<PAGE>
VAN KAMPEN SERIES FUND, INC.
- --------------------------------------------------------------------------------
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
- ------------------------------------------------------------------------------
VAN KAMPEN AGGRESSIVE EQUITY FUND
- ------------------------------------------------------------------------------
VAN KAMPEN AMERICAN VALUE FUND
- ------------------------------------------------------------------------------
VAN KAMPEN ASIAN GROWTH FUND
- ------------------------------------------------------------------------------
VAN KAMPEN EMERGING MARKETS FUND
- ------------------------------------------------------------------------------
VAN KAMPEN GLOBAL EQUITY FUND
- ------------------------------------------------------------------------------
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
- ------------------------------------------------------------------------------
VAN KAMPEN GLOBAL FIXED INCOME FUND
- ------------------------------------------------------------------------------
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
- ------------------------------------------------------------------------------
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
- ------------------------------------------------------------------------------
VAN KAMPEN INTERNATIONAL MAGNUM FUND
- ------------------------------------------------------------------------------
VAN KAMPEN LATIN AMERICAN FUND
- ------------------------------------------------------------------------------
MORGAN STANLEY MONEY MARKET FUND
- ------------------------------------------------------------------------------
VAN KAMPEN U.S. REAL ESTATE FUND
- ------------------------------------------------------------------------------
VAN KAMPEN VALUE FUND
- ------------------------------------------------------------------------------
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
- ------------------------------------------------------------------------------
ANNUAL REPORT
JUNE 30, 1998
<PAGE>
VAN KAMPEN SERIES FUND, INC.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Overview and Portfolio of Investments by Fund:
Letter to Shareholders.............................................. 1
Performance Summary................................................. 3
Aggressive Equity Fund.............................................. 4
American Value Fund................................................. 9
Asian Growth Fund................................................... 14
Emerging Markets Fund............................................... 20
Global Equity Fund.................................................. 29
Global Equity Allocation Fund....................................... 34
Global Fixed Income Fund............................................ 52
Government Obligations Money Market Fund............................ 56
High Yield & Total Return Fund...................................... 59
International Magnum Fund........................................... 64
Latin American Fund................................................. 71
Money Market Fund................................................... 76
U.S. Real Estate Fund............................................... 79
Value Fund.......................................................... 84
Worldwide High Income Fund.......................................... 89
Statement of Assets and Liabilities................................... 94
Statement of Operations............................................... 98
Statement of Changes in Net Assets.................................... 100
Financial Highlights ................................................. 115
Notes to Financial Statements......................................... 130
Report of Independent Accountants..................................... 137
Additional Information................................................ 138
</TABLE>
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholder,
As communicated to you in a separate letter, Van Kampen American Capital is
consolidating all of the retail mutual funds that we distribute under the single
name of Van Kampen Funds. This move accompanies the change in our legal name to
Van Kampen Funds Inc.
You can be assured that the change in your fund's name will not affect its
management or daily operations. You will begin seeing the application of this
change with this report. In addition, as of August 31, your fund, with the
exception of the Government Obligations Money Market Fund and the Money Market
Fund, will be listed in the daily newspapers by share class under the heading
"Van Kampen Funds." For your convenience, we have enclosed a separate brochure
that covers additional details related to these changes.
ECONOMIC REVIEW
The economic crisis in Asia deepened late in the reporting period while growth
continued at a robust pace in the United States and Europe. After last fall's
currency crisis, signs of recovery began to appear in Asia early in 1998 as
equity markets rebounded and currency values stabilized. But a steep decline in
the Japanese yen beginning in February undermined investor confidence in the
region and ignited fears of yet another round of currency devaluations. At the
heart of the problem was a sudden worsening of economic conditions in Japan and
the perceived inability of Japanese leaders to rescue the country's ailing
banking system.
Despite the drag from Asia, the U.S. economy continued to expand at a healthy
rate. The nation's inflation-adjusted output of goods and services ran at 5.4
percent during the first quarter, an annualized rate considered by many
economists to be virtually unsustainable without leading to inflation. As the
reporting period ended, however, there were indications that the Asian financial
crisis was finally having a moderating impact on domestic economic growth. Also,
the Conference Board's index of leading indicators points toward a slowdown in
economic growth for later this year.
In Europe, economic growth accelerated as the region looked forward to monetary
union, set to begin in January 1999. At that time, a common currency (the euro)
will begin to replace the currencies of the 11 participant nations. The
elimination of foreign-exchange risk within these 11 countries and widespread
financial reforms has led to a wave of mergers and acquisitions across the
region.
MARKET REVIEW
The wide variation of returns from global financial markets during the reporting
period reflected the vastly different circumstances in the three major economic
blocks of the United States, Europe, and Asia. In Europe, where companies have
relatively little exposure to Asia, stocks posted impressive gains. During the
12 months ended in June, the Dow Jones Europe/ Africa Index climbed 30.39
percent in U.S. dollar terms. The rally was broad based, with markets in
Finland, France, Germany, Greece, Ireland, Italy, Portugal, and Spain each
climbing more than 30 percent. European bonds also benefited from stable
monetary policy and low inflation.
Stock prices in the United States continued to move higher during the period,
but the Asian financial crisis had an uneven impact on corporate profits. The
Wilshire 5000 Index, consisting of all publicly traded U.S. companies, gained
26.32 percent during the 12-month period. Companies with heavy exposure to
domestic consumers benefited from strength in the American economy, while
commodity-related issues lagged. U.S. bonds benefited from a global flight to
quality and from a growing perception that domestic economic growth was slowing.
The yield on the Treasury's 30-year benchmark bond declined from 5.92 percent on
December 31, 1997 to 5.62 percent by the end of the period.
In Asia, renewed currency concerns caused major declines in nearly all equity
markets. Despite a solid rally in January, the Dow Jones Asia/Pacific Index
(excluding Japan) fell 48.77 percent during the 12 months through June and by
18.69 percent during the first half of 1998. The worst-performing Asian market
was Indonesia, where the average stock lost nearly two-thirds of its value amid
a deepening recession, political turmoil, and social unrest. Also, for the 12
months through June, the Dow Jones Indonesia Index declined by 87.66 percent in
U.S. dollar terms.
OUTLOOK
We remain optimistic about the prospects for European equity markets, based on
the region's accelerating growth rate and the introduction of a common currency
next year. As interest rates decline, liquidity should increase as more European
investors leave the sanctuary of money-market funds in favor of equities.
Our outlook for Asia is guarded. As the reporting period ended, the Japanese
government announced a bank bailout package that ignited a rally in Asian
financial markets. While we view the latest reforms in a positive light, we are
concerned that investor reaction to the news may have been overly euphoric.
------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
In the United States, economic growth is likely to slow in coming months as the
impact of the Asian crisis becomes more evident. With equities already trading
at record-high valuations, we are cautious about the ability of U.S. stocks to
rally significantly from current levels. On a longer-term basis, however, we
believe the environment for domestic equities remain highly positive.
Several factors are helping to sustain a generally bullish environment for
global bonds. Extreme economic weakness in Asia is exerting downward pressure on
energy, commodity, and goods prices. Also, the strong dollar is containing U.S.
inflation despite a tight labor market and above-trend economic growth.
Additional details about your funds, including investment overviews from your
portfolio management team, are provided in this report. As always, we are
pleased to have the opportunity to serve you and your family through our diverse
menu of quality investments.
Sincerely,
<TABLE>
<S> <C>
Don G. Powell Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
July 24, 1998
</TABLE>
- --------------
2
<PAGE>
VAN KAMPEN SERIES FUND, INC.
PERFORMANCE SUMMARY (UNAUDITED)
- --------------------------------------------------------------------------------
JUNE 30, 1998
<TABLE>
<CAPTION>
NET ONE YEAR TOTAL RETURN AVERAGE ANNUAL SINCE INCEPTION
ASSET --------------------------------- ---------------------------------
NET VALUE WITH WITHOUT WITH WITHOUT
INCEPTION ASSETS PER SALES SALES COMPARABLE SALES SALES COMPARABLE
FUNDS DATES (000) SHARE CHARGE CHARGE INDICES CHARGE CHARGE INDICES
- -------------------------- --------- -------- -------- -------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGGRESSIVE EQUITY
Class A................. 1/2/96 $64,035 $ 20.01 23.37% 30.93% 24.90%(1) 29.89% 33.01% 20.15%(1)
Class B................. 1/2/96 130,497 19.67 24.94 29.94 24.90(1) 31.28 32.07 20.15(1)
Class C................. 1/2/96 24,872 19.66 28.90 29.90 24.90(1) 32.03 32.03 20.15(1)
AMERICAN VALUE
Class A................. 10/18/93 220,100 21.34 20.91 28.26 18.10(2) 17.21 18.69 16.64(2)
Class B................. 8/1/95 269,836 21.20 22.30 27.30 18.10(2) 22.85 23.54 19.06(2)
Class C................. 10/18/93 127,401 21.20 26.28 27.28 18.10(2) 17.77 17.77 16.64(2)
ASIAN GROWTH
Class A................. 6/23/93 47,128 6.53 (62.83) (60.57) (60.20)(3) (11.45) (10.40) (9.17)(3)
Class B................. 8/1/95 26,126 6.31 (62.84) (60.89) (60.20)(3) (27.38) (26.66) (25.22)(3)
Class C................. 6/23/93 28,823 6.29 (61.27) (60.88) (60.20)(3) (11.05) (11.05) (9.17)(3)
EMERGING MARKETS
Class A................. 7/6/94 74,959 7.98 (38.08) (34.31) (38.58)(4) (8.24) (6.87) (9.09)(4)
Class B................. 8/1/95 36,423 7.78 (37.69) (34.76) (38.58)(4) (8.00) (7.15) (10.32)(4)
Class C................. 7/6/94 28,680 7.79 (35.32) (34.73) (38.58)(4) (7.55) (7.55) (9.09)(4)
GLOBAL EQUITY
Class A................. 10/29/97 80,508 11.12 5.80* 11.38* 20.12*(5) N/A N/A N/A
Class B................. 10/29/97 623,229 11.08 6.81* 10.84* 20.12*(5) N/A N/A N/A
Class C................. 10/29/97 69,572 11.07 6.70* 10.74* 20.12*(5) N/A N/A N/A
GLOBAL EQUITY ALLOCATION
Class A................. 1/4/93 261,633 16.67 9.50 16.17 17.03(5) 14.70 15.94 17.32(5)
Class B................. 8/1/95 225,797 16.14 10.34 15.33 17.03(5) 17.47 18.22 17.86(5)
Class C................. 1/4/93 108,650 16.30 14.37 15.37 17.03(5) 15.09 15.09 17.32(5)
GLOBAL FIXED INCOME
Class A................. 1/4/93 4,413 10.02 0.31 5.36 5.87(6) 5.33 6.27 7.22(6)
Class B................. 8/1/95 1,425 9.97 0.65 4.65 5.87(6) 3.14 4.07 4.07(6)
Class C................. 1/4/93 1,888 9.96 3.65 4.65 5.87(6) 5.46 5.46 7.22(6)
GOVERNMENT OBLIGATIONS
MONEY MARKET............ 3/12/92 56,302 1.00 N/A 4.79 N/A N/A 3.88 N/A
HIGH YIELD & TOTAL RETURN
Class A................. 5/1/96 7,814 12.66 5.56 10.81 10.98(7) 10.80 13.32 12.29(7)
Class B................. 5/1/96 18,419 12.63 5.93 9.86 10.98(7) 11.21 12.42 12.29(7)
Class C................. 5/1/96 8,145 12.63 8.88 9.86 10.98(7) 12.42 12.42 12.29(7)
INTERNATIONAL MAGNUM
Class A................. 7/1/96 66,817 14.85 2.08 8.32 6.10(8) 9.44 12.72 9.41(8)
Class B................. 7/1/96 51,541 14.72 2.55 7.55 6.10(8) 10.08 11.88 9.41(8)
Class C................. 7/1/96 15,520 14.78 6.55 7.55 6.10(8) 11.86 11.86 9.41(8)
LATIN AMERICAN
Class A................. 7/6/94 44,439 11.42 (22.11) (17.37) (24.92)(9) 7.08 8.67 1.02(9)
Class B................. 8/1/95 24,206 11.03 (21.06) (17.82) (24.92)(9) 18.43 19.17 7.73(9)
Class C................. 7/6/94 14,577 11.04 (18.50) (17.86) (24.92)(9) 7.83 7.83 1.02(9)
MONEY MARKET.............. 8/4/89 119,376 1.00 N/A 4.83 N/A N/A 4.80 N/A
U.S. REAL ESTATE
Class A................. 5/1/96 16,873 15.61 2.04 8.27 8.05(10) 18.66 21.93 20.69(10)
Class B................. 5/1/96 15,197 15.54 2.48 7.23 8.05(10) 19.75 20.86 20.69(10)
Class C................. 5/1/96 4,187 15.55 6.24 7.20 8.05(10) 20.87 20.87 20.69(10)
VALUE
Class A................. 7/7/97 137,447 10.53 (1.25)* 6.74* 20.58*(11) N/A N/A N/A
Class B................. 7/7/97 142,741 10.51 (0.57)* 6.01* 20.58*(11) N/A N/A N/A
Class C................. 7/7/97 35,564 10.50 3.34* 5.83* 20.58*(11) N/A N/A N/A
WORLDWIDE HIGH INCOME.....
Class A................. 4/21/94 91,579 12.46 (1.50) 3.40 6.97(12) 13.27 14.60 14.02(12)
Class B................. 8/1/95 146,401 12.40 (0.86) 2.63 6.97(12) 15.46 16.24 14.09(12)
Class C................. 4/21/94 60,197 12.40 1.68 2.55 6.97(12) 13.71 13.71 14.02(12)
</TABLE>
- --------------------------------------------------------------------------------
* Cumulative (unannualized) total return since inception of the Portfolio.
<TABLE>
<CAPTION>
INDICES:
<C> <S>
(1) Lipper Capital Appreciation Index
(2) Russell 2500 Small Company Index
(3) MSCI Combined Far East Free ex-Japan Index
(4) IFC Global Total Return Composite Index
(5) MSCI World Index
(6) J.P. Morgan Traded Global Bond Index
(7) CS First Boston High Yield Index
(8) MSCI EAFE Index
(9) MSCI Latin America Global Index
(10) NAREIT Equity Index
(11) S&P 500 Index
(12) Worldwide High Income Blended Index
(13) IBC's Money Fund Report Averages/Government
(14) IBC's Money Fund Report Averages/All Taxable
</TABLE>
<TABLE>
<CAPTION>
YIELD INFORMATION AS OF JUNE 30, 1998
- --------------------------------------------------------------------------------------------------------------------------------
30 DAY 7 DAY 7 DAY 30 DAY 30 DAY
CURRENT CURRENT EFFECTIVE CURRENT COMPARABLE
YIELD++ YIELD+ YIELD+ YIELD++ YIELD
------------ ------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
GLOBAL FIXED INCOME MONEY MARKET PORTFOLIOS:
Class A................ 3.18% Government Obligations
Class B................ 2.59 Money Market.............. 4.19% 4.28% 4.24% 5.10% (13)
Class C................ 2.59 Money Market.............. 4.67 4.77 4.67 5.01% (14)
WORLDWIDE HIGH INCOME
Class A 9.18%
Class B................ 8.85
Class C 8.86
HIGH YIELD & TOTAL RETURN
Class A................ 7.06%
Class B................ 6.65
Class C................ 6.65
</TABLE>
- --------------------------------------------------------------------------------
+ The current 7-day yield reflects the net investment income generated by the
Fund over the specified 7-day period expressed as an annual percentage.
Expenses accrued for the 7-day period include any fees charged to all
shareholders. Yields will fluctuate as market conditions change and are not
necessarily indicative of future performance.
++ The current 30-day yield reflects the net investment income generated by the
Fund over a specified 30-day period expressed as an annual percentage.
Expenses accrued for the 30-day period include any fees charged to all
shareholders. Yields will fluctuate as market conditions change and are not
necessarily indicative of future performance.
PAST PERFORMANCE SHOULD NOT BE CONSTRUED AS A GUARANTEE OF FUTURE PERFORMANCE.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. INVESTMENTS
IN THE GOVERNMENT OBLIGATIONS MONEY MARKET FUND AND MONEY MARKET FUND ARE
NEITHER INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT
THE GOVERNMENT OBLIGATIONS MONEY MARKET FUND AND THE MONEY MARKET FUND WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. PLEASE READ THE
FUND'S PROSPECTUSES CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
------------------
3
<PAGE>
VAN KAMPEN
AGGRESSIVE EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 1.7%
Capital Goods 18.5%
Communication Services 0.1%
Consumer Cyclicals 8.6%
Consumer Staples 16.0%
Financial 25.6%
Technology 6.0%
Transportation 18.5%
Short-Term Investment 4.8%
Other 0.2%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
---------------------------------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION
----------------- -----------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares 23.37% 30.93% 29.89% 33.01%
- -----------------------------------------------------------------
Class B Shares 24.94% 29.94% 31.28% 32.07%
- -----------------------------------------------------------------
Class C Shares 28.90% 29.90% 32.03% 32.03%
- -----------------------------------------------------------------
Lipper Capital
Appreciation Index N/A 24.90% N/A 20.15%
- -----------------------------------------------------------------
S&P 500 Index N/A 30.17% N/A 30.13%
- -----------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
The Lipper Capital Appreciation Index is a composite of mutual funds managed for
maximum capital gains. The S&P 500 Index is an unmanaged index of common stocks.
The S&P 500 Index assumes dividends are reinvested.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
ISSUER INDUSTRY NET ASSETS
- --------------------------- ----------------- --------------
<S> <C> <C>
Continental Airlines, Inc. Transportation 18.5%
'B'
Clear Channel Consumer - 9.7%
Communications, Inc. Staples
Loews Corp. Insurance 9.0%
(Multi-Line)
United Technologies Corp. Diversified 5.6%
General RE Corp. Insurance 3.9%
(Property -
Casualty)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- -------------------------- --------- -------------
<S> <C> <C>
Financial $ 56,137 25.6%
Capital Goods 40,603 18.5%
Transportation 40,549 18.5%
Consumer Staples 35,171 16.0%
Consumer Cyclicals 18,853 8.6%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
Aggressive Equity Aggressive Equity Lipper Capital
Fund Class A Fund Class C Appreciation Index S&P 500 Index
1/2/96 $9,500 $10,000 $10,000 $10,000
6/30/96 $11,480 $11,910 $10,950 $11,009
6/30/97 $14,801 $15,378 $12,578 $14,829
6/30/98 $19,179 $19,974 $15,817 $19,130
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; all recurring fees (including
management fees) were deducted; and all dividends and distributions were
reinvested. The graph presents the performance of Class A and Class C shares
which have been in existence since the Fund's inception. The performance of
Class B shares will vary based upon the different inception date and the sales
charge and fees assessed to that Class.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Van Kampen Aggressive Equity Fund, formerly the Morgan Stanley Aggressive
Equity Fund, seeks long term capital appreciation by investing primarily in a
non-diversified portfolio of corporate equity and equity-linked securities of
predominately U.S. corporations. The portfolio tends to hold between 30 and 40
issues (we held 44 securities at June 30), and we can invest up to 25 percent in
a single security when our conviction is very strong. The Fund also has the
ability to sell securities short, although there were no short positions at the
end of the period.
For the year ended June 30, 1998, the Fund had a total return of 30.93 percent
for the Class A shares at net asset value, as compared to a total return of
24.90 percent for the Lipper Capital Appreciation Index and 30.17 percent for
the Standard & Poor's 500-Stock Index during the same period.
After strong, above-benchmark performance in the first three quarters of the
Fund's fiscal year, the portfolio had a disappointing final quarter, returning
- -4.23 percent versus 3.30 percent for the S&P 500 and 1.78 percent for the
Lipper Capital Appreciation Index. Among our best-performing issues in the final
quarter were Clear Channel Communications and Continental Airlines, whose stock
prices rose approximately 11.4 percent and 3.5 percent, respectively. However
these gains were not enough to offset the weakness we experienced when Cendant,
a top-ten holding, fell precipitously on its mid-April announcement of
"accounting irregularities."
The 62 percent weighting in our top ten positions is significantly more
concentrated than most U.S. equity portfolios, but is typical for this Fund.
Since inception in January 1996, the ten holdings have tended to account for
between half and three quarters of assets. Our belief is that heavy
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
- -------------- 4
<PAGE>
VAN KAMPEN
AGGRESSIVE EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(CONT.)
CONCENTRATION MAY LEAD TO GREATER-THAN-AVERAGE VOLATILITY, BUT NOT NECESSARILY
GREATER-THAN-AVERAGE RISK. TO US, RISK IS SYNONYMOUS WITH LACK OF KNOWLEDGE,
WHICH OUR STRATEGY OF "SEEKING THE INFORMATION EDGE" ATTEMPTS TO AVOID. WE MAY
BE WRONG--AS WE WERE WITH CENDANT RECENTLY--BUT WE BELIEVE WE CANNOT BE FAULTED
FOR A LACK OF KNOWLEDGE REGARDING OUR COMPANIES. OVER THE LONG TERM, WE BELIEVE
THE ABILITY TO CONCENTRATE IN ISSUES WHERE WE HAVE EXTREMELY STRONG CONVICTION
SHOULD LEAD TO STRONG PERFORMANCE. THIS HAS BEEN THE CASE SINCE THE INCEPTION OF
THE FUND, WHICH HAS OUTPERFORMED THE S&P 500 INDEX AT A TIME WHEN THE MAJORITY
OF U.S. EQUITY FUNDS HAVE UNDERPERFORMED. LOOKING FORWARD, WE SEE AMPLE
OPPORTUNITIES FOR CAPITAL APPRECIATION IN INDIVIDUAL STOCKS, AND WE HIGHLIGHT A
FEW OF OUR LARGEST HOLDINGS BELOW.
Our biggest position, Continental Airlines, seems exciting for several reasons.
At $60 per share as of June 30, the stock trades at only ten times consensus
earnings expectations for 1998. Such a low valuation in today's market implies
that investors are wary about the company's ability to grow off the 1998 base.
Our research indicates that growth should be strong. We believe that consensus
earnings per share (EPS) expectations of $5.75 for 1998 and $5.95 for 1999 are
too conservative. Like other airlines, Continental has recently begun to deploy
free cash flow into share repurchases. This is very accretive to EPS and should
enhance value over time. In addition to using strong cash flow from operations,
we anticipate that the company will monetize its stake in Amadeus, an
international reservation system, over the next 6 to 12 months. This should
create cash proceeds of $300 million or more, in exchange for an asset with no
earnings. Management has publicly committed to using all of those proceeds for
share repurchase. At or near current prices, this would eliminate 6 percent of
total shares outstanding.
Clear Channel Communications has been a strong performer year-to-date and in
1997, and we continue to be excited about its prospects. Following the company's
recent acquisition of More Group of the United Kingdom, Clear Channel has become
the largest "out of home" advertising media company in the world. The company is
extremely well managed and has been a leader in consolidating the radio and TV
station business in the United States, and more recently the billboard industry.
Radio and billboard share some very positive characteristics: extremely low
capital reinvestment, high profit margins, and the probability of secular growth
through market share gains against traditional television advertising.
We bought Loews aggressively when the stock was quite weak in May and June.
However, we believe business fundamentals are intact. Loews, the Tisch family
holding company, is a very unusual stock. It is a holding company with a strong
track record of investments by management, but investors are placing an
incredibly low valuation on the stock: less than nine times projected 1998
operating profits and less than one times projected year-end book value. Why
such a low valuation? We think there are three primary reasons. First, Loews
owns Lorillard, the cigarette manufacturer. Second, the company holds a large
and widely publicized S&P 500 put position, which may exceed $1 billion. Third,
the company is, from time to time, an aggressive buyer of its shares but it has
not repurchased any stock in more than a year.
At this point, however, we see many reasons to be enthusiastic about Loews.
Managed by the Tisch family, Loews is committed to maximizing shareholder value
over time. For an investment holding company, this will equate to maximizing
book value over the long term. Over the past 12 years, Loews per share book
value has compounded at a 15 percent annual rate. Its stock price, however, has
grown at less than half that rate. Even assuming a slowdown to 10 percent annual
growth, we believe the book value should exceed $100 by the end of next year. In
addition, we believe Loews stock should act as a hedge if the U.S. market
finally cracks. Although we do not have a view that the market is going down, we
would note that the Tischs have been very right before, and sometimes early. For
example, in the early 1990s, Loews put together the largest offshore drilling
company in the world by buying rigs at below scrap value. Today, Loews owns 70
million shares of Diamond Offshore, valued at about $40 per share, with a cost
to Loews of under $1 per share. We are bullish on Loews stock with or without a
market decline. But in the case of a significant market retrenchment, Loews
would, in our view, be one of the best stocks on a relative basis.
For the first time in years, a technology stock--Microsoft--has made it into our
top ten. Typically, we shy away from large investments in technology because it
is difficult to stay ahead of the information curve. Although we have held
Microsoft for some time, we added to our position in April and May amid the
sell-off related to the Department of Justice lawsuit. Our view was that
investors were exaggerating the threat of government action. While the stock has
surged to new highs recently and it is not cheap statistically, Microsoft offers
a powerful combination of growth, extremely high margins, and low risk of
competitive threats. Keep in mind that not all stocks in the portfolio performed
as favorably, and there is no guarantee that any of these stocks will perform as
well in the future.
5------------------
<PAGE>
VAN KAMPEN
AGGRESSIVE EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(CONT.)
Our eleventh-largest holding as of June 30 was Cendant, a stock that has been in
the news since the company's announcement in mid-April of "accounting
irregularities" in its CUC division. (Cendant was created from the merger of CUC
and HFS last December.) The stock dropped about 46 percent, falling as low as
$17 per share. Although the final audit report is not yet available, our initial
assessment was that the market overreacted by taking the stock down so far, so
fast. (At prices in the teens, the market had effectively wiped out most of the
value of the CUC business.) We believe the core franchise and membership
business models of the company remain intact but feel there is more uncertainty
now. We await the final audit report with about a 2 percent position in the
stock, having reduced our exposure substantially.
As we begin the new fiscal year, the Fund is very much a combination of classic
or familiar growth names such as Microsoft, less familiar or traditional growth
opportunities such as Continental Airlines and Loews, and stocks that fall
somewhere in between.
Kurt A. Feuerman
PORTFOLIO MANAGER
- -------------- 6
<PAGE>
VAN KAMPEN
AGGRESSIVE EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS (95.0%)
BASIC MATERIALS (1.7%)
CHEMICALS (1.2%)
36,900 Du Pont (EI) de Nemours Co....................... $ 2,754
--------
CHEMICALS (DIVERSIFIED) (0.5%)
18,700 Monsanto......................................... 1,045
--------
TOTAL BASIC MATERIALS........................................... 3,799
--------
CAPITAL GOODS (18.5%)
AEROSPACE/DEFENSE (5.6%)
87,500 Cordant Technologies, Inc........................ 4,036
(a)66,600 Gulfstream Aerospace Corp........................ 3,097
50,800 Northrop Grumman Corp............................ 5,239
--------
12,372
--------
MACHINERY (DIVERSIFIED) (1.9%)
84,900 Case Corp........................................ 4,096
--------
MANUFACTURING (DIVERSIFIED) (6.9%)
43,600 Tyco International Ltd........................... 2,747
132,800 United Technologies Corp......................... 12,284
--------
15,031
--------
OFFICE EQUIPMENT & SUPPLIES (4.1%)
(a)159,400 Knoll, Inc....................................... 4,702
35,300 Pitney Bowes, Inc................................ 1,699
26,600 Xerox Corp....................................... 2,703
--------
9,104
--------
TOTAL CAPITAL GOODS............................................. 40,603
--------
COMMUNICATION SERVICES (0.1%)
TELECOMMUNICATIONS (CELLULAR/WIRELESS) (0.1%)
(a)5,500 Associated Group, Inc., `B'...................... 219
--------
CONSUMER CYCLICALS (8.6%)
AUTOMOBILES (2.2%)
72,300 General Motors Corp.............................. 4,830
--------
GAMING--LOTTERY (0.4%)
34,100 International Game Technology.................... 827
--------
LODGING--HOTELS (0.6%)
48,200 Hilton Hotels Corp. ............................. 1,374
--------
PUBLISHING (NEWSPAPERS) (1.0%)
24,600 Pulitzer Publishing Co........................... 2,196
--------
RETAIL (SPECIALTY) (0.4%)
(a)32,600 Staples, Inc..................................... 943
--------
SERVICES (ADVERTISING/MARKETING) (0.4%)
(a)28,900 Young & Rubicam, Inc............................. 925
--------
SERVICES (COMMERCIAL & CONSUMER) (3.6%)
(a)249,391 Cendant Corp..................................... 5,206
551,800 Neilsen Media Research........................... 2,552
--------
7,758
--------
TOTAL CONSUMER CYCLICALS........................................ 18,853
--------
CONSUMER STAPLES (16.0%)
BEVERAGES (NON-ALCOHOLIC) (2.4%)
23,900 Coca-Cola Co..................................... 2,043
80,400 Coca-Cola Enterprises, Inc....................... 3,156
--------
5,199
--------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ----------------------------------------------------------------------------
BROADCASTING (TV, RADIO, CABLE) (9.7%)
(a)195,500 Clear Channel Communications, Inc................ $ 21,334
--------
ENTERTAINMENT (1.4%)
(a)66,300 SFX Entertainment, Inc. `A'...................... 3,041
--------
FOODS (2.1%)
19,000 Quaker Oats, Co.................................. 1,044
17,600 Ralston-Ralston Purina Group..................... 2,056
16,400 WM. Wrigley Jr. Co............................... 1,607
--------
4,707
--------
TOBACCO (0.4%)
22,600 Philip Morris Cos., Inc.......................... 890
--------
TOTAL CONSUMER STAPLES.......................................... 35,171
--------
FINANCIAL (25.6%)
BANKS (MAJOR REGIONAL) (0.7%)
3,833 Wells Fargo Co................................... 1,414
--------
BANKS (MONEY CENTER) (5.1%)
27,700 BankAmerica Corp................................. 2,394
50,300 Citicorp......................................... 7,507
11,600 Morgan (J.P.) & Co., Inc......................... 1,359
--------
11,260
--------
FINANCIAL (DIVERSIFIED) (3.1%)
60,300 American Express Co.............................. 6,874
--------
INSURANCE (LIFE & HEALTH) (1.0%)
43,600 Reinsurance Group of America, Inc................ 2,237
--------
INSURANCE (MULTI-LINE) (9.0%)
226,500 Loews Corp....................................... 19,734
--------
INSURANCE (PROPERTY--CASUALTY) (6.0%)
50,900 Allstate Corp.................................... 4,661
33,600 General RE Corp.................................. 8,518
--------
13,179
--------
INVESTMENT BANKING & BROKERAGE (0.7%)
15,600 Merrill Lynch & Co., Inc......................... 1,439
--------
TOTAL FINANCIAL................................................. 56,137
--------
TECHNOLOGY (6.0%)
COMMUNICATION EQUIPMENT (0.3%)
(a)9,600 ADC Telecom, Inc................................. 351
(a)7,700 L-3 Communications Holdings, Inc................. 251
--------
602
--------
COMPUTERS (SOFTWARE & SERVICES) (2.9%)
(a)57,300 Microsoft Corp................................... 6,210
--------
ELECTRONICS (COMPONENT DISTRIBUTORS) (0.0%)
(a)4,000 Celestia, Inc.................................... 75
--------
ELECTRONICS (DEFENSE) (2.8%)
(a)105,000 Litton Industries, Inc........................... 6,195
--------
TOTAL TECHNOLOGY................................................ 13,082
--------
TRANSPORTATION (18.5%)
AIRLINES (18.5%)
(a)666,100 Continental Airlines, `B'........................ 40,549
--------
TOTAL COMMON STOCKS (COST $202,290)............................... 208,413
--------
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
AGGRESSIVE EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ----------------------------------------------------------------------------
SHORT-TERM INVESTMENT (4.8%)
REPURCHASE AGREEMENT (4.8%)
$ 10,586 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $10,588,
collateralized by $10,565 U.S. Treasury Notes,
5.625%, due 2/15/06, valued at $10,830 (COST
$10,586)....................................... $ 10,586
--------
TOTAL INVESTMENTS (99.8%) (COST $212,876)......................... 218,999
OTHER ASSETS IN EXCESS OF LIABILITIES (0.2%)...................... 405
--------
NET ASSETS (100%)................................................. $219,404
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
AMERICAN VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Banking 8.3%
Consumer-Retail 5.4%
Consumer-Staples 5.0%
Energy 5.6%
Financial-Diversified 6.9%
Health Care 6.7%
Insurance 5.2%
Technology 5.5%
Transportation 5.6%
Utilities 4.1%
Short-Term Investment 11.0%
Other 30.7%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
---------------------------------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION
----------------- -----------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares 20.91% 28.26% 17.21% 18.69%
- -----------------------------------------------------------------
Class B+ Shares 22.30% 27.30% 22.85% 23.54%
- -----------------------------------------------------------------
Class C Shares 26.28% 27.28% 17.77% 17.77%
- -----------------------------------------------------------------
Russell 2500 Small
Company Index:
Class A & C Shares N/A 18.10% N/A 16.64%
Class B Shares N/A 18.10% N/A 19.06%
- -----------------------------------------------------------------
S&P 500 Index:
Class A & C Shares N/A 30.17% N/A 23.71%
Class B Shares N/A 30.17% N/A 29.78%
- -----------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
+ Class B shares have been offered since August 1, 1995.
The Russell 2500 Small Company
Index and S&P 500 Index are
unmanaged indices of common
stocks. The S&P 500 Index assumes
dividends are reinvested.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF NET
ISSUER SECTOR ASSETS
- -------------------- ------------------------ --------------
<S> <C> <C>
Southdown, Inc. Building 1.9%
Ocean Energy, Inc. Consumer - Service & 1.7%
Growth
Novell, Inc. Health Care 1.6%
Providian Financial Financial - Diversified 1.5%
Corp.
Atlas Air, Inc. Transportation 1.4%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ---------------------- --------- -------------
<S> <C> <C>
Banking $ 51,019 8.3%
Financial -
Diversified 42,355 6.9%
Health Care 41,459 6.7%
Transportation 34,839 5.6%
Energy 34,519 5.6%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
American Value Fund American Value Fund Russell 2500
Class A Class C Small Company Index S&P 500 Index
10/18/93 $9,500 $10,000 $10,000 $10,000
6/30/94 $9,418 $9,732 $9,409 $9,662
6/30/95 $10,831 $11,219 $11,560 $12,205
6/30/96 $12,717 $13,069 $14,355 $15,376
6/30/97 $16,619 $16,947 $17,239 $20,711
6/30/98 $21,094 $21,571 $20,539 $26,921
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; all recurring fees (including
management fees) were deducted; and all dividends and distributions were
reinvested. The graph presents the performance of Class A and Class C shares
which have been in existence since the Fund's inception. The performance of
Class B shares will vary based upon the different inception date and the sales
charge and fees assessed to that Class.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Van Kampen American Value Fund, formerly the Morgan Stanley American Value
Fund, seeks to invest in small- to medium-sized companies that our research
indicates are undervalued with improving business prospects. The Fund's approach
to value investing seeks to outperform the Russell 2500 Small Company Index over
the long term.
Our stock selection process favors companies that offer the greatest value in
terms of price/earnings ratio and earnings growth rate. Among the companies
offering attractive value, we generally favor those with improving near-term
business prospects relative to investor expectations. To help control risk, the
Fund is diversified across the major economic sectors.
For the 12 months ended June 30, 1998, the Fund generated a total return of
28.26 percent for the Class A shares at net asset value, compared to a total
return of 18.10 percent for the Russell 2500 Small Company Index.
Stock selection in the finance, technology, and consumer durable sectors was the
main positive contributor to the Fund's relative performance during the
reporting period. In the finance sector, Providian, Capital One, and Nationwide
Financial Services posted solid returns, as these companies' earnings grew
faster than expected. The returns in the technology sector benefited from stocks
such as Electronic Arts, a video game company, and Novell, a networking software
company. Building and housing stocks, such as Furniture Brands and Lone Star
Industries, posted solid returns in the consumer durable sector. Stock selection
in the consumer service and health care sectors had a negative effect on overall
performance.
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
------------------
9
<PAGE>
VAN KAMPEN
AMERICAN VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
After increasing the Fund's presence in building and housing stocks during the
first part of the fiscal year, we have recently taken profits in many of these
holdings given that valuations have become extended and revenue growth has
started to slow. We also reduced our weight in the energy service sector due to
deteriorating fundamentals. Within the technology sector, we generally reduced
the Fund's presence in cyclical technology stocks (such as semiconductors) and
reinvested the proceeds into software stocks (such as Novell and Electronic
Arts) and cable equipment stocks (such as General Instrument and Antec). In
addition, we increased the Fund's exposure to the consumer non-durable sector,
as we found reasonably priced stocks with stable or improving business
prospects.
While overall corporate profit growth may continue to slow, our dual emphasis on
earnings revisions and valuation should enable the Fund to perform relatively
well over the long term. In addition, small- and mid-cap stocks currently offer
compelling value relative to large-cap stocks. We expect this valuation gap to
eventually narrow, providing an attractive opportunity for long-term investors.
<TABLE>
<S> <C> <C>
Chris Leavy William B. Gerlach Gary G. Schlarbaum
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
- --------------
10
<PAGE>
VAN KAMPEN
AMERICAN VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
COMMON STOCKS (88.6%)
AEROSPACE (0.2%)
(a)6,700 Coltec Industries, Inc........................... $ 133
(a)5,300 Doncasters plc ADR............................... 147
(a)36,300 Hexcel Corp...................................... 821
(a)2,700 Triumph Group, Inc............................... 113
--------
1,214
--------
BANKING (8.3%)
100,650 AmSouth Bancorp.................................. 3,957
(a)21,700 Cadillac Fairview Corp........................... 499
16,800 City National Corp............................... 621
151,800 Colonial BancGroup, Inc.......................... 4,896
29,450 Comerica, Inc.................................... 1,951
112,200 Community First Bankshares, Inc.................. 2,938
76,000 Compass Bancshares, Inc.......................... 3,430
145,900 Dime Bancorp, Inc................................ 4,368
38,400 First American Corp., Tennessee.................. 1,848
81,500 First Tennessee National Corp.................... 2,572
(a)12,400 Franchise Mortgage Acceptance Co., L.L.C......... 323
(a)19,700 Hawk Corp., 'A'.................................. 347
55,300 Hubco, Inc....................................... 1,980
(a)40,300 Imperial Bancorp, Inc............................ 1,209
24,900 Investors Financial Services Corp................ 1,320
53,500 Mellon Bank Corp................................. 3,725
44,600 Mercantile Bankshares Corp....................... 1,553
39,800 New England Community Bancorp, Inc., 'A'......... 915
34,638 Peoples Heritage Financial Group, Inc............ 818
117,200 Prime Bancshares, Inc............................ 2,974
35,500 Queens County Bancorp, Inc....................... 1,549
101,300 Regions Financial Corp........................... 4,160
28,100 Southtrust Corp.................................. 1,222
87,000 Sovereign Bancorp, Inc........................... 1,422
10,000 Western Bancorp.................................. 422
--------
51,019
--------
BUILDING (3.2%)
(a)191,100 AFC Cable Systems, Inc........................... 6,784
167,900 Southdown, Inc................................... 11,984
7,400 Vulcan Materials Co.............................. 789
--------
19,557
--------
CAPITAL GOODS (1.5%)
72,600 AGCO Corp........................................ 1,493
25,300 Case Corp........................................ 1,221
12,800 Cincinnati Milacron, Inc......................... 311
29,100 Cummins Engine................................... 1,491
140,500 Flowserve Corp................................... 3,460
27,700 Manitowoc Co., Inc............................... 1,117
(a)12,500 Stoneridge, Inc.................................. 228
--------
9,321
--------
CHEMICALS (1.9%)
121,000 Crompton & Knowles Corp.......................... 3,048
17,400 Quaker Chemical Corp............................. 330
293,200 Solutia, Inc..................................... 8,411
--------
11,789
--------
COMMUNICATIONS (4.0%)
(a)79,700 ANTEC Corp....................................... 1,848
(a)48,700 FORE Systems, Inc................................ 1,291
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
(a)159,500 General Instrument Corp.......................... $ 4,336
(a)50,800 Glenayre Technologies, Inc....................... 546
(a)56,400 Journal Register Co.............................. 945
(a)86,100 Paging Network, Inc.............................. 1,205
(a)31,800 SmarTalk Teleservices, Inc....................... 463
(a)206,900 Telco Systems, Inc............................... 2,935
(a)77,300 United Video Satellite Group..................... 3,063
(a)132,100 Valassis Communications, Inc..................... 5,094
(a)160,000 Xircom, Inc...................................... 2,490
(a)34,300 Ziff-Davis, Inc.................................. 476
--------
24,692
--------
COMPUTERS (3.2%)
(a)40,600 Apple Computer, Inc.............................. 1,165
(a)82,900 Computer Horizons Corp........................... 3,072
(a)108,600 Electronics Arts, Inc............................ 5,864
(a)46,200 Quantum Corp..................................... 959
(a)145,000 Splash Technology Holdings, Inc.................. 2,492
(a)35,400 Storage Technology Corp.......................... 1,535
(a)222,000 Sybase, Inc...................................... 1,547
(a)235,200 Transwitch Corp.................................. 3,234
--------
19,868
--------
CONSUMER--DURABLES (2.6%)
215,000 Arvin Industries, Inc............................ 7,807
(a)19,900 Dan River, Inc. 'A'.............................. 338
(a)22,300 Datascope Corp................................... 592
39,000 Kaufman and Broad Home Corp...................... 1,238
(a)1,278,600 Laidlaw Environmental Services................... 4,635
16,000 Lone Star Industries, Inc........................ 1,233
--------
15,843
--------
CONSUMER--RETAIL (5.4%)
(a)191,100 BJ's Wholesale Club, Inc......................... 7,763
(a)59,900 Brylane, Inc..................................... 2,755
82,400 CVS Corp......................................... 3,208
(a)233,100 Office Depot, Inc................................ 7,357
173,400 Ross Stores, Inc................................. 7,456
(a)27,800 Stage Stores, Inc................................ 1,258
116,600 TJX Companies, Inc............................... 2,813
16,200 VF Corp.......................................... 834
--------
33,444
--------
CONSUMER--SERVICE & GROWTH (0.8%)
(a)31,900 Chancellor Media Corp., 'A'...................... 1,584
(a)21,900 Jacor Communications, Inc........................ 1,292
(a)105,200 Prime Hospitality Corp........................... 1,834
--------
4,710
--------
CONSUMER--STAPLES (5.0%)
(a)259,900 Blyth Industries, Inc............................ 8,642
(a)202,000 Consolidated Cigar Holdings, Inc................. 2,475
71,700 Dial Corp........................................ 1,860
49,500 DIMON, Inc....................................... 557
(a)225,300 Fresh Del Monte Produce, Inc..................... 4,267
(a)121,400 General Cigar Holdings, Inc...................... 1,199
40,400 Interstate Bakeries Corp......................... 1,341
36,200 Michael Foods, Inc............................... 1,063
(a)152,500 Omega Protein Corp............................... 2,345
(a)16,000 Standard Commercial Corp......................... 176
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
AMERICAN VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
CONSUMER--STAPLES (CONT.)
(a)92,900 Suiza Foods Corp................................. $ 5,545
35,700 Universal Corp................................... 1,334
--------
30,804
--------
ELECTRIC (1.0%)
152,600 Dpl, Inc......................................... 2,766
39,900 DQE, Inc......................................... 1,436
26,900 Florida Progress Corp............................ 1,106
37,000 SCANA Corp....................................... 1,103
--------
6,411
--------
ENERGY (5.6%)
(a)29,300 BJ Services Co................................... 852
2,700 Black Hills Corp................................. 62
41,900 Camco International, Inc......................... 3,263
(a)41,800 Cooper Cameron Corp.............................. 2,132
21,200 Energy East Corp................................. 882
173,000 Enron Oil & Gas Co............................... 3,503
(a)29,800 Horizon Offshore, Inc............................ 292
33,700 MCN Corp......................................... 838
(a)538,424 Ocean Energy, Inc................................ 10,533
14,700 Nicor, Inc....................................... 590
23,400 Noble Affiliates, Inc............................ 889
(a)253,800 R & B Falcon Corp................................ 5,742
(a)38,000 Suburban Propane Partners........................ 734
38,800 Sun Co., Inc..................................... 1,506
33,400 Transocean Offshore, Inc......................... 1,486
8,900 Ultramar Diamond Shamrock Corp................... 281
(a)1,800 Veritas DGC, Inc................................. 90
44,700 Vintage Petroleum, Inc........................... 844
--------
34,519
--------
ENTERTAINMENT (0.8%)
(a)734,900 Acclaim Entertainment, Inc....................... 4,363
(a)9,300 Imax Corp........................................ 212
(a)105,000 The 3DO Company.................................. 331
--------
4,906
--------
FINANCE (1.7%)
(a)36,000 Heller Financial, Inc............................ 1,080
16,300 Nationwide Health Properties, Inc................ 389
(a)19,400 Security Capital Group, Inc. 'B'................. 517
12,400 SL Green Realty Corp............................. 279
72,800 T. Rowe Price Associates, Inc.................... 2,735
242,700 Waddell & Reed Financial, Inc., 'A'.............. 5,810
--------
10,810
--------
FINANCIAL--DIVERSIFIED (6.9%)
27,300 A.G. Edwards, Inc................................ 1,165
20,200 Capital One Financial Corp....................... 2,509
82,200 CMAC Investment Corp............................. 5,055
43,400 Cousins Properties, Inc.......................... 1,297
181,100 Crescent Real Estate Equities Co. REIT........... 6,089
35,600 Developers Diversified Realty Corp............... 1,395
54,300 Duke Realty Investment, Inc. REIT................ 1,286
13,125 Equity Residential Properties Trust.............. 623
46,400 Felcor Suite Hotels, Inc. REIT................... 1,456
35,000 First Washington Realty Trust, Inc............... 814
26,500 Glenborough Realty Trust, Inc.................... 699
(a)36,500 Innotrac Corp.................................... 347
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
12,900 Irvine Apartment Communities, Inc. REIT.......... $ 373
38,000 JDN Realty Corp.................................. 1,211
(a)36,100 Lasalle Hotel Properties REIT.................... 611
21,600 Legg Mason, Inc.................................. 1,243
48,600 Liberty Property Trust, REIT..................... 1,242
58,500 Manufactured Home Communities, Inc. REIT......... 1,411
3,400 Post Properties, Inc............................. 131
(a)23,800 Promus Company, Inc.............................. 916
117,600 Providian Financial Corp......................... 9,239
9,600 Security Capital Industrial Trust................ 240
17,400 The CIT Group, Inc. 'A'.......................... 653
(a)106,900 Unicapital Corp.................................. 2,044
(a)22,600 United Panam Financial Corp...................... 232
(a)5,250 Wellsford Properties, Inc........................ 74
--------
42,355
--------
HEALTH CARE (6.7%)
(a)75,400 Adac Laboratories................................ 1,697
(a)43,800 Agouron Pharmaceuticals, Inc..................... 1,328
168,000 Alpharma, Inc.................................... 3,696
(a)5,100 Amerisource Health Corp., 'A'.................... 335
(a)21,000 Arterial Vascular Engineering, Inc............... 751
(a)21,500 Biogen, Inc...................................... 1,054
(a)108,700 Coventry Health Care, Inc........................ 1,617
(a)444,900 Del Global Technologies Corp..................... 4,449
(a)4,000 Dental Care Alliance, Inc........................ 46
(a)181,000 Guilford Pharmaceuticals, Inc.................... 3,190
(a)3,700 Manhattan Associates, Inc........................ 77
(a)33,800 Pacificare Health Systems........................ 2,987
(a)65,700 PSS World Medical, Inc........................... 961
(a)103,037 Respironics, Inc................................. 1,604
(a)48,100 Transkaryotic Therapies, Inc..................... 1,239
(a)9,000 Trex Medical Corp................................ 149
(a)49,100 Trigon Healthcare, Inc........................... 1,777
75,100 United Wisconsin Services, Inc................... 2,131
(a)13,600 Universal Health Services, Inc................... 794
220,300 Ventas, Inc...................................... 3,043
(a)84,200 Wellpoint Health Networks, Inc................... 6,231
(a)66,100 Wesley Jessen Visioncare, Inc.................... 1,529
(a)35,300 Zonagen, Inc..................................... 774
--------
41,459
--------
INDUSTRIAL (0.4%)
(a)232,400 Philip Services Corp............................. 959
15,900 Steelcase, Inc................................... 413
48,200 Wabash National Corp............................. 1,241
--------
2,613
--------
INSURANCE (5.2%)
117,600 Allmerica Financial Corp......................... 7,644
58,758 AmerUs Life Holdings, Inc. 'A'................... 1,902
(a)17,100 Annuity & Life Re Holdings Ltd................... 378
156,600 Everest Reinsurance Holdings, Inc................ 6,019
42,600 EXEL Ltd......................................... 3,315
86,300 Nationwide Financial Services, Inc., 'A'......... 4,401
195,600 Old Republic International Corp.................. 5,734
50,100 Reliastar Financial Corp......................... 2,405
--------
31,798
--------
</TABLE>
- --------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
AMERICAN VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
METALS (1.7%)
169,600 Agnico-Eagle Mines Ltd........................... $ 933
209,200 AK Steel Holding Corp............................ 3,739
259,200 Barrick Gold Corp................................ 4,973
22,700 USX-U.S. Steel Group, Inc........................ 749
--------
10,394
--------
MISCELLANEOUS (1.1%)
95,300 S & P Mid Cap 400 Depositary Receipts............ 6,635
--------
PAPER & PACKAGING (0.7%)
79,900 Bowater, Inc..................................... 3,775
(a)7,500 Owens-Illinois, Inc.............................. 336
--------
4,111
--------
RESTAURANTS (0.4%)
(a)152,700 Friendly Ice Cream Corp.......................... 2,577
--------
RETAIL (2.9%)
(a)125,300 800-JR Cigar, Inc................................ 2,475
6,200 Claire's Stores, Inc............................. 127
(a)7,600 Columbia Sportswear Co........................... 144
34,300 Consolidated Stores Corp......................... 1,243
(a)142,200 Dress Barn, Inc.................................. 3,537
(a)12,600 Gadzooks, Inc.................................... 347
(a)38,200 Goody's Family Clothing, Inc..................... 2,096
(a)21,500 I.C. Isaacs & Co., Inc........................... 75
(a)119,100 Maxwell Shoe Co., Inc., 'A'...................... 2,367
(a)219,500 Novel Denim Holdings Ltd......................... 5,707
--------
18,118
--------
SERVICES (2.2%)
(a)20,100 CDI Corp......................................... 538
19,600 Danka Business Systems plc ADR................... 232
(a)5,300 Data Processing Resources Corp................... 165
(a)78,450 FISERV, Inc...................................... 3,332
(a)138,100 Interim Services, Inc............................ 4,436
26,800 Ogden Corp....................................... 742
41,200 Select Appointments Holdings Public Ltd., Co.
ADR............................................ 1,215
(a)8,100 USA Waste Services, Inc.......................... 400
(a)22,600 Veterinary Centers Of America, Inc............... 425
71,500 Viad Corp........................................ 1,984
--------
13,469
--------
TECHNOLOGY (5.5%)
(a)189,100 Artesyn Technologies, Inc........................ 3,026
(a)29,100 Avid Technology, Inc............................. 975
(a)84,090 Comverse Technology, Inc......................... 4,362
(a)25,800 General Scanning Inc............................. 231
(a)23,300 Keane, Inc....................................... 1,305
(a)47,600 KLA-Tencor Corp.................................. 1,318
(a)133,000 Mentor Graphics Corp............................. 1,405
(a)145,500 Networks Associates, Inc......................... 6,966
(a)788,000 Novell, Inc...................................... 10,047
(a)100,800 Synopsys, Inc.................................... 4,612
--------
34,247
--------
TRANSPORTATION (5.6%)
35,700 Air Express International Corp................... 955
(a)258,400 Atlas Air, Inc................................... 8,737
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
(a)10,900 Avis Rent A Car, Inc............................. $ 270
(a)159,200 Budget Group, Inc., 'A'.......................... 5,084
20,200 Canadian National Railway Co..................... 1,073
67,000 CNF Transportation, Inc.......................... 2,848
117,400 Hertz Corp. 'A'.................................. 5,202
(a)15,000 Jevic Transportation, Inc........................ 171
(a)8,900 Midway Airlines Corp............................. 170
(a)49,500 Midwest Express Holdings......................... 1,791
81,300 Teekay Shipping Corp............................. 2,038
(a)90,000 U.S. Xpress Enterprises, Inc., 'A'............... 1,508
261,850 Werner Enterprises, Inc.......................... 4,992
--------
34,839
--------
UTILITIES (4.1%)
84,100 Allegheny Energy, Inc............................ 2,534
(a)196,200 CalEnergy Co., Inc............................... 5,898
15,500 Eastern Enterprises.............................. 665
59,100 Minnesota Power & Light Co....................... 2,349
146,400 New Century Energies, Inc........................ 6,652
101,100 Pinnacle West Capital Corp....................... 4,550
45,200 Public Service Co. of New Mexico................. 1,025
5,300 SJW Corp......................................... 313
19,600 Washington Water Power Co........................ 440
36,400 Wisconsin Energy................................. 1,106
--------
25,532
--------
TOTAL COMMON STOCKS (COST $530,306)............................. 547,054
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
<C> <S> <C>
- ------------
WARRANTS (0.0%)
BANKING (0.0%)
(a)37,800 Golden State Bancorp, Inc., expiring 1/1/01 (COST
$203).......................................... 201
--------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
<C> <S> <C>
- ------------
SHORT-TERM INVESTMENT (11.0%)
REPURCHASE AGREEMENT (11.0%)
$ 67,722 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $67,732,
collateralized by various U.S. Treasury
Obligations 6.25%-6.50%, due 8/31/01-10/31/01,
valued at $69,164. (COST $67,722).............. 67,722
--------
TOTAL INVESTMENTS (99.6%) (COST $598,231)....................... 614,977
OTHER ASSETS IN EXCESS OF LIABILITIES (0.4%).................... 2,360
--------
NET ASSETS (100%)............................................... $617,337
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
ADR -- American Depositary Receipt
REIT -- Real Estate Investment Trust
-----------------------
13
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
ASIAN GROWTH FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Hong Kong 31.1%
India 7.3%
Indonesia 1.5%
Korea 5.4%
Malaysia 9.1%
Pakistan 1.2%
Philippines 3.9%
Singapore 7.9%
Taiwan 19.1%
Thailand 3.2%
Short-Term Investment 5.9%
Other 4.4%
</TABLE>
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Asian Growth Fund Asian Growth Fund MSCI Combined Far East
Class A Class C Free ex-Japan Index
6/23/93 $9,500 $10,000 $10,000
6/30/93 $9,525 $10,000 $10,000
6/30/94 $12,303 $12,705 $13,265
6/30/95 $13,472 $13,951 $15,055
6/30/96 $14,071 $14,459 $16,286
6/30/97 $13,916 $14,200 $16,441
6/30/98 $5,431 $5,555 $6,544
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; all recurring fees (including
management fees) were deducted; and all dividends and distributions were
reinvested. The graph presents the performance of Class A and Class C shares
which have been in existence since the Fund's inception. The performance of
Class B shares will vary based upon the different inception date and the sales
charge and fees assessed to that Class.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
<TABLE>
<CAPTION>
TOTAL RETURNS**
-------------------------------------------------------------
AVERAGE ANNUAL
---------------------------------------
ONE YEAR FIVE YEAR SINCE INCEPTION
----------------- ----------------- -----------------
WITH WITHOUT WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE CHARGE* CHARGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares -62.83% -60.57% -11.49% -10.44% -11.45% -10.40%
- ---------------------------------------------------------------------------------------
Class B+ Shares -62.84% -60.89% N/A N/A -27.38% -26.66%
- ---------------------------------------------------------------------------------------
Class C Shares -61.27% -60.88% -11.09% -11.09% -11.05% -11.05%
- ---------------------------------------------------------------------------------------
MSCI CFEF ex-Japan
Index:
Class A & C Shares N/A -60.20% N/A -9.17% N/A -9.17%
Class B Shares N/A -60.20% N/A N/A N/A -25.22%
- ---------------------------------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
+ Class B shares have been offered since August 1, 1995.
