.80
Jun 00 5.20
</TABLE>
Source: Bureau of Economic Analysis
INTEREST RATES AND INFLATION
(June 30, 1998 -- June 30, 2000)
[BAR GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 98 5.50 1.70
5.50 1.70
5.50 1.60
Sep 98 5.25 1.50
5.00 1.50
4.75 1.50
Dec 98 4.75 1.60
4.75 1.70
4.75 1.60
Mar 99 4.75 1.70
4.75 2.30
4.75 2.10
Jun 99 5.00 2.00
5.00 2.10
5.25 2.30
Sep 99 5.25 2.60
5.25 2.60
5.50 2.60
Dec 99 5.50 2.70
5.50 2.70
5.75 3.20
Mar 00 6.00 3.70
6.00 3.00
6.50 3.10
Jun 00 6.50 3.70
</TABLE>
Interest rates are represented by the closing midline federal funds target rate
on the last day of each month. Inflation is indicated by the annual percent
change of the Consumer Price Index for all urban consumers at the end of each
month.
3
<PAGE> 5
PERFORMANCE SUMMARY
RETURN HIGHLIGHTS
(as of June 30, 2000)
<TABLE>
<S> <C> <C>
-----------------------------------------------------------------------
NYSE Ticker Symbol VXS
-----------------------------------------------------------------------
Six-month total return based on market price(1) 31.40%
-----------------------------------------------------------------------
Six-month total return based on NAV(2) 4.66%
-----------------------------------------------------------------------
Distribution rate as a % of closing common stock
price(3) 2.14%
-----------------------------------------------------------------------
Net asset value $35.23
-----------------------------------------------------------------------
Closing common stock price $33.6250
-----------------------------------------------------------------------
Six-month high common stock price (06/22/00) $34.8750
-----------------------------------------------------------------------
Six-month low common stock price (01/07/00) $24.8125
-----------------------------------------------------------------------
</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. During the reporting period the Fund announced that its Board of
Trustees approved the Fund's reorganization into the Van Kampen Harbor Fund,
an open-end investment company. This announcement corresponded with an
increase in the market price per share of the Fund, on or about the day of
the announcement.
(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.
An investment in the Fund is subject to investment risks, and you could lose
money on your investment in the Fund. Please review the Risk/Return Summary
of the Prospectus for further details on investment risks. Fund shares, when
redeemed, may be worth more or less than their original cost. Past
performance is no guarantee of future results. Investment return and net
asset value will fluctuate with market conditions.
4
<PAGE> 6
Q&A WITH YOUR PORTFOLIO MANAGERS
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN CONVERTIBLE
SECURITIES FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
AND INFLUENCED THE FUND'S RETURN DURING THE SIX MONTHS ENDED JUNE 30, 2000. THE
TEAM IS LED BY CHRISTINE DRUSCH, SENIOR PORTFOLIO MANAGER, WHO HAS BEEN THE
FUND'S LEAD MANAGER SINCE FEBRUARY 1998 (ASSOCIATE MANAGER SINCE 1991) AND HAS
WORKED IN THE INVESTMENT INDUSTRY SINCE 1985. SHE IS JOINED BY DAVID MCLAUGHLIN,
PORTFOLIO MANAGER. THE FOLLOWING DISCUSSION REFLECTS THEIR VIEWS ON THE FUND'S
PERFORMANCE.
Q HOW WOULD YOU DESCRIBE THE
MARKET ENVIRONMENT IN WHICH THE FUND OPERATED, AND HOW DID THE FUND PERFORM?
A From the first quarter to the
second quarter of 2000, two different markets emerged, especially with regard to
technology stocks' performance. Technology stocks led the performance of the
broad market in the first quarter. However, the broad market encountered
turbulence in the second quarter when investors began to worry about these
stocks' high valuations and the effects of continued interest-rate increases on
U.S. corporate earnings.
