<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Partners............................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio of Investments......................... 4
Statement of Assets and Liabilities.............. 6
Statement of Operations.......................... 7
Statement of Changes in Net Assets............... 8
Financial Highlights............................. 9
Notes to Financial Statements.................... 10
</TABLE>
EXCH SAR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO PARTNERS
July 20, 1999
Dear Partner,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns
are always emerging. In the coming months, we'll likely hear more about how the
year 2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
[SIG.]
Richard F. Powers, III
Chairman
Van Kampen Asset Management Inc.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Asset Management Inc.
1
<PAGE> 3
ECONOMIC SNAPSHOT
The strength of the domestic economy continued to defy expectations in the
first half of 1999, although it finally began to show signs of slowing down.
Strong growth, healthy employment, and low inflation all contributed to the
favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3
percent during the first quarter of 1999, but fell to 2.3 percent in the second
quarter. The first-quarter expansion was fueled by an increase in consumer
spending, which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in
more than 30 years. Throughout the reporting period, unemployment remained low,
the number of jobs grew, and wages rose. The labor market remained especially
tight in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report (CPI). Following this up-tick, the Federal Reserve raised interest
rates 0.25 percent on June 30. Although the Fed had expressed a bias toward a
series of rate increases, May's tame CPI report prompted it to drop this bias
when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may
continue, bringing the economy back to historically normal growth levels.
Healthy job growth, which has been supporting the consumer confidence and
spending levels, showed signs of faltering toward the end of the reporting
period. However, a renewed optimism for corporate earnings, low unemployment,
and a vibrant housing market should provide some balance against a slower job
growth rate.
INTEREST RATES AND INFLATION
June 30, 1997, through June 30, 1999
[LINE GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Jun 1997 6.5000 2.3000
6.0000 2.2000
5.5000 2.2000
Sep 1997 6.2500 2.2000
5.7500 2.1000
5.6875 1.8000
Dec 1997 6.5000 1.7000
5.5625 1.6000
5.6250 1.4000
Mar 1998 6.1250 1.4000
5.6250 1.4000
5.6875 1.7000
Jun 1998 6.0000 1.7000
5.5625 1.7000
5.9375 1.6000
Sep 1998 5.7500 1.5000
5.2500 1.5000
4.8750 1.5000
Dec 1998 4.0000 1.6000
4.8125 1.7000
4.8750 1.6000
Mar 1999 5.1250 1.7000
4.9375 2.3000
4.5000 2.1000
Jun 1999 4.0000 2.0000
</TABLE>
Interest rates are represented by the closing midline federal funds rate
on the last day of each month. Inflation is indicated by the annual
percent change of the Consumer Price Index for all urban consumers at
the end of each month.
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED JUNE 30, 1999
VAN KAMPEN EXCHANGE FUND
<TABLE>
<S> <C>
TOTAL RETURNS
Six-month total return(1).................................. 6.32%
One-year total return(1)................................... 22.63%
Five-year average total return(1).......................... 26.04%
Ten-year average total return(1)........................... 17.99%
Life-of-Fund average total return(1)....................... 15.13%
Commencement Date.......................................... 12/16/76
</TABLE>
(1)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 units of partnership interest at the end of the period,
all at NAV.
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.
Because the prices of common stocks and other securities fluctuate, the value of
an investment in the Fund will vary upon the Fund's investment performance.