The Morgan Stanley Capital International (MSCI) Combined Far East Free (CFEF)
ex-Japan Index is an unmanaged index of common stocks and includes Indonesia,
Hong Kong, Malaysia, the Philippines, Korea, Taiwan and Thailand (assumes
dividends are reinvested).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS TOP FIVE SECTORS
PERCENT OF VALUE PERCENT OF
ISSUER COUNTRY NET ASSETS SECTOR (000) NET ASSETS
- ------------------------------------ --------- ---------- ------------------ --------- ----------
<S> <C> <C> <C> <C> <C>
CLP Holdings Ltd. Hong Kong 6.2% Capital Equipment $23,753 23.3%
Hong Kong Telecommunications Ltd. Hong Kong 5.8% Consumer Goods 22,749 22.3%
Hong Kong & Shanghai Bank Holdings Hong Kong 5.8% Services 14.6%
plc 14,952
Asustek Computer, Inc. Taiwan 4.5% Finance 13,370 13.1%
Hong Kong & China Gas Co., Ltd. Hong Kong 4.0% Energy 12,289 12.0%
</TABLE>
The investment objective of the Van Kampen Asian Growth Fund, formerly known as
the Morgan Stanley Asian Growth Fund, is long-term capital appreciation through
investments primarily in equity securities of Asian issues, excluding Japan.
For the 12 months ended June 30, 1998, the Van Kampen Asian Growth Fund
generated a total return of -60.57 percent for the Class A shares at net asset
value, as compared to a total return of -60.20 percent for the Morgan Stanley
Capital International (MSCI) Combined Far East Free ex-Japan Index.
The period was marked by the Asian economic crisis, which had been triggered by
the collapse of the currency peg in Thailand on July 2, 1997. Excessive
borrowing by Thai companies had led to the baht's collapse; other regional
currencies began to succumb in turn. These regional currency woes soon spread to
the equity markets as concerns about the overleveraged economies, typified by
excessive bank lending and an overinvestment in property and infrastructure,
took their toll. In the past, Asia's fortunes flourished because it was an
inexpensive low-end manufacturing base with a cheap labor force, favorable tax
rates, and a fixed exchange rate pegged to the U.S. dollar. Through the years,
however, the massive inflow of foreign investment and loans inevitably led to
overcapacity and rampant overinvestment by local corporates. These concerns
precipitated the sell-down of the equity markets as international investors took
flight in expectation of major fallout.
THE COUNTRY SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MSCI COMBINED FAR EAST FREE EX-JAPAN INDEX AND ARE FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE
FUND'S FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE
SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK
CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL INVESTING.
- -------------- 14
<PAGE>
VAN KAMPEN
ASIAN GROWTH FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(CONT.)
As the markets collapsed during this period, our strategy was to identify
economies and companies that could best compete on a value-added basis in a
technological world, rather than on export ability alone. Economies like Hong
Kong, Singapore, and Taiwan were thought to be able to better withstand the
effects of the "Asian contagion." Nonetheless, the crisis spread unabated and
took its initial victims in Southeast Asia down 70 percent from earlier peaks.
Northeast Asia was not spared; the destruction of the Korean economy jolted
international markets with the sudden realization that the contagion could have
a far-reaching global impact.
As the currencies and equity markets took their blows, the remaining economies,
including Hong Kong, Singapore, and Taiwan looked more expensive and vulnerable.
Hong Kong faced the risk that China's economy was rapidly slowing, and that the
currency peg to the U.S. dollar was exacting a heavy toll on its economy.
Seemingly, China's problems would have a serious effect on Taiwan, which faced
its own difficulties in the electronics sector. A fallout in this area would
have also been hazardous for Singapore, which was already faced with the
disintegration of its neighbors.
Consequently, the Hong Kong and China exposure was reduced, and a hedge was
entered into to minimize currency exposure to the Hong Kong dollar, New Taiwan
dollar, and Singapore dollar. Concurrently, money was put to work in selected
stocks in the more devastated markets that we believe offered compelling values
for the patient investor. Our view was that investors with the luxury of a
longer-term horizon stood to reap long-term gains by capitalizing on this
monumental meltdown in the Asian markets. The strategy was to concentrate on
identifying for acquisition, companies and stocks that represented irreplaceable
franchises available at bargain basement levels.
The devastation of the Asian markets in the second half of 1997 was momentarily
reversed in the first quarter of 1998, with the regional MSCI Combined Far East
Free ex-Japan Index returning 9.8 percent. The Fund underperformed the Index,
returning 1.5 percent. Following the abolition of the two-tier exchange rate in
Thailand and the reform of labor laws in Korea, the Asian markets finally began
to stabilize in January.
International investors flooded into Malaysia in February as the market turned
upwards. We remained cautious, however, because of serious concerns about the
large corporate and personal debt that hung over the economy. As such, the focus
of the Fund's investments was on stocks with strong cash flows and low debt
levels, which could outperform as the debt situation climaxed. The respite from
the regional financial turmoil allowed heavily indebted stocks to surge on
weakening interest rates and a strengthening ringgit.
Our focus on a few key names in Korea, such as Samsung Electronics and POSCO,
paid off. Samsung's technological lead in semiconductors has allowed it to stake
out significant market share, while POSCO's manufacturing efficiency allowed it
to remain one of the lowest-cost steel producers in the world. Both companies
embraced President DJ Kim's efforts to restructure the economy by retiring
excess capacity and reducing labor forces.
During the second quarter of 1998, the benchmark index returned -24.6 percent
versus the Fund's return of -22.6 percent. The continued slide in the yen forced
additional pressure on the Hong Kong to U.S. dollar peg, which translated into
higher interest rates in Hong Kong. Because the Hong Kong stock market is
dominated by interest rate sensitive counters such as property and banking
shares, the higher rates led to a decline of the overall market.
In Malaysia, the market's decline was led by companies with highly leveraged
balance sheets and uncertain cash flows, as well as the banks that had made the
loans to these companies. The Portfolio was concentrated in consumer-orientated
stocks such as Rothman's and Nestle, which have dominant market share and the
ability to pass along price increases directly to the consumer.
The overall market in Taiwan was hit hard by weakness in the electronics sector,
with overcapacity weighing particularly heavily on semiconductor stocks.
Component companies that have strong relationships with multinationals, such as
portfolio stalwarts Compal and Asustek, held up well in the downturn.
The effect of the fallout in the regional markets began to pervade the real
economy. The period was marked by corporate collapses and layoffs, which caused
many of the economies to descend into economic recessions and, in some
countries, political and social unrest.
The inability of the Japanese government to address the looming disaster in its
financial sector, and the corresponding depreciation of the yen against the U.S.
dollar, weighed heavily on the Asian markets. Combined with tepid demand from
the Japanese consumer, the weak yen led to a sharp reduction of Asian exports
into Japan. The Japanese banks, which had built up enormous exposure to Asian
corporate debt during the last decade, have begun calling in their loans at a
rapid level, further contributing to the liquidity crunch haunting the region.
Although we retain the view that the Chinese government will not devalue the
yuan (and consequently the Hong Kong dollar) in the short term, there are
increasing pressures in China. The competitiveness of Chinese exports has been
undermined by the regional currency depreciations, with forthcoming consequences
for both the level of exports and the profitability of the export sector.
Imports in China have gained significant ground at the expense of domestic
companies. The effect of a yuan devaluation in the near term would be negative
for Asia, most likely resulting in the Hong Kong to U.S. dollar peg breaking and
a further round of devaluation throughout the region.
The slowing Chinese economy is one factor that is likely to force a further
deterioration of the Hong Kong economy. Reported GDP growth in the first quarter
of 1998 was -2 percent, while unemployment jumped to 3.5 percent. The
destruction of wealth in property and equities, as well as the steep decline in
tourism, has forced retail sales down more than 10 percent in the first quarter
of 1998. This deflation, combined with high interest rates, is a lethal mixture
for the property sector, which has decreased in value 40 percent. The effect of
difficulties in the real estate sector will continue to be severe for the
overall Hong Kong economy.
Accurate forecasts of Indonesia's growth have become even more difficult since
the departure of longtime leader Suharto. Although the riots and demonstrations
have subsided, distrust of the government remains. Moreover, the rupiah
depreciation, combined with a drought brought on by El Nino, indicate that
simply feeding the country's 200 million people could prove to be difficult. The
situation is exacerbated by the flight of many of the ethnic Chinese, who
dominated the Indonesian economy but were targeted for racial attacks during the
riots earlier this year. Inflation is also becoming a serious problem, to add to
the country's ills. Despite extremely cheap valuations, the macroeconomic and
political risks in Indonesia remain immense.
Korea, however, has taken the lead in confronting its problems and attempting to
work through its version of the Asian financial crisis. The country's Financial
Supervisory Commission, composed of a mixture of leaders from the public and
private sectors, has set an aggressive timetable for dealing with financial
sector reform and corporate restructuring. The government has also built up more
than $40 billion in foreign reserves, while the Korean current account surplus
has reached $23 billion. Though immense problems remain in the economy, the
first steps have been taken to address these issues.
------------------
15
<PAGE>
VAN KAMPEN
ASIAN GROWTH FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(CONT.)
Before Asia's financial crisis can end, countries of the region must directly
address the failures in their own economies. Although the problems in Japan have
proved to be the most recent catalyst, it is important to note that the
situation in Asia, and the seeds of its eventual recovery, are based within the
countries themselves. The IMF has instituted an initial cleansing of the banking
systems in the countries under its care, but a great deal of work needs to be
accomplished domestically as well.
On a stock-specific basis, we will continue to focus our investments in well-run
companies that are in nonfinancial businesses, and whose management has
consistently achieved high returns on equity. Companies with irreplaceable
franchises, world-competitive technology, and strong links with multinationals,
as well as those that do not require external financing will have the capability
and the opportunity to reap the rewards of the devastated Asian markets.
Vinod Sethi Joseph Tern
PORTFOLIO PORTFOLIO
MANAGER MANAGER
- -------------- 16
<PAGE>
VAN KAMPEN
ASIAN GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ----------------------------------------------------------------------------
COMMON STOCKS (89.7%)
HONG KONG (31.1%)
1,395,500 CLP Holdings Ltd................................. $ 6,358
3,576,430 Hong Kong & China Gas Co., Ltd................... 4,062
241,200 Hong Kong & Shanghai Bank Holdings plc........... 5,899
970,000 Hong Kong Electric Holdings Ltd.................. 3,005
3,172,800 Hong Kong Telecommunications Ltd................. 5,958
710,600 Hutchison Whampoa Ltd............................ 3,751
1,016,000 Li & Fung Ltd.................................... 1,639
75,700 Ng Fung Hong Ltd................................. 52
396,000 Television Broadcasting Ltd...................... 1,048
--------
31,772
--------
INDIA (7.3%)
110,000 Ashok Leyland Ltd................................ 112
163,700 Bharat Heavy Electricals Ltd..................... 950
200 Castrol Ltd...................................... 3
55,100 Container Corp. of India Ltd..................... 594
42,200 Hero Honda Motors Ltd............................ 871
34,700 Housing Development Finance Corp., Ltd........... 2,449
62,500 Nestle India Ltd................................. 543
1,700 SmithKline Beecham Consumer Healthcare Ltd....... 15
211,450 State Bank of India.............................. 1,054
135,000 Tata Engineering & Locomotive Co., Ltd........... 530
32,000 T.V.S. Suzuki Ltd................................ 336
--------
7,457
--------
INDONESIA (1.5%)
93,000 Bat Indonesia (Foreign).......................... 164
(a)605,000 Gudang Garam (Foreign)........................... 357
1,395,000 Indofood Sukses Makmur Tbk....................... 137
4,240,000 Mayora Indah..................................... 172
385,700 Unilever Indonesia (Foreign)..................... 732
--------
1,562
--------
KOREA (5.4%)
12,900 Hankuk Glass Industry Co., Ltd................... 141
(d)206 S.K. Telecom (Foreign)........................... 93
49,010 Nong Shim Co..................................... 2,120
(d)15,572 Pohang Iron & Steel Ltd. (Foreign)............... 511
8,370 S1 Corp.......................................... 847
58,791 Samsung Electronics Co. (Foreign)................ 1,820
(a)148 Samsung Electronics Co. GDS (New)................ 2
--------
5,534
--------
MALAYSIA (9.1%)
367,000 Amway Holdings Bhd............................... 601
491,000 Carlsberg Brewery Malaysia Bhd................... 1,491
134,000 Esso Malaysia Bhd................................ 112
943,000 Guiness Anchor Bhd............................... 1,000
322,000 Hap Seng Consolidated Bhd........................ 171
440,000 Nestle Bhd....................................... 1,993
1,209,000 R.J. Reynolds Bhd................................ 1,675
193,000 Rothmans of Pall Mall Bhd........................ 1,337
204,000 Shell Refining Co. Bhd........................... 290
314,000 Sime Darby Bhd................................... 216
214,000 Telekom Malaysia Bhd............................. 361
--------
9,247
--------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ----------------------------------------------------------------------------
PAKISTAN (1.2%)
55,900 Lever Brothers Pakistan Ltd...................... $ 1,054
47,700 Shell Pakistan Ltd............................... 153
--------
1,207
--------
PHILIPPINES (3.9%)
473,800 La Tondena Distillers, Inc....................... 239
(a)5,303,300 Music Corp....................................... 470
28,650 Philippine Long Distance Telephone ADR........... 653
980,200 San Miguel Corp. 'B'............................. 1,293
8,158,180 SM Prime Holdings, Inc........................... 1,291
--------
3,946
--------
SINGAPORE (7.9%)
(a)116,700 Creative Technology Ltd.......................... 1,444
1,312,000 NatSteel Ltd..................................... 2,198
(a)487,000 Singapore Technology Engineering Ltd............. 343
1,064,000 Singapore Telecommunications Ltd................. 1,511
483,000 United Overseas Bank Ltd. (Foreign).............. 1,501
571,000 Venture Manufacturing Ltd........................ 1,082
--------
8,079
--------
TAIWAN (19.1%)
(a)555,750 Asustek Computer, Inc............................ 4,545
(a)218,950 China Development Corp........................... 507
(a)1,222,035 Compal Electronics, Inc.......................... 3,290
(a)116,200 Compeq Manufacturing Co., Ltd.................... 619
(a)977,500 Delpha Construction Co., Ltd..................... 1,280
2,935,841 Far Eastern Textile Ltd.......................... 2,273
(a)535,000 Hon Hai Precision Industry....................... 2,709
(a)425,750 Kuoyang Construction............................. 669
(a)1,514,224 Siliconware Precision Industries Co.............. 2,199
(a)677,150 Taiwan Semiconductor Co.......................... 1,399
--------
19,490
--------
THAILAND (3.2%)
275,000 BEC World Public Co., Ltd........................ 1,049
89,100 Delta Electronics Public Co., Ltd. (Foreign)..... 507
(d)947,700 Eastern Water Resources Development Public Co.,
Ltd. (Foreign)................................. 1,303
(d)56,900 Grammy Entertainment Public Co., Ltd. plc
(Foreign)...................................... 132
(a,d)125,800 GSS Array Technology Public Co., Ltd.
(Foreign)...................................... 298
--------
3,289
--------
TOTAL COMMON STOCKS (COST $114,971)............................... 91,583
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
<C> <S> <C>
- --------------
WARRANTS (0.0%)
HONG KONG (0.0%)
(a)162,565 Hong Kong and China Gas Co., Ltd. (expiring
9/30/99) (COST $0)............................. 11
--------
TOTAL FOREIGN SECURITIES (89.7%) (COST $114,971).................. 91,594
--------
</TABLE>
-----------------------
17
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
ASIAN GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ----------------------------------------------------------------------------
SHORT-TERM INVESTMENT (5.9%)
REPURCHASE AGREEMENT (5.9%)
$ 5,971 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $5,972,
collateralized by $5,300 U.S. Treasury Bonds,
6.625%, due 2/15/27, valued at $6,115 (COST
$5,971)........................................ $ 5,971
--------
TOTAL INVESTMENTS IN SECURITIES (95.6%) (COST $120,942)........... 97,565
--------
FOREIGN CURRENCY (6.1%)
HKD 2,419 Hong Kong Dollar................................. 312
IDR 1,297 Indonesian Rupiah................................ --
INR 17,796 Indian Rupee..................................... 420
KRW 71,443 South Korean Won................................. 52
MYR 2,239 Malaysian Ringgit................................ 540
PHP 367 Philippine Peso.................................. 9
PKR 421 Pakistani Rupee.................................. 9
SGD 36 Singapore Dollar................................. 21
THB 179 Thai Baht........................................ 4
TWD 167,138 Taiwan Dollar.................................... 4,864
--------
TOTAL FOREIGN CURRENCY (COST $6,351).............................. 6,231
--------
TOTAL INVESTMENTS (101.7%) (COST $127,293)........................ 103,796
OTHER LIABILITIES IN EXCESS OF ASSETS (-1.7%)..................... (1,719)
--------
NET ASSETS (100%)................................................. $102,077
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
(d) -- Securities valued at fair value -- see note A-1 to financial
statements.
ADR -- American Depositary Receipt
GDS -- Global Depositary Shares
- -----------------------
18
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
ASIAN GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE INFORMATION:
Under the terms of foreign currency contracts open at June 30, 1998, the
Portfolio is obligated to deliver or is to receive foreign currency in exchange
for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
CURRENCY IN EXCHANGE
TO DELIVER VALUE SETTLEMENT FOR NET UNREALIZED GAIN
(000) (000) DATE (000) VALUE (000) (LOSS) (000)
- ----------- ----- ----------- ----------- ----- -------------------
<S> <C> <C> <C> <C> <C>
$ 194 $ 194 7/1/98 SGD 326 $ 193 $ (1)
HKD 800 103 7/2/98 $ 103 103 --
$ 96 96 7/2/98 MYR 397 96 --
$ 66 66 7/2/98 PHP 2,786 66 --
--
----- -----
$ 459 $ 458 $ (1)
--
--
----- -----
----- -----
</TABLE>
- ---------------
HKD -- Hong Kong Dollar
MYR -- Malaysian Ringgit
PHP -- Philippine Peso
SGD -- Singapore Dollar
- --------------------------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT
OF
VALUE NET
INDUSTRY (000) ASSETS
- ---------------------------------------- -------- --------
<S> <C> <C>
Capital Equipment....................... $ 23,753 23.3%
Consumer Goods.......................... 22,749 22.3
Services................................ 14,952 14.6
Finance................................. 13,370 13.1
Energy.................................. 12,289 12.0
Multi-Industry.......................... 4,481 4.4
-------- ---
$ 91,594 89.7%
-------- ---
-------- ---
</TABLE>
-----------------------
19
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Argentina 4.7%
Brazil 17.1%
India 7.5%
Israel 4.8%
Korea 4.3%
Mexico 9.9%
Russia 5.5%
South Africa 7.4%
Taiwan 5.6%
Turkey 6.7%
Short-Term Investment 3.5%
Other 23.0%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
---------------------------------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION
----------------- -----------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares -38.08% -34.31% -8.24% -6.87%
- -----------------------------------------------------------------
Class B+ Shares -37.69% -34.76% -8.00% -7.15%
- -----------------------------------------------------------------
Class C Shares -35.32% -34.73% -7.55% -7.55%
- -----------------------------------------------------------------
IFC Global Total
Return Composite
Index:
Class A & C Shares N/A -38.58% N/A -9.09%
Class B Shares N/A -38.58% N/A -10.32%
- -----------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
+ Class B shares have been offered since August 1, 1995.
The IFC Global Total Return Composite index is an unmanaged index of common
stocks and includes developing countries in Latin America, East and South Asia,
Europe, the Middle East, and Africa (assuming dividends are reinvested).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
ISSUER COUNTRY NET ASSETS
- ------------------------------------ --------- --------------
<S> <C> <C>
Telebras Brazil 6.3%
CRT Brazil 3.6%
Telemex Mexico 3.4%
Yapi Ve Kredi Bankasi Turkey 3.1%
Telefonica de Argentina Argentina 2.6%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ----------------------------- --------- -------------
<S> <C> <C>
Services $ 50,255 36.0%
Finance 22,073 15.8%
Consumer Goods 20,565 14.7%
Energy 14,128 10.1%
Materials 12,368 8.8%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
IFC Global Retail Return Composite
Emerging Markets Fund Class A Emerging Markets Fund Class C Index
7/6/94 $9,500 $10,000 $10,000
6/30/95 $8,422 $8,688 $9,868
6/30/96 $9,614 $9,942 $10,698
6/30/97 $10,915 $11,201 $11,908
6/30/98 $7,096 $7,311 $7,314
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; all recurring fees (including
management fees) were deducted; and all dividends and distributions were
reinvested. The graph presents the performance of Class A and Class C shares
which have been in existence since the Fund's inception. The performance of
Class B shares will vary based upon the different inception date and the sales
charge and fees assessed to that Class.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The investment objective of the Van Kampen Emerging Markets Fund, formerly known
as the Morgan Stanley Emerging Markets Fund, is to seek to provide long-term
capital appreciation by investing primarily in equity securities of emerging
country issuers.
For the 12 months ended June 30, 1998, the Van Kampen Emerging Markets Fund had
a total return of -34.31 percent for the Class A shares at net asset value, as
compared to a total return of -38.58 percent for the IFC Global Total Return
Composite Index for the same period.
The currency crisis that began with the devaluation of the Thai baht on July 2,
1997, set off a selling panic that left most Asian equity markets down as of
year-end 1997. The crisis also negatively affected markets with fixed currency
regimes and fiscal or current account deficits, such as Brazil. In the aftermath
of the crisis, we began easing into Asia during the second half of 1997, given
our belief that the currency and stock markets had dramatically overshot
fair-value benchmarks. At the time, Asian markets were down 70 percent to 85
percent from their highs, and we felt that at such levels investors had
discounted a good deal of the economic devastation wrought by corporate
bankruptcies. While we felt that the near-term economic and earnings outlook for
Asian countries was grim, and that economic pain with its commensurate political
convulsions was to be expected (particularly in Korea and Indonesia), we
believed that many of these markets represented compelling value. In the face of
negative sentiment, we expected that any marginally positive news could ignite a
huge rally in the region.
Events of the first quarter of 1998 bore out our expectations, as both Thailand
and Korea experienced significant positive performance in the aftermath of
public restructuring and reform.
THE COUNTRY SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMERGING MARKETS
REGIONAL OR COUNTRY INDICES AND ARE FOR INFORMATIONAL PURPOSES ONLY AND SHOULD
NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE PERFORMANCE. INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE SEE THE
PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS ASSOCIATED WITH
INTERNATIONAL INVESTING.
- --------------
20
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
DURING THE FIRST QUARTER, THE THAI AND KOREAN MARKETS WERE UP 43.4 PERCENT AND
59.1 PERCENT, RESPECTIVELY. ALTHOUGH THESE MARKETS HAVE TRADED DOWN IN THE
SECOND QUARTER OF 1998, THEY STILL REPRESENT, IN OUR OPINION, THE BEST
INVESTMENT OPPORTUNITIES IN ASIA. ELSEWHERE, INVESTORS HAVE BEEN UNFORGIVING. IN
MARKETS WHERE MOMENTUM IS PERCEIVED TO BE SLOWING, EQUITIES HAVE BEEN PUNISHED.
FOR EXAMPLE, RUSSIA DECREASED 59.3 PERCENT DURING THE FIRST HALF OF 1998, WHILE
MEXICO DECREASED 22.2 PERCENT, AND TURKEY DECLINED 14.3 PERCENT.
In Latin America during the first half of 1998, we increased our Argentine
exposure by approximately 2 percent, to a market-weight position. This increase
was driven by signs of economic strength and the government's commitment to
reform. We decreased our Brazilian holdings by 2 percent, bringing us to a
market-neutral position. While Brazil offers attractive value and growth
opportunities on a stock level, it suffers from deteriorating macro variables,
such as a widening fiscal deficit and a vulnerable currency. In Argentina and
Brazil, we are focusing on the telecom sector, given its strong operating
earnings growth and privatization potential. While we remained underweight, we
increased our Mexican exposure by 1 percent during the month of April. Our
underweight position in Mexico is driven by deterioration in the country's macro
environment, including a worsening trade account and expectation for higher
inflation and interest rates. Given the continued fiscal strength of the Mexican
consumer, we are focusing on such consumer-related industries as beverages and
retailers.
The Asian markets, driven by declines in Thailand (down 32.0 percent), Indonesia
(down 57.9 percent), and Malaysia (down 30.1 percent), plunged 22.4 percent
during the first half of 1998. The best performing Asian market for the period
was Korea, up 5.6 percent. The abysmal returns for Asia were a result of renewed
fears that currencies in the region would be devalued again based on currency
instability in Japan and Russia. Investors also were troubled by reports of
widespread nonperforming bank loans, as well as rising interest rates,
inflation, and unemployment within Southeast Asia. The most notable political
event took place in Indonesia, where President Suharto resigned in May after
leading the country for 32 years. Vice President Habibie replaced him (to the
dismay of many student protesters) and has pledged new general elections next
year. We expect that Habibie will be in office on a transitional basis.
The equity markets of the Indian subcontinent plummeted, with India and Pakistan
falling 15.8 percent and 58.2 percent, respectively, during the first half of
1998. Both markets toppled in the aftermath of nuclear tests, which sparked
renewed tension in the region and economic sanctions from the United States and
Japan. We had viewed these markets as offering good value and growth potential.
However, with the announcement of a disappointing budget on June 1, we have
begun to trim our overweight position in India.
Equity markets in Europe, the Middle East, and Africa posted widely disparate
returns. The laggards included Russia (down 59.3 percent) and South Africa (down
14.2 percent). Meanwhile, Greece was the star performer of this region,
returning 44.9 percent through June 30. Russia's equity market was devastated in
the first half of the year due to political changes, pressure on the currency,
and the decline in oil prices. At the end of March, President Yeltsin dismantled
his cabinet in a successful effort to remove then-Prime Minister Chernomyrdin.
Yeltsin assembled his new team headed by Prime Minister Kiriyenko, who had
previously been the Fuel and Energy Minister. In the short-term, sentiment
deteriorated as fears over currency instability forced the central bank to hike
interest rates by more than 100 percent. On a positive note, expectations of an
IMF package for the ailing economy are widespread and should be supportive of
the market and currency.
South African stocks fell 23.3 percent in June, while the currency declined 15.7
percent versus the U.S. dollar. A weak supply of foreign currency reserves left
the government unable to ward off increasing pressure on the currency, as
speculators sensed vulnerability. A lack of consistency in implementing monetary
policy led to a loss of confidence in the South African central bank. The
central bank continued to tinker with overnight repurchase rates throughout the
month, only to induce more pessimism regarding the short-term future of the
South African market. Ongoing structural problems in wages (which remain high in
real terms), weaker dollar commodity prices, and low economic growth conspired
to create an overvalued rand versus Asian currencies, further eroding the
competitiveness of South African companies.
------------------
21
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
During the second quarter of 1998, we entered the Greek market, with 2 percent
exposure, given our expectation for improving macroeconomic numbers as the
country prepares to join the European Monetary Union. We moved to an overweight
stance on Hungary as a result of improving economic growth and declining
inflation. Though still overweight, we decreased our exposure to Russia by 2
percent as interest rates rose to astronomical levels. Finally, while
maintaining our underweight position, we increased our exposure to South Africa
by 3 percent where we are focusing on the corporate restructuring story.
The spectacular bust in Asia and the bear market in emerging countries have
heightened the importance of resolving the issues plaguing these markets. In our
view, investors are passing judgment that capitalism without democracy is
fundamentally flawed, and they are demanding politically open systems, which
encourage the free flow of information of all kinds. This free flow of
information is ultimately the best natural "regulator" in the world. A free
press, full and frequent disclosure by corporations, government agencies, and,
in particular, the banking system is vital for vibrant and effective economic
functioning.
We believe that one of the most critical factors in the modernizing equation for
poor countries, particularly democracies, is the specter of mass unemployment.
Economic liberalization dramatically increases efficiency and is fundamentally
deflationary in its early stages. Japan, Asia, and Russia are in the throes of
such an adjustment, and Latin America (particularly Mexico) is in the early
stages of recovery from a similar transition. In truly impoverished countries,
unemployment is more than a statistic and a political inconvenience. Social
safety nets are crucial in countries with high illiteracy and low labor
mobility. Mass privatizations are critical, not only in increasing efficiency
and accountability in large parts of the economy, but also as an important
source of funding for social security and unemployment benefits.
At the micro-economic level, a focus on shareholder values needs to replace the
idea of old-style "Asian values," in which businesses were run by overweening
politicians and ministries in the "national interest." In today's world of low
and declining tariffs, intense global competition, and readily available
information, corporate survival will increasingly depend on producing better-
quality goods and services at lower prices. We believe the corporate largesse
engendered by the corrupt nexus between politics and big business must end.
Increasingly, the ability to extract earnings from assets that exceed their cost
of capital will be key. Developing countries will have to focus on nurturing and
producing a professional cadre of businessmen who can steer family-operated
empires in a more competitive global landscape. Education at the management and
employee level will be critical, otherwise increases in technologically driven
productivity, primarily in the West, will erode one of the important competitive
edges of the emerging markets--cheap and plentiful labor.
To summarize, we believe there are several important lessons to be learned from
the Asian currency crisis:
- Consistency in fiscal, monetary, and currency policy is crucial.
Inconsistency is brutally punished.
- Banking systems are the heart of an economy and must be carefully and
rigorously supervised.
- Bankruptcy laws are crucial cleansing solvents, and must be clearly stated
and enforced.
- Return on equity must exceed the cost of equity. Prices of both must be
clear; shareholder and property rights must be respected in the capital
market and in the boardroom.
- Deregulating capital markets without deregulating domestic industry is a
disastrous combination.
With Asian stocks down by as much as 90 percent, we believe that the region's
equity markets are at least approaching a trough and that an economic
breakthrough in Asia is also relatively close at hand. However, the size and
speed of the recovery will depend on the ability of Asian leaders to recognize
and resolve the issues mentioned earlier. As the period ended, a Japanese
yen-driven
- --------------
22
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
panic led to a second round of volatility in Asia. Nonetheless, the early
indications are that Korea and Thailand in particular are starting to transform.
Both countries have new political leadership, which should foster needed
readjustments. With the equity market down 95 percent and Suharto ousted, it is
easy to say that the worst is over in Indonesia. In reality, however, the repair
work to construct a free-market economy and a functioning democracy will be long
and painful. The ability of Russia and China to adapt to economic recessions and
the intense pressure to devalue are important factors that have yet to play out.
The markets are in an unforgiving mood, having driven China and Hong Kong down
50 percent and Russia down 70 percent. There may be worse economic and political
news ahead, particularly if the Japanese mandarins don't become more realistic
in their assessment of the country's economic woes. We believe, however, that
the death knell to socialism's last and true champions has been struck and the
evidence indicates that Darwinian adaptation is underway. Stock buybacks in
Japan, chaebol asset sales in Korea, bankruptcy law formulation in Thailand, and
the passage of social security reform in Brazil are perhaps the first drops of
rain after the long drought.
Asset valuations are near bargain levels. Investor sentiment is the most
depressed that we have seen, and early signs of restructuring is evident across
several markets. Yen stability and some decisive action by Japan to end its
crisis of confidence will most likely be the catalyst that arrests the current
free fall in sentiment and prices. We are aligning our portfolios toward
countries and companies that are demonstrating hardheaded adaptability to the
new environment we envision.
<TABLE>
<S> <C>
Madhav Dhar
PORTFOLIO Robert L. Meyer
MANAGER PORTFOLIO MANAGER
</TABLE>
------------------
23
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (87.6%)
ARGENTINA (4.7%)
12,405 Nortel ADR....................................... $ 308
66,534 Telecom Argentina ADR............................ 1,984
110,297 Telefonica de Argentina ADR...................... 3,578
24,035 YPF ADR.......................................... 723
--------
6,593
--------
BRAZIL (7.7%)
19,393 Brahma ADR....................................... 242
22,397 CEMIG ADR........................................ 693
1,384,100 Coteminas........................................ 377
(e)12,645 Coteminas ADR.................................... 172
23,359 CVRD ADR......................................... 494
1,256,000 Encorpar ADR..................................... 3
85,000 Lightpar......................................... --
(a,d,e)14,225 Lojas Arupua ADR................................. 8
4,660,000 Pao de Acucar.................................... 105
12,056 Pao de Acucar ADR................................ 273
(e)12,340 Petrobras ADR.................................... 230
58,865 Telebras ADR..................................... 6,427
6,659,000 Telebras S.A..................................... 530
43,075 Unibanco GDR..................................... 1,271
--------
10,825
--------
CHILE (0.8%)
18,300 CCU ADR.......................................... 386
15,030 ENDESA ADR....................................... 214
18,030 Enersis S.A. ADR................................. 441
7,629 Santa Isabel ADR................................. 84
--------
1,125
--------
CHINA (0.9%)
(a)25,845 Huaneng Power International, Inc. ADR............ 347
281,000 Qingling Motors Co., 'H'......................... 78
(a)38,150 Yanzhou Coal ADR................................. 372
2,135,000 Zhenhai Refining & Chemical Co................... 276
996,000 Zhehuang Expressway Co., Ltd. 'H'................ 167
--------
1,240
--------
EGYPT (1.7%)
8,400 Al-Ahram Beverages Co. S.A.E. GDR................ 264
7,916 Ameriyah Cement Co............................... 137
26,764 Commercial International Bank.................... 295
5,157 Commercial International Bank GDR................ 56
19,920 Eastern Tobacco.................................. 357
2,000 Egypt Gas........................................ 192
11,550 Egyptian Finance & Industrial.................... 247
10,475 Helwan Portland Cement........................... 158
6,377 Industrial & Engine.............................. 104
3,200 Madinet Housing & Development.................... 153
500 Paints & Chemical Industries Co.................. 14
34,800 Paints & Chemical Industries Co. GDR............. 308
8,575 Tora H. Portland Cement.......................... 148
--------
2,433
--------
GREECE (2.1%)
(a)29,680 Hellenic Petroleum S.A........................... 243
77,096 Hellenic Telecommunication Organization S.A...... 1,979
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- -------------------------------------------------------------------------------
2,520 National Bank of Greece.......................... $ 323
(a)8,000 STAT Hellas Telcommunications S.A. ADR........... 332
--------
2,877
--------
HONG KONG (1.5%)
147,000 China Resources Enterprises Ltd.................. 152
182,000 CLP Holdings Ltd................................. 829
646,000 Ng Fung Hong Ltd................................. 446
38,000 Shanghai Industrial Holdings Ltd................. 90
440,000 South China Morning Post......................... 212
78,000 Sun Hung Kai Properties Ltd...................... 331
--------
2,060
--------
HUNGARY (3.1%)
6,046 Gedeon Richter Ltd............................... 487
(a)3,200 Gedeon Richter Ltd. GDR.......................... 262
13,340 Matav ADR........................................ 393
67,780 Matav Rt......................................... 393
(a)85,036 MOL Magyar Olaj-es Gazipari Rt. GDR.............. 2,292
9,700 OPT Bank Rt...................................... 477
--------
4,304
--------
INDIA (7.5%)
22,000 Bajaj Auto Ltd................................... 297
199,700 Bharat Heavy Electricals Ltd..................... 1,158
12,000 Bharat Petroleum Corp., Ltd...................... 99
125,000 Container Corp. of India Ltd..................... 1,347
(e)150,000 E.I.D. Parry Ltd. GDR............................ 244
40,930 Hero Honda Motors Ltd............................ 845
504,000 Hindustan Development Corp., Ltd. GDR............ 78
16,000 Hindustan Petroleum Corp., Ltd................... 147
24,400 Hoechstshering Agrero Ltd........................ 426
29,954 Housing Development Finance Corp., Ltd........... 2,115
(e)108,750 Indo Rama Synthetics Ltd. GDR.................... 326
41,800 Infosys Technologies Ltd......................... 2,191
19,800 ITC Ltd.......................................... 304
79,200 ITW Signode India Ltd............................ 105
23,500 Larson & Tourbo Ltd., 'A'........................ 127
184,150 LG Balakrishnan Bros............................. 162
3,300 Mahanagar Telephone Nigam Ltd.................... 14
5,000 MRF Ltd.......................................... 228
(a)317,000 SIV Industries GDR............................... 127
50 State Bank of India.............................. --
302,600 Tube Investments of India Ltd. GDR............... 182
--------
10,522
--------
INDONESIA (1.0%)
(a)464,325 Gudang Garam (Foreign)........................... 274
(a)8,100 Gulf Indonesia Resources Ltd..................... 93
1,812,380 Indah Kiat Pulp & Paper Corp. Tbk................ 347
101,000 Semen Gresik..................................... 58
1,637,200 Telekomunikasi................................... 463
19,590 Telekomunikasi Indonesia ADR..................... 114
--------
1,349
--------
ISRAEL (4.8%)
(a)273,200 Bank Hapoalim Ltd................................ 826
(a)22,900 DOR Energy....................................... 165
1 Elbit Systems Ltd................................ --
68,000 First International Bank of Israel Ltd.'1'....... 106
</TABLE>
- --------------
24
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
ISRAEL (CONT.)
<TABLE>
<C> <S> <C>
109,700 First International Bank of Israel Ltd.'5'....... $ 858
17,333 Koor Industries Ltd.............................. 2,003
16,500 Koor Industries Ltd. ADR......................... 386
(a)16,712 Orbotech Ltd..................................... 608
530,700 Super Sol Ltd.................................... 1,748
--------
6,700
--------
KOREA (4.3%)
22,700 Hankuk Glass Industry Co., Ltd................... 248
(d)889 S.K. Telecom Corp................................ 402
(d)67,756 Pohang Iron & Steel Ltd. (Foreign)............... 2,221
4,340 S1 Corp.......................................... 439
85,518 Samsung Electronics Co. (Foreign)................ 2,647
(a)2,040 Samsung Electronics Co. GDS (New)................ 29
230 Samsung Fire & Marine Insurance.................. 38
--------
6,024
--------
MALAYSIA (2.8%)
20,000 Carlsberg Brewery Malaysia Bhd................... 61
257,000 Genting Bhd...................................... 464
242,000 Golden Hope Plantations Bhd...................... 222
150,000 Kuala Lumpur Kepong Bhd.......................... 242
(a)166,000 Magnum Corp. Bhd................................. 62
349,600 Malayan Banking Bhd.............................. 352
59,000 Malaysian International Shipping (Foreign)....... 86
46,000 Nestle Bhd....................................... 208
193,000 Petronas Gas Bhd................................. 358
52,000 R.J. Reynolds Bhd................................ 72
62,000 Rothmans of Pall Mall Bhd........................ 430
220,000 Technology Resources Industries.................. 151
421,000 Telekom Malaysia Bhd............................. 710
368,000 Tenaga Nasional Bhd.............................. 443
--------
3,861
--------
MEXICO (9.9%)
(a)182,279 Banacci 'B'...................................... 355
(a)193,888 Banacci 'L'...................................... 313
116,450 Bancomer 'B'..................................... 43
(a,e)16,880 Bancomer 'B' ADR................................. 124
19,527 Cemex 'B' ADR.................................... 172
307,499 Cemex CPO........................................ 1,153
39,504 Cemex CPO ADR.................................... 296
5,080 Cemex S.A. de C.V. 'B'........................... 22
(a)70,035 FEMSA............................................ 2,181
35,831 FEMSA ADR........................................ 1,129
320,177 Kimberly Clarke de Mexico 'A'.................... 1,131
97,284 Telemex ADR...................................... 4,676
(a)54,961 Televisa CPO GDR................................. 2,068
21,082 TV Azteca ADR.................................... 228
--------
13,891
--------
MOROCCO (0.1%)
2,076 Sni Maroc........................................ 199
--------
PAKISTAN (2.1%)
725,500 Fauji Fertilizer Co., Ltd........................ 783
341,000 Hub Power........................................ 93
104,644 Pakistan State Oil Co., Ltd...................... 166
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- -------------------------------------------------------------------------------
4,778,000 Pakistan Telecommunication Co.................... $ 1,679
(a)887,397 Sui Northern Gas Pipelines....................... 167
--------
2,888
--------
PHILIPPINES (2.1%)
2,083,560 Ayala Corp....................................... 537
41,572 Ayala Land, Inc. 'B'............................. 12
173,680 Manila Electric 'B'.............................. 458
42,170 Philippine Long Distance Telephone Co............ 961
3,200 Philippine Long Distance Telephone Co. ADR....... 72
359,720 San Miguel Corp. 'B'............................. 475
2,400,940 SM Prime Holdings, Inc........................... 380
--------
2,895
--------
POLAND (2.9%)
(a)21,511 Agros Holdings S.A. 'C'.......................... 315
15,100 Bank Rozwoju Eksportu S.A........................ 409
4,836 Bank Slaski S.A.................................. 325
10,587 Bank of Handlowy W Warszawie S.A................. 202
13,000 BIG Bank Gdanski S.A. GDR........................ 253
588,000 Big Bank Inicjatyw............................... 784
(a)14,250 Debica S.A....................................... 286
(a)106,590 Elektrim S.A..................................... 1,299
(a)7,340 Exbud S.A........................................ 88
(a)71,261 Polifarb Cieszyn-Wroclaw S.A..................... 184
--------
4,145
--------
RUSSIA (5.5%)
1,040 A O Tatneft ADR.................................. 8
(a)45,838 Lukoil Holdings.................................. 392
4,760 Lukoil Oil Co. ADR............................... 158
1,184,103 Moscow Energy (Mosenergo)........................ 59
(a,d)4,570,885 Mustcom.......................................... 1,576
(e)13,260 Pliva d.d........................................ 216
(a,d)600 Storyfirst Communications........................ 1,716
62,110 Surgutneftegaz ADR............................... 248
(a,e)2,684,488 Svyaz Finance.................................... 2,148
28,160 Tatneft ADR...................................... 218
2,679,200 Unified Energy Systems........................... 347
(a)14,487 Vimpel-Communications ADR........................ 648
--------
7,734
--------
SOUTH AFRICA (7.4%)
71,950 Amalgamated Banks of South Africa................ 450
40,106 Barlow Ltd....................................... 212
50,023 Bidvest Group Ltd................................ 382
8,400 Coronation Holdings Ltd. 'N'..................... 126
130,110 Ellerine Holdings Ltd............................ 714
66,200 Forbes Group Ltd................................. 131
217,000 Illovo Sugar Ltd................................. 271
51,978 Liberty Life Association of Africa Ltd........... 1,015
113,275 Malbak Ltd....................................... 77
548,470 NBS Boland Group Ltd............................. 714
(a)864,300 New Africa Investments Ltd. 'N'.................. 927
251,540 Orion Selections Holdings Ltd.................... 425
180,390 Orion Selections Ltd............................. 224
82,400 Persetel Holdings Ltd............................ 738
57,700 Primedia Ltd..................................... 379
359,035 Protea Furnishers Ltd............................ 255
88,810 Rembrant Group Ltd............................... 555
</TABLE>
-----------------------
25
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
<C> <S> <C>
SOUTH AFRICA (CONT.)
183,020 Sasol Ltd........................................ $ 1,062
41,760 South African Breweries Ltd...................... 861
278,962 The Education Investment Corp., Ltd.............. 507
371,600 Woolworths Holdings Ltd.......................... 276
--------
10,301
--------
TAIWAN (5.6%)
(a)140,750 Asustek Computer, Inc............................ 1,151
(a)678,000 Chinatrust Commercial Bank....................... 669
(a)411,600 Compal Electronics, Inc.......................... 1,108
1,477,469 Far Eastern Textile Ltd.......................... 1,144
(a)211,000 Hon Hai Precision Industry....................... 1,068
(a)234,000 Kuoyang Construction............................. 368
162,000 Pesident Chain Store Corp........................ 516
(a)757,520 Siliconware Precision Industries Co.............. 1,100
(a)374,000 Taiwan Semiconductor Co.......................... 773
--------
7,897
--------
THAILAND (1.7%)
100,400 Advanced Information Services Co., Ltd.
(Foreign)...................................... 428
503,800 Bangkok Bank Co., Ltd. (Foreign)................. 621
38,200 BEC World Public Co., Ltd........................ 146
73,350 Delta Electronics Public Co., Ltd. (Foreign)..... 417
(a)75,600 Exploration & Production Public Co., Ltd.
(Foreign)...................................... 573
22,000 Lanna Lignite Public Co., Ltd.................... 15
9 National Petrochemical Public Co., Ltd........... --
55,540 Shinawatra Computer Co., Ltd. (Foreign).......... 203
(a)4,200 Siam City Cement Public Co., Ltd. (Foreign)...... 3
(a)30,300 Thai Engine Manufacturing Public Co., Ltd.
(Foreign)...................................... 11
--------
2,417
--------
TURKEY (6.7%)
3,689,600 Akbank T.A.S..................................... 119
(e)17,600 Akbank T.A.S. ADR................................ 114
10,599,494 Arcelik A.S...................................... 498
5,059,500 Ege Biracilik Ve Malt Sanayii.................... 598
2,268,000 Erciyas Biracilik Ve Malt Sanayii................ 345
(a)8,136,000 Eregli Demir Ve Celik Fabrikalari A.S............ 1,268
201,000 Migros Turk...................................... 196
1,236,000 Petrol Ofisi A.S................................. 316
3,001,000 Turk Sise ve Cam Fabrikalari A.S................. 99
8,962,500 Turkiye Is Bankasi, Class C...................... 362
(a)7,819,000 Vestel Elektronik Sanayii ve Ticaret A.S......... 1,042
171,678,821 Yapi Ve Kredi Bankasi............................ 4,384
--------
9,341
--------
VENEZUELA (0.0%)
110,412 Electricidad de Caracas.......................... 50
--------
ZIMBABWE (0.7%)
718,517 Delta Corp....................................... 471
374,200 Meikles Africa Ltd............................... 458
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- -------------------------------------------------------------------------------
(e)327,000 Trans Zambesi Industries Ltd..................... $ 41
270,000 Trans Zambesi Industries Ltd..................... 34
--------
1,004
--------
TOTAL COMMON STOCKS (COST $156,635)..................................
122,675
--------
PREFERRED STOCKS (9.4%)
BRAZIL (NON-VOTING STOCKS) (9.4%)
105,926,574 Banco Bradesco................................... 889
(a,d,e)11,156 Banco Nacional................................... --
2,025,099 Brahma........................................... 1,261
66,941,161 CEMIG............................................ 2,084
4,646,590 CRT.............................................. 5,066
10,173 CVRD............................................. 202
(a)144,500 EBE S.A.......................................... 2
144,500 Electropaulo Metropolitana....................... 11
(a)144,500 EMAE S.A......................................... --
(a)144,500 EPTE S.A......................................... --
(a)12,437 Lojas Arapua S.A................................. 8
6,448,000 Lojas Renner S.A................................. 190
3,335,000 Petrobras........................................ 620
17,480,390 Telebras......................................... 1,901
(a)1,755,000 Telerj Celular S.A............................... 103
(d)53,661 TELESP........................................... 13
(a)8,972,661 TELESP Cellular.................................. 745
--------
13,095
--------
COLOMBIA (0.0%)
7,150 BanColombia...................................... 13
--------
TOTAL PREFERRED STOCKS (COST $16,158)................................ 13,108
--------
INVESTMENT COMPANY (0.3%)
UNITED STATES (0.3%)
(g)34,265 Morgan Stanley Africa Investment Fund, Inc. (COST
$414).......................................... 407
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
RIGHTS
<C> <S> <C>
- -----------------
RIGHTS (0.1%)
BRAZIL (0.0%)
(a)2,521,000 TELESP........................................... --
--------
POLAND (0.0%)
(a)15,100 Bank Rozwoju Eksportu S.A........................ 4
--------
TURKEY (0.1%)
(a,d)2,306,000 Akbank........................................... 60
(a,d)3,001,000 Turk Sise ve Cam Fabrikalari A.S................. 22
--------
82
--------
TOTAL RIGHTS (COST $155)............................................. 86
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
<C> <S> <C>
- -----------------
WARRANTS (0.0%)
THAILAND
(a,d)111,466 Siam Commercial Bank, expiring 12/31/02 (COST
$0)............................................ --
--------
</TABLE>
- --------------
26
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- -------------------------------------------------------------------------------
CONVERTIBLE DEBENTURE (0.0%)
SOUTH AFRICA (0.0%)
$ (a)15 Sasol Ltd. 8.50%, 12/15/2049 (COST $182)......... $ 81
--------
TOTAL FOREIGN SECURITIES (97.4%) (COST $173,544)..................... 136,357
--------
SHORT-TERM INVESTMENT (3.5%)
REPURCHASE AGREEMENT (3.5%)
4,983 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $4,984,
collateralized by $3,100 U.S. Treasury Bonds,
11.25%, due 2/15/15, valued at $5,097 (COST
$4,983)........................................ 4,983
--------
TOTAL INVESTMENTS IN SECURITIES (100.9%) (COST $178,527)............. 141,340
--------
FOREIGN CURRENCY (1.5%)
ARP 14 Argentine Peso................................... 14
BRL 221 Brazilian Real................................... 191
COP 359 Colombian Peso................................... --
HKD 180 Hong Kong Dollar................................. 23
HUF 424 Hungarian Forint................................. 2
INR 32,015 Indian Rupee..................................... 755
IDR 295,984 Indonesian Rupiah................................ 20
MYR 420 Malaysian Ringgit................................ 101
PKR 7,716 Pakistani Rupee.................................. 167
PHP 108 Philippine Peso.................................. 3
PLN 379 Polish Zloty..................................... 109
ZAR 3,141 South African Rand............................... 531
KRW 38,859 South Korean Won................................. 28
TWD 4,362 Taiwan Dollar.................................... 127
VEB 1,041 Venezuelan Bolivar............................... 2
--------
TOTAL FOREIGN CURRENCY (COST $2,088)................................. 2,073
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
<C> <S> <C>
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.4%) (COST $180,615)........................... $143,413
OTHER LIABILITIES IN EXCESS OF ASSETS (-2.4%)........................ (3,351)
--------
NET ASSETS (100%).................................................... $140,062
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
(d) -- Security valued at fair value--see note A-1 to financial statements.
(e) -- 144A Security - Certain conditions for public sale may exist.
(g) -- The Fund is advised by an affiliate which earns a management fee as
advisor to the Fund.
ADR -- American Depositary Receipt
CPO -- Certificate of Participation
GDR -- Global Depositary Receipt
GDS -- Global Depositary Shares
-----------------------
27
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE INFORMATION:
Under the terms of foreign currency contracts open at June 30, 1998, the
Portfolio is obligated to deliver or is to receive foreign currency in exchange
for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
CURRENCY IN EXCHANGE NET UNREALIZED
TO DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- -------------- --------- ----------- ------------ --------- -----------------
<S> <C> <C> <C> <C> <C>
$ 191 $ 191 7/1/98 BRL 221 $ 191 $ --
$ 8 8 7/2/98 IDR 120,595 8 --
$ 46 46 7/2/98 MYR 189 46 --
MYR 8,795 2,071 8/11/98 $ 2,307 2,307 236
MYR 1,170 276 8/11/98 $ 330 330 54
ZAR 11,980 1,956 9/18/98 $ 2,159 2,159 203
ZAR 1,829 291 12/23/98 $ 313 313 22
ZAR 7,388 1,174 12/24/98 $ 1,253 1,253 79
ZAR 9,156 1,463 12/28/98 $ 1,566 1,566 103
KRW 468,930 342 12/29/98 $ 308 308 (34)
ZAR 1,145 183 12/31/98 $ 188 188 5
KRW 1,196,213 865 1/4/99 $ 775 775 (90)
$ 63 63 6/21/99 ZAR 410 63 --
ZAR 11,048 1,695 6/21/99 $ 1,880 1,880 185
--------- --------- -----
$ 10,624 $ 11,387 $ 763
--------- --------- -----
--------- --------- -----
</TABLE>
- ---------------
BRL -- Brazilian Real
IDR -- Indonesian Rupiah
INR -- Indian Rupee
KRW -- South Korean Won
MYR -- Malaysian Ringgit
ZAR -- South African Rand
- --------------------------------------------------------------------------------
SWAP AGREEMENTS:
The Portfolio had the following Total Return Swap Agreements open at June 30,
1998:
<TABLE>
<CAPTION>
NOTIONAL UNREALIZED
AMOUNT DEPRECIATION
(000) DESCRIPTION (000)
- --------- ----------------------------------------------------------------------------- -------------
<S> <C> <C>
$ 2,000 Agreement with Goldman Sachs International terminating November 3, 1998 to
pay 12 month USD-LIBOR minus 4.00% and to pay or receive the return of the
Thailand SET Index converted into USD at the mid-market rate on October 30,
1998......................................................................... $ (837)
624 Agreement with Goldman Sachs International terminating March 8, 1999 to make
quarterly payments equal to 3 month USD-LIBOR plus 2.00% and to pay or
receive quarterly payments equal to the return of the Thailand SET Index
converted into USD at the mid-market rate.................................... (95)
-------------
$ (932)
-------------
-------------
</TABLE>
- ---------------
LIBOR -- London Interbank Offer Rate
THB -- Thai Baht
USD -- U.S. Dollar
- --------------------------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION (UNAUDITED)
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- ----------------------------------------------------------------------------- --------- -------------
<S> <C> <C>
Services $ 50,255 35.9%
Finance 22,073 15.8
Consumer Goods 20,565 14.7
Energy 14,128 10.1
Materials 12,368 8.8
Capital Equipment 12,036 8.6
Multi-Industry 4,932 3.5
--------- ---
$ 136,357 97.4%
--------- ---
--------- ---
</TABLE>
- --------------
28
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Canada 2.6%
France 7.0%
Germany 5.0%
Italy 2.6%
Japan 6.9%
Netherlands 3.2%
Spain 2.5%
Switzerland 8.4%
United Kingdom 11.9%
United States 35.7%
Short-Term Investment 6.0%
Other 8.2%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS
SINCE INCEPTION
(OCTOBER 29,
1997)**
-----------------
WITH WITHOUT
SALES SALES
CHARGE* CHARGE
- -------------------------------------------
<S> <C> <C>
Class A Shares 5.80% 11.38%
- -------------------------------------------
Class B Shares 6.81% 10.84%
- -------------------------------------------
Class C Shares 6.70% 10.74%
- -------------------------------------------
MSCI World Index N/A 20.12%
- -------------------------------------------
</TABLE>
*The returns above are calculated using the applicable sales charge for Class A
shares and the deferred sales charge for Class B and Class C shares.
**Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
The Morgan Stanley Capital International (MSCI) World Index is an unmanaged
index which includes securities listed on the stock exchanges of the U.S.,
Europe, Canada, Australia, New Zealand, and the Far East and assumes dividends
are reinvested net of withholding tax.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
ISSUER COUNTRY NET ASSETS
- ----------------------------- ------------- --------------
<S> <C> <C>
Nestle S.A. Switzerland 3.0%
Groupe Danone RFD France 2.3%
Reckitt & Coleman United 2.3%
Kingdom
Chase Manhattan Corp. United States 2.2%
Philip Morris Cos., Inc. United States 2.2%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- --------------------------- --------- -------------
<S> <C> <C>
Capital Equipment $177,354 22.9 %
Services 140,324 18.2 %
Consumer Products 139,424 18.0 %
Finance 126,276 16.3 %
Materials 68,631 8.9 %
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
Global Equity Fund Class A Global Equity Fund Class B Global Equity Fund Class C MSCI World Index
10/29/97 $9,500 $10,000 $10,000 $10,000
6/30/98 $10,495 $11,085 $11,075 $11,321
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; the maximum deferred sales charge was
deducted from the value of the investment of $10,000 in Class B and Class C
shares; all recurring fees (including management fees) were deducted; and all
dividends and distributions were reinvested.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The investment objective of the Van Kampen Global Equity Fund, formerly known as
the Morgan Stanley Global Equity Fund, is to seek long-term capital appreciation
by investing primarily in equity securities of issuers in developed markets
throughout the world, and in emerging markets on an opportunistic basis.
For the period from the inception of the portfolio on October 29, 1997, through
June 30, 1998, the Fund generated a total return of 12.21 percent for Class A
shares at net asset value, as compared to a total return of 20.12 percent for
the Morgan Stanley Capital International (MSCI) World Index for the same period.
The Fund's underperformance in 1998 was almost entirely due to weak relative
performance from U.S. stock selection, particularly in the second quarter. It is
also clearly reflective of the fact that the U.S. market is being driven to
record levels by macro-cap names such as General Electric and Coca-Cola
respectively trading at 35 times and 53 times trailing earnings. As value
investors, we are loath to pay such premiums in what seems to be a flight to
(apparent) quality.
Several of our U.S. stocks were hurt, however, by specific events that we
believe caused them to be oversold. Borg Warner (BWA), for example, the auto
components manufacturer, fell 24 percent during the quarter because of Asian
fears (20 percent of sales) and production delays within Ford, which produces 20
percent of BWA's sales. The oil stocks, Noble Drilling, and Ocean Energy,
continue to be affected by weakness in the price of oil. Philip Morris, one of
our largest holdings, fell 4 percent amid continuing litigation worries. We
expect, however, some shareholder-friendly measures to be announced by the
company during the second half of the year.
THE COUNTRY-SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MSCI
WORLD INDEX AND ARE FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED
AS A GUARANTEE OF THE FUND'S FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A
DESCRIPTION OF CERTAIN RISK CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL
INVESTING.