The convertible securities market, sensitive to the movements of the stock
market, also declined, as some of the highest-growth names fell in the second
quarter. However, the technology sector was still the top contributor to the
fund's performance, and, as a result, the fund returned 4.66 percent at net
asset value and 31.40 percent at market price for the six-month period ended
June 30, 2000. The fund's return reflects the increase in market price per share
on the New York Stock Exchange from $25.875 on December 31, 1999, to $33.625 on
June 30, 2000, with dividends totaling $0.360 per share. (On May 10, 2000, the
fund announced that its Board of Trustees had approved the fund's merger with
the Van Kampen Harbor Fund, an open-end investment company.) Of course, past
performance is no guarantee of future results and as a result of recent market
activity, current performance may vary from figures shown. Please refer to the
chart on page 4 for additional fund performance results.
Q WHAT WAS YOUR STRATEGY FOR
MANAGING THE FUND IN THIS ENVIRONMENT?
A The fund had heavy exposure to
technology during the reporting period. When we did reduce some of the fund's
technology holdings, it was in response to negative changes in the
5
<PAGE> 7
specific companies rather than to the overall market conditions.
We also liked the health-care, energy, and communication-services sectors.
Energy was a strong performer in the first quarter, and health care surged in
the second quarter. Communication services was also a strong sector as
competition among telecommunications companies continued to grow.
Q WHAT SECURITIES PERFORMED WELL?
A Telecommunications securities
were among the strongest contributors to the fund's performance during the
reporting period. The fund's largest holding, Comverse Technologies, was also
its top performer. Comverse provides the technology that phone companies need to
offer advanced services such as voicemail, one-touch call back, and message
groups, and it is the top provider of these services. Oak Industries, a
subsidiary of fiber-optics manufacturer Corning, and Amdocs, a
telecommunications billing-services provider, also performed well in light of
the expanding demand for telecommunications.
Semiconductor securities LSI Logic and STMicroelectronics also helped the
fund's overall performance. These companies manufacture microchips for computers
and communications networks.
Keep in mind that not all securities in the portfolio performed favorably,
and there is no guarantee that any of these securities will perform well or will
be held by the fund in the future.
Q WHAT SECURITIES
WERE DISAPPOINTMENTS?
A Qualcomm, the best performer of
1999 not only for the fund but also for the U.S. stock market, became one of the
fund's poorest performers in the first half of 2000. We eliminated this holding
from the portfolio as it no longer fit our objectives of capital appreciation,
current income and preservation of capital. Many investors also sold the stock
upon hearing the June announcement that China was no longer considering
Qualcomm's code-division multiple access technology for use in cellular phones.
Retail was also a troublesome area for the fund. In particular, Home Depot,
Costco, and Ann Taylor were poor performers. In a rising interest-rate
environment, consumer spending tends to slow, and these companies suffered as a
result of investors' expectations of diminishing demand. Consequently, we
eliminated these stocks from the fund's portfolio.
Q WHAT IS YOUR OUTLOOK FOR THE
FUND IN THE COMING MONTHS?
A We believe the Federal Reserve
Board has done a good job of moderating the economy so far, and we hope it will
succeed in slowing the economy without causing a recession. At the same time, we
expect to see strong growth potential in the technology, telecommunications, and
health-care sectors. In our opinion, as technology advances, it will continue to
make both the economy and businesses more efficient, providing investment
opportunities in all businesses--not just technology companies.
6
<PAGE> 8
GLOSSARY OF TERMS
A HELPFUL GUIDE TO SOME OF THE COMMON TERMS YOU'RE LIKELY TO SEE IN THIS REPORT
AND OTHER FINANCIAL PUBLICATIONS.
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.
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.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from the total assets in its portfolio and dividing this
amount by the number of shares outstanding. The NAV does not include any initial
or contingent deferred sales charge.
PORTFOLIO: A collection of securities owned by an individual or an institution
that may include stocks, bonds, and/or money-market securities.
RECESSION: A period of zero or negative economic growth and high unemployment.
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.
