<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 22
Statement of Operations.......................... 23
Statement of Changes in Net Assets............... 24
Financial Highlights............................. 25
Notes to Financial Statements.................... 28
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
October 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the 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 Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree, keeping the economy growing at a
healthy pace. High levels of consumer confidence fueled this heavy retail
purchasing activity, pushing the personal savings rate down to a record low as
spending rates outpaced income growth. Although we experienced a slowdown during
the second quarter of 1999, economic growth accelerated toward the end of the
reporting period. The growth rate of the nation's gross domestic product (GDP)
dipped to 1.6 percent for the second quarter of 1999, but climbed back up to 4.8
percent in the third quarter.
EMPLOYMENT SITUATION
The strong job market helped to support the health of the economy. During
the reporting period, the unemployment rate reached its lowest level in almost
30 years, and wages continued to climb. The wage pressures were balanced
somewhat by productivity gains, but they ultimately pushed the cost of labor
higher, as evidenced by the sharp jump in the Employment Cost Index in the
second quarter of 1999.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index (CPI) report. The Federal Reserve remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
two of its interest rate cuts from the fall of 1998, raising rates in June and
August 1999 to keep the economy from overheating.
INTEREST RATES AND INFLATION
September 30, 1997, through September 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Sep 1997 5.5000 2.2000
6.2500 2.2000
5.7500 2.1000
Dec 1997 5.6875 1.8000
6.5000 1.7000
5.5625 1.6000
Mar 1998 5.6250 1.4000
6.1250 1.4000
5.6250 1.4000
Jun 1998 5.6875 1.7000
6.0000 1.7000
5.5625 1.7000
Sep 1998 5.9375 1.6000
5.7500 1.5000
5.2500 1.5000
Dec 1998 4.8750 1.5000
4.0000 1.6000
4.8125 1.7000
Mar 1999 4.8750 1.6000
5.1250 1.7000
4.9375 2.3000
Jun 1999 4.5000 2.1000
4.0000 2.0000
4.7500 2.1000
Sep 1999 5.4375 2.3000
</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 SEPTEMBER 30, 1999
VAN KAMPEN HIGH YIELD FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV(1)... (0.14%) (0.54%) (0.54%)
Six-month total return(2)................ (4.88%) (4.35%) (1.50%)
One-year total return(2)................. 1.60% 1.91% 4.83%
Five-year average annual total
return(2)................................ 7.10% 7.11% 7.30%
Ten-year average annual total
return(2)................................ 7.56% N/A N/A
Life-of-Fund average annual total
return(2)................................ 7.52% 6.48% 5.96%
Commencement date........................ 06/27/86 05/17/93 08/13/93
DISTRIBUTION RATE AND YIELD
Distribution rate(3)..................... 9.30% 8.93% 8.94%
SEC Yield(4)............................. 10.21% 9.94% 9.94%
N/A = Not Applicable
</TABLE>
(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for A shares) or contingent
deferred sales charge for early withdrawal (4% for B shares and 1% for C
shares).
(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).
(3) Distribution rate represents the monthly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.
(4) SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio should
theoretically generate for the 30-day period ending September 30, 1999. Had
certain expenses of the Fund not been assumed Van Kampen, the SEC Yield would
have been 10.11%, 9.84%, and 9.84% for Classes A, B and C, respectively, and the
total returns would have been lower.
See the Comparative Performance section of the current prospectus. 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.
Investing in high-yield, lower-rated securities involves certain risks, which
may include the potential for greater sensitivity to general economic downturns
and greater market price volatility.
Market forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN HIGH YIELD FUND
We recently spoke with the portfolio managers of the Van Kampen High Yield Fund
about the key events and economic forces that shaped the markets during the most
recent reporting period. The managers are led by Robert J. Hickey, portfolio
manager, who has managed the Fund since February 1998 and worked in the
investment industry since 1988. He is joined by Peter W. Hegel, chief investment
officer for fixed-income investments. The following excerpts reflect their views
on the Fund's performance during the six-month reporting period ended September
30, 1999.
Q HOW WOULD YOU CHARACTERIZE THE ECONOMIC ENVIRONMENT IN WHICH THE FUND
OPERATED DURING THE REPORTING PERIOD?
A After the extreme underperformance that overshadowed the high-yield market
in late 1998, the second quarter of 1999 initially marked a brief period
of recovery. However, investors quickly became distracted by expectations
of rising inflation and warnings of an interest rate increase by the Federal
Reserve Board. This development caused yield spreads to widen between Treasuries
and other types of bond, including high-yield securities. The market breathed a
sigh of relief at the end of the second quarter, as the Fed announced a 0.25
percent rate hike.
By the beginning of August, rumblings of another rate hike were again
triggered by indications of a strengthening economy and a further increase in
inflation. At its late August meeting, the Fed raised the federal funds rates a
second time, to 5.25 percent. Bond prices came under additional pressure by the
possibility of a third increase by the end of the year, and declined for most of
September. However, a slide in the stock market and reports of slowing economic
growth provided a boost for bonds in the final days of the reporting period.
Q HOW DID THESE FACTORS AFFECT THE HIGH-YIELD MARKET?
A Initially, the high-yield market participated in the cautious recovery of
the fixed-income market from last fall's lows. However, investor concerns
about the direction of interest rates and an increase in the level of
high-yield defaults lingered through the reporting period. Although the default
rate continued to creep higher during the period, we believe it represented a
reversion to historical norms from the unusually low default levels of the past
few years. In our opinion, the attractive yields of high-yield bonds currently
compensate investors for their increased credit and default risk. In addition,
we feel that default rates have been isolated to certain sectors that have
fallen under extreme financial stress. Taking this into consideration, we
believe this spike in defaults is not a precursor to a sustained higher default
rate.
Concerns about the impact of the year 2000 problem also played a major role
in the performance of the high-yield market during the last few months of the
reporting period. In the middle of the third quarter, there was a widespread
expectation that issuers would
4
<PAGE> 6
attempt to bring significant levels of new bonds to the market in September in
an effort to preclude any problems with liquidity or investor demand toward the
end of the year. Predictions of as much as $30 billion of new issuance in one
month drove apart spreads between high-yield bonds and Treasuries, but less than
$5 billion was actually priced by the end of the month. As investor fears
subsided, spreads narrowed in the final days of the quarter.
Q HOW DID YOU MANAGE THE FUND IN LIGHT OF THESE CONDITIONS?
A We continued to implement an investment strategy focused on fundamental
credit analysis--which, given the volatility experienced in the market
during this period of time, served the Fund well. In support of this
strategy, we maintained the Fund's credit quality profile with a focus on B
rated bonds, which provided a yield advantage over higher-quality investments.
In retrospect, the Fund might have further benefited from a greater allocation
to CCC rated bonds, but we were uncomfortable with the higher level of
volatility the portfolio would have incurred as a result.
Another successful element of our investment strategy during the reporting
period was to maintain a low cash position in the portfolio despite the flow of
assets in and out of the Fund. This allowed us to participate more actively in
the new-issue market, which was especially important in the last two months of
the reporting period. By contrast, many of the Fund's peers held higher cash
positions due to fears of year 2000 problems or the flood of new issuance that
was expected to arrive in September. When that level of new issuance failed to
materialize, those funds were at the mercy of an imbalance in the supply and
demand of available bonds.
Finally, the Fund's return was boosted by a very small but high-performing
percentage of equity positions in the Fund. We acquired these positions by
purchasing new bond issues with attached equity warrants, predominately in the
telecommunications sector.
Q WHAT SECTORS DID YOU FAVOR--OR AVOID--DURING THIS TIME?
A Our continued heavy weighting in the telecommunications sector benefited
the portfolio, thanks to that sector's high profile and limited new
issuance. Standouts within this sector were cellular and mobile companies
like Price Cellular. However, our positions in CLECs, or competitive local
exchange carriers, were not as successful during the period. We also maintained
above-average allocations to automobile and housing companies during the period,
which supported the Fund's return.
Sectors we tried to avoid during the reporting period included health-care
and energy sectors, which were two of the weakest industries in 1999. We
acquired three new health-care issues during the period but maintained a
relatively low weighting in this area compared to our peers. This was a plus for
the portfolio, as the battered sector continued to suffer from changes in
Medicare legislation. However, our slight underweighting in energy companies
caused us to miss a rally in that sector, which arrived much quicker than we'd
expected.
5
<PAGE> 7
Finally, we maintained lower weightings in emerging markets and textiles,
thus avoiding the volatility and poor performance in those areas. In particular,
textile companies came under extreme pressure during the summer months. For
additional portfolio highlights, please refer to page 8.
Q TAKING THE FUND'S INVESTMENT STRATEGY INTO CONSIDERATION, HOW DID THE FUND
PERFORM?
A The Fund posted a total return of -0.14 percent(1) (Class A shares at net
asset value) for the six-month period ended September 30, 1999. By
comparison, the Credit Suisse First Boston High Yield Index returned -0.47
percent for the same period. This broad-based, unmanaged index reflects the
general performance of a wide range of selected bonds within the public
high-yield debt market. As of September 30, 1999, the Fund's distribution rate
stood at 9.30 percent(3) per Class A share. Of course, past performance does not
guarantee future results. Please refer to the chart and footnotes on page 3 for
additional Fund performance results.
Q WHAT IS YOUR OUTLOOK FOR THE HIGH-YIELD MARKET AND THE FUND IN THE COMING
MONTHS?
A We think that the picture for the high-yield bond market is generally
improving from six months ago. At the same time, there's definitely a
level of uncertainty about how the market will react to the end of the
year. We're bracing for an increase in volatility, although we're optimistic
about the market's prospects in the first six months of the new year--as
investor concerns about issuance and liquidity are resolved.
As we manage the Fund going forward, our focus on fundamental, in-depth
research and assessment of high-yield bonds will remain unchanged. We will look
beyond the sector and credit rating of a bond to identify those issuers that we
believe will remain financially sound and perform well in a range of market
conditions. We'll also search for value in out-of-favor areas of the market in
our quest for opportunities to diversify the portfolio and contribute to the
Fund's performance.
[SIG]
Robert J. Hickey
Portfolio Manager
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
6
<PAGE> 8
GLOSSARY OF TERMS
BOND: A debt security issued by a government or corporation that pays a
bondholder a stated rate of interest and repays the principal at the
maturity date.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are
two companies that assign bond ratings. Standard & Poor's ratings range from
a high of AAA to a low of D, while Moody's ratings range from a high of Aaa
to a low of C.
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues (such as Treasury securities) and lower-quality
issues. Normally, lower-quality issues provide higher yields to compensate
investors for the additional credit risk.
FEDERAL FUNDS RATE: The interest rate charged by one financial institution
lending overnight funds to another. The Federal Reserve Board adjusts the
federal funds rate to affect the direction of interest rates.
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.
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.
LIQUIDITY: The ease with which an investor can buy or sell a security at a
reasonable price.
YIELD: The annual rate of return on an investment, expressed as a percentage.
YIELD SPREAD: The additional yield investors can earn by either investing in
bonds with longer maturities or by investing in bonds with lower ratings.
The spread is the difference in yield between bonds with short versus long
maturities or the difference in yield between high-quality bonds and
lower-quality bonds.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN HIGH YIELD FUND
CREDIT QUALITY*
AS OF SEPTEMBER 30, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa BBB/Baa BB/Ba B/B CCC/Caa CC/Ca C/C Non-Rated
------- ----- ------- ----- ----- ------- ----- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AS OF SEPTEMBER 30, 1999 0.2% 0.3% 3.6% 12.2% 70.3% 2.2% 0.5% 0.1% 10.6%
</TABLE>
AS OF MARCH 31, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AAA/Aaa AA/Aa A/A BBB/Baa BB/Ba B/B CCC/Caa C/Ca Non-Rated
------- ----- --- ------- ----- --- ------- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AS OF MARCH 31, 1999 0.2% 0.3% 1.0% 6.9% 13.6% 66.0% 4.5% 0.3% 7.2%
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DISTRIBUTION HISTORY
FOR THE PERIOD ENDED SEPTEMBER 30, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
DISTRIBUTIONS
-------------
<S> <C>
Apr 1999 $0.070
May 1999 $0.070
Jun 1999 $0.070
Jul 1999 $0.070
Aug 1999 $0.070
Sep 1999 $0.070
</TABLE>
The distribution history represents past performance of the Fund's Class A
shares and does not predict the Fund's future distributions.
TOP FIVE PORTFOLIO INDUSTRIES*
[BAR GRAPH]
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ --------------
<S> <C> <C>
Telecommunications 24.6% 23.1 %
Foreign Bonds 20.9% 22.8 %
Printing, Publishing, & Broadcasting 9.8% 10.1 %
Automobile 5.3% 5.1 %
Healthcare 5.1% 3.93%
</TABLE>
*As a Percentage of Long-Term Investments
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
DOMESTIC CORPORATE BONDS 72.9%
AEROSPACE & DEFENSE 1.5%
$ 1,720 Compass Aerospace Corp., 144A
Private Placement (a) (g)........... 10.125% 04/15/05 $ 1,505,000
4,500 Dyncorp (g)......................... 9.500 03/01/07 4,320,000
------------
5,825,000
------------
AUTOMOBILE 5.0%
5,000 Aetna Industries, Inc. ............. 11.875 10/01/06 5,125,000
1,125 Cambridge Industries, Inc., Series
B................................... 10.250 07/15/07 742,500
1,500 Dura Operating Corp., Series B...... 9.000 05/01/09 1,395,000
2,000 Eagle Picher Industries, Inc. ...... 9.375 03/01/08 1,910,000
2,700 Oxford Automotive, Inc., Series D... 10.125 06/15/07 2,362,500
1,200 Stanadyne Automotive Corp., Series
B................................... 10.250 12/15/07 1,026,000
4,430 Talon Automotive Group, Inc., Series
B (g)............................... 9.625 05/01/08 3,654,750
1,000 Venture Holdings, Inc., 144A Private
Placement (a)....................... 12.000 06/01/09 985,000
2,075 Venture Holdings, Inc., Series B.... 9.500 07/01/05 1,929,750
------------
19,130,500
------------
BEVERAGE, FOOD & TOBACCO 3.6%
2,200 Agrilink Foods, Inc. (g)............ 11.875 11/01/08 1,936,000
1,500 Fleming Cos., Inc. ................. 10.625 07/31/07 1,402,500
2,250 Fleming Cos., Inc., Series B........ 10.500 12/01/04 2,131,875
500 Jitney Jungle Stores America, Inc.
(e) (h)............................. 12.000 03/01/06 342,500
2,000 Luiginos, Inc....................... 10.000 02/01/06 1,870,000
2,000 National Wine & Spirits, Inc. ...... 10.125 01/15/09 2,000,000
4,100 Pantry, Inc. (g) ................... 10.250 10/15/07 4,018,000
------------
13,700,875
------------
BUILDINGS & REAL ESTATE 3.1%
1,650 American Plumbing & Mechanical, 144A
Private Placement (a)............... 11.625 10/15/08 1,542,750
1,800 Building One Services Corp. ........ 10.500 05/01/09 1,674,000
750 Cemex International Capital,
Inc. ............................... 9.660 11/29/49 714,375
1,750 Home Interiors Gifts, Inc. ......... 10.125 06/01/08 1,540,000
</TABLE>
See Notes to Financial Statements
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
BUILDINGS & REAL ESTATE (CONTINUED)
$ 775 Juno Lighting, Inc., 144A Private
Placement (a)....................... 11.875% 07/01/09 $ 730,437
2,750 Schuler Homes, Inc. ................ 9.000 04/15/08 2,488,750
3,075 Webb (Del E.) Corp. ................ 10.250 02/15/10 2,890,500
------------
11,580,812
------------
CHEMICALS, PLASTICS & RUBBER 2.0%
3,748 ISP Holdings, Inc. ................. 9.750 02/15/02 3,719,890
1,000 Lyondell Chemical Co. .............. 10.875 05/01/09 1,010,000
1,800 Lyondell Chemical Co., Series A..... 9.625 05/01/07 1,800,000
1,000 United Industries Corp., 144A
Private Placement (a)............... 9.875 04/01/09 865,000
------------
7,394,890
------------
CONSUMER DURABLES 0.5%
1,800 Sleepmaster LLC, 144A Private
Placement (a)....................... 11.000 05/15/09 1,804,500
------------
CONSUMER SERVICES 0.5%
1,800 Muzak, Inc., 144A Private Placement
(a)................................. 9.875 03/15/09 1,746,000
------------
CONTAINERS, PACKAGING & GLASS 0.4%
1,690 Packaging Corp. of America, 144A
Private Placement (a)............... 9.625 04/01/09 1,706,900
------------
DIVERSIFIED/CONGLOMERATE
MANUFACTURING 1.4%
4,600 Communications & Power Industries,
Inc. (g)............................ 12.000 08/01/05 3,933,000
1,200 Intersil Corp., 144A Private
Placement (a)....................... 13.250 08/15/09 1,251,000
------------
5,184,000
------------
ECOLOGICAL 0.1%
500 Envirosource, Inc., Series B........ 9.750 06/15/03 307,500
------------
ELECTRONICS 0.3%
1,950 DecisionOne Corp. (e)............... 9.750 08/01/07 19,500
3,100 DecisionOne Corp. (Including 3,100
common stock warrants) (b).......... 0/11.500 08/01/08 11,625
2,000 Radio Unica Corp. (b) (g)........... 0/11.750 08/01/06 1,205,000
------------
1,236,125
------------
ENERGY 0.6%
1,000 Houston Exploration Co., Series B... 8.625 01/01/08 965,000
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ENERGY (CONTINUED)
$ 2,200 Universal Compression Holdings, Inc.
(g)................................. 9.875% 02/15/08 $ 1,331,000
------------
2,296,000
------------
FINANCE 1.6%
3,300 Americo Life, Inc., 144A Private
Placement (a) (g)................... 9.250 06/01/05 3,300,000
1,500 Contifinancial Corp. ............... 8.125 04/01/08 465,000
2,425 Port Arthur Finance Corp., Series A,
144A Private Placement (a).......... 12.500 01/15/09 2,437,125
------------
6,202,125
------------
HEALTHCARE 4.9%
2,000 Alliance Imaging, Inc. (g).......... 9.625 12/15/05 2,030,000
1,500 Biovail Corp. International (g)..... 10.875 11/15/05 1,575,000
1,050 DJ Orthopedics LLC, 144A Private
Placement (a)....................... 12.625 06/15/09 994,875
775 Express Scripts, Inc. .............. 9.625 06/15/09 790,500
3,000 Hudson Respiratory Care, Inc. (g)... 9.125 04/15/08 2,355,000
2,500 King Pharmaceuticals, Inc. ......... 10.750 02/15/09 2,562,500
1,800 Lifepoint Hospitals Holdings, Inc.,
144A Private Placement (a).......... 10.750 05/15/09 1,809,000
2,000 Mediq, Inc. ........................ 11.000 06/01/08 1,410,000
4,000 Oxford Health Plans, Inc., 144A
Private Placement (a)............... 11.000 05/15/05 3,980,000
900 Triad Hospitals Holdings, Inc., 144A
Private Placement (a)............... 11.000 05/15/09 897,750
------------
18,404,625
------------
HOTEL, MOTEL, INNS & GAMING 2.4%
1,110 Argosy Gaming Co., 144A Private
Placement (a)....................... 10.750 06/01/09 1,148,850
2,000 Hollywood Casino Corp., 144A Private
Placement (a)....................... 11.250 05/01/07 2,025,000
780 Hollywood Casino Shreveport, 144A
Private Placement (a)............... 13.000 08/01/06 803,400
2,225 Isle of Capri Casinos, Inc. ........ 8.750 04/15/09 2,044,219
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
HOTEL, MOTEL, INNS & GAMING
(CONTINUED)
$ 1,750 Majestic Star Casino LLC, 144A
Private Placement (a)............... 10.875% 07/01/06 $ 1,741,250
1,250 Station Casinos, Inc. .............. 8.875 12/01/08 1,215,625
------------
8,978,344
------------
LEISURE 2.7%
1,085 AMC Entertainment, Inc. ............ 9.500 02/01/11 889,700
3,000 Booth Creek Ski Holdings, Inc.,
Series B (g)........................ 12.500 03/15/07 2,250,000
2,000 Premier Parks, Inc. ................ 9.250 04/01/06 1,905,000
4,750 Selmer, Inc. (g).................... 11.000 05/15/05 5,035,000
------------
10,079,700
------------
MACHINERY 0.3%
1,300 Terex Corp., Series D............... 8.875 04/01/08 1,235,000
------------
MINING, STEEL, IRON & NON-PRECIOUS
METAL 1.6%
1,000 GS Technologies Operating, Inc. .... 12.000 09/01/04 717,500
2,000 Pen Holdings, Inc., Series B........ 9.875 06/15/08 1,910,000
1,950 Renco Steel Holdings, Inc., Series
B................................... 10.875 02/01/05 1,618,500
2,000 Republic Technologies International,
144A Private Placement (Including
2,000 common stock warrants) (a).... 13.750 07/15/09 1,930,000
------------
6,176,000
------------
OIL & GAS 3.4%
2,050 Frontier Oil Corp. ................. 9.125 02/15/06 1,957,750
1,150 Giant Industries, Inc. ............. 9.750 11/15/03 1,124,125
3,895 Giant Industries, Inc. (g).......... 9.000 09/01/07 3,602,875
1,350 KCS Energy, Inc., Series B (e)...... 11.000 01/15/03 1,086,750
3,700 National Energy Group, Inc., Series
D (e) (g)........................... 10.750 11/01/06 1,258,000
2,000 Pride International, Inc. .......... 10.000 06/01/09 2,050,000
2,000 Triton Energy Ltd. ................. 8.750 04/15/02 1,970,000
------------
13,049,500
------------
PRINTING, PUBLISHING & BROADCASTING 9.3%
3,000 @Entertainment, Inc., Series B
(b)................................. 0/14.500 02/01/09 1,875,000
1,500 Cadmus Communications Corp. ........ 9.750 06/01/09 1,496,250
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PRINTING, PUBLISHING & BROADCASTING (CONTINUED)
$ 3,000 Capstar Broadcasting Partners (g)... 9.250% 07/01/07 $ 3,037,500
2,750 Capstar Broadcasting Partners (b)... 0/12.750 02/01/09 2,371,875
3,350 Century Communications Corp. (g).... 8.875 01/15/07 3,274,625
600 Classic Cable Inc., 144A Private
Placement (a)....................... 9.375 08/01/09 583,500
1,950 Coaxial Communications Central Ohio,
Inc. ............................... 10.000 08/15/06 1,918,313
2,600 CSC Holdings, Inc. ................. 10.500 05/15/16 2,902,250
3,350 Gray Communications Systems, Inc.
(g)................................. 10.625 10/01/06 3,479,812
2,450 International Cabletel, Inc. (b).... 0/12.750 04/15/05 2,401,000
2,750 International Cabletel, Inc. (b).... 0/11.500 02/01/06 2,406,250
1,000 James Cable Partners LP, Series B... 10.750 08/15/04 1,010,000
2,000 Northland Cable Television, Inc.