------------------
29
<PAGE>
VAN KAMPEN
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
Stock selection in Italy and Germany was also a negative contributor during the
second quarter. Telecom Italia fell 20 percent, while in Germany, Veba was
affected by the departure of its Chairman. On a positive note, stock selection
in Switzerland and the Netherlands was particularly strong and our underweight
positions in Japan and Southeast Asia continue to benefit the portfolio.
New additions to the portfolio during the period included Groupe Danone, Chase
Manhattan, and Richemont. Groupe Danone is France's largest brewer of beer, the
world's second-largest producer of mineral water, and is number one in the
European dairy-products market. Though the company has problems in its biscuit
and pasta business, management is committed to turning these around. Danone has
a low level of maintenance capital expenditure and generates strong free cash
flow.
Chase Manhattan provides domestic and international financial services, and has
virtually completed nationalizing two of the largest mergers in U.S. banking
history. It is the leading player in the corporate loan syndication business and
has weakened recently due to concerns over its emerging markets exposure. Chase
should be able to grow earnings at a double-digit rate, and use excess cash to
buy back 3 to 4 percent of its stock.
Richemont is the Swiss holding company for Rothman's International, the
fourth-largest international tobacco group, and Vendome Luxury Group, whose
brands include Cartier, Alfred Dunhill, and Montblanc. On the negative side, the
Rupert family owns just 10 percent of the equity but controls 50 percent of the
voting stock in Richemont. However, the Ruperts have a good track record of
creating and nurturing cash-generative consumer franchises.
Given a remarkably strong first half of the year in Europe, robust returns in
the United States, and sustained weakness throughout Asia, it is somewhat
difficult to predict the second half of 1998. The U.S. market's current
fascination with Internet stocks seems to indicate an unhealthy optimism while,
it is important to note, earnings expectations for the balance of the year
remain overly optimistic. Continental Europe provides the only environment where
both corporate profits are accelerating and interest rates are likely to remain
low. While Asia's travails are slowing the pace of recovery we do not expect
even the capital goods dependent economy of Germany to stagnate. However, stock
markets have not been slow to discount this environment and multiples are high,
although European markets generally remain more attractive than the United
States on price-to-book value and price-to-cash flow multiples. The extent of
earnings disappointment from Asia will be the key driver of the second half,
although companies in both Europe and the United States typically generate less
than 10 percent of their sales there. Money flows, merger and acquisition
activity, and interest rates should remain supportive in the near term.
We decreased our U.S. weighting during the period as some of our U.S. stocks
have reached their fair-value targets and we strive to add more defensive names.
We would expect to continue our underweight in the United States, with selected
overweights in Europe. Despite regular visits from our analysts--and absent
fundamental reform--we struggle to find catalysts that will unlock what
increasingly appears to be relative value in Japan, and the risk in Southeast
Asia continues to outweigh the potential return.
<TABLE>
<S> <C> <C>
Francis Campion Richard Boon Paul Boyne
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
- --------------
30
<PAGE>
VAN KAMPEN
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
COMMON STOCKS (93.7%)
AUSTRALIA (1.3%)
2,586,000 CSR Ltd.......................................... $ 7,471
893,600 Telstra Corp., Ltd............................... 2,294
--------
9,765
--------
BELGIUM (0.2%)
30,858 G.I.B. Holdings Ltd.............................. 1,741
--------
CANADA (2.6%)
94,600 Potash Corp. of Saskatchewan, Inc................ 7,123
(a)130,000 Renaissance Energy Ltd........................... 1,948
439,600 TELUS Corp....................................... 11,367
--------
20,438
--------
FINLAND (0.5%)
210,000 Valmet Oyj....................................... 3,623
--------
FRANCE (7.0%)
5,987 Bongrain S.A..................................... 3,006
62,300 Elf Aquitaine.................................... 8,757
149,900 France Telecom S.A............................... 10,336
63,600 Groupe Danone RFD................................ 17,531
166,000 Scor............................................. 10,527
(a)55,600 SGS-Thomson Microelectronics N.V................. 3,940
--------
54,097
--------
GERMANY (5.0%)
223,400 BASF AG.......................................... 10,591
215,000 Bayer AG......................................... 11,099
133,400 Veba AG.......................................... 9,098
11,000 Viag AG.......................................... 7,441
--------
38,229
--------
HONG KONG (1.0%)
2,800,000 Hysan Development Co............................. 2,313
2,808,000 Jardine Strategic Holdings Ltd................... 5,335
--------
7,648
--------
IRELAND (2.0%)
609,166 Bank of Ireland.................................. 12,461
470,000 Green Property plc............................... 3,281
--------
15,742
--------
ITALY (2.6%)
1,700,000 Mediaset S.p.A................................... 10,854
1,823,000 Telecom Italia S.p.A............................. 8,829
--------
19,683
--------
JAPAN (6.9%)
142,000 Fuji Photo Film Co............................... 4,948
911,000 Fujisawa Pharmaceutical Co., Ltd................. 8,530
335,000 Hitachi Ltd...................................... 2,187
600 Japan Tobacco, Inc............................... 4,064
260,000 KAO Corp......................................... 4,014
590,000 Matsushita Electric Industrial Co., Ltd.......... 9,492
1,320,000 Shionogi & Co.................................... 7,618
773,000 Sumitomo Marine & Fire Insurance Co.............. 4,327
110,000 TDK Corp......................................... 8,134
--------
53,314
--------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
NETHERLANDS (3.2%)
(a)189,800 Benckiser N.V. 'B'............................... $ 11,678
201,980 ING Groep N.V.................................... 13,232
--------
24,910
--------
NEW ZEALAND (0.4%)
1,538,300 Lion Nathan Ltd.................................. 3,421
--------
PORTUGAL (0.9%)
203,500 Cimpor-Cimentos de Portugal S.A.................. 7,153
--------
SOUTH AFRICA (0.0%)
48,200 Sasol Ltd........................................ 280
--------
SPAIN (2.5%)
610,400 Iberdrola S.A.................................... 9,911
205,745 Telefonica de Espana............................. 9,512
--------
19,423
--------
SWEDEN (1.6%)
1,722,700 Nordbanken Holding AB............................ 12,633
--------
SWITZERLAND (8.4%)
6,000 ABB AG (Bearer).................................. 8,867
1,800 Ascom Holding AG (Bearer)........................ 3,325
(a)7,890 Cie Financiere Richemont AG, Class A............. 10,333
13,100 Forbo Holdings AG (Registered)................... 6,673
9,900 Holderbank Financiere Glaris AG `B' (Bearer)..... 12,606
10,700 Nestle S.A. (Registered)......................... 22,915
--------
64,719
--------
UNITED KINGDOM (11.9%)
1,836,700 Aegis Group plc.................................. 2,975
589,700 BG plc........................................... 3,412
(a)2,746,980 BTR plc, Class B................................. 7,799
304,800 Burmah Castrol plc............................... 5,446
365,000 Danka Business Systems plc ADR................... 4,312
1,255,900 English China Clays plc.......................... 4,300
838,300 Imperial Tobacco Group plc....................... 6,188
722,500 Peninsular & Oriental Steam Navigation Co........ 10,413
811,800 Premier Farnell plc.............................. 4,121
915,500 Reckitt & Colman plc............................. 17,491
628,800 Royal & Sun Alliance Insurance Group plc......... 6,505
998,100 Wolseley plc..................................... 5,867
1,961,100 WPP Group plc.................................... 12,863
--------
91,692
--------
UNITED STATES (35.7%)
279,400 Albertson's, Inc................................. 14,476
135,900 Aluminum Co. of America.......................... 8,961
522,800 American Stores Co............................... 12,645
189,500 B.F. Goodrich Co................................. 9,404
286,200 Boise Cascade Corp............................... 9,373
239,300 Borg-Warner Automotive, Inc...................... 11,501
(a)334,998 Cadiz Land Co., Inc.............................. 3,873
220,800 Chase Manhattan Corp............................. 16,670
337,900 COMSAT Corp...................................... 9,567
(a)901,600 Data General Corp................................ 13,468
(a)535,300 Egghead, Inc..................................... 4,517
146,600 Enhance Financial Services Group, Inc............ 4,948
117,300 FINOVA Group, Inc................................ 6,642
(a)456,900 GenRad, Inc...................................... 9,024
</TABLE>
-----------------------
31
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
UNITED STATES (CONT.)
128,400 General Signal Corp.............................. $ 4,622
121,500 Georgia-Pacific Corp............................. 7,161
121,500 Georgia-Pacific Corp. (Timber Group)............. 2,802
385,800 Houghton Mifflin Co.............................. 12,249
200,000 IBP, Inc......................................... 3,625
182,400 MBIA, Inc........................................ 13,657
(a)255,000 NCR Corp......................................... 8,287
(a)200,900 Noble Drilling Corp.............................. 4,834
(a)201,370 Ocean Energy, Inc................................ 3,939
368,600 Penncorp Financial Group, Inc.................... 7,556
324,500 Pharmacia & Upjohn, Inc.......................... 14,968
422,700 Philip Morris Cos., Inc.......................... 16,644
99,300 Tecumseh Products Co. 'A'........................ 5,244
178,600 Tenneco, Inc..................................... 6,798
199,100 Terra Nova (Bermuda) Holdings Ltd. 'A'........... 6,247
233,500 Tupperware Corp.................................. 6,567
117,100 Unicom Corp...................................... 4,106
197,200 United Dominion Industries....................... 6,582
199,100 UST Corp......................................... 5,276
--------
276,233
--------
TOTAL COMMON STOCKS (COST $663,297)............................. 724,744
--------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
<C> <S> <C>
- ------------
SHORT-TERM INVESTMENTS (6.0%)
REPURCHASE AGREEMENT (6.0%)
$ 46,443 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $46,450,
collateralized by $48,898 U.S. Treasury Notes,
5.50%, due 12/31/00 valued at $48,398 (COST
$46,443)....................................... 46,443
--------
TOTAL INVESTMENT IN SECURITIES (99.7%) (COST $709,740).......... 771,187
--------
</TABLE>
<TABLE>
<CAPTION>
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- --------------------------------------------------------------------------
FOREIGN CURRENCY (0.3%)
BEF 1,049 Belgian Franc.................................... $ 28
GBP 219 British Pound.................................... 366
FRF 1,437 French Franc..................................... 238
DEM 837 German Mark...................................... 464
HKD 2 Hong Kong Dollar................................. --
IEP 7 Irish Punt....................................... 10
ITL 403,375 Italian Lira..................................... 227
JPY 53,660 Japanese Yen..................................... 387
NLG 2 Netherlands Guilder.............................. 1
NZD 105 New Zealand Dollar............................... 55
ESP 1,175 Spanish Peseta................................... 8
SEK 1 Swedish Krona.................................... --
CHF 569 Swiss Franc...................................... 375
--------
TOTAL FOREIGN CURRENCY (COST $2,174)............................ 2,159
--------
TOTAL INVESTMENTS (100.0%) (COST $711,914)...................... 773,346
LIABILITIES IN EXCESS OF OTHER ASSETS (0.0%).................... (37)
--------
NET ASSETS (100%)............................................... $773,309
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
RFD -- Ranked for Dividend
ADR -- American Depositary Receipt
- --------------
32
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE INFORMATION:
Under the terms of foreign currency contracts open at June 30, 1998, the
Portfolio is obligated to deliver or is to receive foreign currency in exchange
for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
CURRENCY IN EXCHANGE
TO DELIVER VALUE SETTLEMENT FOR VALUE NET UNREALIZED
(000) (000) DATE (000) (000) GAIN (LOSS) (000)
- ----------- --------- ----------- ------------ --------- -----------------
<S> <C> <C> <C> <C> <C>
$ 752 $ 752 7/1/98 GBP 451 $ 754 $ 2
$ 244 243 7/1/98 ZAR 1,435 242 (1)
GBP 6,600 10,915 12/16/98 $ 10,850 10,850 (65)
--------- --------- ---
$ 11,910 $ 11,846 $ (64)
--------- --------- ---
--------- --------- ---
</TABLE>
- ---------------
GBP -- British Pounds
ZAR -- South African Rand
- --------------------------------------------------------------------------------
SUMMARY OF FOREIGN & U.S. SECURITIES BY INDUSTRY CLASSIFICATION (UNAUDITED)
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- --------------------------------------------------------------------------------- --------- -------------
<S> <C> <C>
Capital Equipment................................................................ $ 177,354 22.9%
Services......................................................................... 140,324 18.2
Consumer Products................................................................ 139,424 18.0
Finance.......................................................................... 126,276 16.3
Materials........................................................................ 68,631 8.9
Energy........................................................................... 35,397 4.6
Diversified Operations........................................................... 30,762 4.0
Gold Mines....................................................................... 3,874 0.5
Consumer Staples................................................................. 2,702 0.3
--------- ---
$ 724,744 93.7%
--------- ---
--------- ---
</TABLE>
-----------------------
33
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Canada 2.8%
France 3.0%
Germany 3.3%
Italy 4.0%
Japan 4.8%
Netherlands 4.1%
Spain 3.2%
Switzerland 3.9%
United Kingdom 9.1%
United States 37.5%
Short-Term Investment 21.0%
Other 3.3%
</TABLE>
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Global Equity Allocation Fund Class A Global Equity Allocation Fund Class C MSCI World Index
1/4/93 $9,500 $10,000 $10,000
6/30/93 $10,563 $10,939 $11,515
6/30/94 $11,516 $11,972 $12,696
6/30/95 $12,286 $12,671 $14,050
6/30/96 $15,311 $15,667 $16,640
6/30/97 $18,467 $18,752 $20,346
6/30/98 $21,227 $21,633 $21,840
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; all recurring fees (including
management fees) were deducted; and all dividends and distributions were
reinvested. The graph presents the performance of Class A and Class C shares
which have been in existence since the Fund's inception. The performance of
Class B shares will vary based upon the different inception date and the sales
charge and fees assessed to that Class.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
<TABLE>
<CAPTION>
TOTAL RETURNS**
-------------------------------------------------------------
AVERAGE ANNUAL
---------------------------------------
ONE YEAR FIVE YEAR SINCE INCEPTION
----------------- ----------------- -----------------
WITH WITHOUT WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE CHARGE* CHARGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares 9.50% 16.17% 13.86% 15.22% 14.70% 15.94%
- ---------------------------------------------------------------------------------------
Class B+ Shares 10.34% 15.33% N/A N/A 17.47% 18.22%
- ---------------------------------------------------------------------------------------
Class C Shares 14.37% 15.37% 14.38% 14.38% 15.09% 15.09%
- ---------------------------------------------------------------------------------------
MSCI World Index:
Class A & C Shares N/A 17.03% N/A 17.32% N/A 17.32%
Class B Shares N/A 17.03% N/A N/A N/A 17.86%
- ---------------------------------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
+ Class B shares have been offered since August 1, 1995.
The Morgan Stanley Capital International (MSCI) World Index is an unmanaged
index which includes securities listed on the stock exchanges of the U.S.,
Europe, Canada, Australia, New Zealand and the Far East and assumes dividends
are reinvested net of withholding tax.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS TOP FIVE SECTORS
PERCENT OF VALUE PERCENT OF NET
ISSUER COUNTRY NET ASSETS SECTOR (000) ASSETS
- --------------------------- ----------- -------------- --------------------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Royal Dutch Petroleum Co. Netherlands 1.3% Finance $ 120,588 20.2%
Microsoft Corp. United 1.1% Consumer Products 106,881 17.9%
States
General Electric Co. United 1.0% Services 85,785 14.4%
States
Telecom Italia SPA Italy 0.9% Capital Goods & Equipment 71,102 11.9%
Coca Cola Co. United 0.9% Energy 49,310 8.3%
States
</TABLE>
The Van Kampen Global Equity Allocation Fund, formerly known as the Morgan
Stanley Global Equity Allocation Fund, seeks long-term capital appreciation by
investing primarily in equity securities of U.S. and non-U.S. issuers in
accordance with country weightings determined by the subadviser and with stock
selection within each country designed to replicate a broad market index. As
such, emphasis is placed upon country rather than stock selection. This approach
reflects our investment philosophy that a diversified selection of securities
representing exposure to each country that we find attractive is an effective
way to maximize the return and reduce the risk associated with global investing.
For the 12 months ended June 30, 1998, the Van Kampen Global Equity Allocation
Fund generated a total return of 16.17 percent for the Class A shares at net
asset value, as compared to a total return of 17.03 percent for the Morgan
Stanley Capital International (MSCI) World Index.
The MSCI World Index performed strongly in the year ended June 30, 1998, and was
marked by the continuing strong performance of the United States and Europe and
the sharp declines of Japan and Asia. Buoyed by strengthening economies and
increasing euphoria about the approaching economic and monetary union, stock
markets in Europe led with a 37 percent
THE COUNTRY SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MSCI WORLD INDEX AND ARE FOR INFORMATIONAL PURPOSES ONLY AND
SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE PERFORMANCE.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.
- --------------
34
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
RETURN (IN U.S. DOLLARS). THE UNITED STATES RETURNED 30 PERCENT WITH STRONG FUND
FLOWS AND OPTIMISTIC EARNINGS FORECASTS SUPPORTING EQUITIES. CONVERSELY, JAPAN
AND THE REST OF ASIA FELL DRAMATICALLY, RETURNING -32 PERCENT AND -44 PERCENT,
RESPECTIVELY. THE JAPANESE ECONOMY MOVED INTO RECESSION AND GOVERNMENT POLICY
FAILED TO RESPOND WHILE THE CRISIS IN ASIA BROADENED AND DEEPENED.
During the reporting period, the single largest contributor to the portfolio's
relative outperformance was our significant underweight positions in Japan, Hong
Kong, Singapore, and Malaysia. We continued to underweight the United
States--the largest market in our investment universe--which detracted from
performance. Our overweight allocation to Europe, which we increased during the
year, was positive and the portfolio benefited, especially from overweight
positions in Italy and Spain. A slight overweight to the United Kingdom and
underweight to Finland detracted from portfolio results. Hedging most of our
Japanese yen exposure was constructive as the U.S. dollar appreciated against
the yen, while hedging a portion of our deutsche mark bloc exposure was broadly
neutral for portfolio returns.
Recently, we made several minor allocation adjustments in countries, sectors,
and currencies, gradually increasing our cash as further evidence developed of
the depth of the economic problems in Japan, Asia, and other emerging markets
such as Russia and South Africa.
We are concerned about U.S. equity valuations and market levels. Though
supported by continued liquidity, strong money growth, and record consumer
sentiment, some of the underpinnings of this bull market are weakening.
Specifically, earnings downgrades and momentum are negative and returns on
equity have moved well below peak. Forward earnings versus bond yields are back
at levels seen in the summer of 1997. Priced for perfection, we feel that there
is little room for disappointment. We remain underweight relative to our
benchmark.
We remain overweight in European equities, particularly the so-called
"Euro-bubble" countries. We still believe that the European stock markets are
the best place to be in an equity world that is generally both frothy and
expensive.
In 1998, after the glorious surge of the first three months of the year, the
second quarter was either the pause that refreshes--a period of consolidation as
the technicians would say--or a broad top formation. Frankly, we aren't quite
sure which, but if actions speak louder than words, our cash position is
definitely on the high side.
We have benefited from our long-held strategy of being overweight in Europe and
underweight in Japan, the yen, and the rest of Asia. Within Europe, our heavy
allocations to Italy and Spain that served us so well in the first quarter were
less fruitful, as the stock markets of Germany and France, where we were
modestly overweight, assumed leadership.
At this point, we are not inclined to alter our fundamental positions. There is
a lot of turbulence and random noise, but the underlying environment is that the
U.S. economy and dollar are strong, Europe is recovering, and Asia is sick.
Stock markets are discounting mechanisms so we must be alert that change at the
margin is not occurring.
With this in mind, we visited Asia in April and spent three days in Japan. We
met with investors, businessmen, the Bank of Japan, the Ministry of Finance, and
a senior leader of the LDP. We found good manners and some charm but nothing to
cheer us. Has there been positive change at the margin in Japan? Maybe a little,
but the problems are so dire and confidence so low, that dramatic solutions
which alter sentiment are needed. Instead, we feel the government tries to fool
the markets with talk and halfway measures. The bridge bank proposal is a step
in the right direction, but details are lacking and it will take years to play
out; it is not a market-clearing solution. The politicians' vacillation on tax
cuts is pathetic, and the markets are tiring of it.
We still believe Japan's equity market is expensive, its economy a disaster, and
its political institutions remain in full denial of the seriousness of the
predicament that the country is in. We are actually more bearish on the yen than
the stock market, and our approximately 40 percent of the index weight in Japan
is 90 percent hedged back to the dollar.
------------------
35
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
We believe the rest of Asia is not in a recession but a depression. Visits to
Hong Kong and China confirmed this, as did the New York visit with the Finance
Minister of Malaysia. We eliminated our position in Hong Kong, which turned out
to be felicitous. The problems of Asia have been dissected ad nauseam, but in
summary we believe it is too soon to make a serious investment commitment.
Europe still looks like the place to be because of its economic cycle and
because of Economic and Monetary Union (EMU) and its accompanying euphoria.
Recent visits to both Spain and Italy confirmed our conviction that these two
markets are the essence of the so-called "Euro-bubble" concept.
There is still a lot of skepticism about EMU, and some very smart people believe
that it won't work in the long run. We say baloney! We say it will work and the
surprise may be how successful it is. The Euro-bubble markets should be the
prime beneficiaries. The realpolitik of Euroland requires that the new European
Central Bank must converge interest rates at a low enough level to sustain
growth in the slower-growing core countries where unemployment is still very
high, even if this means that the faster growing fringe economies overheat. The
elite that has stage-managed EMU so adroitly simply cannot take the chance that
the French and German economies falter in the first year of EMU.
We are continuing to put a lot of effort into sector research. We maintain our
emphasis on financial stocks across Europe. In Italy we heard repeatedly how the
banks and insurance companies are benefiting from low interest rates and strong
fund flows. We added a tilt into European oil stocks during the second quarter,
which we have profitably unwound, and we are currently buying a broad cross
section of European real estate securities.
Commercial property prices across Europe are still very depressed, but we
believe the cycle is about to turn, as do local experts and our sources in
Morgan Stanley's real estate group. Already rents are beginning to firm, and
many of the stocks are selling well below both net asset values and replacement
costs of the underlying assets.
In conclusion, we are carefully watching markets and economic events. The risk
is that Asia undermines the Western economies, and indeed there are a few early
signs that both the United States and Europe are slowing. If so, earnings will
be disappointing but interest rates will fall again. Will equity markets go down
under such circumstances? In our opinion, it depends on how severe the earnings
shortfall is. We do believe that international portfolios will outperform U.S.
equities in this environment.
<TABLE>
<S> <C>
Barton M. Biggs Ann D. Thivierge
PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
- --------------
36
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
COMMON STOCKS (80.1%)
AUSTRALIA (0.0%)
1,698 Broken Hill Proprietary Ltd...................... $ 14
460 Coles Myer Ltd................................... 2
595 Gio Australia Holdings Ltd....................... 2
651 MIM Holdings Ltd................................. --
16 Westfield Trust.................................. --
(a)755 Westfield Trust (New)............................ 1
--------
19
--------
AUSTRIA (0.8%)
600 Austria Mikro Systems International AG........... 41
2,900 Austrian Airlines Osterreichische Luftverkehrs
AG............................................. 96
13,128 Bank Austria AG.................................. 1,068
800 Bau Holdings AG.................................. 45
2,100 Boehler-Udderholm AG............................. 139
300 BWT AG........................................... 64
2,000 Creditanstalt-Bankverein......................... 213
1,100 Creditanstalt-Bankverein: Vorzu.................. 119
4,600 Flughafen Wein AG................................ 221
1,000 Generali AG...................................... 294
(a)700 Lenzing AG....................................... 54
2,300 Mayr-Melnhof Karton AG........................... 150
1,100 Oesterreichische Brau-Beteiligungs AG............ 65
5,600 Oesterreichish Elektrizitaets, 'A'............... 670
4,300 OMV AG........................................... 576
2,600 Radex-Heraklith Industriebet AG.................. 126
1,900 Steyr-Daimler-Puch AG............................ 52
2,300 VA Technologies AG............................... 286
1,600 Wienerberger Baustoffindustrie AG................ 387
--------
4,666
--------
BELGIUM (0.1%)
6,000 Kredietbank N.V.................................. 537
--------
CANADA (2.8%)
9,800 Abitibi-Consolidated, Inc........................ 126
8,000 Agrium, Inc...................................... 100
(a)8,100 Air Canada....................................... 72
13,900 Alcan Aluminum Ltd............................... 383
3,700 Avenor, Inc...................................... 86
14,300 Bank of Montreal................................. 787
26,000 Bank of Nova Scotia.............................. 643
22,900 Barrick Gold Corp................................ 436
8,500 Barrick Gold Corp................................ 163
34,000 BCE, Inc......................................... 1,441
17,500 Bombardier, Inc., 'A'............................ 476
7,400 CAE, Inc......................................... 63
3,100 Cameco Corp...................................... 86
22,400 Canadian Imperial Bank of Commerce............... 720
1,976 Canadian National Railway Co..................... 105
5,600 Canadian Natural Resources Ltd................... 96
8,600 Canadian Occidental Petroleum Ltd................ 183
18,800 Canadian Pacific Ltd............................. 529
5,000 Canadian Tire Corp., 'A'......................... 145
4,500 Cominco Ltd...................................... 67
(a)4,000 Corel Corp....................................... 8
3,200 Cott Corp........................................ 23
5,500 Dofasco, Inc..................................... 90
8,800 Domtar, Inc...................................... 59
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
(a)8,600 Echo Bay Mines Ltd............................... $ 18
7,500 George Weston Ltd................................ 265
(a)13,400 Gulf Canada Resources Ltd........................ 66
23,200 Imasco Ltd....................................... 428
27,300 Imperial Oil Ltd................................. 477
8,600 Inco Ltd......................................... 117
3,200 IPL Energy, Inc.................................. 144
11,500 Laidlaw, Inc..................................... 140
15,800 Laidlaw, Inc. 'B'................................ 191
3,800 Loewen Group, Inc................................ 102
8,500 MacMillan Bloedel Ltd............................ 91
3,900 Magna International, Inc., 'A'................... 267
(a)9,500 Methanex Corp.................................... 83
4,400 Molson Companies Ltd., 'A'....................... 80
6,100 Moore Corp., Ltd................................. 81
(a)8,200 Newbridge Networks Corp.......................... 196
13,300 Noranda, Inc..................................... 230
25,600 Northern Telecom Ltd............................. 1,451
29,700 Nova Corp........................................ 340
16,000 Petro............................................ 257
11,600 Placer Dome, Inc................................. 135
3,000 Potash Corp. of Saskatchewan, Inc................ 226
7,100 Power Corp. of Canada............................ 333
(a)7,200 Provigo, Inc..................................... 44
(a)7,400 Ranger Oil Ltd................................... 53
(a)7,100 Renaissance Energy Ltd........................... 106
(a)9,600 Rogers Communication, Inc., 'B'.................. 85
16,900 Royal Bank of Canada............................. 1,016
19,300 Seagram Co., Ltd................................. 786
(a)4,400 Suncor, Inc...................................... 149
(a)7,200 Talisman Energy, Inc............................. 206
4,700 Teck Corp., 'B'.................................. 51
5,800 TELUS Corp....................................... 150
31,500 Thomson Corp..................................... 914
13,100 Transcanada Pipelines Ltd........................ 290
6,700 Westcoast Energy, Inc............................ 149
--------
16,604
--------
DENMARK (0.2%)
2,000 BG Bank A/S...................................... 124
3,800 Den Danske Bank Corp............................. 456
600 Jyske Bank A/S (Registered)...................... 71
3,800 Unidanmark A/S 'A' (Registered).................. 342
--------
993
--------
FRANCE (3.0%)
2,677 Accor S.A........................................ 749
3,406 Alcatel Alsthom.................................. 693
7,182 AXA S.A.......................................... 808
6,925 Banque Nationale de Paris........................ 566
4,591 Banque Paribas................................... 491
1,337 BIC Corp......................................... 95
613 Bouygues......................................... 111
761 Canal Plus....................................... 142
4,763 Cap Gemini S.A................................... 748
875 Carrefour S.A.................................... 554
1,948 Cie de Saint-Gobain.............................. 361
751 Credit Commercial de France...................... 63
383 Dexia France..................................... 52
5,759 Elf Aquitaine.................................... 810
2,474 Elf Sanofi S.A................................... 291
</TABLE>
-----------------------
37
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
FRANCE (CONT.)
<TABLE>
<C> <S> <C>
697 Eridania Beghin-Say S.A.......................... $ 154
256 Essilor International............................ 108
3,633 Etablissements Economiques du Casino
Guichard-Perrachon............................. 290
18,547 France Telecom S.A............................... 1,279
1,768 Groupe Danone RFD................................ 487
1,650 Havas S.A........................................ 140
375 Imetal S.A....................................... 52
2,430 Klepierre........................................ 472
2,167 L'air Liquide.................................... 358
1,441 L'Oreal.......................................... 801
2,277 Lafarge S.A...................................... 235
(a)71 Lafarge S.A...................................... 7
2,484 Lagardere S.C.A.................................. 103
698 Legrand S.A...................................... 185
1,965 LVMH Moet Hennessy Louis Vuitton................. 393
2,807 Lyonnaise des Eaux S.A........................... 462
2,750 Michelin (C.G.D.E.) 'B'.......................... 159
193 Pathe S.A........................................ 38
1,540 Pernod-Ricard.................................... 107
486 Pinault S.A...................................... 407
434 Promodes......................................... 240
1,176 PSA Peugeot Citroen S.A.......................... 253
7,548 Rhone-Poulenc S.A. 'A'........................... 426
111 Sagem............................................ 86
2,989 Schneider S.A.................................... 238
(a)1,917 Silic............................................ 349
6,256 Simco S.A. (Registered).......................... 513
88 Societe Eurafrance S.A........................... 55
3,218 Societe Generale................................. 669
13 Sodexho Alliance S.A............................. 3
(a)676 Sodexho S.A...................................... 128
6,120 Sophia S.A....................................... 283
2,745 Thomson CSF S.A.................................. 104
5,431 Total S.A. 'B'................................... 706
3,620 Unibail.......................................... 468
5,699 Usinor Sacilor................................... 88
1,494 Valeo S.A........................................ 153
2,822 Vivendi.......................................... 602
--------
18,135
--------
GERMANY (3.3%)
1,183 Adidas AG........................................ 205
(a)900 Agiv AG.......................................... 25
(a)292 Allianz AG....................................... 95
5,550 Allianz AG....................................... 1,831
483 AMB Aachener & Muenchener Beteiligungs AG........ 56
2,000 Bankgesellschaft Berlin AG....................... 42
14,150 BASF AG.......................................... 671
17,550 Bayer AG......................................... 906
8,100 Bayer Hypothecen-und Wechsel-Bank AG............. 514
9,550 Bayer Vereinsbank AG............................. 813
533 Beiersdorf AG.................................... 34
800 BHF-Bank AG...................................... 30
2,400 Bilfinger & Berger Bau AG........................ 82
183 Brau und Brunnen AG.............................. 24
967 CKAG Colonia Konzern AG.......................... 120
3,900 Commerzbank AG................................... 149
2,033 Continental AG................................... 63
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
16,100 Daimler-Benz AG.................................. $ 1,580
2,383 Degussa AG....................................... 147
18,450 Deutsche Bank AG................................. 1,564
55,187 Deutsche Telekom AG.............................. 1,490
15,167 Dresdner Bank AG................................. 818
1,253 Heidelberger Zement AG........................... 119
2,433 Hochtief AG...................................... 117
800 IKB Deutsche Industriebank AG.................... 16
250 Karstadt AG...................................... 121
1,267 Kloeckner-Humboldt-Deutz AG...................... 15
283 Linde AG......................................... 198
8,700 Lufthansa AG..................................... 219
350 MAN AG........................................... 136
9,170 Mannesmann AG.................................... 931
4,290 Merck KGAA....................................... 192
5,557 Metro AG......................................... 337
1,947 Muenchener Rueckversicherungs-Gesellschaft AG
(Registered)................................... 966
450 Preussag AG...................................... 161
12,204 RWE AG........................................... 724
1,477 SAP AG........................................... 897
1,900 Schering AG...................................... 224
13,233 Siemens AG....................................... 806
100 STRABAG AG....................................... 9
867 Thyssen AG....................................... 220
12,283 VEBA AG.......................................... 838
695 Viag AG.......................................... 470
748 Volkswagen AG.................................... 719
--------
19,694
--------
HONG KONG (0.0%)
139 Bank of East Asia................................ --
700 Cathay Pacific Airways Ltd....................... --
1,600 Hong Kong & China Gas Co., Ltd................... 2
12,643 Hong Kong Land Holdings Ltd...................... 16
500 Hong Kong Shanghai Hotels........................ --
200 Hopewell Holdings Ltd............................ --
1,400 Hutchison Whampoa Ltd............................ 7
400 Johnson Electric Holdings Ltd.................... 1
1,300 New World Development Co., Ltd................... 3
1,000 Regal Hotel International........................ --
7,593 Sino Land Co..................................... 3
2,400 South China Morning Post......................... 1
1,340 Sun Hung Kai Properties Ltd...................... 6
200 Swire Pacific Ltd. 'A'........................... 1
500 Television Broadcasting Ltd...................... 1
800 Varitronix International Ltd..................... 2
--------
43
--------
IRELAND (0.1%)
46,700 Allied Irish Banks plc........................... 676
--------
ITALY (4.0%)
76,176 Assicurazioni Generali S.p.A..................... 2,478
128,300 Banca Commerciale Italiana....................... 768
20,000 Banca Fideuram................................... 114
10,000 Banca Intesa S.p.A............................... 29
1,000 Banca Popolare di Bergamo Credito Varesino
S.p.A.......................................... 21
75,000 Banca di Roma.................................... 156
60,900 Banco Ambrosiano Veneto.......................... 341
</TABLE>
- --------------
38
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
ITALY (CONT.)
<TABLE>
<C> <S> <C>
4,000 Banco Popolare Milano............................ $ 32
40,000 Banco di Napoli.................................. 51
133,800 Benetton Group S.p.A............................. 278
11,700 Burgo Cartiere S.p.A............................. 94
(a)418,700 Ciga Spa......................................... 487
218,500 Credito Italiano S.p.A........................... 1,144
48,000 Edison S.p.A..................................... 385
568,000 Ente Nazionale Idrocarburi S.p.A................. 3,724
9,500 Falck Acciaierie & Ferriere Lombarde............. 61
239,630 Fiat S.p.A....................................... 1,049
52,970 Fiat S.p.A. Di Risp NCS.......................... 131
85,200 Immobiliare Metanopoli S.p.A..................... 94
(a)26,000 Impreglio S.p.A.................................. 23
74,600 Istituto Bancario San Paolo di Torina S.p.A...... 1,077
53,950 Istituto Mobiliare Italiano S.p.A................ 850
500,720 Istituto Nazionale delle Assicurazioni (INA)..... 1,423
11,650 Italcementi S.p.A. RNC........................... 51
17,300 Italcementi S.p.A................................ 156
49,400 Italgas.......................................... 201
16,878 La Rinascente S.p.A.............................. 168
36,500 Magneti Marelli S.p.A............................ 80
86,000 Mediaset S.p.A................................... 549
51,260 Mediobanca S.p.A................................. 651
208,108 Montedison S.p.A................................. 258
68,900 Montedison S.p.A. Di Risp NCS.................... 53
(a)252,880 Olivetti Group................................... 376
114,640 Parmalat Finanziaria S.p.A....................... 234
115,000 Pirelli S.p.A.................................... 359
22,269 R.A.S............................................ 290
462 R.A.S. di Risp................................... 4
250 S.A.I............................................ 2
10,100 S.A.I............................................ 129
(a)12,000 Sasib S.p.A...................................... 54
22,000 Sirti S.p.A...................................... 120
51,000 Snia BPD S.p.A................................... 63
470,300 Telecom Italia Mobile S.p.A...................... 2,877
110,000 Telecom Italia Mobile S.p.A. RNC................. 371
68,663 Telecom Italia S.p.A. RNC........................ 333
255,388 Telecom Italia S.p.A............................. 1,881
--------
24,070
--------
JAPAN (4.8%)
28,800 Ajinomoto Co., Inc............................... 252
(a)30,800 Aoki Corp........................................ 15
500 Asahi Bank Ltd................................... 2
19,000 Asahi Breweries Ltd.............................. 240
59,400 Asahi Chemical Industry Co., Ltd................. 214
53,600 Asahi Glass Co................................... 290
91,600 Bank of Tokyo-Mitsubishi Ltd..................... 971
500 Bank of Yokohama................................. 1
19,000 Bridgestone Corp................................. 450
23,800 Canon, Inc....................................... 541
11,000 Casio Computer Co., Ltd.......................... 102
800 Chiba Bank Ltd................................... 3
18,800 Chugai Pharmaceutical Ltd........................ 123
23,800 Dai Nippon Printing Co., Ltd..................... 380
18,800 Daiei, Inc....................................... 44
18,800 Daikin Industries Ltd............................ 121
18,800 Daiwa House Industry............................. 166
20,600 Denso Corp....................................... 342
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
114 East Japan Railway Co............................ $ 536
13,800 Ebara Corp....................................... 123
8,300 Fanuc Co......................................... 287
11,000 Fuji Photo Film Co............................... 383
45,600 Fujitsu Ltd...................................... 480
13,800 Furukawa Electric................................ 46
23,000 Hankyu Corp...................................... 94
(a)18,000 Hazama-Gumi...................................... 10
98,000 Hitachi Ltd...................................... 640
23,000 Honda Motor Co................................... 820
12,000 Ito-Yokado Co., Ltd.............................. 565
(a)61,000 Japan Airlines Co., Ltd.......................... 170
43,600 Japan Energy Corp................................ 46
800 Joyo Bank........................................ 3
8,800 Jusco Co......................................... 162
23,800 KAO Corp......................................... 367
35,600 Kajima Corp...................................... 98
25,900 Kansai Electric Power Co......................... 450
28,600 Kawasaki Steel Corp.............................. 52
41,600 Kinki Nippon Railway............................. 195
38,600 Kirin Brewery Co., Ltd........................... 365
34,600 Komatsu Ltd...................................... 168
51,400 Kubota Corp...................................... 119
(a)60,600 Kumagai Gumi Co., Ltd............................ 44
5,500 Kyocera Corp..................................... 269
16,800 Kyowa Hakko Kogyo................................ 67
46,000 Long-Term Credit Bank of Japan Ltd............... 27
50,200 Marubeni Corp.................................... 100
4,800 Marui Co., Ltd................................... 72
51,400 Matsushita Electric Industrial Co., Ltd.......... 827
59,000 Mitsubishi Chemical Corp......................... 107
51,000 Mitsubishi Corp.................................. 316
67,400 Mitsubishi Electric Corp......................... 155
106,000 Mitsubishi Heavy Industries Ltd.................. 401
34,600 Mitsubishi Materials Corp........................ 71
26,000 Mitsubishi Trust and Banking Corp................ 221
51,200 Mitsui & Co...................................... 277
(a)37,600 Mitsui Engineering & Shipbuilding Co., Ltd....... 29
400 Mitsui Trust & Banking Co., Ltd.................. 1
17,800 Mitsukoshi....................................... 51
12,800 Mycal Corp....................................... 81
32,600 NEC Corp......................................... 304
38,600 New OJI Paper Co., Ltd........................... 168
18,800 NGK Insulators Ltd............................... 163
15,000 Nippon Express Co., Ltd.......................... 81
16,800 Nippon Fire & Marine Insurance Co................ 69
16,800 Nippon Light Metal Co............................ 19
16,800 Nippon Meat Packers, Inc......................... 206
54,600 Nippon Oil Co.................................... 177
216,000 Nippon Steel Corp................................ 380
292 Nippon Telegraph & Telephone Corp. ADR........... 2,423
51,400 Nippon Yusen Kabushiki Kaisha.................... 174
350 Nissan Fire & Marine Insurance Co., Ltd.......... 1
65,400 Nissan Motor Co., Ltd............................ 206
114,000 NKK Corp......................................... 109
20,800 Odakyu Electric Railway Co....................... 64
82,200 Osaka Gas Co..................................... 211
16,800 Penta-Ocean Construction......................... 39
5,000 Pioneer Electronic Corp.......................... 96
2,000 Rohm Co.......................................... 206
</TABLE>
-----------------------
39
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
JAPAN (CONT.)
<TABLE>
<C> <S> <C>
66,200 Sakura Bank Ltd.................................. $ 172
14,800 Sankyo Co., Ltd.................................. 337
61,000 Sanwa Bank Ltd................................... 546
51,400 Sanyo Electric Co., Ltd.......................... 156
4,800 Secom Co......................................... 277
3,900 Sega Enterprises Ltd............................. 67
18,800 Sekisui House Ltd................................ 146
34,600 Sharp Corp....................................... 281
5,000 Shimano, Inc..................................... 127
27,800 Shimizu Corp..................................... 80
7,000 Shin-Etsu Chemical Co............................ 121
7,000 Shiseido Co., Ltd................................ 80
800 Shizuoka Bank.................................... 9
34,600 Showa Denko K.K.................................. 35
700 Softbank Corp.................................... 27
8,900 Sony Corp........................................ 767
69,200 Sumitomo Chemical Co............................. 214
36,400 Sumitomo Corp.................................... 175
25,800 Sumitomo Electric Industries..................... 261
70,400 Sumitomo Metal Industries........................ 113
18,000 Sumitomo Metal Mining Co......................... 73
17,800 Sumitomo Osaka Cement Co., Ltd................... 23
38,600 Taisei Corp., Ltd................................ 84
11,000 Taisho Pharmaceutical Co......................... 206
21,000 Taiyo Yuden Co., Ltd............................. 224
23,800 Takeda Chemical Industries....................... 634
38,600 Teijin Ltd....................................... 117
23,800 Tobu Railway Co.................................. 63
13,500 Tohoku Electric Power............................ 199
600 Tokai Bank....................................... 3
59,400 Tokio Marine & Fire Insurance Co................. 611
32,500 Tokyo Electric Power Co.......................... 638
2,000 Tokyo Electron Ltd............................... 61
77,200 Tokyo Gas Co..................................... 172
28,800 Tokyu Corp....................................... 87
23,800 Toppan Printing Co., Ltd......................... 255
58,500 Toray Industries, Inc............................ 304
17,800 Toto Ltd......................................... 108
38,600 Toyobo Ltd....................................... 51
77,000 Toyota Motor Corp................................ 1,994
34,600 Ube Industries Ltd............................... 45
300 Yamaichi Securities.............................. --
19,000 Yokogawa Electric Corp........................... 101
--------
28,692
--------
NETHERLANDS (4.1%)
83,307 ABN Amro Holding N.V............................. 1,950
4,200 Akzo Nobel N.V................................... 934
29,800 Elsevier N.V..................................... 450
4,106 Getronics........................................ 213
15,313 Heineken N.V..................................... 602
57,176 ING Groep N.V.................................... 3,746
4,039 KLM Royal Dutch Airlines N.V..................... 164
25,874 Koninklijke Ahold N.V............................ 831
287 Koninklijke Hoogovens............................ 12
5,300 Koninklijke KNP BT N.V........................... 137
27,847 Koninklijke PTT Nederland N.V.................... 1,072
1,200 Nedlloyd Groep N.V............................... 24
1,656 Oce N.V.......................................... 71
(a)1,100 Oce N.V.......................................... 47
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
17,600 Phillips Electronics N.V......................... $ 1,480
(a)22,700 Rodamco N.V...................................... 623
107,400 Royal Dutch Petroleum............................ 5,958
33,600 Royal Dutch Petroleum Co., New York Shares....... 1,842
2,318 Stork N.V........................................ 74
(a)27,847 TNT Post Group N.V............................... 712
32,900 Uni-Invest N.V................................... 477
32,100 Unilever N.V..................................... 2,548
3,664 Wolters Kluwer N.V............................... 503
--------
24,470
--------
NORWAY (0.3%)
(a)121,900 Choice Hotels Scandinavia S.A.................... 366
64,000 Christiania Bank OG Kreditkasse.................. 268
74,100 Den Norske Bank ASA.............................. 389
100 Hafslund ASA 'A'................................. --
(a)68,540 Linstow ASA...................................... 492
(a)33 NCL Holdings ASA................................. --
100 Norsk Hydro ASA.................................. 4
(a)200 Storebrand ASA................................... 2
--------
1,521
--------
PORTUGAL (1.3%)
38,742 Banco Comercial (Registered)..................... 1,101
18,620 Banco Espirito Santo............................. 559
12,300 Banco Totta & Acores 'B' (Registered)............ 373
16,300 BPI-SGPS S.A. (Registered)....................... 526
1,300 Cia de Seguros Tranquilidade (Registered)........ 35
13,500 Cimpor-Cimentos de Portugal S.A.................. 474
700 CIN S.A.......................................... 52
3,100 Corticeira Amorim, S.A........................... 60
59,500 EDP-Electricidade de Portugal, S.A............... 1,384
1,000 Engil-SGPS....................................... 11
2,600 INAPA, S.A....................................... 34
(a)18,450 Jeronimo Martins, SGPS, S.A...................... 887
14,600 Portucel Industrial-Empresa Produtora de Celulose
S.A............................................ 116
30,500 Portugal Telecom S.A............................. 1,617
(a)2,000 Sociedade de Construcoes Soares da Costa S.A..... 17
6,700 Sonae Investimentos S.A.......................... 366
1,900 UNICER-Uniao Cervejeira S.A...................... 42
--------
7,654
--------
SPAIN (3.2%)
840 Acerinox S.A..................................... 112
(a)297 ACS S.A.......................................... 9
(a)41 Aguas de Barcelona............................... 2
45,280 Argentaria S.A................................... 1,016
16,742 Autopistas Concesionaria Espanola S.A............ 259
3,300 Azucarere Ebro Agricolas S.A..................... 98
59,200 Banco Bilbao Vizcaya, S.A. (Registered).......... 3,038
(a)7,200 Banco Espanol de Credito S.A..................... 86
1,400 Banco Popolar Espanol S.A........................ 120
94,000 Banco Santander S.A.............................. 2,406
400 Bankinter S.A.................................... 26
29,800 BCH S.A.......................................... 937
1,000 Corporacion Financiera Alba S.A.................. 110
3,898 Corporacion Mapfre............................... 137
3,850 Dragados y Construcciones S.A.................... 123
</TABLE>
- --------------
40
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
SPAIN (CONT.)
<TABLE>
<C> <S> <C>
1,450 Empresa Nacional de Cellulosas S.A............... $ 26
81,600 Endesa S.A....................................... 1,785
317 Energia y Industrias Aragonesas.................. 3
(a)11,600 Ercros S.A....................................... 15
4,000 Fomento de Construcciones y Contratas S.A........ 206
11,200 Gas Natural SDG S.A. 'E'......................... 809
3,335 General de Aguas De Barcelona S.A................ 186
73,000 Iberdrola S.A.................................... 1,185
3,202 Immobiliaria Metropolitana Vasco Central S.A..... 94
500 Portland Valderrivas S.A......................... 61
23,800 Repsol S.A....................................... 1,312
(a)12,500 Tabacalera S.A. 'A'.............................. 256
76,054 Telefonica de Espana............................. 3,516
(a)3,145 Telefonica de Espana............................. 146
19,900 Union Electrica Fenosa S.A....................... 256
4,500 Uralita S.A...................................... 64
15,396 Vallehermoso S.A................................. 566
1,550 Viscofan Industria Navarra de Envolturas
Celulosicas S.A................................ 72
4,363 Zardoya-Otis S.A................................. 130
--------
19,167
--------
SWEDEN (1.6%)
21,300 ABB AB 'A'....................................... 302
8,900 ABB AB 'B'....................................... 124
5,100 AGA AB 'A'....................................... 80
(a)45,600 Asticus AB....................................... 503
42,366 Astra AB 'A'..................................... 866
10,300 Astra AB 'B'..................................... 205
4,250 Atlas Copco AB 'A'............................... 116
2,100 Atlas Copco AB 'B'............................... 57
14,000 Castellum AB..................................... 165
55,400 Diligentia AB.................................... 479
12,500 Electrolux AB 'B'................................ 215
600 Esselte AB 'B'................................... 14
10,900 Fastighets AB Tornet............................. 175
100 Granges AB....................................... 2
6,700 Hennes & Mauritz AB 'B'.......................... 427
(a)3,500 NetCom Systems AB 'B'............................ 134
37,100 Nordbanken Holding AB............................ 272
14,800 Piren AB......................................... 117
6,000 Sandvik AB 'A'................................... 166
2,500 Sandvik AB 'B'................................... 69
8,100 SCA AB 'B'....................................... 210
2,900 Securitas AB 'B'................................. 142
(a)17,000 Skandia Forsakrings AB........................... 243
36,200 Skandinaviska Enskilda Banken 'A'................ 619
4,000 Skanska AB 'B'................................... 179
3,000 SKF AB 'B'....................................... 55
20,700 Sparbanken Sverige AB 'A'........................ 623
10,450 Stora Kopparbergs Bergslags Aktiebolag........... 164
13,400 Svenska Handelsbanken 'A'........................ 622
600 Svenska Handelsbanken 'B'........................ 26
3,400 Svenskt Stal AB 'A'.............................. 52
60,400 Telefonaktiebolaget LM Ericsson.................. 1,764
4,500 Trelleborg AB 'B'................................ 59
500 Volvo AB 'A'..................................... 15
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
14,000 Volvo AB 'B'..................................... $ 417
2,400 Wm-Data Ab 'B'................................... 83
--------
9,761
--------
SWITZERLAND (3.9%)
415 ABB AG (Bearer).................................. 613
770 Adecco S.A. (Bearer)............................. 348
240 Alusuisse-Lonza Holding AG (Registered).......... 305
80 Banca del Gottardo 'B'........................... 58
40 Banque Cantonale Vaudoise........................ 16
10,450 CS Holding AG (Registered)....................... 2,327
225 Georg Fischer AG (Registered).................... 88
285 Holderbank Financiere Glarus AG (Bearer)......... 363
1,655 Nestle S.A. (Registered)......................... 3,544
2,696 Novartis AG (Registered)......................... 4,489
69 Roche Holding AG (Bearer)........................ 1,023
293 Roche Holding AG-Genusshein...................... 2,879
325 Sairgroup (Registered)........................... 107
610 Schweizerische Rueckver (Registered)............. 1,544
80 SGS Societe Generale de Surveillance Holding S.A.
(Bearer)....................................... 136
215 SMH AG (Bearer).................................. 166
170 Sulzer AG (Registered)........................... 134
450 SwissAir AG (Registered)......................... 148
(a)8,594 UBS AG (Registered).............................. 3,198
1,070 Union Bank of Switzerland (Registered)........... 386
275 Valora Holding AG (Registered)................... 73
60 Vontobel Holding AG 'B'.......................... 87
2,005 Zuerich Versicherungs-Gesellschaft
(Registered)................................... 1,280
--------
23,312
--------
UNITED KINGDOM (9.1%)
52,400 Abbey National plc............................... 932
26,150 Arjo Wiggins Appleton plc........................ 88
18,725 Associated British Foods plc..................... 177
70,289 Barclays plc..................................... 2,028
36,717 Bass plc......................................... 689
115,891 B.A.T Industries plc............................. 1,161
145,190 BG plc........................................... 840
26,177 BICC plc......................................... 56
49,451 Blue Circle Industries plc....................... 280
26,105 BOC Group plc.................................... 356
41,125 Boots Co. plc.................................... 682
26,150 BPB Industries plc............................... 159
74,772 British Aerospace plc............................ 573
44,903 British Airways plc.............................. 486
59,930 British Land Co. plc............................. 616
218,658 British Petroleum Co. plc........................ 3,192
59,825 British Sky Broadcasting Group plc............... 430
74,800 British Steel plc................................ 165
216,950 British Telecommunications plc................... 2,681
127,648 BTR plc, 'B'..................................... 362
11,156 Burmah Castrol plc............................... 199
93,487 Cable & Wireless plc............................. 1,137
41,160 Cadbury Schweppes plc............................ 638
72,300 Capital Shopping Centers plc..................... 487
28,530 Caradon plc...................................... 88
(a)164,550 Centrica plc..................................... 278
33,646 Coats Viyella plc................................ 41
26,106 Commercial Union plc............................. 487
</TABLE>
-----------------------
41
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
UNITED KINGDOM (CONT.)