7
<PAGE> 9
BY THE NUMBERS
YOUR FUND'S INVESTMENTS
June 30, 2000 (Unaudited)
THE FOLLOWING PAGES DETAIL YOUR FUND'S PORTFOLIO OF INVESTMENTS AT THE END OF
THE REPORTING PERIOD.
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
CONVERTIBLE DEBT 66.7%
CONSUMER DISTRIBUTION 1.3%
$ 969 eToys, Inc., 144A--Private Placement (a)..... 6.250% 12/01/04 $ 411,825
1,140 Magna International, Inc. ................... 4.875 02/15/05 1,032,920
-----------
1,444,745
-----------
CONSUMER NON-DURABLES 2.0%
850 Loews Corp. ................................. 3.125 09/15/07 711,875
1,248 Swiss Life Finance Co. ...................... 2.000 05/20/05 1,248,000
252 Swiss Life Finance Co., 144A--Private
Placement (a)................................ 2.000 05/20/05 252,000
-----------
2,211,875
-----------
CONSUMER SERVICES 2.9%
1,130 EchoStar Communications Corp., 144A--Private
Placement (a)................................ 4.875 01/01/07 1,083,263
675 Interpublic Group of Companies, Inc. ........ 1.870 06/01/06 655,911
470 Interpublic Group of Companies, Inc.,
144A--Private Placement (a).................. 1.870 06/01/06 454,725
300 Omnicom Group, Inc. ......................... 2.250 01/06/13 554,946
200 Omnicom Group, Inc. ......................... 4.250 01/03/07 566,476
-----------
3,315,321
-----------
ENERGY 2.5%
830 Anadarko Petroleum Corp. .................... * 03/07/20 544,140
698 Devon Energy Corp. .......................... 4.950 08/15/08 671,825
352 Kerr-McGee Corp. ............................ 5.250 02/15/10 404,951
757 Kerr-McGee Corp. ............................ 7.500 05/15/14 723,881
867 Transocean Sedco Forex, Inc. ................ * 05/24/20 526,494
-----------
2,871,291
-----------
FINANCE 0.4%
531 Pinnacle Holdings, Inc., 144A--Private
Placement (a)................................ 5.500 09/15/07 469,075
-----------
HEALTHCARE 6.6%
434 Affymetrix, Inc., 144A--Private Placement
(a).......................................... 4.750 02/15/07 338,316
428 Alpharma, Inc., 144A--Private Placement
(a).......................................... 3.000 06/01/06 822,830
662 COR Theraputics, Inc., 144A--Private
Placement (a)................................ 5.000 03/01/07 884,598
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
YOUR FUND'S INVESTMENTS
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
HEALTHCARE (CONTINUED)
~$ 327 Inhale Therapeutic Systems, Inc.,
144A--Private Placement (a).................. 5.000% 02/08/07 $ 467,724
492 Invitrogen Corp., 144A--Private Placement
(a).......................................... 5.500 03/01/07 514,224
2,122 IVAX Corp., 144A--Private Placement (a)...... 5.500 05/15/07 2,777,104
632 Millennium Pharmaceuticals, Inc.,
144A--Private Placement (a).................. 5.500 01/15/07 946,186
526 Roche Holdings, Inc., LYON, 144A--Private
Placement (a)................................ * 01/19/15 471,428
715 Universal Health Services, Inc.,
144A--Private Placement (a).................. 0.426 06/23/20 340,933
-----------
7,563,343
-----------
PRODUCER MANUFACTURING 2.0%
898 Advanced Energy Industries, Inc. ............ 5.250 11/15/06 1,206,687
755 Kulicke & Soffa Industries, Inc.,
144A--Private Placement (a).................. 4.750 12/15/06 1,097,710
-----------
2,304,397
-----------
TECHNOLOGY 46.1%
2,019 America Online, Inc. ........................ * 12/06/19 1,025,914
147 America Online, Inc. ........................ 4.000 11/15/02 1,190,863
935 American Tower Corp., 144A--Private Placement
(a).......................................... 5.000 02/15/10 957,879
908 Amkor Technology, Inc., 144A--Private
Placement (a)................................ 5.000 03/15/07 836,123
1,000 ASM Lithography Holding NV (Netherlands),
144A--Private Placement (a).................. 4.250 11/30/04 1,355,630