(g)................................. 10.250 11/15/07 2,010,000
2,500 Pegasus Communications Corp., Series
B (g)............................... 9.625 10/15/05 2,412,500
2,000 Premire Graphics, Inc. ............. 11.500 12/01/05 1,860,000
2,000 Young Broadcasting, Inc. ........... 11.750 11/15/04 2,110,000
------------
35,148,875
------------
RETAIL 1.2%
1,250 Big 5 Corp., Series B (g)........... 10.875 11/15/07 1,231,250
1,650 Community Distributors, Inc., Series
B (g)............................... 10.250 10/15/04 1,410,750
1,750 Hosiery Corp. of America, Inc.
(e)................................. 13.750 08/01/02 1,820,000
------------
4,462,000
------------
TELECOMMUNICATIONS 23.0%
2,060 Airgate PCS, Inc. (Including 2,060
common stock warrants).............. 13.500 10/01/09 1,112,400
2,000 AMSC Acquisition, Inc. ............. 12.250 04/01/08 1,430,000
1,100 Bresnan Communications Group, Series
B................................... 8.000 02/01/09 1,080,750
3,800 Centennial Cellular Operating
Co. ................................ 10.750 12/15/08 3,971,000
3,205 Charter Communications Holdings,
144A Private Placement (a).......... 8.250 04/01/07 3,020,712
1,100 Citadel Broadcasting Co. ........... 9.250 11/15/08 1,091,750
1,000 Crown Castle International Corp.
(b)................................. 0/10.625 11/15/07 705,000
1,000 Crown Castle International Corp.,
144A Private Placement (a).......... 9.500 08/01/11 970,000
3,740 E Spire Communications, Inc. (b).... 0/13.000 11/01/05 2,187,900
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
$ 1,600 E Spire Communications, Inc. (b).... 0/12.750% 04/01/06 $ 864,000
1,750 E Spire Communications, Inc. ....... 13.750 07/15/07 1,470,000
2,000 Fairchild Semiconductor Corp., 144A
Private Placement (a)............... 10.375 10/01/07 2,000,000
2,000 Filtronic PLC, 144A Private
Placement (a)....................... 10.000 12/01/05 1,970,000
2,000 Firstworld Communications, Inc.
(b)................................. 0/13.000 04/15/08 1,030,000
2,880 GST Network Funding, Inc., 144A
Private Placement (a) (b)........... 0/10.500 05/01/08 1,396,800
1,350 Intermedia Communications of
Florida, Inc., Series B............. 13.500 06/01/05 1,518,750
3,000 Intermedia Communications, Inc.
(b)................................. 0/11.250 07/15/07 2,017,500
7,050 Intermedia Communications, Inc. .... 8.600 06/01/08 6,151,125
750 IXC Communications, Inc. ........... 9.000 04/15/08 742,500
2,000 KMC Telecommunications Holdings,
Inc. (b)............................ 0/12.500 02/15/08 1,060,000
3,000 Level 3 Communications, Inc. (b).... 0/10.500 12/01/08 1,702,500
1,130 Metromedia Fiber Network, Inc.,
Series B............................ 10.000 11/15/08 1,096,100
2,000 MJD Communications, Inc. ........... 9.500 05/01/08 1,810,000
2,250 Nextel Communications, Inc. ........ 9.750 08/15/04 2,278,125
2,250 Nextel Communications, Inc. (b)..... 0/10.650 09/15/07 1,670,625
2,000 NTL Communications Corp., Series
B................................... 11.500 10/01/08 2,150,000
1,000 NTL, Inc. (GBP)..................... 9.500 04/01/08 1,596,910
1,000 NTL, Inc., Series B (b)............. 0/9.750 04/01/08 670,000
1,000 Omnipoint Corp., 144A Private
Placement (a)....................... 11.500 09/15/09 1,032,500
2,500 Optel, Inc. ........................ 11.500 07/01/08 1,512,500
1,000 Park N View, Inc., Series B......... 13.000 05/15/08 455,000
1,150 Philippine Long Distance
Telephone........................... 10.500 04/15/09 1,117,283
3,000 Pinnacle Holdings, Inc. (b) (g)..... 0/10.000 03/15/08 1,747,500
2,000 Price Communications Wireless,
Inc. ............................... 11.750 07/15/07 2,195,000
1,250 Primus Telecommunications Group..... 11.250 01/15/09 1,193,750
2,850 PSINet, Inc. ....................... 11.500 11/01/08 2,899,875
1,800 PSINet, Inc. (EUR).................. 11.000 08/01/09 1,862,618
400 PSINet, Inc., Series B.............. 10.000 02/15/05 386,000
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
$ 2,500 RSL Communications (b).............. 0/10.125% 03/01/08 $ 1,406,250
3,750 SBA Communications Corp. (b)........ 0/12.000 03/01/08 2,062,500
3,500 Splitrock Services, Inc., Series
B................................... 11.750 07/15/08 3,150,000
3,000 Startec Global Communications....... 12.000 05/15/08 2,415,000
2,000 Telecommunications Techniques (g)... 9.750 05/15/08 1,910,000
825 Telecorp PCS, Inc., 144A Private
Placement (a) (b)................... 0/11.625 04/15/09 482,625
1,600 Tritel PCS, Inc., 144A Private
Placement (a) (b)................... 0/12.750 05/15/09 908,000
2,325 Triton Communications, Inc. (b)..... 0/11.000 05/01/08 1,563,563
5,475 United International Holdings, Inc.
(g)................................. 10.750 02/15/08 3,339,750
2,415 Verio, Inc. (g)..................... 10.375 04/01/05 2,402,925
600 Verio, Inc. ........................ 11.250 12/01/08 618,000
1,500 Viatel, Inc. (b).................... 0/12.500 04/15/08 832,500
2,000 Viatel, Inc., 144A Private Placement
(EUR) (a)........................... 11.500 03/15/09 2,032,334
1,000 Williams Communications Group, Inc.
(f)................................. 10.700 10/01/07 1,000,000
------------
87,289,920
------------
TEXTILES 0.7%
1,250 Galey & Lord, Inc. ................. 9.125 03/01/08 300,000
3,000 Globe Manufacturing Corp. (g)....... 10.000 08/01/08 2,010,000
640 Scovill Fasteners, Inc., Series B... 11.250 11/30/07 281,600
------------
2,591,600
------------
TRANSPORTATION 1.5%
1,750 Atlas Air, Inc. .................... 9.375 11/15/06 1,680,000
3,000 Atlas Air, Inc. (g)................. 9.250 04/15/08 2,790,000
1,000 Avis Rent A Car, Inc., 144A Private
Placement (a)....................... 11.000 05/01/09 1,027,500
------------
5,497,500
------------
UTILITIES 1.3%
2,125 AES Corp. .......................... 9.500 06/01/09 2,146,250
600 El Paso Electric Co., Series C...... 8.250 02/01/03 620,250
1,500 El Paso Electric Co., Series D...... 8.900 02/01/06 1,599,375
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UTILITIES (CONTINUED)
$ 672 Midland Funding Corp. .............. 10.330% 07/23/02 $ 702,541
------------
5,068,416
------------
TOTAL DOMESTIC CORPORATE BONDS 72.9%....................... 276,096,707
------------
</TABLE>
<TABLE>
<CAPTION>
Par
Amount
in Local
Currency
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FOREIGN BONDS AND SECURITIES 20.1%
ARGENTINA 0.4%
3,000 CTI Holdings SA (US$) (b)........... 0/11.500 04/15/08 1,485,000
------------
AUSTRALIA 0.2%
1,100 Commonwealth of Australia (AUD)..... 10.000 10/15/02 804,741
------------
BERMUDA 0.3%
1,100 Globenet Communications Group Ltd.
(US$), 144A Private Placement (a)... 13.000 07/15/07 1,050,500
------------
BRAZIL 1.2%
1,750 Federal Republic of Brazil (US$).... 11.625 04/15/04 1,642,813
400 Globo Communicacoes (US$), 144A
Private Placement (a)............... 10.625 12/05/08 293,000
1,000 Globo Participacoe (US$)............ 10.625 12/05/08 732,500
500 Multicanal Participacoes (US$)...... 12.625 06/18/04 497,500
1,200 Multicanal Participacoes, Series B
(US$)............................... 12.625 06/18/04 1,194,000
------------
4,359,813
------------
CANADA 4.5%
2,000 Clearnet Communications, Inc. (US$)
(b)................................. 0/14.750 12/15/05 1,890,000
3,000 Clearnet Communications, Inc. (US$)
(b)................................. 0/10.125 05/01/09 1,815,000
500 Doman Industries Ltd. (US$), 144A
Private Placement (a)............... 12.000 07/01/04 505,000
3,500 Fundy Cable Ltd. (US$) (g).......... 11.000 11/15/05 3,745,000
1,000 Hurricane Hydrocarbons Ltd. (US$),
144A Private Placement (a).......... 11.750 11/01/04 225,000
1,500 Metronet Communications Corp.
(US$)............................... 12.000 08/15/07 1,755,000
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
in Local
Currency
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CANADA (CONTINUED)
$ 3,000 Microcell Telecommunications, Series
B (US$) (b)......................... 0/14.000% 06/01/06 $ 2,520,000
400 Pacifica Papers, Inc. (US$)......... 10.000 03/15/09 408,000
2,100 Repap New Brunswick, Inc. (US$)..... 9.000 06/01/04 2,026,500
1,000 Repap New Brunswick, Inc. (US$),
144A Private Placement (a).......... 11.500 06/01/04 1,012,500
1,000 Worldwide Fiber, Inc. (US$), 144A
Private Placement (a)............... 12.000 08/01/09 985,000
------------
16,887,000
------------
CHILE 0.2%
1,855 Empresa Electrica Delaware Norte SA
(US$), 144A Private Placement (a)
(c)................................. 7.750 03/15/06 946,050
------------
COLUMBIA 1.2%
2,300 Financiera Energetica (US$), 144A
Private Placement (a)............... 9.375 06/15/06 1,840,000
400 Financiera Energetica (US$)......... 9.375 06/15/06 320,000
750 Republic of Colombia (Var. Rate
Coupon) (DEM)....................... 4.079 11/21/01 373,347
2,500 Republic of Columbia (US$).......... 9.750 04/23/09 2,143,750
------------
4,677,097
------------
FRANCE 0.6%
2,000 Go Outdoor Systems Holdings SA
(EUR)............................... 10.500 07/15/09 2,191,942
------------
HUNGARY 0.2%
216,650 Hungary Govt (HUF).................. 16.000 11/24/00 915,367
------------
ITALY 0.3%
775 Federal Republic of Italy (EUR)..... 10.000 08/01/03 980,590
------------
KOREA 0.4%
1,200 Korea Development Bank (DEM)........ 5.625 10/25/99 653,239
1,000 Korea Electric Power Corp. (US$).... 7.000 02/01/27 909,600
------------
1,562,839
------------
LUXEMBOURG 0.8%
4,000 Millicom International Cellular SA
(US$) (b) (g)....................... 0/13.500 06/01/06 2,870,000
------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
in Local
Currency
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MEXICO 2.7%
$ 1,000 Gruma SA (US$)...................... 7.625% 10/15/07 $ 897,500
3,000 Grupo Televisa Corp. (US$) (b)
(g)................................. 0/13.250 05/15/08 2,508,600
1,000 Petroleos Mexicanos (US$), 144A
Private Placement (Var. Rate Coupon)
(a)................................. 9.520 07/15/05 950,000
4,850 Satelites Mexicanos SA (US$), Series
B................................... 10.125 11/01/04 3,758,750
1,000 United Mexican States (US$)......... 10.375 02/17/09 1,013,250
1,000 United Mexican States, Series A
(US$)............................... 6.250 12/31/19 736,875
750 United Mexican States, Series B
(US$)............................... 6.250 12/31/19 552,656
------------
10,417,631
------------
MOROCCO 0.5%
2,149 Morocco Trust A Loan (US$) (c)...... 5.906 01/01/09 1,829,196
------------
NETHERLANDS 1.3%
1,350 Kappa Beheer BV (EUR)............... 10.625 07/15/09 1,454,423
1,000 KPNQWest BV, 144A Private Placement
(US$) (a)........................... 8.125 06/01/09 960,000
2,075 United Pan Europe Communications
N.V. (US$), 144A Private Placement
(a)................................. 0/12.500 08/01/09 1,159,406
1,500 United Pan-Europe Communications
N.V. (US$), 144A Private Placement
(a)................................. 10.875 08/01/09 1,501,875
------------
5,075,704
------------
PANAMA 0.8%
4,000 Republic of Panama (US$)............ 8.875 09/30/27 3,210,000
------------
POLAND 1.1%
2,250 Netia Holdings, Inc., Series B (US$)
(b) (g)............................. 0/11.250 11/01/07 1,428,750
3,000 Netia Holdings, Inc., Series B
(US$)............................... 10.250 11/01/07 2,655,000
------------
4,083,750
------------
RUSSIA 0.8%
1,000 Russia Principal Loans (US$)........ 11.000 07/24/18 425,000
22,750 Russia Principal Loans (US$) (c)
(d)................................. 6.063 12/15/20 2,161,250
362 Russian Ian (US$)................... 6.063 12/15/15 41,633
3,000 Vnesheconombank (US$) (c) (e)....... 6.063 12/15/15 345,000
------------
2,972,883
------------
</TABLE>
See Notes to Financial Statements
18
<PAGE> 20
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
in Local
Currency
(000) Description Coupon Maturity Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UNITED KINGDOM 2.1%
$ 2,750 Cenargo International PLC (US$)..... 9.750% 06/15/08 $ 2,378,750
3,450 Diamond Cable Commerce PLC (US$) (b)
(g)................................. 0/10.750 02/15/07 2,708,250
1,400 Espirit Telecom Group PLC (US$)..... 11.500 12/15/07 1,442,000
1,250 Espirit Telecom Group PLC (US$)..... 10.875 06/15/08 1,268,750
------------
7,797,750
------------
VENEZUELA 0.5%
1,000 Republic of Venezuela (US$)......... 6.750 03/31/20 655,000
2,000 Republic of Venezuela (US$)......... 9.250 09/15/27 1,315,000
------------
1,970,000
------------
TOTAL FOREIGN BONDS AND DEBT SECURITIES 20.1%.............. 76,087,853
------------
TOTAL CORPORATE BONDS 93.0%................................ 352,184,560
------------
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
----------------------------------------------------------------------------
<S> <C>
EQUITIES 2.0%
American Mobile Satellite Corp., (2,000 common stock
warrants) 144A Private Placement (a) (e).................. $ 82,000
Crown Castle International Corp. (2,197 preferred shares)
(d)....................................................... 2,235,033
Dobson Communications Corp. Oklahoma (1,857 preferred
shares) (d)............................................... 1,801,290
Firstworld Communications, Inc., (2,000 common stock
warrants) 144A Private Placement (a) (e).................. 140,000
Hosiery Corp. of America, Inc., (1,000 common shares)....... 40,500
Intermedia Communications, Inc. (13,797 common shares)...... 300,085
KMC Telecommunications Holdings, Inc., (1,000 common stock
warrrants) 144A Private Placement (a) (e)................. 10,000
Meditrust (3,867 common stock warrants) (e)................. 32,628
NTL, Inc., (5,178 common stock warrants) 144A Private
Placement (a) (e)......................................... 383,017
Park N View, Inc., (1,000 common stock warrants) 144A
Private Placement (a) (e)................................. 250
Price Communications Corp. (97,269 common shares)........... 2,437,806
Republic of Argentina (875 bond warrants) (e)............... 9,187
Splitrock Services, Inc., (3,500 common stock warrants) 144A
Private Placement (a) (e)................................. 253,750
Star Gas Partners LP (441 common shares).................... 7,135
Startec Global Communications (3,000 common stock warrants)
(e)....................................................... 3,000
United Mexican States (1,000 bond warrants) (US$) (e)....... 63,500
------------
TOTAL EQUITIES.............................................. 7,799,181
------------
TOTAL LONG-TERM INVESTMENTS 95.0% (Cost $396,096,647)...... 359,983,741
------------
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description Market Value
----------------------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENT 1.6%
State Street Bank and Trust (Collateralized by U.S.
T-Note, $5,435,000 par, 7.25% coupon, due 05/15/16,
dated 09/30/99, to be sold on 10/01/99 at $5,869,859)
(Cost $5,869,000)....................................... $ 5,869,000
============
TOTAL INVESTMENTS 96.6%
(Cost $401,965,647)....................................... 365,852,741
FOREIGN CURRENCY (VARIOUS DENOMINATIONS) 1.2%
(Cost $4,578,392)......................................... 4,577,084
OTHER ASSETS IN EXCESS OF LIABILITIES 2.2%................. 8,395,055
------------
NET ASSETS 100.0%.......................................... $378,824,880
============
</TABLE>
(a) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may be resold in
transactions exempt from registration which are normally transactions with
qualified institutional buyers.
(b) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(c) Security is a bank loan participation.
(d) Payment-in-kind security.
(e) Non-Income producing security.
(f) Securities purchased on a when issued or delayed delivery basis.
(g) Assets segregated as collateral for open forward commitments or when issued
or delayed delivery purchase commitments.
(h) Subsequent to the period ended September 30, 1999, this borrower has filed
for protection in federal bankruptcy court.
AUD--Australian Dollar
DEM--German Mark
EUR--Eurodollar
GBP--British Pound
HUF--Hungarian Forint
See Notes to Financial Statements
21
<PAGE> 23
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $401,965,647)....................... $365,852,741
Foreign Currency (Cost $4,578,392).......................... 4,577,084
Cash........................................................ 726
Receivables:
Interest.................................................. 9,973,435
Investments Sold.......................................... 3,695,517
Fund Shares Sold.......................................... 437,714
Forward Currency Contracts.................................. 8,275
Other....................................................... 26,995
------------
Total Assets.......................................... 384,572,487
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 2,831,148
Income Distributions...................................... 1,469,962
Fund Shares Repurchased................................... 448,194
Distributor and Affiliates................................ 334,537
Investment Advisory Fee................................... 212,309
Accrued Expenses............................................ 285,949
Trustees' Deferred Compensation and Retirement Plans........ 165,508
------------
Total Liabilities..................................... 5,747,607
------------
NET ASSETS.................................................. $378,824,880
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $480,578,328
Accumulated Distributions in Excess of Net Investment
Income.................................................... (1,979,776)
Net Unrealized Depreciation................................. (36,095,494)
Accumulated Net Realized Loss............................... (63,678,178)
------------
NET ASSETS.................................................. $378,824,880
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $247,001,169 and 28,708,597 shares of
beneficial interest issued and outstanding)............. $ 8.60
Maximum sales charge (4.75%* of offering price)......... .43
------------
Maximum offering price to public........................ $ 9.03
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $119,290,890 and 13,864,509 shares of
beneficial interest issued and outstanding)............. $ 8.60
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $12,532,821 and 1,458,215 shares of
beneficial interest issued and outstanding)............. $ 8.59
============
*On sales of $100,000 or more, the sales charge will be
reduced.
</TABLE>
See Notes to Financial Statements
22
<PAGE> 24
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Net of foreign withholding taxes of $3,589)....... $ 21,567,850
Dividends................................................... 195,894
Other....................................................... 180,102
-------------
Total Income............................................ 21,943,846
-------------
EXPENSES:
Investment Advisory Fee..................................... 1,519,408
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B, and C of $312,533, $644,374, and $68,340,
respectively)............................................. 1,025,247
Shareholder Services........................................ 357,901
Custody..................................................... 75,803
Trustees' Fees and Related Expenses......................... 27,928
Legal....................................................... 20,130
Other....................................................... 157,665
-------------
Total Expenses.......................................... 3,184,082
Less:
Investment Advisory Fee Reduction..................... 202,588
Credits Earned on Cash Balances....................... 14,996
-------------
Net Expenses............................................ 2,966,498
-------------
NET INVESTMENT INCOME....................................... $ 18,977,348
=============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................. $ (4,914,805)
Options................................................. (33,668)
Futures................................................. (853,045)
Forwards................................................ 31,500
Foreign Currency Transactions........................... (341,149)
-------------
Net Realized Gain/Loss...................................... (6,111,167)
-------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (22,324,238)
-------------
End of the Period:
Investments............................................. (36,112,906)
Forwards................................................ 8,275
Foreign Currency Translation............................ 9,137
-------------
(36,095,494)
-------------
Net Unrealized Depreciation During the Period............... (13,771,256)
-------------
NET REALIZED AND UNREALIZED GAIN/LOSS....................... $ (19,882,423)
=============
NET INCREASE/DECREASE IN NET ASSETS FROM OPERATIONS......... $ (905,075)
=============
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended September 30, 1999, the Nine Months Ended March 31,
1999 and the Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Nine Months Ended Year Ended
September 30, 1999 March 31, 1999 June 30, 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income......................... $ 18,977,348 $ 26,991,960 $ 36,727,184
Net Realized Gain/Loss........................ (6,111,167) (11,821,088) 10,238,004
Net Unrealized Appreciation/Depreciation
During the Period............................ (13,771,256) (25,290,256) (8,832,338)
------------ ------------ ------------
Change in Net Assets from Operations.......... (905,075) (10,119,384) 38,132,850
------------ ------------ ------------
Distributions from Net Investment Income...... (18,127,416) (26,991,960) (36,588,695)
Distributions in Excess of Net Investment
Income....................................... -0- (161,827) -0-
------------ ------------ ------------
Distributions from and in Excess of Net
Investment Income*........................... (18,127,416) (27,153,787) (36,588,695)
Return of Capital Distribution*............... (471,642) (586,214) -0-
------------ ------------ ------------
Total Distributions........................... (18,599,058) (27,740,001) (36,588,695)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES................................... (19,504,133) (37,859,385) 1,544,155
------------ ------------ ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold..................... 49,873,507 127,864,335 141,976,974
Net Asset Value of Shares Issued Through
Dividend Reinvestment........................ 8,517,316 11,396,598 14,616,655
Cost of Shares Repurchased.................... (88,024,865) (110,498,564) (145,829,346)
------------ ------------ ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS................................. (29,634,042) 28,762,369 10,764,283
------------ ------------ ------------
TOTAL INCREASE/DECREASE IN NET ASSETS......... (49,138,175) (9,097,016) 12,308,438
NET ASSETS:
Beginning of the Period....................... 427,963,055 437,060,071 424,751,633
------------ ------------ ------------
End of the Period (Including accumulated
distributions in excess of net investment
income of $1,979,776, $1,847,204, and
$1,685,377, respectively).................... $378,824,880 $427,963,055 $437,060,071
============ ============ ============
</TABLE>
*Distributions by Class
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Distributions from and in Excess of
Net Investment Income:
Class A Shares............................... $(12,120,799) $(18,127,647) $(24,757,453)
Class B Shares............................... (5,431,616) (8,272,046) (11,057,055)
Class C Shares............................... (575,001) (754,094) (774,187)
------------ ------------ ------------
$(18,127,416) $(27,153,787) $(36,588,695)
============ ============ ============
Return of Capital Distribution:
Class A Shares............................... $ (314,838) $ (391,352) $ -0-
Class B Shares............................... (141,491) (178,582) -0-
Class C Shares............................... (15,313) (16,280) -0-
------------ ------------ ------------
$ (471,642) $ (586,214) $ -0-
============ ============ ============
</TABLE>
See Notes to Financial Statements
24
<PAGE> 26
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months Year Ended June 30
Ended Ended ------------------------------------
Class A Shares September 30, 1999 March 31, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period................. $ 9.034 $ 9.893 $ 9.854 $ 9.493 $ 9.398 $9.643
------- ------- ------- ------- ------- ------
Net Investment
Income............. .422 .619 .857 .857 .878 .844
Net Realized and
Unrealized
Gain/Loss.......... (.432) (.848) .037 .384 .147 (.099)
------- ------- ------- ------- ------- ------
Total from Investment
Operations........... (.010) (.229) .894 1.241 1.025 .745
------- ------- ------- ------- ------- ------
Less:
Distributions from
and in Excess of
Net Investment
Income............. .408 .617 .855 .865 .880 .815
Return of Capital
Distribution....... .012 .013 -0- .015 .050 .175
------- ------- ------- ------- ------- ------
Total Distributions.... .420 .630 .855 .880 .930 .990
------- ------- ------- ------- ------- ------
Net Asset Value, End of
the Period........... $ 8.604 $ 9.034 $ 9.893 $ 9.854 $ 9.493 $9.398
======= ======= ======= ======= ======= ======
Total Return* (a)...... (0.14%)** (2.13%)** 9.36% 13.60% 11.26% 8.50%
Net Assets at End of
the Period (In
millions)............ $ 247.0 $ 277.9 $ 280.6 $ 288.0 $ 271.1 $253.3
Ratio of Expenses to
Average Net
Assets *............. 1.19% 1.17% 1.14% 1.17% 1.31% 1.31%
Ratio of Net Investment
Income to Average Net
Assets *............. 9.61% 8.98% 8.61% 8.83% 9.16% 9.13%
Portfolio Turnover..... 50%** 104%** 154% 125% 102% 152%
*If certain expenses had not been waived or reimbursed by Van Kampen, total return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to
Average Net Assets... 1.29% 1.27% 1.24% 1.26% 1.31% N/A
Ratio of Net Investment
Income to Average Net
Assets............... 9.51% 8.88% 8.51% 8.73% 9.15% N/A
</TABLE>
** Non-Annualized
(a) Total return is based upon Net Asset Value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
N/A -- Not applicable.