<TABLE>
<C> <S> <C>
18,725 Courtaulds plc................................... $ 139
3,722 De La Rue plc.................................... 18
126,724 Diageo plc....................................... 1,503
19,947 Diageo plc, 'B'.................................. 167
(a)29,175 Elementis plc.................................... 74
24,590 EMI Group plc.................................... 215
1 Energy Group plc................................. --
108,475 General Electric plc............................. 936
(a)44,734 GKN plc.......................................... 570
119,675 Glaxo Wellcome plc............................... 3,595
26,140 Granada Group plc................................ 481
158,400 Grantchester Holdings plc........................ 452
44,875 Great Universal Stores plc....................... 592
(a)28,470 Guardian Royal Exchange plc...................... 167
22,443 Hanson plc....................................... 137
89,470 HSBC Holdings plc................................ 2,170
3,400 HSBC Holdings plc................................ 86
33,675 Imperial Chemical Industries plc................. 541
44,888 Ladbroke Group plc............................... 247
70,325 Land Securities plc.............................. 1,088
29,925 Lasmo plc........................................ 120
44,875 Legal & General Group plc........................ 479
227,075 Lloyds TSB Group plc............................. 3,180
(a)7,485 Lonrho Africa plc................................ 9
(a)7,485 Lonrho Africa plc................................ 35
130,875 Marks & Spencer plc.............................. 1,192
22,475 MEPC plc......................................... 198
52,400 National Power plc............................... 494
6,800 National Westminster Bank plc.................... 122
30,693 Peninsular & Oriental Steam Navigation Co........ 442
56,053 Pilkington plc................................... 103
74,809 Prudential Corp. plc............................. 986
34,463 Rank Group plc................................... 189
51,925 Reed International plc........................... 470
55,120 Reuters Holdings plc............................. 631
22,475 Rexam plc........................................ 98
45,035 Rio Tinto Corp. plc (Registered)................. 508
11,200 RMC Group plc.................................... 194
52,412 Royal & Sun Alliance Insurance Group plc......... 542
4,800 Royal Bank of Scotland Group plc................. 54
22,079 Royal Bank of Scotland plc....................... 383
33,640 Safeway plc...................................... 220
59,797 Sainsbury (J) plc................................ 533
11,175 Schroders plc.................................... 289
37,418 Scottish Power plc............................... 328
74,800 Sears plc........................................ 66
22,726 Sedgwick Group plc............................... 49
18,725 Slough Estates plc............................... 107
192,871 SmithKline Beecham plc........................... 2,356
18,701 Southern Electric plc............................ 169
3,900 Standard Chartered plc........................... 44
52,385 Tarmac plc....................................... 94
29,879 Taylor Woodrow plc............................... 100
71,067 Tesco plc........................................ 694
26,194 Thames Water plc................................. 477
17,463 Thorn plc........................................ 71
18,691 TI Group plc..................................... 142
2,000 Unilever N.V. - New York Shares.................. 158
107,150 Unilever plc..................................... 1,142
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
26,148 United Utilities plc............................. $ 381
123,417 Vodafone Group plc............................... 1,567
382,300 Wates City of London Properties plc.............. 626
33,675 Zeneca Group plc................................. 1,446
--------
53,974
--------
UNITED STATES (37.5%)
100 AAR Corp......................................... 3
12,600 Abbott Laboratories.............................. 515
(a)1,000 Access Health, Inc............................... 25
(a)1,900 AccuStaff, Inc................................... 59
(a)900 Action Performance Cos., Inc..................... 29
(a)1,300 ACX Technologies, Inc............................ 28
4,300 Adobe Systems, Inc............................... 182
(a)1,700 Advanced Fibre Communications, Inc............... 68
(a)2,400 Advanced Lighting Technologies, Inc.............. 56
6,500 Aeroquip-Vickers, Inc............................ 379
(a)1,500 Affiliated Computer Services, Inc., 'A'.......... 58
1,700 A.H. Ahmanson & Co............................... 121
3,500 A.H. Belo Corp., 'A'............................. 85
100 Air Express International Corp................... 3
3,200 Air Products & Chemicals, Inc.................... 128
3,000 Airborne Freight Corp............................ 105
(a)7,300 Airtouch Communications, Inc..................... 427
2,200 Albany International Corp,. 'A'.................. 53
1,300 Albertson's, Inc................................. 67
500 Alcan Aluminum Ltd............................... 14
12,700 Allegheny Teledyne, Inc.......................... 291
12,000 Allied Signal, Inc............................... 532
(a)1,700 Allied Waste Industries, Inc..................... 41
2,000 Allmerica Financial Corp......................... 130
15,800 Allstate Corp.................................... 1,447
15,900 Alltel Corp...................................... 739
1,400 Alumax, Inc...................................... 65
8,500 Aluminum Co. of America.......................... 560
(a)2,300 Alza Corp., 'A'.................................. 99
3,300 AMBAC Financial Group, Inc....................... 193
800 AmerUs Life Holdings, Inc. 'A'................... 26
(a)3,200 AmeriCredit Corp................................. 114
(a)2,300 America West Holdings Corp., 'B'................. 66
15,500 American Express Co.............................. 1,767
500 American General Corp............................ 36
6,600 American Greeting Corp., 'A'..................... 336
37,300 American Home Products Corp...................... 1,930
13,000 American International Group, Inc................ 1,898
(a)1,700 American Power Conversion Corp................... 51
47,700 American Telephone & Telegraph Co................ 2,725
4,800 American Water Works, Inc........................ 149
(a)400 Amerisource Health Corp., 'A'.................... 26
21,400 Ameritech Corp................................... 960
(a)2,200 Amgen, Inc....................................... 144
22,500 Amoco Corp....................................... 937
8,000 AMP, Inc......................................... 275
(a)400 Amphenol Corp, 'A'............................... 16
(a)6,000 AMR Corp......................................... 499
2,400 Anadarko Petroleum Corp.......................... 161
(a)6,200 Andrew Corp...................................... 112
2,700 Anheuser-Busch Cos., Inc., 'A'................... 127
(a)4,800 Anixter International, Inc....................... 91
1,200 Apache Corp...................................... 38
(a)500 Apollo Group, Inc., 'A'.......................... 17
</TABLE>
- --------------
42
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<C> <S> <C>
(a)5,300 Apple Computer, Inc.............................. $ 152
(a)1,000 Applied Graphics Technologies, Inc............... 46
(a)11,400 Applied Material, Inc............................ 336
1,900 Applied Power, Inc., 'A'......................... 65
(a)59,800 Armco, Inc....................................... 381
5,300 Armstrong World Industries, Inc., 'B'............ 357
1,900 Arrow International, Inc......................... 52
(a)1,400 ATMI, Inc........................................ 21
(a)1,200 Arterial Vascular Engineering, Inc............... 43
1,600 Arvin Industries, Inc............................ 58
(a)700 Aspect Development, Inc.......................... 53
(a)1,100 Aspen Technologies, Inc.......................... 56
7,296 Associates First Capital Corp., 'A'.............. 561
6,900 Autodesk, Inc.................................... 267
1,500 Automatic Data Processing, Inc................... 109
(a)200 Autozone, Inc.................................... 6
4,800 Avon Products, Inc............................... 372
9,700 Baker Hughes, Inc................................ 335
22,700 Banc One Corp.................................... 1,267
400 Bandag, Inc...................................... 16
5,800 Bank of New York Co., Inc........................ 352
24,200 BankAmerica Corp................................. 2,092
12,600 BankBoston Corp.................................. 701
200 Bankers Trust New York Corp...................... 23
2,000 Banta Corp....................................... 62
2,900 Bausch & Lomb, Inc............................... 145
12,500 Baxter International, Inc........................ 673
(a)2,600 BEC Energy....................................... 108
15,600 Becton & Dickinson & Co.......................... 1,211
9,400 Bell Atlantic Corp............................... 429
24,000 BellSouth Corp................................... 1,611
6,800 Bemis Co., Inc................................... 278
(a)2,500 Berg Electronics Corp............................ 49
1,100 Bergen Brunswig Corp., 'A'....................... 51
(a)2,300 Best Buy Co., Inc................................ 83
8,400 Bestfoods........................................ 488
(a)35,200 Bethlehem Steel Corp............................. 438
(a)4,600 Beverly Enterprises, Inc......................... 64
(a)1,800 Billing Concepts Corp............................ 28
2,400 Bindley Western Industries, Inc.................. 79
(a)1,100 Biogen, Inc...................................... 54
1,800 Biomet, Inc...................................... 60
(a)1,300 BISYS Group, Inc................................. 53
(a)3,400 BJ Services Co................................... 99
1,100 Black & Decker Corp.............................. 67
(a)1,100 Blyth Industries, Inc............................ 37
21,900 Boeing Co........................................ 976
(a)2,000 Borders Group, Inc............................... 74
2,000 Borg-Warner Automotive, Inc...................... 96
1,800 Boston Edison Co................................. 75
(a)1,600 Boston Scientific Corp........................... 115
1,900 Briggs & Stratton Corp........................... 71
(a)3,000 Brightpoint, Inc................................. 43
(a)5,700 Brinker International, Inc....................... 110
31,200 Bristol-Myers Squibb Co.......................... 3,586
(a)2,700 Broderbund Software, Inc......................... 62
3,400 Brown-Forman Corp., 'B'.......................... 218
2,700 Brunswick Corp................................... 67
(a)1,200 Budget Group, Inc., 'A'.......................... 38
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
(a)6,000 Buffets, Inc..................................... $ 94
(a)7,000 Burlington Industries, Inc....................... 98
8,600 Burlington Northern Railroad Co.................. 844
2,200 Burlington Resources, Inc........................ 95
1,100 C&D Technology, Inc.............................. 64
(a)1,400 CACI International, Inc., 'A'.................... 29
(a)5,400 California Energy Company, Inc................... 162
(a)1,700 California Microwave, Inc........................ 30
(a)900 Cambridge Tech Partner, Inc...................... 49
6,600 Campbell Soup Co................................. 351
(a)900 Canandaigua Brands, Inc., 'A'.................... 44
2,700 Capital One Financial Corp....................... 335
1,700 Cardinal Health, Inc............................. 159
4,200 Carlisle Cos., Inc............................... 181
3,700 Case Corp........................................ 179
17,200 Caterpillar, Inc................................. 909
3,600 CBS, Inc......................................... 114
(a)600 CDW Computer Centers, Inc........................ 30
(a)1,800 Cendant Corp..................................... 38
1,100 Centex Construction Products, Inc................ 42
3,000 Centex Corp...................................... 113
(a)300 Centocor, Inc.................................... 11
700 Central & South West Corp........................ 19
1,700 Central Parking Corp............................. 79
2,400 Centura Banks, Inc............................... 150
(a)1,600 Chancellor Media Corp., 'A'...................... 79
35,000 Chase Manhattan Corp............................. 2,642
22,000 Chevron Corp..................................... 1,827
37,000 Chrysler Corp.................................... 2,086
(a)2,700 CHS Electronics, Inc............................. 48
6,700 Chubb Corp....................................... 539
(a)1,400 CIBER, Inc....................................... 53
10,200 CIGNA Corp....................................... 704
9,800 Cincinnati Milacron, Inc......................... 238
300 Cincinnati Financial Corp........................ 12
10,700 Cinergy Corp..................................... 374
3,200 Cintas Corp...................................... 163
1,000 Circuit City Stores-Circuit City Group........... 47
(a)13,300 Cisco Systems, Inc............................... 1,224
(a)2,100 Citation Corp.................................... 42
13,200 Citicorp......................................... 1,970
(a)1,000 Citrix Systems, Inc.............................. 68
700 CKE Restaurants, Inc............................. 29
(a)500 Clear Channel Communications, Inc................ 55
2,000 Clorox Co........................................ 191
700 CMAC Investment Corp............................. 43
5,000 Coastal Corp..................................... 349
59,600 Coca-Cola Co..................................... 5,096
2,600 Colgate Palmolive Co............................. 229
(a)4,600 Coltec Industries, Inc........................... 91
5,550 Columbia Energy Group............................ 309
7,000 Columbia HCA/Healthcare Corp..................... 204
1,100 Comair Holdings, Inc............................. 34
10,800 Comdisco, Inc.................................... 205
3,000 Comerica, Inc.................................... 199
2,100 Commercial Federal Corp.......................... 66
1,000 Commercial Metals Co............................. 31
(a)1,700 CompUSA, Inc..................................... 31
42,417 Compaq Computer Corp............................. 1,204
17,300 Computer Associates International, Inc........... 961
</TABLE>
-----------------------
43
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<C> <S> <C>
2,300 Computer Sciences Corp........................... $ 147
(a)2,700 Comverse Technology, Inc......................... 140
(a)1,900 Concord EFS, Inc................................. 50
1,500 Conseco, Inc..................................... 70
4,700 Consolidated, Inc................................ 128
(a)1,100 Consolidated Graphics, Inc....................... 65
(a)300 Consolidated Stores Corp......................... 11
5,100 Cooper Industries, Inc........................... 280
1,400 Cordant Technologies, Inc........................ 65
1,300 Corning, Inc..................................... 45
(a)1,400 Cort Business Services Corp...................... 44
(a)2,800 Costco Cos., Inc................................. 177
3,800 Countrywide Credit Industries, Inc............... 193
1,300 C.R. Bard, Inc................................... 50
1,700 Crompton & Knowles Corp.......................... 43
2,000 Crown Cork & Seal, Inc........................... 95
3,100 CSX Corp......................................... 141
1,100 Cullen/Frost Bankers, Inc........................ 60
300 Cummins Engine................................... 15
1,600 CVS Corp......................................... 62
(a)2,000 Cytec Industries, Inc............................ 88
1,100 Dallas Semiconductor Corp........................ 34
4,900 Dana Corp........................................ 262
800 Danaher Corp..................................... 29
12,000 Darden Restaurants, Inc.......................... 190
12,000 Dayton Hudson Corp............................... 582
1,600 Dean Foods Co.................................... 88
20,400 Deere & Co....................................... 1,079
3,400 Del Webb Corp.................................... 88
(a)10,900 Dell Computer Corp............................... 1,012
(a)1,326 Delphi Financial Group, Inc., 'A'................ 75
4,000 Delta Airlines, Inc.............................. 517
15,400 Deluxe Corp...................................... 552
400 Diebold, Inc..................................... 12
1,600 Digital Microwave Corp........................... 12
1,300 Dillards, Inc. 'A'............................... 54
12,800 Dime Bancorp, Inc................................ 383
(a)1,650 Dollar Tree Stores, Inc.......................... 67
7,000 Dominion Resources, Inc.......................... 285
4,800 Dow Jones & Co., Inc............................. 268
18,200 DPL, Inc......................................... 330
3,800 D.R. Horton, Inc................................. 79
(a)2,500 Dress Barn, Inc.................................. 62
12,700 Dresser Industries, Inc.......................... 560
(a)1,700 DST Systems, Inc................................. 95
25,500 Du Pont (EI) de Nemours Co....................... 1,903
(a)1,100 DuPont Photomasks, Inc........................... 38
5,200 Duke Power Co.................................... 308
11,600 Dun & Bradstreet Corp............................ 419
(a)1,000 Dura Pharmaceuticals, Inc........................ 22
4,900 Eastern Enterprises.............................. 210
800 Eastman Chemical Co.............................. 50
2,600 Eastman Kodak Co................................. 190
200 Eaton Corp....................................... 16
3,300 Ecolab, Inc...................................... 102
9,900 Edison International............................. 293
2,400 Electronics for Imaging, Inc..................... 130
19,800 Eli Lilly & Co................................... 1,308
(a)18,100 EMC Corp......................................... 811
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
8,400 Emerson Electric Co.............................. $ 507
1,700 Energen Corp..................................... 34
2,500 Energy East Corp................................. 104
8,600 Engelhard Corp................................... 174
6,000 Enron Corp....................................... 324
8,800 Entergy Corp..................................... 253
(a)900 Etec Systems, Inc................................ 32
2,700 Ethan Allen Interiors, Inc....................... 135
(a)900 Extended Stay America, Inc....................... 10
15,600 Exxon Corp....................................... 1,112
(a)1,255 EVI Weatherford, Inc............................. 47
1,500 E.W. Blanch Holdings, Inc........................ 55
(a)2,500 Fairfield Communities, Inc....................... 48
9,800 Family Dollar Stores, Inc........................ 181
20,900 Fannie Mae....................................... 1,270
(a)1,500 FDX Corp......................................... 94
(a)900 Federated Department Stores...................... 48
3,200 Fingerhut Cos., Inc.............................. 106
3,100 FINOVA Group, Inc................................ 176
1,100 First Chicago NBD Corp........................... 97
1,800 First Colorado Bancorp, Inc...................... 50
300 First Commercial Corp............................ 21
1,900 First Security Corp.............................. 41
32,900 First Union Corp. (N.C.)......................... 1,916
(a)1,400 FirstFed Financial Corp.......................... 73
3,900 FirstEnergy Corp................................. 120
10,700 Fleet Financial Group, Inc....................... 893
1,400 Fleetwood Enterprises, Inc....................... 56
6,400 Florida Progress Corp............................ 263
4,500 Flowers Industries, Inc.......................... 92
1,400 Flowserve Corp................................... 34
6,600 Fluor Corp....................................... 337
(a)3,100 Foodmaker, Inc................................... 52
(a)3,500 FORE Systems, Inc................................ 93
27,500 Ford Motor Co.................................... 1,623
(a)1,200 Forest Laboratories, Inc. 'A'.................... 43
5,800 Fort James Corp.................................. 258
12,800 Fortune Brands, Inc.............................. 492
11,200 Foster Wheeler Corp.............................. 240
10,400 FPL Group, Inc................................... 655
300 Franklin Resources, Inc.......................... 16
(a)900 Fred Meyer, Inc.................................. 38
11,100 Freddie Mac...................................... 522
8,500 Freeport McMoran Copper Corp., 'B'............... 129
800 Fremont General Corp............................. 43
(a)2,400 Fruit of the Loom................................ 80
(a)2,100 Furniture Brands International, Inc.............. 59
12,300 Gannett Co., Inc................................. 874
7,200 Gap, Inc......................................... 444
(a)1,800 Gateway 2000, Inc................................ 91
2,800 General Cable Corp............................... 81
(a)2,000 General Cigar Holdings, Inc...................... 20
1,600 General Dynamics Corp............................ 74
63,400 General Electric Co.............................. 5,769
500 General Mills, Inc............................... 34
10,700 General Motors Corp.............................. 715
(a)1,700 General Nutrition Cos., Inc...................... 53
2,300 General RE Corp.................................. 583
1,500 General Signal Corp.............................. 54
(a)1,300 Genesis Health Ventures, Inc..................... 33
</TABLE>
- --------------
44
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<C> <S> <C>
(a)3,800 Gentex Corp...................................... $ 69
2,000 Genzyme Corp..................................... 51
3,500 Georgia Gulf Corp................................ 80
1,100 Georgia-Pacific Corp............................. 65
12,300 Gillette Co...................................... 697
3,200 Gleason Corp..................................... 90
(a)1,600 Golden State Bancorp, Inc........................ 48
500 Golden West Financial Corp....................... 53
21,100 Goodrich (B.F.) Co............................... 1,047
(a)1,300 Goody's Family Clothing, Inc..................... 71
4,200 Goodyear Tire & Rubber Co........................ 271
13,500 GPU, Inc......................................... 510
1,400 Graco, Inc....................................... 49
1,200 Great Lakes Chemical Corp........................ 47
32,900 GTE Corp......................................... 1,830
2,100 Guidant Corp..................................... 150
2,500 Guilford Mills, Inc.............................. 50
(a)1,000 Ha-Lo Industries, Inc............................ 31
12,200 Halliburton Co................................... 544
3,100 Hannaford Brothers Co............................ 136
(a)700 Harrah's Entertainment, Inc...................... 16
11,100 Harris Corp...................................... 496
5,900 Harte-Hanks Communications, Inc.................. 152
11,700 Hartford Financial Services Group................ 1,338
600 Hartford Life, Inc. 'A'.......................... 34
2,400 HBO & Co......................................... 85
(a)1,800 Heartland Express, Inc........................... 36
8,200 Helmerich & Payne, Inc........................... 182
10,500 Hercules, Inc.................................... 432
4,200 Herman Miller, Inc............................... 102
5,300 Hershey Foods Corp............................... 366
1,000 Hertz Corp. 'A'.................................. 44
26,500 Hewlett-Packard Co............................... 1,587
3,300 Hibernia Corp., 'A'.............................. 67
5,400 Hilton Hotels Corp............................... 154
25,700 Home Depot, Inc.................................. 2,135
100 Honeywell, Inc................................... 8
800 Household International, Inc,.................... 40
4,300 Houston Industries, Inc.......................... 133
1,200 Hubco, Inc....................................... 43
4,800 Huntington Bancshares, Inc....................... 161
(a)1,100 Hyperion Software Corp........................... 31
2,200 IKON Office Solutions, Inc....................... 32
(a)1,000 Imation Corp..................................... 17
4,100 Impac Mortgage Holdings, Inc..................... 64
2,300 Inland Steel Industries, Inc..................... 65
4,700 INMC Mortgage Holdings, Inc...................... 107
(a)1,900 Input/Output, Inc................................ 34
37,900 Intel Corp....................................... 2,809
4,200 Interface, Inc................................... 85
(a)3,300 Interim Services, Inc............................ 106
22,800 International Business Machines Corp............. 2,618
(a)700 International Network Services................... 29
9,600 Interpublic Group of Cos., Inc................... 583
1,300 Interstate Bakeries Corp......................... 43
(a)2,000 Intuit, Inc...................................... 122
4,300 IPALCO Enterprises, Inc.......................... 191
4,700 ITT Industries, Inc.............................. 176
8,500 J.C. Penney Co., Inc............................. 615
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
2,100 Jefferson-Pilot Corp............................. $ 122
34,500 John H. Harland Co............................... 584
37,600 Johnson & Johnson................................ 2,773
11,400 Johnson Controls, Inc............................ 652
(a)4,200 Jones Apparel Group, Inc......................... 154
22,500 Jostens, Inc..................................... 537
2,000 Kansas City Southern Industries, Inc............. 99
4,000 Kaufman and Broad Home Corp...................... 127
1,800 Kaydon Corp...................................... 64
(a)1,100 Keane, Inc....................................... 62
800 Kerr-McGee Corp.................................. 46
19,600 KeyCorp.......................................... 698
13,100 Kimberly-Clark Corp.............................. 601
(a)5,200 King World Productions, Inc...................... 133
(a)100 KLA-Tencor Corp.................................. 3
(a)4,900 Kmart Corp....................................... 94
8,500 Knight Ridder, Inc............................... 468
5,300 Kuhlman Corp..................................... 210
1,700 La Quinta Inns, Inc.............................. 36
(a)1,800 Legato Systems, Inc.............................. 70
4,700 Lehman Brothers Holdings, Inc.................... 365
4,200 Lennar Corp...................................... 124
(a)1,400 Level One Communications, Inc.................... 33
(a)2,800 Lexmark International Group, Inc................. 171
(a)2,300 Linens 'n Things, Inc............................ 70
(a)500 Litton Industries, Inc........................... 29
5,800 Lockheed Martin Corp............................. 614
3,200 Longs Drug Stores, Inc........................... 92
7,400 Lowe's Cos., Inc................................. 300
(a)1,400 LSI Logic Corp................................... 32
8,100 LTV Corp......................................... 77
1,800 Lubrizol Corp.................................... 54
21,000 Lucent Technologies, Inc......................... 1,747
4,200 Lyondell Petrochemical Co........................ 128
1,000 Magna Group, Inc................................. 56
6,000 Mallinckrodt, Inc................................ 178
20,600 Manor Care, Inc.................................. 792
2,550 Marsh & McLennan Cos., Inc....................... 154
400 Martin Marietta Corp............................. 18
3,300 MascoTech, Inc................................... 79
900 Mattel, Inc...................................... 38
3,800 May Department Stores Co......................... 249
8,300 Maytag Corp...................................... 410
6,200 MBIA, Inc........................................ 464
2,200 MBNA Corp........................................ 73
900 McClatchy Newspapers, Inc........................ 31
6,600 McDermott International, Inc..................... 227
32,800 McDonald's Corp.................................. 2,263
6,900 McGraw-Hill Cos., Inc............................ 563
2,500 MCI Communications Corp.......................... 145
4,200 MCN Corp......................................... 104
2,100 MDU Resources Group.............................. 75
6,100 Mead Corp........................................ 194
(a)3,000 Medquist, Inc.................................... 87
6,900 Medtronic, Inc................................... 440
2,000 Mellon Bank Corp................................. 139
300 Mercantile Stores Co., Inc....................... 24
22,000 Merck & Co., Inc................................. 2,942
7,000 Mercury General Corp............................. 451
5,500 Meredith Corp.................................... 258
</TABLE>
-----------------------
45
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<C> <S> <C>
2,366 Meritor Automotive, Inc.......................... $ 57
14,000 Merrill Lynch & Co., Inc......................... 1,291
1,200 Metris Cos., Inc................................. 76
(a)62,400 Microsoft Corp................................... 6,763
1 Midas, Inc....................................... --
(a)1,500 Midway Games, Inc................................ 23
(a)2,350 Midwest Express Holdings......................... 85
3,000 Millenium Chemicals, Inc......................... 102
4,300 Minnesota Mining & Manufacturing Co.............. 353
19,300 Mobil Corp....................................... 1,479
7,900 Monsanto......................................... 441
8,500 Montana Power Co................................. 295
7,600 Motorola, Inc.................................... 399
4,700 Mylan Laboratories, Inc.......................... 141
(a)3,100 Nabors Industries, Inc........................... 61
10,200 National City Corp............................... 724
5,500 National Commerce Bancorp........................ 230
1,000 National Data Corp............................... 44
2,200 National Service Industries, Inc................. 112
28,300 NationsBank Corp................................. 2,165
1,800 Nationwide Financial Services, Inc., Class A..... 92
(a)2,400 Nautica Enterprises, Inc......................... 64
(a)13,800 Navistar International Corp...................... 398
(a)1,200 NBTY, Inc........................................ 22
(a)1,600 Neiman Marcus Group, Inc......................... 69
2,200 New Century Energies, Inc........................ 100
700 New York State Electric & Gas Corp............... 29
3,100 New York Times Co., 'A'.......................... 246
1,100 Newell Co........................................ 55
5,400 Newmont Mining Corp.............................. 128
(a)4,500 Newpark Resources, Inc........................... 50
800 Newport News Shipbuilding, Inc................... 21
1,800 Nicor, Inc....................................... 72
(a)1,800 Nine West Group, Inc............................. 48
6,800 Nipsco Industries, Inc........................... 190
(a)3,000 Noble Drilling Corp.............................. 72
400 Nordstrom, Inc................................... 31
8,800 Northern Telecom Ltd............................. 499
1,300 Northrop Grumman Corp............................ 134
6,100 Norwest Corp..................................... 228
(a)6,800 Novacare Corp.................................... 80
(a)10,900 Novell, Inc...................................... 139
(a)1,000 Nu Skin Enterprises, Inc......................... 20
1,900 Nucor Corp....................................... 87
8,400 Occidental Petroleum Corp........................ 227
(a)1,700 Ocean Energy, Inc................................ 33
(a)4,900 Office Depot, Inc................................ 155
(a)3,400 OfficeMax, Inc................................... 56
2,520 Old Kent Financial Corp.......................... 91
7,050 Old Republic International Corp.................. 207
2,400 Olin Corp........................................ 100
800 Omnicon Group, Inc............................... 40
(a)18,400 Oracle System Corp............................... 452
(a)1,100 Orbital Sciences Corp............................ 41
(a)100 O'Reilly Automotive, Inc......................... 4
2,700 Orion Capital Corp............................... 151
(a)1,900 Owens-Illinois, Inc.............................. 85
2,600 PACCAR, Inc...................................... 136
800 PacifiCorp....................................... 18
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
(a)600 Palm Harbor Homes, Inc........................... $ 26
(a)300 Parametric Technology Co......................... 8
670 Patriot American Hospitality, Inc. REIT.......... 16
(a)4,900 Patterson Energy, Inc............................ 48
(a)1,100 Payless ShoeSource, Inc.......................... 81
53,200 Peco Energy Co................................... 1,553
9,500 Pennzoil Co...................................... 481
1,200 Peoples Energy Corp.............................. 46
30,700 PepsiCo, Inc..................................... 1,264
2,300 Perkin-Elmer Corp................................ 143
37,400 Pfizer, Inc...................................... 4,065
3,400 PG&E Corp........................................ 107
1,300 Pharmacia & Upjohn, Inc.......................... 60
91,900 Philip Morris Cos., Inc.......................... 3,619
3,400 Phillips-Van Heusen Corp......................... 50
2,700 Pier 1 Imports, Inc.............................. 64
9,600 Pinnacle West Capital Corp....................... 432
(a)1,700 Platinum Technology, Inc......................... 49
(a)1,100 PMC-Sierra, Inc.................................. 52
2,700 Polaroid Corp.................................... 96
(a)1,600 Policy Management Systems Corp................... 63
7,200 PP&L Resources, Inc.............................. 163
(a)1,900 Premiere Technologies, Inc....................... 16
(a)700 Primark Corp..................................... 22
(a)5,200 Prime Hospitality Corp........................... 91
45,500 Procter & Gamble Co.............................. 4,143
(a)1,700 Profitt's Inc.................................... 69
300 Progressive Corp................................. 42
(a)2,690 Promus Company, Inc.............................. 104
2,100 Protective Life Corp............................. 77
2,100 Provident Companies, Inc......................... 72
3,800 Providian Financial Corp......................... 299
3,800 Public Service Co. of New Mexico................. 86
10,000 Public Service Enterprise Group, Inc............. 344
8,800 Pulte Corp....................................... 263
(a)3,100 Quintiles Transnational Corp..................... 152
(a)3,000 Quorum Health Group, Inc......................... 80
(a)3,400 R & B Falcon Corp................................ 77
3,400 Ralston-Ralston Purina Group..................... 397
12,400 Raychem Corp..................................... 367
3,800 Rayonier, Inc.................................... 175
5,300 Raytheon Co., 'B'................................ 313
3,700 Readers Digest Association, Inc., 'A'............ 100
(a)3,800 Reebok International Ltd......................... 105
3,700 Regis Corp....................................... 109
8,600 Reliastar Financial Corp......................... 413
5,800 Republic New York Corp........................... 365
2,100 Resource Bancshares Mortgage Group, Inc.......... 39
(a)800 Rexall Sundown, Inc.............................. 28
3,100 Reynolds & Reynolds Co. 'A'...................... 56
(a)3,200 Rio Hotel & Casino, Inc.......................... 60
(a)2,900 Robert Half International, Inc................... 162
4,100 Rochester Gas & Electric Corp.................... 131
4,700 Rockwell International Corp...................... 226
2,700 Rohm & Haas Co................................... 281
3,700 Rollins Truck Leasing Corp....................... 46
(a)2,300 Romac International, Inc......................... 70
2,200 Roper Industries, Inc............................ 57
2,000 Ross Stores, Inc................................. 86
(a)5,400 Rowan Cos., Inc.................................. 105
</TABLE>
- --------------
46
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<C> <S> <C>
3,400 Rubbermaid, Inc.................................. $ 113
2,700 Ruby Tuesday, Inc................................ 42
(a)1,300 Rural/Metro Corp................................. 17
2,000 Russell Corp..................................... 60
1,900 Ryder Systems, Inc............................... 60
1,700 Ryland Group, Inc................................ 45
4,200 SAFECO Corp...................................... 191
(a)900 Sapient Corp..................................... 47
20,300 Sara Lee Corp.................................... 1,136
20,398 SBC Communications, Inc.......................... 816
5,500 Schering-Plough Corp............................. 504
4,600 Schlumberger Ltd................................. 314
200 Schwab (Charles) Corp............................ 7
5,600 Scientific-Atlanta, Inc.......................... 142
(a)1,000 Seagate Technology, Inc.......................... 24
(a)1,200 Sealed Air Corp.................................. 44
15,400 Sears, Roebuck & Co.............................. 940
(a)7,368 Sempra Energy.................................... 204
2,100 Service Corp. International...................... 90
2,100 Shared Medical Systems Corp...................... 154
(a)1,600 Showbiz Pizza Time, Inc.......................... 65
(a)2,000 Siebel Systems, Inc.............................. 65
(a)4,000 Silicon Valley Bancshares........................ 142
(a)1,100 Smith International, Inc......................... 38
2,700 Snap-On, Inc..................................... 98
(a)800 Snyder Communications, Inc....................... 35
(a)900 Sofamor Danek Group, Inc......................... 78
(a)4,350 Sonic Corp....................................... 97
4,750 Sonoco Products Co............................... 144
2,500 Sotheby's Holdings, Inc. 'A'..................... 56
21,800 Southern Co...................................... 604
3,200 Southern New England Telecommunications Corp..... 210
800 Southwest Airlines Co............................ 24
300 Springs Industries, Inc. 'A'..................... 14
3,900 Sprint Corp...................................... 275
(a)300 SPX Corp......................................... 19
3,966 St. Paul Cos., Inc............................... 167
1,400 St. John Knits, Inc.............................. 54
(a)1,100 St. Jude Medical, Inc............................ 41
(a)1,900 Staffmark, Inc................................... 70
(a)900 Starbucks Corp................................... 48
1,300 State Auto Financial Corp........................ 41
1,300 StateStreet Corp................................. 90
(a)3,100 Station Casinos, Inc............................. 46
(a)900 Steris Corp...................................... 57
(a)1,400 Sterling Commerce, Inc........................... 68
(a)3,200 Sterling Software, Inc........................... 95
2,900 Stewart Enterprises, Inc. 'A'.................... 77
(a)1,200 Storage Technology Corp.......................... 52
(a)900 Stratus Computer, Inc............................ 23
(a)1,200 Suburban Lodges of America....................... 18
(a)500 Suiza Foods Corp................................. 30
28,800 Sun Co., Inc..................................... 1,118
(a)15,400 Sun Microsystems, Inc............................ 669
12,000 SunAmerica, Inc.................................. 689
4,600 Suntrust Banks, Inc.............................. 374
13,700 SUPERVALU Inc.................................... 608
2,400 Superior Industries International................ 68
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
1,700 Superior TeleCom, Inc............................ $ 71
(a)2,000 Sybron International Corp........................ 51
(a)3,800 Symantec Corp.................................... 99
1,300 Symbol Technologies, Inc......................... 49
(a)1,700 Synopsys, Inc.................................... 78
(a)2,800 Systems & Computer Technology Corp............... 76
700 Tandy Corp....................................... 37
1,400 TCA Cable TV, Inc................................ 84
(a)1,000 Tech Data Corp................................... 43
6,600 Tektronix, Inc................................... 233
(a)200 Tele-Communications, Inc., 'A'................... 8
(a)11,132 Tele-Communications-TCI Ventures Group 'A'....... 223
(a)900 Tellabs, Inc..................................... 64
2,400 Telxon Corp...................................... 78
(a)400 Tenet Healthcare Corp............................ 13
4,500 Tenneco, Inc..................................... 171
5,200 Texaco, Inc...................................... 310
9,200 Texas Instruments, Inc........................... 536
10,900 Texas Utilities Co............................... 454
5,400 Textron, Inc..................................... 387
(a)1,750 The Buckle, Inc.................................. 52
900 Thiokol Corp..................................... 42
11,000 Thomas & Betts Corp.............................. 542
(a)200 3Com Corp........................................ 6
(a)2,800 360 Communications Co............................ 90
1,300 Tidewater, Inc................................... 43
1,800 Tiffany & Co..................................... 86
4,700 TIG Holdings, Inc................................ 108
3,800 Time Warner, Inc................................. 325
5,200 Timken Co........................................ 160
16,200 TJX Companies, Inc............................... 391
10,000 Torchmark Corp................................... 458
(a)1,300 Total Renal Care Holdings, Inc................... 45
(a)500 Toys 'R' Us, Inc................................. 12
3,800 Trans Financial, Inc............................. 218
(a)900 Transactions Systems Architects, Inc............. 35
900 Transatlantic Holdings, Inc...................... 70
32,100 Travelers, Inc................................... 1,946
(a)1,500 Triad Guaranty, Inc.............................. 51
100 Tribune Co....................................... 7
(a)400 Tricon Global Restaurants, Inc................... 13
(a)1,900 Trigon Healthcare, Inc........................... 69
5,100 Trinity Industries, Inc.......................... 212
(a)1,100 Triumph Group, Inc............................... 46
7,600 Trustmark Corp................................... 167
5,100 TRW, Inc......................................... 279
3,000 Tupperware Corp.................................. 84
22,800 Tyco International Ltd........................... 1,436
11,400 Unicom Corp...................................... 400
3,700 Union Carbide Corp............................... 197
3,500 Union Pacific Corp............................... 154
800 Union Pacific Resources Group, Inc............... 14
(a)1,300 Uniphase Corp.................................... 82
(a)8,600 Unisys Corp...................................... 243
6,100 United Asset Management Co....................... 159
2,200 United Illuminating Co........................... 111
(a)1,100 United Stationers, Inc........................... 71
14,800 United Technologies Corp......................... 1,369
3,000 Universal Foods Corp............................. 67
(a)2,300 Universal Health Services, Inc................... 134
</TABLE>
-----------------------
47
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<C> <S> <C>
(a)900 U.S. Airways Group, Inc.......................... $ 71
5,200 U.S. Bancorp..................................... 224
(a)300 U.S. Filter Corp................................. 8
(a)300 U.S. Foodservice, Inc............................ 11
1,700 U.S. Freightways Corp............................ 56
1,000 U.S. Industries, Inc............................. 25
4,200 U.S. Surgical Corp............................... 192
(a)11,200 U.S. West Communications Group................... 526
1,900 U.S. West Media Group............................ 83
2,600 USG Corp......................................... 141
23,300 UST, Inc......................................... 629
18,900 USX-Marathon Group............................... 649
31,400 USX-U.S. Steel Group, Inc........................ 1,036
4,400 UtliCorp United, Inc............................. 166
2,100 Valspar Corp..................................... 83
(a)3,200 Varco International, Inc......................... 63
(a)1,300 Vencor, Inc...................................... 9
2,000 Ventas, Inc...................................... 28
(a)600 Veritas DGC, Inc................................. 30
(a)3,600 Viacom, Inc., Class B............................ 210
(a)3,600 Viking Office Products, Inc...................... 113
(a)600 Visio Corp....................................... 29
(a)1,900 Vitesse Semiconductor............................ 59
(a)480 Vlasic Foods International, Inc.................. 10
1,900 Vulcan Materials Co.............................. 203
2,500 Wabash National Corp............................. 64
51,600 Wal-Mart Stores, Inc............................. 3,135
1,100 Walgreen Co...................................... 45
15,200 Walt Disney Co................................... 1,597
11,400 Warner-Lambert Co................................ 791
2,600 Washington Gas Light Co.......................... 70
10,500 Washington Mutual, Inc........................... 456
(a)1,900 Waters Corp...................................... 112
(a)1,700 Watson Pharmaceuticals, Inc...................... 79
5,400 Webster Financial Corp........................... 180
4,000 Wendy's International, Inc....................... 94
(a)2,700 Western Digital Corp............................. 32
(a)1,500 Westpoint Stevens, Inc........................... 50
3,900 Weyerhaeuser Co.................................. 180
3,500 Whitman Corp..................................... 80
(a)700 Whole Foods Market, Inc.......................... 42
2,800 Wicor, Inc....................................... 65
2,100 Williams Cos., Inc............................... 71
(a)500 Williams-Sonoma, Inc............................. 16
1,200 Wolverine World Wide, Inc........................ 26
(a)6,900 Woolworth Corp................................... 132
(a)8,300 Worldcom, Inc.................................... 402
(a)800 World Access, Inc................................ 24
3,600 Worthington Industries, Inc...................... 54
(a)8,400 W.R. Grace & Co.................................. 143
9,900 Xerox Corp....................................... 1,006
(a)600 Yahoo!, Inc...................................... 95
3,100 York International Corp.......................... 135
(a)4,300 Zale Corp........................................ 137
--------
223,557
--------
TOTAL COMMON STOCKS (COST $396,708)............................. 477,545
--------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------
PREFERRED STOCKS (0.3%)
AUSTRIA ( 0.1%)
(a)5,528 Bank Austria AG.................................. $ 449
(a)300 Bank Austria AG.................................. 14
(a)200 EA-Generali AG................................... 40
--------
503
--------
GERMANY (0.2%)
(a)1,076 SAP AG-Vorzug.................................... 732
(a)150 Volkswagen AG.................................... 102
--------
834
--------
ITALY (0.0%)
(a)81,550 Fiat S.p.A. (Privilegiate)....................... 203
--------
TOTAL PREFERRED STOCKS (COST $622).............................. 1,540
--------
INVESTMENT COMPANIES (0.9%)
UNITED STATES (0.9%)
(g)381,900 Latin American Discovery Fund, Inc............... 3,628
(g)70,000 Morgan Stanley Africa Investment Fund, Inc....... 831
(g)124,800 Morgan Stanley Asia-Pacific Fund, Inc............ 803
--------
TOTAL INVESTMENT COMPANIES (COST $8,048)........................ 5,262
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
RIGHTS
<C> <S> <C>
- ------------
RIGHTS (0.0%)
GERMANY (0.0%)
(a)9,200 Daimler-Benz AG.................................. 10
(a)5,557 Metro AG, expiring 7/24/98....................... --
--------
10
--------
PORTUGAL (0.0%)
(a)10,100 Banco Espirito Santo............................. 64
(a)7,100 Banco Espirito Santo (Registered)................ 5
--------
69
--------
SPAIN (0.0%)
(a)8,610 Autopistas Concesionaria Espanola S.A., expiring
7/10/98........................................ --
--------
SWITZERLAND (0.0%)
(a)3,850 Adecco S.A., expiring 7/15/98.................... --
--------
TOTAL RIGHTS (COST $0).......................................... 79
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
<C> <S> <C>
- ------------
WARRANTS (0.0%)
FRANCE (0.0%)
(a)5,623 Cie Generale des Eaux, expiring 5/2/01........... 11
(a)5 Sodexho S.A., expiring 6/7/04.................... 2
--------
13
--------
HONG KONG (0.0%)
(a)8,950 Hong Kong and China Gas Co., Ltd., expiring
9/30/99........................................ 1
(a)8,400 Hysan Development Co., Ltd., expiring 4/30/99.... --
--------
1
--------
</TABLE>
- --------------
48
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
NO. OF VALUE
WARRANTS (000)
- --------------------------------------------------------------------------
ITALY (0.0%)
<C> <S> <C>
(a)2,891 La Rinascente S.p.A., expiring 12/31/99.......... $ 6
(a)913 La Rinascente S.p.A., expiring 12/31/99.......... 1
(a)7,210 Mediobanca S.p.A................................. 34
--------
41
--------
TOTAL WARRANTS (COST $0)........................................ 55
--------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- --------------------------------------------------------------------------
CONVERTIBLE DEBENTURES (0.0%)
FRANCE (0.0%)
FRF 32 Casino Guichard Perrachon 4.50%, 7/12/01......... 26
29 Sanofi S.A. 4.00%, 1/1/00........................ 39
53 Simco S.A. 3.25%, 1/1/06......................... 52
25 Sodexho S.A. 6.00%, 6/7/04....................... 4
--------
121
--------
ITALY (0.0%)
ITL 18,504 Mediobanca S.p.A. 4.50%, 1/1/00.................. 10
--------
PORTUGAL (0.0%)
$ 3,403 Jeronimo Martins................................. 20
--------
TOTAL CONVERTIBLE DEBENTURES (COST $72)......................... 151
--------
TOTAL FOREIGN & U.S. SECURITIES (81.3%) (COST $405,450)......... 484,632
--------
SHORT-TERM INVESTMENT (21.0%)
REPURCHASE AGREEMENT (21.0%)
125,328 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $125,347,
collateralized by $95,580 U.S. Treasury Bonds,
10.75%, due 8/15/05, valued at $128,255 (COST
$125,328)...................................... 125,328
--------
TOTAL INVESTMENT IN SECURITIES (102.3%) (COST $530,778)......... 609,960
--------
</TABLE>
<TABLE>
<CAPTION>
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- --------------------------------------------------------------------------
FOREIGN CURRENCY (0.3%)
AUD 2 Australian Dollar................................ $ 1
ATS 231 Austrian Schilling............................... 18
GBP 1 British Pound.................................... 2
CAD 28 Canadian Dollar.................................. 19
FRF 1,844 French Franc..................................... 305
DEM 41 German Mark...................................... 23
HKD 127 Hong Kong Dollar................................. 17
HUF 1,105 Hungarian Forint................................. 5
ITL 1,599,098 Italian Lira..................................... 900
JPY 8,624 Japanese Yen..................................... 62
NOK 101 Norwegian Krone.................................. 13
PTE 65 Portuguese Escudo................................ 1
KRW 73 South Korean Won................................. --
ESP 186 Spanish Peseta................................... 1
SEK 1,099 Swedish Krona.................................... 138
CHF 9 Swiss Franc...................................... 6
THB 1,370 Thai Baht........................................ 32
--------
TOTAL FOREIGN CURRENCY (COST $1,554)............................ 1,543
--------
TOTAL INVESTMENTS (102.6%) (COST $532,332)...................... 611,503
LIABILITIES IN EXCESS OF OTHER ASSETS (-2.6%)................... (15,423)
--------
NET ASSETS (100%)............................................... $596,080
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
(g) -- The Fund is advised by an affiliate which earns a management fee as
advisor to the Fund.
ADR -- American Depositary Receipt
NCS -- Non Convertible Shares
REIT -- Real Estate Investment Trust
-----------------------
49
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE INFORMATION:
Under the terms of foreign currency contracts open at June 30, 1998, the
Portfolio is obligated to deliver or is to receive foreign currency in exchange
for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
CURRENCY IN EXCHANGE
TO DELIVER VALUE SETTLEMENT FOR VALUE NET UNREALIZED
(000) (000) DATE (000) (000) GAIN (LOSS) (000)
- ------------- --------- ----------- --------------- --------- -----------------
<S> <C> <C> <C> <C> <C>
$ 133 $ 133 7/1/98 ITL 235,733 $ 132 $ (1)
$ 100 100 7/1/98 NLG 204 100 --
$ 448 448 7/1/98 SEK 3,573 448 --
$ 21 21 7/1/98 GBP 13 21 --
$ 81 81 7/2/98 GBP 49 81 --
JPY 8,664 63 7/2/98 $ 63 63 --
$ 54 54 7/2/98 NLG 110 54 --
$ 160 160 7/3/98 ITL 286,262 161 1
$ 116 116 7/3/98 GBP 69 116 --
$ 11 11 7/6/98 GBP 7 11 --
$ 84 84 7/6/98 GBP 51 84 --
$ 2,379 2,379 7/9/98 DEM 4,266 2,366 (13)
$ 2,374 2,374 7/9/98 DEM 4,174 2,316 (58)
$ 12,903 12,903 7/9/98 DEM 22,924 12,718 (185)
DEM 1,046 580 7/9/98 $ 572 572 (8)
DEM 22,924 12,718 7/9/98 $ 12,892 12,892 174
$ 5,906 5,906 7/15/98 ITL 10,412,222 5,861 (45)
$ 5,205 5,205 7/15/98 ITL 9,216,913 5,188 (17)
ITL 1,252,034 705 7/15/98 $ 696 696 (9)
ITL 1,995,313 1,123 7/15/98 $ 1,109 1,109 (14)
$ 258 258 7/29/98 GBP 157 262 4
$ 11,855 11,855 7/29/98 GBP 7,108 11,852 (3)
GBP 7,108 11,852 7/29/98 $ 11,596 11,596 (256)
$ 553 553 7/31/98 FRF 3,351 555 2
$ 2,526 2,526 8/4/98 MYR 10,391 2,463 (63)
MYR 4,297 1,019 8/4/98 $ 953 953 (66)
MYR 6,094 1,445 8/4/98 $ 1,335 1,335 (110)
$ 3,528 3,528 8/6/98 ITL 6,183,349 3,482 (46)
$ 2,460 2,460 8/12/98 HKD 19,142 2,461 1
$ 3,459 3,459 8/12/98 HKD 26,904 3,459 --
HKD 19,142 2,461 8/12/98 $ 2,464 2,464 3
HKD 26,904 3,459 8/12/98 $ 3,463 3,463 4
ITL 907,150 511 8/12/98 $ 509 509 (2)
$ 11,158 11,158 8/14/98 DEM 19,770 10,992 (166)
DEM 19,770 10,992 8/14/98 $ 11,158 11,158 166
DEM 184 102 8/14/98 $ 102 102 --
$ 7,067 7,067 8/17/98 FRF 41,533 6,888 (179)
$ 16,387 16,387 8/17/98 GBP 10,077 16,783 396
$ 4,869 4,869 8/17/98 GBP 2,987 4,975 106
FRF 41,533 6,888 8/17/98 $ 6,981 6,981 93
GBP 2,987 4,975 8/17/98 $ 4,902 4,902 (73)
$ 1,270 1,270 8/19/98 JPY 166,805 1,212 (58)
$ 1,784 1,784 8/19/98 JPY 234,221 1,702 (82)
JPY 234,221 1,702 8/19/98 $ 1,687 1,687 (15)
$ 631 631 8/26/98 JPY 87,474 637 6
JPY 70,206 511 8/26/98 $ 526 526 15
JPY 87,474 636 8/26/98 $ 654 654 18
$ 2 2 8/31/98 JPY 333 2 --
$ 3,127 3,127 8/31/98 JPY 437,245 3,154 27
JPY 437,245 3,154 8/31/98 $ 3,440 3,440 286
JPY 323 2 8/31/98 $ 2 2 --
$ 10 10 9/10/98 CAD 15 10 --
$ 3,483 3,483 9/10/98 JPY 481,948 3,514 31
JPY 331,541 2,417 9/10/98 $ 2,427 2,427 10
JPY 481,948 3,514 9/10/98 $ 3,531 3,531 17
</TABLE>
- --------------
50
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
CURRENCY IN EXCHANGE
TO DELIVER VALUE SETTLEMENT FOR VALUE NET UNREALIZED
(000) (000) DATE (000) (000) GAIN (LOSS) (000)
- ------------- --------- ----------- --------------- --------- -----------------
<S> <C> <C> <C> <C> <C>
JPY 898,977 $ 6,554 9/10/98 $ 6,220 $ 6,220 $ (334)
$ 5,055 5,055 9/14/98 DEM 9,100 5,069 14
$ 10,350 10,350 9/16/98 FRF 62,412 10,368 18
DEM 9,916 5,524 9/18/98 $ 5,542 5,542 18
JPY 828,783 6,053 9/21/98 $ 6,088 6,088 35
JPY 615,727 4,502 9/28/98 $ 4,505 4,505 3
JPY 106,298 777 9/28/98 $ 754 754 (23)
DEM 9,911 5,526 10/2/98 $ 5,542 5,542 16
DEM 9,856 5,500 10/16/98 $ 5,542 5,542 42
CAD 1,630 1,110 10/19/98 $ 1,112 1,112 2
JPY 690,663 5,065 10/19/98 $ 4,870 4,870 (195)
--------- --------- -----
$ 231,247 $ 230,734 $ (513)
--------- --------- -----
--------- --------- -----
</TABLE>
- --------------------------------------------------------------------------------
FUTURES CONTRACTS: At June 30, 1998, the Portfolio had futures contracts open:
<TABLE>
<CAPTION>
UNREALIZED
AGGREGATE APPRECIATION
NUMBER OF FACE VALUE EXPIRATION (DEPRECIATION)
CONTRACTS (000) DATE (000)
------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C>
PURCHASES:
DAX Index 29 DEM 9,004 Sep-98 $ 471
CAC 40 Index 130 FRF 17,873 Sep-98 476
FTSE 100 Index 175 GBP 17,174 Sep-98 (291)
MIB 30 Index 64 ITL 12,016 Sep-98 280
S&P 500 Index 55 $ 15,813 Sep-98 (92)
SALES:
TOPIX Index 25 JPY 2,118 Sep-98 (89)
Toronto Index 8 CAD 1,073 Sep-98 (31)
-----
$ 724
-----
-----
</TABLE>
- ---------------
CAD -- Canadian Dollar
FRF -- French Franc
DEM -- German Mark
GBP -- British Pound
HKD -- Hong Kong Dollar
ITL -- Italian Lira
JPY -- Japanese Yen
MYR -- Malaysian Ringgit
NLG -- Netherlands Guilder
SEK -- Swedish Krona
- --------------------------------------------------------------------------------
SUMMARY OF FOREIGN & U.S. SECURITIES BY INDUSTRY CLASSIFICATION (UNAUDITED)
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- --------------------------------------------------------------------------------- --------- -------------
<S> <C> <C>
Finance.......................................................................... $ 120,588 20.2%
Consumer Products................................................................ 106,881 17.9
Services......................................................................... 85,785 14.4
Capital Goods & Equipment........................................................ 71,102 11.9
Energy........................................................................... 49,310 8.3
Materials........................................................................ 32,151 5.4
Multi-Industry................................................................... 6,517 1.1
Technology....................................................................... 5,854 1.0
Investment Companies............................................................. 5,263 0.9
Gold Mines....................................................................... 1,181 0.2
--------- ---
$ 484,632 81.3%
--------- ---
--------- ---
</TABLE>
-----------------------
51
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Australian Dollar 7.1%
British Pound 7.4%
Canadian Dollar 4.4%
Danish Krone 4.9%
French Franc 3.5%
German Mark 20.2%
Italian Lira 7.1%
Japanese Yen 5.2%
Swedish Krona 5.4%
United States Dollar 28.1%
Short-Term Investment 5.1%
Other 1.6%
</TABLE>
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
J.P. Morgan Traded
Global Fixed Income Fund Class A Global Fixed Income Fund Class C Global Bond Index
1/4/93 $9,500 $10,000 $10,000
6/30/93 $10,289 $10,653 $10,760
6/30/94 $10,331 $10,733 $11,187
6/30/95 $11,509 $11,833 $13,139
6/30/96 $12,107 $12,362 $13,408
6/30/97 $12,624 $12,792 $14,009
6/30/98 $13,300 $13,386 $14,831
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; all recurring fees (including
management fees) were deducted; and all dividends and distributions were
reinvested. The graph presents the performance of Class A and Class C shares
which have been in existence since the Fund's inception. The performance of
Class B shares will vary based upon the different inception date and the sales
charge and fees assessed to that Class.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
<TABLE>
<CAPTION>
TOTAL RETURNS**
-------------------------------------------------------------
AVERAGE ANNUAL
---------------------------------------
ONE YEAR FIVE YEAR SINCE INCEPTION
----------------- ----------------- -----------------
WITH WITHOUT WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE CHARGE* CHARGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares 0.31% 5.36% 4.24% 5.27% 5.33% 6.27%
- ---------------------------------------------------------------------------------------
Class B+ Shares 0.65% 4.65% N/A N/A 3.14% 4.07%
- ---------------------------------------------------------------------------------------
Class C Shares 3.65% 4.65% 4.46% 4.46% 5.46% 5.46%
- ---------------------------------------------------------------------------------------
J.P. Morgan Traded Global Bond Index:
Class A & C Shares N/A 5.87% N/A 7.22% N/A 7.22%
Class B Shares N/A 5.87% N/A N/A N/A 4.07%
- ---------------------------------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
+ Class B shares have been offered since August 1, 1995.
The J.P. Morgan Traded Global Bond Index is an unmanaged index of government
bond issues that includes Australia, Belgium, Canada, Denmark, France, Germany,
Italy, Japan, the Netherlands, Spain, Sweden, the United Kingdom and the United
States excluding withholding tax.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS TOP FIVE CURRENCY DENOMINATIONS
PERCENT OF VALUE PERCENT OF
SECURITY CURRENCY NET ASSETS CURRENCY (000) NET ASSETS
- --------------------------------- ---------------- -------------- --------------------- --------- --------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Note 7.25%, 5/15/04 United States 14.0% $ 7,212 28.1%
Dollar United States Dollar
United Kingdom 8.50%, 7/16/07 British Pound 7.4% German Mark 1,559 20.2%
Treuhandanstalt 7.50%, 9/9/04 German Mark 6.7% British Pound 570 7.4%
U.S. Treasury Bond 8.125%, United States 6.7% 550 7.1%
8/15/19 Dollar Australian Dollar
Swedish Government 6.00%, 2/9/05 Swedish Krona 5.4% Italian Lira 550 7.1%
</TABLE>
The Van Kampen Global Fixed Income Fund, formerly known as the Morgan Stanley
Global Fixed Income Fund, seeks to produce an attractive real rate of return by
investing in fixed-income securities of U.S. and foreign issuers denominated in
U.S. dollars and in other currencies.
For the 12 months ended June 30, 1998, the Van Kampen Global Fixed Income Fund
achieved a total return of 5.36 percent for the Class A shares at net asset
value. By comparison, the J.P. Morgan Traded Global Bond Index returned 5.87
percent during the same period.
The Asian economic crisis and the resultant weakness in world trade and
commodity prices combined to provide an attractive environment for global bonds
during the 12-month period. As secondary negative macroeconomic shocks appeared
within the Asian countries during recent months, growth expectations for the
region in general and Japan specifically, have been further reduced. While the
effect of growth in the United States and Western Europe has been mitigated by
the strength of the domestic economies to date, expectations are for a broader
downturn in the second half of 1998. The anticipated slowdown of growth in the
United States and Europe, coupled with a general flight to quality from the
emerging markets, resulted in all global fixed income markets producing solid
local currency returns.
In the United States, 10-year yields fell 99 basis points (0.99 percent) as
Treasuries gained on dollar strength, benign inflation data, and the belief that
any raising of interest rates by the Federal Reserve was on hold. The core
European markets also performed well and 10-year yields fell 70 to 90 basis
points (0.7 to 0.9 percent) as the lower inflation outlook led to a further
downgrading of
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING. YIELDS WILL FLUCTUATE AS MARKET
CONDITIONS CHANGE.
- --------------
52
<PAGE>
VAN KAMPEN
GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
INTEREST RATE EXPECTATIONS. WITHIN EUROPE, THE CONTINUED MOVE TOWARD MONETARY
UNION WAS ALSO A DOMINANT THEME WITH THE RELEASE OF VARIOUS EUROPEAN CONVERGENCE
REPORTS IN THE FIRST QUARTER OF 1998 CONFIRMING THE START OF MONETARY UNION WITH
11 QUALIFYING COUNTRIES. THIS FOCUS WAS REFLECTED IN THE CONVERGENCE IN YIELDS
OF EUROPEAN PERIPHERAL MARKETS TOWARD THOSE IN GERMANY, AS ITALIAN, SPANISH, AND
IRISH BONDS ALL RALLIED STRONGLY. THE ITALIAN MARKET WAS THE BEST PERFORMING
MARKET GLOBALLY, WITH 10-YEAR YIELDS FALLING 174 BASIS POINTS (1.74 PERCENT)
VERSUS A 137 BASIS POINT (1.37 PERCENT) MOVE IN THE SPANISH AND IRISH MARKETS.
ATTENTION SHIFTED TO THE COUNTRIES THAT MAY BE PART OF THE SECOND STAGE OF
EUROPEAN MONETARY UNION, AND 10-YEAR YIELDS IN SWEDEN, THE MAIN BENEFICIARY,
FELL 163 BASIS POINTS (1.63 PERCENT). IN THE UNITED KINGDOM HOWEVER, 10-YEAR
YIELDS FELL ONLY 116 BASIS POINTS (1.16 PERCENT) AS BONDS SUFFERED IN RESPONSE
TO HIGHER-THAN-EXPECTED INFLATION DATA AND FOUR INCREASES IN THE BASE RATE
DURING THE PERIOD. IN JAPAN, THE DETERIORATION OF THE ECONOMY TO NEARLY
DEPRESSION-LIKE CONDITIONS, COUPLED WITH INVESTOR SKEPTICISM ABOUT THE
GOVERNMENT'S COMMITMENT TO FISCAL STIMULUS, CONTINUED TO SUPPORT THE BOND
MARKET. AS A RESULT, 10-YEAR YIELDS FELL 100 BASIS POINTS (1 PERCENT).
Global returns in U.S. dollars were reduced because of general dollar
appreciation during the period. The largest move was versus the Japanese yen,
against which the U.S. currency rose a massive 17.5 percent. The Australian
dollar was almost equally soft, falling 17.3 percent versus the dollar, as the
proximity of Australia to Asia appeared to further the correlation of the
Australian dollar with the yen. The U.S. dollar generally appreciated a more
moderate 3 to 7 percent against the European currencies. The sterling, however,
gained just more than 1 percent against the dollar, supported by the strength of
the U.K. economy and the 1-percent rise in the base rate during the period.
Contributory factors to the performance of the Fund were the overweight position
during the period to the higher-yielding European markets and to the U.K. and
Irish markets. Our underweight exposure to the Japanese yen was also a positive
factor, but our cautious approach to duration overall, and to the Japanese
market in particular, were negative factors.
Strategy changes in the second half of 1997 included reduced exposure to
Japanese bonds, with proceeds placed in the Australian market. We also purchased
a position in a 5-year U.S. Treasury inflation-protected security, taking
advantage of the attractive levels of real yields. In 1998, the most significant
shift in exposure has been a further extension in our underweight position in
Japanese bonds during June. This shift was in response to our concern that
investors may start pricing in a higher-risk premium for Japanese assets. We
placed proceeds in the dollar bloc and European bond markets, taking our
interest rate exposure in both regions to an overweight position and our overall
portfolio exposure to neutral. This was consistent with our more negative
interpretation of the Asian crisis. An underweight position in Japanese yen was
maintained throughout the 12-month period. However, following the Federal
Reserve's June intervention in the currency markets to support yen to dollar, we
reduced our underweight position to approximately 5 percent.