105 BEA Systems, Inc. ........................... 4.000 06/15/05 780,544
706 BEA Systems, Inc., 144A--Private Placement
(a).......................................... 4.000 12/15/06 1,114,965
1,775 Comverse Technology, Inc., 144A--Private
Placement (a)................................ 4.500 07/01/05 7,650,250
743 CoreComm Ltd., 144A--Private Placement (a)... 6.000 10/01/06 709,565
678 Critical Path, Inc., 144A--Private Placement
(a).......................................... 5.750 04/01/05 567,405
630 Cypress Semiconductor Corp. ................. 4.000 02/01/05 733,950
760 Cypress Semiconductor Corp. ................. 6.000 10/01/02 1,350,900
935 DSC Communications Corp. .................... 7.000 08/01/04 1,068,237
1,960 Hewlett-Packard Co., LYON.................... * 10/14/17 1,852,200
476 i2 Technologies, Inc., 144A--Private
Placement (a)................................ 5.250 12/15/06 728,875
1,026 Juniper Networks, Inc. ...................... 4.750 03/15/07 1,122,187
1,040 Lam Research Corp. .......................... 5.000 09/01/02 1,413,100
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
YOUR FUND'S INVESTMENTS
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
PAR
AMOUNT MARKET
(000) DESCRIPTION COUPON MATURITY VALUE
<C> <S> <C> <C> <C>
TECHNOLOGY (CONTINUED)
$ 318 Lattice Semiconductor Corp., 144A--Private
Placement (a)................................ 4.750% 11/01/06 $ 572,400
1,087 Level 3 Communications, Inc. ................ 6.000 03/15/10 1,000,149
1,300 LSI Logic Corp., 144A--Private Placement
(a).......................................... 4.250 03/15/04 4,567,875
695 Nextel Communications, Inc., 144A--Private
Placement (a)................................ 4.750 07/01/07 1,836,538
790 Oak Industries, Inc. ........................ 4.875 03/01/08 4,585,950
1,091 Primus Telecommunications Group, Inc.,
144A--Private Placement (a).................. 5.750 02/15/07 762,336
470 Rational Software Corp., 144A--Private
Placement (a)................................ 5.000 02/01/07 700,888
815 Sanmina Corp. ............................... 4.250 05/01/04 1,653,537
203 Sanmina Corp., 144A--Private Placement (a)... 4.250 05/01/04 406,000
769 SCI Systems, Inc. ........................... 3.000 03/15/07 755,865
140 Siebel Systems, Inc. ........................ 5.500 09/15/06 502,775
800 Siebel Systems, Inc., 144A--Private Placement
(a).......................................... 5.500 09/15/06 2,868,000
1,556 STMicroelectronics NV (Netherlands), LYON.... * 09/22/09 2,686,979
623 TriQuint Semiconductor, Inc., 144A--Private
Placement (a)................................ 4.000 03/01/07 581,415
1,059 VERITAS Software Corp. ...................... 1.856 08/13/06 3,443,730
1,388 Vitesse Semiconductor Corp., 144A--Private
Placement (a)................................ 4.000 03/15/05 1,269,035
-----------
52,652,059
-----------
UTILITIES 2.9%
700 NTL, Inc., 144A--Private Placement (a)....... 7.000 12/15/08 1,123,500
1,600 Telefonos de Mexico SA (Mexico).............. 4.250 06/15/04 2,146,000
-----------
3,269,500
-----------
TOTAL CONVERTIBLE DEBT 66.7%............................................ 76,101,606
-----------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
YOUR FUND'S INVESTMENTS
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
PREFERRED STOCK 15.0%
CONSUMER SERVICES 0.2%
Cendant Corp., PRIDES, 6.75%................................ 32,500 $ 274,219
------------
ENERGY 5.3%
Apache Corp., ACES, 6.50%................................... 39,400 2,038,950
El Paso Energy Capital Trust I, 4.75%....................... 17,500 1,126,563
Kerr-McGee Corp., 5.50%..................................... 15,800 786,050
Pogo Trust I, QUIPS, 6.50%.................................. 9,400 507,600