Foreign securities may magnify volatility due to changes in foreign exchange
rates, the political and economic uncertainties in foreign countries, and the
potential lack of liquidity, government supervision, and regulation.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 5
PORTFOLIO OF INVESTMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
--------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 95.3%
CONSUMER DISTRIBUTION 1.5%
Cardinal Health, Inc................................. 1,245 $ 79,836
IKON Office Solutions, Inc........................... 86,993 1,304,895
-----------
1,384,731
-----------
CONSUMER DURABLES 1.3%
Dana Corp............................................ 13,677 629,997
SPX Corp. (a)........................................ 6,824 569,804
-----------
1,199,801
-----------
CONSUMER NON-DURABLES 4.1%
International Flavors & Fragrances, Inc.............. 49,712 2,205,970
McCormick & Co., Inc................................. 48,259 1,523,175
-----------
3,729,145
-----------
CONSUMER SERVICES 0.2%
Luby's Cafeterias, Inc............................... 13,367 200,505
-----------
ENERGY 12.4%
Amerada Hess Corp.................................... 21,200 1,261,400
Apache Corp.......................................... 11,406 444,834
Baker Hughes Inc..................................... 25,634 858,739
BP Amoco Plc -- ADR (United Kingdom)................. 16,938 1,837,773
Halliburton Co....................................... 30,320 1,371,980
Kerr-McGee Corp...................................... 10,900 547,044
Mobil Corp........................................... 40,262 3,985,938
Schlumberger, Ltd.................................... 16,080 1,024,095
-----------
11,331,803
-----------
FINANCE 3.9%
American International Group, Inc.................... 22,234 2,602,768
Household International, Inc......................... 21,372 1,012,498
-----------
3,615,266
-----------
HEALTHCARE 34.6%
American Home Products Corp.......................... 56,000 3,220,000
Baxter International, Inc............................ 5,000 303,125
Johnson & Johnson, Inc............................... 54,432 5,334,336
</TABLE>
See Notes to Financial Statements
4
<PAGE> 6
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Shares Market Value
--------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE (CONTINUED)
Merck & Co., Inc..................................... 50,376 $ 3,727,824
Schering-Plough Corp................................. 195,374 10,354,822
Warner-Lambert Co.................................... 127,290 8,830,744
-----------
31,770,851
-----------
PRODUCER MANUFACTURING 1.4%
AlliedSignal, Inc.................................... 12,528 789,264
Fluor Corp........................................... 12,831 519,656
-----------
1,308,920
-----------
RAW MATERIALS/PROCESSING INDUSTRIES 9.4%
Air Products & Chemicals, Inc........................ 109,090 4,390,872
Alcan Aluminum, Ltd.................................. 10,774 344,095
Georgia Pacific Corp................................. 37,376 1,770,688
Georgia Pacific Corp. -- Timber Group................ 18,688 471,872
Louisiana-Pacific Corp............................... 25,970 616,788
Lubrizol Corp........................................ 37,620 1,025,145
-----------
8,619,460
-----------
TECHNOLOGY 26.5%
Intel Corp........................................... 375,554 22,345,462
International Business Machines Corp................. 15,016 1,940,817
-----------
24,286,279
-----------
TOTAL LONG-TERM INVESTMENTS 95.3%
(Cost $7,354,175)............................................. 87,446,761
REPURCHASE AGREEMENT 4.2%
Donaldson Lufkin and Jenrette ($3,866,000 par collateralized
by U.S. Government obligations in a pooled cash account, dated
06/30/99, to be sold on 07/01/99 at $3,866,515)
(Cost $3,866,000)............................................. 3,866,000
-----------
TOTAL INVESTMENTS 99.5%
(Cost $11,220,175)............................................ 91,312,761
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5%..................... 490,420
-----------
NET ASSETS 100.0%.............................................. $91,803,181
===========
</TABLE>
(a) Non-income producing security as this stock currently does not declare
dividends.