We believe that Japan and the level of the Japanese yen are now key to any
recovery within the Asian economies. We remain, however, unconvinced of the
Japanese government's commitment to providing any near-term effective stimulus
to its economy. While talk of permanent tax cuts and a "bridge bank" scheme are
positive, investors need clearer indications of policy implementation. It is
difficult to predict what will happen in Japan and Asia. However, on balance, we
feel that the Asian crisis, and its negative implications for global growth,
will continue. These fundamentals should continue to support global bonds and
also to sustain the ongoing flight to quality from the emerging markets.
Consequently, we are positive on global bond markets--with the exception of
Japan. However, caution is also required, as U.S. bond yields are at their
lowest level since 1993, and Japanese and European yields are also at all-time
lows. It is difficult to justify extending interest rate exposure unless we
expect economic conditions globally to worsen from the already negative scenario
priced into the markets. We are, therefore, in an overall position of neutral in
interest rate exposure, and expect bonds to remain a good performing asset class
during the remainder of the year.
<TABLE>
<S> <C>
J. David Germany Michael B. Kushma
PORTFOLIO MANAGER PORTFOLIO MANAGER
Paul F. O'Brien Richard B. Worley
PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
------------------
53
<PAGE>
VAN KAMPEN
GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- -----------------------------------------------------------------------
FIXED INCOME SECURITIES (93.3%)
AUSTRALIAN DOLLAR (7.1%)
GOVERNMENT BONDS
AUD 200 Government of Australia 12.00%, 11/15/01......... $ 149
200 Government of Australia 10.00%, 2/15/06.......... 158
------
307
------
U.S. GOVERNMENT & AGENCY OBLIGATIONS--GLOBAL
200 Federal National Mortgage Association 6.50%,
7/10/02........................................ 127
180 Federal National Mortgage Association 6.375%,
8/15/07........................................ 116
------
243
------
TOTAL AUSTRALIAN DOLLAR...................................... 550
------
BRITISH POUND (7.4%)
GOVERNMENT BOND
GBP 290 United Kingdom 8.50%, 7/16/07.................... 570
------
CANADIAN DOLLAR (4.4%)
GOVERNMENT BONDS
CAD 330 Government of Canada 8.75%, 12/1/05.............. 270
80 Government of Canada 8.00%, 6/1/23............... 73
------
343
------
DANISH KRONE (4.9%)
GOVERNMENT BONDS
DKK 800 Kingdom of Denmark 9.00%, 11/15/00............... 128
1,500 Kingdom of Denmark 8.00%, 5/15/03................ 250
------
378
------
FRENCH FRANC (3.5%)
GOVERNMENT BOND
FRF 1,400 Government of France 7.25%, 4/25/06.............. 270
------
GERMAN MARK (20.2%)
GOVERNMENT BONDS
DEM 500 Deutschland Republic, 6.50%, 10/14/05............ 308
200 Deutschland Republic, 6.00%, 1/4/07.............. 120
200 Deutschland Republic, 6.25%, 1/4/24.............. 125
450 German Unity Bond 8.00%, 1/21/02................. 279
810 Treuhandanstalt 7.50%, 9/9/04.................... 519
------
1,351
------
CORPORATE BONDS
150 KFW International Finance, Inc. 7.50%, 1/24/00... 87
200 Landeskreditbank Baden-Wuerttemberg Financial
6.63%, 8/20/03................................. 121
------
208
------
TOTAL GERMAN MARK............................................ 1,559
------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- -----------------------------------------------------------------------
ITALIAN LIRA (7.1%)
GOVERNMENT BONDS
ITL 400,000 Buoni Poliennali Del Tesoro 10.00%, 8/1/03....... $ 278
150,000 Buoni Poliennali Del Tesoro 9.50%, 1/1/05........ 106
230,000 Buoni Poliennali Del Tesoro 9.50%, 2/1/06........ 166
------
TOTAL ITALIAN LIRA........................................... 550
------
JAPANESE YEN (5.2%)
EUROBONDS
JPY 27,000 Japan Development Bank 6.50%, 9/20/01............ 230
20,000 World Bank 4.75%, 12/20/04....................... 175
------
TOTAL JAPANESE YEN........................................... 405
------
SWEDISH KRONA (5.4%)
GOVERNMENT BOND
SEK 3,100 Swedish Government 6.00%, 2/9/05................. 415
------
UNITED STATES DOLLAR (28.1%)
U.S. TREASURY BONDS
$ 400 8.125%, 8/15/19.................................. 516
300 6.25%, 8/15/23................................... 321
40 7.625%, 2/15/25.................................. 51
------
888
------
U.S. TREASURY NOTES
1,000 7.25%, 5/15/04................................... 1,085
201 3.625%, 1/15/08.................................. 199
------
1,284
------
TOTAL UNITED STATES DOLLAR................................... 2,172
------
TOTAL FIXED INCOME SECURITIES (COST $7,162).................... 7,212
------
SHORT-TERM INVESTMENT (5.1%)
REPURCHASE AGREEMENT (5.1%)
UNITED STATES DOLLAR
390 Chase Securities, Inc., 5.40%, dated 6/30/98 due
7/1/98, to be repurchased at $390,
collateralized by $305 U.S. Treasury Bonds,
8.125%, due 5/15/21, valued at $400 (COST
$390).......................................... 390
------
TOTAL INVESTMENTS IN SECURITIES (98.4%) (COST $7,552).......... 7,602
------
FOREIGN CURRENCY (0.1%)
ITL 40 Italian Lira..................................... --
JPY 713 Japanese Yen..................................... 5
------
TOTAL FOREIGN CURRENCY (COST $5)............................... 5
------
TOTAL INVESTMENTS (98.5%) (COST $7,557)........................ 7,607
OTHER ASSETS IN EXCESS OF LIABILITIES (1.5%)................... 119
------
NET ASSETS (100%).............................................. $7,726
------
------
</TABLE>
- --------------
54
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE INFORMATION:
Under the terms of foreign currency contracts open at June 30, 1998, the
Portfolio is obligated to deliver or is to receive foreign currency in exchange
for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
CURRENCY IN EXCHANGE
TO DELIVER VALUE SETTLEMENT FOR VALUE NET UNREALIZED
(000) (000) DATE (000) (000) GAIN (LOSS) (000)
- ------------- --------- ----------- ------------- --------- -----------------
<S> <C> <C> <C> <C> <C>
DEM 450 $ 250 7/13/98 $ 255 $ 255 $ 5
DEM 115 64 7/13/98 $ 65 65 1
SEK 1,040 130 7/14/98 $ 137 137 7
$ 269 269 7/16/98 JPY 37,000 268 (1)
$ 38 38 7/17/98 CAD 55 37 (1)
$ 20 20 7/17/98 CAD 30 20 --
CAD 200 136 7/17/98 $ 136 136 --
ATS 500 310 7/21/98 $ 312 312 2
ATS 240 149 7/21/98 $ 147 147 (2)
--------- --------- ---
$ 1,366 $ 1,377 $ 11
--------- --------- ---
--------- --------- ---
</TABLE>
- ---------------
ATS -- Austrian Schilling
CAD -- Canadian Dollar
DEM -- German Mark
DKK -- Danish Krone
FRF -- French Franc
JPY -- Japanese Yen
SEK -- Swedish Krona
-----------------------
55
The accompanying notes are an integral part of the financial statements.
<PAGE>
MORGAN STANLEY
GOVERNMENT OBLIGATIONS MONEY MARKET FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Variable Rate Obligations 4.4%
U.S. Treasury & Agency
Obligations 78.9%
Short-Term Investment 16.7%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY INSTRUMENT NET ASSETS
- ----------------------- --------------- --------------
<S> <C> <C>
Federal Home Loan
Mortgage Association U.S. Treasury &
Discount Notes 5.42%, Agency
9/4/98 Obligations 35.2%
Federal Home Loan
Mortgage Association U.S. Treasury &
Discount Notes 5.46%, Agency
4/21/99 Obligations 26.6%
Federal Home Loan
Mortgage Association U.S. Treasury &
Discount Notes 5.45%, Agency
8/7/98 Obligations 10.0%
Federal Home Loan Bank Variable Rate
5.43%, 8/18/98 Obligations 4.4%
U.S. Treasury &
U.S. Treasury Note Agency
5.875%, 1/31/99 Obligations 3.6%
</TABLE>
The investment objective of the Morgan Stanley Government Obligations Money
Market Fund is to provide a high level of current interest income consistent
with maintaining liquidity and stability of principal. It seeks to achieve this
objective by investing in short-term U.S. Treasury bills, notes, and other
obligations issued or guaranteed by the U.S. government, its agencies, or
instrumentalities, and entering into repurchase agreements relating to such
obligations.
The annualized seven-day yield and seven-day effective yield (which assumes all
dividends are reinvested) for the Government Obligations Money Market Fund as of
June 30, 1998, were 4.19 percent and 4.28 percent, respectively. As with all
money market portfolios, the seven-day yields are not necessarily indicative of
future performance.
The U.S. economy began 1998 with a robust first quarter, as indicated by a GDP
growth of 5.4 percent. This level represented a healthy pace of economic growth.
Inflation at the CPI level was nonexistent, as commodity and producer prices
fell during the first quarter. Interest rates also declined; as a result,
consumers enjoyed attractive financing, which stimulated a strong housing
market. Jobs remained plentiful and the unemployment rate held steady at 4.7
percent.
As we moved into the second quarter, economic strength continued, although at a
more moderate pace. The labor market made further gains, and the unemployment
rate fell to 4.5 percent. Wages rose in the second quarter, although not enough
to trigger market fears of higher inflation and tighter corporate profit
margins. Wage growth continues to be one of the key elements in defining the
expansion's life cycle. As long as wages grow at a gradual pace, the current
balance between low inflation and healthy corporate profits can remain intact.
By the end of the second quarter, interest rates had fallen to their lowest
levels of the year. The U.S. Treasury curve was flat to inverted, and the yield
on the long bond had fallen to 5.626 percent. Low domestic inflation played a
large part in driving interest rates lower, as did the economic and fiscal
crisis in Asia. Asian pressures helped increase foreign demand for U.S. bonds,
as foreign investors sought out higher-quality markets in which to invest and
protect their capital.
Typically, in situations where the economy is as strong as it is in the United
States, markets would become concerned that monetary policy might turn more
restrictive in order to slow economic growth and prevent inflation. Although
these concerns exist, the markets are less concerned that the Federal Reserve
Board might raise interest rates to slow economic growth because other
regulating factors exist. While the Asian crisis has helped to drive bond prices
higher, it has also widened the trade deficit, and may provide a slowing effect
on our domestic economy. The strength of the dollar will also have a similar
effect, as foreign demand for U.S. exports will decline and slow U.S. output.
There is concern that U.S. businesses have built up excessive inventories, which
may put corporate profit margins under pressure. If consumer demand is not
sufficient to relieve businesses of their surplus inventories, the excessive
carrying costs of unsold goods can potentially tie up capital and stall
corporate growth plans.
INVESTMENTS IN SHARES OF THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE IS NO ASSURANCE THAT THE FUND WILL MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. YIELDS WILL FLUCTUATE AS MARKET CONDITIONS
CHANGE.
- --------------
56
<PAGE>
MORGAN STANLEY
GOVERNMENT OBLIGATIONS MONEY MARKET FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
Most economists have lowered their third and fourth quarter GDP estimates by 1
to 2 percent in anticipation of the above economic effects. If these economists
are correct, and the economy slows automatically, the Fed may leave monetary
policy unchanged throughout the remainder of 1998. This outcome is especially
likely if Fed Chairman Alan Greenspan persists in exercising his influence over
the other members of the FOMC.
Throughout the first half of the year, we invested the Fund's assets in fixed
government bills, discount notes, and floating-rate instruments. The Fund ended
the second quarter with a weighted average maturity of 51 days. Our target
maturity range has been between 50 and 60 days, reflecting our neutral
interest-rate outlook which we plan to maintain.
Current money market yields are very low and the yield curve offers little
protection against a potential interest rate hike by the Fed. While the market
is not expecting a Fed tightening, there is still little reason to extend our
overall maturity in the Fund. Yields in longer-dated maturities offer almost the
same return as do yields on shorter-dated maturities. We have been looking to
add more floating rate securities to the Fund to increase incremental yield
without taking undue interest rate risk. By buying floaters, we are protected
against any increase in interest rates by the Fed should they tighten early next
year.
We believe that while it is likely that there will be no tightening throughout
the remainder of 1998, the risks of higher interest rates remain and could be
realized as early as the first quarter of 1999. Additionally, we may experience
a steepening in the yield curve before the end of this year as markets
anticipate future monetary policy changes. Should the curve experience some
steepening, we would view the event as an opportunity to extend our average
maturity.
Abigail Jones Feder Daniel M. Niland
PORTFOLIO MANAGER PORTFOLIO MANAGER
------------------
57
<PAGE>
MORGAN STANLEY
GOVERNMENT OBLIGATIONS MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
<C> <S> <C>
- ---------------------------------------------------------------------------
U.S. TREASURY & AGENCY OBLIGATIONS (78.9%)
FEDERAL HOME LOAN MORTGAGE ASSOCIATION DISCOUNT NOTES
(71.8%)
$ 5,650 5.45%, 8/7/98.................................... $ 5,618
15,000 5.46%, 4/21/99................................... 14,993
20,000 5.42%, 9/4/98.................................... 19,804
-----------
40,415
-----------
FEDERAL FARM CREDIT BANK (3.5%)
2,000 5.50%, 4/1/99.................................... 1,999
-----------
U.S. TREASURY NOTES (3.6%)
2,000 5.875%, 1/31/99.................................. 2,005
-----------
TOTAL U.S. TREASURY & AGENCY OBLIGATIONS (COST $44,419)....... 44,419
-----------
VARIABLE RATE OBLIGATIONS (4.4%)
FEDERAL HOME LOAN BANK (4.4%)
2,500 5.43%, 8/18/98 (COST $2,500)..................... 2,500
-----------
SHORT-TERM INVESTMENT (16.7%)
REPURCHASE AGREEMENT (16.7%)
9,398 J.P. Morgan Securities, Inc., 5.50%, dated
6/30/98, due 7/1/98, to be repurchased at
$9,399, collateralized by $9,623 U.S. Treasury
Notes, 5.375%, 6/30/00, valued at $9,811 (COST
$9,398)........................................ 9,398
-----------
TOTAL INVESTMENTS (100.0%) (COST $56,317)..................... 56,317
OTHER LIABILITIES IN EXCESS OF ASSETS (0.0%).................. (15)
-----------
NET ASSETS (100%)............................................. $56,302
-----------
-----------
</TABLE>
- --------------
58
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
HIGH YIELD & TOTAL RETURN FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. YIELDS WILL FLUCTUATE AS MARKET CONDITIONS CHANGE.
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Aerospace & Defense 2.5%
Broadcast-Radio & Television 6.3%
Entertainment & Leisure 3.7%
Finance 3.9%
Financial Services 6.8%
Gaming & Lodging 2.4%
Health Care Supplies &
Services 5.1%
Multi-Industry 9.8%
Retail-General 2.9%
Telecommunications 15.7%
Short-Term Investments 18.7%
Other 22.2%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
---------------------------------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION
----------------- -----------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares 5.56% 10.81% 10.80% 13.32%
- -----------------------------------------------------------------
Class B Shares 5.93% 9.86% 11.21% 12.42%
- -----------------------------------------------------------------
Class C Shares 8.88% 9.86% 12.42% 12.42%
- -----------------------------------------------------------------
CS First Boston High
Yield Index N/A 10.98% N/A 12.29%
- -----------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
The CS First Boston High Yield Index is an unmanaged index of high yield
corporate bonds.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF NET
SECURITY SECTOR ASSETS
- ------------------------- ------------------- --------------
<S> <C> <C>
Tenet Healthcare Corp. Health Care
Supplies & Services 2.8%
Time Warner, Inc., Series Entertainment 2.5%
M
Norcal Waste Systems Environmental
Controls 2.0%
Rogers Communications, Broadcast - Radio &
Inc. Television 1.9%
ISP Holdings, Inc., Chemicals 1.8%
Series B
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- -------------------------- --------- -------------
<S> <C> <C>
Telecommunications $ 5,491 15.7%
Multi-Industry 3,377 9.8%
Financial Services 2,362 6.8%
Broadcast - Radio & 2,156 6.3%
Television
Health Care Supplies & 1,766 5.1%
Services
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
High Yield & Total Return High Yield & Total Return High Yield & Total Return CS First Boston
FundClass A FundClass B FundClass C High Yield Index
5/1/96 $9,500 $10,000 $10,000 $10,000
6/30/96 $9,553 $9,521 $9,921 $10,501
6/30/97 $11,284 $11,346 $11,746 $12,040
6/30/98 $12,493 $12,893 $12,892 $13,362
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; the maximum deferred sales charge was
deducted from the value of the investment of $10,000 in Class B and Class C
shares; all recurring fees (including management fees) were deducted; and all
dividends and distributions were reinvested.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The investment objective of the Van Kampen High Yield & Total Return Fund,
formerly the Morgan Stanley High Yield Fund, is to seek to maximize total return
by investing in a diversified portfolio of high-yield, high-risk income
securities that offer a yield above what is generally available on debt
securities in the four highest categories of the recognized rating services.
For the year ended June 30, 1998, the Fund had a total return of 10.81 percent
for Class A shares at net asset value, as compared to 10.98 percent for the CS
First Boston High Yield Index.
Bolstered by a favorable investing environment, the high-yield market performed
reasonably well during the reporting period. Interest rates on 10-year Treasury
securities declined about 100 basis points during the year ended June 30,
causing the 2-year to 10-year portion of the yield curve to invert slightly. The
equity market was very strong as the S&P 500 index rose over 25 percent during
the same period. The first quarter of 1998 was particularly strong for equities,
while the high-yield market also performed better in the first quarter of the
year than during the final three months of the reporting period.
Given the declining interest rate environment and solid economy, B-rated bonds
outperformed higher-quality issues. Longer-duration bonds also outperformed. The
lower tier and distressed sector of the high-yield sector, however, continued to
experience difficulties. From an industry perspective, retail, technology, and
utilities outperformed while auto parts, energy, and textiles lagged.
------------------
59
<PAGE>
VAN KAMPEN
HIGH YIELD & TOTAL RETURN FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
Our portfolio continues to benefit from a large position in Nextel. The company
has done an excellent job of adding subscribers to its network at a rapid pace.
The cable television sector also performed well, especially after TCI and AT&T
announce a merger. Our positions in Korea rebounded nicely after being very
depressed in the fall. This has been a volatile position, not only on its own
merits, but due to concerns over Asia and Russia. Our other emerging-markets
positions have been a drag on performance so far this year.
Widening spreads during the second quarter made the high-yield sector reasonably
attractive as the reporting period ended. Most companies continue to maintain
decent balance sheets. While the Fed appears inclined to raise interest rates
because of the strong economy and rising wage pressures, problems in Asia and
Russia--coupled with tame inflation statistics--have kept the Fed on hold. The
commodity and cyclical sectors are a concern at this point. We strive to
position our holdings in growth-oriented companies and those not impacted by
competition from Asian imports or declining commodity prices.
Robert Angevine Thomas L. Bennett Stephen F. Esser
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
- --------------
60
<PAGE>
VAN KAMPEN
HIGH YIELD & TOTAL RETURN FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- -----------------------------------------------------------------------
CORPORATE BONDS AND NOTES (69.9%)
AEROSPACE & DEFENSE (2.0%)
$ (e)200 Jet Equipment Trust, Series C-1, 11.79%,
6/15/13........................................ $ 272
(e)300 Jet Equipment Trust, Series 1995-D, 11.44%,
11/1/14........................................ 406
-------
678
-------
BROADCAST--RADIO & TELEVISION (6.3%)
(e)300 AMSC Acquisition Co., Units 12.25%, 4/1/08....... 282
530 Lenfest Communications 8.375%, 11/1/05........... 563
350 Paramount Communications 8.25%, 8/1/22........... 370
60 Rogers Communications, Inc. 9.125%, 1/15/06...... 61
650 Rogers Communications, Inc. 8.875%, 7/15/07...... 654
(n)335 TCI Satellite Entertainment 0.00%, 2/15/07....... 226
-------
2,156
-------
BUILDING MATERIALS & COMPONENTS (1.4%)
490 American Standard Cos., Inc. 7.375%, 2/1/08...... 481
-------
CAPITAL GOODS/CONSTRUCTION (1.6%)
540 Murrin Murrin Holdings 9.375%, 8/31/07........... 532
-------
CHEMICALS (1.8%)
600 ISP Holdings, Inc., Series B, 9.00%, 10/15/03.... 626
-------
COMPUTERS (0.9%)
275 Advanced Micro Devices 11.00%, 8/1/03............ 291
-------
DIVERSIFIED (1.1%)
375 Kmart Funding Corp. 8.80%, 7/1/10................ 388
-------
ELECTRICAL EQUIPMENT (1.8%)
360 AES Corp. 8.50%, 11/1/07......................... 365
(e)325 Hyundai Semiconductor 8.625%, 5/15/07............ 252
-------
617
-------
ENERGY (1.9%)
325 Quezon Power Ltd. 8.86%, 6/15/17................. 274
380 Snyder Oil Corp. 8.75%, 6/15/07.................. 384
-------
658
-------
ENTERTAINMENT & LEISURE (1.2%)
400 Musicland Group, Inc. 9.875%, 3/15/08............ 398
-------
ENVIRONMENTAL CONTROLS (2.0%)
(n)600 Norcal Waste Systems 13.50%, 11/15/05............ 690
-------
FINANCE (3.9%)
410 CSC Holdings, Inc. 9.875%, 5/15/06............... 450
275 CSC Holdings, Inc. 7.875%, 12/15/07.............. 290
(e)190 Flag Ltd. 8.25%, 1/30/08......................... 192
(e,n)180 Fuji JGB Investments LLC 9.87%, 12/31/49......... 160
(e,n)235 SB Treasury Co. LLC 9.40%, 12/29/49.............. 234
-------
1,326
-------
FINANCIAL SERVICES (2.5%)
(e)100 CEX Holdings, Inc. 9.625%, 6/1/08................ 101
150 HMC Acquisition Properties 9.00%, 12/15/07....... 165
(n)425 PTC International Finance BV 0.00%, 7/1/07....... 292
140 Pindo Deli Fin Mauritius 10.75%, 10/1/07......... 97
225 Western Financial Bank 8.875%, 8/1/07............ 211
-------
866
-------
FOOD (0.7%)
94 Fleming Cos., Inc., Series B 10.50%, 12/1/04..... 98
(e)150 Smithfield Foods, Inc. 7.625%, 2/15/08........... 150
-------
248
-------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- -----------------------------------------------------------------------
FOOD SERVICE & LODGING (1.0%)
$ 335 Host Marriott Travel Plaza, 'B', 9.50%,
5/15/05........................................ $ 357
-------
FOREST PRODUCTS & PAPER (1.4%)
215 Asia Pulp & Paper Co., Ltd. 12.00%, 2/15/04...... 150
305 SD Warren Co., Series B, 12.00%, 12/15/04........ 338
-------
488
-------
GAMING & LODGING (2.4%)
445 Grand Casinos, Inc. 10.125%, 12/1/03............. 481
320 Station Casinos, Inc. 10.125%, 3/15/06........... 357
-------
838
-------
HEALTH CARE SUPPLIES & SERVICES (5.1%)
30 Columbia/HCA Healthcare, 8.125%, 8/4/03.......... 31
540 Columbia/HCA Healthcare, 6.91%, 6/15/05.......... 522
275 Columbia/HCA Healthcare, 7.69%, 6/15/25.......... 264
920 Tenet Healthcare Corp. 8.625%, 1/15/07........... 949
-------
1,766
-------
MULTI-INDUSTRY (9.1%)
(e)150 AST Research, Inc. 7.45%, 10/1/02................ 124
410 Comcast Cellular Holdings 9.50%, 5/1/07.......... 427
210 Globalstar LP/Capital 11.375%, 2/15/04........... 204
275 Hermes Europe Railtel BV 11.50%, 8/15/07......... 311
(e)200 Hylsa SA de CV 9.25%, 9/15/07.................... 188
235 Multicanal S.A. 10.50%, 2/1/07................... 235
325 Navistar Financial Corp., Series B, 9.00%,
6/1/02......................................... 340
355 Outdoor Systems, Inc., 8.875%, 6/15/07........... 370
(e)240 RBS Participacoes S.A. 11.00%, 4/1/07............ 217
(e)200 Samsonite Corp. 10.75%, 6/15/08.................. 199
325 TV Azteca S.A. de CV, Series B 10.50%, 2/15/07... 327
(e)200 Vencor, Inc. 9.875%, 5/1/05...................... 197
-------
3,139
-------
PAPER (1.5%)
500 Indah Kiat Financial Mauritius 10.00%, 7/1/07.... 355
(e)170 Norampac, Inc. 9.50%, 2/1/08..................... 173
-------
528
-------
PERSONAL CARE PRODUCTS (0.8%)
260 Revlon Consumer Products 8.125%, 2/1/06.......... 260
-------
RETAIL--GENERAL (2.9%)
500 Fred Meyer, Inc. 7.375%, 3/1/05.................. 503
550 Southland Corp. 5.00%, 12/15/03.................. 478
-------
981
-------
SERVICES (0.7%)
255 CB Richard Ellis Service 8.875%, 6/1/06.......... 253
-------
TECHNOLOGY (0.2%)
(e,n)160 Rhythms Netconnections 0.00%, 5/15/08............ 78
-------
TELECOMMUNICATIONS (15.0%)
(e)145 American Cellular Corp. 10.50%, 5/15/08.......... 146
(n)190 Dial Call Communications, Series B, 0.00%,
12/15/05....................................... 188
(e,n)255 Dolphin Telecommunication plc 0.00%, 6/1/08...... 145
(e)200 Globo Communications 10.50%, 12/20/06............ 182
(e)195 IXC Communications, Inc. 9.00%, 4/15/08.......... 195
(n)810 Intermedia Communications, Series B, 0.00%,
7/15/07........................................ 591
100 Iridium LLC/Capital Corp., Series A 13.00%,
7/15/05........................................ 107
(e)150 Lenfest Communications 7.625%, 2/15/08........... 154
(e)155 Level 3 Communications, Inc. 9.125%, 5/1/08...... 150
</TABLE>
-----------------------
61
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
HIGH YIELD & TOTAL RETURN FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS (CONT.)
$ (e,n)425 NEXTLINK Communications, Inc. 0.00%, 4/15/08..... $ 260
(n)440 Nextel Communications 0.00%, 8/15/04............. 427
(n)900 Nextel Communications 0.00%, 9/15/07............. 603
(n)400 Occidente Y Caribe 0.00%, 3/15/04................ 348
(e)195 Onepoint Communications Corp., 14.50%, 6/1/08.... 183
215 Philippine Long Distance Telephone 7.85%,
3/6/07......................................... 193
(e)260 Primus Telecommunications Group 9.875%, 5/15/08.. 255
100 Qwest Communications International, Series B,
10.875%, 4/1/07................................ 115
(e,n)150 Qwest Communications International 0.00%,
2/1/08......................................... 108
(n)155 RCN Corp. 0.00%, 10/15/07........................ 100
(n)370 RCN Corp 0.00%, 2/15/08.......................... 225
17 RSL Communications plc 12.25%, 11/15/06.......... 19
(e)115 RSL Communications plc 9.125%, 3/1/08............ 112
150 Rogers Cantel, Inc. 8.30%, 10/1/07............... 147
(e)55 Satelites Mexicanos S.A. 10.125%, 11/1/04........ 53
(e)180 Total Access Communications 2.00%, 5/31/06....... 140
-------
5,146
-------
UTILITIES (0.7%)
65 Korea Electric Power 7.75%, 4/1/13............... 48
90 Niagara Mohawk Power 'G' 7.75%, 10/1/08.......... 92
(n)163 Niagara Mohawk Power 'H' 0.00%, 7/1/10........... 112
-------
252
-------
TOTAL CORPORATE BONDS AND NOTES (COST $24,029)................ 24,041
-------
ASSET BACKED SECURITIES (4.8%)
AEROSPACE & DEFENSE (0.5%)
175 Aircraft Lease Portfolio Securitization Ltd.,
Series 1996-1, Class D 12.75%, 6/15/06......... 174
-------
FINANCIAL SERVICES (4.3%)
(e)241 CA FM Lease Trust 8.50%, 7/15/17................. 253
(e)235 Commercial Financial Services, Inc., Series
1997-5, Class A1 7.72%, 6/15/05................ 237
(e,h)315 DLJ Mortgage Acceptance Corp., Series 1996-CF2,
Class S, IO, 1.64%, 11/12/21................... 25
150 DR Securitized Lease Trust, Series 1993-K1, Class
A2 7.43%, 8/15/18.............................. 139
471 DR Securitized Lease Trust, Series 1994-K1, Class
A1, 7.60%, 8/15/07............................. 466
100 DR Securitized Lease Trust, Series 1994-K1, Class
A2, 8.375%, 8/15/15............................ 100
(e)122 First Home Mortgage Acceptance Corp., Series
1996-B, Class C, 7.93%, 11/1/18................ 110
(e)167 Long Beach Acceptance Auto Grantor Trust 1997-1,
Class B, 14.22%, 10/26/03...................... 166
-------
1,496
-------
TOTAL ASSET BACKED SECURITIES (COST $1,578)................... 1,670
-------
FOREIGN GOVERNMENT BONDS (1.2%)
BONDS (1.2%)
(n)90 Republic of Argentina BOCON, Series 2, PIK,
0.00%, 9/1/02.................................. 110
(h)328 Republic of Argentina, Series L, Floating Rate,
6.625%, 3/31/05................................ 290
-------
TOTAL FOREIGN GOVERNMENT BONDS (COST $394).................... 400
-------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- -----------------------------------------------------------------------
PREFERRED STOCKS (3.5%)
ENTERTAINMENT AND LEISURE (2.5%)
773 Time Warner, Inc., Series M, 10.25%.............. $ 860
-------
TELECOMMUNICATIONS (0.3%)
(e)1,000 Concentric Network Corp., 13.50%................. 100
4 IXC Communications, Inc. PIK 9.50%............... 5
-------
105
-------
MULTI-INDUSTRY ( 0.7%)
2,150 Sinclair Capital, 11.625%........................ 238
-------
TOTAL PREFERRED STOCKS (COST $1,123).......................... 1,203
-------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
UNITS
<C> <S> <C>
- ----------
UNITS (0.3%)
TELECOMMUNICATIONS (0.3%)
(e,n)170 Viatel, Inc, 0.00%, 4/15/08 (COST $108).......... 102
-------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
<C> <S> <C>
- ----------
WARRANTS (0.1%)
TELECOMMUNICATIONS (0.1%)
(a,e)100 Concentric Network Corp., expiring 12/15/07...... --
(a,e)210 Globalstar Telecom, expiring 2/15/04............. 26
(a,e)1,600 Occidente Y Caribe, expiring 3/15/04............. --
-------
TOTAL WARRANTS (COST $0)...................................... 26
-------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
<C> <S> <C>
- ----------
SHORT-TERM INVESTMENTS (18.7%)
DISCOUNT NOTES (14.5%)
$ 1,000 Federal Home Mortgage Corp., 5.46%, 7/10/98...... 999
2,000 Federal Home Mortgage Corp., 5.43%, 7/14/98...... 1,996
2,000 Federal Home Mortgage Corp., 5.45%, 7/20/98...... 1,994
-------
4,989
-------
REPURCHASE AGREEMENT (4.2%)
1,424 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $1,424,
collateralized by $885 U.S. Treasury Bonds,
11.25%, due 2/15/15, valued at $1,455.......... 1,424
-------
TOTAL SHORT-TERM INVESTMENTS (COST $6,413).................... 6,413
-------
TOTAL INVESTMENTS (98.5%) (COST $33,645)...................... 33,855
OTHER ASSETS IN EXCESS OF LIABILITIES (1.5%).................. 523
-------
NET ASSETS (100%)............................................. $34,378
-------
-------
</TABLE>
- ---------------
(a) -- Non-income producing security
(e) -- 144A Security -- Certain conditions for public sale may exist.
(h) -- Variable/Floating rate securities -- rate disclosed is as of June 30,
1998.
(n) -- Step Bond -- coupon rate increases in increments to maturity. Rate
disclosed is as of June 30, 1998. Maturity date disclosed is the
ultimate maturity date.
IO -- Interest Only
PIK -- Payment-In-Kind. Income may be received in additional securities or
cash at the discretion of the issuer.
- --------------
62
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
HIGH YIELD & TOTAL RETURN FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
SUMMARY OF SECURITIES BY COUNTRY (UNAUDITED)
<TABLE>
<CAPTION>
VALUE PERCENT OF
COUNTRY (000) NET ASSETS
- ------------------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
United States.................................................................. $ 28,038 81.5%
Canada......................................................................... 1,035 3.0
Argentina...................................................................... 635 1.9
Netherlands.................................................................... 603 1.8
Mexico......................................................................... 568 1.6
Australia...................................................................... 533 1.5
Philippines.................................................................... 467 1.4
Brazil......................................................................... 399 1.2
Indonesia...................................................................... 355 1.0
Colombia....................................................................... 348 1.0
Korea.......................................................................... 300 0.9
Bermuda........................................................................ 192 0.6
United Kingdom................................................................. 145 0.4
Thailand....................................................................... 140 0.4
Mauritius...................................................................... 97 0.3
---------- ---
$ 33,855 98.5%
---------- ---
---------- ---
</TABLE>
-----------------------
63
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
INTERNATIONAL MAGNUM FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Denmark 3.5%
Finland 4.9%
France 8.9%
Germany 10.8%
Italy 3.7%
Japan 11.8%
Netherlands 4.4%
Sweden 6.1%
Switzerland 6.8%
United Kingdom 16.8%
Short-Term Investment 14.0%
Other 8.3%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
---------------------------------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION
----------------- -----------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares 2.08% 8.32% 9.44% 12.72%
- -----------------------------------------------------------------
Class B Shares 2.55% 7.55% 10.08% 11.88%
- -----------------------------------------------------------------
Class C Shares 6.55% 7.55% 11.86% 11.86%
- -----------------------------------------------------------------
MSCI EAFE Index N/A 6.10% N/A 9.41%
- -----------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
The Morgan Stanley International (MSCI) EAFE Index is an unmanaged index of
common stocks and includes Europe, Australia and the Far East (assumes dividends
are reinvested net of withholding taxes).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF NET
ISSUER COUNTRY ASSETS
- ----------------------------------- ---------- --------------
<S> <C> <C>
BG Bank A/S Denmark 2.6%
Nestle S.A. Switzerland 1.6%
ING Groep N.V. Netherlands 1.4%
Telecom Italia S.p.A. Italy 1.4%
Iberdrola S.A. Spain 1.2%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ---------------------------- --------- -------------
<S> <C> <C>
Capital Equipment $ 28,326 21.2%
Consumer Goods 23,891 17.8%
Finance 19,747 14.8%
Materials 17,121 12.8%
Services 11,767 8.8%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
International Magnum International Magnum International Magnum
Fund - Class A Fund - Class B Fund - Class C MSCI EAFE Index
7/1/96 $9,500 $10,000 $10,000 $10,000
6/30/97 $11,173 $11,140 $11,527 $11,284
6/30/98 $11,977 $12,518 $12,514 $11,613
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; the maximum deferred sales charge was
deducted from the value of the investment of $10,000 in Class B and Class C
shares; all recurring fees (including management fees) were deducted; and all
dividends and distributions were reinvested.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Van Kampen International Magnum Fund, formerly known as the Morgan Stanley
International Magnum Fund, seeks long-term capital appreciation by investing
primarily in equity securities of non-U.S. issuers in accordance with the EAFE
country weightings determined by the subadviser. The EAFE countries in which the
Portfolio will invest are those comprising the MSCI EAFE Index, which includes
Australia, Japan, New Zealand, most Western European nations, and certain
developed countries.
For the 12 months ended June 30, 1998, the Van Kampen International Magnum Fund
generated a total return of 8.32 percent for the Class A shares at net asset
value, as compared to a total return of 6.10 percent for the MSCI EAFE Index.
June marked the end of a very turbulent year in the international markets. The
turmoil began with the devaluation of the Thai baht on July 2, 1997, and quickly
spread throughout Asia, claiming victims large and small. A year later, the
economies of Thailand, Malaysia, Indonesia, and others are on the brink of
recession, with some currencies having lost as much as 60 percent of their value
versus the dollar. Meanwhile, the weakest stock markets fell as much as 60
percent in local currency terms. No Asian market--developed or developing--has
been spared; the MSCI Emerging Markets Far East Index depreciated 65.7 percent
in U.S. dollar terms for the 12-month period ended June 30, 1998.
The so-called "Asian Flu" exacerbated problems in Japan, which encountered its
own bout of currency weakness. Concerns about excessive bad bank loans, a
slowing economy, and a lack of political will to confront these problems also
hurt the Japanese stock market, which fell more than 17 percent in yen terms and
more than 30 percent in U.S. dollar terms during the past 12 months.
- --------------
64
<PAGE>
VAN KAMPEN
INTERNATIONAL MAGNUM FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
The economic troubles from the Pacific Rim even sent ripples through markets as
far away as the United States and Europe, where companies such as banks and
high-tech firms with significant exposure to Asia began to feel a pinch in
earnings. Despite these selected sectors, however, the tone in both the United
States and European markets has remained positive overall. In Europe, the mood
bordered on euphoric, particularly in the first quarter of 1998. Europe's
overall exposure to Asia is low, and the continent has been focusing on its own
economic agenda: the start of the Economic and Monetary Union (EMU) in 1999.
The European equity markets posted a dramatic 20.3 percent rise in the first
quarter of 1998, followed by a more modest 5.1 percent gain in U.S. dollar terms
for the three-month period ended June 30, 1998. Year-to-date, the European
markets have climbed an impressive 26.5 percent in U.S. dollar terms. Investors
are bullish about EMU, which took a step closer to reality with May's
announcement of the 11 initial participant nations. Although valuations are
becoming a bit stretched, fundamentals are generally supportive. The
pan-European economy continues to strengthen and interest rates continue to
fall, particularly in higher-growth economies like Spain and Italy. Corporate
earnings are rising as companies restructure and focus more on creating
shareholder value. Flows into European mutual funds have been very strong, as
high-flying equity returns have drawn individual investors' assets from
low-yielding bank accounts.
In 1998, the European equity markets have been led by strong year-to-date
performances in Germany (up 36.5 percent), Finland (up 65.6 percent), and
Belgium (up 43.3 percent). Germany has been helped by EMU euphoria and improving
economic fundamentals, including lower unemployment rates and benign inflation.
Meanwhile, the gains in Finland largely reflect the strong performance of Nokia
(+125 percent), which comprises more than half of the EAFE Index. Belgium
thrived on the strength of the banking sector, as consolidation in European
financial services has boosted the sector throughout the continent. Portugal and
Italy, two of the markets that were the strongest during the first quarter,
succumbed to profit taking during the second quarter, with each falling more
than 2 percent. The United Kingdom is one of the weakest markets year-to-date,
falling 2.0 percent for the second quarter and rising only 15.7 percent year to
date, with much of the rise attributable to the strength of the pound. Tight
monetary policy has threatened to drive the United Kingdom into a recession,
while the strength of the currency has hurt exporters.
In sharp contrast to the gains in Europe, the MSCI Japan Index fell 4.5 percent
in U.S. dollar terms during the second quarter and declined 2.5 percent during
the first six months of the year. Market participants were disappointed by the
lack of political will to address the nation's problems, and responded by
selling both Japanese equities and the yen. For most of this decade, the
Japanese economy has been hampered by billions of dollars of bad bank loans and
the lack of a coherent and stimulative fiscal policy. Permanent tax cuts,
coupled with the creation of an institution similar to the Resolution Trust
Corporation could help solve these problems and provide an economic boost. So
far, however, the ruling party has been unwilling or unable to implement these
or other changes. Given the lack of progress, investors abandoned Japanese
assets, causing the Japanese currency to depreciate by more than 13 percent
versus the U.S. dollar and the Nikkei 225 Index to fall 11 percent in the second
quarter alone. In mid-June, during the most panic-filled moments of the sell-
off, the U.S. Federal Reserve Board and the Bank of Japan intervened in the
currency markets to support the yen. This show of solidarity gave yen-selling
speculators pause and bought policy makers a little time. However, elections in
early July handed the leading LDP party a surprising defeat and caused Prime
Minister Hashimoto to resign. As of this writing, many issues remained
unresolved, including the future leadership of the world's second-largest
economy and the nation's ability to address its economic problems.
Following a short-lived rally during the first quarter, the equity markets of
Asia (excluding Japan) depreciated 22.6 percent for the quarter and 17.4 percent
year-to-date in U.S. dollar terms. The markets resumed their downward trend
after it became clear a cure for the Asian Flu had yet to be found. As expected,
economic growth has fallen off substantially following last year's currency
devaluations. In Singapore, where the market fell 35.2 percent during the second
quarter, credit contracted for the first time in a decade and GDP growth is
expected to be a meager 0.5 percent. In Hong Kong (down 26.9 percent during the
second quarter), authorities postponed the real estate
------------------
65
<PAGE>
VAN KAMPEN
INTERNATIONAL MAGNUM FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
auctions that provide the government with most of its revenues, choosing instead
to support real estate values that have fallen by more than 50 percent from
their highs. The markets were also rattled by comments from Chinese officials
that the free fall in the yen would need to be stopped lest China be forced to
devalue the yuan and perhaps the Hong Kong dollar to maintain competitiveness.
Devaluation in China, in turn, would lead to another round of currency
devaluations throughout the region as other export-oriented Asian nations
struggled to remain competitive with their larger neighbors. Although the threat
of such a move prompted the United States to intervene in the currency markets
to stem the yen's slide, the continued lack of stability, combined with the
dramatic fall-off in economic activity throughout the region, kept investors at
bay. Japan is Asia's engine of growth, and until its economy revives, the region
will have difficulty stabilizing.
The International Magnum Fund outperformed the benchmark MSCI EAFE Index during
the past 12 months due to a variety of factors. Our regional allocation
contributed to performance--we continued to reduce exposure to Asia and Japan
while increasing European holdings. Stock selection in Europe was negative, as
we were underweight in the bank and insurance sectors, which were among the
stronger performers. We benefited, however, by strong performance in our
Japanese stocks, where we concentrated on export-oriented companies. Style also
hurt performance in Europe as growth stocks outperformed our portfolio's value
stocks by a rather wide margin, particularly during the second quarter of 1998.
Our hedged exposure to the yen and the Deutschemark, both of which depreciated
versus the dollar, added to performance.
During the second quarter of 1998 we continued to increase the Fund's exposure
to Europe based on our belief that fears of an Asian-induced slowdown there were
overdone and that EMU would enhance growth prospects for the region. We moved
from a slightly underweight position to a slightly overweight one, such that
European holdings now make up about three-quarters of the portfolio.
Looking ahead, Europe appears to offer the most attractive investment potential.
Consequently, we anticipate increasing our exposure to the region. Although
valuations in Europe are extended relative to historical levels, we expect
fundamentals to remain supportive, with increased crossborder investment, share
buybacks, mergers and acquisitions, and lower interest rates all being positive
factors for equities. Furthermore, earnings expectations have bottomed and are
rising, as free cash flow has hit the highest levels in 25 years.
We will maintain our underweight positions in Japan and Asia pending signs of
improvement in the region. Specifically, we will carefully monitor political
developments in Japan, as the choice of a new prime minister may signal the
policies that will be implemented. We will continue to look for signs that the
bad debt crisis is being addressed, and we would view any permanent tax cut or
other stimulative policy as a positive move. Without stability and growth in
Japan, however, we believe opportunities for regional growth throughout Asia
will be limited.
Francine J. Bovich
PORTFOLIO MANAGER
- --------------
66
<PAGE>
VAN KAMPEN
INTERNATIONAL MAGNUM FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------
COMMON STOCKS (85.8%)
AUSTRALIA (1.2%)
35,000 Australia & New Zealand Banking Group Ltd........ $ 242
9,150 Brambles Industries Ltd.......................... 180
18,600 Commonwealth Bank of Australia................... 217
6,200 Lend Lease Corp. Ltd............................. 125
14,500 National Australia Bank Ltd...................... 191
40,240 News Corp., Ltd.................................. 329
33,200 Seven Network Ltd................................ 100
112,500 Telstra Corp., Ltd............................... 289
--------
1,673
--------
AUSTRIA (0.6%)
12,000 Boehler-Udderholm AG............................. 793
--------
BELGIUM (0.6%)
14,430 G.I.B. Holdings Ltd.............................. 814
--------
DENMARK (3.5%)
56,900 BG Bank A/S...................................... 3,527
12,500 Unidanmark A/S 'A' (Registered).................. 1,124
--------
4,651
--------
FINLAND (4.9%)
11,500 Huhtamaki Oyj 'I'................................ 658
6,675 Kone Oyj 'B'..................................... 937
113,900 Merita Ltd. 'A'.................................. 752
32,399 Metra Oyj 'B'.................................... 1,064
19,800 Partek Oyj Abp................................... 343
77,900 Rautaruukki Oyj.................................. 597
11,450 Sampo Insurance Co., Ltd., Class A............... 543
40,050 The Rauma Group.................................. 822
50,000 Valmet Oyj....................................... 863
--------
6,579
--------
FRANCE (8.9%)
2,200 Alcatel Alsthom.................................. 448
1,139 Bongrain S.A..................................... 572
6,642 Cie de Saint-Gobain.............................. 1,231
10,670 Elf Aquitaine S.A................................ 1,500
10,900 France Telecom S.A............................... 752
5,300 Groupe Danone RFD................................ 1,461
8,700 Lafarge S.A...................................... 899
18,988 Legris Industries S.A............................ 889
7,770 Michelin (C.G.D.E.) 'B'.......................... 448
10,400 Rhone-Poulenc S.A. 'A'........................... 586
4,600 Scor............................................. 292
(a)8,400 SGS-Thomson Microelectronics N.V................. 595
11,600 Total S.A. 'B'................................... 1,508
3,270 Union des Assurances Federales................... 515
16,450 Usinor Sacilor................................... 254
--------
11,950
--------
GERMANY (10.8%)
31,800 BASF AG.......................................... 1,508
19,900 Bayer AG......................................... 1,027
8,300 Bayer Vereinsbank AG............................. 706
2,660 Buderus AG....................................... 1,327
2,780 Dyckerhoff AG.................................... 1,107
25,110 Gerresheimer Glas AG............................. 377
6,000 Hornbach Holding AG.............................. 551
14,020 Metro AG......................................... 851
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------
(a)4,040 Philip Holzmann AG............................... $ 968
6,260 Plettac AG....................................... 875
2,320 Suedzucker AG.................................... 1,411
15,000 Veba AG.......................................... 1,023
1,790 Viag AG.......................................... 1,211
1,583 Volkswagen AG.................................... 1,523
--------
14,465
--------
HONG KONG (0.7%)
28,400 CLP Holdings Ltd................................. 129
134,600 Hong Kong & China Gas Co., Ltd................... 153
5,500 Hong Kong & Shanghai Bank Holdings plc........... 135
55,500 Hong Kong Electric Holdings Ltd.................. 172
63,200 Hong Kong Telecommunications Ltd................. 119
22,600 Hutchison Whampoa Ltd............................ 119
49,000 Li & Fung Ltd.................................... 79
25,000 Television Broadcasting Ltd...................... 66
--------
972
--------
ITALY (3.7%)
275,000 Magneti Marelli S.p.A............................ 604
55,400 Marzotto (Gaetano) & Figli S.p.A................. 845
111,600 Mediaset S.p.A................................... 712
255,800 Sogefi S.p.A..................................... 857
388,224 Telecom Italia S.p.A............................. 1,880
--------
4,898
--------
JAPAN (11.8%)
47,000 Amada Co., Ltd................................... 229
4,000 Autobacs Seven Co., Ltd.......................... 115
21,000 Canon, Inc....................................... 477
31,000 Casio Computer Co., Ltd.......................... 288
21,000 Dai Nippon Printing Co., Ltd..................... 336
85,000 Daicel Chemical Industries Ltd................... 180
45,000 Daifuku Co., Ltd................................. 168
41,000 Daikin Industries Ltd............................ 264
4,100 Family Mart...................................... 156
17,000 Fuji Machine Manufacturing Co.................... 451
13,000 Fuji Photo Film Co............................... 453
28,000 Fujitec Co., Ltd................................. 170
49,000 Fujitsu Ltd...................................... 516
68,000 Furukawa Electric................................ 229
14,000 Hitachi Credit Corp.............................. 236
72,000 Hitachi Ltd...................................... 470
13,000 Inabata & Co..................................... 40
50,000 Kaneka Corp...................................... 263
17,000 Kurita Water Industries.......................... 201
7,700 Kyocera Corp..................................... 377
18,000 Kyudenko Co., Ltd................................ 118
18,000 Lintec Corp...................................... 157
32,000 Matsushita Electric Industrial Co., Ltd.......... 515
92,000 Mitsubishi Chemical Corp......................... 167
26,000 Mitsubishi Estate Co., Ltd....................... 229
85,000 Mitsubishi Heavy Industries Ltd.................. 321
22,000 Mitsumi Electric Co., Ltd........................ 389
8,000 Murata Manufacturing Co., Inc.................... 260
51,000 NEC Corp......................................... 476
23,000 Nifco, Inc....................................... 182
6,000 Nintendo Corp., Ltd.............................. 556
1,000 Nippon Pillar Packing............................ 4
56 Nippon Telephone & Telegraph Corp................ 465
</TABLE>
-----------------------
67
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
INTERNATIONAL MAGNUM FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
JAPAN (CONT.)
<TABLE>
<C> <S> <C>
101,000 Nissan Motor Co., Ltd............................ $ 318
17,000 Nissha Printing Co., Ltd......................... 104
9,000 Ono Pharmaceutical Co., Ltd...................... 215
45,000 Ricoh Co., Ltd................................... 474
12,000 Rinnai........................................... 182
9,000 Sangetsu Co., Ltd................................ 116
21,000 Sankyo Co., Ltd.................................. 479
30,000 Sanwa Shutter Corp............................... 132
28,000 Sekisui Chemical Co.............................. 143
22,000 Sekisui House Ltd................................ 171
6,000 Shimamura Co., Ltd............................... 162
38,000 Shin-Etsu Polymer Co., Ltd....................... 153
6,900 Sony Corp........................................ 595
12,000 Sumitomo Marine & Fire Insurance Co.............. 67
28,000 Suzuki Motor Co., Ltd............................ 254
7,000 TDK Corp......................................... 518
12,000 Tokyo Electron Ltd............................... 368
117,000 Toshiba Corp..................................... 479
19,000 Toyota Motor Corp................................ 492
67,000 Tsubakimoto Chain Co............................. 225
23,000 Yamaha Corp...................................... 224
22,000 Yamanuchi Pharmaceutical Co...................... 459
--------
15,788
--------
MALAYSIA (0.1%)
5,000 Carlsberg Brewery Malaysia Bhd................... 15
25,000 Guiness Anchor Bhd............................... 27
8,000 Nestle Bhd....................................... 36
7,600 Rothmans of Pall Mall Bhd........................ 53
--------
131
--------
NETHERLANDS (4.4%)
29,600 ABN Amro Holding N.V............................. 693
6,300 Akzo Nobel N.V................................... 1,401
28,943 ING Groep N.V.................................... 1,896
2,400 Koninklijke Bijenkorf Beheer..................... 168
34,900 Koninklijke KNP BT N.V........................... 901
9,600 Phillips Electronics N.V......................... 808
--------
5,867
--------
NEW ZEALAND (0.1%)
56,000 AMP NZ Office Trust.............................. 26
1,840 Fletcher Challenge Forests....................... 1
4,000 Telecom Corp. of New Zealand Ltd. IR............. 9
8,800 Telecom Corp. of New Zealand Ltd................. 36
--------
72
--------
NORWAY (1.1%)
67,800 Saga Petroleum ASA 'B'........................... 960
15,600 Sparebanken NOR.................................. 448
--------
1,408
--------
SINGAPORE (0.2%)
(a)6,200 Creative Technology Ltd.......................... 75
45,000 NatSteel Ltd..................................... 75
21,000 United Overseas Bank Ltd. (Foreign).............. 65
23,000 Venture Manufacturing Ltd........................ 44
--------
259
--------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------
SPAIN (3.5%)
27,800 Banco Bilbao Vizcaya, S.A. (Registered).......... $ 1,427
100,100 Iberdrola S.A.................................... 1,625
13,050 Telefonica de Espana............................. 603
(a)1,386 Telefonica de Espana............................. 64
69,100 Uralita S.A...................................... 985
--------
4,704
--------
SWEDEN (6.1%)
31,700 Autoliv Inc., Swedish Depository Receipt......... 1,013
27,600 BT Industries AB................................. 557
41,600 Esselte AB 'B'................................... 965
1,810 Fastighets AB Balder............................. 18
214,900 Nordbanken Holding AB............................ 1,576
16,300 Pharmicia & Upjohn, Inc. Depository Shares....... 750
56,300 PLM AB........................................... 889
2,200 S.K.F. AB 'B'.................................... 40
20,300 Spectra-Physics AB 'A'........................... 325
40,200 Svedala Industries AB............................ 932
23,500 Svenska Handelsbanken 'A'........................ 1,090
--------
8,155
--------
SWITZERLAND (6.8%)
30 Ascom Holding AG (Bearer)........................ 56
470 Bobst AG (Bearer)................................ 865
824 Cie Financiere Richemont AG, Class A............. 1,079
1,910 Forbo Holding AG (Registered).................... 973
1,245 Holderbank Financiere Glarus AG 'B' (Bearer)..... 1,585
970 Nestle S.A. (Registered)......................... 2,077
80 Schindler Holding AG (Participating
Certificates).................................. 122
434 Schindler Holding AG (Registered)................ 673
830 Schweizerische Industrie-Gesellschaft Holding AG
(Registered)................................... 676
3,530 Valora Holding AG (Registered)................... 932
--------
9,038
--------
UNITED KINGDOM (16.8%)
327,000 Aegis Group plc.................................. 530
50,689 Bank of Ireland.................................. 1,040
69,762 Bank of Scotland................................. 782
195,611 BG plc........................................... 1,132
85,500 British Telecommunications plc................... 1,057
134,988 BTR plc, Class B................................. 383
101,100 Bunzl plc........................................ 474
67,450 Burmah Castrol plc............................... 1,205
55,100 Capital Radio plc................................ 654
134,100 Charter plc...................................... 1,401
28,375 Commercial Union plc............................. 530
700 Danka Business Systems plc....................... 2
48,983 Diageo plc....................................... 581
104,900 Glynwed International plc........................ 432
66,700 Great Universal Stores plc....................... 880
25,200 Halma plc........................................ 52
148,200 Imperial Tobacco Group plc....................... 1,094
38,898 John Mowlem & Co. plc............................ 94
78,425 Lonrho Africa plc................................ 368
(a)58,425 Lonrho Africa plc................................ 70
320,700 Medeva plc....................................... 910
29,500 Peninsular & Oriental Steam Navigation Co........ 425
126,000 Premier Farnell plc.............................. 640
1,804,100 Premier Oil plc.................................. 1,273
</TABLE>
- --------------
68
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
INTERNATIONAL MAGNUM FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
UNITED KINGDOM (CONT.)