Tosco Financing Trust, 5.75%................................ 20,800 1,011,400
Valero Energy Corp., PEPS, 7.75%............................ 21,400 569,775
------------
6,040,338
------------
HEALTHCARE 0.9%
Biovail Corp., 6.75%........................................ 18,200 985,075
------------
TECHNOLOGY 4.6%
Amdocs Ltd., TRACES, 6.75%.................................. 31,500 1,988,437
Intermedia Communications, Inc., Ser E, 7.00%............... 11,000 302,500
McLeodUSA, Inc., Ser A, 6.75%............................... 2,550 1,530,319
Nextlink Communications, Inc., 6.50%, 144A--Private
Placement (a)............................................. 1,400 250,528
Titan Capital Trust, 5.75%, 144A--Private Placement (a)..... 21,900 1,199,025
------------
5,270,809
------------
UTILITIES 4.0%
Calpine Capital Trust, TIDES, 5.75%......................... 17,400 2,081,475
Calpine Capital Trust II, TIDES, 5.50%, 144A--Private
Placement (a)............................................... 18,400 1,329,400
Omnipoint Corp., 7.00%, 144A--Private Placement (a)......... 7,000 1,193,500
------------
4,604,375
------------
TOTAL PREFERRED STOCK............................................... 17,174,816
------------
COMMON STOCKS 15.8%
ENERGY 3.9%
Baker Hughes, Inc. ......................................... 33,500 1,072,000
Dynegy, Inc., Class A....................................... 9,900 676,294
Enron Corp.................................................. 29,900 1,928,550
Grant Prideco, Inc. (b)..................................... 11,500 287,500
Weatherford International, Inc. (b)......................... 11,500 457,844
------------
4,422,188
------------
FINANCE 3.8%
American Express Co. ....................................... 12,600 656,775
Citigroup, Inc. ............................................ 19,500 1,174,875
Lehman Brothers Holdings, Inc. ............................. 19,700 1,862,881
Starwood Hotels & Resorts Worldwide, Inc., Class B.......... 20,000 651,250
------------
4,345,781
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
YOUR FUND'S INVESTMENTS
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
MARKET
DESCRIPTION SHARES VALUE
<S> <C> <C>
HEALTHCARE 1.5%
Genetech, Inc. (b).......................................... 10,300 $ 1,771,600
------------
TECHNOLOGY 6.6%
Applied Materials, Inc. (b)................................. 10,000 906,250
EMC Corp. (b)............................................... 35,312 2,716,817
Lam Research Corp. (b)...................................... 24,000 900,000
Micron Technology, Inc. .................................... 13,000 1,144,813
RF Micro Devices, Inc. (b).................................. 4,900 429,362
SCI Systems, Inc. (b)....................................... 6,412 251,270
Texas Instruments, Inc. .................................... 16,800 1,153,950
------------
7,502,462
------------
TOTAL COMMON STOCKS 15.8%.......................................... 18,042,031
------------
TOTAL LONG-TERM INVESTMENTS 97.5%
(Cost $77,969,252)................................................ 111,318,453
REPURCHASE AGREEMENT 2.1%
BA Securities ($2,431,000 par collateralized by U.S. Government
obligations in a pooled cash account, dated 06/30/00, to be sold
on 07/03/00 at $2,432,388)
(Cost $2,431,000)................................................. 2,431,000
------------
TOTAL INVESTMENTS 99.6%
(Cost $80,400,252)................................................ 113,749,453
OTHER ASSETS IN EXCESS OF LIABILITIES 0.4%......................... 447,613
------------
NET ASSETS 100.0%.................................................. $114,197,066
============
</TABLE>
* Zero coupon bond
(a) 144A Securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally
transactions with qualified institutional buyers.