See Notes to Financial Statements
25
<PAGE> 27
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months Year Ended June 30,
Ended Ended -------------------------------------
Class B Shares September 30, 1999 March 31, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period.................. $9.032 $ 9.890 $ 9.855 $ 9.497 $ 9.398 $ 9.638
------ ------- ------- ------- ------- -------
Net Investment
Income.............. .394 .560 .782 .777 .797 .788
Net Realized and
Unrealized
Gain/Loss........... (.438) (.842) .036 .389 .160 (.115)
------ ------- ------- ------- ------- -------
Total from Investment
Operations............ (.044) (.282) .818 1.166 .957 .673
------ ------- ------- ------- ------- -------
Less:
Distributions from and
in Excess of Net
Investment Income... .373 .564 .783 .794 .812 .751
Return of Capital
Distribution........ .011 .012 -0- .014 .046 .162
------ ------- ------- ------- ------- -------
Total Distributions..... .384 .576 .783 .808 .858 .913
------ ------- ------- ------- ------- -------
Net Asset Value, End of
the Period............ $8.604 $ 9.032 $ 9.890 $ 9.855 $ 9.497 $ 9.398
====== ======= ======= ======= ======= =======
Total Return* (a)....... (0.54%)** (2.71%)** 9.28% 12.64% 10.55% 7.61%
Net Assets at End of the
Period (In
millions)............. $119.3 $ 135.4 $ 145.0 $ 128.7 $ 97.1 $ 55.9
Ratio of Expenses to
Average Net Assets*... 1.96% 1.93% 1.91% 1.93% 2.07% 2.04%
Ratio of Net Investment
Income to Average Net
Assets*............... 8.84% 8.19% 7.84% 8.03% 8.39% 8.35%
Portfolio Turnover...... 50%** 104%** 154% 125% 102% 152%
*If certain expenses had not been waived or reimbursed by Van Kampen, total return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to
Average Net Assets.... 2.06% 2.03% 2.01% 2.02% 2.07% N/A
Ratio of Net Investment
Income to Average Net
Assets................ 8.74% 8.09% 7.74% 7.94% 8.38% N/A
</TABLE>
** Non-Annualized
(a) Total Return is based upon Net Asset Value which does not include payment of
maximum sales charge or contingent deferred sales charge.
N/A -- Not applicable.
See Notes to Financial Statements
26
<PAGE> 28
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months Year Ended June 30,
Ended Ended ------------------------------------
Class C Shares September 30, 1999 March 31, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 9.023 $ 9.884 $ 9.851 $ 9.495 $ 9.396 $9.643
------- ------- ------- ------- ------- ------
Net Investment
Income............... .394 .562 .780 .780 .828 .745
Net Realized and
Unrealized
Gain/Loss............ (.439) (.847) .036 .384 .129 (.079)
------- ------- ------- ------- ------- ------
Total from Investment
Operations........... (.045) (.285) .816 1.164 .957 .666
------- ------- ------- ------- ------- ------
Less:
Distributions from
and in Excess of
Net Investment
Income............. .373 .564 .783 .794 .812 .751
Return of Capital
Distribution....... .011 .012 -0- .014 .046 .162
------- ------- ------- ------- ------- ------
Total Distributions.... .384 .576 .783 .808 .858 .913
------- ------- ------- ------- ------- ------
Net Asset Value, End of
Period............... $ 8.594 $ 9.023 $ 9.884 $ 9.851 $ 9.495 $9.396
======= ======= ======= ======= ======= ======
Total Return* (a)...... (0.54%)** (2.71%)** 8.47% 12.65% 10.55% 7.61%
Net Assets at End of
Period (In
millions)............ $12.5 $14.7 $11.5 $8.1 $7.0 $2.0
Ratio of Expenses to
Average Net
Assets*.............. 1.95% 1.93% 1.91% 1.93% 2.06% 2.12%
Ratio of Net Investment
Income to Average Net
Assets*.............. 8.83% 8.25% 7.83% 8.08% 8.38% 8.13%
Portfolio Turnover..... 50%** 104%** 154% 125% 102% 152%
*If certain expenses had not been waived or reimbursed by Van Kampen, total return would have been
lower and the ratios would have been as follows:
Ratio of Expenses to
Average Net Assets... 2.05% 2.03% 2.01% 2.03% 2.07% N/A
Ratio of Net Investment
Income to Average Net
Assets............... 8.73% 8.15% 7.73% 7.99% 8.38% N/A
</TABLE>
** Non-Annualized
(a) Total Return is based upon Net Asset Value which does not include payment of
maximum sales charge or contingent deferred sales charge.
N/A -- Not applicable.
See Notes to Financial Statements
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen High Yield Fund (the "Fund") is organized as a series of Van Kampen
Trust, a Delaware business trust (the "Trust"), and is registered as a
diversified open-end management investment company under the Investment Company
Act of 1940, as amended. The Fund's primary investment objective is to provide a
high level of current income through investment in medium and lower grade
domestic corporate debt securities. The Fund also may invest up to 35% of its
assets in foreign government and corporate debt securities of comparable
quality. The Fund commenced investment operations on June 27, 1986. The Fund
commenced distribution of its Class B and C shares on May 17, 1993 and August
13, 1993, respectively.
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 are stated at value using market quotations
or indications of value obtained from an independent pricing service. For those
securities where quotations or prices are not available valuations are obtained
from yield data relating to instruments or securities with similar
characteristics in accordance with procedures established in good faith by the
Board of Trustees. Short-term securities with remaining maturities of 60 days or
less are valued at amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase
28
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 Investment Advisory Corp. (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. INCOME AND EXPENSES--Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Bond discount is amortized
over the expected life of each applicable security. Income and expenses of the
Fund are allocated on a pro rata basis to each class of shares, except for
distribution and service fees and transfer agency costs which are unique to each
class of shares.
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. Although the
Fund's fiscal year end was recently changed from June 30 to March 31, the Fund's
tax year end remains June 30.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 1999, the Fund had an accumulated capital loss carryforward
for tax purposes of $52,932,143, which will expire between June 30, 2000 and
June 30, 2007. Of this amount, $30,093,392 will expire on June 30, 2000. Net
realized gains or losses may differ for financial and tax reporting purposes
primarily as a result of the difference in the Fund's tax year end, wash sales,
and the recognition of related gain/loss for tax purposes on open futures
contracts at June 30, 1999.
At September 30, 1999, for federal income tax purposes, the cost of long-
and short-term investments is $408,333,820; the aggregate gross unrealized
appreciation is $5,099,237 and the aggregate gross unrealized depreciation is
$43,003,232, resulting in net unrealized depreciation on long- and short-term
investments of $37,903,995.
29
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
E. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net investment income for federal income
tax purposes includes gains and losses realized on foreign currency
transactions. These gains and losses are included as net realized gains and
losses for financial reporting purposes.
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 as 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
for the 1999 fiscal year have been identified and appropriately reclassified.
For the tax year ended June 30, 1999, permanent book and tax differences of
$272,539 relating to the recognition of net realized losses on foreign currency
transactions were reclassified from accumulated undistributed net investment
income to accumulated net realized gain/loss. Also, $709,965 relating to fee
income were reclassified from accumulated undistributed net investment income to
accumulated net realized gain/loss, and $39,385,731 relating to a portion of the
capital loss carryforward that expired during the year ended June 30, 1999 were
reclassified from capital to accumulated net realized gain/loss.
For tax purposes, the determination of a return of capital distribution is
made at the end of the Fund's taxable year (June 30).
F. CURRENCY TRANSLATION--Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated into
U.S. dollars at the mean of the quoted bid and ask prices of such currencies
against the U.S. dollar. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated at rates prevailing when accrued.
G. BANK LOAN PARTICIPATIONS--The Fund invests in participation interests of
loans to foreign entities. When the Fund purchases a participation of a foreign
loan interest, the Fund typically enters into a contractual agreement with the
lender or other third party selling the participation, but not with the borrower
directly. As such, the Fund assumes credit risk for the borrower, selling
participant or other persons positioned between the Fund and the borrower.
30
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
H. EXPENSE REDUCTIONS-- During the six months ended September 30, 1999, the
Fund's custody fee was reduced by $14,996 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 $500 million................................. .75 of 1%
Over $500 million.................................. .65 of 1%
</TABLE>
For the six months ended September 30, 1999, the Adviser waived a portion of
its advisory fee. This waiver is voluntary and may be discontinued at any time.
For the six months ended September 30, 1999, the Fund recognized expenses of
approximately $8,200, 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 six months ended September 30, 1999, the Fund recognized expenses of
approximately $35,200, representing Van Kampen Funds Inc.'s or its affiliates'
(collectively "Van Kampen") cost of providing accounting and legal services to
the Fund.
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
September 30, 1999, the Fund recognized expenses of approximately $256,700.
Transfer agency fees are determined through negotiations with the Fund's Board
of Trustees and are based on competitive market benchmarks.
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.
31
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
At September 30, 1999, capital aggregated $346,737,959, $121,260,352 and
$12,580,017 for Class A, B and C shares, respectively. For the six months ended
September 30, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A..................................... 3,164,771 $ 28,528,387
Class B..................................... 2,015,536 18,029,672
Class C..................................... 367,884 3,315,448
---------- ------------
Total Sales................................... 5,548,191 $ 49,873,507
========== ============
Dividend Reinvestment:
Class A..................................... 674,704 $ 5,946,113
Class B..................................... 257,785 2,276,355
Class C..................................... 33,401 294,848
---------- ------------
Total Dividend Reinvestment................... 965,890 $ 8,517,316
========== ============
Repurchases:
Class A..................................... (5,892,522) $(52,708,025)
Class B..................................... (3,399,492) (30,240,419)
Class C..................................... (566,965) (5,076,421)
---------- ------------
Total Repurchases............................. (9,858,979) $(88,024,865)
========== ============
</TABLE>
32
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 1999, capital aggregated $391,207,193, $144,042,232 and
$15,406,532 for Class A, B and C shares, respectively. For the nine months ended
March 31, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A................................... 8,548,658 $ 77,472,960
Class B................................... 4,618,109 42,170,273
Class C................................... 916,995 8,221,102
----------- -------------
Total Sales................................. 14,083,762 $ 127,864,335
=========== =============
Dividend Reinvestment:
Class A................................... 850,491 $ 7,690,242
Class B................................... 364,542 3,296,841
Class C................................... 45,353 409,515
----------- -------------
Total Dividend Reinvestment................. 1,260,386 $ 11,396,598
=========== =============
Repurchases:
Class A................................... (6,997,669) $ (63,522,912)
Class B................................... (4,654,114) (42,458,339)
Class C................................... (501,047) (4,517,313)
----------- -------------
Total Repurchases........................... (12,152,830) $(110,498,564)
=========== =============
</TABLE>
33
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At June 30, 1998, capital aggregated $369,566,903, $141,033,457 and
$11,293,228 for Class A, B and C shares, respectively. For the year ended June
30, 1998, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 8,945,784 $ 89,317,500
Class B.................................... 4,588,921 45,799,499
Class C.................................... 687,284 6,859,975
----------- -------------
Total Sales.................................. 14,221,989 $ 141,976,974
=========== =============
Dividend Reinvestment:
Class A.................................... 997,599 $ 9,948,016
Class B.................................... 427,244 4,261,071
Class C.................................... 40,893 407,568
----------- -------------
Total Dividend Reinvestment.................. 1,465,736 $ 14,616,655
=========== =============
Repurchases:
Class A.................................... (10,812,030) $(107,994,896)
Class B.................................... (3,408,945) (33,992,220)
Class C.................................... (385,647) (3,842,230)
----------- -------------
Total Repurchases............................ (14,606,622) $(145,829,346)
=========== =============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares purchased
on or after June 1, 1996 will automatically convert to Class A shares after the
eighth year following purchase. Class B shares purchased before June 1, 1996
automatically convert to Class A shares after the sixth year following purchase.
For the six months ended September 30, 1999, 479,196 Class B shares
automatically converted to Class A shares. Class C shares purchased on or after
January 1, 1997 do not convert to Class A shares. Class C shares purchased
before January 1, 1997, automatically convert to Class A shares after the tenth
year following purchase. For the six months ended September 30, 1999, no Class C
shares converted to Class A shares. The CDSC will be imposed on most redemptions
made within six years of the purchase for Class B and one year of the purchase
for Class C as detailed in the following schedule.
34
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ---------------------------------------------------------------------------
<S> <C> <C>
First........................................ 4.00% 1.00%
Second....................................... 3.75% None
Third........................................ 3.50% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Sixth........................................ 1.00% None
Seventh and Thereafter....................... None None
</TABLE>
For the six months ended September 30, 1999, Van Kampen, as Distributor for
the Fund, received commissions on sales of the Fund's Class A shares of
approximately $26,500, and CDSC on redeemed shares of approximately $164,500.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
For the six months ended September 30, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $197,166,120
and $240,218,035, respectively.
5. 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 and to manage the portfolio's effective yield, foreign currency
exposure, maturity and duration, 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
exercising a call option contract or taking delivery of a security underlying a
futures or forward contract. In these instances, the recognition of gain or loss
is postponed until the disposal of the security underlying the option, futures
or forward contract. Risks may arise as a result of the potential inability of
the counterparties to meet the terms of their contracts.
Summarized below are the specific types of derivative financial instruments
used by the Fund.
35
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Fund
to manage the portfolio's effective maturity and duration.
Transactions in options for the six months ended September 30, 1999, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- --------------------------------------------------------------------------
<S> <C> <C>
Outstanding at March 31, 1999.................... 100 $(33,613)
Options Written and Purchased (Net).............. -0- -0-
Options Terminated in Closing Transactions
(Net).......................................... -0- -0-
Options Expired (Net)............................ (100) 33,613
---- --------
Outstanding at September 30, 1999................ -0- $ -0-
==== ========
</TABLE>
B. FUTURES CONTRACTS--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 futures on U.S. Treasury Bonds and typically closes
the contract prior to the delivery date. These contracts are generally used to
manage the portfolio's effective maturity and duration.
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 for the six months ended September 30,
1999, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- -----------------------------------------------------------------------
<S> <C>
Outstanding at March 31, 1999............................. 250
Futures Opened............................................ 1,211
Futures Closed............................................ (1,461)
------
Outstanding at September 30, 1999......................... -0-
======
</TABLE>
C. FORWARD CURRENCY CONTRACTS--These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss
36
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
arising from the difference between the original value of the contract and the
closing value of such contract is included as a component of realized gain/loss
on forwards.
At September 30, 1999, the Fund has outstanding forward currency contracts
as follows:
<TABLE>
<CAPTION>
FORWARD CURRENT UNREALIZED
CURRENCY CONTRACTS VALUE APPRECIATION
- -----------------------------------------------------------------------
<S> <C> <C>
SHORT CONTRACTS:
British Pound
2,424,566 expiring 10/29/99............... $3,991,725 $8,275
</TABLE>
D. SWAP TRANSACTIONS--These securities represent an agreement between two
parties to exchange a series of cash flows based upon various indices at
specified intervals. There were no open swap transactions at September 30, 1999.
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% for Class A net assets and 1.00%
each for Class B and Class C net assets are accrued daily. Included in these
fees for the six months ended September 30, 1999, are payments retained by Van
Kampen of approximately $430,600.
37
<PAGE> 39
VAN KAMPEN FUNDS
GROWTH
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
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
Short-Term Global Income*
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
38
<PAGE> 40
VAN KAMPEN HIGH YIELD FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN*
Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
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
STEPHEN L. BOYD*
PETER W. HEGEL*
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN INVESTMENT
ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
* "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.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After February 29, 2000, the report, if used with
prospective investors, must be accompanied by a monthly performance update.
39
<PAGE> 41
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.
40
<PAGE> 42
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 11
Statement of Operations.......................... 12
Statement of Changes in Net Assets............... 13
Financial Highlights............................. 14
Notes to Financial Statements.................... 17
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 43
LETTER TO SHAREHOLDERS
October 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the 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 Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 44
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree, keeping the economy growing at a
healthy pace. High levels of consumer confidence fueled this heavy retail
purchasing activity, pushing the personal savings rate down to a record low as
spending rates outpaced income growth. Although we experienced a slowdown during
the second quarter of 1999, economic growth accelerated toward the end of the
reporting period. The growth rate of the nation's gross domestic product (GDP)
dipped to 1.6 percent for the second quarter of 1999, but climbed back up to 4.8
percent in the third quarter.
EMPLOYMENT SITUATION
The strong job market helped to support the health of the economy. During
the reporting period, the unemployment rate reached its lowest level in almost
30 years, and wages continued to climb. The wage pressures were balanced
somewhat by productivity gains, but they ultimately pushed the cost of labor
higher, as evidenced by the sharp jump in the Employment Cost Index in the
second quarter of 1999.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index (CPI) report. The Federal Reserve remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
two of its interest rate cuts from the fall of 1998, raising rates in June and
August 1999 to keep the economy from overheating.
INTEREST RATES AND INFLATION
September 30, 1997, through September 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Sep 1997 5.5000 2.2000
6.2500 2.2000
5.7500 2.1000
Dec 1997 5.6875 1.8000
6.5000 1.7000
5.5625 1.6000
Mar 1998 5.6250 1.4000
6.1250 1.4000
5.6250 1.4000
Jun 1998 5.6875 1.7000
6.0000 1.7000
5.5625 1.7000
Sep 1998 5.9375 1.6000
5.7500 1.5000
5.2500 1.5000
Dec 1998 4.8750 1.5000
4.0000 1.6000
4.8125 1.7000
Mar 1999 4.8750 1.6000
5.1250 1.7000
4.9375 2.3000
Jun 1999 4.5000 2.1000
4.0000 2.0000
4.7500 2.1000
Sep 1999 5.4375 2.3000
</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> 45
PERFORMANCE RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 1999
VAN KAMPEN SHORT-TERM GLOBAL INCOME FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV(1)... 2.37% 1.98% 1.98%
Six-month total return(2)................ (0.95%) (1.00%) 0.98%
One-year total return(2)................. 4.13% (3.85%) 5.85%
Five-year average annual total
return(2)................................ 3.89% 3.77% 3.72%
Life-of-Fund average annual total
return(2)................................ 3.84% 3.44% 1.94%
Commencement date........................ 09/28/90 07/22/91 08/13/93
DISTRIBUTION RATE AND YIELD
Distribution rate(3)..................... 5.81% 5.25% 5.25%
SEC Yield(4)............................. 5.66% 5.09% 5.09%
</TABLE>
(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (3.25% for A shares) or contingent
deferred sales charge for early withdrawal (3% for B shares and 1% for C
shares).
(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).
(3) Distribution rate represents the monthly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.
(4) SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio should
theoretically generate for the 30-day period ending September 30, 1999.
See the Comparative Performance section of the current prospectus. 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.
The Fund's net asset value will fluctuate as a result of changes in foreign
exchange rates and fluctuations in market interest rates. Foreign investments
involve the risks of future foreign political and economic developments and
securities of many foreign companies are less liquid and their prices more
volatile than domestic companies.
Market forecasts provided in this report may not necessarily come to pass.
The Board of Trustees has continuously reviewed the investment policies and
practices, performance, expenses and reduced net assets of the Van Kampen
Short-Term Global Income Fund (the "Fund"). In connection therewith, the Board
considered various alternatives including a possible merger or liquidation of
the Fund. After due consideration of a number of factors, including those
listed above, the Board determined that it would be in the best interest of
shareholders to terminate and liquidate the Fund. On September 23, 1999, the
Board approved a Plan of Liquidation. The Plan of Liquidation will be
presented to the shareholders of the Fund for approval.
3
<PAGE> 46
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN SHORT-TERM GLOBAL INCOME FUND
We recently spoke with representatives of the advisor of the Van Kampen
Short-Term Global Income Fund about the key events and economic forces that
shaped the markets during the past six months. Thomas J. Slefinger, portfolio
manager, has managed the Fund since its inception in 1990, with the help of
Peter W. Hegel, chief investment officer for fixed-income investments.
The following discussion reflects their views on the Fund's performance
during the six-month period ended September 30, 1999.
Q HOW WOULD YOU DESCRIBE THE INVESTMENT ENVIRONMENT IN WHICH THE FUND
OPERATED DURING THE PAST SIX MONTHS?
A During the past six months we witnessed recovery and renewed investor
confidence in the global economy. Increases in commodity prices, primarily
industrial metal and oil prices, helped revive many economies worldwide. In the
United States, however, the rise in oil prices fueled fears of inflation and led
to higher interest rates. Throughout the period the dollar weakened against the
Japanese yen as Japan's economy rebounded. In Europe, the recovery began late in
the period, which helped strengthen its new currency, the euro.
Long-term interest rates in the United States increased--by approximately
0.5 percent by the end of the period. Keeping watch over the U.S. economy, the
Federal Reserve Board raised short-term interest rates in late June and again in
late August. These moves reversed two of the three interest rate decreases the
Fed used to stabilize the U.S. economy during the end of 1998.
Q WHAT STRATEGY DID YOU EMPLOY TO MANAGE THE FUND IN THIS INVESTMENT
ENVIRONMENT?
A Going into the period we positioned the Fund to take advantage of what we
believed would be a market shift toward favoring higher-yielding bonds. We
felt that the dust had settled from the global economic crisis of the past
12 months and expected investors to return to these high-risk markets in search
of better yields. Our patience paid off, as the demand for these bonds
increased, boosting their prices. We also decreased the Fund's exposure to U.S.
dollar-denominated securities and increased its exposure to mortgage-backed,
high-yield, and emerging market securities. This benefited the Fund as we saw
long-term interest rates rise and the U.S. dollar weaken during the period.