ADR -- American Depositary Receipt
See Notes to Financial Statements
5
<PAGE> 7
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $11,220,175)........................ $91,312,761
Cash........................................................ 3,598
Receivables:
Investments Sold.......................................... 521,952
Dividends................................................. 76,736
Other....................................................... 89,438
-----------
Total Assets.......................................... 92,004,485
-----------
LIABILITIES:
Payables:
Investment Advisory Fee................................... 35,898
Income Distributions...................................... 17,184
Affiliates................................................ 2,401
Managing General Partners' Retirement Plan.................. 115,712
Accrued Expenses............................................ 30,109
-----------
Total Liabilities..................................... 201,304
-----------
NET ASSETS.................................................. $91,803,181
===========
NET ASSETS WERE COMPRISED OF:
272,407 units of limited partnership interest............... $90,597,493
3,406 units of non-managing general partnership interest.... 1,132,610
220 units of managing general partnership interest.......... 73,078
-----------
NET ASSETS.................................................. $91,803,181
===========
NET ASSET VALUE PER UNIT ($91,803,181 divided by 276,033
units of partnership interest outstanding)................ $ 332.58
===========
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................... $ 493,022
Interest.................................................... 92,281
----------
Total Income............................................ 585,303
----------
EXPENSES:
Investment Advisory Fee..................................... 220,362
Managing General Partners' Fees and Related Expenses........ 29,764
Shareholder Reports......................................... 28,292
Accounting.................................................. 15,172
Custody..................................................... 11,807
Legal....................................................... 1,475
Other....................................................... 19,234
----------
Total Expenses............................................ 326,106
Less Credits Earned on Overnight Cash Balances............ 40
----------
Net Expenses.............................................. 326,066
----------
NET INVESTMENT INCOME....................................... $ 259,237
==========
REALIZED AND UNREALIZED GAIN/LOSS
Net Realized Gain........................................... $1,777,870
----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 76,547,458
End of the Period......................................... 80,092,586
----------
Net Unrealized Appreciation During the Period............... 3,545,128
----------
NET REALIZED AND UNREALIZED GAIN............................ $5,322,998
==========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $5,582,235
==========
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1999 and the
Year Ended December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 259,237 $ 573,557
Net Realized Gain................................ 1,777,870 2,475,843
Net Unrealized Appreciation During the Period.... 3,545,128 17,188,549
----------- -----------
Change in Net Assets from Operations............. 5,582,235 20,237,949
----------- -----------
Distributions from Net Investment Income......... (177,761) (366,286)
Distributions from Net Realized Gain............. (136,842) -0-
----------- -----------
Total Distributions.......................... (314,603) (366,286)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... 5,267,632 19,871,663
----------- -----------
FROM PARTNERSHIP UNIT TRANSACTIONS:
Proceeds from Units Issued Through Dividend
Reinvestment................................... 55,938 49,579
Cost of Units Repurchased........................ (1,437,121) (2,278,503)
----------- -----------
NET CHANGE IN NET ASSETS FROM
PARTNERSHIP UNIT TRANSACTIONS.................. (1,381,183) (2,228,924)
----------- -----------
TOTAL INCREASE IN NET ASSETS..................... 3,886,449 17,642,739
NET ASSETS:
Beginning of the Period.......................... 87,916,732 70,273,993
----------- -----------
End of the Period (Including accumulated
undistributed net investment income of
$2,906,860 and $2,825,384, respectively)....... $91,803,181 $87,916,732
=========== ===========
CHANGE IN PARTNERSHIP UNITS OUTSTANDING:
Units Issued Through Dividend Reinvestment....... 172 180
Units Repurchased................................ (4,498) (8,376)
----------- -----------
Decrease in Partnership Units Outstanding.... (4,326) (8,196)
=========== ===========
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one unit of partnership
interest outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31 (a)
Six Months Ended ----------------------------------------
June 30, 1999(a) 1998 1997 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period................. $ 313.586 $243.538 $205.349 $ 151.88 $115.36
------------ -------- -------- -------- -------
Net Investment
Income............... 0.932 2.010 1.908 1.488 1.62
Net Realized and
Unrealized Gain...... 19.192 69.318 37.561 53.261 36.18
------------ -------- -------- -------- -------
Total from Investment
Operations............. 20.124 71.328 39.469 54.749 37.80
------------ -------- -------- -------- -------
Less:
Distributions from Net
Investment Income.... .640 1.280 1.280 1.28 1.28
Distributions from Net
Realized Gain........ .490 -0- -0- -0- -0-
------------ -------- -------- -------- -------
Total Distributions...... 1.130 1.280 1.280 1.28 1.28
------------ -------- -------- -------- -------
Net Asset Value, End of
the Period............. $ 332.580 $313.586 $243.538 $205.349 $151.88
============ ======== ======== ======== =======
Total Return............. 6.32%* 29.36% 19.23% 36.21% 32.89%
Net Assets at End of the
Period (In millions)... $ 91.8 $ 87.9 $ 70.3 $ 61.8 $ 47.8
Ratio of Expenses to
Average Net Assets..... .74% .74% .75% .93% .88%
Ratio of Net Investment
Income to Average Net
Assets................. .59% .73% .80% .87% 1.16%
Portfolio Turnover....... 0%* 0% 0% 0% 0%
</TABLE>
* Non-Annualized
(a) Based on average units outstanding.