(b) Non-income producing security as this security currently does not declare
dividends.
ACES--Automatically convertible equity securities
LYON--Liquid yield option note
PEPS--Premium equity participating security
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
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $80,400,252)........................ $113,749,453
Receivables:
Interest.................................................. 519,364
Dividends................................................. 3,450
Other....................................................... 21,609
------------
Total Assets............................................ 114,293,876
------------
LIABILITIES:
Payables:
Investment Advisory Fee................................... 45,278
Affiliates................................................ 959
Custodian Bank............................................ 215
Trustees' Deferred Compensation and Retirement Plans........ 33,507
Accrued Expenses............................................ 16,851
------------
Total Liabilities....................................... 96,810
------------
NET ASSETS.................................................. $114,197,066
============
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................................. 33,349,201
Accumulated Net Realized Gain............................... 9,209,651
Accumulated Undistributed Net Investment Income............. 359,696
------------
NET ASSETS.................................................. $114,197,066
============
NET ASSET VALUE PER SHARE ($114,197,066 divided by 3,241,824
shares outstanding)....................................... $ 35.23
============
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
Statement of Operations
For the Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 1,111,191
Dividends................................................... 451,736
-----------
Total Income............................................ 1,562,927
-----------
EXPENSES:
Investment Advisory Fee..................................... 288,110
Shareholder Reports......................................... 21,442
Trustees' Fees and Related Expenses......................... 19,216
Custody..................................................... 12,166
Legal....................................................... 912
Other....................................................... 50,988
-----------
Total Expenses.......................................... 392,834
-----------
NET INVESTMENT INCOME....................................... $ 1,170,093
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $10,250,286
Futures................................................... (292,123)
-----------
Net Realized Gain........................................... 9,958,163
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 39,307,011
End of the Period:
Investments............................................. 33,349,201
-----------
Net Unrealized Depreciation During the Period............... (5,957,810)
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 4,000,353
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 5,170,446
===========
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
Statement of Changes in Net Assets
For the Six Months Ended June 30, 2000, and the Year Ended December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................. $ 1,170,093 $ 2,609,212
Net Realized Gain................................. 9,958,163 2,434,961
Net Unrealized Appreciation/Depreciation During
the Period...................................... (5,957,810) 33,080,192
------------ ------------
Change in Net Assets from Operations.............. 5,170,446 38,124,365
------------ ------------
Distributions from Net Investment Income.......... (1,169,642) (2,724,759)
Distributions from Net Realized Gain.............. -0- (2,579,925)
------------ ------------
Total Distributions............................... (1,169,642) (5,304,684)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES...................................... 4,000,804 32,819,681
NET ASSETS:
Beginning of the Period........................... 110,196,262 77,376,581
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of $359,696
and $359,245, respectively)..................... $114,197,066 $110,196,262
============ ============
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
Financial Highlights
(Unaudited)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
FUND OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<TABLE>
<CAPTION>
SIX MONTHS ENDED -----------------------------
JUNE 30, 2000 1999 1998 1997
-------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF THE
PERIOD............................ $33.992 $23.868 $24.265 $24.451
------- ------- ------- -------
Net Investment Income............. .360 .804 .896 1.006
Net Realized and Unrealized Gain/
Loss............................ 1.234 10.954 .530 3.014
------- ------- ------- -------
Total from Investment Operations.... 1.594 11.758 1.426 4.020
------- ------- ------- -------
Less:
Distributions from and in Excess
of Net Investment Income........ .360 .840 .880 1.179
Distributions from and in Excess
of Net Realized Gain............ -0- .794 .943 3.027
------- ------- ------- -------
Total Distributions................. .360 1.634 1.823 4.206
------- ------- ------- -------
NET ASSET VALUE, END OF
THE PERIOD........................ $35.226 $33.992 $23.868 $24.265
======= ======= ======= =======
Market Price Per Share at End of the
Period............................ $33.625 $25.875 $19.875 $21.125
Total Investment Return at Market
Price (a)......................... 31.40%* 39.22% 2.05% 19.48%
Total Return at Net Asset Value
(b)............................... 4.66%* 50.19% 5.90% 18.57%
Net Assets at End of the Period (In
millions)......................... $ 114.2 $ 110.2 $ 77.4 $ 78.7
Ratio of Expenses to Average Net
Assets............................ .68% .76% .83% .76%
Ratio of Net Investment Income to
Average Net Assets................ 2.03% 3.03% 3.75% 3.86%
Portfolio Turnover.................. 45%* 107% 157% 181%
</TABLE>
* Non-Annualized
(a) Total return based on market price assumes an investment at the market price
at the beginning of the period indicated, reinvestment of all distributions
for the period in accordance with the Fund's dividend reinvestment plan, and
sale of all shares at the closing stock price at the end of the period
indicated.