With commodity-based economies, we've seen a pattern in which economic
recovery generally leads to currency strength. Therefore, we maintained
significant currency exposure to Canada, Australia, and New Zealand because of
the high correlation between these currencies and their commodity-based
economies. As a result, the increase in commodity prices helped boost the Fund's
return. For additional Fund portfolio highlights, please refer to page 8.
4
<PAGE> 47
Q DID ANYTHING DISAPPOINT YOU DURING THE PERIOD?
A We were disappointed that our lack of exposure to Japan caused us to miss
potential returns as the Japanese yen strengthened relative to the U.S.
dollar and the euro. Based on Japan's low interest rates and issuance of a
tremendous amount of debt during the year, we felt that Japan's bond market
would be weak. As a result, we found it difficult to acquire the right exposure
to the Japanese yen.
Q HOW DID THE FUND PERFORM DURING THE SIX-MONTH REPORTING PERIOD?
A Our strategy of investing in higher-yielding bonds and commodities-based
economies led to the Fund's performance during the period. In addition,
the Fund returns were supported by our decreased exposure to
dollar-dominated securities in anticipation of the U.S. dollar's decline
relative to other currencies. As a result, the Fund outpaced its benchmark, the
J.P. Morgan Short-Term Global Index, an unmanaged broad-based index that tracks
the major bond markets of the world with maturities of three years or less.
The Fund's total return for the six-month reporting period was 2.37
percent(1) (Class A shares at net asset value) and was 4.13 percent(2) for the
12 months ended September 30, 1999. By comparison, the J.P. Morgan Short-Term
Global Index produced a total return of 1.15 percent for the six-month period
and 0.30 percent for 12-month period. This index does not reflect any
commissions or sales charges that would be paid by an investor purchasing the
securities or investments it represents.
The Fund's distribution rate as of September 30, 1999, was 5.81 percent(3)
based on a monthly dividend of $0.0355 per share and a maximum public offering
price of $7.33 per share. Please refer to the chart and footnotes on page 3 for
additional Fund performance results. Past performance does not guarantee future
results.
Q WHAT IS YOUR OUTLOOK FOR THE FUND IN THE COMING MONTHS?
A One of the main themes worldwide during the next few months will be the
year 2000 issue and its affect on financial markets and global liquidity.
As a result, we expect to decrease our exposure during the next few months
to mortgage-backed, high-yield, and emerging market securities.
5
<PAGE> 48
We believe that between now and the end of the year, volatility will
increase worldwide and liquidity will decrease. In this environment, we will
look to acquire higher-quality investments. Near the end of the current
reporting period we began to increase our exposure to short-term U.S. Treasuries
and agency issues, and we expect to continue this strategy as we approach the
millennium.
Editor's note: At a meeting held September 23, 1999, the Board of Trustees of
the Fund considered and unanimously approved the investment advisor's
recommendation that the Fund be liquidated and dissolved. As a result, proxy
statements were sent to shareholders in mid November to vote on the liquidation
and dissolution. If the proposal is approved, the Fund's assets will be
liquidated and the proceeds will be distributed to Fund shareholders.
[SIG]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
[SIG]
Thomas J. Slefinger
Portfolio Manager
6
<PAGE> 49
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to 1 percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis-point move.
BOND: A debt security issued by a government or corporation that generally pays
a bondholder a stated rate of interest and repays the principal at the
maturity date.
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues (such as Treasury securities) and lower-quality
issues. Normally, lower-quality issues provide higher yields to compensate
investors for the additional credit risk.
EMERGING MARKETS: The financial markets of developing economies. Many Latin
American and Asian countries are considered emerging markets.
FEDERAL FUNDS RATE: The interest rate charged by one financial institution
lending federal funds to another. This overnight rate is used to meet banks'
daily reserve requirements. The Federal Reserve Board uses the federal funds
rate to affect the direction of interest rates.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its
policy-making committee, called the Federal Open Market Committee, meets
eight times a year to establish monetary policy and monitor the economic
pulse of the United States.
INVESTMENT GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody's Investor Services. Bonds rated below BBB or Baa are
noninvestment grade.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from its total assets and dividing this amount by the
number of shares outstanding. The NAV does not include any initial or
contingent deferred sales charge.
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.
YIELD: The annual rate of return on an investment, expressed as a percentage.
7
<PAGE> 50
PORTFOLIO HIGHLIGHTS
VAN KAMPEN SHORT-TERM GLOBAL INCOME FUND
TOP TEN PORTFOLIO HOLDINGS AS OF SEPTEMBER 30, 1999*
<TABLE>
<S> <C>
United States Treasury Notes, 5.750% Coupon, 11/30/02
Maturity ............................................. 12.6%
United States Treasury Notes, 5.500% Coupon, 08/31/01
Maturity ........................................... 12.5%
Federal Home Loan Mortgage Corp ...................... 12.4%
Federal National Mortgage Association ................ 10.1%
Federal Home Loan Banks, 6.000% Coupon, 05/15/02
Maturity ........................................... 6.3%
Federal Home Loan Banks, 5.875% Coupon, 09/17/01
Maturity ........................................... 5.0%
Petro Mexicanos ...................................... 4.8%
Repurchase Agreement ................................. 4.0%
Interamer Development Bank ........................... 3.8%
Gillette ............................................. 3.8%
</TABLE>
* As a percentage of long-term investments
TOP FIVE COUNTRIES AS A PERCENTAGE OF LONG-TERM INVESTMENTS
[GRAPH]
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ --------------
<S> <C> <C>
United States 79.12 45.04
Korea 5.58 5.63
Mexico 4.78 4.87
Chile 3.56 2.88
Canada 2.58 3.57
</TABLE>
8
<PAGE> 51
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
in Local
Currency Maturity U.S. $
(000) Description Coupon Date Market Value
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS 33.1%
CONSUMER NON-DURABLES 6.4%
1,500 Gillette -- US$........................ 6.000% 11/14/00 $ 1,497,750
1,000 Glaxo Welcome -- US$................... 6.750 05/31/00 1,003,500
-----------
2,501,250
-----------
ENERGY 4.8%
3,000 Petro Mexicanos, 144A -- US$ (a)....... 9.857 07/15/05 1,900,000
-----------
FINANCE 18.3%
2,500 Export-Import Bank Korea -- DEM........ 4.063 10/06/00 1,349,218
1,500 GE Capital Corp. -- US$................ 5.500 01/16/01 1,486,350
1,000 GMAC -- US$............................ 5.330 10/20/00 992,768
1,500 Interamer Development Bank -- US$...... 6.375 08/01/00 1,503,000
1,600 Korea Development Bank -- DEM.......... 5.625 10/25/99 870,986
2,000 Union Bank of Norway -- US$............ 9.100 10/25/00 1,013,750
-----------
7,216,072
-----------
UTILITIES 3.6%
3,000 Empresa Electrica Del Notre, 144A --
US$ (a)................................ 7.750 03/15/06 1,415,250
-----------
Total Corporate Bonds........................................ 13,032,572
-----------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 1.9%
COLOMBIA 1.3%
1,000 Republic of Colombia -- DEM............ 4.900 11/21/01 497,796
-----------
RUSSIA 0.6%
42 Russian Ian -- US$..................... 5.969 12/15/15 4,736
2,500 Russia Principal Loan -- Vnesh -- US$
(b)(c)................................. 5.969 12/15/20 231,250
-----------
235,986
-----------
Total Foreign Government and Agency Securities............... 733,782
-----------
US GOVERNMENT AND AGENCY OBLIGATIONS 59.6%
2,000 Federal Home Loan Banks................ 5.875 09/17/01 1,994,740
2,500 Federal Home Loan Banks................ 6.000 08/15/02 2,486,625
5,000 Federal Home Loan Mortgage Corp........ 5.500 05/15/02 4,921,100
4,000 Federal National Mortgage
Association............................ 6.500 08/15/04 4,018,440
</TABLE>
See Notes to Financial Statements
9
<PAGE> 52
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
in Local
Currency Maturity U.S. $
(000) Description Coupon Date Market Value
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
US GOVERNMENT AND AGENCY OBLIGATIONS (CONTINUED)
5,000 United States Treasury Notes........... 5.500% 08/31/01 $ 4,988,650
5,000 United States Treasury Notes........... 5.750 11/30/02 4,996,750
-----------
23,406,305
-----------
REPURCHASE AGREEMENT 4.0%
State Street Bank and Trust (Collateralized by $1,470,000 of U.S.
Treasury Bonds, 7.25% coupon, due 05/15/16 dated 09/30/99, to be sold
on 10/01/99 at $1,586,232).............................................. 1,586,000
-----------
SHORT TERM NOTES 2.6%
1,506 Canadian Time Deposit.................. 4.350 10/13/99 1,025,257
-----------
TOTAL INVESTMENTS 101.2%
(Cost $41,570,225).................................................... 39,783,916
OTHER ASSETS IN EXCESS OF LIABILITIES (1.2%)........................... (494,088)
-----------
NET ASSETS 100.0%...................................................... $39,289,828
===========
</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 those transactions
with qualified institutional buyers.
(b) Payment in kind security.
(c) Security is accruing at less than the stated coupon.
PORTFOLIO COMPOSITION BY CREDIT QUALITY
The following table summarizes the portfolio composition at September 30, 1999,
based upon the highest credit quality ratings as determined by Standard & Poor's
or Moody's.
<TABLE>
<S> <C>
Repurchase Agreement........... 4.0%
Short Term Notes............... 2.6%
AAA............................ 66.4%
AA............................. 6.3%
A.............................. 5.0%
BBB............................ 6.8%
BB............................. 8.3%
NR............................. 0.6%
-----
100.0%
=====
</TABLE>
See Notes to Financial Statements
10
<PAGE> 53
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $41,570,225)........................ $ 39,783,916
Cash........................................................ 71
Receivables:
Investments Sold.......................................... 1,998,096
Interest.................................................. 627,622
Fund Shares Sold.......................................... 25
Other....................................................... 2,082
------------
Total Assets.......................................... 42,411,812
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 2,514,767
Distributor and Affiliates................................ 83,231
Income Distributions...................................... 70,443
Fund Shares Repurchased................................... 67,464
Forward Currency Contracts................................ 52,875
Investment Advisory Fee................................... 17,890
Accrued Expenses............................................ 161,665
Trustees' Deferred Compensation and Retirement Plans........ 153,649
------------
Total Liabilities..................................... 3,121,984
------------
NET ASSETS.................................................. $ 39,289,828
============
NET ASSETS CONSIST OF:
Capital (Par value of $.01 per share with an unlimited
number of shares authorized).............................. $106,201,741
Accumulated Distributions in Excess of Net Investment
Income.................................................... (15,831)
Net Unrealized Depreciation................................. (1,799,420)
Accumulated Net Realized Loss............................... (65,096,662)
------------
NET ASSETS.................................................. $ 39,289,828
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $37,469,231 and 5,284,158 shares of
beneficial interest issued and outstanding)............. $ 7.09
Maximum sales charge (3.25%* of offering price)......... .24
------------
Maximum offering price to public........................ $ 7.33
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $1,534,271 and 216,378 shares of
beneficial interest issued and outstanding)............. $ 7.09
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $286,326 and 40,374 shares of beneficial
interest issued and outstanding)........................ $ 7.09
============
</TABLE>
*On sales of $25,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
11
<PAGE> 54
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1999 (Unaudited)
-------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Net of foreign withholding taxes of $15,312)...... $ 1,915,452
Dividends................................................... 8,829
-----------
Total Income............................................ 1,924,281
-----------
EXPENSES:
Investment Advisory Fee..................................... 137,048
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $59,156, $11,171 and $1,382,
respectively)............................................. 71,709
Shareholder Services........................................ 69,520
Custody..................................................... 37,792
Blue Sky Expense............................................ 26,072
Trustees' Fees and Related Expenses......................... 21,418
Legal....................................................... 9,175
Other....................................................... 52,939
-----------
Total Expenses.......................................... 425,673
Less Credits Earned on Overnight Cash Balances.......... 5,399
-----------
Net Expenses............................................ 420,274
-----------
NET INVESTMENT INCOME....................................... $ 1,504,007
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (600,536)
Forwards.................................................. (30,371)
Foreign Currency Transactions............................. (749,527)
-----------
Net Realized Loss........................................... (1,380,434)
-----------
Net Unrealized Appreciation/Depreciation:
Beginning of the Period................................... (2,802,037)
-----------
End of the Period:
Investments............................................. (1,786,309)
Foreign Currency Translation............................ (13,111)
-----------
(1,799,420)
-----------
Net Unrealized Appreciation During the Period............... 1,002,617
-----------
NET REALIZED AND UNREALIZED LOSS............................ $ (377,817)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 1,126,190
===========
</TABLE>
See Notes to Financial Statements
12
<PAGE> 55
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended September 30, 1999, the Nine Months Ended March 31,
1999 and the Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Nine Months Ended Year Ended
September 30, 1999 March 31, 1999 June 30, 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From Investment Activities:
Operations:
Net Investment Income.................. $ 1,504,007 $ 2,689,753 $ 3,914,766
Net Realized Loss...................... (1,380,434) (1,451,526) (267,176)
Net Unrealized
Appreciation/Depreciation During the
Period............................... 1,002,617 (385,058) (996,003)
----------- ----------- ------------
Change in Net Assets from Operations... 1,126,190 853,169 2,651,587
----------- ----------- ------------
Distributions from Net Investment
Income............................... (1,086,974) (991,214) (3,914,766)
Distributions in Excess of Net
Investment Income.................... -0- -0- (331,088)
----------- ----------- ------------
Distributions from and in Excess of Net
Investment Income*................... (1,086,974) (991,214) (4,245,854)
Return of Capital Distribution*........ (427,391) (1,687,147) (290,326)
----------- ----------- ------------
Total Distributions.................... (1,514,365) (2,678,361) (4,536,180)
----------- ----------- ------------
NET CHANGE IN NET ASSETS FROM
INVESTMENT ACTIVITIES................ (388,175) 1,825,192) (1,884,593)
----------- ----------- ------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold.............. 2,520,981 14,681,976 19,032,931
Net Asset Value of Shares Issued
Through Dividend Reinvestment........ 761,597 1,300,796 2,772,850
Cost of Shares Repurchased............. (17,884,996) (25,487,170) (46,043,368)
----------- ----------- ------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS......................... (14,602,418) (9,504,398) (24,237,587)
----------- ----------- ------------
TOTAL DECREASE IN NET ASSETS........... (14,990,593) (11,329,590) (26,122,180)
NET ASSETS:
Beginning of the Period................ 54,280,421 65,610,011 91,732,191
----------- ----------- ------------
End of the Period (Including
accumulated distributions in excess
of net investment income of $15,831,
$1,974,455, and $1,985,847,
respectively)........................ $39,289,828 $54,280,421 $ 65,610,011
=========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
*Distributions by Class
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Distributions from and in Excess of Net
Investment Income:
Class A Shares....................... $(1,040,708) $ (859,888) $ (2,310,645)
Class B Shares....................... (40,796) (126,684) (1,921,964)
Class C Shares....................... (5,470) (4,642) (13,245)
----------- ----------- ------------
$(1,086,974) $ (991,214) $ (4,245,854)
=========== =========== ============
Return of Capital Distribution:
Class A Shares....................... $ (406,994) $(1,463,617) $ (179,548)
Class B Shares....................... (18,511) (215,630) (109,531)
Class C Shares....................... (1,886) (7,900) (1,247)
----------- ----------- ------------
$ (427,391) $(1,687,147) $ (290,326)
=========== =========== ============
</TABLE>
See Notes to Financial Statements
13
<PAGE> 56
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months
Ended Ended Year Ended June 30,
September 30, March 31, -----------------------------
Class A Shares 1999 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................. $ 7.14 $ 7.35 $7.55 $7.62 $7.56 $8.15
------------- ----------- ----- ----- ----- -----
Net Investment Income......... .22 .33 .39 .42 .49 .50
Net Realized and Unrealized
Gain/Loss................... (.05) (.21) (.13) .03 .16 (.45)
------------- ----------- ----- ----- ----- -----
Total from Investment
Operations.................. .17 .12 .26 .45 .65 .05
------------- ----------- ----- ----- ----- -----
Less:
Distributions from and in
Excess of Net Investment
Income.................... .16 .12 .42 .51 -0- .37
Return of Capital
Distribution.............. .06 .21 .04 .01 .59 .27
------------- ----------- ----- ----- ----- -----
Total Distributions........... .22 .33 .46 .52 .59 .64
------------- ----------- ----- ----- ----- -----
Net Asset Value, End of the
Period...................... $ 7.09 $ 7.14 $7.35 $7.55 $7.62 $7.56
============= =========== ===== ===== ===== =====
Total Return* (a)............. 2.37%** 1.76%** 3.46% 6.09% 8.81% .69%
Net Assets at End of the
Period (In millions)........ $ 37.5 $ 51.0 $45.7 $39.5 $50.1 $72.5
Ratio of Expenses to Average
Net Assets* (b)............. 1.69% 1.56% 1.39% 1.33% 1.31% 1.14%
Ratio of Net Investment Income
to Average Net Assets*...... 6.23% 6.21% 5.40% 5.37% 6.54% 7.20%
Portfolio Turnover............ 67%** 53%** 175% 378% 225% 204%
* If certain expenses had not
been assumed by Van Kampen,
Total Return would have been
lower and the ratios would
have been as follows:
Ratio of Expenses to Average
Net Assets (b).............. N/A N/A 1.41% 1.36% 1.34% N/A
Ratio of Net Investment Income
to Average Net Assets....... N/A N/A 5.38% 5.34% 6.51% N/A
</TABLE>
** Non-Annualized
(a) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(b) Beginning with the year ended June 30, 1997, the Ratios of Expenses to
Average Net Assets are based upon expense amounts which do not reflect
credits earned on overnight cash balances.
N/A = Not Applicable
See Notes to Financial Statements
14
<PAGE> 57
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months
Ended Ended Year Ended June 30,
September 30, March 31, ----------------------------------
Class B Shares 1999(a) 1999(a) 1998(a) 1997(a) 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period................. $ 7.14 $ 7.35 $7.55 $7.62 $7.56 $ 8.15
------------- ----------- ----- ----- ----- ------
Net Investment Income........ .19 .36 .36 .35 .39 .41
Net Realized and Unrealized
Gain/Loss.................. (.05) (.28) (.16) .04 .20 (.42)
------------- ----------- ----- ----- ----- ------
Total from Investment
Operations................. .14 .08 .20 .39 .59 (.01)
------------- ----------- ----- ----- ----- ------
Less:
Distributions from and in
Excess of Net Investment
Income................... .14 .11 .37 .45 -0- .34
Return of Capital
Distribution............. .05 .18 .03 .01 .53 .24
------------- ----------- ----- ----- ----- ------
Total Distributions.......... .19 .29 .40 .46 .53 .58
------------- ----------- ----- ----- ----- ------
Net Asset Value, End of the
Period..................... $ 7.09 $ 7.14 $7.35 $7.55 $7.62 $ 7.56
============= =========== ===== ===== ===== ======
Total Return* (b)............ 1.98%** 1.15%** 2.67% 5.29% 8.02% (.14%)
Net Assets at End of the
Period (In millions)....... $ 1.5 $ 3.0 $19.6 $52.1 $81.1 $127.9
Ratio of Expenses to Average
Net Assets* (c)............ 2.50% 2.31% 2.16% 2.09% 2.09% 1.96%
Ratio of Net Investment
Income to Average Net
Assets*.................... 5.42% 5.46% 4.48% 4.62% 5.79% 6.42%
Portfolio Turnover........... 67%** 53%** 175% 378% 225% 204%
* If certain expenses had not
been assumed by Van Kampen,
Total Return would have been
lower and the ratios would
have been as follows:
Ratio of Expenses to Average
Net Assets (c).............. N/A N/A 2.18% 2.12% 2.09% N/A
Ratio of Net Investment Income
to Average Net Assets....... N/A N/A 4.46% 4.59% 5.76% N/A
</TABLE>
** Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) Beginning with the year ended June 30, 1997, the Ratios of Expenses to
Average Net Assets are based upon expense amounts which do not reflect
credits earned on overnight cash balances.
N/A = Not Applicable
See Notes to Financial Statements
15
<PAGE> 58
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months
Ended Ended Year Ended June 30,
September 30, March 31, ---------------------------------
Class C Shares 1999(a) 1999(a) 1998(a) 1997(a) 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
the Period.................. $ 7.14 $ 7.35 $7.55 $7.62 $7.56 $8.16
------------- ----------- ----- ----- ----- -----
Net Investment Income......... .19 .29 .34 .35 .45 .50
Net Realized and Unrealized
Gain/Loss................... (.05) (.21) (.14) .04 .14 (.52)
------------- ----------- ----- ----- ----- -----
Total from Investment
Operations.................. .14 .08 .20 .39 .59 (.02)
------------- ----------- ----- ----- ----- -----
Less:
Distributions from and in
Excess of Net Investment
Income.................... .14 .11 .37 .45 -0- .34
Return of Capital
Distribution.............. .05 .18 .03 .01 .53 .24
------------- ----------- ----- ----- ----- -----
Total Distributions........... .19 .29 .40 .46 .53 .58
------------- ----------- ----- ----- ----- -----
Net Asset Value, End of the
Period...................... $ 7.09 $ 7.14 $7.35 $7.55 $7.62 $7.56
============= =========== ===== ===== ===== =====
Total Return* (b)............. 1.98%** 1.15%** 2.67% 5.29% 8.03% (.27%)
Net Assets at End of the
Period (In millions)........ $.3 $.3 $.3 $.2 $.2 $.2
Ratio of Expenses to Average
Net Assets* (c)............. 2.46% 2.33% 2.16% 2.09% 2.07% 1.96%
Ratio of Net Investment Income
to Average Net Assets*...... 5.37% 5.46% 4.67% 4.63% 5.72% 6.30%
Portfolio Turnover............ 67%** 53%** 175% 378% 225% 204%
* If certain expenses had not
been assumed by Van Kampen,
Total Return would have been
lower and the ratios would
have been as follows:
Ratio of Expenses to Average
Net Assets (c).............. N/A N/A 2.17% 2.12% 2.09% N/A
Ratio of Net Investment Income
to Average Net Assets....... N/A N/A 4.65% 4.60% 5.69% N/A
</TABLE>
** Non-Annualized
(a) Based on average month-end shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
(c) Beginning with the year ended June 30, 1997, the Ratios of Expenses to
Average Net Assets are based upon expense amounts which do not reflect
credits earned on overnight cash balances.
N/A = Not Applicable
See Notes to Financial Statements
16
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Short-Term Global Income Fund (the "Fund") is organized as a series
of Van Kampen Trust (the "Trust"), a Delaware business trust, and is registered
as a non-diversified open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek a
high level of current income, consistent with prudent investment risk through
investment in a global portfolio of investment grade debt securities denominated
in various currencies and multi-national currency units and having an average
duration of three years or less. The Fund commenced investment operations on
September 28, 1990. The distribution of the Fund's Class B and Class C shares
commenced on July 22, 1991, and August 13, 1993, respectively.
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 are stated at value using the last available
bid price, or if not available, yield equivalents obtained from dealers in the
over-the-counter (OTC) or interbank market. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made. At September 30, 1999, there were no
when issued or delayed delivery purchase commitments.