<TABLE>
<C> <S> <C>
84,768 Reckitt & Colman plc............................. $ 1,619
14,500 RMC Group plc.................................... 252
98,882 Royal & Sun Alliance Insurance Group plc......... 1,023
347,300 Scapa Group plc.................................. 1,102
107,100 SIG plc.......................................... 402
36,350 Tate & Lyle plc.................................. 288
33,600 Unilever plc..................................... 358
35,500 Westminster Health Care Holdings plc............. 189
204,100 WPP Group plc.................................... 1,339
--------
22,581
--------
TOTAL COMMON STOCKS (COST $104,799)........................... 114,798
--------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
<C> <S> <C>
- ----------
CONVERTIBLE DEBENTURE (0.0%)
NEW ZEALAND (0.0%)
$ (a)56 AMP Office Trust, 7.50%, 6/30/03 (COST $33)...... 25
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
RIGHTS
<C> <S> <C>
- ----------
RIGHTS (0.0%)
GERMANY (0.0%)
(a)14,020 Metro AG (COST $0)............................... 1
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
<C> <S> <C>
- ----------
WARRANTS (0.0%)
HONG KONG (0.0%)
(a)5,300 Hong Kong and China Gas Co., Ltd. (expiring
9/30/99) (COST $0)............................. --
--------
TOTAL FOREIGN SECURITIES (85.8%) (COST $104,832).............. 114,824
--------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------------------
SHORT-TERM INVESTMENT (14.0%)
REPURCHASE AGREEMENT (14.0%)
$ 18,731 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $18,734,
collateralized by $18,690 U.S. Treasury Notes,
5.625%, due 2/15/06, valued at $19,163 (COST
$18,731)....................................... $ 18,731
--------
TOTAL INVESTMENTS IN SECURITIES (99.8%) (COST $123,563)....... 133,555
--------
FOREIGN CURRENCY (0.5%)
BEF 491 Belgian Franc.................................... 13
GBP 116 British Pound.................................... 193
DKK 1 Danish Krone..................................... --
FIM 718 Finnish Marka.................................... 131
FRF 657 French Franc..................................... 109
DEM 52 German Mark...................................... 29
HKD 672 Hong Kong Dollar................................. 87
ITL 71,350 Italian Lira..................................... 40
JPY 9,579 Japanese Yen..................................... 69
MYR 8 Malaysian Ringgit................................ 2
NZD 3 New Zealand Dollar............................... 2
SGD 2 Singapore Dollar................................. 1
ESP 73 Spanish Peseta................................... --
CHF 35 Swiss Franc...................................... 23
--------
TOTAL FOREIGN CURRENCY (COST $698)............................ 699
--------
TOTAL INVESTMENTS (100.3%) (COST $124,261).................... 134,254
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.3%)................. (376)
--------
NET ASSETS (100%)............................................. $133,878
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
RFD -- Ranked for Dividend
-----------------------
69
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
INTERNATIONAL MAGNUM FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE INFORMATION:
Under the terms of foreign currency contracts open at June 30, 1998, the
Portfolio is obligated to deliver or is to receive foreign currency in exchange
for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
CURRENCY IN EXCHANGE
TO DELIVER VALUE SETTLEMENT FOR VALUE NET UNREALIZED
(000) (000) DATE (000) (000) GAIN (LOSS) (000)
- ------------- --------- ----------- ------------ --------- -----------------
<S> <C> <C> <C> <C> <C>
$ 62 $ 62 7/1/98 FIM 343 $ 62 $ --
$ 76 76 7/1/98 DEM 138 76 --
$ 112 112 7/1/98 SEK 895 112 --
$ 15 15 7/2/98 MYR 64 15 --
BEF 491 13 7/2/98 $ 13 13 --
HKD 619 80 7/2/98 $ 80 80 --
ITL 71,336 40 7/2/98 $ 40 40 --
$ 295 295 7/7/98 SGD 503 298 3
SGD 503 298 7/7/98 $ 285 285 (13)
DEM 1,714 951 7/14/98 $ 942 942 (9)
$ 1,647 1,647 7/16/98 JPY 226,434 1,638 (9)
JPY 226,434 1,638 7/16/98 $ 1,768 1,768 130
CHF 1,286 850 7/21/98 $ 868 868 18
$ 2,513 2,513 7/29/98 JPY 344,961 2,500 (13)
JPY 344,961 2,500 7/29/98 $ 2,685 2,685 185
DEM 1,714 953 8/14/98 $ 972 972 19
$ 301 301 8/19/98 JPY 41,135 299 (2)
JPY 259,357 1,885 8/19/98 $ 1,962 1,962 77
JPY 320,073 2,334 9/10/98 $ 2,343 2,343 9
DEM 317 177 9/14/98 $ 176 176 (1)
DEM 1,323 737 9/14/98 $ 734 734 (3)
JPY 376,055 2,749 9/28/98 $ 2,761 2,761 12
JPY 506,990 3,722 10/26/98 $ 3,587 3,587 (135)
--------- --------- -----
$ 23,948 $ 24,216 $ 268
--------- --------- -----
--------- --------- -----
</TABLE>
- ---------------
BEF -- Belgian Franc
CHF -- Swiss Franc
DEM -- German Mark
FIM -- Finnish Markka
HKD -- Hong Kong Dollar
ITL -- Italian Lira
JPY -- Japanese Yen
MYR -- Malaysian Ringgit
SEK -- Swedish Krona
SGD -- Singapore Dollars
- --------------------------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION (UNAUDITED)
<TABLE>
<CAPTION>
MARKET PERCENT OF
INDUSTRY VALUE NET ASSETS
- ----------------------------------------------------------------------------- --------- -------------
<S> <C> <C>
Capital Equipment............................................................ $ 28,326 21.2%
Consumer Goods............................................................... 23,891 17.8
Finance...................................................................... 19,770 14.8
Materials.................................................................... 17,121 12.8
Services..................................................................... 11,767 8.8
Energy....................................................................... 8,400 6.3
Multi-Industry............................................................... 5,549 4.1
--------- ---
$ 114,824 85.8%
--------- ---
--------- ---
</TABLE>
- --------------
70
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
LATIN AMERICAN FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
THE COUNTRY SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MSCI LATIN AMERICA GLOBAL INDEX AND ARE FOR INFORMATIONAL
PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Argentina 9.6%
Brazil 44.6%
Chile 6.9%
Colombia 0.7%
Mexico 33.3%
Short-Term Investment 3.3%
Other 1.6%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
---------------------------------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION
----------------- -----------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares -22.11% -17.37% 7.08% 8.67%
- -----------------------------------------------------------------
Class B+ Shares -21.06% -17.82% 18.43% 19.17%
- -----------------------------------------------------------------
Class C Shares -18.50% -17.86% 7.83% 7.83%
- -----------------------------------------------------------------
MSCI Latin America
Global Index:
Class A & C Shares N/A -24.92% N/A 1.02%
Class B Shares N/A -24.92% N/A 7.73%
- -----------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
+ Class B shares have been offered since August 1, 1995.
The MSCI Latin America Global Index is a broad-based market cap weighted
composite index covering at least 60% of markets in Mexico, Argentina, Brazil,
Chile, Colombia, Peru and Venezuela (assumes dividends are reinvested).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
ISSUER COUNTRY NET ASSETS
- ------------------------------------ --------- --------------
<S> <C> <C>
CRT Brazil 12.6%
Telebras Brazil 9.8%
FEMSA YBD Mexico 7.4%
Telemex Mexico 7.3%
CEMIG Brazil 6.6%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ---------------------------- --------- -------------
<S> <C> <C>
Services $ 41,509 49.9%
Energy 13,424 16.1%
Consumer Goods 11,891 14.3%
Materials 6,239 7.5%
Finance 5,134 6.2%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Latin American Latin American MSCI Latin America
Fund Class A Fund Class C Global Index
7/6/94 $9,500 $10,000 $10,000
6/30/95 $7,327 $7,542 $8,517
6/30/96 $10,210 $10,532 $10,002
6/30/97 $16,062 $16,434 $14,587
6/30/98 $13,136 $13,508 $10,952
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; all recurring fees (including
management fees) were deducted; and all dividends and distributions were
reinvested. The graph presents the performance of Class A and Class C shares
which have been in existence since the Fund's inception. The performance of
Class B shares will vary based upon the different inception date and the sales
charge and fees assessed to that Class.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The investment objective of the Van Kampen Latin American Fund, formerly known
as the Morgan Stanley Latin American Fund, is to provide long-term capital
appreciation by investing primarily in equity securities of Latin American
issuers.
For the 12 months ended June 30, 1998, the Van Kampen Latin American Fund had a
total return of -17.37 percent for the Class A shares at net asset value, as
compared to a total return of -24.92 percent for the Morgan Stanley Capital
International (MSCI) Latin America Global Index.
The Asian crisis that began July 2, 1997, with the Thai baht devaluation and its
subsequent contagion throughout the emerging markets resulted in poor
performance across all Latin markets in the last half of 1997. However, the Fund
outperformed its benchmark during the period, primarily because of strong
country allocation and stock selection. The largest contributors to the Fund's
outperformance were our overweight exposure in Mexico, underweight exposure in
Chile, increased exposure to Brazil in early December, and strong stock
selection in Mexico, where we focused on the consumer-related companies.
Investors punished Brazil during the second half of 1997, as its stock market
decreased 18.4 percent. Because Brazil follows a fixed exchange rate regime and
has both a large current account and fiscal deficit, superficial similarities to
Southeast Asian countries led to fears of a currency devaluation. The effect of
these fears was exacerbated by profit taking following the large gains of the
prior year. During the fourth quarter of 1997, Brazil was able to distance
itself from the focus on Asia as
------------------
71
<PAGE>
VAN KAMPEN
LATIN AMERICAN FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
Brazilian authorities made positive moves to support the equity market. These
moves included an aggressive, well-planned response to the crisis, including the
doubling of interest rates and a significant tightening of fiscal policy.
Mexico was the region's best performing market during the first half of the
period, appreciating 16.8 percent. The outstanding performance was largely due
to the recovery of the Mexican consumer, as evidenced by improving retail and
consumer production sales, and increasing real wages.
Elsewhere in Latin America, Argentina declined 1.4 percent during the last six
months of 1997 largely in sympathy with the overall weakness of equity prices in
the region. The Chilean market decreased 21.3 percent during the same period
because of modest profit taking during the third quarter and commodity deflation
during the fourth quarter of last year.
Colombia posted the second best return in Latin America, appreciating 3.3
percent during the second half of 1997. The Colombian equity market benefited
from improved sentiment as investors anticipated an end to the economic slowdown
and subsequent upturn in growth. Peru decreased 14.9 percent during the period,
largely in response to concerns over effect of El Nino on the economy, and
political instability. Weakening oil prices fueled Venezuela's 10.9 percent
decline.
Renewed turmoil in Asia led to continued declines in all Latin equity markets in
the first half of 1998. Overall, the Latin American region decreased 19.9
percent during the first six months of 1998, driven by returns in Venezuela
(down 45.7 percent), Brazil (down 15.9 percent), and Mexico (down 22.2 percent).
Peru was the best performing Latin market during the period, decreasing 9.9
percent. Rounding out the region, Argentina declined 16.4 percent, Colombia
declined 30.0, and Chile decreased 21.2 percent. Declining commodity prices
(particularly oil and copper) and political noise surrounding upcoming
presidential elections in Brazil and Venezuela negatively affected these
markets.
Weak fiscal fundamentals, coupled with rising political uncertainty, led to a
sharp decline in Brazilian stocks after a brief rally early in the year. We
question the ability of the Brazilian government to strengthen its fiscal
position prior to this year's elections. Political jitters already were apparent
in early June as President Cardoso's opposition (left-wing party candidate Lula)
began to gain popularity. President Cardoso's drop in the polls largely
reflected social malaise in the aftermath of the government's mishandling of the
drought and famine conditions in the Northeast, fires in the Amazon forest,
growing unemployment, and unfortunate statements regarding the work ethics of
those who are eligible to retire. While Brazil offers attractive value and
growth opportunities on a stock level, we are cautious with respect to its
widening fiscal deficit and vulnerable currency. We continue to focus on the
telecom sector given its strong operating earnings growth and privatization
potential.
The Mexican equities market faltered due to declining oil prices and a reduction
in capital inflows. During the past 12 months, the average oil export price for
Mexico has declined nearly 40 percent. Because oil represents 32 percent of
Mexico's total revenues, the sharp decline in energy prices has been
particularly detrimental for fiscal performance. Because of attractive
valuations introduced during the quarter in selected stocks, we increased our
exposure from a market-neutral position to a modest overweight position. In
spite of the oil-price squeeze, we expect economic growth in Mexico to remain
healthy, fueled by strong consumer demand. Thus, our focus is on such
consumer-related industries as beverages and retailers.
Stock prices in Argentina decreased in sympathy with the region and because of
concerns about a widening trade deficit. We increased our Argentine exposure to
a modest underweight position. We are encouraged by Argentina's strong economic
activity, low inflation, increasing international reserves, and improving fiscal
deficit. In Argentina, we are focusing on the telecom companies, which offer
strong operating earnings growth.
High domestic interest rates, commodity price deflation, and weak demand from
Asia for copper, forestry products, and fishmeal drove the Chilean market's
decline. Interest rates have been continually raised by the central bank since
the beginning of 1998 in an effort to defend the Chilean
- --------------
72
<PAGE>
VAN KAMPEN
LATIN AMERICAN FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
peso and narrow the country's trade deficit. The high interest rates have
hindered stock market returns, as local investors preferred to tap the
fixed-income market and foreign investors remained on the sidelines awaiting
signs of a rate cut.
In other Latin American markets, investors greeted Colombia President-elect
Pastrana's victory on June 21 with optimism. However, lending rates averaging 15
percent--the highest levels in 13 years--dampened investor sentiment. In April,
we exited both the Peruvian and Venezuelan markets. In Peru, deteriorating
external accounts and slow growth have undermined equity-market performance.
Meanwhile, higher interest rates, a tense political environment, and currency
concerns led to our decision to eliminate our exposure to the Venezuelan market.
From a longer-term perspective, we are optimistic that capital flows will return
to Latin America. Stock prices in the region generally offer the best
fundamentals of all the emerging markets. As of the end of the reporting period,
the average Latin America stock sold for 10 times estimated 1999 earnings, while
profits were forecasted to grow by 15 percent next year.
Robert L. Meyer Andy B. Skov
PORTFOLIO MANAGER PORTFOLIO MANAGER
------------------
73
<PAGE>
VAN KAMPEN
LATIN AMERICAN FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- -----------------------------------------------------------------------------
COMMON STOCKS (65.6%)
ARGENTINA (9.6%)
125,350 Telecom Argentina S.A. ADR....................... $ 3,737
105,508 Telefonica de Argentina ADR...................... 3,423
27,410 YPF ADR.......................................... 824
-------
7,984
-------
BRAZIL (15.1%)
48,643 CEMIG ADR........................................ 1,506
(e)835 CEMIG ADR........................................ 26
49,950 CVRD ADR......................................... 1,056
(a)2,289,172 Companhia de Electricidade do Estado do Rio de
Janeiro........................................ 1,128
201,955 Copel............................................ 1,886
(e)31,925 Coteminas ADR.................................... 435
(a)600,500 Iven............................................. 301
(a,e)10,410 Lojas Arapua ADR................................. 6
(e)44,275 Petrobras ADR.................................... 826
187,805 Rossi Residencial S.A. GDS....................... 939
(e)60,287 Rossi Residencial S.A............................ 301
26,491 Telebras ADR..................................... 2,892
43,762 Unibanco GDR..................................... 1,291
-------
12,593
-------
CHILE (6.9%)
5,440 Banco Edwards ADR................................ 77
10,475 Banco Santander ADR.............................. 135
10,060 Banco Santiago ADR............................... 168
35,150 CCU ADR.......................................... 743
66,060 Chilectra ADR.................................... 1,404
19,606 Cia Telecom ADR.................................. 398
24,110 D & S ADR........................................ 362
64,153 Empressa Nacional de Electricidad S.A. ADR....... 914
30,245 Enersis S.A. ADR................................. 739
9,460 Gener ADR........................................ 173
32,200 Quinenco ADR..................................... 290
28,582 Santa Isabel S.A. ADR............................ 314
-------
5,717
-------
COLOMBIA (0.7%)
575 BanColombia...................................... 1
60,609 Bavaria.......................................... 354
110,584 Valores Bavaria SA............................... 190
-------
545
-------
MEXICO (33.3%)
(a)466,867 Banacci 'B'...................................... 909
(a)166,310 Banacci 'L'...................................... 268
2,801,313 Bancomer 'B'..................................... 1,044
92,140 Carso 'A1'....................................... 379
70,254 Cemex 'B' ADR.................................... 620
588,061 Cemex 'CPO'...................................... 2,204
16,110 Cemex ADR........................................ 121
152,600 Cemex S.A. de C.V. 'B'........................... 673
520,115 Cifra 'B'........................................ 773
75,850 Cifra 'C'........................................ 105
3,522 Cifra ADR........................................ 52
58,253 FEMSA ADR........................................ 1,835
(a)138,292 FEMSA............................................ 4,307
64,630 Groupo Modelo 'C'................................ 543
205,270 Grupo Industrial Bimbo S.A. de CV 'A'............ 406
574,974 Kimberly 'A'..................................... 2,030
461,233 Soriana 'B'...................................... 1,324
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- -----------------------------------------------------------------------------
126,698 Telemex ADR...................................... $ 6,089
(a)100,258 Televisa CPO ADR................................. 3,772
27,190 TV Azteca ADR.................................... 294
-------
27,748
-------
TOTAL COMMON STOCKS (COST $62,319).................................. 54,587
-------
PREFERRED STOCKS (29.5%)
BRAZIL (NON-VOTING STOCKS) (29.5%)
(a,d)8,115,000 Banco Nacional................................... --
126,469,735 CEMIG............................................ 3,937
9,617,022 CRT.............................................. 10,486
18,500 CVRD............................................. 368
(a)44,859 Centrais Geradoras do Sul do Brasil S.A.......... 61
1,689,000 Cia Cimento Portland Itau........................ 299
2,492,000 Coteminas........................................ 679
2,961,000 Encorpar ADR..................................... 7
64,912,167 Gerdau........................................... 898
8,000 Globex Utilidades S.A............................ 69
(a)19,195,300 Lojas Arapua S.A................................. 12
21,326,700 Lojas Renner S.A................................. 627
(a)11,891 TELESP Class B................................... 987
48,604,783 Telebras......................................... 5,287
(a)14,670 Telerj Celular S.A............................... 863
(a)31,997 Vale Do Rio Doce ADR............................. --
-------
TOTAL PREFERRED STOCKS (COST $30,177)............................... 24,580
-------
TOTAL FOREIGN SECURITIES (95.1%) (COST $92,496)..................... 79,167
-------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
<C> <S> <C>
- ----------------
SHORT-TERM INVESTMENT (3.3%)
REPURCHASE AGREEMENT (3.3%)
$ 2,772 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $2,772,
collateralized by $1,725 U.S. Treasury Bonds,
11.25%, due 2/15/15, valued at $2,836 (COST
$2,772)........................................ 2,772
-------
TOTAL INVESTMENT IN SECURITIES (98.4%) (COST $95,268)............... 81,939
-------
FOREIGN CURRENCY (1.4%)
ARP 482 Argentine Peso................................... 482
BRL 267 Brazilian Real................................... 231
COP 6,920 Colombian Peso................................... 5
MXP 3,465 Mexican Peso..................................... 385
PSS 3 Peruvian New Sol................................. 1
VEB 10,387 Venezuelan Bolivar............................... 19
-------
TOTAL FOREIGN CURRENCY (COST $1,126)................................ 1,123
-------
TOTAL INVESTMENTS (99.8%) (COST $96,394)............................ 83,062
OTHER ASSETS IN EXCESS OF LIABILITIES (0.2%)........................ 160
-------
NET ASSETS (100%)................................................... $83,222
-------
-------
</TABLE>
- ---------------
(a) -- Non-income producing security
(d) -- Security valued at fair value--see note A-1 to financial statements
(e) -- 144A Security--certain conditions for public sale may exist
ADR -- American Depositary Receipt
CPO -- Certificate of Participation
GDR -- Global Depositary Receipt
GDS -- Global Depositary Shares
- --------------
74
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
LATIN AMERICAN FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE INFORMATION:
Under the terms of foreign currency contracts open at June 30, 1998, the
Portfolio is obligated to deliver or is to receive foreign currency in exchange
for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
CURRENCY IN EXCHANGE NET UNREALIZED
TO DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- ---------- ----- ------------- --------------- ----- -----------------
<S> <C> <C> <C> <C> <C>
MXP 2,158 $ 240 7/1/98 $ 240 $ 240 $ --
</TABLE>
- ---------------
MXP -- Mexican Peso
- --------------------------------------------------------------------------------
SUMMARY OF FOREIGN SECURITIES BY INDUSTRY CLASSIFICATION (UNAUDITED)
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- ------------------------------------------------------------------------------ --------- -------------
<S> <C> <C>
Services...................................................................... $ 41,509 49.9%
Energy........................................................................ 13,424 16.1
Consumer Goods................................................................ 11,891 14.3
Materials..................................................................... 6,239 7.5
Finance....................................................................... 5,134 6.2
Multi-Industry................................................................ 970 1.1
--------- ---
$ 79,167 95.1%
--------- ---
--------- ---
</TABLE>
-----------------------
75
The accompanying notes are an integral part of the financial statements.
<PAGE>
MORGAN STANLEY
MONEY MARKET FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
INVESTMENTS IN SHARES OF THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE IS NO ASSURANCE THAT THE FUND WILL MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. YIELDS WILL FLUCTUATE AS MARKET CONDITIONS
CHANGE.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Certificates of Deposit 25.1%
Commercial Paper 47.2%
Corporate Floating Rate Notes 6.7%
U.S. Government & Agency Obligations 4.2%
Short-Term Investment 16.4%
Other 0.4%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY INSTRUMENT NET ASSETS
- -------------------- ------------------ --------------
<S> <C> <C>
Federal Home Loan
Mortgage Corp. U.S. Government &
Discount Note Agency Obligation 4.2%
Swiss Bank, New York Certificates of
Deposit 3.4%
Daimler-Benz Commercial Paper 3.3%
Monsanto Co. Commercial Paper 2.8%
Canadian Imperial Certificates of
Bank (Yankee) Deposit 2.5%
</TABLE>
The investment objective of the Morgan Stanley Money Market Fund is to provide a
high level of current interest income consistent with maintaining liquidity and
stability of principal. Obligations held by the Money Market Fund will have
remaining maturities of 397 days or less. In pursuing its investment objective,
the Fund invests in a broad range of U.S. dollar-denominated instruments, such
as government, bank, and commercial obligations.
The annualized seven-day yield and seven-day effective yield (which assumes all
dividends are reinvested) for the Money Market Fund as of June 30, 1998, were
4.67 percent and 4.77 percent, respectively. As with all money market
portfolios, the seven-day yields are not necessarily indicative of future
performance.
The U.S. economy began 1998 with a robust first quarter, as indicated by a GDP
of 5.4 percent. This level represented a healthy pace of economic growth.
Inflation at the CPI level was nonexistent, as commodity and producer prices
fell during the quarter. Interest rates declined, and consumers enjoyed
attractive financing which stimulated a strong housing market. Jobs remained
plentiful and the unemployment rate held steady at 4.7 percent.
As we moved into the second quarter, economic strength continued, although at a
more moderate pace. The labor market made further gains and the unemployment
rate fell to 4.5 percent. Wages rose in the second quarter, although not enough
to trigger market fears of higher inflation and tighter corporate profit
margins. Wage growth continues to be one of the key elements in defining the
expansion's life cycle. As long as wages grow at a gradual pace, the current
balance between low inflation and healthy corporate profits can remain intact.
By the end of the second quarter, interest rates had fallen to their lowest
levels of the year. The U.S. Treasury curve was flat to inverted, and the yield
on the long bond had fallen to 5.626 percent. Low domestic inflation played a
large part in driving interest rates lower, as did the Asian economic and fiscal
crisis. Pressures in Asia helped increase foreign demand for U.S. bonds, as
investors sought out higher-quality markets in which to invest and protect their
capital.
In situations where the economy is as strong as it is in the United States, the
markets typically become concerned that monetary policy might turn more
restrictive to slow economic growth and prevent inflation. Although these
concerns exist, the markets are less concerned that the Federal Reserve Board
might raise interest rates to slow economic growth because other regulating
factors exist. While the Asian crisis has helped to drive bond prices higher, it
has also widened the trade deficit and may provide a slowing effect on our
domestic economy. The strength in the dollar will have a similar effect as
foreign demand for U.S. exports will decline, slowing U.S. output. There is
concern that U.S. businesses have built up excessive inventories, which may put
corporate profit margins under pressure. If consumer demand is not sufficient to
relieve businesses of their surplus inventories, excessive carrying costs of
unsold goods can potentially tie up capital and stall corporate growth plans.
- --------------
76
<PAGE>
MORGAN STANLEY
MONEY MARKET FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
Most economists have lowered their third and fourth quarter GDP estimates by 1
to 2 percent in anticipation of the above economic effects. If these economists
are correct, and the economy slows automatically, the Fed may leave monetary
policy unchanged throughout the remainder of 1998. This outcome is especially
likely if Fed Chairman Alan Greenspan persists in exercising his influence over
the other members of the FOMC.
During the first half of the year, we invested the Fund's assets in fixed agency
and corporate obligations, as well as in floating rate instruments. The Fund
ended the second quarter with a weighted average maturity of 55 days. Our target
maturity range has been, and will continue to be between 50 and 60 days,
reflecting our neutral interest-rate outlook.
Current money market yields are very low and the yield curve offers little
protection against a potential interest rate hike by the Fed. While the market
is not expecting a Fed tightening, there is still little reason to extend our
overall maturity in the Fund. Yields in longer-dated maturities offer almost the
same return as do yields on shorter-dated maturities. We have been looking to
add more floating rate securities to the Fund to add incremental yield, without
taking undue interest rate risk. By buying floaters, we are protected against
any increase in interest rates by the Fed should they tighten early next year.
We believe that while it is likely that there will be no tightening throughout
the remainder of 1998, the risks of higher interest rates remain and could be
realized as early as the first quarter of 1999. Additionally, we may experience
a steepening in the yield curve before the end of this year as markets
anticipate future monetary policy changes. Should the curve experience some
steepening, we would view the event as an opportunity to extend the Fund's
average maturity.
Abigail Jones Feder Daniel M. Niland
PORTFOLIO MANAGER PORTFOLIO MANAGER
------------------
77
<PAGE>
MORGAN STANLEY
MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (4.2%)
FEDERAL HOME LOAN MORTGAGE CORP. DISCOUNT NOTES (4.2%)
$ 5,000 5.46%, 4/21/99 (COST $4,998)..................... $ 4,998
---------
COMMERCIAL PAPER (47.2%)
AUTOMOBILES (5.8%)
4,000 Daimler-Benz 5.57%, 8/12/98...................... 3,974
3,000 Ford Motor Credit Corp. 5.48%, 7/16/98........... 2,993
---------
6,967
---------
CONSUMER STAPLES (7.8%)
3,000 Eastman Kodak Co. 5.55%, 8/25/98................. 2,975
3,000 H.J. Heinz Co. 5.49%, 7/22/98.................... 2,990
3,300 Monsanto Co. 5.50%, 7/9/98....................... 3,296
---------
9,261
---------
FINANCIAL SERVICES (11.6%)
3,000 American Express Credit Corp. 5.51%, 8/28/98..... 2,973
3,000 General Electric 5.50%, 9/15/98.................. 2,965
2,000 International Lease Finance 5.54%, 7/16/98....... 1,995
3,000 Merrill Lynch 5.54%, 7/30/98..................... 2,987
3,000 Metlife Funding 5.54%, 9/9/98.................... 2,968
---------
13,888
---------
SPECIAL PURPOSE ENTITY (7.5%)
3,000 Atlantic Asset Security 5.54%, 7/10/98........... 2,996
3,000 Citation Capital 5.55%, 7/27/98.................. 2,988
3,000 Greenwich Funding 5.53%, 7/20/98................. 2,991
---------
8,975
---------
TELECOMMUNICATIONS (2.0%)
2,340 SBC Communication 5.50%, 8/6/98.................. 2,327
---------
U.S. BANKS (5.0%)
3,000 Bank of America 5.52%, 8/21/98................... 2,977
3,000 J.P. Morgan & Co. 5.47%, 7/16/98................. 2,993
---------
5,970
---------
UTILITIES (2.5%)
3,000 National Rural 5.50%, 8/7/98..................... 2,983
---------
INSURANCE (5.0%)
3,000 General RE Insurance 5.51%, 9/3/98............... 2,971
3,000 USAA Capital Corp. 5.47%, 7/10/98................ 2,996
---------
5,967
---------
TOTAL COMMERCIAL PAPER (COST $56,338)........................ 56,338
---------
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (25.1%)
NON U.S. BANKS (10.0%)
$ 3,000 Canadian Imperial Bank (Yankee) 5.94%, 10/23/98.. $ 3,000
3,000 Credit Agricole (Yankee) 5.66%, 3/29/99.......... 2,998
2,000 National Westminster Bank 5.53%, 8/5/98.......... 2,000
4,000 Swiss Bank, New York 5.83%, 12/16/98............. 3,999
---------
11,997
---------
U.S. BANKS (10.0%)
1,000 ABN-AMRO Bank N.V., Chicago (Yankee) 5.65%,
3/22/99........................................ 1,000
2,000 ABN-AMRO Bank N.V., Chicago (Yankee) 5.75%,
3/31/99........................................ 1,999
3,000 Bank of Austria, New York (Yankee) 5.74%,
4/26/99........................................ 2,999
3,000 Bank of Montreal, Chicago (Yankee) 5.80%,
11/6/98........................................ 2,999
(h)3,000 Societe Generale Bank, New York (Yankee) 5.59%,
1/19/99........................................ 2,999
---------
11,996
---------
FOREIGN BONDS (5.1%)
(h)3,000 Bayerische Landesbank 5.52%, 6/29/99............. 2,998
(h)3,000 Royal Bank of Canada, New York 5.53%, 6/29/99.... 2,998
---------
5,996
---------
TOTAL CERTIFICATES OF DEPOSIT (COST $29,989)................. 29,989
---------
CORPORATE FLOATING RATE NOTES (6.7%)
BANKS (4.2%)
(h)3,000 Banc One, Dayton 5.84%, 8/21/98.................. 3,000
(h)2,000 First Union National Bank 5.79%, 5/17/99......... 2,000
---------
5,000
---------
TECHNOLOGY (2.5%)
(h)3,000 IBM Credit Corp. 5.66%, 11/20/98................. 3,000
---------
TOTAL CORPORATE FLOATING RATE NOTES (COST $8,000)............ 8,000
---------
REPURCHASE AGREEMENT (16.4%)
19,615 J.P. Morgan Securities, Inc., 5.50%, dated
6/30/98, due 7/1/98, to be repurchased at
$19,618, collateralized by U.S. Treasury Notes,
5.375%, 6/30/00, valued at $20,048 (COST
$19,615)....................................... 19,615
---------
TOTAL INVESTMENTS (99.6%) (COST $118,940).................... 118,940
OTHER ASSETS IN EXCESS OF LIABILITIES (0.4%)................. 436
---------
NET ASSETS (100%)............................................ $119,376
---------
---------
</TABLE>
- ---------------
(h) -- Variable/floating rate security -- rate disclosed is as of June 30,
1998.
- --------------
78
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
U.S. REAL ESTATE FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Diversified 7.5%
Land 0.5%
Lodging/Resorts 8.5%
Office/Industrial 37.8%
Residential 19.5%
Retail 17.4%
Self Storage 4.3%
Short-Term Investment 1.5%
Other 3.0%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
---------------------------------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION
----------------- -----------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares 2.04% 8.27% 18.66% 21.93%
- -----------------------------------------------------------------
Class B Shares 2.48% 7.23% 19.75% 20.86%
- -----------------------------------------------------------------
Class C Shares 6.24% 7.20% 20.87% 20.87%
- -----------------------------------------------------------------
NAREIT Equity Index N/A 8.05% N/A 20.69%
- -----------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
The NAREIT Equity Index is an unmanaged market weighted index of tax qualified
REITs listed on the New York Stock Exchange, American Stock Exchange and the
NASDAQ National Market System, including dividends.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
ISSUER INDUSTRY NET ASSETS
- ------------------------------ ----------------- ----------
<S> <C> <C>
Arden Realty Group, Inc. Office/Industrial 5.1%
Chateau Communities, Inc. REIT Residential 5.0%
CarrAmerica Realty Corp. REIT Office/Industrial 4.9%
Starwood Lodging Trust REIT Lodging/Resorts 4.6%
Brookfield Properties Corp. Office 4.4%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
PERCENT
OF
VALUE NET
SECTOR (000) ASSETS
- --------------------------- --------- --------
<S> <C> <C>
Office/Industrial $13,718 37.8%
Residential 7,061 19.5%
Retail 6,319 17.4%
Lodging/Resorts 3,071 8.5%
Diversified 2,716 7.5%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
U.S. Real Estate Fund U.S. Real Estate Fund U.S. Real Estate Fund NAREIT Equity Index
Class A Class B Class C
05/1/96 $9,500 $10,000 $10,000 $10,000
6/30/96 $9,965 $9,954 $10,372 $10,289
6/30/97 $13,528 $13,669 $14,067 $12,854
6/30/98 $14,496 $15,086 $15,088 $13,133
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; the maximum deferred sales charge was
deducted from the value of the investment of $10,000 in Class B and Class C
shares; all recurring fees (including management fees) were deducted; and all
dividends and distributions were reinvested.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The investment objective of the Van Kampen U.S. Real Estate Fund, formerly the
Morgan Stanley U.S. Real Estate Fund, is to provide above-average current income
and long-term capital appreciation by investing primarily in equity securities
of companies in the U.S. real estate industry, including real estate investment
trusts.
For the year ended June 30, 1998, the Fund had a total return of 8.27 percent
for the Class A shares at net asset value (NAV), as compared to 8.05 percent for
the National Association of Real Estate Investment Trusts (NAREIT) Equity Index.
Following a difficult first quarter, the second quarter provided very little
improvement for REIT investors. The NAREIT Equity Index declined 4.59 percent
for the quarter, and was down 5.03 percent at the end of the reporting period.
This represents the first time that the REIT market provided a negative total
return on a quarterly basis since the first quarter of 1995. As is the pattern
in the REIT market, the second half of the year provides the majority of the
performance; this was true in the second half of 1997, with third and fourth
quarter returns of 11.8 percent and 1.8 percent, respectively.
In the first quarter, the key reason for the difficulties in REIT prices
appeared to be technical--the continued strength in the U.S. equity market led
many non-dedicated real estate investors to move funds to the broad market from
the REIT sector. In the second quarter, however, the continuation of price
weakness led to a greater focus on real estate fundamentals. As the U.S. real
estate cycle continues to age, the level of new construction has begun to raise
concerns among real estate
------------------
79
<PAGE>
VAN KAMPEN
U.S. REAL ESTATE FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
industry participants. Specifically, markets are being gauged for a view as to
when supply will surpass demand. Since the public market tends to look to the
future, we can expect multiples to contract in anticipation of a deterioration
in fundamentals.
After three years of strong performance, the sector is faced with competing
rallying cries of both REIT bulls and bears. One group of analysts finds value
in the sector by demonstrating the large disparity between the relative average
multiple of the S&P 500 versus REITs. These analysts cite REITs for providing
defensive characteristics and portfolio diversification. The bears point to the
cyclical nature of the real estate asset class and argue that multiples have
begun to contract in anticipation of a slowdown in the rate of return in U.S.
commercial real estate and an eventual downturn in capital values. Other
favorite criticisms advanced by the bears include the notion that the REIT
sector's reliance on raising equity capital to grow creates a supply-demand
imbalance for REIT shares, thus keeping a ceiling on share prices. This opinion
reflects the idea that non-dedicated investors will continue to avoid the
sector; in addition, it is not clear how much demand will be provided by
value-oriented investors or those investors searching for defensive vehicles.
As we have discussed, the multifamily and industrial markets have already
achieved equilibrium, with limited pockets of current supply problems. Despite a
rapidly accelerating pace of new office development, the potential for
widespread occupancy pressures from this sector does not appear on the horizon
until 1999 or 2000. New development is confined primarily to sunbelt suburban
locations and is only lightly scattered in a number of central business
districts. In the hotel sector, although recent concerns were focused on the
limited service segment of the market, the cautionary yellow flag is now being
waved for each of the categories. The reason that potential oversupply in the
hotel sector creates greater concern than in other sectors is that the typical
lease in a hotel is only one night, creating the potential for a rapid
deterioration of the operating environment. In light of the strong economy,
retail sales have been buoyant, leading to strong results for retailers and
greater demand to open new stores. We expect new development to meet this
demand.
It is not surprising that the equity offering calendar has become very light,
and that the few deals that were completed in the quarter were priced at far
lower levels than were desired by issuers. This is in contrast to 1997, which
featured a record level of new equity issuance. Given current valuations, we
expect that a number of the IPOs that have been filed will be postponed until
the market recovers. In addition, a number of companies that made large
acquisitions and that expected to complete equity follow-on offerings need to
carefully study alternative options. Clearly, if current pricing levels persist,
the rapid pace of equity securitization will slow as companies become reluctant
or unable to raise equity capital to finance their growth. This should apply to
acquisitions financed by cash as well as to the trend of trading property for
shares with institutional investors and private companies. Finally, we expect
that the merger environment may heat up, given that some companies are trading
at or below valuation levels that approximate their private real estate value.
The current market also may require a change of focus by the majority of the
REIT analyst community. The recent focus has been on setting targets for a
company's annual acquisitions pace and utilizing these targets to establish
estimates of funds from operations (FFO) per share. Since this analysis is
highly dependent on projecting future equity issuance and the corresponding
price for that issuance, current FFO estimates have become suspect. Our style of
focusing on NAV per share does not face this issue. However, to the extent that
we have attributed some portion of the NAV to "development value," we must
analyze the feasibility of a REIT completing its identified projects. We have
spent considerable time discussing the attitude of management toward enhancing
shareholder value by focusing on internal growth, development and redevelopment
of assets, stock buybacks, and the sale of non-strategic assets.
The REIT market has come under pressure by selling from non-dedicated investors.
These investors were heavily concentrated in larger-capitalization companies,
particularly those focusing in the office and hotel sectors (which were the two
best-performing sectors over the last three years). We have continued to shape
the portfolio with companies that we feel offer attractive fundamental
- --------------
80
<PAGE>
VAN KAMPEN
U.S. REAL ESTATE FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
valuations relative to their underlying real estate value. As a result, we added
a number of large-cap companies that have faced the greatest price compression.
From a top-down perspective, we significantly added to the office sector as a
result of price declines. Previously, we attempted to overweight the office
sector due to favorable fundamentals, but lofty prices caused us to temper that
overweighting. High prices in the office sector were the result of external
growth expectations, which are in the process of being downgraded. Despite price
pressure in the hotel sector, we modestly decreased our exposure due to the
concerns discussed above. In order to pay for additions to the office sector, we
decreased our exposure to both multifamily and health care. These two sectors
were modestly valued and did not suffer the same declines in share price.
IMPORTANT FUND UPDATE
On October 23, 1997, the Trustees of the Fund approved its reorganization into
the Van Kampen Real Estate Securities Fund. Upon shareholder approval, the
reorganization of the Fund is expected to take place prior to December 31, 1998.
More information about the reorganization will be forwarded to you in a proxy
statement in the near future.
Your Fund and the Van Kampen Real Estate Securities Fund have substantially
similar investment objectives, policies and practices, and are managed by the
same portfolio management team. The Van Kampen Fund's investment objective is to
provide shareholders with long-term growth of capital, with current income as a
secondary objective.
Russell Platt Theodore R. Bigman
PORTFOLIO MANAGER PORTFOLIO MANAGER
------------------
81
<PAGE>
VAN KAMPEN
U.S. REAL ESTATE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- -----------------------------------------------------------------------
COMMON STOCKS (94.2%)
DIVERSIFIED (7.5%)
6,900 Capital Automotive REIT.......................... $ 98
1,400 Crescent Real Estate Equities Co. REIT........... 47
41,400 Pacific Gulf Properties, Inc. REIT............... 895
26,800 Pennsylvania Real Estate Investment Trust........ 595
11,100 Vornado Realty Trust............................. 440
(a)45,351 Wellsford Properties, Inc........................ 641
-------
2,716
-------
LAND (0.2%)
(a)45,224 Atlantic Gulf Communities Corp................... 93
-------
LODGING/RESORTS (8.5%)
(a)18,800 Capstar Hotel Co................................. 526
(a)34,400 Host Marriott Corp............................... 613
(a)12,200 John Q. Hammons Hotels, Inc...................... 86
34,251 Starwood Lodging Trust REIT...................... 1,655
(a)13,000 Station Casinos, Inc............................. 191
-------
3,071
-------
OFFICE/INDUSTRIAL (37.2%)
INDUSTRIAL (2.4%)
8,200 Meridian Industrial Trust REIT................... 189
41,200 Prime Group Realty Trust......................... 705
-------
894
-------
OFFICE/INDUSTRIAL MIXED (3.5%)
6,500 Bedford Property Investors, Inc. REIT............ 119
19,100 Reckson Associates Realty Corporation REIT....... 451
3,056 Reckson Service Industries, Inc.................. 10
17,500 Spieker Properties, Inc. REIT.................... 678
-------
1,258
-------
OFFICE (31.3%)
70,800 Arden Realty Group, Inc.......................... 1,832
(e,d)37,100 Beacon Capital Partners, Inc..................... 742
60,766 Brandywine Realty Trust REIT..................... 1,360
99,700 Brookfield Properties Corp....................... 1,372
62,700 CarrAmerica Realty Corp. REIT.................... 1,779
43,706 Equity Office Properties Trust REIT.............. 1,240
48,000 Great Lakes Inc. REIT............................ 837
17,600 Kilroy Realty Corp. REIT......................... 440
16,300 Mack-Cali Realty Corp............................ 560
28,600 SL Green Realty Corp............................. 644
25,200 Trizec Hahn Corp................................. 540
-------
11,346
-------
TOTAL OFFICE/INDUSTRIAL....................................... 13,498
-------
RESIDENTIAL (19.5%)
APARTMENTS (13.8%)
38,300 Avalon Bay Communities, Inc. REIT................ 1,455
2,300 Charles E. Smith Residential Realty, Inc......... 74
10,800 Equity Residential Properties Trust.............. 512
40,000 Essex Property Trust, Inc. REIT.................. 1,240
19,900 Irvine Apartment Communities, Inc. REIT.......... 576
47,032 Security Capital Atlantic, Inc................... 1,050
3,700 Security Capital Pacific Trust REIT.............. 83
-------
4,990
-------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- -----------------------------------------------------------------------
MANUFACTURED HOMES (5.7%)
63,148 Chateau Communities, Inc. REIT................... $ 1,815
3,300 Manufactured Home Communities, Inc. REIT......... 80
5,300 Sun Communities, Inc............................. 176
-------
2,071
-------
TOTAL RESIDENTIAL............................................. 7,061
-------
RETAIL (17.0%)
REGIONAL MALLS (7.1%)
18,100 CBL & Associates Properties, Inc. REIT........... 439
103,000 Taubman Center, Inc. REIT........................ 1,468
21,500 Urban Shopping Centers, Inc. REIT................ 677
-------
2,584
-------
STRIP CENTERS (9.9%)
79,600 Burnham Pacific Property Trust REIT.............. 1,129
61,000 Federal Realty Investment Trust REIT............. 1,468
22,200 Pan Pacific Retail Properties, Inc. REIT......... 430
200 Ramco-Gershenson Properties Trust REIT........... 4
21,700 Regency Realty Corp. REIT........................ 545
-------
3,576
-------
TOTAL RETAIL.................................................. 6,160
-------
SELF STORAGE (4.3%)
9,379 PS Business Parks, Inc. 'A' REIT................. 220
25,788 PS Business Parks, Inc........................... 606
11,100 Public Storage, Inc. REIT........................ 311
15,300 Shurgard Storage Centers, Inc. 'A' REIT.......... 425
-------
TOTAL SELF STORAGE............................................ 1,562
-------
TOTAL COMMON STOCKS (COST $34,037)............................ 34,161
-------
PREFERRED STOCKS (0.7%)
LAND (0.3%)
(a,f)5,829 Atlantic Gulf Communities Corp................... 41
(a,f)8,207 Atlantic Gulf Communities Corp................... 57
-------
98
-------
RETAIL (0.4%)
STRIP CENTER (0.4%)
5,500 First Washington Realty Trust, Inc. 'A'.......... 159
-------
TOTAL PREFERRED STOCKS (COST $294)............................ 257
-------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
<C> <S> <C>
- ----------
CONVERTIBLE BONDS (0.6%)
OFFICE/INDUSTRIAL (0.6%)
$ (a)224 Brookfield Properties Corp. 6.00%, 2/14/07 (COST
$173).......................................... 220
-------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
<C> <S> <C>
- ----------
WARRANTS (0.0%)
LAND (0.0%)
(a,f)9,609 Atlantic Gulf Communities Corp., Class A,
expiring 6/23/04............................... 5
(a,f)9,609 Atlantic Gulf Communities Corp., Class B,
expiring 6/23/04............................... 5
(a,f)9,609 Atlantic Gulf Communities Corp., Class C,
expiring 6/23/04............................... 5
-------
TOTAL WARRANTS (COST $0)...................................... 15
-------
</TABLE>
- --------------
82
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
U.S. REAL ESTATE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENT (1.5%)
REPURCHASE AGREEMENT (1.5%)
$ 537 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $537,
collateralized by $335, U.S. Treasury Bonds,
11.25%, due 2/15/15, valued at $551 (COST
$537).......................................... $ 537
-------
TOTAL INVESTMENTS (97.0%) (COST $35,041)...................... 35,190
OTHER ASSETS IN EXCESS OF LIABILITIES (3.0%).................. 1,067
-------
NET ASSETS (100%)............................................. $36,257
-------
-------
</TABLE>
- ---------------
(a) -- Non-income producing security
(e) -- 144A Security--certain conditions for public sale may exist.
(d) -- Security valued at fair value--see note A-1 to financial statements.
(f) -- Restricted as to public resale. Total value of restricted securities
at June 30, 1998 was $113 or 0.31% of net assets (Total cost $140).
REIT -- Real Estate Investment Trust
-----------------------
83
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Equipment 22.9%
Energy 4.4%
Finance 18.9%
Materials 6.3%
Consumer Products-Miscellaneous 28.1%
Services 5.4%
Short-Term Investment 13.6%
Other 0.4%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS
SINCE INCEPTION
(JULY 7, 1997)**
-----------------
WITH WITHOUT
SALES SALES
CHARGE* CHARGE
- -------------------------------------------
<S> <C> <C>
Class A Shares -1.25% 6.74%
- -------------------------------------------
Class B Shares -0.57% 6.01%
- -------------------------------------------
Class C Shares 3.34% 5.83%
- -------------------------------------------
S&P 500 Index N/A 20.58%
- -------------------------------------------
</TABLE>
* The returns above with sales charge are calculated using the applicable sales
charge for Class A shares and applicable deferred sales charge for Class B
and Class C shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
The S&P 500 Index is an unmanaged index of common stocks. The S&P 500 Index
assumes dividends are reinvested.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
ISSUER SECTOR NET ASSETS
- --------------------------- ----------------- --------------
<S> <C> <C>
Ford Motor Co. Consumer Products
- Miscellaneous 3.0%
International Business Consumer Products
Machines Corp. - Miscellaneous 2.8%
General Motors Corp. Consumer Products
- Miscellaneous 2.7%
Chase Manhattan Corp. Finance 2.6%
Case Corp. Capital Equipment 2.4%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- --------------------------- --------- -------------
<S> <C> <C>
Consumer Products -
Miscellaneous $88,577 28.1%
Capital Equipment 72,263 22.9%
Finance 59,907 18.9%
Materials 20,029 6.3%
Services 16,958 5.4%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
Value Fund Class A Value Fund Class B Value Fund Class C S&P 500 Index
7/7/97 $9,500 $10,000 $10,000 $10,000
9/30/97 $9,849 $10,440 $10,430 $10,429
12/31/97 $9,598 $10,151 $10,143 $10,727
3/31/98 $10,464 $11,048 $11,040 $12,221
6/30/98 $10,060 $10,601 $10,583 $12,623
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; the maximum deferred sales charge was
deducted from the value of the investment of $10,000 in Class B and Class C
shares; all recurring fees (including management fees) were deducted; and all
dividends and distributions were reinvested.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Van Kampen Value Fund, formerly the Morgan Stanley Value Fund, seeks to
achieve above-average total return over a market cycle of three to five years,
consistent with reasonable risk. The Fund invests in a diversified portfolio of
common stocks and other equity securities that are believed to be undervalued on
the basis of key valuation parameters, including price-to-earnings, price-to-
sales, and price-to-cash flow ratios. In general, the Fund benefits from
investing in the stocks of companies with relative valuations below that which
is merited based upon the company's relative growth and profit characteristics.
The period beginning at the Fund's inception on July 7, 1997 ending June 30,
1998 can be characterized as a difficult period for low price-to-earnings value
investing--an approach the Fund embraces. As a result, the Fund fell
significantly short of its performance goal relative to the Standard & Poor's
500-Stock Index. The S&P 500 Index, which was driven by mega-cap, high price-
to-earnings stocks, returned 20.58 percent during this period, while the Fund's
return was only 4.81 percent for Class A shares at net asset value.
The performance shortfall that began in September of last year continued in the
first six months of 1998. The threat of a global economic slowdown stemming from
the economic crisis in Asia generated a strong interest in the shares of stable
growth companies. Because the Fund owns only low price-to-earnings stocks, many
of the traditionally stable sectors of the market--such as health care,
beverages, personal care products, and telephone and consumer services--are not
represented among this group. The market's preference for steady growth,
seemingly without regard for valuation, negatively affected the Fund's relative
performance.
- --------------
84
<PAGE>
VAN KAMPEN
VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
From an industry perspective, the Fund's relative return was negatively affected
by an overweight position in the heavy industry/transport sector, as well as an
underweighting in defensive sectors such as telephone services, consumer
services, and health care. Adverse sector exposure accounted for roughly 1.2
percentage points of the differential between Fund performance and the Index.
The Fund applies strict value-based criteria for buying and selling stocks. New
names are added to the portfolio only if (1) the current price-to-earnings ratio
is in the bottom 40 percent of the market, (2) the earnings-per-share outlook is
flat to rising, and (3) the share price has underperformed by at least 20
percent on either an absolute or relative basis during the prior 12 to 18
months. Shares are sold if price-to-earnings multiples appreciate two quintiles
(a 40 percent increase) from the time of purchase. This strategy, which has been
effective in past market cycles, tends to underperform in periods of excessive
speculation or "nifty fifty" style growth domination, such as we had during the
reporting period.
During the past year, the inability of the Fund to own many mega-cap growth
stocks (due to valuation and process restrictions) generally is classified as
poor stock selection in our attribution analysis. Value names in each sector
simply did not keep pace with their growth counterparts. As such, negative stock
selection was responsible for roughly three-quarters of the Fund's
underperformance during the reporting period. Specifically, stock selection in
the food and tobacco, health care, technology, retail, and heavy
industry/transportation sectors penalized results by almost 14 percentage
points. Gains from our top performers, including Ford Motor Company, Compaq
Computer, AMR Corp., Delta Air Lines, Nellcor Puritan Bennett, Bergen Brunswig,
and Chase Manhattan, were offset by the negative impact of positions in Case
Corporation, Toys 'R' Us, Cummins Engine, Goodyear, Stratus Computer,
Harnischfeger, and Olsten.
Since inception, our value-driven selection process has guided us toward
economically sensitive stocks, as many of these companies continued to post
favorable relative profit margins and income gains. At the same time, valuations
moved below levels posted during the last recession of 1990-91.
The Fund's investable universe includes about 40 percent financial service
stocks. As a group, these names outperformed the S&P 500 during the last 12
months. Although we carried a modest overweight in this sector, the Fund avoided
the extreme overweight held by many value managers. Risk control factors prevent
us from holding 40 percent positions in any sector of the portfolio, including
financials. As a result, most of the Fund's holdings are low price-to-earnings,
nonfinancial companies; therefore, much of our relative performance shortfall
(versus peer group) resulted from our commitment to diversified low
price-to-earnings investing.
Recently, our stock-selection discipline has enabled us to diversify into more
defensive areas of the market. The Fund added new positions in EDS, a large-cap
technology service company; Bell Atlantic; Tenet Healthcare, a large for-profit
hospital chain; and Air Products & Chemicals, an industrial gas company. We also
expanded our bank holdings with new positions in BancOne, Washington Mutual, and
PNC Corp. Meanwhile, we trimmed the Fund's positions among consumer cyclicals,
including Ford Motor Company and AMR Corp., which experienced big upward moves.
At the end of the reporting period, we retained large underweightings in
consumer staples, consumer services, health care, technology, and telephone
utilities. These groups include many of the mega-cap growth names that led the
market in recent months. Of the 50 largest companies in the S&P 500 as of June
30, 1998, 41 were excluded from ownership due to the Fund's valuation criteria.
Eight of the nine companies that met the Fund's criteria are in the portfolio,
five of which are top-ten holdings. It should be noted, however, that the
subsequent gains in even those stocks have taken valuations beyond the Fund's
parameters for initial purchase.
The current characteristics of the Fund's holdings reflect our ongoing
commitment to value investing. The price-to-earnings ratio for the portfolio is
12.8 times earnings for the next 12 months, compared to 21.3 times earnings for
the S&P 500. The portfolio's price-to-sales ratio of 0.73 and price-to-cash flow
ratio of 10.1 compare favorably to the 1.8 times sales and 17.0 times cash flow
of the S&P 500. These price-to-earnings, price-to-sales, and price-to-cash flow
valuation discounts of
------------------
85
<PAGE>
VAN KAMPEN
VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
40 percent, 60 percent, and 41 percent, respectively, represent large valuation
discounts in the Fund's value strategy. These valuation discounts may be
warranted if the portfolio contained companies with poor or deteriorating
fundamentals; however, this simply is not the case.
The Fund's last 12-month growth rates of 5.5 percent for earnings-per-share, 8.1
percent for sales, and 7.0 percent for dividends approach the 7.4 percent, 11.2
percent, and 8.8 percent rates, respectively, of the S&P 500. Earnings estimate
revisions for the current and next fiscal years stand at -1.7 percent and -7.1
percent for the Fund versus -1.0 percent and -8.8 percent for the S&P 500.
Earnings estimate revisions are frequently a good predictor of future
performance. These comparisons underscore the Fund's investment premise, which
is based on the concept of valuation reconciliation. In today's narrow stock
market, valuation considerations have been eclipsed by the performance of a
relatively few large-cap growth stocks. Regardless of popular trends, however,
the Fund will adhere to its investment philosophy of buying good companies at
attractive prices. This approach has generated successful performance in the
past, and we have every confidence that it will do so in the future.
<TABLE>
<S> <C> <C>
Richard Behler Nicholas Kovich Robert Marcin
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
- --------------
86
<PAGE>
VAN KAMPEN
VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------------
COMMON STOCKS (86.0%)
CAPITAL EQUIPMENT (22.9%)
CHEMICALS--DIVERSIFIED (3.4%)
29,700 Dow Chemical Co.................................. $ 2,872
40,710 Du Pont (EI) de Nemours Co....................... 3,038
31,560 Rohm & Haas Co................................... 3,280
52,000 The Lubrizol Corp................................ 1,573
--------
10,763
--------
CONSTRUCTION & HOUSING (1.5%)
110,420 Owens Corning.................................... 4,507
--------
ELECTRICAL & ELECTRONICS (0.8%)
64,400 Electronic Data Systems Corp..................... 2,576
--------
ELECTRIC UTILITIES (1.2%)
53,580 DTE Energy Co.................................... 2,163
54,690 Entergy Corp..................................... 1,572
--------
3,735
--------
ELECTRONIC COMPONENTS--MISCELLANEOUS (2.5%)
(a)76,560 Arrow Electronics, Inc........................... 1,665
51,300 Avnet, Inc....................................... 2,806
96,110 Tektronix, Inc................................... 3,400
--------
7,871
--------
HEALTHCARE--MEDICAL DEVICE (1.5%)
83,330 Beckman Coulter, Inc............................. 4,854
--------
INDUSTRIAL COMPONENTS (2.0%)
106,990 Aeroquip-Vickers, Inc............................ 6,245
--------
MACHINERY & ENGINEERING (7.4%)
158,300 Case Corp........................................ 7,638
37,900 Caterpillar, Inc................................. 2,004
106,700 Cummins Engine................................... 5,468
300 Deere & Co....................................... 16
115,660 Harnischfeger Industries, Inc.................... 3,275
65,950 Kennametal, Inc.................................. 2,753
56,725 Parker-Hannifin Corp............................. 2,163
--------
23,317
--------
MANUFACTURING (2.0%)
20,000 Eaton Corp....................................... 1,555
(a)31,510 FMC Corp......................................... 2,148
51,670 Tecumseh Products Co. 'A'........................ 2,729
--------
6,432
--------
PROFESSIONAL SERVICES (0.6%)
175,470 Olsten Corp...................................... 1,963
--------
TOTAL CAPITAL EQUIPMENT........................................... 72,263
--------
CONSUMER PRODUCTS--MISCELLANEOUS (28.1%)
AUTOMOBILES (9.6%)
56,690 Dana Corp........................................ 3,033
157,930 Ford Motor Co.................................... 9,318
127,180 General Motors Corp.............................. 8,497
95,900 Goodyear Tire & Rubber Co........................ 6,180
57,860 TRW, Inc......................................... 3,161
--------
30,189
--------
CONSUMER SERVICES (0.4%)
32,970 Standard Register Co............................. 1,166
--------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------------
COMPUTERS/SOFTWARE (3.5%)
76,900 International Business Machines Corp............. $ 8,829
(a)86,300 Stratus Computer, Inc............................ 2,184
--------
11,013
--------
CONSUMER PRODUCTS--MISCELLANEOUS (0.5%)
59,910 Tupperware Corp.................................. 1,685
--------
HEALTHCARE SUPPLIES & SERVICES (3.2%)
112,070 Columbia HCA/Healthcare Corp..................... 3,264
(a)127,400 Foundation Health Systems 'A'.................... 3,360
34,410 Mallinckrodt, Inc................................ 1,022
(a)60,310 Maxicare Health Plans, Inc....................... 407
(a)51,100 Tenet Healthcare Corp............................ 1,597
(a)20,900 Vencor, Inc...................................... 151
16,600 Ventas, Inc...................................... 229
--------
10,030
--------
RETAIL--GENERAL (0.7%)
(a)118,100 Venator Group, Inc............................... 2,259
--------
RETAIL--MAJOR DEPARTMENT STORES (4.5%)
93,420 Dillards, Inc. 'A'............................... 3,871
(a)39,310 Federated Department Stores...................... 2,115
59,300 Sears, Roebuck & Co.............................. 3,621
(a)191,640 Toys 'R' Us, Inc................................. 4,516
--------
14,123
--------
TEXTILES & APPAREL (2.8%)
63,230 Russell Corp..................................... 1,909
48,520 Springs Industries, Inc. 'A'..................... 2,238
90,940 VF Corp.......................................... 4,683
--------
8,830
--------
TOBACCO (2.9%)
143,240 Philip Morris Cos., Inc.......................... 5,640
153,340 RJR Nabisco Holdings Corp........................ 3,642
--------
9,282
--------
TOTAL CONSUMER PRODUCTS--MISCELLANEOUS............................ 88,577
--------
ENERGY (4.4%)
ELECTRIC--INTEGRATED (1.4%)
32,970 Cinergy Corp..................................... 1,154
27,400 Duke Power Co.................................... 1,623
43,340 GPU, Inc......................................... 1,639
--------
4,416
--------
OIL & GAS (3.0%)
(a)83,000 Nabors Industries, Inc........................... 1,645
49,660 Phillips Petroleum Co............................ 2,393
75,070 Ultramar Diamond Shamrock Corp................... 2,369
103,400 YPF ADR.......................................... 3,108
--------
9,515
--------
TOTAL ENERGY...................................................... 13,931
--------
FINANCE (18.9%)
BANKING (4.9%)
108,840 Chase Manhattan Corp............................. 8,218
24,330 Citicorp......................................... 3,631
</TABLE>
-----------------------
87
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<C> <S> <C>
BANKING (CONT.)