See Notes to Financial Statements
9
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Exchange Fund (the "Fund"), a California limited partnership, is a
partnership registered under the Investment Company Act of 1940, as amended, as
a diversified open-end investment management company. The Fund seeks capital
appreciation in a portfolio of common stock. The Fund commenced investment
operations on December 16, 1976.
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--Investments in securities listed on a securities exchange
are valued at their sale price as of the close of such securities exchange.
Fixed income investments are stated at value using market quotations. Unlisted
securities and listed securities for which the last sales price is not available
are valued at the mean between the last reported bid and ask price. For those
securities where quotations or prices are not available, valuations are
determined in accordance with procedures established in good faith by the
Managing General Partners. Short-term securities with remaining maturities of 60
days or less are valued at amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may 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.
10
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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--Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Discounts are amortized over
the life of each applicable security. Premiums on debt securities are not
amortized.
D. FEDERAL INCOME TAXES--The Fund has met the qualifications to be classified as
a partnership for federal income tax purposes and intends to maintain this
qualification in the future. A partnership is not subject to federal income tax.
At June 30, 1999, for federal income tax purposes the cost of long- and
short-term investments is $11,220,175; the aggregate gross unrealized
appreciation is $80,092,586 and the aggregate gross unrealized depreciation is
$0, resulting in net unrealized appreciation on long- and short-term investments
of $80,092,586.
E. DISTRIBUTION OF INCOME AND GAINS--Quarterly distributions to partners are
recorded on the record date. Net investment income is allocated daily to each
partner, relative to the total number of units held. Capital gains or losses
will be allocated equally among units outstanding on the day recognized.
F. EXPENSE REDUCTIONS--During the six months ended June 30, 1999, the Fund's
custody fee was reduced by $40 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 facilities and investment advice to the Fund for an annual fee payable
monthly of .50% based on the average daily net assets of the Fund.
For the six months ended June 30, 1999, the Fund recognized expenses of
approximately $1,500 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended June 30, 1999, the Fund recognized expenses of
approximately $15,200 representing Van Kampen Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting services to the Fund.
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Van Kampen Investor Services Inc. ("VKIS"), an affiliate of the Adviser,
serves as the shareholder servicing agent for the Fund. For the six months ended
June 30, 1999, the Fund recognized expenses of approximately $7,600. Transfer
agency fees are determined through negotiations with the Fund's Managing General
Partners and are based on competitive benchmarks.
Managing general partners of the Fund who are not affiliated with the
Adviser are compensated by the Fund at the annual rate of approximately $500
plus a fee of $250 per Board meeting attended.
The Managing General Partners of the Fund instituted a Retirement Plan
effective April 1, 1996. The Plan is not funded, and obligations under the Plan
will be paid solely out of the Fund's general accounts. The Fund will not
reserve or set aside funds for the payment of its obligations under the Plan by
any form of trust or escrow. For the current Managing General Partners not
affiliated with the Adviser, the annual retirement benefit payable per year for
a ten year period is based upon the highest total annual compensation received
in any of the three calendar years preceding retirement. Managing General
Partners with more than five but less than ten years service at retirement will
receive a prorated reduced benefit. Under the Plan, for the Managing General
Partners retiring with the effectiveness of the Plan, the annual retirement
benefit payable per year for a ten year period is equal to 75% of the total
compensation received from the Fund during the 1995 calendar year.
At June 30, 1999, the Adviser and Van Kampen Exchange Corp., as non-managing
general partners of the Fund, owned 354 and 3,019 units of partnership interest,
respectively.
3. PARTNERSHIP UNIT TRANSACTIONS
Partners of the Fund may redeem units at any time. The net asset value of units
redeemed, other than redemptions under a systematic withdrawal plan, may be paid
in cash or securities, at the option of the Fund, and will ordinarily be paid in
whole or in part in securities. The Fund's valuation will determine the quantity
of securities tendered. The Fund will select securities for tender in
redemptions based on tax or investment considerations.
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $-0- and $1,835,041, respectively.
12
<PAGE> 14
VAN KAMPEN FUNDS
EQUITY FUNDS
Domestic
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
Global/International
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
Income
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
Tax Exempt Income
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
Capital Preservation
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these
funds, ask your financial advisor for
a prospectus, which contains more
complete information, including sales
charges, risks, and expenses. Please
read it carefully before you invest
or send money.