The Fund may invest in repurchase agreements, which are short-term
investments in which the Fund acquires ownership of a debt security and the
seller agrees to repurchase
17
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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 Investment Advisory Corp. (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 security 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. INCOME AND EXPENSES--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security. Income and expenses of the Fund are allocated on a pro rata
basis to each class of shares, except for distribution and service fees and
transfer agency costs which are unique to each class of shares.
D. CURRENCY TRANSLATION--Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated into
U.S. dollars at the mean of the quoted bid and ask prices of such currencies
against the U.S. dollar. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated at rates prevailing when accrued.
E. 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. Although the
Fund's fiscal year end was recently changed from June 30 to March 31, the Fund's
tax year end remains June 30.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 1999, the Fund had an accumulated capital loss carryforward
for tax purposes of $63,433,029 which will expire between June 30, 2001 and June
30, 2007. Net realized gains or losses may differ for financial and tax
reporting purposes primarily as a result of the difference in the Fund's tax
year end.
18
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At September 30, 1999, for federal income tax purposes, cost of long- and
short-term investments is $41,570,225; the aggregate gross unrealized
appreciation is $26,239 and the aggregate gross unrealized depreciation is
$1,812,548, resulting in net unrealized depreciation of $1,786,309.
F. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually. Net investment income for federal income tax purposes
includes gains and losses realized on transactions in foreign currencies and
options on foreign currencies. These realized gains and losses are included as
net realized gains or losses for financial reporting purposes.
Permanent book and tax differences relating to net realized currency losses
totaling $1,077,862 were reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income. Additionally, permanent
differences related to an overdistribution of prior year income that was
utilized by a short term capital loss totaling $932,306, was reclassed from
accumulated undistributed net investment income to capital.
For tax purposes, the determination of a return of capital distribution is
made at the end of the Fund's taxable year (June 30).
G. EXPENSE REDUCTIONS--During the six months ended September 30, 1999, the
Trust's custody fee was reduced by $5,399 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 of .55% of the Fund's average net assets.
For the six months ended September 30, 1999, the Fund recognized expenses of
approximately $3,400 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the
Fund is an affiliated person.
For the six months ended September 30, 1999, the Fund recognized expenses of
approximately $12,400, representing Van Kampen's cost of providing accounting
and legal services to the Fund.
19
<PAGE> 62
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the six months ended September
30, 1999, the Fund recognized expenses of approximately $44,600. Transfer agency
fees are determined through negotiations with the Fund's Board of Trustees and
are based on competitive market benchmarks.
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. CAPITAL TRANSACTIONS
At September 30, 1999, capital aggregated $59,340,083, $46,571,454 and
$290,204, for Classes A, B and C, respectively. For the six months ended
September 30, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A..................................... 334,240 $ 2,381,371
Class B..................................... 17,075 121,189
Class C..................................... 2,595 18,421
---------- ------------
Total Sales................................... 353,910 $ 2,520,981
========== ============
Dividend Reinvestment:
Class A..................................... 100,328 $ 713,660
Class B..................................... 5,707 40,599
Class C..................................... 1,032 7,338
---------- ------------
Total Dividend Reinvestment................... 107,067 $ 761,597
========== ============
Repurchases:
Class A..................................... (2,292,884) $(16,238,532)
Class B..................................... (230,898) (1,644,976)
Class C..................................... (210) (1,488)
---------- ------------
Total Repurchases............................. (2,523,992) $(17,884,996)
========== ============
</TABLE>
20
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 1999, capital aggregated $75,377,296, $48,190,817 and $282,890,
for Classes A, B and C, respectively. For the nine months ended March 31, 1999,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A..................................... 2,006,866 $ 14,345,350
Class B..................................... 38,305 277,659
Class C..................................... 8,367 58,967
---------- ------------
Total Sales................................... 2,053,538 $ 14,681,976
========== ============
Dividend Reinvestment:
Class A..................................... 155,386 $ 1,111,883
Class B..................................... 24,804 177,510
Class C..................................... 1,596 11,403
---------- ------------
Total Dividend Reinvestment................... 181,786 $ 1,300,796
========== ============
Repurchases:
Class A..................................... (1,242,343) $ (8,908,308)
Class B..................................... (2,299,947) (16,448,982)
Class C..................................... (18,281) (129,880)
---------- ------------
Total Repurchases............................. (3,560,571) $(25,487,170)
========== ============
</TABLE>
21
<PAGE> 64
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At June 30, 1998, capital aggregated $68,828,371, $64,184,630 and $342,400,
for Classes A, B and C, respectively. For the year ended June 30, 1998,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A..................................... 2,451,703 $ 18,354,657
Class B..................................... 64,808 487,442
Class C..................................... 25,354 190,832
---------- ------------
Total Sales................................... 2,541,865 $ 19,032,931
========== ============
Dividend Reinvestment:
Class A..................................... 227,701 $ 1,709,854
Class B..................................... 139,292 1,048,650
Class C..................................... 1,914 14,346
---------- ------------
Total Dividend Reinvestment................... 368,907 $ 2,772,850
========== ============
Repurchases:
Class A..................................... (1,683,807) $(12,642,954)
Class B..................................... (4,446,060) (33,357,245)
Class C..................................... (5,747) (43,169)
---------- ------------
Total Repurchases............................. (6,135,614) $(46,043,368)
========== ============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares purchased
on or after June 1, 1996 will automatically convert to Class A shares after the
eighth year following purchase. Class B shares purchased before June 1, 1996
automatically convert to Class A shares after the sixth year following purchase.
For the six months ended September 30, 1999, 1,115,521 Class B shares
automatically converted to Class A shares. Class C shares purchased before
January 1, 1997 will automatically convert to Class A shares after the tenth
year following purchase. Class C shares purchased on or after January 1, 1997 do
not convert to Class A shares. The CDSC for Class B and C shares will be
22
<PAGE> 65
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
imposed on most redemptions made within three years of the purchase for Class B
and one year of the purchase for Class C as detailed in the following schedule.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ---------------------------------------------------------------------------
<S> <C> <C>
First........................................ 3.00% 1.00%
Second....................................... 2.00% None
Third........................................ 1.00% None
Fourth and Thereafter........................ None None
</TABLE>
For the six months ended September 30, 1999, Van Kampen, as Distributor for
the Fund, received commissions on sales of the Fund's Class A shares of
approximately $400, and CDSC on redeemed shares of approximately $1,200. Sales
charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
For the six months ended September 30, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $30,382,500
and $37,217,029, respectively.
5. 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 and to manage the portfolio's effective yield, foreign currency
exposure, maturity and duration. 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 exercising a call option
contract or taking delivery of a security underlying a forward contract. In this
instance, the recognition of gain or loss is postponed until the disposal of the
security underlying the option or forward contract. Risks may arise as a result
of the potential inability of the counterparties to meet the terms of their
contracts.
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period.
23
<PAGE> 66
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
There were no transactions in options for the six months ended September 30,
1999.
B. FUTURES CONTRACTS--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 futures on U.S. Treasury Notes and typically closes
the contract prior to the delivery date. These contracts are generally used to
manage the portfolio's effective maturity and duration.
There were no transactions in futures contracts for the six months ended
September 30, 1999.
C. FORWARD CURRENCY CONTRACTS--These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on forwards.
At September 30, 1999, the Fund did not have any forward currency contracts
outstanding.
D. CLOSED BUT UNSETTLED FORWARD COMMITMENTS--In certain situations, the Fund has
entered into offsetting transactions for outstanding forward commitments prior
to settlement of the obligation. In doing so, the Fund realizes a gain or loss
on the transactions at the time the forward commitment is closed. Risk may
result due to the potential inability of counterparties to meet the terms of
their contracts. At September 30, 1999, the Fund has net realized losses on
closed but unsettled forward currency contracts of $52,875 scheduled to settle
on October 27, 1999. This amount is due to one counterparty.
6. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the six months ended September 30, 1999 are payments retained by Van Kampen
of approximately $22,800.
24
<PAGE> 67
VAN KAMPEN FUNDS
GROWTH
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
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
Short-Term Global Income*
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
25
<PAGE> 68
VAN KAMPEN SHORT-TERM GLOBAL INCOME FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
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
STEPHEN L. BOYD*
PETER W. HEGEL*
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN
INVESTOR SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
* "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.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After February 29, 2000, this report, if used with
prospective investors, must be accompanied by a quarterly performance update.
26
<PAGE> 69
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.
27
<PAGE> 70
VAN KAMPEN FUNDS
YOUR NOTES:
28
<PAGE> 71
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 9
Statement of Assets and Liabilities.............. 20
Statement of Operations.......................... 21
Statement of Changes in Net Assets............... 22
Financial Highlights............................. 23
Notes to Financial Statements.................... 26
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 72
LETTER TO SHAREHOLDERS
October 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial
markets, some investors have sold securities because of uncertainty about where
the markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the 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 Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
1
<PAGE> 73
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree, keeping the economy growing at a
healthy pace. High levels of consumer confidence fueled this heavy retail
purchasing activity, pushing the personal savings rate down to a record low as
spending rates outpaced income growth. Although we experienced a slowdown during
the second quarter of 1999, economic growth accelerated toward the end of the
reporting period. The growth rate of the nation's gross domestic product (GDP)
dipped to 1.6 percent for the second quarter of 1999, but climbed back up to 4.8
percent in the third quarter.
EMPLOYMENT SITUATION
The strong job market helped to support the health of the economy. During
the reporting period, the unemployment rate reached its lowest level in almost
30 years, and wages continued to climb. The wage pressures were balanced
somewhat by productivity gains, but they ultimately pushed the cost of labor
higher, as evidenced by the sharp jump in the Employment Cost Index in the
second quarter of 1999.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index (CPI) report. The Federal Reserve remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
two of its interest rate cuts from the fall of 1998, raising rates in June and
August 1999 to keep the economy from overheating.
INTEREST RATES AND INFLATION
September 30, 1997, through September 30, 1999
[GRAPH]
<TABLE>
<CAPTION>
INTEREST RATES INFLATION
-------------- ---------
<S> <C> <C>
Sep 1997 5.5000 2.2000
6.2500 2.2000
5.7500 2.1000
Dec 1997 5.6875 1.8000
6.5000 1.7000
5.5625 1.6000
Mar 1998 5.6250 1.4000
6.1250 1.4000
5.6250 1.4000
Jun 1998 5.6875 1.7000
6.0000 1.7000
5.5625 1.7000
Sep 1998 5.9375 1.6000
5.7500 1.5000
5.2500 1.5000
Dec 1998 4.8750 1.5000
4.0000 1.6000
4.8125 1.7000
Mar 1999 4.8750 1.6000
5.1250 1.7000
4.9375 2.3000
Jun 1999 4.5000 2.1000
4.0000 2.0000
4.7500 2.1000
Sep 1999 5.4375 2.3000
</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> 74
PERFORMANCE RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 1999
VAN KAMPEN STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
A SHARES B SHARES C SHARES
<S> <C> <C> <C>
TOTAL RETURNS
Six-month total return based on NAV(1)... (0.85%) (1.17%) (1.17%)
Six-month total return(2)................ (5.56%) (4.97%) (2.12%)
One-year total return(2)................. (0.85%) (0.48%) 2.39%
Five-year average annual total
return(2).............................. 5.30% 5.29% 5.47%
Life-of-Fund average annual total
return(2).............................. 2.47% 2.43% 2.51%
Commencement date........................ 12/31/93 12/31/93 12/31/93
DISTRIBUTION RATE AND YIELD
Distribution rate(3)..................... 8.36% 7.96% 7.97%
SEC Yield(4)............................. 8.30% 7.94% 7.94%
</TABLE>
(1) Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for A shares) or contingent
deferred sales charge for early withdrawal (4% for B shares and 1% for C
shares).
(2) Standardized total return. Assumes reinvestment of all distributions for the
period and includes payment of the maximum sales charge (A shares) or contingent
deferred sales charge for early withdrawal (B and C shares).
(3) Distribution rate represents the monthly annualized distributions of the
Fund at the end of the period and not the earnings of the Fund.
(4) SEC Yield is a standardized calculation prescribed by the Securities and
Exchange Commission for determining the amount of net income a portfolio should
theoretically generate for the 30-day period ending September 30, 1999. Had
certain expenses of the Fund not been assumed by Van Kampen, total returns would
have been lower and the SEC Yield would have been 7.98%, 7.62% and 7.62% for
Classes A, B and C, respectively.
See the Comparative Performance section of the current prospectus. 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.
A substantial portion of the Fund's assets may be invested in lower-grade income
securities, including issues of emerging market countries and securities rated
in the lowest categories, commonly referred to as junk bonds. The Fund's
investments in these securities hold the potential for risks not associated with
investments in the United States or other types of fixed income securities.
The Fund may react to changes in interest rate cycles, business or economic
conditions, rates of inflation, or other market conditions. Global investing,
investing in lower rated securities, and investing in a limited number of
sectors each hold the potential for risks not associated with many other types
of fixed-income investments.
Market Forecasts provided in this report may not necessarily come to pass.
3
<PAGE> 75
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN STRATEGIC INCOME FUND
We recently spoke with the portfolio managers of the Van Kampen Strategic Income
Fund about the key events and economic forces that shaped the markets during the
past six months. The discussion included portfolio managers Kelly Gilbert,
Robert Hickey, Jack Reynoldson, and Thomas J. Slefinger, and chief investment
officer for fixed-income investments, Peter W. Hegel.
The following discussion reflects their views on the Fund's performance
during the six-month period ended September 30, 1999.
Q DESCRIBE THE MARKET CONDITIONS THAT AFFECTED THE FUND DURING THE REPORTING
PERIOD.
A During the past six months we witnessed recovery and renewed confidence in
the global economy. One beneficiary of the economic recovery was Japan. As
a result, the U.S. dollar weakened relative to the Japanese yen. For most
of the period investors did not bestow this confidence upon Europe, and the U.S.
dollar strengthened relative to the new currency, the euro. In addition,
increases in oil prices fueled fears of inflation and led to higher interest
rates in Europe, Japan, and the United States.
In the United States, long-term interest rates increased by approximately
0.5 percent by the end of the period. Monitoring the U.S. economy, the Federal
Reserve Board raised short-term interest rates in late June and again in late
August. These moves reversed two of the three interest rate decreases the Fed
used to stabilize the U.S. economy during the end of 1998. As a result, interest
rates on mortgage-backed, high-yield, and emerging market securities increased,
which made these securities more attractive. Near the end of the period,
investor confidence finally returned to Europe, and the euro began to strengthen
against the U.S. dollar.
Q WHAT STRATEGIES DID YOU PURSUE IN THIS ENVIRONMENT?
A We increased our exposure within the global investment-grade sector. The
Fund benefited from this strategy because we focused primarily on Japan
and countries whose economies rely on commodity production like Canada and
Australia, which all performed well. At the beginning of the period, we took a
conservative approach and increased our exposure within the domestic bond market
to U.S. Treasuries and reduced our exposure to mortgage-backed securities. Near
the end of the period, however, we reversed this strategy, which helped the Fund
as yield spreads widened and mortgage-backed securities started to outperform
U.S. Treasuries.
Throughout the period, we decreased our exposure to emerging markets. In
1998 and early 1999, the Fund's performance was hurt by this exposure as
emerging market economies suffered through a global economic crisis. While some
of these nations have rebounded, we remained cautious as many of them, for
example Ecuador, continued to struggle and some of the larger countries like
Argentina were marked by political
4
<PAGE> 76
instability. As a result, we invested in high-yield securities because we felt
they provided attractive yields but exposed the Fund to less risk when compared
with emerging market securities. We believe our strategy of investing in
high-yield securities helped the Fund's returns.
Q HOW DID THE FUND PERFORM DURING THE SIX-MONTH REPORTING PERIOD?
A Compared to its peers, the Fund performed well due to our reduced exposure
to emerging markets securities and increased exposure to the Japanese yen
and foreign investment grade securities. However, the decline in the U.S.
bond market did moderate the good performance in these areas. For the six months
ended September 30, 1999, the Fund generated a total return of -0.85 percent(1)
(Class A shares at net asset value).
By comparison, the Lehman Brothers Aggregate Bond Index, an unmanaged broad-
based index, generated a total return of -0.20 percent for the same six-month
period. Similarly, a composite index of 20 percent of each Salomon Brothers
Index for Mortgages, High Yield Market, Corporate, Non-U.S. Dollar World
Government, and Brady Bonds produced a total return of -0.16 percent during the
period. Keep in mind that neither index reflects any commissions or sales fees
that would be paid by an investor purchasing the securities or investments it
represents. The Fund's current distribution rate as of September 30, 1999, was
8.36 percent(3)--based on a monthly dividend of $0.0765 per Class A share and a
maximum public offering price of $10.98 per share. Please refer to the chart and
footnotes on page 3 for additional Fund performance results. Past performance
does not guarantee future results.
Q HOW IS THE FUND CURRENTLY POSITIONED?
A At the end of the period 24 percent of the long-term portfolio of
investments was allocated to the foreign investment grade sector, compared
to just 18 percent in the foreign lower-grade sector, which consists
primarily of emerging market securities. Of the remaining sectors, 16 percent of
the Fund's long-term investments were in the domestic lower grade securities, 12
percent were in domestic investment grade securities, and 23 percent were in the
U.S. government and mortgage-backed securities sector. For additional Fund
portfolio highlights, please refer to page 8.
Q WHAT DO YOU EXPECT IN THE NEXT FEW MONTHS?
A One of the main themes worldwide during the next few months will be the
year 2000 issue and its affect on financial markets. We expect to reduce
our exposure to emerging markets due to concerns about year 2000 readiness
and general economic difficulties within certain countries.
5
<PAGE> 77
Globally, we will monitor the effects of increasing interest rates, and we
expect Japan's growth and Europe's recovery to continue. As a result, we
anticipate the Japanese yen and the euro will strengthen relative to the U.S.
dollar. In addition, we will also look for attractive yields in mortgage-backed
securities and corporate bonds. With high-yield securities, we believe that
yields should be attractive, but we remain cautious because we expect defaults
to increase.
In anticipation of a weaker U.S. dollar, the Fund expects to maintain
neutral (20 percent) or slightly greater exposure to foreign investment grade
securities, with a bias toward the euro. If volatility remains high during the
fourth quarter of 1999, we will look to increase our exposure to domestic
investment grade and mortgage-backed securities. Overall, we've made an effort
to reduce the Fund's leverage because of the uncertainty surrounding borrowing
costs at the end of the year.
[SIG.]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
[SIG.]
Kelly Gilbert
Portfolio Manager
[SIG.]
Tom Slefinger
Portfolio Manager
[SIG]
Robert Hickey
Portfolio Manager
[SIG.]
Jack Reynoldson
Portfolio Manager
6
<PAGE> 78
GLOSSARY OF TERMS
BASIS POINT: A measure used in quoting bond yields. One hundred basis points is
equal to 1 percent. For example, if a bond's yield changes from 7.00 to 6.65
percent, it is a 35 basis-point move.
BOND: A debt security issued by a government or corporation that generally pays
a bondholder a stated rate of interest and repays the principal at the
maturity date.
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues (such as Treasury securities) and lower-quality
issues. Normally, lower-quality issues provide higher yields to compensate
investors for the additional credit risk.
EMERGING MARKETS: The financial markets of developing economies. Many Latin
American and Asian countries are considered emerging markets.
FEDERAL FUNDS RATE: The interest rate charged by one financial institution
lending federal funds to another. This overnight rate is used to meet banks'
daily reserve requirements. The Federal Reserve Board uses the federal funds
rate to affect the direction of interest rates.
FEDERAL RESERVE BOARD (THE FED): The governing body of the Federal Reserve
System, which is the central bank system of the United States. Its
policy-making committee, called the Federal Open Market Committee, meets
eight times a year to establish monetary policy and monitor the economic
pulse of the United States.
NET ASSET VALUE (NAV): The value of a mutual fund share, calculated by deducting
a fund's liabilities from its total assets and dividing this amount by the
number of shares outstanding. The NAV does not include any initial or
contingent deferred sales charge.
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.
YIELD: The annual rate of return on an investment, expressed as a percentage.