14,050 Crestar Financial Corp........................... $ 767
46,640 Republic New York Corp........................... 2,935
--------
15,551
--------
INSURANCE (4.8%)
45,440 Allstate Corp.................................... 4,161
35,020 Hartford Financial Services Group................ 4,006
21,100 Loews Corp....................................... 1,838
106,805 Old Republic International Corp.................. 3,131
46,850 Washington Mutual, Inc........................... 2,035
--------
15,171
--------
LIFE INSURANCE (1.0%)
46,040 American General Corp............................ 3,277
--------
LIFE/HEALTH INSURANCE (1.5%)
69,200 CIGNA Corp....................................... 4,775
--------
REINSURANCE (2.9%)
78,710 Everest Reinsurance Holdings, Inc................ 3,025
71,980 Reliastar Financial Corp......................... 3,455
32,965 Transatlantic Holdings, Inc...................... 2,549
--------
9,029
--------
SUPER-REGIONAL BANKS--U.S. (3.8%)
57,100 Banc One Corp.................................... 3,187
112,889 First Union Corp. (N.C.)......................... 6,576
30,600 NationsBank Corp................................. 2,341
--------
12,104
--------
TOTAL FINANCE..................................................... 59,907
--------
MATERIALS (6.3%)
CHEMICALS (4.1%)
44,400 Air Products & Chemicals, Inc.................... 1,776
40,130 British Petroleum ADR............................ 3,541
36,110 Cabot Corp....................................... 1,167
75,230 Great Lakes Chemical Corp........................ 2,967
73,200 IMC Global, Inc.................................. 2,205
(a)87,400 W.R. Grace & Co.................................. 1,491
--------
13,147
--------
ENERGY (1.0)
40,610 Atlantic Richfield Co............................ 3,173
--------
FOREST PRODUCTS & PAPER (0.4%)
41,820 Westvaco Corp.................................... 1,181
--------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------------
METALS--STEEL (0.8%)
89,700 Inland Steel Industries, Inc..................... $ 2,528
--------
TOTAL MATERIALS................................................... 20,029
--------
SERVICES (5.4%)
FOOD--MISCELLANEOUS (1.4%)
78,410 IBP, Inc......................................... 1,421
138,820 Universal Foods Corp............................. 3,080
--------
4,501
--------
TELECOMMUNICATIONS EQUIPMENT (1.2%)
82,700 Bell Atlantic Corp............................... 3,773
--------
TRANSPORTATION--AIRLINES (2.0%)
(a)31,180 AMR Corp......................................... 2,596
26,800 Delta Airlines, Inc.............................. 3,464
--------
6,060
--------
TRANSPORTATION--RAIL (0.8%)
6,200 Burlington Northern Railroad Co.................. 609
44,280 CSX Corp......................................... 2,015
--------
2,624
--------
TOTAL SERVICES.................................................... 16,958
--------
TOTAL COMMON STOCKS (COST $270,443)................................. 271,665
--------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
<C> <S> <C>
- ----------------
SHORT-TERM INVESTMENT (13.6%)
REPURCHASE AGREEMENT (13.6%)
$ 42,983 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $42,989,
collateralized by $43,900 U.S. Treasury Notes,
5.50%, due 12/31/00, valued at $45,087 (COST
$42,983)....................................... 42,983
--------
TOTAL INVESTMENTS (99.6%) (COST $313,426)........................... 314,648
OTHER ASSETS IN EXCESS OF LIABILITIES (0.4%)........................ 1,104
--------
NET ASSETS (100%)................................................... $315,752
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
ADR -- American Depositary Receipt
- --------------
88
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
WORLDWIDE HIGH INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING. YIELDS WILL FLUCTUATE AS MARKET
CONDITIONS CHANGE.
COMPOSITION OF NET ASSETS (AT JUNE 30, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Argentina 8.7%
Brazil 12.1%
Gabon 1.1%
Jamaica 2.0%
Korea 2.6%
Mexico 10.9%
Netherlands 3.0%
Russia 13.4%
Turkey 3.1%
United States 27.4%
Short-Term Investment 3.9%
Other 11.8%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
---------------------------------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION
----------------- -----------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares -1.50% 3.40% 13.27% 14.60%
- -----------------------------------------------------------------
Class B+ Shares -0.86% 2.63% 15.46% 16.24%
- -----------------------------------------------------------------
Class C Shares 1.68% 2.55% 13.71% 13.71%
- -----------------------------------------------------------------
Worldwide High Income
Blended Index
Class A & C Shares N/A 6.97% N/A 14.02%
Class B Shares N/A 6.97% N/A 14.09%
- -----------------------------------------------------------------
Lehman Aggregate
Bond Index
Class A & C Shares N/A 10.54% N/A 8.59%
Class B Shares N/A 10.54% N/A 8.20%
- -----------------------------------------------------------------
</TABLE>
* The returns above are calculated using the applicable sales charge for Class
A shares and the applicable deferred sales charge for Class B and Class C
shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
+ Class B shares have been offered since August 1, 1995.
The Worldwide High Income Blended Index is an unmanaged index comprised of 50%
CS First Boston High Yield Index, 25% J.P. Morgan Latin Eurobond Index, and 25%
J.P. Morgan Emerging Markets Bond Index Plus.
The Lehman Aggregate Bond Index is an unmanaged index comprised of the
Government/Corporate Index, the Mortgage-Backed Securities Index and the
Asset-Backed Securities Index.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY COUNTRY NET ASSETS
- ------------------------------------ --------- --------------
<S> <C> <C>
Federative Republic of Brazil,
Series EI-L, Floating Rate 6.625%,
4/15/06 Brazil 4.1%
Federative Republic of Brazil
9.375%, 4/7/08 Brazil 3.7%
Republic of Argentina 9.75%, 9/19/27 Argentina 3.5%
Ministry of Finance 10.00%, 6/26/07 Russia 3.5%
United Mexican States 11.375,
9/15/16 Mexico 3.4%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ---------------------------- --------- -------------
<S> <C> <C>
Foreign Government & Agency
Obligations $ 123,850 41.5%
Multi-Industry 38,210 12.8%
Telecommunications 27,121 9.1%
Finance 23,958 8.0%
Eurobonds 15,487 5.2%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C> <C>
Worldwide High Worldwide High Worldwide High Lehman Aggregate
Income Fund Class A Income Fund Class C Income Blended Index Bond Index
4/21/94 $9,500 $10,000 $10,000 $10,000
6/30/94 $9,797 $10,160 $9,741
6/30/95 $10,470 $10,899 $10,738
6/30/96 $12,524 $12,938 $12,802
6/30/97 $16,318 $16,706 $16,431
6/30/98 $16,859 $17,131 $18,606 $13,847
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown at
left assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; all recurring fees (including
management fees) were deducted; and all dividends and distributions were
reinvested. The graph presents the performance of Class A and Class C shares
which have been in existence since the Fund's inception. The performance of
Class B shares will vary based upon the different inception date and the sales
charge and fees assessed to that Class.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Van Kampen Worldwide High Income Fund, formerly known as the Morgan Stanley
Worldwide High Income Fund, seeks to offer investors high current income
consistent with relative stability of principal and potential for capital
appreciation. To achieve this objective, the Fund will invest primarily in
high-yielding, high risk fixed-income securities of issuers located throughout
the world.
For the 12 months ended June 30, 1998, the Van Kampen Worldwide High Income Fund
generated a total return of 3.40 percent for the Class A shares at net asset
value, as compared to a total return of 6.97 percent for the Worldwide High
Income Blended Index. This benchmark is comprised of 50 percent CS First Boston
High Yield Index, 25 percent J.P. Morgan Latin Eurobond Index, and 25 percent
J.P. Morgan Emerging Markets Bond Index Plus. In addition, the Lehman Aggregate
Bond Index returned 10.54 percent for the same period.***
During the last six months of 1997, volatility in the emerging debt markets
increased dramatically. Following a robust third quarter, the almost two-year
rally in emerging country debt came to an abrupt halt during the final three
months of 1997. After emerging market debt had reached an all-time high in terms
of price in early September, investors suddenly lost their appetite for risk,
causing prices to fall to a 12-month low by mid-October. Because of the
deepening Asian economic crisis, investors reassessed the risk premium
appropriate for investing in emerging markets. By late October, fears of
contagion from the Asian economic crisis overtook the market, sending prices of
*** The Lehman Aggregate Bond Index was initially selected as a benchmark for
the Fund's performance; however, based upon the Fund's asset composition,
we believe the Worldwide High Income Blended Index provides a more accurate
benchmark for the Fund. Therefore, the Lehman Brothers Aggregate Bond Index
will not be shown beginning with the December 31, 1998 semi-annual report.
------------------
89
<PAGE>
VAN KAMPEN
WORLDWIDE HIGH INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
emerging debt lower and spreads correspondingly wider. Although the majority of
outstanding emerging market debt is from Latin American and Eastern European
countries, all prices fell, as any asset with the word "emerging" in its
description was penalized.
The U.S. high-yield market performed reasonably well during the first half of
1998. The environment was particularly good in the first months of the year,
with 10-year Treasury yields declining about 30 basis points (0.3 percent) from
the beginning of the year to the end of June. Within the declining-rate
environment and solid economy, single B-rated bonds outperformed higher-quality
bonds in the high-yield market. Longer duration bonds also outperformed. The
lower tier and distressed sector continued to have problems, as it has for some
time. Strong performing industries included retail, technology, and utilities,
while weak performing ones included auto parts, energy, and textiles.
The Asian region remained in the spotlight throughout the first half of 1998 and
continued to dictate the tone of the market. In the first quarter, emerging
market debt recovered a large portion of the losses realized in October 1997, as
Asia appeared to stabilize. The market, however, remained volatile during this
period of spread compression, with general market spreads oscillating within a
100 basis point (1 percent) range. The past three months have seen the return of
the nervousness, volatility, and investor skepticism that we experienced during
the large emerging markets sell-offs in 1994 and the fourth quarter of 1997. The
reasons for this current round of volatility are less obvious than past
episodes, as we have not seen the classic signs of a decrease in global
liquidity. In addition, this sell-off has not been precipitated by political or
social instability in any major country. Globally, interest rates continue to
remain low, there have not been large flows out of emerging market debt mutual
funds, global inflation remains quite well contained, and most emerging
countries continue to pursue virtuous economic policies. The poor health of the
Japanese economy and of major Japanese banks, however, has caused investors to
adjust risk premiums higher and has caused liquidity for most emerging countries
to evaporate. Investors fear that Japan's inability to stabilize its economy
will continue to weaken the yen, and might eventually cause a devaluation in
China. This would increase the risk of another round of currency devaluation in
Asia and might further depress commodity prices, a large source of earnings for
many emerging countries. The good news is that markets have considerably
discounted this negative scenario. While Asia continues to cast a dark shadow
over the emerging markets, any evidence of improving or stable conditions in
Asia should allow prices on emerging market debt to recover substantially.
As markets rallied in the beginning of 1998, we decreased the Fund's exposure to
the market in general, particularly Russia. We remained cautious during most of
the first quarter and only increased our exposure to emerging market debt after
the market had sold off significantly. As we began to feel that valuations more
accurately represented the risks in the market, we established an overweight
position in Russia and Mexico. The overweight in Russia has hurt the Fund's
performance as Russian debt performed below other emerging market bonds by a
wide margin in June, with the Russian subcomponent of the J.P. Morgan Emerging
Markets Bond Index returning -13.85 percent for the month. The dramatic sell-off
in Russian assets reflects investors' concerns about short-term liquidity rather
than longer-term solvency issues. Russia relies heavily on foreign debt and
foreign investors in its local markets to fund its budget deficit, which has
been aggravated this year by poor tax collection resulting from low oil prices.
As global liquidity has become scarce, Russia has come under scrutiny as it
relies on the markets for constant funding. We believe that the new
administration in Moscow has developed a credible program to avoid full-blown
economic crisis, and Russia will survive its current predicament. The Russians
are working closely with the IMF and should, in the next two months, come to
terms for additional aid and an expanded program to bolster international
reserves. We will continue to overweight in Mexico, as we remain confident about
the soundness of Mexico's macroeconomics fundamentals. The Mexican economy
should register growth of 5 percent this year; unlike 1995, this growth is more
balanced now as it is being driven by both the export and nontradable sectors.
Robert Angevine Paul Ghaffari
PORTFOLIO MANAGER PORTFOLIO MANAGER
- --------------
90
<PAGE>
VAN KAMPEN
WORLDWIDE HIGH INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- --------------------------------------------------------------------------
CORPORATE BONDS & NOTES (37.7%)
ARGENTINA (2.4%)
ARP(e)8,500 CIA International Telecommunication 10.375%,
8/1/04......................................... $ 7,013
--------
AUSTRALIA (0.5%)
$ 1,500 Murrin Murrin Holdings 9.375%, 8/31/07........... 1,479
--------
BRAZIL (1.5%)
(h)4,500 Banco Nacional Desenv Econ 10.30%, 6/16/08....... 4,493
--------
CANADA (0.9%)
400 Rogers Cablesystems Ltd. 10.125%, 9/1/12......... 436
865 Rogers Cablesystems Ltd., Series B, 10.00%,
3/15/05........................................ 961
1,080 Rogers Cantel, Inc. 8.30%, 10/1/07............... 1,056
250 Rogers Communications, Inc. 9.125%, 1/15/06...... 253
100 Rogers Communications, Inc. 8.875%, 7/15/07...... 101
--------
2,807
--------
KOREA (2.6%)
(e)3,200 Export-Import Bank of Korea, 6.50%, 10/6/99...... 3,020
5,900 Korea Electric Power 6.375%, 12/1/03............. 4,651
--------
7,671
--------
MEXICO (1.4%)
4,200 TV Azteca S.A. 10.125%, 2/15/04.................. 4,211
--------
NETHERLANDS (3.0%)
475 Hermes Europe Railtel BV 11.50%, 8/15/07......... 537
(n)1,500 PTC International Finance BV 0.00%, 7/1/07....... 1,031
6,100 SBS Argo Finance BV 10.25%, 7/21/00.............. 4,636
3,375 Tjiwi Kimia International B.V. 13.25%, 8/1/01.... 2,684
--------
8,888
--------
TURKEY (1.9%)
ZAR(e)2,500 Pera Financial Services 9.375%, 10/15/02......... 2,231
$ 500 Pera Financial Services 9.375%, 10/15/02......... 446
3,150 Yapi Kredi Finance Co. 10.00%, 8/19/02........... 3,095
--------
5,772
--------
UNITED KINGDOM (0.3%)
(e,n)1,000 Dolphin Telecommunication plc 0.00%, 6/1/08...... 570
DEM (e)625 Esprit Telecommunication Group plc 11.00%,
6/15/08........................................ 347
--------
917
--------
UNITED STATES (23.2%)
$ 1,025 AES Corp. 8.50%, 11/1/07......................... 1,038
2,930 American Standard Cos., Inc. 7.375%, 2/1/08...... 2,878
625 Advanced Micro Devices 11.00%, 8/1/03............ 661
(e)964 CA FM Lease Trust 8.50%, 7/15/17................. 1,012
700 CB Richard Ellis Service 8.875%, 6/1/06.......... 695
(e)600 CEX Holdings, Inc. 9.625%, 6/1/08................ 606
(e)2,060 Chesapeake Energy Corp., 9.625%, 5/1/05.......... 2,070
85 Columbia/HCA Healthcare 8.125%, 8/4/03........... 87
425 Columbia/HCA Healthcare 6.91%, 6/15/05........... 410
790 Columbia/HCA Healthcare, 7.00%, 7/1/07........... 758
2,500 Columbia/HCA Healthcare, 7.69%, 6/15/25.......... 2,403
2,945 Comcast Cellular Holdings, Series B 9.50%,
5/1/07......................................... 3,070
3,105 CSC Holdings, Inc. 9.875%, 5/15/06............... 3,412
150 CSC Holdings, Inc. 7.875%, 12/15/07.............. 158
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- --------------------------------------------------------------------------
805 DR Securitized Lease Trust, Series 1993-K1, Class
A1, 6.66%, 8/15/10............................. $ 752
963 DR Securitized Lease Trust, Series 1994-K1, Class
A1, 7.60%, 8/15/07............................. 952
250 DR Securitized Lease Trust, Series 1994-K1, Class
A2, 8.375%, 8/15/15............................ 250
150 DR Structured Finance, Series 1994-K2, CMO,
9.35%, 8/15/19................................. 159
(n)1,025 Dial Call Communications, Series B, 0.00%,
12/15/05....................................... 1,015
(e)300 EES Coke Battery Co., Inc. 9.382%, 4/15/07....... 314
49 Fleming Cos., Inc., Series B 10.50%, 12/1/04..... 51
(e)900 Fresenius Medical Capital Trust II 7.875%,
2/1/08......................................... 877
200 Globalstar LP/Capital 11.375%, 2/15/04........... 195
1,610 Grand Casinos, Inc. 10.125%, 12/1/03............. 1,739
625 HMC Acquisition Properties 9.00%, 12/15/07....... 689
950 Host Marriott Travel Plaza, Series B, 9.50%,
5/15/05........................................ 1,012
1,970 ISP Holdings, Inc., Series B, 9.00%, 10/15/03.... 2,054
(e)735 IXC Communications, Inc. 9.00%, 4/15/08.......... 737
(e,n)2,765 Intermedia Communications, Series B, 0.00%,
7/15/07........................................ 2,018
320 Iridium LLC/Capital Corp., Series A 13.00%,
7/15/05........................................ 342
(e)300 Jet Equipment Trust, Series 1995-D, 11.44%,
11/1/14........................................ 406
(e)300 Jet Equipment Trust, Series C-1, 11.79%,
6/15/13........................................ 409
1,150 Kmart Funding Corp. 8.80%, 7/1/10................ 1,190
1,425 Lenfest Communications 8.375%, 11/1/05........... 1,514
(e)70 Lenfest Communications 7.625%, 2/15/08........... 72
950 Musicland Group, Inc. 9.875%, 3/15/08............ 945
(e,n)1,760 NEXTLINK Communications, Inc. 0.00%, 4/15/08..... 1,078
(e)525 NSM Steel Lts. Units 12.25%, 2/1/08.............. 462
200 Navistar Financial Corp., Series B, 9.00%,
6/1/02......................................... 209
(n)565 Nextel Communications 0.00%, 8/15/04............. 548
(n)2,775 Nextel Communications 0.00%, 9/15/07............. 1,859
256 Niagara Mohawk Power Series G 7.75%, 10/1/08..... 262
(n)442 Niagara Mohawk Power Series H 0.00%, 7/1/10...... 304
(n)990 Norcal Waste Systems 13.50%, 11/15/05............ 1,139
(e)735 Onepoint Communications Corp., Units 14.50%,
6/1/08......................................... 691
1,020 Outdoor Systems, Inc., 8.875%, 6/15/07........... 1,063
2,400 Paramount Communications 8.25%, 8/1/22........... 2,537
(e)325 Primus Telecommunications Group 9.875%,
5/15/08........................................ 318
(e)165 Psinet, Inc. 10.00%, 2/15/05..................... 168
320 Qwest Communications International, Series B,
10.875%, 4/1/07................................ 369
(n)2,305 Qwest Communications International 0.00%,
10/15/07....................................... 1,729
(e,n)440 Qwest Communications International 0.00%,
2/1/08......................................... 317
(n)3,465 RCN Corp. 0.00%, 10/15/07........................ 2,235
35 RSL Communications Ltd. 12.25%, 11/15/06......... 39
</TABLE>
-----------------------
91
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
WORLDWIDE HIGH INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------
<C> <S> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<C> <S> <C>
$ (e)1,540 RSL Communications Ltd. 9.125%, 3/1/08........... $ 1,494
1,000 Revlon Consumer Products 8.125%, 2/1/06.......... 999
(e,n)425 SB Treasury Co. LLC 9.40%, 12/29/49.............. 423
800 SD Warren Co., Series B, 12.00%, 12/15/04........ 886
(e)2,000 Samsung Electronics Co. 9.75%, 5/1/03............ 1,797
900 Sinclair Broadcast Group 9.00%, 7/15/07.......... 927
(e)530 Smithfield Foods, Inc. 7.625%, 2/15/08........... 529
1,360 Snyder Oil Corp. 8.75%, 6/15/07.................. 1,374
2,232 Southland Corp. 5.00%, 12/15/03.................. 1,939
825 Station Casinos, Inc. 9.75%, 4/15/07............. 931
(n)1,475 TCI Satellite Entertainment 0.00%, 2/15/07....... 996
(n)1,075 Teleport Communications 0.00%, 7/1/07............ 926
1,980 Tenet Healthcare Corp. 8.625%, 1/15/07........... 2,042
500 Tenet Healthcare Corp. 8.125%, 12/1/08........... 503
(e,n)750 Wam!Net, Inc. 0.00%, 3/1/05...................... 476
595 Western Financial Bank 8.875%, 8/1/07............ 558
--------
69,077
--------
TOTAL CORPORATE BONDS & NOTES (COST $114,989)................. 112,328
--------
ASSET BACKED SECURITIES (0.7%)
UNITED STATES (0.7%)
(e)698 Aircraft Lease Portfolio Securitization Ltd.,
Series 1996-1, Class D 12.75%, 6/15/06......... 698
(e)894 Commercial Financial Services, Inc., Series
1997-5, Class A1 7.72%, 6/15/05................ 900
(e)633 Long Beach Acceptance Auto Grantor Trust 1997-1,
Class B, 14.22%, 10/26/03...................... 632
--------
TOTAL ASSET BACKED SECURITIES (COST $2,235)................... 2,230
--------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.9%)
UNITED STATES (0.9%)
36,916 DLJ Mortgage Acceptance Corp., Series 1997-CF2,
Class S, IO, 0.36%, 10/15/30................... 958
(e,h)1,016 DLJ Mortgage Acceptance Corp., Series 1996-CF2,
Class S, IO, 1.64%, 11/12/21................... 83
(e)535 First Home Mortgage Acceptance Corp., Series
1996-B, Class C, 7.93%, 11/1/18................ 483
1,137 OHA Grantor Trust, 11.00%, 9/15/03............... 1,120
--------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $2,568)....... 2,644
--------
EUROBONDS (5.2%)
ARGENTINA (2.8%)
(e,h)2,500 Acindar Industria Argentina 11.55%, 11/12/98..... 2,523
(h)6,470 Republic of Argentina, Series L, 6.625%,
3/31/05........................................ 5,722
--------
8,245
--------
RUSSIA (1.2%)
(e)5,050 Mosenergo Finance BV 8.375%, 10/9/02............. 3,529
--------
TURKEY (1.2%)
3,750 Export Credit Bank of Turkey 9.00%, 8/18/00...... 3,713
--------
TOTAL EUROBONDS (COST $17,021)................................ 15,487
--------
FOREIGN GOVERNMENT & AGENCY OBLIGATIONS (41.5%)
ARGENTINA (3.5%)
11,400 Republic of Argentina 9.75%, 9/19/27............. 10,568
--------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- --------------------------------------------------------------------------
BRAZIL (10.6%)
$ 12,100 Federative Republic of Brazil, 9.375%, 4/7/08.... $ 10,878
(h)14,793 Federative Republic of Brazil, Series EI-L,
Floating Rate 6.625%, 4/15/06.................. 12,181
11,718 Republic of Brazil "C" PIK 8.00%, 4/15/14........ 8,635
--------
31,694
--------
BULGARIA (1.1%)
(n)5,500 Bulgaria Front Loaded Interest Reduction Bond
2.25%, 7/28/12................................. 3,407
--------
COLOMBIA (0.9%)
(h)2,778 Republic of Colombia Hercules 6.875%, 12/15/03... 2,598
--------
ECUADOR (1.0%)
(e)3,000 Conecel 14.00%, 5/1/02........................... 3,000
--------
JAMAICA (1.7%)
3,000 Government of Jamaica 12.00%, 7/19/99............ 3,090
(e)300 Government of Jamaica 10.875%, 6/10/05........... 300
2,000 Mechala Group Jamaica Ltd., Series B 12.75%,
12/30/99....................................... 1,840
--------
5,230
--------
MEXICO (9.5%)
ZAR 8,000 National Financiera 17.00%, 2/26/99.............. 1,325
$ 7,700 United Mexican States 9.875%, 1/15/07............ 8,014
3,500 United Mexican States 8.625%, 3/12/08............ 3,397
8,950 United Mexican States 11.375%, 9/15/16........... 9,979
4,900 United Mexican States 11.50%, 5/15/26............ 5,570
--------
28,285
--------
PERU (0.9%)
(e,n)3,950 Republic of Peru Front Loaded Interest Reduction
Bond 3.25%, 3/7/17............................. 2,207
700 Republic of Peru Front Loaded Interest Reduction
Bond 3.25%, 3/7/17............................. 391
--------
2,598
--------
RUSSIA (11.1%)
6,000 Ministry of Finance 14.00%, 5/19/99.............. 5,078
(e)8,050 Ministry of Finance 11.75%, 6/10/03.............. 7,124
13,950 Ministry of Finance 10.00%, 6/26/07.............. 10,550
(e)7,400 Ministry of Finance 12.75%, 6/24/28.............. 6,614
208 Republic of Russia 6.625%, 12/15/15.............. 116
4 Ministry of Finance Tranche VI GDR 3.00%,
5/14/03........................................ 2
(e)3,800 Unexim International Finance BV 9.875%, 8/1/00... 2,893
900 Unexim International Finance BV 9.875%, 8/1/00... 685
--------
33,062
--------
THAILAND (0.8%)
2,290 Kingdom of Thailand 8.70%, 8/1/99................ 2,297
--------
VENEZUELA (0.4%)
(h)1,357 Republic of Venezuela Discount Bond, Series L,
6.625%, 12/18/07............................... 1,111
--------
TOTAL FOREIGN GOVERNMENT & AGENCY OBLIGATIONS
(COST $133,981)............................................. 123,850
--------
</TABLE>
- --------------
92
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
WORLDWIDE HIGH INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
JUNE 30, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------
<C> <S> <C>
LOAN AGREEMENTS (2.5%)
GABON (1.1%)
$ (h)4,376 Republic of Gabon Syndicated Loan, 6.69%,
4/1/04......................................... $ 3,479
--------
JAMAICA (0.3%)
(h)938 Republic of Jamaica Syndicated Loan, 6.44%,
12/1/05........................................ 858
--------
RUSSIA (1.1%)
(h)6,750 Republic of Russia Syndicated Loan, 3.31%,
12/15/20....................................... 3,206
--------
TOTAL LOAN AGREEMENTS (COST $8,080)............................. 7,543
--------
<CAPTION>
SHARES
- ------------
<C> <S> <C>
PREFERRED STOCKS (1.1% )
UNITED STATES (1.1%)
(a)3,250 Concentric Network Corp. 13.50%.................. 323
(a)17 IXC Communications, Inc. PIK 9.50%............... 20
3 Time Warner, Inc., Series M, 10.25%.............. 2,986
--------
TOTAL PREFERRED STOCKS (COST $3,298)............................ 3,329
--------
UNITS (0.4%)
UNITED STATES (0.4%)
(e)885 AMSC Acquisition Co. 12.25%, 4/1/08.............. 832
(e,n)500 Viatel, Inc. 0.00%, 4/15/08...................... 301
--------
TOTAL UNITS (COST $1,216)....................................... 1,133
--------
<CAPTION>
NO. OF
WARRANTS
- ------------
<C> <S> <C>
WARRANTS (0.0%)
UNITED STATES (0.0%)
(a)325 Concentric Network Corp. (COST $0)............... --
--------
TOTAL FOREIGN & U.S. SECURITIES (90.0%) (COST $283,388)......... 268,544
--------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------
SHORT-TERM INVESTMENT (3.9%)
<C> <S> <C>
REPURCHASE AGREEMENT (3.9% )
$ 11,543 Chase Securities, Inc., 5.40%, dated 6/30/98, due
7/1/98, to be repurchased at $11,545,
collateralized by $10,410 U.S. Treasury Notes,
7.875%, due 11/15/04, valued at $11,799.
(COST $11,543)................................. $ 11,543
--------
TOTAL INVESTMENTS IN SECURITIES (93.9%) (COST $294,931)......... 280,087
--------
FOREIGN CURRENCY (0.2%)
FRF 3,213 French Franc (COST $569)......................... 531
--------
TOTAL INVESTMENTS (94.1%) (COST $295,500)....................... 280,618
OTHER ASSETS IN EXCESS OF LIABILITIES (5.9%).................... 17,559
--------
NET ASSETS (100%)............................................... $298,177
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
(e) -- 144A Security - certain conditions for public sale may exist.
(h) -- Variable/floating rate security - rate disclosed is as of June 30,
1998.
(n) -- Step Bond - coupon rate increases in increments to maturity. Rate
disclosed is as of June 30, 1998. Maturity date disclosed is the
ultimate maturity date.
ARP -- Argentine Peso
DEM -- German Mark
FRF -- French Franc
GDR -- Global Depositary Receipt
PIK -- Payment-In-Kind. Income may be received in additional securities or
cash at the discretion of the issuer.
IO -- Interest only
ZAR -- South African Rand
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE INFORMATION:
Under the terms of forward foreign currency contracts open at June 30, 1998, the
Fund is obligated to deliver or is to receive foreign currency in exchange for
U.S. dollars as indicated below:
<TABLE>
<CAPTION>
CURRENCY IN EXCHANGE NET UNREALIZED
TO DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
- ---------- ------ ---------- ----------- ------ --------------
<S> <C> <C> <C> <C> <C>
DEM 625 $ 348 9/25/98 $ 351 $ 351 $ 4
ZAR 8,226 1,384 7/7/98 $1,600 1,600 215
------ ------ -----
$1,732 $1,951 $219
------ ------ -----
------ ------ -----
</TABLE>
- ---------------
DEM -- German Mark
ZAR -- South African Rand
- --------------------------------------------------------------------------------
SUMMARY OF FOREIGN & U.S. SECURITIES
BY INDUSTRY CLASSIFICATION (UNAUDITED)
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- -------------------------------------------------------------------------------------- --------- -------------
<S> <C> <C>
Foreign Government & Agency Obligations............................................... $ 123,850 41.6%
Multi-Industry........................................................................ 38,210 12.8
Telecommunications.................................................................... 27,121 9.1
Finance............................................................................... 23,958 8.0
Eurobonds............................................................................. 15,487 5.2
Services.............................................................................. 11,322 3.8
Loan Agreements....................................................................... 7,543 2.5
Collateralized Mortgage Obligations & Asset Backed Securities......................... 4,874 1.6
Consumer Goods........................................................................ 4,074 1.4
Broadcast--Radio & Television......................................................... 3,265 1.1
Technology............................................................................ 2,458 0.8
Materials............................................................................. 2,054 0.7
Utilities............................................................................. 1,604 0.6
Energy................................................................................ 1,374 0.4
Transportation........................................................................ 1,350 0.4
--------- ---
$ 268,544 90.0%
--------- ---
--------- ---
</TABLE>
-----------------------
93
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1998
<TABLE>
<CAPTION>
GOVERNMENT
GLOBAL GLOBAL OBLIGATIONS
AGGRESSIVE AMERICAN ASIAN EMERGING GLOBAL EQUITY FIXED MONEY
EQUITY VALUE GROWTH MARKETS EQUITY ALLOCATION INCOME MARKET
FUND FUND FUND FUND FUND FUND FUND FUND
(000) (000) (000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in Securities, at Value
See accompanying portfolios $ 218,999 $614,977 $ 97,565 $141,340 $771,187 $ 609,960 $7,602 $ 56,317
Foreign Currency -- -- 6,231 2,073 2,159 1,543 5 --
Cash -- -- -- -- 1 -- -- --
Margin Deposit on Futures -- -- -- -- -- 4,224 -- --
Receivable for:
Investments Sold 3,422 8,168 385 1,148 -- 99 -- --
Variation of Futures Contracts -- -- -- -- -- 518 -- --
Fund Shares Sold 1,715 7,810 177 408 3,166 1,902 14 --
Dividends 86 324 348 429 1,672 1,374 -- --
Interest 2 10 1 377 7 19 180 102
Security Lending Income -- -- -- -- -- 13 -- --
Foreign Withholding Tax Reclaim -- -- 24 41 342 301 -- --
Net Unrealized Gain on Foreign
Currency Exchange Contracts -- -- -- 763 -- -- 11 --
Deferred Organizational Costs 26 1 -- 3 35 -- -- --
Receivable from Investment Adviser -- -- 26 -- -- -- 16 --
Securities, at Value, Held as
Collateral for Securities Loaned -- -- -- -- -- 21,788 -- --
Other 1 3 53 2 5 56 -- 7
---------- -------- -------- -------- -------- ---------- ------ ----------
Total Assets 224,251 631,293 104,810 146,584 778,574 641,797 7,828 56,426
---------- -------- -------- -------- -------- ---------- ------ ----------
LIABILITIES:
Payable for:
Investments Purchased 4,001 11,702 955 723 2,321 3,890 -- --
Fund Shares Redeemed 338 930 1,247 1,844 447 17,200 31 --
Bank Overdraft -- -- -- 2,218 -- 6 -- 2
Dividends Declared 6 -- -- -- -- 54 23 58
Investment Advisory Fees 82 255 -- 38 625 384 -- 18
Administrative Fees 43 119 23 35 158 109 2 2
Custody Fees 4 1 233 394 83 346 3 1
Professional Fees 18 18 40 43 49 70 20 17
Distribution Fees 262 684 127 178 1,175 554 6 20
Shareholder Reporting Expenses 24 52 29 18 71 94 6 --
Transfer Agent Fees 23 46 36 20 61 244 6
Directors' Fees and Expenses 5 8 16 10 9 49 5 6
Securities Lending Expense -- -- -- -- -- 15 -- --
Filing and Registration Fees 40 141 -- 9 202 19 -- --
Deferred Country Tax -- -- 21 27 -- -- -- --
Collateral on Securities Loaned -- -- -- -- -- 21,788 -- --
Net Unrealized Loss on Foreign
Currency Exchange Contracts -- -- 1 -- 64 513 -- --
Unrealized Loss on Swap Agreements -- -- -- 932 -- -- -- --
Other 1 -- 5 33 -- 382 -- --
---------- -------- -------- -------- -------- ---------- ------ ----------
Total Liabilities 4,847 13,956 2,733 6,522 5,265 45,717 102 124
---------- -------- -------- -------- -------- ---------- ------ ----------
NET ASSETS $ 219,404 $617,337 $102,077 $140,062 $773,309 $ 596,080 $7,726 $ 56,302
---------- -------- -------- -------- -------- ---------- ------ ----------
---------- -------- -------- -------- -------- ---------- ------ ----------
</TABLE>
- ------------------
94
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1998 (CONT.)
<TABLE>
<CAPTION>
HIGH
YIELD WORLDWIDE
& TOTAL INTERNATIONAL LATIN MONEY U.S. REAL HIGH
RETURN MAGNUM AMERICAN MARKET ESTATE VALUE INCOME
FUND FUND FUND FUND FUND FUND FUND
(000) (000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in Securities, at Value
See accompanying portfolios $33,855 $ 133,555 $ 81,939 $118,940 $ 35,190 $314,648 $ 280,087
Foreign Currency -- 699 1,123 -- -- -- 531
Cash -- -- 66 -- 5 69 1,878
Receivable for:
Investments Sold -- 419 336 -- 1,045 1,714 12,012
Fund Shares Sold 360 1,928 266 -- 145 2,067 2,617
Dividends -- 309 230 -- 298 378 1
Interest 470 3 -- 657 5 6 6,707
Security Lending Income -- -- -- -- -- -- --
Foreign Withholding Tax Reclaim -- 105 -- -- -- -- --
Net Unrealized Gain on Foreign
Currency Exchange Contracts -- 268 -- -- -- -- 219
Deferred Organizational Costs 14 22 3 -- 11 6 3
Other -- 1 3 41 13 2 2
------- ------------- -------- -------- --------- ----- ---------
Total Assets 34,699 137,309 83,966 119,638 36,712 318,890 304,057
------- ------------- -------- -------- --------- ----- ---------
LIABILITIES:
Payable for:
Investments Purchased -- 2,716 -- -- 249 1,488 2,408
Fund Shares Redeemed 31 358 356 -- 106 836 609
Bank Overdraft 7 6 -- 156 -- -- --
Dividends Declared 192 -- -- 40 6 -- 2,070
Investment Advisory Fees 6 45 116 35 6 195 183
Administrative Fees 7 28 24 1 8 65 62
Custody Fees 2 69 73 -- 9 35 24
Professional Fees 15 19 21 17 15 36 35
Distribution Fees 44 131 99 1 37 346 388
Shareholder Reporting Expenses 6 13 12 -- 4 26 17
Transfer Agent Fees 4 19 26 1 6 16 28
Directors' Fees and Expenses 4 5 6 11 5 6 9
Filing and Registration Fees 3 22 5 -- 4 89 39
Country Tax -- -- 5 -- -- -- --
Other -- -- 1 -- -- -- 8
------- ------------- -------- -------- --------- ----- ---------
Total Liabilities 321 3,431 744 262 455 3,138 5,880
------- ------------- -------- -------- --------- ----- ---------
NET ASSETS $34,378 $ 133,878 $ 83,222 $119,376 $ 36,257 $315,752 $ 298,177
------- ------------- -------- -------- --------- ----- ---------
------- ------------- -------- -------- --------- ----- ---------
</TABLE>
-----------------------
95
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1998 (CONT.)
<TABLE>
<CAPTION>
GOVERNMENT
GLOBAL GLOBAL OBLIGATIONS
AGGRESSIVE AMERICAN ASIAN EMERGING GLOBAL EQUITY FIXED MONEY
EQUITY VALUE GROWTH MARKETS EQUITY ALLOCATION INCOME MARKET
FUND FUND FUND FUND FUND FUND FUND FUND
(000) (000) (000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital Stock at Par $ 11 $ 21 $ 16 $ 18 $ 70 $ 233 $ 1 $ 62
Paid in Capital in Excess of Par 198,527 565,577 253,634 206,540 709,605 500,322 7,794 56,291
Undistributed (Distributions in
Excess of) Net Investment Income (4) (6) (1,200) (1,090) 1,301 4,082 (150) 38
Accumulated (Distributions in
Excess of) Net Realized Gain
(Loss) 14,747 34,999 (126,890) (28,054) 978 12,058 21 (89)
Unrealized Appreciation
(Depreciation) on Investments and
Foreign Currency Translations** 6,123 16,746 (23,483) (37,352) 61,355 79,385 60 --
---------- -------- -------- -------- -------- ---------- ------ ----------
NET ASSETS $ 219,404 $617,337 $102,077 $140,062 $773,309 $ 596,080 $7,726 $ 56,302
---------- -------- -------- -------- -------- ---------- ------ ----------
---------- -------- -------- -------- -------- ---------- ------ ----------
CLASS A SHARES:
Net Assets $ 64,035 $220,100 $ 47,128 $ 74,959 $ 80,508 $ 261,633 $4,413 $ 56,302
Shares Issued and Outstanding
($.001 par value)
(Authorized 2,625,000,000) 3,200 10,315 7,218 9,388 7,239 15,695 440 56,414
Net Asset Value and Redemption
Price Per Share $ 20.01 $ 21.34 $ 6.53 $ 7.98 $ 11.12 $ 16.67 $10.02 $ 1.00
---------- -------- -------- -------- -------- ---------- ------ ----------
---------- -------- -------- -------- -------- ---------- ------ ----------
Maximum Sales Charge 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.75% --
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100
/ (100 - maximum sales charge)) $ 21.23 $ 22.64 $ 6.93 $ 8.38 $ 11.80 $ 17.69 $10.52 --
---------- -------- -------- -------- -------- ---------- ------ ----------
---------- -------- -------- -------- -------- ---------- ------ ----------
CLASS B SHARES:
Net Assets $ 130,497 $269,836 $ 26,126 $ 36,423 $623,229 $ 225,797 $1,425 --
Shares Issued and Outstanding
($.001 par value)
(Authorized 2,625,000,000) 6,634 12,730 4,143 4,679 56,269 13,987 143 --
Net Asset Value and Offering Price
Per Share*** $ 19.67 $ 21.20 $ 6.31 $ 7.78 $ 11.08 $ 16.14 $ 9.97 --
---------- -------- -------- -------- -------- ---------- ------ ----------
---------- -------- -------- -------- -------- ---------- ------ ----------
CLASS C SHARES:
Net Assets $ 24,872 $127,401 $ 28,823 $ 28,680 $ 69,572 $ 108,650 $1,888 --
Shares Issued and Outstanding
($.001 par value)
(Authorized 2,625,000,000) 1,265 6,008 4,583 3,681 6,282 6,666 190 --
Net Asset Value and Offering Price
Per Share*** $ 19.66 $ 21.20 $ 6.29 $ 7.79 $ 11.07 $ 16.30 $ 9.96 --
---------- -------- -------- -------- -------- ---------- ------ ----------
---------- -------- -------- -------- -------- ---------- ------ ----------
Investments at Cost, Including
Foreign Currency $ 212,876 $598,231 $127,293 $180,615 $711,914 $ 532,332 $7,557 $ 56,317
---------- -------- -------- -------- -------- ---------- ------ ----------
---------- -------- -------- -------- -------- ---------- ------ ----------
</TABLE>
- ---------------
* Includes repurchase agreements aggregating $10,586,000, $67,722,000,
$5,971,000, $4,983,000, $46,443,000, $125,328,000, $390,000,
$9,398,000, $1,424,000, $18,731,000 $2,772,000, $19,615,000, $537,000,
$42,983,000 and $11,543,000 for Aggressive Equity Fund, American Value
Fund, Asian Growth Fund, Emerging Markets Fund, Global Equity Fund,
Global Equity Allocation Fund, Global Fixed Income Fund, Government
Obligations Money Market Fund, High Yield & Total Return Fund,
International Magnum Fund, Latin American Fund, Money Market Fund,
U.S. Real Estate Fund, Value Fund, and Worldwide High Income Fund,
respectively.
** Net of accrual for country tax of U.S. $8,000 for Asian Growth Fund
and $26,000 for Emerging Markets Fund.
*** Redemption price may be subject to a contingent deferred sales charge.
- ------------------
96
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1998 (CONT.)
<TABLE>
<CAPTION>
HIGH
YIELD WORLDWIDE
& TOTAL INTERNATIONAL LATIN MONEY U.S. REAL HIGH
RETURN MAGNUM AMERICAN MARKET ESTATE VALUE INCOME
FUND FUND FUND FUND FUND FUND FUND
(000) (000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital Stock at Par $ 27 $ 9 $ 7 $ 119 $ 2 $ 30 $ 24
Paid in Capital in Excess of Par 33,531 121,221 106,175 119,334 34,797 309,683 310,969
Undistributed (Distributions in
Excess of) Net Investment
Income 36 1,524 (95) (6) 4 (45) 781
Accumulated (Distributions in
Excess of) Net Realized
Gain (Loss) 574 874 (9,525) (71) 1,305 4,863 1,096
Unrealized Appreciation
(Depreciation) on Investments and
Foreign Currency Translations** 210 10,250 (13,340) -- 149 1,221 (14,693)
------- ------------- -------- -------- --------- --------- ---------
NET ASSETS $34,378 $ 133,878 $ 83,222 $119,376 $ 36,257 $ 315,752 $ 298,177
------- ------------- -------- -------- --------- --------- ---------
------- ------------- -------- -------- --------- --------- ---------
CLASS A SHARES:
Net Assets $ 7,814 $ 66,817 $ 44,439 $119,376 $ 16,873 $ 137,447 $ 91,579
Shares Issued and Outstanding
($.001 par value)
(Authorized 2,625,000,000) 617 4,501 3,890 119,514 1,081 13,057 7,347
Net Asset Value and Redemption
Price Per Share $ 12.66 $ 14.85 $ 11.42 $ 1.00 $ 15.61 $ 10.53 $ 12.46
------- ------------- -------- -------- --------- --------- ---------
------- ------------- -------- -------- --------- --------- ---------
Maximum Sales Charge 4.75% 5.75% 5.75% -- 5.75% 5.75% 4.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100
/ (100 - maximum
sales charge)) $ 13.43 $ 15.76 $ 12.12 -- $ 16.39 $ 11.17 $ 13.08
------- ------------- -------- -------- --------- --------- ---------
------- ------------- -------- -------- --------- --------- ---------
CLASS B SHARES:
Net Assets $18,419 $ 51,541 $ 24,206 -- $ 15,197 $ 142,741 $ 146,401
Shares Issued and Outstanding
($.001 par value)
(Authorized 2,625,000,000) 1,458 3,500 2,195 -- 978 13,576 11,810
Net Asset Value and Offering Price
Per Share*** $ 12.63 $ 14.72 $ 11.03 -- $ 15.54 $ 10.51 $ 12.40
------- ------------- -------- -------- --------- --------- ---------
------- ------------- -------- -------- --------- --------- ---------
CLASS C SHARES:
Net Assets $ 8,145 $ 15,520 $ 14,577 -- $ 4,187 $ 35,564 $ 60,197
Shares Issued and Outstanding
($.001 par value)
(Authorized 2,625,000,000) 645 1,050 1,321 -- 269 3,386 4,854
Net Asset Value and Offering Price
Per Share*** $ 12.63 $ 14.78 $ 11.04 -- $ 15.55 $ 10.50 $ 12.40
------- ------------- -------- -------- --------- --------- ---------
------- ------------- -------- -------- --------- --------- ---------
Investments at Cost, Including
Foreign Currency $33,645 $ 124,261 $ 96,394 $118,940 $ 35,041 $ 313,426 $ 295,500
------- ------------- -------- -------- --------- --------- ---------
------- ------------- -------- -------- --------- --------- ---------
</TABLE>
-----------------------
97
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
GOVERNMENT
GLOBAL GLOBAL OBLIGATIONS
AGGRESSIVE AMERICAN ASIAN EMERGING GLOBAL* EQUITY FIXED MONEY
EQUITY VALUE GROWTH MARKETS EQUITY ALLOCATION INCOME MARKET
FUND FUND FUND FUND FUND FUND FUND FUND
(000) (000) (000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 1,061 $ 3,096 $ 2,836 $ 3,788 $ 9,475 $ 5,332 $ -- $ --
Interest 350 1,345 519 1,019 2,619 2,018 502 3,830
Security Lending -- -- -- -- -- 152 -- --
Less Foreign Taxes Withheld -- -- (266) (183) (885) (311) (4) --
---------- -------- --------- -------- ------- ---------- ------ ----------
Total Income 1,411 4,441 3,089 4,624 11,209 7,191 498 3,830
---------- -------- --------- -------- ------- ---------- ------ ----------
EXPENSES:
Investment Advisory Fees 1,127 2,691 1,823 2,462 4,344 2,399 69 289
Less: Fees Waived (279) (267) (266) (553) -- (292) (69) (183)
---------- -------- --------- -------- ------- ---------- ------ ----------
Net Investment Advisory Fees 848 2,424 1,557 1,909 4,344 2,107 -- 106
Administrative Fees 316 799 463 522 1,089 657 27 70
Custodian Fees 55 68 650 912 150 271 14 17
Filing and Registration Fees 39 141 -- 8 -- -- -- --
Directors' Fees and Expenses 7 9 12 26 12 13 6 7
Professional Fees 32 33 39 66 52 50 29 4
Shareholder Reports 79 121 109 100 141 103 39 37
Transfer Agent Fees 102 189 270 141 274 148 22 --
Dividend Expense for Securities
Sold Short 1
Distribution Fees
Class A 100 289 224 263 108 219 14 343
Class B 706 1,232 379 452 3,543 673 15 --
Class C 141 766 558 465 368 843 21 --
Amortization of Organizational
Costs 11 4 5 3 44 6 6 --
Blue Sky Fees 67 123 81 84 232 67 37 64
Country Tax Expense -- -- 108 231 -- -- -- --
Security Lending Expense -- -- -- -- -- 28 -- --
Other 4 34 13 59 8 13 4 2
Expenses Reimbursed by Adviser -- -- -- -- -- -- (72) --
---------- -------- --------- -------- ------- ---------- ------ ----------
Net Expenses 2,508 6,232 4,468 5,241 10,365 5,198 162 650
---------- -------- --------- -------- ------- ---------- ------ ----------
Net Investment Income (Loss) (1,097) (1,791) (1,379) (617) 844 1,993 336 3,180
---------- -------- --------- -------- ------- ---------- ------ ----------
NET REALIZED GAIN (LOSS) ON:
Investments 23,535 45,496 (116,787) (22,635) 978 23,954 (104) 2
Foreign Currency Transactions -- -- (408) (225) 711 3,262 45 --
Futures and Swaps -- -- -- (376) -- 6,360 -- --
Securities Sold Short (506) -- -- -- -- -- --
---------- -------- --------- -------- ------- ---------- ------ ----------
Net Realized Gain (Loss) 23,029 45,496 (117,195) (23,236) 1,689 33,576 (59) 2
---------- -------- --------- -------- ------- ---------- ------ ----------
CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments 2,407 4,044 (58,679) (57,931) 61,447 47,367 145 --
Foreign Currency Translations -- -- 67 1,186 (92) (793) 33 --
Futures and Swaps -- -- -- (932) -- 724 -- --
Securities Sold Short 237 -- -- -- -- -- -- --
---------- -------- --------- -------- ------- ---------- ------ ----------
Change in Unrealized
Appreciation/Depreciation 2,644 4,044 (58,612) (57,677) 61,355 47,298 178 --
---------- -------- --------- -------- ------- ---------- ------ ----------
Net Realized Gain (Loss) and Change
in Unrealized
Appreciation/Depreciation 25,673 49,540 (175,807) (80,913) 63,044 80,874 119 2
---------- -------- --------- -------- ------- ---------- ------ ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 24,576 $ 47,749 $(177,186) $(81,530) $63,888 $ 82,867 $ 455 $ 3,182
---------- -------- --------- -------- ------- ---------- ------ ----------
---------- -------- --------- -------- ------- ---------- ------ ----------
</TABLE>
- ---------------
* Commencement of operations was October 29, 1997.
- --------------
98
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1998 (CONT.)
<TABLE>
<CAPTION>
HIGH
YIELD
& WORLDWIDE
TOTAL INTERNATIONAL LATIN MONEY U.S. REAL HIGH
RETURN MAGNUM AMERICAN MARKET ESTATE VALUE* INCOME
FUND FUND FUND FUND FUND FUND FUND
(000) (000) (000) (000) (000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 93 $ 2,088 $ 2,387 $ -- $ 1,461 $3,434 $ 214
Interest 2,046 661 203 9,435 115 1,511 24,212
Security Lending -- -- -- -- -- -- --
Less Foreign Taxes Withheld -- (261) (52) -- -- -- --
------ ------ -------- ------ --------- ------ ---------
Total Income 2,139 2,488 2,538 9,435 1,576 4,945 24,426
------ ------ -------- ------ --------- ------ ---------
EXPENSES:
Investment Advisory Fees 185 709 1,416 680 343 1,589 1,864
Less: Fees Waived (158) (148) (169) (195) (185) (278) --
------ ------ -------- ------ --------- ------ ---------
Net Investment Advisory Fees 27 561 1,247 485 158 1,311 1,864
Administrative Fees 64 237 335 162 89 500 626
Custodian Fees 13 152 208 31 44 116 59
Filing and Registration Fees 3 22 3 -- 4 89 42
Directors' Fees and Expenses 6 7 9 7 6 8 9
Professional Fees 27 42 49 -- 23 31 54
Shareholder Reports 41 56 74 51 35 80 112
Transfer Agent Fees 20 81 101 31 104 135
Distribution Fees
Class A 18 104 164 825 45 236 216
Class B 123 356 264 -- 120 845 1,101
Class C 50 112 214 -- 37 194 517
Amortization of Organizational
Costs 5 7 4 -- 10 63 4
Blue Sky Fees 36 69 75 56 46 104 72
Country Tax Expense -- -- 162 -- -- -- --
Other 5 3 9 4 3 4 24
------ ------ -------- ------ --------- ------ ---------
Net Expenses 438 1,809 2,918 1,621 651 3,685 4,835
------ ------ -------- ------ --------- ------ ---------
Net Investment Income (Loss) 1,701 679 (380) 7,814 925 1,260 19,591
------ ------ -------- ------ --------- ------ ---------
NET REALIZED GAIN (LOSS) ON:
Investments 1,119 927 4,800 28 2,646 5,893 11,805
Foreign Currency Transactions -- 948 (224) -- -- -- 213
------ ------ -------- ------ --------- ------ ---------
Net Realized Gain 1,119 1,875 4,576 28 2,646 5,893 12,018
------ ------ -------- ------ --------- ------ ---------
CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments (585) 5,933 (27,218) -- (1,683) 1,221 (28,594)
Foreign Currency Translations -- 133 12 -- -- -- 159
------ ------ -------- ------ --------- ------ ---------
Change in Unrealized
Appreciation/Depreciation (585) 6,066 (27,206) -- (1,683) 1,221 (28,435)
------ ------ -------- ------ --------- ------ ---------
Net Realized Gain (Loss) and Change
in Unrealized
Appreciation/Depreciation 534 7,941 (22,630) 28 963 7,114 (16,417)
------ ------ -------- ------ --------- ------ ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM
OPERATIONS $2,235 $ 8,620 $(23,010) $7,842 $ 1,888 $8,374 $ 3,174
------ ------ -------- ------ --------- ------ ---------
------ ------ -------- ------ --------- ------ ---------
</TABLE>
- ---------------
* Commencement of operations was July 7, 1997.