To view a current Van Kampen fund
prospectus or to receive additional
fund information, choose from one of
the following:
- - visit our Web site at
WWW.VANKAMPEN.COM--to view a prospectus, select Download Prospectus
- - call us at 1-800-341-2911 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Telecommunications Device for the Deaf users, call 1-800-421-2833.
- - e-mail us by visiting WWW.VANKAMPEN.COM and selecting Contact Us
13
<PAGE> 15
VAN KAMPEN EXCHANGE FUND
(A California Limited Partnership)
- --------------------------------------------------------------------------------
MANAGING GENERAL PARTNERS
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
STEVEN MULLER
THEODORE A. MYERS
DON G. POWELL*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
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
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
PAUL R. WOLKENBERG*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
SHAREHOLDER SERVICE AGENT
VAN KAMPEN INVESTOR
SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK AND TRUST CO.
225 Franklin Street
Boston, Massachusetts 02105
NON-MANAGING GENERAL PARTNERS
VAN KAMPEN EXCHANGE CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
VAN KAMPEN ASSET MANAGEMENT INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
* "Interested" persons of the Fund, as defined in the Investment Company Act of
1940.
(C) Van Kampen Funds Inc., 1999. All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
14
<PAGE> 16
RESULTS OF PARTNER VOTES
The Annual Meeting of Partners of the Fund was held on June 16, 1999, where
partners voted on the election of managing general partners whose terms expired
in 1999 and the election of independent public accountants.
1) With regard to the election of the following managing general partners by
the partners of the Fund:
<TABLE>
<CAPTION>
# OF UNITS
-------------------
IN FAVOR WITHHELD
- ------------------------------------------------------------------------
<S> <C> <C>
David C. Arch....................................... 141,626 8,500
Rod Dammeyer........................................ 141,626 8,500
Howard J Kerr....................................... 141,626 8,500
Dennis J. McDonnell................................. 141,626 8,500
Steven Muller....................................... 141,626 8,500
Theodore A. Myers................................... 141,626 8,500
Don G. Powell....................................... 141,626 8,500
Hugo F. Sonnenschein................................ 141,626 8,500
Wayne W. Whalen..................................... 141,626 8,500
</TABLE>
2) With regard to the ratification of KPMG LLP as independent public
accountants for its current fiscal year, 150,093 units voted for the proposal, 0
units voted against and 33 units abstained.
15
<PAGE> 17
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
16
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> EXCHANGE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<INVESTMENTS-AT-COST> 11,220,175
<INVESTMENTS-AT-VALUE> 91,312,761
<RECEIVABLES> 598,688
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 93,036
<TOTAL-ASSETS> 92,004,485
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 201,304
<TOTAL-LIABILITIES> 201,304
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> (43,145,741)
<SHARES-COMMON-STOCK> 276,033
<SHARES-COMMON-PRIOR> 280,359
<ACCUMULATED-NII-CURRENT> 2,906,860
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 51,949,477
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 80,092,585
<NET-ASSETS> 91,803,181
<DIVIDEND-INCOME> 493,022
<INTEREST-INCOME> 92,281
<OTHER-INCOME> 0
<EXPENSES-NET> (326,066)
<NET-INVESTMENT-INCOME> 259,237
<REALIZED-GAINS-CURRENT> 1,777,870
<APPREC-INCREASE-CURRENT> 3,545,128
<NET-CHANGE-FROM-OPS> 5,582,235
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (177,761)
<DISTRIBUTIONS-OF-GAINS> (136,842)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (4,498)
<SHARES-REINVESTED> 172
<NET-CHANGE-IN-ASSETS> 3,886,449
<ACCUMULATED-NII-PRIOR> 2,825,384
<ACCUMULATED-GAINS-PRIOR> 50,308,449
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 220,362
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 326,106
<AVERAGE-NET-ASSETS> 88,907,467
<PER-SHARE-NAV-BEGIN> 313.586
<PER-SHARE-NII> 0.932
<PER-SHARE-GAIN-APPREC> 19.192
<PER-SHARE-DIVIDEND> (0.640)
<PER-SHARE-DISTRIBUTIONS> (0.490)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 332.580
<EXPENSE-RATIO> 0.74
</TABLE>