7
<PAGE> 79
PORTFOLIO HIGHLIGHTS
VAN KAMPEN STRATEGIC INCOME FUND
TOP TEN PORTFOLIO HOLDINGS AS OF SEPTEMBER 30, 1999*
<TABLE>
<S> <C>
FNMA TBA 30, 6.500% Coupon, 10/15/29 Maturity ........ 3.4%
Government of Japan, 4.600% Coupon, 09/20/04
Maturity ........................................... 2.6%
French Treasury Note, 5.500% Coupon, 10/12/01
Maturity ........................................... 2.6%
Spanish Government, 4.250% Coupon, 07/30/02
Maturity ........................................... 2.5%
Republic of Italy, 4.000% Coupon, 09/01/01 Maturity .. 2.5%
Bundesrepublik Deutschland, 3.500% Coupon, 09/14/01
Maturity ........................................... 2.5%
MBNA Capital I, 8.278% Coupon, 12/01/06 Maturity ..... 2.1%
MCI Worldcom Inc., 8.875% Coupon, 01/15/06 Maturity .. 2.1%
GE Capital Mortgage Services Inc., 7.110% Coupon,
07/25/14 Maturity................................... 1.9%
New Century Home Equity Loan Trust, 7.190% Coupon,
03/25/26 Maturity .................................. 1.9%
</TABLE>
TOP FIVE COUNTRIES*
[GRAPH]
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ --------------
<S> <C> <C>
United States 53.8 62.7
Mexico 6.0 6.7
United Kingdom 4.2 6.2
Netherlands 3.3 0.5
Italy 3.2 N/A
</TABLE>
* As a percentage of long-term investments
8
<PAGE> 80
PORTFOLIO OF INVESTMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S. $
(000) Description Coupon Date Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ASSET BACKED SECURITIES 3.6%
2,500 PECO Energy Transport Trust,
Ser A2-US$ (c)................... 5.630% 03/01/05 $ 2,447,038
1,000 PECO Energy Transport Trust,
Ser A6-US$ (c)................... 6.050 03/01/09 962,575
------------
TOTAL ASSET BACKED SECURITIES............................. 3,409,613
------------
CORPORATE BONDS 55.4%
AUTOMOBILE 2.6%
250 Aetna Industries, Inc.-US$....... 11.875 10/01/06 256,250
125 Cambridge Industries, Inc., Ser
B-US$ (c)........................ 10.250 07/15/07 82,500
1,125 Federal-Mogul Corp.-US$ (c)...... 7.750 07/01/06 1,060,313
100 Oxford Automotive, Inc., Ser
D-US$............................ 10.125 06/15/07 87,500
855 Talon Automotive Group, Inc.,
Ser B-US$ (c).................... 9.625 05/01/08 705,375
300 Venture Holdings Trust, Ser
B-US$............................ 9.500 07/01/05 279,000
------------
2,470,938
------------
BANKING 5.6%
3,000 MBNA Capital I-US$ (c)........... 8.278 12/01/26 2,752,038
2,400 Sovereign Bancorp Inc.-US$ (c)... 8.000 03/15/03 2,441,966
------------
5,194,004
------------
BEVERAGE, FOOD & TOBACCO 6.4%
300 Fleming Companies Inc., Ser B-US$
(c).............................. 10.625 07/31/07 280,500
250 Luigino's, Inc.-US$.............. 10.000 02/01/06 233,750
200 National Wine & Spirits,
Inc.-US$......................... 10.125 01/15/09 200,000
650 Pantry, Inc.-US$ (c)............. 10.250 10/15/07 637,000
2,500 Pepsi - Gemex SA, Ser B-US$
(c).............................. 9.750 03/30/04 2,450,000
2,000 Shoppers Food Warehouse-US$
(c).............................. 9.750 06/15/04 2,150,000
------------
5,951,250
------------
</TABLE>
See Notes to Financial Statements
9
<PAGE> 81
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S. $
(000) Description Coupon Date Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
BROADCASTING, TELEVISION &
MUSIC 0.9%
500 British Sky Broadcasting-
US$ (c).......................... 6.875% 02/23/09 $ 453,750
250 Capstar Broadcasting-
US$ (c)(d)....................... 0/12.750 02/01/09 215,625
200 Muzak LLC - 144A - Private
Placement-US$ (a) (c)............ 9.875 03/15/09 194,000
------------
863,375
------------
BUILDINGS & REAL ESTATE 2.4%
350 American Plumbing & Mechanical,
144A - Private Placement-
US$ (a)(c)....................... 11.625 10/15/08 327,250
500 Avalonbay Communities, Inc.-
US$ (c).......................... 7.500 08/01/09 485,685
200 Building One Services
Corp.-US$........................ 10.500 05/01/09 186,000
750 Cemex International LLC-
US$ (c).......................... 9.660 11/29/49 714,375
125 Del Webb Corp.-US$............... 10.250 02/15/10 117,500
450 Standard Pacific Corp.-US$....... 8.500 04/01/09 420,750
------------
2,251,560
------------
CABLE/MEDIA 3.4%
500 Century Communications-US$ (c)... 9.500 03/01/05 502,500
300 Charter Communications Holdings-
144A-Private Placement-US$ (a)... 8.250 04/01/07 282,750
1,000 CSC Holdings, Inc.-US$........... 10.500 05/15/16 1,116,250
500 Go Outdoor Systems
Holdings-EUR..................... 10.500 07/15/09 545,325
500 NTL Communications Corp.-
US$ (c).......................... 11.500 10/01/08 537,500
250 NTL Inc., Ser A-US$ (c) (d)...... 0/12.750 04/15/05 245,000
------------
3,229,325
------------
CHEMICALS, PLASTIC & RUBBER 0.7%
500 Coastal Corp.-US$ (c)............ 6.500 06/01/08 470,112
200 Lyondell Chemical Co.-US$........ 9.625 05/01/07 200,000
------------
670,112
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 82
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S. $
(000) Description Coupon Date Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONTAINERS, PACKAGING, PAPER &
GLASS 1.6%
150 Kappa Beheer BV-EUR.............. 10.625% 07/15/09 $ 161,203
1,000 Owens Corning-US$ (c)............ 7.500 08/01/18 905,349
250 Packaging Corp. of America,
144A-Private Placement-US$ (a)... 9.625 04/01/09 252,500
200 Repap New Brunswick-US$ (c)...... 9.000 06/01/04 193,000
------------
1,512,052
------------
HEALTHCARE 1.0%
200 Lifepoint Hospitals Holdings,
Inc., 144A - Private
Placement-US$ (a) (c)............ 10.750 05/15/09 201,000
625 Oxford Health Plans,
144A - Private Placement-
US$ (a).......................... 11.000 05/15/05 621,875
100 Triad Hospitals Holdings, Inc.,
144A - Private Placement-
US$ (a)(c)....................... 11.000 05/15/09 99,750
------------
922,625
------------
HOTEL & GAMING 1.7%
575 Booth Creek Ski Holdings, Ser
B-US$ (c)........................ 12.500 03/15/07 431,250
150 Hollywood Casino Corp.,
144A - Private Placement-
US$ (a).......................... 11.250 05/01/07 151,875
150 Isle Capri Casinos, Inc.-
US$.............................. 8.750 04/15/09 137,813
300 Majestic Star Casino LLC,
144A - Private Placement-
US$ (a).......................... 10.875 07/01/06 298,500
500 Park Place Entertainment
Corp.-US$ (c).................... 7.875 12/15/05 475,000
100 Station Casinos, Inc.-US$........ 8.875 12/01/08 97,250
------------
1,591,688
------------
MACHINERY 0.2%
200 Terex Corp., Ser D-US$........... 8.875 04/01/08 190,000
------------
MINING 0.4%
250 Renco Steel Holdings,
144A - Private Placement-
US$ (a)(c........................ 10.875 02/01/05 207,500
200 Republic Technologies
International, Ser UNIT, 144A -
Private Placement-US$ (a)........ 13.750 07/15/09 193,000
------------
400,500
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 83
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S. $
(000) Description Coupon Date Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
OIL & GAS 3.9%
500 Frontier Oil Corp., Ser A-
US$ (c).......................... 9.125% 02/15/06 $ 477,500
500 Giant Industries-US$ (c)......... 9.750 11/15/03 488,750
1,000 Hurricane
Hydrocarbons - 144A - Private
Placement-US$ (a) (c) (g)........ 11.750 11/01/04 225,000
1,000 Lukinter Finance, BV-144A-Private
Placement-US$ (a) (c)............ * 11/03/03 460,000
2,000 Petroleos Mexicanos, 144A-Private
Placement-US$ (a) (c)............ 9.520 07/15/05 1,900,000
125 Port Arthur Finance Corp.,
144A-Private Placement-US$ (a)... 12.500 01/15/09 125,625
------------
3,676,875
------------
RETAIL 1.5%
250 Big 5 Corp., Ser B-US$ (c)....... 10.875 11/15/07 246,250
400 Community Distributors, Ser
B-US$ (c)........................ 10.250 10/15/04 342,000
400 Duane Reade Inc.-US$ (c)......... 9.250 02/15/08 398,000
500 Saks Inc.-US$.................... 7.375 02/15/19 426,250
------------
1,412,500
------------
TELECOMMUNICATIONS 17.0%
200 Centennial Cellular Operating
Co.-US$.......................... 10.750 12/15/08 209,000
1,000 CIA International
Telecommunication-ARP (c)........ 10.375 08/01/04 740,122
1,000 Clearnet Communications,
Inc.-US$ (c) (d)................. 0/10.125 05/01/09 605,000
250 E. Spire Communications
Inc.-US$ (c)..................... 13.750 07/15/07 210,000
600 E. Spire Communications
Inc.-US$ (c) (d)................. 0/13.000 11/01/05 351,000
200 Fairchild
Semiconductor-144A-Private
Placement-US$ (a) (b)............ 10.375 10/01/07 200,000
100 Globenet Communications Group
Ltd., 144A-Private
Placement-US$ (a)................ 13.000 07/15/07 95,500
235 Globo Communicacoes Participacoe,
144A-Private Placement-
US$ (a) (c)..................... 10.625 12/05/08 170,963
500 Globo Communicacoes
Participacoe-US$ (c)............. 10.625 12/05/08 363,750
1,000 Hermes Europe Railtel BV-EUR..... 10.375 01/15/06 1,093,311
</TABLE>
See Notes to Financial Statements
12
<PAGE> 84
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S. $
(000) Description Coupon Date Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
<-> TELECOMMUNICATIONS (CONTINUED)
500 Hermes Europe Railtel
BV-US$ (c)....................... 11.500% 08/15/07 $ 506,250
700 Intermedia Communications, Inc.,
Ser B-US$ (c).................... 8.600 06/01/08 610,750
250 Intermedia Communications, Inc.,
Ser B-US$ (c) (d)................ 0/11.250 07/15/07 168,125
100 Intersil Corp., Ser UNIT,
144A - Private Placement-
US$ (a).......................... 13.250 08/15/09 104,250
1,000 KPNQWest BV, 144A - Private
Placement-US$ (a) (c)............ 8.125 06/01/09 960,000
1,000 Level 3 Communications, Inc.-
US$ (d).......................... 0/10.500 12/01/08 567,500
2,500 MCI Worldcom Inc.-US$ (c)........ 8.875 01/15/06 2,646,040
250 Millicom International-
US$ (c) (d)...................... 0/13.500 06/01/06 179,375
1,500 Netia Holdings BV, Ser B-US...... 10.250 11/01/07 1,327,500
250 Netia Holdings BV, Ser B-
US$ (c) (d)...................... 0/11.250 11/01/07 158,750
1,250 Nextel Communications, Inc.-
US$ (c).......................... 9.750 08/15/04 1,265,625
350 Philippine Long Distance
Telephone, Ser EMTN-US$ (c)...... 10.500 04/15/09 339,990
375 Pinnacle Holdings, Inc.-
US$ (c)(d)....................... 0/10.000 03/15/08 218,438
250 Primus Telecommunications
Group-US$........................ 11.250 01/15/09 238,750
200 PSINet, Inc.-EUR................. 11.000 08/01/09 206,426
500 Satelites Mexicanos SA, Ser
B-US$............................ 10.125 11/01/04 387,500
750 SBA Communications Corp.-
US$ (c) (d)...................... 0/12.000 03/01/08 412,500
250 Splitrock Services, Inc., Ser
B-US$ (c)........................ 11.750 07/15/08 225,000
500 Sun Microsystems Inc.-US......... 7.500 08/15/06 505,753
150 Telecorp PCS, Inc.,
144A - Private Placement-
US$ (a) (d)...................... 0/11.625 04/15/09 87,750
480 Tritel PCS, Inc., 144A - Private
Placement-US$ (a) (c) (d)........ 0/12.750 05/15/09 272,400
450 Triton PCS, Inc.-US$ (c) (d)..... 0/11.000 05/01/08 302,625
250 Viatel, Inc.-US$ (c) (d)......... 0/12.500 04/15/08 138,750
------------
15,868,693
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 85
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S. $
(000) Description Coupon Date Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXTILES 0.4%
600 Galey & Lord, Inc.-US$........... 9.125% 03/01/08 $ 144,000
110 Scovill Fasteners, Inc., Ser
B-US$ (c)........................ 11.250 11/30/07 48,400
200 Sleepmaster LLC, 144A - Private
Placement-US$ (a) (c)............ 11.000 05/15/09 200,500
------------
392,900
------------
UTILITIES 5.6%
1,000 Central Termica Guemes, SA,
144A - Private Placement-US$ (a)
(c) (g).......................... 12.000 11/26/01 140,000
1,000 Edelnor, 144A - Private
Placement-US$ (a) (c)............ 10.500 06/15/05 580,000
1,620 Edelnor, 144A - Private
Placement-US$ (a) (c)............ 7.750 03/15/06 826,200
2,000 Korea Electric Power-US$ (c)..... 7.000 02/01/27 1,819,200
375 Midamerican Energy Holdings-
US$ (c).......................... 7.230 09/15/05 368,438
448 Midland Cogeneration Vent,
Ser C-91-US$ (c)................. 10.330 07/23/02 468,361
1,000 Southern Energy Inc.,
144A - Private Placement-
US$ (a) (c)...................... 7.900 07/15/09 981,815
------------
5,184,014
------------
TOTAL CORPORATE BONDS 55.4%.............................. 51,782,411
------------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 42.9%
AUSTRALIA 1.4%
2,000 Australian Government-AUD (c).... 6.750 11/15/06 1,350,200
------------
BRAZIL 1.3%
1,250 Republic of Brazil-US$ (c)....... 11.625 04/15/04 1,171,875
------------
BULGARIA 1.1%
1,500 Bulgaria Disc, Ser A-
US$ (c) (e)...................... 6.500 07/28/24 1,031,250
------------
CANADA 0.9%
1,250 Canadian Government, Ser
A83-CAD.......................... 7.500 03/01/01 875,247
------------
COLUMBIA 0.4%
750 Republic of Columbia-DEM......... 4.900 11/21/01 373,347
------------
</TABLE>
See Notes to Financial Statements
14
<PAGE> 86
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S. $
(000) Description Coupon Date Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FRANCE 3.5%
3,000 French Treasury Note BTAN-EUR.... 5.500% 10/12/01 $ 3,302,277
------------
GERMANY 3.4%
3,000 Bundesrepublik Deutschland, Ser
99-EUR........................... 3.500 09/14/01 3,182,572
------------
HUNGARY 2.0%
433,350 Hungary Government-HUF........... 16.000 11/24/00 1,830,943
------------
ITALY 4.4%
775 Republic of Italy BTPS-EUR....... 9.500 05/01/01 897,335
3,000 Republic of Italy BTPS-EUR....... 4.000 09/01/01 3,203,640
------------
4,100,975
------------
JAPAN 3.5%
300,000 Government of Japan, Ser
174-JPY.......................... 4.600 09/20/04 3,310,815
------------
MEXICO 3.0%
1,000 United Mexican States, Ser
XW-US$........................... 10.375 02/17/09 1,012,000
2,500 United Mexican States, Ser WB-
US$ (e).......................... 6.250 12/31/19 1,840,625
------------
2,852,625
------------
MOROCCO 0.8%
905 Moroccan Loan Agreement-US$...... 5.906 01/01/09 770,188
------------
NEW ZEALAND 1.2%
2,000 New Zealand Government-NZD (c)... 8.000 11/15/06 1,098,639
------------
PANAMA 3.2%
1,400 Republic of Panama - 144A -
Private Placement-US$ (a) (c).... 7.875 02/13/02 1,358,000
2,000 Republic of Panama-US$........... 8.875 09/30/27 1,605,000
------------
2,963,000
------------
RUSSIA 1.7%
1,000 Russian Federation-US$........... 11.000 07/24/18 420,000
12,800 Russia Principal Loan - Vnesh-
US$ (f) (g)...................... 6.063 12/15/20 1,184,000
216 Russia-Ian-US$ (g)............... 6.063 12/15/15 24,247
------------
1,628,247
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 87
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S. $
(000) Description Coupon Date Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SOUTH KOREA 2.1%
2,500 Export-Import Bank Korea-DEM..... 3.162% 10/06/00 $ 1,349,219
1,200 Korea Development Bank-DEM....... 2.850 05/14/01 653,239
------------
2,002,458
------------
SPAIN 3.4%
3,000 Spanish Government-EUR........... 4.250 07/30/02 3,204,917
------------
UNITED KINGDOM 2.4%
1,000 U.K. Treasury-GBP................ 7.000 11/06/01 1,675,109
350 U.K. Treasury-GBP................ 6.750 11/26/04 590,610
------------
2,265,719
------------
URUGUAY 0.9%
1,000 Banco Central Del Uruguay,
Ser B-US$ (e).................... 6.750 02/19/21 880,000
------------
VENEZUELA 2.1%
1,000 Republic of Venezuela,
Ser W-A-US$ (c) (e).............. 6.750 03/31/20 655,000
2,000 Republic of Venezuela-US$ (c).... 9.250 09/15/27 1,315,000
------------
1,970,000
------------
TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES 42.9%..... 40,165,294
------------
MORTGAGE BACKED SECURITIES (U.S.) 24.9%
1,342 DLJ Mortgage Acceptance Corp.
1996-E (c)....................... 6.935 12/28/25 1,231,513
2,000 Federal Home Loan Bank - Ser
AH01............................. 7.905 11/07/01 2,071,760
2,000 Federal Home Loan Mortgage
Corp............................. 7.000 05/12/14 1,889,080
12,499 FNMA REMIC #97-20 IB
(Interest Only) (c).............. 1.840 03/25/27 429,664
2,608 FNMA Benchmark Note.............. 5.125 02/13/04 2,484,355
4,500 FNMA 30 YR (b)................... 6.500 TBA 4,315,770
1,500 FNMA 30 YR (b)................... 7.000 TBA 1,474,215
315 GNMA (c)......................... 7.000 05/15/26 309,413
333 GNMA (c)......................... 7.000 05/15/28 326,338
237 GNMA (c)......................... 7.000 06/15/28 232,949
2,279 GNMA (c)......................... 7.000 07/15/28 2,235,819
</TABLE>
See Notes to Financial Statements
16
<PAGE> 88
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S. $
(000) Description Coupon Date Market Value
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MORTGAGE BACKED SECURITIES (U.S.)
(CONTINUED)
2,500 GE Capital Mortgage Services
Inc.,
Ser HE3.......................... 7.110% 07/25/14 $ 2,500,400
2,500 New Century Home Equity Loan
Trust, Ser NCB................... 7.190 03/25/26 2,499,225
20,080 SBA Strip (Principal Only)....... * 08/24/19 1,317,026
------------
TOTAL MORTGAGE BACKED SECURITIES (U.S.) 24.9%............ 23,317,527
------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS 6.5%
2,000 U.S. Treasury Bonds.............. 5.500 08/15/28 1,790,300
1,900 U.S. Treasury Notes.............. 6.000 08/15/04 1,918,544
1,250 U.S. Treasury Notes.............. 6.000 08/15/09 1,260,150
2,000 U.S. Treasury Strip (Principal
Only)............................ * 05/15/09 1,094,720
------------
TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS... 6,063,714
------------
</TABLE>
<TABLE>
<CAPTION>
U.S. $
Description Shares Market Value
- ------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON AND PREFERRED STOCKS 4.4%
Avalon Bay Communities, Ser G-Preferred
Shares-US$ (c)........................... 50,000 $ 1,168,750
Dobson Communications Corp.-Preferred
Shares-US$ (f)........................... 206 199,820
Grupo Casa Autrey-ADR (Mexico)-US$ (c)... 8,500 34,000
MEPC International Capital, LP-Preferred
Shares-US$ (c)........................... 100,000 2,481,250
Price Communications Corp.-US$........... 3,969 99,469
Republic of Argentina-Warrants-US$....... 625 6,563
Splitrock Services, Inc.- Warrants,
144A-Private Placement-US$ (a)........... 250 18,125
Thai Military Bank-THB................... 15,000 5,036
United Mexican States-Warrants-US$....... 1,000 62,500
------------
TOTAL COMMON AND PREFERRED STOCKS...................... 4,075,513
------------
TOTAL LONG-TERM INVESTMENTS 137.7%
(Cost $136,894,923).................................... $128,814,072
------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 89
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Amount
in Local
Currency Maturity U.S. $ Market
(000) Description Coupon Date Value
- --------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS 2.5%
187 GBP Time Deposit.................. 4.850% 10/06/99 $ 307,710
3,003 CAD Time Deposit.................. 4.375 10/13/99 2,043,963
-------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $2,345,072)....................................... 2,351,673
-------------
TOTAL INVESTMENTS 143.7%
(Cost $139,239,995)..................................... 131,165,745
FOREIGN CURRENCY (VARIOUS DENOMINATIONS) 3.5%
(Cost $3,270,677)....................................... 3,273,246
LIABILITIES IN EXCESS OF OTHER ASSETS (43.7%)........... (40,863,823)
-------------
NET ASSETS 100.0%....................................... $ 93,575,168
=============
</TABLE>
* Zero coupon bond.
ARP -- Argentine Peso
AUD -- Australian Dollar
CAD -- Canadian Dollar
DEM -- German Mark
EUR -- Eurodollar
GBP -- British Pound
HUF -- Hungarian Forint
JPY -- Japanese Yen
NZD -- New Zealand Dollar
THB -- Thai Baht
(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 those transactions
with qualified institutional buyers.
(b) Securities purchased on a when issued or delayed delivery basis.
(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments, forwards or borrowings of the Fund.
(d) Security is a "step-up" bond where the coupon increases, or steps up, at a
predetermined date.
(e) Item represents a "Brady Bond" which is the product of the "Brady Plan"
under which various Latin American, African, and Southeast Asian nations
have converted their outstanding external defaulted commercial bank loans
into bonds. Certain Brady Bonds have been collateralized, as to principal
due at maturity, by U.S. Treasury zero coupon bonds with a maturity date
equal to the final maturity date of such Brady Bonds.
(f) Payment-in-kind security.
(g) Security is accruing at less than the stated coupon.
See Notes to Financial Statements
18
<PAGE> 90
PORTFOLIO OF INVESTMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY CREDIT QUALITY*
The following table summarizes the portfolio composition at September 30,
1999, based upon the highest credit quality ratings as determined by Standard &
Poor's or Moody's.
<TABLE>
<S> <C>
U.S. Government and U.S. Government Agency Obligations...... 18.0%
AAA......................................................... 19.4%
AA.......................................................... 5.7%
A........................................................... 1.4%
BBB......................................................... 14.2%
BB.......................................................... 14.0%
B........................................................... 19.3%
CCC......................................................... 1.3%
Non-Rated................................................... 6.7%
------
100.0%
======
</TABLE>
* As a percentage of long-term investments.
See Notes to Financial Statements
19
<PAGE> 91
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $139,239,995)....................... $131,165,745
Foreign Currency (Cost $3,270,677).......................... 3,273,246
Receivables:
Investments Sold.......................................... 5,542,747
Interest.................................................. 2,547,034
Fund Shares Sold.......................................... 35,628
Other....................................................... 4,210
------------
Total Assets.......................................... 142,568,610
------------
LIABILITIES:
Payables:
Bank Borrowings........................................... 29,304,565
Investments Purchased..................................... 13,782,569
Reverse Repurchase Agreements............................. 4,724,151
Income Distributions...................................... 286,809
Fund Shares Repurchased................................... 269,304
Distributor and Affiliates................................ 118,190
Forward Currency Contracts................................ 68,745
Investment Advisory Fee................................... 49,654
Accrued Expenses............................................ 249,454
Trustees' Deferred Compensation and Retirement Plans........ 140,001
------------
Total Liabilities..................................... 48,993,442
------------
NET ASSETS.................................................. $ 93,575,168
============
NET ASSETS CONSIST OF:
Capital (par value of $.01 per share with an unlimited
number of shares authorized).............................. $117,188,890
Accumulated Distribution in Excess of Net Investment
Income.................................................... (936,147)
Net Unrealized Depreciation................................. (8,126,233)
Accumulated Net Realized Loss............................... (14,551,342)
------------
NET ASSETS.................................................. $ 93,575,168
============
MAXIMUM OFFERING PRICE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (Based on
net assets of $36,877,315 and 3,524,167 shares of
beneficial interest issued and outstanding)............. $ 10.46
Maximum sales charge (4.75%* of offering price)......... .52
------------
Maximum offering price to public........................ $ 10.98
============
Class B Shares:
Net asset value and offering price per share (Based on
net assets of $53,141,164 and 5,071,903 shares of
beneficial interest issued and outstanding)............. $ 10.48
============
Class C Shares:
Net asset value and offering price per share (Based on
net assets of $3,556,689 and 339,914 shares of beneficial
interest issued and outstanding)........................ $ 10.46
============
</TABLE>
*On sales of $100,000 or more, the sales charge will be reduced.