(b) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
16
<PAGE> 18
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1996 1995 1994 1993 1992 1991
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 24.41 $ 21.62 $ 24.88 $ 23.64 $ 22.23 $ 19.41
------- ------- ------- ------- ------- -------
.968 1.14 1.09 1.15 1.175 1.32
1.768 3.5325 (2.56) 2.01 1.415 2.90
------- ------- ------- ------- ------- -------
2.736 4.6725 (1.47) 3.16 2.59 4.22
------- ------- ------- ------- ------- -------
1.005 1.15 1.10 1.12 1.18 1.40
1.690 .7325 .69 .80 -0- -0-
------- ------- ------- ------- ------- -------
2.695 1.8825 1.79 1.92 1.18 1.40
------- ------- ------- ------- ------- -------
$24.451 $ 24.41 $ 21.62 $ 24.88 $ 23.64 $ 22.23
======= ======= ======= ======= ======= =======
$21.125 $21.375 $18.125 $22.375 $20.375 $19.250
11.67% 28.88% -11.71% 19.43% 12.31% 24.68%
11.51% 23.42% -5.29% 14.50% 12.84% 23.32%
$ 79.3 $ 79.1 $ 70.1 $ 80.7 $ 76.6 $ 72.1
.88% .80% .82% .87% .88% .89%
3.88% 4.82% 4.70% 4.60% 5.28% 6.41%
140% 127% 111% 128% 87% 168%
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (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 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, which approximates market value.
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 52% 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 with its custodian, assets having an aggregate
value at least equal to the amount of the when-issued or delayed delivery
purchase commitments
18
<PAGE> 20
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
until payment is made. At June 30, 2000, there were no when-issued or delayed
delivery purchase commitments.
The Fund may invest in repurchase agreements, which are short-term
investments whereby the Fund acquires ownership of a debt security and the
seller agrees to repurchase the security at a future time and specified price.
The Fund may invest independently in repurchase agreements or transfer
uninvested cash balances into a pooled cash account along with other investment
companies advised by Van Kampen Asset Management Inc. (the "Adviser") or its
affiliates, the daily aggregate of which is invested in repurchase agreements.
Repurchase agreements are fully collateralized by the underlying debt security.
The Fund will make payment for such securities only upon physical delivery or
evidence of book entry transfer to the account of the custodian bank. The seller
is required to maintain the value of the underlying security at not less than
the repurchase proceeds due the Fund.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Discounts are accreted over
the expected life of each applicable security. Premiums on debt securities are
not amortized.
D. FEDERAL INCOME TAXES It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes is required.
At June 30, 2000, for federal income tax purposes the cost of long- and
short-term investments is $80,400,252, the aggregate gross unrealized
appreciation is $35,995,279 and the aggregate gross unrealized depreciation is
$2,646,078, resulting in net unrealized appreciation on long- and short-term
investments of $33,349,201.
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.