See Notes to Financial Statements
20
<PAGE> 92
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Net of foreign withholding taxes of $18,228)...... $ 5,710,687
Dividends................................................... 175,912
-----------
Total Income.......................................... 5,886,599
-----------
EXPENSES:
Investment Advisory Fee..................................... 530,039
Distribution (12b-1) and Service Fees (Attributed to Classes
A, B and C of $48,854, $288,694 and $19,279,
respectively)............................................. 356,827
Shareholder Services........................................ 113,057
Custody..................................................... 31,596
Trustees' Fees and Related Expenses......................... 19,732
Legal....................................................... 10,735
Other....................................................... 117,198
-----------
Total Operating Expenses.............................. 1,179,184
Less:
Investment Advisory Fee Reduction................... 154,559
Credits Earned on Cash Balances..................... 3,880
-----------
Net Operating Expenses................................ 1,020,745
Interest Expense...................................... 1,037,086
-----------
NET INVESTMENT INCOME....................................... $ 3,828,768
===========
NET REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $(3,240,707)
Options................................................... 3,087
Futures................................................... (352,963)
Forwards.................................................. (62,920)
Foreign Currency Transactions............................. (451,220)
-----------
Net Realized Loss........................................... (4,104,723)
-----------
Net Unrealized Appreciation/Depreciation:
Beginning of the Period..................................... (7,276,985)
-----------
End of the Period:
Investments............................................... (8,071,681)
Forwards.................................................. (17,666)
Foreign Currency Translation.............................. (36,886)
-----------
(8,126,233)
-----------
Net Unrealized Depreciation During the Period............... (849,248)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(4,953,971)
===========
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $(1,125,203)
===========
</TABLE>
See Notes to Financial Statements
21
<PAGE> 93
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended September 30, 1999, the Nine Months Ended
March 31, 1999 and the Year Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Nine Months Ended Year Ended
September 30, 1999 March 31, 1999 June 30, 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income..................... $ 3,828,768 $ 6,557,498 $ 9,217,102
Net Realized Loss......................... (4,104,723) (6,755,235) (1,253,925)
Net Unrealized Depreciation
During the Period........................ (849,248) (6,100,297) (3,763,808)
------------------ ----------------- -------------
Change in Net Assets from Operations...... (1,125,203) (6,298,034) 4,199,369
------------------ ----------------- -------------
Distributions from Net Investment
Income*.................................. (3,199,438) (5,622,679) (9,238,901)
Return of Capital Distribution*........... (929,211) (1,182,153) -0-
------------------ ----------------- -------------
Total Distributions....................... (4,128,649) (6,804,832) (9,238,901)
------------------ ----------------- -------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES............................... (5,253,852) (13,102,866) (5,039,532)
------------------ ----------------- -------------
FROM CAPITAL TRANSACTIONS:
Proceeds from Shares Sold................. 6,642,590 20,972,354 37,212,204
Net Asset Value of Shares Issued Through
Dividend Reinvestment.................... 2,053,844 3,077,004 4,088,237
Cost of Shares Repurchased................ (18,488,835) (27,689,372) (34,763,480)
------------------ ----------------- -------------
NET CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS............................. (9,792,401) (3,640,014) 6,536,961
------------------ ----------------- -------------
TOTAL INCREASE/DECREASE IN NET ASSETS..... (15,046,253) (16,742,880) 1,497,429
NET ASSETS:
Beginning of the Period................... 108,621,421 125,364,301 123,866,872
------------------ ----------------- -------------
End of the Period (Including accumulated
undistributed net investment income of
($936,147), ($974,738) and ($1,909,557),
respectively)............................ $ 93,575,168 $ 108,621,421 $ 125,364,301
================== ================= =============
*Distributions by Class
Distributions from Net Investment Income:
Class A Shares........................... $ (1,321,319) $ (2,213,332) $ (3,523,499)
Class B Shares........................... (1,762,054) (3,219,759) (5,451,394)
Class C Shares........................... (116,065) (189,588) (264,008)
------------------ ----------------- -------------
$ (3,199,438) $ (5,622,679) $ (9,238,901)
================== ================= =============
Return of Capital Distribution:
Class A Shares........................... $ (384,168) $ (465,347) $ -0-
Class B Shares........................... (511,926) (676,946) -0-
Class C Shares........................... (33,117) (39,860) -0-
------------------ ----------------- -------------
$ (929,211) $ (1,182,153) $ -0-
================== ================= =============
</TABLE>
See Notes to Financial Statements
22
<PAGE> 94
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months Year Ended June 30,
Ended Ended -------------------------------------
Class A Shares September 30, 1999(a) March 31, 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period............. $11.018 $12.286 $12.778 $12.065 $11.704 $11.975
------- ------- ------- ------- ------- -------
Net Investment Income... .417 .679 .973 1.019 1.013 .657
Net Realized and
Unrealized Gain/Loss.. (.504) (1.236) (.489) .714 .446 .272
------- ------- ------- ------- ------- -------
Total from Investment
Operations............ (.087) (.557) .484 1.733 1.459 .929
------- ------- ------- ------- ------- -------
Less:
Distributions from and
in Excess of Net
Investment Income... .364 .587 .976 1.020 1.098 .793
Return of Capital
Distribution........ .103 .124 -0- -0- -0- .407
------- ------- ------- ------- ------- -------
Total Distributions..... .467 .711 .976 1.020 1.098 1.200
------- ------- ------- ------- ------- -------
Net Asset Value, End of
the Period............ $10.464 $11.018 $12.286 $12.778 $12.065 $11.704
======= ======= ======= ======= ======= =======
Total Return* (b)....... (.85%)** (4.47%)** 3.89% 14.92% 12.92% 8.46%
Net Assets at End of the
Period (In millions).. $ 36.9 $ 41.8 $ 45.3 $ 43.8 $ 33.8 $ 29.6
Ratio of Operating
Expenses to Average
Net Assets*........... 1.58% 1.53% 1.68% 1.81% 1.84% 1.98%
Ratio of Interest
Expense to Average Net
Assets................ 2.08% 1.79% 1.69% 1.99% 2.27% 2.38%
Ratio of Net Investment
Income to Average Net
Assets*............... 8.45% 8.06% 7.72% 8.12% 8.34% 5.88%
Portfolio Turnover...... 78%** 282%** 523% 474% 343% 253%
* If certain expenses had not been reimbursed by Van Kampen, Total Return would have been lower and the
ratios would have been as follows:
Ratio of Operating
Expenses to Average
Net Assets............ 1.90% 1.82% 1.78% 1.86% 1.92% N/A
Ratio of Net Investment
Income to Average Net
Assets................ 8.15% 7.78% 7.63% 8.07% 8.26% N/A
</TABLE>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
N/A = Not Applicable
See Notes to Financial Statements
23
<PAGE> 95
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months Year Ended June 30,
Ended Ended -------------------------------------
Class B Shares September 30, 1999(a) March 31, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period................. $11.026 $12.286 $12.779 $12.069 $11.706 $11.968
------- ------- ------- ------- ------- -------
Net Investment Income.... .378 .622 .878 .920 .926 .585
Net Realized and
Unrealized Gain/Loss... (.504) (1.243) (.491) .717 .443 .245
------- ------- ------- ------- ------- -------
Total from Investment
Operations............. (.126) (.621) .387 1.637 1.369 .830
------- ------- ------- ------- ------- -------
Less:
Distributions from and
in Excess of Net
Investment Income.... .329 .528 .880 .927 1.006 .722
Return of Capital
Distribution......... .093 .111 -0- -0- -0- .370
------- ------- ------- ------- ------- -------
Total Distributions...... .422 .639 .880 .927 1.006 1.092
------- ------- ------- ------- ------- -------
Net Asset Value, End of
the Period............. $10.478 $11.026 $12.286 $12.779 $12.069 $11.706
======= ======= ======= ======= ======= =======
Total Return* (b)........ (1.17%)** (4.99%)** 3.11% 13.98% 12.06% 7.62%
Net Assets at End of the
Period (In millions)... $ 53.1 $ 62.8 $ 76.2 $ 76.2 $ 61.9 $ 52.6
Ratio of Operating
Expenses to Average Net
Assets*................ 2.35% 2.29% 2.44% 2.57% 2.59% 2.68%
Ratio of Interest Expense
to Average Net
Assets................. 2.09% 1.80% 1.69% 1.98% 2.26% 2.38%
Ratio of Net Investment
Income to Average Net
Assets*................ 7.72% 7.30% 6.96% 7.33% 7.58% 5.30%
Portfolio Turnover....... 78%** 282%** 523% 474% 343% 253%
* If certain expenses had not been reimbursed by Van Kampen, Total Return would have been lower and the
ratios would have been as follows:
Ratio of Operating
Expenses to Average Net
Assets................. 2.67% 2.58% 2.54% 2.61% 2.67% N/A
Ratio of Net Investment
Income to Average Net
Assets................. 7.40% 7.02% 6.86% 7.28% 7.50% N/A
</TABLE>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
N/A = Not Applicable
See Notes to Financial Statements
24
<PAGE> 96
FINANCIAL HIGHLIGHTS (CONTINUED)
The following schedule presents financial highlights for one share of
the Fund outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Nine Months Year Ended June 30,
Ended Ended -------------------------------------
Class C Shares September 30, 1999(a) March 31, 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the
Period.................. $11.013 $12.274 $12.768 $12.059 $11.699 $11.966
------- ------- ------- ------- ------- -------
Net Investment Income... .375 .607 .876 .913 .944 .598
Net Realized and
Unrealized
Gain/Loss............. (.503) (1.229) (.490) .723 .422 .227
------- ------- ------- ------- ------- -------
Total from Investment
Operations............ (.128) (.622) .386 1.636 1.366 .825
------- ------- ------- ------- ------- -------
Less:
Distributions from and
in Excess of Net
Investment Income... .329 .528 .880 .927 1.006 .722
Return of Capital
Distribution........ .093 .111 -0- -0- -0- .370
------- ------- ------- ------- ------- -------
Total Distributions..... .422 .639 .880 .927 1.006 1.092
------- ------- ------- ------- ------- -------
Net Asset Value, End of
the Period............ $10.463 $11.013 $12.274 $12.768 $12.059 $11.699
======= ======= ======= ======= ======= =======
Total Return* (b)....... (1.17%)** (5.01%)** 3.03% 13.99% 12.07% 7.53%
Net Assets at End of the
Period (In
millions)............. $ 3.6 $ 4.0 $ 3.9 $ 3.8 $ 3.1 $ 1.7
Ratio of Operating
Expenses to Average
Net Assets*........... 2.35% 2.28% 2.44% 2.56% 2.58% 2.69%
Ratio of Interest
Expense to Average Net
Assets................ 2.07% 1.77% 1.69% 1.98% 2.22% 2.38%
Ratio of Net Investment
Income to Average Net
Assets*............... 7.63% 7.29% 6.96% 7.31% 7.49% 5.92%
Portfolio Turnover...... 78%** 282%** 523% 474% 343% 253%
* If certain expenses had not been reimbursed by Van Kampen, Total Return would have been lower and the
ratios would have been as follows:
Ratio of Operating
Expenses to Average
Net Assets............ 2.67% 2.57% 2.54% 2.61% 2.66% N/A
Ratio of Net Investment
Income to Average Net
Assets................ 7.32% 7.01% 6.87% 7.27% 7.41% N/A
</TABLE>
** Non-Annualized
(a) Based on average shares outstanding.
(b) Total Return is based upon net asset value which does not include payment of
the maximum sales charge or contingent deferred sales charge.
N/A = Not Applicable
See Notes to Financial Statements
25
<PAGE> 97
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Strategic Income Fund (the "Fund") is organized as a series of Van
Kampen Trust (the "Trust"), a Delaware business trust, and is registered as a
non-diversified open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's primary investment objective is to
seek to provide shareholders with high current income, while its secondary
investment objective is to seek capital appreciation. The Fund will allocate its
investments among the following market sectors: U.S. government securities,
domestic investment grade income securities, domestic lower grade income
securities, foreign investment grade income securities and foreign lower grade
income securities. The Fund borrows money for investment purposes which will
create the opportunity for enhanced return, but also should be considered a
speculative technique and may increase the Fund's volatility. The Fund commenced
investment operations on December 31, 1993, with three classes of common shares,
Class A, Class B and Class C shares.
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 these estimates.
A. SECURITY VALUATION--Investments are stated at value using market quotations,
prices provided by market makers or, if such valuations are not available,
estimates obtained from yield data relating to instruments or securities with
similar characteristics in accordance with procedures established in good faith
by the Board of Trustees. Foreign investments are stated at value using the last
available bid price or yield equivalents obtained from dealers in the
over-the-counter (OTC) or interbank market. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost.
B. SECURITY TRANSACTIONS--Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may purchase and sell securities on a "when-issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Fund will
maintain, in a segregated account
26
<PAGE> 98
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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.
C. INCOME AND EXPENSES--Interest income is recorded on an accrual basis and
dividend income is recorded on the ex-dividend date. Original issue discount is
amortized over the expected life of each applicable security. Income and
expenses of the Fund are allocated on a pro rata basis to each class of shares,
except for distribution and service fees and transfer agency costs which are
unique to each class of shares.
D. CURRENCY TRANSLATION--Assets and liabilities denominated in foreign
currencies and commitments under forward currency contracts are translated into
U.S. dollars at the mean of the quoted bid and ask prices of such currencies
against the U.S. dollar. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated at rates prevailing when accrued.
E. ORGANIZATIONAL COSTS--The Fund has reimbursed Van Kampen Funds Inc. or its
affiliates (collectively "Van Kampen") for costs incurred in connection with the
Fund's organization in the amount of $170,000. These costs were amortized on a
straight line basis over the 60 month period ended December 31, 1998.
F. 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. Although the
Fund's fiscal year end was changed from June 30 to March 31, the Fund's tax year
end remains June 30.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At June 30, 1999, the Fund had an accumulated capital loss carryforward
for tax purposes of $8,283,861 which will expire between June 30, 2003 and June
30, 2007. Net realized gains or losses may differ for financial and tax
reporting purposes primarily as a result of post October 31 losses which are not
recognized for tax purposes until the first day of the following tax year, wash
sales, the difference in the Fund's tax year end, and gains or losses recognized
for tax purposes on open options, futures and forward transactions.
27
<PAGE> 99
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At September 30, 1999, for federal income tax purposes, cost of long- and
short-term investments is $142,544,797; the aggregate gross unrealized
appreciation is $1,954,245 and the aggregate gross unrealized depreciation is
$10,060,052, resulting in net unrealized depreciation on long- and short-term
investments of $8,105,807.
G. DISTRIBUTION OF INCOME AND GAINS--The Fund declares daily and pays dividends
monthly from net investment income. Net investment income for federal income tax
purposes includes gains and losses realized on transactions in foreign
currencies and options and futures on foreign currencies. These realized gains
and losses are included as net realized gains or losses for financial reporting
purposes. Net realized gains, if any, are distributed annually.
For tax purposes, the determination of a return of capital distribution is
made at the end of the Fund's taxable year (June 30). For the taxable year ended
June 30, 1999, permanent book and tax basis differences relating to the
recognition of net realized losses on foreign currency transactions totaling
$590,739 were reclassified from accumulated net realized gain/loss to
accumulated undistributed net investment income.
H. EXPENSE REDUCTIONS--During the six months ended September 30, 1999, the
Fund's custody fee was reduced by $3,880 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, Van Kampen
Investment Advisory Corp. ("the Adviser") will provide investment advice and
facilities to the Fund for an annual fee payable monthly as follows:
<TABLE>
<CAPTION>
AVERAGE MANAGED ASSETS % PER ANNUM
- --------------------------------------------------------------------
<S> <C>
First $500 million..................................... .75 of 1%
Next $500 million...................................... .70 of 1%
Over $1 billion........................................ .65 of 1%
</TABLE>
For the six months ended September 30, 1999, the Adviser voluntarily waived
approximately $154,600 of its investment advisory fees. This waiver is voluntary
and can be discontinued at any time.
For the six months ended September 30, 1999, the Fund recognized expenses of
approximately $3,700 representing legal services provided by Skadden, Arps,
Slate,
28
<PAGE> 100
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Meagher & Flom (Illinois), counsel to the Fund, of which a trustee of the Fund
is an affiliated person.
For the six months ended September 30, 1999, the Fund recognized expenses of
approximately $22,200 representing Van Kampen's cost of providing accounting,
cash management and legal services to the Fund.
Van Kampen Investor Services Inc., an affiliate of the Adviser, serves as
the shareholder servicing agent for the Fund. For the six months ended September
30, 1999, the Fund recognized expenses of approximately $113,100. Transfer
agency fees are determined through negotiations with the Fund's Board of
Trustees and are based on competitive market benchmarks.
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.
29
<PAGE> 101
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
3. CAPITAL TRANSACTIONS
At September 30, 1999, capital aggregated $45,385,259, $67,397,649 and
$4,405,982 for Classes A, B and C, respectively. For the six months ended
September 30, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 284,698 $ 3,053,260
Class B.................................... 286,982 3,084,429
Class C.................................... 46,528 504,901
---------- ------------
Total Sales.................................. 618,208 $ 6,642,590
========== ============
Dividend Reinvestment:
Class A.................................... 89,235 $ 948,088
Class B.................................... 94,684 1,009,036
Class C.................................... 9,087 96,720
---------- ------------
Total Dividend Reinvestment.................. 193,006 $ 2,053,844
========== ============
Repurchases:
Class A.................................... (640,873) $ (6,829,083)
Class B.................................... (1,006,519) (10,774,052)
Class C.................................... (82,488) (885,700)
---------- ------------
Total Repurchases............................ (1,729,880) $(18,488,835)
========== ============
</TABLE>
30
<PAGE> 102
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 1999, capital aggregated $49,062,509, $75,267,108 and
$4,763,038 for Classes A, B and C, respectively. For the nine months ended March
31, 1999, transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 797,826 $ 9,027,495
Class B.................................... 895,851 10,155,513
Class C.................................... 156,680 1,789,346
---------- ------------
Total Sales.................................. 1,850,357 $ 20,972,354
========== ============
Dividend Reinvestment:
Class A.................................... 112,529 $ 1,258,452
Class B.................................... 148,695 1,664,203
Class C.................................... 13,820 154,349
---------- ------------
Total Dividend Reinvestment.................. 275,044 $ 3,077,004
========== ============
Repurchases:
Class A.................................... (807,350) $ (9,050,583)
Class B.................................... (1,549,706) (17,323,867)
Class C.................................... (117,752) (1,314,922)
---------- ------------
Total Repurchases............................ (2,474,808) $(27,689,372)
========== ============
</TABLE>
31
<PAGE> 103
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
At June 30, 1998, capital aggregated $47,827,145, $80,771,259 and $4,134,265
for Classes A, B and C, respectively. For the year ended June 30, 1998,
transactions were as follows:
<TABLE>
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Sales:
Class A.................................... 1,118,648 $ 14,164,929
Class B.................................... 1,677,599 21,153,724
Class C.................................... 150,464 1,893,551
---------- ------------
Total Sales.................................. 2,946,711 $ 37,212,204
========== ============
Dividend Reinvestment:
Class A.................................... 131,101 $ 1,649,403
Class B.................................... 180,125 2,266,285
Class C.................................... 13,723 172,549
---------- ------------
Total Dividend Reinvestment.................. 324,949 $ 4,088,237
========== ============
Repurchases:
Class A.................................... (990,262) $(12,470,355)
Class B.................................... (1,620,464) (20,396,054)
Class C.................................... (150,449) (1,897,071)
---------- ------------
Total Repurchases............................ (2,761,175) $(34,763,480)
========== ============
</TABLE>
Class B and C shares are offered without a front end sales charge, but are
subject to a contingent deferred sales charge (CDSC). Class B shares purchased
on or after June 1, 1996 will automatically convert to Class A shares after the
eighth year following purchase. Class B shares purchased before June 1, 1996
automatically convert to Class A shares after the sixth year following purchase.
Class C shares purchased on or after January 1, 1997 do not convert to Class A
shares. Class C shares purchased before January 1, 1997, automatically convert
to Class A shares after the tenth year following purchase.
32
<PAGE> 104
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
The CDSC will be imposed on most redemptions made within six years of the
purchase for Class B and one year of the purchase for Class C as detailed in the
following schedule.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
--------------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ---------------------------------------------------------------------------
<S> <C> <C>
First........................................ 4.00% 1.00%
Second....................................... 3.75% None
Third........................................ 3.50% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Sixth........................................ 1.00% None
Seventh and Thereafter....................... None None
</TABLE>
For the six months ended September 30, 1999, Van Kampen, as Distributor for
the Fund, received commissions on sales of the Fund's Class A shares of
approximately $4,900, and CDSC on redeemed shares of approximately $107,700.
Sales charges do not represent expenses of the Fund.
4. INVESTMENT TRANSACTIONS
For the six months ended September 30, 1999, the cost of purchases and proceeds
from sales of investments, excluding short-term investments, were $104,717,140
and $114,941,726, respectively.
5. 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, manage the portfolio's effective yield, foreign currency exposure,
maturity and duration 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
exercising a call option contract or taking delivery of a security underlying a
futures or forward contract. In these instances, the recognition of gain or loss
is postponed until the disposal of the security underlying the option, futures
or forward contract. Risks may arise as a result of the potential inability of
the counterparties to meet the terms of their contracts.
33
<PAGE> 105
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Summarized below are the specific types of derivative financial instruments
used by the Fund.
A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Fund
to manage the portfolio's effective maturity and duration.
Transactions in options for the six months ended September 30, 1999 were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- -------------------------------------------------------------------------
<S> <C> <C>
Outstanding at March 31, 1999................... 25 $ 44,331
Options terminated in closing transactions...... (25) (44,331)
---- ---------
Outstanding at September 30, 1999............... -0- $ -0-
==== =========
</TABLE>
B. FUTURES CONTRACTS--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 futures on U.S. Treasury Bonds and typically closes
the contract prior to the delivery date. These contracts are generally used to
manage the portfolio's effective maturity and duration.
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). The cost of securities
acquired through delivery under a contract is adjusted by the unrealized gain or
loss on the contract.
34
<PAGE> 106
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in futures contracts for the six months ended September 30,
1999, were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- -----------------------------------------------------------------------
<S> <C>
Outstanding at March 31, 1999............................. 150
Futures Opened............................................ 634
Futures Closed............................................ (784)
------
Outstanding at September 30, 1999......................... -0-
======
</TABLE>
C. FORWARD CURRENCY CONTRACTS--These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on forwards.
At September 30, 1999, the Fund has outstanding forward currency contracts
as follows:
<TABLE>
<CAPTION>
UNREALIZED
FORWARD CURRENT APPRECIATION/
CURRENCY VALUE DEPRECIATION
- ------------------------------------------------------------------------
<S> <C> <C>
SHORT CONTRACTS:
Great British Pound,
551,335 expiring 10/18/99................ $ 907,685 $(12,151)
619,951 expiring 10/27/99................ 1,020,664 (4,440)
251,942 expiring 10/28/99................ 414,788 (1,075)
---------- --------
$2,343,137 $(17,666)
========== ========
</TABLE>
D. CLOSED BUT UNSETTLED FORWARD COMMITMENTS--In certain situations, the Fund has
entered into offsetting transactions for outstanding forward commitments prior
to settlement of the obligation. In doing so, the Fund realizes a gain or loss
on the transactions at the time the forward commitment is closed. Risk may
result due to the potential inability of counterparties to meet the terms of
their contracts. At September 30, 1999, the Fund has a net realized loss on
closed but unsettled forward currency contracts of $51,079 scheduled to settle
on October 7, 1999.
E. INVERSE FLOATING SECURITY--These instruments have a coupon which is inversely
indexed to a short-term floating interest rate multiplied by a specified factor.
As the
35
<PAGE> 107
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. The price of these securities may be more
volatile than the price of a comparable fixed rate security. These instruments
are typically used by the Fund to enhance the yield of the portfolio.
F. INTEREST ONLY/PRINCIPAL ONLY SECURITIES--A Mortgage-Backed Security or U.S.
Treasury Obligation may be stripped to create an Interest Only (IO) security and
a Principal Only (PO) security. An IO represents ownership in the cash flows of
the interest payments or coupon payments made. The cash flow from an IO
instrument decreases as the borrower repays the principal balance. Conversely, a
PO represents ownership in the cash flows of the principal payments made. A PO
created from a U.S. Treasury Obligation becomes a zero coupon bond. The cash
flow on a PO instrument increases as the borrowers repay the principal balance.
These instruments are typically used to manage interest rate exposure in the
fund's portfolio.
6. MORTGAGE-BACKED SECURITIES
A Mortgage-Backed Security (MBS) is a pass-through security created by pooling
mortgages and selling participations in the principal and interest payments
received from borrowers. Most of these securities are guaranteed by federally
sponsored agencies such as Federal National Mortgage Association (FNMA).
A REMIC (Real Estate Mortgage Investment Conduit) is a bond which is
collateralized by a pool of MBS's. These MBS pools are divided into classes or
tranches with each class having its own characteristics.
7. ASSET-BACKED SECURITIES
An Asset-Backed Security (ABS) is a security collateralized by assets such as
installment loans, leases, mortgage loans, receivables or other kinds of assets
that are issued independently of the originator.
8. DISTRIBUTION AND SERVICE PLANS
The Fund and its shareholders have adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act of 1940 and a service plan (collectively
the "Plans"). The Plans govern payments for the distribution of the Fund's
shares, ongoing shareholder services and maintenance of shareholder accounts.
Annual fees under the Plans of up to .25% of Class A net assets and 1.00%
each of Class B and Class C net assets are accrued daily. Included in these fees
for the six
36
<PAGE> 108
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
months ended September 30, 1999, are payments retained by Van Kampen of
approximately $197,500.
9. BORROWINGS
In accordance with its investment policies, the Fund may borrow money from banks
or enter into reverse repurchase agreements or dollar rolls for investment
purposes in an amount up to 33.3% of its total assets.
The Fund has entered into a $45,000,000 revolving credit agreement which
expires on May 31, 2000. Interest is charged under the agreement at a rate of
.425% above the federal funds rate. The interest rate in effect at September 30,
1999, was 6.1125%. An annual facility fee of .075% is charged on the maximum
facility of this line of credit.
The Fund has entered into reverse repurchase agreements with Warburg Dillon
Read LLC, under which the Fund sells securities and agrees to repurchase them on
October 1, 1999 at a mutually agreed upon price. For the six months ended
September 30, 1999, the average interest rate in effect for reverse repurchase
agreements was 4.090%.
The average daily balance of bank borrowings and reverse repurchase
agreements for the six months ended September 30, 1999, was approximately
$40,604,000 with an average interest rate of 5.05%.
At September 30, 1999, these agreements represented 23.9% of the Fund's
total assets.
37
<PAGE> 109
VAN KAMPEN FUNDS
GROWTH
Aggressive Growth
American Value*
Emerging Growth
Enterprise
Equity Growth
Focus Equity
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
Short-Term Global Income*
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
38
<PAGE> 110
VAN KAMPEN STRATEGIC INCOME FUND
BOARD OF TRUSTEES
J. MILES BRANAGAN
JERRY D. CHOATE
RICHARD M. DEMARTINI*
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
JACK E. NELSON
DON G. POWELL*
PHILLIP B. ROONEY
FERNANDO SISTO
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY, PH.D.
PAUL G. YOVOVICH
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
STEPHEN L. BOYD*
PETER W. HEGEL*
MICHAEL H. SANTO
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
DISTRIBUTOR
VAN KAMPEN FUNDS INC.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
SHAREHOLDER SERVICING AGENT
VAN KAMPEN INVESTOR
SERVICES INC.
P.O. Box 218256
Kansas City, Missouri 64121-8256
CUSTODIAN
STATE STREET BANK
AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
* "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.
TAX NOTICE TO CORPORATE SHAREHOLDERS
For taxable year ended June 30, 1999,
6.11% of the dividends taxable as
ordinary income qualified for the 70%
dividends received deduction for
corporations.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless it
has been preceded or is accompanied by an effective prospectus of the Fund which
contains additional information on how to purchase shares, the sales charge, and
other pertinent data. After February 29, 2000, the report, if used with
prospective investors, must be accompanied by a monthly performance update.
39
<PAGE> 111
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.
40
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> HIGH YIELD CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 406,544,039<F1>
<INVESTMENTS-AT-VALUE> 370,429,825<F1>
<RECEIVABLES> 14,106,666<F1>
<ASSETS-OTHER> 26,995<F1>
<OTHER-ITEMS-ASSETS> 9,001<F1>
<TOTAL-ASSETS> 384,572,487<F1>
<PAYABLE-FOR-SECURITIES> 2,831,148<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,916,459<F1>
<TOTAL-LIABILITIES> 5,747,607<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 346,737,959
<SHARES-COMMON-STOCK> 28,708,597
<SHARES-COMMON-PRIOR> 30,761,644
<ACCUMULATED-NII-CURRENT> (1,979,776)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (63,678,178)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (36,095,494)<F1>
<NET-ASSETS> 247,001,169
<DIVIDEND-INCOME> 195,894<F1>
<INTEREST-INCOME> 21,567,850<F1>
<OTHER-INCOME> 180,102<F1>
<EXPENSES-NET> (2,966,498)<F1>
<NET-INVESTMENT-INCOME> 18,977,348<F1>
<REALIZED-GAINS-CURRENT> (6,111,167)<F1>
<APPREC-INCREASE-CURRENT> (13,771,256)<F1>
<NET-CHANGE-FROM-OPS> (905,075)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (12,120,799)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (314,838)
<NUMBER-OF-SHARES-SOLD> 3,164,771
<NUMBER-OF-SHARES-REDEEMED> (5,892,522)
<SHARES-REINVESTED> 674,704
<NET-CHANGE-IN-ASSETS> (30,920,207)
<ACCUMULATED-NII-PRIOR> (2,433,418)<F1>
<ACCUMULATED-GAINS-PRIOR> (97,935,246)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,519,408<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,184,082<F1>
<AVERAGE-NET-ASSETS> 262,638,253
<PER-SHARE-NAV-BEGIN> 9.034
<PER-SHARE-NII> 0.422
<PER-SHARE-GAIN-APPREC> (0.432)
<PER-SHARE-DIVIDEND> (0.408)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> (0.012)
<PER-SHARE-NAV-END> 8.604
<EXPENSE-RATIO> 1.19
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> HIGH YIELD CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 406,544,039<F1>
<INVESTMENTS-AT-VALUE> 370,429,825<F1>
<RECEIVABLES> 14,106,666<F1>
<ASSETS-OTHER> 26,995<F1>
<OTHER-ITEMS-ASSETS> 9,001<F1>
<TOTAL-ASSETS> 384,572,487<F1>
<PAYABLE-FOR-SECURITIES> 2,831,148<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,916,459<F1>
<TOTAL-LIABILITIES> 5,747,607<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 121,260,352
<SHARES-COMMON-STOCK> 13,864,509
<SHARES-COMMON-PRIOR> 14,990,680
<ACCUMULATED-NII-CURRENT> (1,979,776)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (63,678,178)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (36,095,494)<F1>
<NET-ASSETS> 119,290,890
<DIVIDEND-INCOME> 195,894<F1>
<INTEREST-INCOME> 21,567,850<F1>
<OTHER-INCOME> 180,102<F1>
<EXPENSES-NET> (2,966,498)<F1>
<NET-INVESTMENT-INCOME> 18,977,348<F1>
<REALIZED-GAINS-CURRENT> (6,111,167)<F1>
<APPREC-INCREASE-CURRENT> (13,771,256)<F1>
<NET-CHANGE-FROM-OPS> (905,075)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (5,431,616)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (141,491)
<NUMBER-OF-SHARES-SOLD> 2,015,536
<NUMBER-OF-SHARES-REDEEMED> (3,399,492)
<SHARES-REINVESTED> 257,785
<NET-CHANGE-IN-ASSETS> (16,098,312)
<ACCUMULATED-NII-PRIOR> (2,433,418)<F1>
<ACCUMULATED-GAINS-PRIOR> (97,935,246)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,519,408<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,184,082<F1>
<AVERAGE-NET-ASSETS> 128,877,411
<PER-SHARE-NAV-BEGIN> 9.032
<PER-SHARE-NII> 0.394
<PER-SHARE-GAIN-APPREC> (0.438)
<PER-SHARE-DIVIDEND> (0.373)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> (0.011)
<PER-SHARE-NAV-END> 8.604
<EXPENSE-RATIO> 1.96
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> HIGH YIELD CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 406,544,039<F1>
<INVESTMENTS-AT-VALUE> 370,429,825<F1>
<RECEIVABLES> 14,106,666<F1>
<ASSETS-OTHER> 26,995<F1>
<OTHER-ITEMS-ASSETS> 9,001<F1>
<TOTAL-ASSETS> 384,572,487<F1>
<PAYABLE-FOR-SECURITIES> 2,831,148<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 2,916,459<F1>
<TOTAL-LIABILITIES> 5,747,607<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,580,017
<SHARES-COMMON-STOCK> 1,458,215
<SHARES-COMMON-PRIOR> 1,623,895
<ACCUMULATED-NII-CURRENT> (1,979,776)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (63,678,178)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (36,095,494)<F1>
<NET-ASSETS> 12,532,821
<DIVIDEND-INCOME> 195,894<F1>
<INTEREST-INCOME> 21,567,850<F1>
<OTHER-INCOME> 180,102<F1>
<EXPENSES-NET> (2,966,498)<F1>
<NET-INVESTMENT-INCOME> 18,977,348<F1>
<REALIZED-GAINS-CURRENT> (6,111,167)<F1>
<APPREC-INCREASE-CURRENT> (13,771,256)<F1>
<NET-CHANGE-FROM-OPS> (905,075)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (575,001)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (15,313)
<NUMBER-OF-SHARES-SOLD> 367,884
<NUMBER-OF-SHARES-REDEEMED> (566,965)
<SHARES-REINVESTED> 33,401
<NET-CHANGE-IN-ASSETS> (2,119,656)
<ACCUMULATED-NII-PRIOR> (2,433,418)<F1>
<ACCUMULATED-GAINS-PRIOR> (97,935,246)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,519,408<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,184,082<F1>
<AVERAGE-NET-ASSETS> 13,670,169
<PER-SHARE-NAV-BEGIN> 9.023
<PER-SHARE-NII> 0.394
<PER-SHARE-GAIN-APPREC> (0.439)
<PER-SHARE-DIVIDEND> (0.373)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> (0.011)
<PER-SHARE-NAV-END> 8.594
<EXPENSE-RATIO> 1.95
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 21
<NAME> S-T GBL CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 41,570,225<F1>
<INVESTMENTS-AT-VALUE> 39,783,916<F1>
<RECEIVABLES> 2,625,743<F1>
<ASSETS-OTHER> 2,082<F1>
<OTHER-ITEMS-ASSETS> 71<F1>
<TOTAL-ASSETS> 42,411,812<F1>
<PAYABLE-FOR-SECURITIES> 2,514,767<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 607,217<F1>
<TOTAL-LIABILITIES> 3,121,984<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59,340,083
<SHARES-COMMON-STOCK> 5,284,158
<SHARES-COMMON-PRIOR> 7,142,474
<ACCUMULATED-NII-CURRENT> (15,831)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (65,096,662)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,799,420)<F1>
<NET-ASSETS> 37,469,231
<DIVIDEND-INCOME> 8,829<F1>
<INTEREST-INCOME> 1,915,452<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (420,274)<F1>
<NET-INVESTMENT-INCOME> 1,504,007<F1>
<REALIZED-GAINS-CURRENT> (1,380,434)<F1>
<APPREC-INCREASE-CURRENT> 1,002,617<F1>
<NET-CHANGE-FROM-OPS> 1,126,190<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,040,708)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (406,994)
<NUMBER-OF-SHARES-SOLD> 334,240
<NUMBER-OF-SHARES-REDEEMED> (2,292,884)
<SHARES-REINVESTED> 100,328
<NET-CHANGE-IN-ASSETS> (13,517,375)
<ACCUMULATED-NII-PRIOR> (1,974,455)<F1>
<ACCUMULATED-GAINS-PRIOR> (64,794,090)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 137,048<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 425,673<F1>
<AVERAGE-NET-ASSETS> 46,030,842
<PER-SHARE-NAV-BEGIN> 7.140
<PER-SHARE-NII> 0.220
<PER-SHARE-GAIN-APPREC> (0.050)
<PER-SHARE-DIVIDEND> (0.160)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> (0.060)
<PER-SHARE-NAV-END> 7.090
<EXPENSE-RATIO> 1.69
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 22
<NAME> S-T GBL CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 41,570,225<F1>
<INVESTMENTS-AT-VALUE> 39,783,916<F1>
<RECEIVABLES> 2,625,743<F1>
<ASSETS-OTHER> 2,082<F1>
<OTHER-ITEMS-ASSETS> 71<F1>
<TOTAL-ASSETS> 42,411,812<F1>
<PAYABLE-FOR-SECURITIES> 2,514,767<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 607,217<F1>
<TOTAL-LIABILITIES> 3,121,984<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,571,454
<SHARES-COMMON-STOCK> 216,378
<SHARES-COMMON-PRIOR> 424,495
<ACCUMULATED-NII-CURRENT> (15,831)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (65,096,662)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,799,420)<F1>
<NET-ASSETS> 1,534,271
<DIVIDEND-INCOME> 8,829<F1>
<INTEREST-INCOME> 1,915,452<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (420,274)<F1>
<NET-INVESTMENT-INCOME> 1,504,007<F1>
<REALIZED-GAINS-CURRENT> (1,380,434)<F1>
<APPREC-INCREASE-CURRENT> 1,002,617<F1>
<NET-CHANGE-FROM-OPS> 1,126,190<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (40,796)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (18,511)
<NUMBER-OF-SHARES-SOLD> 17,075
<NUMBER-OF-SHARES-REDEEMED> (230,899)
<SHARES-REINVESTED> 5,707
<NET-CHANGE-IN-ASSETS> (1,495,674)
<ACCUMULATED-NII-PRIOR> (1,974,455)<F1>
<ACCUMULATED-GAINS-PRIOR> (64,794,090)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 137,048<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 425,673<F1>
<AVERAGE-NET-ASSETS> 2,166,163
<PER-SHARE-NAV-BEGIN> 7.140
<PER-SHARE-NII> 0.190
<PER-SHARE-GAIN-APPREC> (0.050)
<PER-SHARE-DIVIDEND> (0.140)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> (0.050)
<PER-SHARE-NAV-END> 7.090
<EXPENSE-RATIO> 2.50
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 23
<NAME> S-T GBL CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 41,570,225<F1>
<INVESTMENTS-AT-VALUE> 39,783,916<F1>
<RECEIVABLES> 2,625,743<F1>
<ASSETS-OTHER> 2,082<F1>
<OTHER-ITEMS-ASSETS> 71<F1>
<TOTAL-ASSETS> 42,411,812<F1>
<PAYABLE-FOR-SECURITIES> 2,514,767<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 607,217<F1>
<TOTAL-LIABILITIES> 3,121,984<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 290,204
<SHARES-COMMON-STOCK> 40,374
<SHARES-COMMON-PRIOR> 36,957
<ACCUMULATED-NII-CURRENT> (15,831)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (65,096,662)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,799,420)<F1>
<NET-ASSETS> 286,326
<DIVIDEND-INCOME> 8,829<F1>
<INTEREST-INCOME> 1,915,452<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (420,274)<F1>
<NET-INVESTMENT-INCOME> 1,504,007<F1>
<REALIZED-GAINS-CURRENT> (1,380,434)<F1>
<APPREC-INCREASE-CURRENT> 1,002,617<F1>
<NET-CHANGE-FROM-OPS> 1,126,190<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (5,470)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (1,866)
<NUMBER-OF-SHARES-SOLD> 2,595
<NUMBER-OF-SHARES-REDEEMED> (210)
<SHARES-REINVESTED> 1,032
<NET-CHANGE-IN-ASSETS> (22,455)
<ACCUMULATED-NII-PRIOR> (1,974,455)<F1>
<ACCUMULATED-GAINS-PRIOR> (64,794,090)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 137,048<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 425,673<F1>
<AVERAGE-NET-ASSETS> 269,745
<PER-SHARE-NAV-BEGIN> 7.140
<PER-SHARE-NII> 0.190
<PER-SHARE-GAIN-APPREC> (0.050)
<PER-SHARE-DIVIDEND> (0.140)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> (0.050)
<PER-SHARE-NAV-END> 7.090
<EXPENSE-RATIO> 2.46
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 41
<NAME> STRATEGIC INCOME CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 139,239,995<F1>
<INVESTMENTS-AT-VALUE> 131,165,745<F1>
<RECEIVABLES> 8,125,409<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 3,277,456<F1>
<TOTAL-ASSETS> 142,568,610<F1>
<PAYABLE-FOR-SECURITIES> 13,782,569<F1>
<SENIOR-LONG-TERM-DEBT> 34,028,716<F1>
<OTHER-ITEMS-LIABILITIES> 1,182,157<F1>
<TOTAL-LIABILITIES> 48,993,442<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45,385,259
<SHARES-COMMON-STOCK> 3,524,167
<SHARES-COMMON-PRIOR> 3,791,107
<ACCUMULATED-NII-CURRENT> (936,147)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (14,551,342)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (8,126,233)<F1>
<NET-ASSETS> 36,877,315
<DIVIDEND-INCOME> 175,912<F1>
<INTEREST-INCOME> 5,710,687<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,057,831)<F1>
<NET-INVESTMENT-INCOME> 3,828,768<F1>
<REALIZED-GAINS-CURRENT> (4,104,723)<F1>
<APPREC-INCREASE-CURRENT> (849,248)<F1>
<NET-CHANGE-FROM-OPS> (1,125,203)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,321,319)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (384,168)
<NUMBER-OF-SHARES-SOLD> 284,698
<NUMBER-OF-SHARES-REDEEMED> (640,873)
<SHARES-REINVESTED> 89,235
<NET-CHANGE-IN-ASSETS> (4,891,834)
<ACCUMULATED-NII-PRIOR> (974,738)<F1>
<ACCUMULATED-GAINS-PRIOR> (11,037,358)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 530,039<F1>
<INTEREST-EXPENSE> 1,037,086<F1>
<GROSS-EXPENSE> 2,216,270<F1>
<AVERAGE-NET-ASSETS> 38,784,890
<PER-SHARE-NAV-BEGIN> 11.018
<PER-SHARE-NII> 0.417
<PER-SHARE-GAIN-APPREC> (0.504)
<PER-SHARE-DIVIDEND> (0.364)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> (0.103)
<PER-SHARE-NAV-END> 10.464
<EXPENSE-RATIO> 1.58
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 42
<NAME> STRATEGIC INCOME CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 139,239,995<F1>
<INVESTMENTS-AT-VALUE> 131,165,745<F1>
<RECEIVABLES> 8,125,409<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 3,277,456<F1>
<TOTAL-ASSETS> 142,568,610<F1>
<PAYABLE-FOR-SECURITIES> 13,782,569<F1>
<SENIOR-LONG-TERM-DEBT> 34,028,716<F1>
<OTHER-ITEMS-LIABILITIES> 1,182,157<F1>
<TOTAL-LIABILITIES> 48,993,442<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,397,649
<SHARES-COMMON-STOCK> 5,071,903
<SHARES-COMMON-PRIOR> 5,696,756
<ACCUMULATED-NII-CURRENT> (936,147)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (14,551,342)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (8,126,233)<F1>
<NET-ASSETS> 53,141,164
<DIVIDEND-INCOME> 175,912<F1>
<INTEREST-INCOME> 5,710,687<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,057,831)<F1>
<NET-INVESTMENT-INCOME> 3,828,768<F1>
<REALIZED-GAINS-CURRENT> (4,104,723)<F1>
<APPREC-INCREASE-CURRENT> (849,248)<F1>
<NET-CHANGE-FROM-OPS> (1,125,203)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,762,054)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (511,926)
<NUMBER-OF-SHARES-SOLD> 286,982
<NUMBER-OF-SHARES-REDEEMED> (1,006,519)
<SHARES-REINVESTED> 94,684
<NET-CHANGE-IN-ASSETS> (9,671,673)
<ACCUMULATED-NII-PRIOR> (974,738)<F1>
<ACCUMULATED-GAINS-PRIOR> (11,037,358)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 530,039<F1>
<INTEREST-EXPENSE> 1,037,086<F1>
<GROSS-EXPENSE> 2,216,270<F1>
<AVERAGE-NET-ASSETS> 57,085,820
<PER-SHARE-NAV-BEGIN> 11.026
<PER-SHARE-NII> 0.378
<PER-SHARE-GAIN-APPREC> (0.504)
<PER-SHARE-DIVIDEND> (0.329)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> (0.093)
<PER-SHARE-NAV-END> 10.478
<EXPENSE-RATIO> 2.35
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 43
<NAME> STRATEGIC INCOME CLASS C
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000<F1>
<PERIOD-START> APR-01-1999<F1>
<PERIOD-END> SEP-30-1999<F1>
<INVESTMENTS-AT-COST> 139,239,995<F1>
<INVESTMENTS-AT-VALUE> 131,165,745<F1>
<RECEIVABLES> 8,125,409<F1>
<ASSETS-OTHER> 0<F1>
<OTHER-ITEMS-ASSETS> 3,277,456<F1>
<TOTAL-ASSETS> 142,568,610<F1>
<PAYABLE-FOR-SECURITIES> 13,782,569<F1>
<SENIOR-LONG-TERM-DEBT> 34,028,716<F1>
<OTHER-ITEMS-LIABILITIES> 1,182,157<F1>
<TOTAL-LIABILITIES> 48,993,442<F1>
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,405,982
<SHARES-COMMON-STOCK> 339,914
<SHARES-COMMON-PRIOR> 366,787
<ACCUMULATED-NII-CURRENT> (936,147)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (14,551,342)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (8,126,233)<F1>
<NET-ASSETS> 3,556,689
<DIVIDEND-INCOME> 175,912<F1>
<INTEREST-INCOME> 5,710,687<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,057,831)<F1>
<NET-INVESTMENT-INCOME> 3,828,768<F1>
<REALIZED-GAINS-CURRENT> (4,104,723)<F1>
<APPREC-INCREASE-CURRENT> (849,248)<F1>
<NET-CHANGE-FROM-OPS> (1,125,203)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (116,065)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (33,117)
<NUMBER-OF-SHARES-SOLD> 46,528
<NUMBER-OF-SHARES-REDEEMED> (82,488)
<SHARES-REINVESTED> 9,087
<NET-CHANGE-IN-ASSETS> (482,746)
<ACCUMULATED-NII-PRIOR> (974,738)<F1>
<ACCUMULATED-GAINS-PRIOR> (11,037,358)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 530,039<F1>
<INTEREST-EXPENSE> 1,037,086<F1>
<GROSS-EXPENSE> 2,216,270<F1>
<AVERAGE-NET-ASSETS> 3,772,036
<PER-SHARE-NAV-BEGIN> 11.013
<PER-SHARE-NII> 0.375
<PER-SHARE-GAIN-APPREC> (0.503)
<PER-SHARE-DIVIDEND> (0.329)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> (0.093)
<PER-SHARE-NAV-END> 10.463
<EXPENSE-RATIO> 2.35
<FN>
<F1>This item relates to the Fund on a composite basis and not on a class basis
</FN>
</TABLE>