19
<PAGE> 21
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (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 DAILY 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, 2000, the Fund recognized expenses of
approximately $900, 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, 2000, the Fund recognized expenses of
approximately $4,900, 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 $56,266,587 and $49,254,211,
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
20
<PAGE> 22
NOTES TO
FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
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 variation margin).
Transactions in futures contracts, each with a par value of $250,000, for
the six months ended June 30, 2000, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
<S> <C>
Outstanding at December 31, 1999............................ 13
Futures Opened.............................................. -0-
Futures Closed.............................................. (13)
---
Outstanding at June 30, 2000................................ -0-
===
</TABLE>
21
<PAGE> 23
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.
22
<PAGE> 24
VAN KAMPEN FUNDS
THE VAN KAMPEN
FAMILY OF FUNDS
Growth
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
Growth
Mid Cap Growth
Pace
Select Growth
Small Cap Value
Tax Managed Equity Growth
Technology
Growth and Income
Comstock
Equity Income
Growth and Income
Harbor
Real Estate Securities
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
International Magnum
Latin American
Strategic Income
Tax Managed Global Franchise
Worldwide High Income
Income
Corporate Bond
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return*
Limited Maturity Government
U.S. Government
U.S. Government Trust for Income
Capital Preservation
Reserve
Tax Free Money
Senior Loan
Prime Rate Income Trust
Senior Floating Rate
Tax Free
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal**
Insured Tax Free Income
Intermediate Term Municipal
Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
To find out more about any of these funds, ask your financial advisor for a
prospectus, which contains more complete information, including sales charges,
risks, and ongoing expenses. Please read it carefully before you invest or send
money.
To view a current Van Kampen fund prospectus or to receive additional fund
information, choose from one of the following:
- visit our Web site at
WWW.VANKAMPEN.COM--
to view a prospectus, select
Download Prospectus [COMPUTER ICON]
- call us at 1-800-341-2911
weekdays from 7:00 a.m. to 7:00 p.m.
Central time. Telecommunications
Device for the Deaf users, call
1-800-421-2833.
[PHONE ICON]
- e-mail us by visiting
WWW.VANKAMPEN.COM and
selecting Contact Us
[MAIL ICON]
* Closed to new investors
** Open to new investors for a limited time
23
<PAGE> 25
FUND OFFICERS AND IMPORTANT ADDRESSES
VAN KAMPEN CONVERTIBLE SECURITIES FUND
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
THEODORE A. MYERS
RICHARD F. POWERS, III*- Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN
OFFICERS
RICHARD F. POWERS, III*
President
STEPHEN L. BOYD*
Executive Vice President and
Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and
Chief Financial Officer
RICHARD A. CICCARONE*
JOHN R. REYNOLDSON*
MICHAEL H. SANTO*
JOHN H. ZIMMERMANN, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
STATE STREET BANK AND TRUST CO.
222 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 AUDITORS(1)
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
FOR FEDERAL INCOME TAX PURPOSES, THE FOLLOWING INFORMATION IS FURNISHED WITH
RESPECT TO DISTRIBUTIONS PAID BY THE FUND DURING ITS TAXABLE YEAR ENDED AUGUST
18, 2000. THE FUND DESIGNATED AND PAID $12,277,722 AS A 20% RATE GAIN
DISTRIBUTION. THE DISTRIBUTIONS WILL BE INCLUDED ON 2000'S FORM 1099-DIV WHICH
WILL BE MAILED IN JANUARY OF 2001.
INQUIRIES 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) 893-0500 EXTENSION: 2223
(1)
Independent auditors for the Fund perform an annual audit of the Fund's
financial statements. The Board of Trustees has engaged Deloitte & Touche LLP to
be the Fund's independent auditors.
Ernst & Young LLP, located at 233 South Wacker Drive, Chicago, IL 60606, ceased
being the Fund's independent auditors effective May 12, 2000.
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940, as amended.
(C) Van Kampen Funds Inc., 2000. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
24