-----------------------
99
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
AGGRESSIVE EQUITY FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment (Loss) $ (1,097) $ (135)
Net Realized Gain 23,029 3,674
Change in Unrealized Appreciation/Depreciation 2,644 3,205
---------- -------
Net Increase in Net Assets Resulting from
Operations 24,576 6,744
---------- -------
DISTRIBUTIONS:
Net Investment Income:
Class A -- (16)
Class B -- (5)
Class C -- (5)
---------- -------
-- (26)
---------- -------
Net Realized Gain:
Class A (3,187) (711)
Class B (5,696) (452)
Class C (1,157) (439)
---------- -------
(10,040) (1,602)
---------- -------
Net Decrease in Net Assets Resulting from
Distributions (10,040) (1,628)
---------- -------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 171,376 57,588
Distributions Reinvested 9,563 1,037
Redeemed (42,384) (7,818)
---------- -------
Net Increase in Net Assets Resulting from
Capital Share Transactions 138,555 50,807
---------- -------
Total Increase in Net Assets 153,091 55,923
NET ASSETS--Beginning of Year 66,313 10,390
---------- -------
NET ASSETS--End of Year (Including undistributed
net investment loss of $(4) and $(0),
respectively) $ 219,404 $ 66,313
---------- -------
---------- -------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 3,038 1,309
Distributions Reinvested 177 35
Redeemed (1,340) (392)
---------- -------
Net Increase in Class A Shares Outstanding 1,875 952
---------- -------
---------- -------
Dollars:
Subscribed $ 59,406 $ 20,966
Distributions Reinvested 3,064 522
Redeemed (26,003) (6,373)
---------- -------
Net Increase $ 36,467 $ 15,115
---------- -------
---------- -------
Ending Paid in Capital $ 56,463 $ 19,996
---------- -------
---------- -------
Class B:
---------------------
Shares:
Subscribed 4,818 1,905
Distributions Reinvested 314 18
Redeemed (539) (51)
---------- -------
Net Increase in Class B Shares Outstanding 4,593 1,872
---------- -------
---------- -------
Dollars:
Subscribed $ 92,956 $ 30,344
Distributions Reinvested 5,363 262
Redeemed (10,091) (818)
---------- -------
Net Increase $ 88,228 $ 29,788
---------- -------
---------- -------
Ending Paid in Capital $ 120,092 $ 31,863
---------- -------
---------- -------
Class C:
---------------------
Shares:
Subscribed 982 404
Distributions Reinvested 67 17
Redeemed (343) (42)
---------- -------
Net Increase in Class C Shares Outstanding 706 379
---------- -------
---------- -------
Dollars:
Subscribed $ 19,014 $ 6,278
Distributions Reinvested 1,136 252
Redeemed (6,290) (626)
---------- -------
Net Increase $ 13,860 $ 5,904
---------- -------
---------- -------
Ending Paid in Capital $ 21,983 $ 8,124
---------- -------
---------- -------
- ---------------------------------------------------------------------------------------
</TABLE>
- -----------
100
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
AMERICAN VALUE FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss) $ (1,791) $ 424
Net Realized Gain 45,496 6,719
Change in Unrealized Appreciation/Depreciation 4,044 7,544
---------- ---------------
Net Increase in Net Assets Resulting from
Operations 47,749 14,687
---------- ---------------
DISTRIBUTIONS:
Net Investment Income:
Class A -- (309)
Class B -- (25)
Class C -- (133)
In Excess of Net Investment Income:
Class A (122) (1)
Class B (29) --
Class C (25) --
---------- ---------------
(176) (468)
---------- ---------------
Net Realized Gain:
Class A (5,303) (1,555)
Class B (5,203) (209)
Class C (3,629) (1,482)
---------- ---------------
(14,135) (3,246)
---------- ---------------
Net Decrease in Net Assets Resulting from
Distributions (14,311) (3,714)
---------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 558,778 38,027
Distributions Reinvested 12,507 3,292
Redeemed (69,473) (13,557)
---------- ---------------
Net Increase in Net Assets Resulting from
Capital Share Transactions 501,812 27,762
---------- ---------------
Total Increase in Net Assets 535,250 38,735
NET ASSETS--Beginning of Year 82,087 43,352
---------- ---------------
NET ASSETS--End of Year (Including distributions
in excess of net investment income of $(6) and
$(1), respectively) $ 617,337 $ 82,087
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 9,937 1,025
Distributions Reinvested 269 119
Redeemed (1,843) (538)
---------- ---------------
Net Increase in Class A Shares Outstanding 8,363 606
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 205,042 $ 16,463
Distributions Reinvested 5,049 1,785
Redeemed (37,455) (8,501)
---------- ---------------
Net Increase $ 172,636 $ 9,747
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 197,990 $ 25,289
---------- ---------------
---------- ---------------
Class B:
---------------------
Shares:
Subscribed 12,495 714
Distributions Reinvested 239 15
Redeemed (875) (27)
---------- ---------------
Net Increase in Class B Shares Outstanding 11,859 702
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 257,479 $ 11,773
Distributions Reinvested 4,461 228
Redeemed (18,025) (420)
---------- ---------------
Net Increase $ 243,915 $ 11,581
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 257,889 $ 13,891
---------- ---------------
---------- ---------------
Class C:
---------------------
Shares:
Subscribed 4,675 623
Distributions Reinvested 160 85
Redeemed (671) (312)
---------- ---------------
Net Increase in Class C Shares Outstanding 4,164 396
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 96,257 $ 9,791
Distributions Reinvested 2,997 1,279
Redeemed (13,993) (4,636)
---------- ---------------
Net Increase $ 85,261 $ 6,434
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 109,719 $ 24,423
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
</TABLE>
-----------------------
101
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
ASIAN GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment (Loss) $ (1,379) $ (2,748)
Net Realized (Loss) (117,195) (4,804)
Change in Unrealized Appreciation/Depreciation (58,612) (2,619)
---------- ---------------
Net Decrease in Net Assets Resulting from
Operations (177,186) (10,171)
---------- ---------------
DISTRIBUTIONS:
Net Realized Gain:
Class A -- (33)
Class B -- (10)
Class C -- (24)
In Excess of Net Realized Gain:
Class A (135) (4,110)
Class B (60) (1,274)
Class C (84) (3,072)
---------- ---------------
Net Decrease in Net Assets Resulting from
Distributions (279) (8,523)
---------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 114,898 114,562
Distributions Reinvested 258 8,035
Redeemed (188,300) (220,149)
---------- ---------------
Net Decrease in Net Assets Resulting from
Capital Share Transactions (73,144) (97,552)
---------- ---------------
Total Decrease in Net Assets (250,609) (116,246)
NET ASSETS--Beginning of Year 352,686 468,932
---------- ---------------
NET ASSETS--End of Year (Including net investment
loss of $(1,200) and $(1,153), respectively) $ 102,077 $352,686
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 9,205 4,724
Distributions Reinvested 15 243
Redeemed (12,556) (8,877)
---------- ---------------
Net Decrease in Class A Shares Outstanding (3,336) (3,910)
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 80,960 $ 77,015
Distributions Reinvested 125 3,930
Redeemed (123,834) (144,501)
---------- ---------------
Net Decrease $ (42,749) $(63,556)
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 76,638 $155,944
---------- ---------------
---------- ---------------
Class B:
---------------------
Shares:
Subscribed 2,181 1,466
Distributions Reinvested 7 77
Redeemed (1,929) (803)
---------- ---------------
Net Increase in Class B Shares Outstanding 259 740
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 19,723 $ 23,406
Distributions Reinvested 55 1,210
Redeemed (19,925) (12,628)
---------- ---------------
Net Increase (Decrease) $ (147) $ 11,988
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 63,990 $ 64,231
---------- ---------------
---------- ---------------
Class C:
---------------------
Shares:
Subscribed 1,702 883
Distributions Reinvested 10 184
Redeemed (4,222) (3,989)
---------- ---------------
Net Decrease in Class C Shares Outstanding (2,510) (2,922)
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 14,215 $ 14,140
Distributions Reinvested 78 2,895
Redeemed (44,541) (63,019)
---------- ---------------
Net Decrease $ (30,248) $(45,984)
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 113,022 $106,991
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
</TABLE>
- -----------
102
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment (Loss) $ (617) $ (538)
Net Realized Gain (Loss) (23,236) 14,993
Change in Unrealized Appreciation/Depreciation (57,677) 7,475
---------- ---------------
Net Increase (Decrease) in Net Assets Resulting
from Operations (81,530) 21,930
---------- ---------------
DISTRIBUTIONS:
In Excess of Net Investment Income:
Class A -- (291)
Class B -- (52)
Class C -- (44)
---------- ---------------
-- (387)
---------- ---------------
Net Realized Gain:
Class A (6,225) (871)
Class B (3,112) (182)
Class C (2,878) (503)
In Excess of Net Realized Gain:
Class A (2,361) --
Class B (1,180) --
Class C (1,091) --
---------- ---------------
(16,847) (1,556)
---------- ---------------
Net Decrease in Net Assets Resulting from
Distributions (16,847) (1,943)
---------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 160,772 133,953
Distributions Reinvested 15,915 1,855
Redeemed (151,194) (111,716)
---------- ---------------
Net Increase in Net Assets Resulting from
Capital Share Transactions 25,493 24,092
---------- ---------------
Total Increase (Decrease) in Net Assets (72,884) 44,079
NET ASSETS--Beginning of Year 212,946 168,867
---------- ---------------
NET ASSETS--End of Year (Including net investment
loss and distributions in excess of net
investment income of $(1,090) and $(659),
respectively) $ 140,062 $212,946
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 10,304 7,637
Distributions Reinvested 891 104
Redeemed (10,645) (8,424)
---------- ---------------
Net Increase (Decrease) in Class A Shares
Outstanding 550 (683)
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 114,410 $ 89,680
Distributions Reinvested 8,101 1,103
Redeemed (115,555) (96,827)
---------- ---------------
Net Increase (Decrease) $ 6,956 $ (6,044)
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 107,744 $100,788
---------- ---------------
---------- ---------------
Class B:
---------------------
Shares:
Subscribed 2,827 2,028
Distributions Reinvested 457 20
Redeemed (1,321) (205)
---------- ---------------
Net Increase in Class B Shares Outstanding 1,963 1,843
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 33,891 $ 23,982
Distributions Reinvested 4,064 223
Redeemed (13,053) (2,355)
---------- ---------------
Net Increase $ 24,902 $ 21,850
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 56,453 $ 31,551
---------- ---------------
---------- ---------------
Class C
---------------------
Shares:
Subscribed 1,061 1,753
Distributions Reinvested 421 51
Redeemed (2,173) (1,086)
---------- ---------------
Net Increase (Decrease) in Class C Shares
Outstanding (691) 718
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 12,471 $ 20,292
Distributions Reinvested 3,750 528
Redeemed (22,586) (12,534)
---------- ---------------
Net Increase (Decrease) $ (6,365) $ 8,286
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 42,361 $ 48,726
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
</TABLE>
-----------------------
103
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
OCTOBER 29, 1997* TO
JUNE 30, 1998
(000)
<S> <C>
- ---------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 844
Net Realized Gain 1,689
Change in Unrealized Appreciation/Depreciation 61,355
----------
Net Increase in Net Assets Resulting from
Operations 63,888
----------
DISTRIBUTIONS:
Net Investment Income:
Class A (88)
Class B (188)
Class C (18)
----------
Net Decrease in Net Assets Resulting from
Distributions (294)
----------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 739,265
Distributions Reinvested 276
Redeemed (29,826)
----------
Net Increase in Net Assets Resulting from
Capital Share Transactions 709,715
----------
Total Increase in Net Assets 773,309
NET ASSETS--Beginning of Period --
----------
NET ASSETS--End of Period (Including undistributed
net investment income of $1,301) $ 773,309
----------
----------
- ---------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 7,876
Distributions Reinvested 8
Redeemed (645)
----------
Net Increase in Class A Shares Outstanding 7,239
----------
----------
Dollars:
Subscribed $ 81,031
Distributions Reinvested 78
Redeemed (7,009)
----------
Net Increase $ 74,100
----------
----------
Ending Paid in Capital $ 74,096
----------
----------
Class B:
---------------------
Shares:
Subscribed 57,900
Distributions Reinvested 19
Redeemed (1,650)
----------
Net Increase in Class B Shares Outstanding 56,269
----------
----------
Dollars:
Subscribed $ 588,891
Distributions Reinvested 180
Redeemed (17,780)
----------
Net Increase $ 571,291
----------
----------
Ending Paid in Capital $ 571,259
----------
----------
Class C:
---------------------
Shares:
Subscribed 6,752
Distributions Reinvested 2
Redeemed (472)
----------
Net Increase in Class C Shares Outstanding 6,282
----------
----------
Dollars:
Subscribed $ 69,343
Distributions Reinvested 18
Redeemed (5,037)
----------
Net Increase $ 64,324
----------
----------
Ending Paid in Capital $ 64,320
----------
----------
- ---------------------------------------------------------------------------
* Commencement of operations
</TABLE>
- -----------
104
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
GLOBAL EQUITY ALLOCATION FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,993 $ 245
Net Realized Gain 33,576 13,170
Change in Unrealized Appreciation/Depreciation 47,298 17,251
---------- ----------
Net Increase in Net Assets Resulting from
Operations 82,867 30,666
---------- ----------
DISTRIBUTIONS:
Net Investment Income:
Class A (1,628) (2,358)
Class B (1,028) (759)
Class C (1,187) (2,093)
---------- ----------
(3,843) (5,210)
---------- ----------
Net Realized Gain:
Class A (8,369) (2,101)
Class B (6,610) (751)
Class C (9,026) (2,262)
---------- ----------
(24,005) (5,114)
---------- ----------
Net Decrease in Net Assets Resulting from
Distributions (27,848) (10,324)
---------- ----------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 399,475 54,525
Distributions Reinvested 26,341 9,826
Redeemed (74,620) (36,345)
---------- ----------
Net Increase in Net Assets Resulting from
Capital Share Transactions 351,196 28,006
---------- ----------
Total Increase in Net Assets 406,215 48,348
NET ASSETS--Beginning of Year 189,865 141,517
---------- ----------
NET ASSETS--End of Year (Including undistributed
net investment income of $82 and $2,666,
respectively) $ 596,080 $ 189,865
---------- ----------
---------- ----------
- ------------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 13,220 1,091
Distributions Reinvested 658 293
Redeemed (2,571) (1,314)
---------- ----------
Net Increase in Class A Shares Outstanding 11,307 70
---------- ----------
---------- ----------
Dollars:
Subscribed $ 193,752 $ 16,569
Distributions Reinvested 9,235 4,157
Redeemed (41,983) (19,605)
---------- ----------
Net Increase $ 161,004 $ 1,121
---------- ----------
---------- ----------
Ending Paid in Capital $ 215,278 $ 53,342
---------- ----------
---------- ----------
Class B:
---------------------
Shares:
Subscribed 11,944 1,444
Distributions Reinvested 533 106
Redeemed (902) (160)
---------- ----------
Net Increase in Class B Shares Outstanding 11,575 1,390
---------- ----------
---------- ----------
Dollars:
Subscribed $ 170,660 $ 21,138
Distributions Reinvested 7,277 1,475
Redeemed (14,280) (2,336)
---------- ----------
Net Increase $ 163,657 $ 20,277
---------- ----------
---------- ----------
Ending Paid in Capital $ 198,908 $ 34,446
---------- ----------
---------- ----------
Class C:
---------------------
Shares:
Subscribed 2,310 1,160
Distributions Reinvested 713 300
Redeemed (1,171) (995)
---------- ----------
Net Increase in Class C Shares Outstanding 1,852 465
---------- ----------
---------- ----------
Dollars:
Subscribed $ 35,063 $ 16,818
Distributions Reinvested 9,829 4,194
Redeemed (18,357) (14,404)
---------- ----------
Net Increase $ 26,535 $ 6,608
---------- ----------
---------- ----------
Ending Paid in Capital $ 86,368 $ 59,446
---------- ----------
---------- ----------
- ------------------------------------------------------------------------------------------
</TABLE>
-----------------------
105
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
GLOBAL FIXED INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 336 $ 436
Net Realized Gain (Loss) (59) 111
Change in Unrealized Appreciation/Depreciation 178 (84)
------- -------
Net Increase in Net Assets Resulting from
Operations 455 463
------- -------
DISTRIBUTIONS:
Net Investment Income:
Class A (219) (218)
Class B (49) (46)
Class C (68) (74)
In Excess of Net Investment Income:
Class A (4) (41)
Class B (1) (9)
Class C (1) (14)
------- -------
(342) (402)
------- -------
Net Realized Gain:
Class A (30) --
Class B (8) --
Class C (11) --
------- -------
(49) --
------- -------
Net Decrease in Net Assets Resulting from
Distributions (391) (402)
------- -------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 1,701 4,760
Distributions Reinvested 329 335
Redeemed (4,936) (6,304)
------- -------
Net Decrease in Net Assets Resulting from
Capital Share Transactions (2,906) (1,209)
------- -------
Total Decrease in Net Assets (2,842) (1,148)
NET ASSETS--Beginning of Year 10,568 11,716
------- -------
NET ASSETS--End of Year (Including distributions
in excess of net investment income of $(150) and
$(63), respectively) $ 7,726 $ 10,568
------- -------
------- -------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
--------------------
Shares:
Subscribed 72 256
Distributions Reinvested 22 22
Redeemed (298) (382)
------- -------
Net Decrease in Class A Shares Outstanding (204) (104)
------- -------
------- -------
Dollars:
Subscribed $ 714 $ 2,529
Distributions Reinvested 226 225
Redeemed (2,981) (3,839)
------- -------
Net Decrease $ (2,041) $ (1,085)
------- -------
------- -------
Ending Paid in Capital $ 4,452 $ 6,492
------- -------
------- -------
Class B:
--------------------
Shares:
Subscribed 58 100
Distributions Reinvested 4 4
Redeemed (92) (76)
------- -------
Net Increase (Decrease) in Class B Shares
Outstanding (30) 28
------- -------
------- -------
Dollars:
Subscribed $ 572 $ 999
Distributions Reinvested 42 41
Redeemed (909) (758)
------- -------
Net Increase (Decrease) $ (295) $ 282
------- -------
------- -------
Ending Paid in Capital $ 1,434 $ 1,730
------- -------
------- -------
Class C:
--------------------
Shares:
Subscribed 42 123
Distributions Reinvested 6 7
Redeemed (105) (170)
------- -------
Net Decrease in Class C Shares Outstanding (57) (40)
------- -------
------- -------
Dollars:
Subscribed $ 415 $ 1,232
Distributions Reinvested 61 69
Redeemed (1,046) (1,707)
------- -------
Net Decrease $ (570) $ (406)
------- -------
------- -------
Ending Paid in Capital $ 1,909 $ 2,479
------- -------
------- -------
- ---------------------------------------------------------------------------------------
</TABLE>
- -----------
106
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 3,180 $ 5,375
Net Realized Gain 2 8
---------- ---------------
Net Increase in Net Assets Resulting from
Operations 3,182 5,383
---------- ---------------
DISTRIBUTIONS:
Net Investment Income: (3,204) (5,375)
---------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 290,344 359,068
Distributions Reinvested 3,076 4,349
Redeemed (331,864) (414,635)
---------- ---------------
Net Decrease in Net Assets Resulting from
Capital Share Transactions (38,444) (51,218)
---------- ---------------
Total Decrease in Net Assets (38,466) (51,210)
NET ASSETS--Beginning of Year 94,768 145,978
---------- ---------------
NET ASSETS--End of Year $ 56,302 $ 94,768
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Shares
Subscribed 290,344 359,068
Distributions Reinvested 3,076 4,349
Redeemed (331,864) (414,635)
---------- ---------------
Net Decrease in Shares Outstanding (38,444) (51,218)
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 56,353 $ 94,859
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
</TABLE>
-----------------------
107
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
HIGH YIELD & TOTAL RETURN FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,701 $ 1,246
Net Realized Gain 1,119 312
Change in Unrealized Appreciation/Depreciation (585) 881
-------- ---------------
Net Increase in Net Assets Resulting from
Operations 2,235 2,439
-------- ---------------
DISTRIBUTIONS:
Net Investment Income:
Class A (525) (434)
Class B (854) (454)
Class C (343) (338)
-------- ---------------
(1,722) (1,226)
-------- ---------------
Net Realized Gain:
Class A (236) (20)
Class B (415) (24)
Class C (120) (20)
-------- ---------------
(771) (64)
-------- ---------------
Net Decrease in Net Assets Resulting from
Distributions (2,493) (1,290)
-------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 32,419 12,562
Distributions Reinvested 1,273 237
Redeemed (21,623) (2,025)
-------- ---------------
Net Increase in Net Assets Resulting from
Capital Share Transactions 12,069 10,774
-------- ---------------
Total Increase in Net Assets 11,811 11,923
NET ASSETS--Beginning of Year 22,567 10,644
-------- ---------------
NET ASSETS--End of Year (Including undistributed
net investment income of $36 and $38,
respectively.) $ 34,378 $ 22,567
-------- ---------------
-------- ---------------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 786 461
Distributions Reinvested 33 10
Redeemed (900) (101)
-------- ---------------
Net Increase (Decrease) in Class A Shares
Outstanding (81) 370
-------- ---------------
-------- ---------------
Dollars:
Subscribed $ 10,149 $ 5,790
Distributions Reinvested 420 131
Redeemed (11,731) (1,282)
-------- ---------------
Net Increase (Decrease) $ (1,162) $ 4,639
-------- ---------------
-------- ---------------
Ending Paid in Capital $ 7,412 $ 8,574
-------- ---------------
-------- ---------------
Class B:
---------------------
Shares:
Subscribed 1,167 397
Distributions Reinvested 48 6
Redeemed (427) (20)
-------- ---------------
Net Increase in Class B Shares Outstanding 788 383
-------- ---------------
-------- ---------------
Dollars:
Subscribed $ 15,056 $ 4,971
Distributions Reinvested 615 72
Redeemed (5,588) (249)
-------- ---------------
Net Increase $ 10,083 $ 4,794
-------- ---------------
-------- ---------------
Ending Paid in Capital $ 18,320 $ 8,237
-------- ---------------
-------- ---------------
Class C:
---------------------
Shares:
Subscribed 562 144
Distributions Reinvested 19 3
Redeemed (323) (39)
-------- ---------------
Net Increase in Class C Shares Outstanding 258 108
-------- ---------------
-------- ---------------
Dollars:
Subscribed $ 7,214 $ 1,800
Distributions Reinvested 238 35
Redeemed (4,304) (494)
-------- ---------------
Net Increase $ 3,148 $ 1,341
-------- ---------------
-------- ---------------
Ending Paid in Capital $ 7,826 $ 4,678
-------- ---------------
-------- ---------------
- ---------------------------------------------------------------------------------------
</TABLE>
- -----------
108
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
INTERNATIONAL MAGNUM FUND
<TABLE>
<CAPTION>
YEAR ENDED JULY 1, 1996* TO
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 679 $ 170
Net Realized Gain 1,875 770
Change in Unrealized Appreciation /Depreciation 6,066 4,184
---------- -------
Net Increase in Net Assets Resulting from
Operations 8,620 5,124
---------- -------
DISTRIBUTIONS:
Net Investment Income:
Class A (488) (52)
Class B (330) (45)
Class C (53) (43)
---------- -------
(871) (140)
---------- -------
Net Realized Gain:
Class A (33) (4)
Class B (31) (4)
Class C (9) (4)
---------- -------
(73) (12)
---------- -------
Net Decrease in Net Assets Resulting from
Distributions (944) (152)
---------- -------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 106,801 47,034
Distributions Reinvested 850 50
Redeemed (30,781) (2,724)
---------- -------
Net Increase in Net Assets Resulting from
Capital Share Transactions 76,870 44,360
---------- -------
Total Increase in Net Assets 84,546 49,332
NET ASSETS--Beginning of Year 49,332 --
---------- -------
NET ASSETS--End of Year (Including undistributed
net investment income of $1,524 and $767,
respectively) $ 133,878 $ 49,332
---------- -------
---------- -------
- ----------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 4,160 1,722
Distributions Reinvested 38 1
Redeemed (1,276) (144)
---------- -------
Net Increase in Class A Shares Outstanding 2,922 1,579
---------- -------
---------- -------
Dollars:
Subscribed $ 58,246 $ 21,512
Distributions Reinvested 473 14
Redeemed (17,581) (1,786)
---------- -------
Net Increase $ 41,138 $ 19,740
---------- -------
---------- -------
Ending Paid in Capital $ 60,878 $ 19,740
---------- -------
---------- -------
Class B:
---------------------
Shares:
Subscribed 2,713 1,321
Distributions Reinvested 26 2
Redeemed (556) (6)
---------- -------
Net Increase in Class B Shares Outstanding 2,183 1,317
---------- -------
---------- -------
Dollars:
Subscribed $ 37,386 $ 16,670
Distributions Reinvested 322 18
Redeemed (7,487) (73)
---------- -------
Net Increase $ 30,221 $ 16,615
---------- -------
---------- -------
Ending Paid in Capital $ 46,836 $ 16,615
---------- -------
---------- -------
Class C:
---------------------
Shares:
Subscribed 809 728
Distributions Reinvested 4 1
Redeemed (425) (67)
---------- -------
Net Increase in Class C Shares Outstanding 388 662
---------- -------
---------- -------
Dollars:
Subscribed $ 11,169 $ 8,852
Distributions Reinvested 55 18
Redeemed (5,713) (865)
---------- -------
Net Increase $ 5,511 $ 8,005
---------- -------
---------- -------
Ending Paid in Capital $ 13,516 $ 8,005
---------- -------
---------- -------
- ----------------------------------------------------------------------------------------
* Commencement of operations
</TABLE>
-----------------------
109
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
LATIN AMERICAN FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment (Loss) $ (380) $ (131)
Net Realized Gain 4,576 13,981
Change in Unrealized Appreciation/Depreciation (27,206) 10,200
-------- ---------------
Net Increase (Decrease) in Net Assets Resulting
from Operations (23,010) 24,050
-------- ---------------
DISTRIBUTIONS:
In Excess of Net Investment Income:
Class A -- (117)
Class B -- (17)
Class C -- (13)
-------- ---------------
-- (147)
-------- ---------------
Net Realized Gain:
Class A (7,513) (2,192)
Class B (3,444) (359)
Class C (2,645) (727)
In Excess of Net Realized Gain:
Class A (5,098) --
Class B (2,337) --
Class C (1,795) --
-------- ---------------
(22,832) (3,278)
-------- ---------------
Net Decrease in Net Assets Resulting from
Distributions (22,832) (3,425)
-------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 115,672 114,111
Distributions Reinvested 20,476 3,304
Redeemed (126,144) (46,502)
-------- ---------------
Net Increase in Net Assets Resulitng from
Capital Share Transactions 10,004 70,913
-------- ---------------
Total Increase (Decrease) in Net Assets (35,838) 91,538
NET ASSETS--Beginning of Year 119,060 27,522
-------- ---------------
NET ASSETS--End of Year (Including net investment
loss (distributions in excess of net investment
income) of $(95) and $(11), respectively) $ 83,222 $119,060
-------- ---------------
-------- ---------------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 4,455 6,162
Distributions Reinvested 920 187
Redeemed (6,340) (2,975)
-------- ---------------
Net Increase (Decrease) in Class A Shares
Outstanding (965) 3,374
-------- ---------------
-------- ---------------
Dollars:
Subscribed $ 72,239 $ 90,337
Distributions Reinvested 11,506 2,243
Redeemed (98,189) (41,558)
-------- ---------------
Net Increase (Decrease) $ (14,444) $ 51,022
-------- ---------------
-------- ---------------
Ending Paid in Capital $ 54,118 $ 68,562
-------- ---------------
-------- ---------------
Class B:
---------------------
Shares:
Subscribed 1,661 752
Distributions Reinvested 443 30
Redeemed (752) (104)
-------- ---------------
Net Increase in Class B Shares Outstanding 1,352 678
-------- ---------------
-------- ---------------
Dollars:
Subscribed $ 26,168 $ 11,139
Distributions Reinvested 5,380 353
Redeemed (10,163) (1,385)
-------- ---------------
Net Increase $ 21,385 $ 10,107
-------- ---------------
-------- ---------------
Ending Paid in Capital $ 33,297 $ 11,912
-------- ---------------
-------- ---------------
Class C:
---------------------
Shares:
Subscribed 1,071 856
Distributions Reinvested 296 60
Redeemed (1,242) (266)
-------- ---------------
Net Increase in Class C Shares Outstanding 125 650
-------- ---------------
-------- ---------------
Dollars:
Subscribed $ 17,265 $ 12,635
Distributions Reinvested 3,590 708
Redeemed (17,792) (3,559)
-------- ---------------
Net Increase $ 3,063 $ 9,784
-------- ---------------
-------- ---------------
Ending Paid in Capital $ 18,767 $ 15,704
-------- ---------------
-------- ---------------
- ---------------------------------------------------------------------------------------
</TABLE>
- -----------
110
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 7,814 $ 8,859
Net Realized Gain 28 13
---------- ---------------
Net Increase in Net Assets Resulting from
Operations 7,842 8,872
---------- ---------------
DISTRIBUTIONS:
Net Investment Income (7,882) (8,859)
---------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 921,486 677,641
Distributions Reinvested 7,384 7,110
Redeemed (947,876) (717,315)
---------- ---------------
Net Decrease in Net Assets Resulting from
Capital Share Transactions (19,006) (32,564)
---------- ---------------
Total Decrease in Net Assets (19,046) (32,551)
NET ASSETS--Beginning of Year 138,422 170,973
---------- ---------------
NET ASSETS--End of Year $ 119,376 $138,422
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Shares:
Subscribed 921,486 677,641
Distributions Reinvested 7,384 7,110
Redeemed (947,876) (717,315)
---------- ---------------
Net Decrease in Shares Outstanding (19,006) (32,564)
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 119,453 $138,521
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
</TABLE>
-----------------------
111
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
U.S. REAL ESTATE FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 925 $ 280
Net Realized Gain 2,646 2,077
Change in Unrealized Appreciation/Depreciation (1,683) 1,622
-------- -------
Net Increase in Net Assets Resulting from
Operations 1,888 3,979
-------- -------
DISTRIBUTIONS:
Net Investment Income:
Class A (558) (162)
Class B (328) (57)
Class C (94) (31)
In Excess of Net Investment Income:
Class A (52) --
Class B (30) --
Class C (9) --
-------- -------
(1,071) (250)
-------- -------
Net Realized Gain:
Class A (1,796) (100)
Class B (1,083) (71)
Class C (334) (48)
-------- -------
(3,213) (219)
-------- -------
Net Decrease in Net Assets Resulting from
Distributions (4,284) (469)
-------- -------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 28,564 23,984
Distributions Reinvested 3,942 268
Redeemed (18,169) (9,254)
-------- -------
Net Increase in Net Assets Resulting from
Capital Share Transactions 14,337 14,998
-------- -------
Total Increase in Net Assets 11,941 18,508
NET ASSETS--Beginning of Year 24,316 5,808
-------- -------
NET ASSETS--End of Year (Including undistributed
(distributions in excess of) net investment
income of $4 and $55, respectively.) $ 36,257 $ 24,316
-------- -------
-------- -------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 856 1,003
Distributions Reinvested 140 13
Redeemed (820) (257)
-------- -------
Net Increase in Class A Shares Outstanding 176 759
-------- -------
-------- -------
Dollars:
Subscribed $ 14,430 $ 15,148
Distributions Reinvested 2,255 187
Redeemed (13,538) (3,998)
-------- -------
Net Increase $ 3,147 $ 11,337
-------- -------
-------- -------
Ending Paid in Capital $ 16,184 $ 13,087
-------- -------
-------- -------
Class B:
---------------------
Shares:
Subscribed 665 441
Distributions Reinvested 80 4
Redeemed (202) (185)
-------- -------
Net Increase in Class B Shares Outstanding 543 260
-------- -------
-------- -------
Dollars:
Subscribed $ 11,167 $ 6,607
Distributions Reinvested 1,279 54
Redeemed (3,346) (2,916)
-------- -------
Net Increase $ 9,100 $ 3,745
-------- -------
-------- -------
Ending Paid In Capital $ 14,914 $ 5,860
-------- -------
-------- -------
Class C:
---------------------
Shares:
Subscribed 175 150
Distributions Reinvested 25 2
Redeemed (76) (149)
-------- -------
Net Increase in Class C Shares Outstanding 124 3
-------- -------
-------- -------
Dollars:
Subscribed $ 2,967 $ 2,229
Distributions Reinvested 408 26
Redeemed (1,285) (2,339)
-------- -------
Net Increase (Decrease) $ 2,090 $ (84)
-------- -------
-------- -------
Ending Paid in Capital $ 3,701 $ 1,624
-------- -------
-------- -------
- ---------------------------------------------------------------------------------------
</TABLE>
- -----------
112
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
VALUE FUND
<TABLE>
<CAPTION>
JULY 7, 1997* TO
JUNE 30, 1998
(000)
<S> <C>
- ----------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 1,260
Net Realized Gain 5,893
Change in Unrealized Appreciation/Depreciation 1,221
----------
Net Increase in Net Assets Resulting from
Operations 8,374
----------
DISTRIBUTIONS:
Net Investment Income:
Class A (930)
Class B (264)
Class C (66)
In Excess of Net Investment Income:
Class A (77)
Class B (22)
Class C (6)
----------
(1,365)
----------
Net Realized Gain:
Class A (502)
Class B (431)
Class C (95)
----------
(1,028)
----------
Net Decrease in Net Assets Resulting from
Distributions (2,393)
----------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 354,369
Distributions Reinvested 2,140
Redeemed (49,738)
----------
Net Increase in Net Assets Resulting from
Capital Share Transactions 306,771
----------
Total Increase in Net Assets 312,752
NET ASSETS--Beginning of Period 3,000
----------
NET ASSETS--End of Period (Including distributions
in excess of net investment income of $(45)) $ 315,752
----------
----------
- ----------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 16,264
Distributions Reinvested 136
Redeemed (3,343)
----------
Net Increase in Class A Shares Outstanding 13,057
----------
----------
Dollars:
Subscribed $ 167,353
Distributions Reinvested 1,393
Redeemed (35,499)
----------
Net Increase $ 133,247
----------
----------
Ending Paid in Capital $ 134,222
----------
----------
Class B:
---------------------
Shares:
Subscribed 14,654
Distributions Reinvested 60
Redeemed (1,138)
----------
Net Increase in Class B Shares Outstanding 13,576
----------
----------
Dollars:
Subscribed $ 150,818
Distributions Reinvested 607
Redeemed (12,023)
----------
Net Increase $ 139,402
----------
----------
Ending Paid in Capital $ 140,375
----------
----------
Class C:
---------------------
Shares:
Subscribed 3,584
Distributions Reinvested 14
Redeemed (212)
----------
Net Increase in Class C Shares Outstanding 3,386
----------
----------
Dollars:
Subscribed $ 36,198
Distributions Reinvested 140
Redeemed (2,216)
----------
Net Increase $ 34,122
----------
----------
Ending Paid in Capital $ 35,116
----------
----------
- ----------------------------------------------------------------------
* Commencement of operations
</TABLE>
-----------------------
113
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
WORLDWIDE HIGH INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 19,591 $ 13,435
Net Realized Gain 12,018 9,362
Change in Unrealized Appreciation/Depreciation (28,435) 14,412
---------- ---------------
Net Increase in Net Assets Resulting from
Operations 3,174 37,209
---------- ---------------
DISTRIBUTIONS:
Net Investment Income:
Class A (6,930) (5,678)
Class B (8,313) (4,269)
Class C (3,852) (3,020)
---------- ---------------
(19,095) (12,967)
---------- ---------------
Realized Gain:
Class A (6,907) (2,320)
Class B (8,787) (1,708)
Class C (4,230) (1,293)
---------- ---------------
(19,924) (5,321)
---------- ---------------
Net Decrease in Net Assets Resulting from
Distributions (39,019) (18,288)
---------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 226,529 133,028
Distributions Reinvested 25,615 11,818
Redeemed (114,610) (63,040)
---------- ---------------
Net Increase in Net Assets Resulting from
Capital Share Transactions 137,534 81,806
---------- ---------------
Total Increase in Net Assets 101,689 100,727
NET ASSETS--Beginning of Year 196,488 95,761
---------- ---------------
NET ASSETS--End of Year (Including undistributed
net investment income of $781 and $311,
respectively) $ 298,177 $196,488
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 6,811 5,082
Distributions Reinvested 743 423
Redeemed (5,569) (3,469)
---------- ---------------
Net Increase in Class A Shares Outstanding 1,985 2,036
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 93,959 $ 67,886
Distributions Reinvested 9,850 5,651
Redeemed (77,161) (46,537)
---------- ---------------
Net Increase $ 26,648 $ 27,000
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 92,892 $ 66,246
---------- ---------------
---------- ---------------
Class B:
---------------------
Shares:
Subscribed 7,464 3,787
Distributions Reinvested 770 246
Redeemed (1,939) (622)
---------- ---------------
Net Increase in Class B Shares Outstanding 6,295 3,411
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 101,066 $ 50,939
Distributions Reinvested 10,086 3,287
Redeemed (26,325) (8,415)
---------- ---------------
Net Increase $ 84,827 $ 45,811
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 156,092 $ 71,297
---------- ---------------
---------- ---------------
Class C:
---------------------
Shares:
Subscribed 2,312 1,057
Distributions Reinvested 432 217
Redeemed (825) (596)
---------- ---------------
Net Increase in Class C Shares Outstanding 1,919 678
---------- ---------------
---------- ---------------
Dollars:
Subscribed $ 31,504 $ 14,203
Distributions Reinvested 5,679 2,880
Redeemed (11,124) (8,088)
---------- ---------------
Net Increase $ 26,059 $ 8,995
---------- ---------------
---------- ---------------
Ending Paid in Capital $ 62,009 $ 35,964
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
</TABLE>
- -----------
114
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
AGGRESSIVE EQUITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------------------- --------------
YEAR ENDED YEAR ENDED JANUARY 2, 1996* TO YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1998#
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.98 $ 14.40 $ 12.00 $ 16.85
------- ------------- ------ --------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.07) 0.01 0.06 (0.21)
Net Realized and Unrealized Gain 5.03 3.95 2.40 4.96
------- ------------- ------ --------------
Total From Investment Operations 4.96 3.96 2.46 4.75
------- ------------- ------ --------------
DISTRIBUTIONS
Net Investment Income -- (0.03) (0.06) --
Net Realized Gain (1.93) (1.35) -- (1.93)
------- ------------- ------ --------------
Total Distributions (1.93) (1.38) (0.06) (1.93)
------- ------------- ------ --------------
NET ASSET VALUE, END OF PERIOD $ 20.01 $ 16.98 $ 14.40 $ 19.67
------- ------------- ------ --------------
------- ------------- ------ --------------
TOTAL RETURN (1) 30.93% 28.93% 20.52% 29.94%
------- ------------- ------ --------------
------- ------------- ------ --------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 64,035 $ 22,521 $ 5,382 $ 130,497
Ratio of Expenses to Average Net
Assets 1.50% 1.57% 2.03%** 2.25%
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.37)% (0.04)% 1.22%** (1.11)%
Portfolio Turnover Rate 308% 241% 204% 308%
- ---------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.04 $ 0.22 $ 0.06 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets 1.71% 2.38% 3.26%** 2.47%
Net Investment Income (Loss) to
Average Net Assets (0.59)% (0.85)% (0.01)%** (1.34)%
Ratio of Expenses to Average Net
Assets excluding dividend expense
on securities sold short 1.50% 1.50% 1.50%** 2.25%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED JANUARY 2, 1996* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1997 JUNE 30, 1996
<S> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.38 $ 12.00
------------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.02) 0.03
Net Realized and Unrealized Gain 3.86 2.39
------------- ------
Total From Investment Operations 3.84 2.42
------------- ------
DISTRIBUTIONS
Net Investment Income (0.02) (0.04)
Net Realized Gain (1.35) --
------------- ------
Total Distributions (1.37) (0.04)
------------- ------
NET ASSET VALUE, END OF PERIOD $ 16.85 $ 14.38
------------- ------
------------- ------
TOTAL RETURN (1) 28.01% 20.18%
------------- ------
------------- ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 34,382 $ 2,426
Ratio of Expenses to Average Net
Assets 2.32% 2.67%**
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.83)% 0.43%**
Portfolio Turnover Rate 241% 204%
- ----------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.02 $ 0.07
Ratios Before Expense Limitation:
Expenses to Average Net Assets 2.88% 3.79%**
Net Investment Income (Loss) to
Average Net Assets (1.43)% (0.69)%**
Ratio of Expenses to Average Net
Assets excluding dividend expense
on securities sold short 2.25% 2.25%**
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------
YEAR ENDED YEAR ENDED JANUARY 2, 1996* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.83 $ 14.37 $ 12.00
------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.21) (0.06) 0.03
Net Realized and Unrealized Gain 4.97 3.89 2.38
------- ------ ------
Total From Investment Operations 4.76 3.83 2.41
------- ------ ------
DISTRIBUTIONS
Net Investment Income -- (0.02) (0.04)
Net Realized Gain (1.93) (1.35) --
------- ------ ------
Total Distributions (1.93) (1.37) (0.04)
------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 19.66 $ 16.83 $ 14.37
------- ------ ------
------- ------ ------
TOTAL RETURN (1) 29.90% 28.04% 20.10%
------- ------ ------
------- ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 24,872 $ 9,410 $ 2,582
Ratio of Expenses to Average Net
Assets 2.25% 2.32% 2.67%**
Ratio of Net Investment Income (Loss)
to Average Net Assets (1.13)% (0.77)% 0.44%**
Portfolio Turnover Rate 308% 241% 204%
- --------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.04 $ 0.07 $ 0.07
Ratios Before Expense Limitation:
Expenses to Average Net Assets 2.25% 3.23% 3.80%**
Net Investment Income (Loss) to
Average Net Assets (1.35)% (1.67)% (0.69)%**
Ratio of Expenses to Average Net
Assets excluding dividend expense
on securities sold short 2.25% 2.25% 2.25%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total returns for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
-----------------------
115
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
AMERICAN VALUE FUND
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
OCTOBER 18,
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 1993*
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30, JUNE 30, TO JUNE 30,
AND RATIOS 1998# 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 17.59 $ 14.63 $ 12.89 $ 11.70 $ 12.00
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) (0.02) 0.20 0.27 0.27 0.17
Net Realized and
Unrealized Gain
(Loss) 4.84 4.05 1.94 1.44 (0.30)
------------ ------------ ------------ ------------ ------------
Total from Investment
Operations 4.82 4.25 2.21 1.71 (0.13)
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income (0.03) (0.20) (0.27) (0.28) (0.17)
In Excess of Net
Investment Income (0.00)++ (0.00)++ (0.01) -- --
Net Realized Gain (1.04) (1.09) (0.19) (0.24) --
------------ ------------ ------------ ------------ ------------
Total Distributions (1.07) (1.29) (0.47) (0.52) (0.17)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 21.34 $ 17.59 $ 14.63 $ 12.89 $ 11.70
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN (1) 28.26% 30.68% 17.41% 15.01% (1.12)%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 220,100 $ 34,331 $ 19,674 $ 20,675 $ 10,717
Ratio of Expenses to
Average Net Assets 1.50% 1.50% 1.50% 1.50% 1.50%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.09)% 1.25% 1.90% 2.29% 2.14%**
Portfolio Turnover Rate 207% 73% 41% 23% 17%
- ---------------------------------------------------------------------------------------------------------
Effect of Voluntary
Expense
Limitation During the
Period
Per Share Benefit to
Net Investment Income $ 0.02 $ 0.04 $ 0.04 $ 0.05 $ 0.08
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 1.58% 1.76% 1.81% 1.96% 2.48%**
Net Investment Income
(Loss) to Average Net
Assets (0.18)% 0.98% 1.59% 1.83% 1.16%**
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
--------------------------------------------
AUGUST 1,
YEAR ENDED YEAR ENDED 1995+ TO
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998# 1997 1996
<S> <C> <C> <C>
- -------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 17.59 $ 14.63 $ 13.37
------------ ------------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) (0.17) 0.09 0.15
Net Realized and
Unrealized Gain
(Loss) 4.83 4.05 1.46
------------ ------------ ------
Total from Investment
Operations 4.66 4.14 1.61
------------ ------------ ------
DISTRIBUTIONS
Net Investment Income (0.01) (0.09) (0.15)
In Excess of Net
Investment Income (0.00)++ (0.00)++ (0.01)
Net Realized Gain (1.04) (1.09) (0.19)
------------ ------------ ------
Total Distributions (1.05) (1.18) (0.35)
------------ ------------ ------
NET ASSET VALUE, END OF
PERIOD $ 21.20 $ 17.59 $ 14.63
------------ ------------ ------
------------ ------------ ------
TOTAL RETURN (1) 27.30% 29.77% 12.29%
------------ ------------ ------
------------ ------------ ------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 269,836 $ 15,331 $ 2,485
Ratio of Expenses to
Average Net Assets 2.25% 2.25% 2.25%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.84)% 0.40% 1.18%**
Portfolio Turnover Rate 207% 73% 41%
- ------------------------------------------------------------------------------------------
Effect of Voluntary
Expense
Limitation During the
Period
Per Share Benefit to
Net Investment Income $ 0.02 $ 0.06 $ 0.04
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 2.33% 2.48% 2.61%**
Net Investment Income
(Loss) to Average Net
Assets (0.93)% 0.14% 0.82%**
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------------------
OCTOBER 18,
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 1993*
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30, JUNE 30, TO JUNE 30,
AND RATIOS 1998# 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 17.59 $ 14.64 $ 12.89 $ 11.69 $ 12.00
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) (0.17) 0.08 0.16 0.17 0.11
Net Realized and
Unrealized Gain
(Loss) 4.83 4.05 1.94 1.44 (0.31)
------------ ------------ ------------ ------------ ------------
Total from Investment
Operations 4.66 4.13 2.10 1.61 (0.20)
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income (0.01) (0.09) (0.15) (0.17) (0.11)
In Excess of Net
Investment Income (0.00)++ (0.00)++ (0.01) -- --
Net Realized Gain (1.04) (1.09) (0.19) (0.24) --
------------ ------------ ------------ ------------ ------------
Total Distributions (1.05) (1.18) (0.35) (0.41) (0.11)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 21.20 $ 17.59 $ 14.64 $ 12.89 $ 11.69
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN (1) 27.28% 29.67% 16.50% 14.13% (1.70)%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 127,401 $ 32,425 $ 21,193 $ 13,867 $ 7,237
Ratio of Expenses to
Average Net Assets 2.25% 2.25% 2.25% 2.25% 2.25%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.84)% 0.49% 1.17% 1.54% 1.39%**
Portfolio Turnover Rate 207% 73% 41% 23% 17%
- ---------------------------------------------------------------------------------------------------------
Effect of Voluntary
Expense
Limitation During the
Period
Per Share Benefit to
Net Investment Income $ 0.02 $ 0.04 $ 0.04 $ 0.05 $ 0.08
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 2.33% 2.47% 2.58% 2.71% 3.28%**
Net Investment Income
(Loss) to Average Net
Assets (0.92)% 0.22% 0.84% 1.08% 0.36%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Annualized
+ The Fund began offering Class B shares on August 1, 1995.
++ Amount is less than $0.01 per share.
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total returns for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
- ------------------
116
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
ASIAN GROWTH FUND
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.62 $ 17.15 $ 16.42 $ 15.50 $ 12.00
------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment (Loss) (0.04) (0.06) (0.04) -- (0.03)
Net Realized and Unrealized Gain
(Loss) (10.03) (0.14) 0.77 1.43 3.53
------- ------------- ------------- ------------- -------------
Total From Investment Operations (10.07) (0.20) 0.73 1.43 3.50
------- ------------- ------------- ------------- -------------
DISTRIBUTIONS
Net Realized Gain -- -- -- (0.49) --
In Excess of Net Realized Gain (0.02) (0.33) -- (0.02) --
------- ------------- ------------- ------------- -------------
Total Distributions (0.02) (0.33) -- (0.51) --
------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 6.53 $ 16.62 $ 17.15 $ 16.42 $ 15.50
------- ------------- ------------- ------------- -------------
------- ------------- ------------- ------------- -------------
TOTAL RETURN (1) (60.57)% (1.10)% 4.45% 9.50% 29.17%
------- ------------- ------------- ------------- -------------
------- ------------- ------------- ------------- -------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 47,128 $ 175,440 $ 248,009 $ 178,667 $ 138,212
Ratio of Expenses to Average Net
Assets 1.90% 1.84% 1.88% 1.90% 1.90%
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.39)% (0.31)% (0.16)% 0.04% (0.24)%
Portfolio Turnover Rate 130% 74% 38% 34% 34%
- --------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During
the Period
Per Share Benefit to Net Investment
Loss $ 0.01 $ -- $ -- $ -- $ 0.03
Ratios Before Expense Limitation:
Expenses to Average Net Assets 2.21% -- -- -- 2.17%
Net Investment Loss to Average Net
Assets (0.53)% -- -- -- (0.51)%
Ratio of Expenses to Average Net
Assets excluding country tax
expense 1.90% -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
-------------------------------------------------------
YEAR ENDED YEAR ENDED AUGUST 1, 1995+ TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996
<S> <C> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.17 $ 16.81 $ 16.51
------- ------------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment (Loss) (0.10) (0.16) (0.03)
Net Realized and Unrealized Gain
(Loss) (9.74) (0.15) 0.33
------- ------------- -------
Total From Investment Operations (9.84) (0.31) 0.30
------- ------------- -------
DISTRIBUTIONS
Net Realized Gain -- -- --
In Excess of Net Realized Gain (0.02) (0.33) --
------- ------------- -------
Total Distributions (0.02) (0.33) --
------- ------------- -------
NET ASSET VALUE, END OF PERIOD $ 6.31 $ 16.17 $ 16.81
------- ------------- -------
------- ------------- -------
TOTAL RETURN (1) (60.89)% (1.79)% 1.82%
------- ------------- -------
------- ------------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 26,126 $ 62,786 $ 52,853
Ratio of Expenses to Average Net
Assets 2.65% 2.59% 2.61%**
Ratio of Net Investment Income (Loss)
to Average Net Assets (1.01)% (1.04)% (0.52)%**
Portfolio Turnover Rate 130% 74% 38%
- -------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During
the Period
Per Share Benefit to Net Investment
Loss $ 0.02 $ -- $ --
Ratios Before Expense Limitation:
Expenses to Average Net Assets 2.96 -- --
Net Investment Loss to Average Net
Assets (1.15)% -- --
Ratio of Expenses to Average Net
Assets excluding country tax
expense 2.65% -- --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.14 $ 16.78 $ 16.19 $ 15.40 $ 12.00
------- ------------- ------------- ------------- -------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss (0.12) (0.21) (0.13) (0.12) (0.10)
Net Realized and Unrealized Gain
(Loss) (9.71) (0.10) 0.72 1.42 3.50
------- ------------- ------------- ------------- -------------
Total From Investment Operations (9.83) (0.31) 0.59 1.30 3.40
------- ------------- ------------- ------------- -------------
DISTRIBUTIONS
Net Realized Gain -- -- -- (0.49) --
In Excess of Net Realized Gain (0.02) (0.33) -- (0.02) --
------- ------------- ------------- ------------- -------------
Total Distributions (0.02) (0.33) -- (0.51) --
------- ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 6.29 $ 16.14 $ 16.78 $ 16.19 $ 15.40
------- ------------- ------------- ------------- -------------
------- ------------- ------------- ------------- -------------
TOTAL RETURN (1) (60.88)% (1.79)% 3.64% 8.71% 28.33%
------- ------------- ------------- ------------- -------------
------- ------------- ------------- ------------- -------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 28,823 $ 114,460 $ 168,070 $ 139,497 $ 116,889
Ratio of Expenses to Average Net
Assets 2.65% 2.59% 2.63% 2.63% 2.65%
Ratio of Net Investment Loss to
Average Net Assets (1.17)% (1.06)% (0.94)% (0.77)% (0.99)%
Portfolio Turnover Rate 130% 74% 38% 34% 34%
- --------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Loss $ 0.01 $ -- $ -- $ -- $ 0.03
Ratios Before Expense Limitation:
Expenses to Average Net Assets 2.96% -- -- -- 2.92%
Net Investment Loss to Average Net
Assets (1.31)% -- -- -- (1.26)%
Ratio of Expenses to Average Net
Assets excluding country tax
expense 2.65% -- -- -- --
</TABLE>
- --------------------------------------------------------------------------------
** Annualized
+ The Fund began offering Class B shares on August 1, 1995.
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total returns for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
-----------------------
117
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
JULY 6,
YEAR ENDED YEAR ENDED YEAR ENDED 1994* TO
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998# 1997 1996 1995
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 13.47 $ 12.06 $ 10.61 $ 12.00
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) -- 0.01 0.05 0.05
Net Realized and
Unrealized Gain
(Loss) (4.49) 1.57 1.44 (1.44)
------------ ------------ ------------ ------------
Total From Investment
Operations (4.49) 1.58 1.49 (1.39)
------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income -- -- (0.04) --
In Excess of Net
Investment Income -- (0.04) -- --
Net Realized Gain (0.73) (0.13) -- --
In Excess of Net
Realized Gain (0.27) -- -- --
------------ ------------ ------------ ------------
Total Distributions (1.00) (0.17) (0.04) --
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 7.98 $ 13.47 $ 12.06 $ 10.61
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
TOTAL RETURN (1) (34.31)% 13.54% 14.16% (11.58)%
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 74,959 $ 119,022 $ 114,850 $ 26,091
Ratio of Expenses to
Average Net Assets 2.27% 2.21% 2.16% 2.33%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets 0.04% (0.06)% 0.93% 0.81%**
Portfolio Turnover Rate 99% 82% 42% 32%
- ---------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to
Net Investment Income $ 0.03 $ 0.03 $ 0.02 $ 0.04
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 2.60% 2.41% 2.56% 3.10%**
Net Investment Income
(Loss) to Average Net
Assets (0.24)% (0.27)% 0.53% 0.04%**
Ratio of Expenses to
Average Net Assets
excluding country tax
expense. 2.15% 2.15% 2.15% 2.15%**
- ---------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
----------------------------------------------
AUGUST 1,
YEAR ENDED YEAR ENDED 1995+ TO
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998# 1997 1996
<S> <C> <C> <C>
- -------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 13.24 $ 11.94 $ 10.91
------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) (0.07) (0.03) 0.01
Net Realized and
Unrealized Gain
(Loss) (4.39) 1.50 1.02
------------ ------------ ------------
Total From Investment
Operations (4.46) 1.47 1.03
------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income -- -- --
In Excess of Net
Investment Income -- (0.04)
Net Realized Gain (0.73) (0.13) --
In Excess of Net
Realized Gain (0.27) -- --
------------ ------------ ------------
Total Distributions (1.00) (0.17) --
------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 7.78 $ 13.24 $ 11.94
------------ ------------ ------------
------------ ------------ ------------
TOTAL RETURN (1) (34.76)% 12.67% 9.45%
------------ ------------ ------------
------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 36,423 $ 35,966 $ 10,416
Ratio of Expenses to
Average Net Assets 3.02% 2.96% 2.91%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.67)% (0.64)% 0.30%**
Portfolio Turnover Rate 99% 82% 42%
- --------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to
Net Investment Income $ 0.03 $ 0.01 $ 0.02
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 3.35% 3.17% 3.31%**
Net Investment Income
(Loss) to Average Net
Assets (0.97)% (0.87)% (0.10)%**
Ratio of Expenses to
Average Net Assets
excluding country tax
expense. 2.90% 2.90% 2.90%**
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------
JULY 6,
YEAR ENDED YEAR ENDED YEAR ENDED 1994* TO
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998# 1997 1996 1995
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 13.26 $ 11.93 $ 10.53 $ 12.00
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) (0.08) (0.08) (0.01) --
Net Realized and
Unrealized Gain
(Loss) (4.39) 1.55 1.41 (1.47)
------------ ------------ ------------ ------------
Total From Investment
Operations (4.47) 1.47 1.40 (1.47)
------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income -- -- -- --
In Excess of Net
Investment Income -- (0.01) -- --
Net Realized Gain (0.73) (0.13) -- --
In Excess of Net
Realized Gain (0.27) -- -- --
------------ ------------ ------------ ------------
Total Distributions (1.00) (0.14) -- --
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 7.79 $ 13.26 $ 11.93 $ 10.53
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
TOTAL RETURN (1) (34.73)% 12.66% 13.30% (12.25)%
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 28,680 $ 57,958 $ 43,601 $ 22,245
Ratio of Expenses to
Average Net Assets 3.01% 2.96% 2.91% 3.08%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.76)% (0.79)% (0.11)% 0.06%**
Portfolio Turnover Rate 99% 82% 42% 32%
- -----------------------------------------------------------------------------------------
Effect of Voluntary
Expense
Limitation During the
Period
Per Share Benefit to
Net Investment Income $ 0.03 $ 0.02 $ 0.03 $ 0.04
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 3.34% 3.17% 3.34% 3.90%**
Net Investment (Loss)
to Average Net Assets (1.03)% (1.00)% (0.54)% (0.76)%**
Ratio of Expenses to
Average Net Assets
excluding country tax
expense. 2.90% 2.90% 2.90% 2.90%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Annualized
+ The Fund began offering Class B shares on August 1, 1995.
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total return for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
- ------------------
118
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------------- ----------------- -----------------
OCTOBER 29, 1997* OCTOBER 29, 1997* OCTOBER 29, 1997*
SELECTED PER SHARE DATA AND RATIOS TO JUNE 30, 1998 TO JUNE 30, 1998 TO JUNE 30, 1998
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00 $ 10.00
------- ----------------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.06 0.01 0.01
Net Realized and Unrealized Gain 1.08 1.07 1.06
------- ----------------- -------
Total From Investment Operations 1.14 1.08 1.07
------- ----------------- -------
DISTRIBUTIONS
Net Investment Income (0.02) -- --
Net Realized Gain -- -- --
------- ----------------- -------
Total Distributions (0.02) -- --
------- ----------------- -------
NET ASSET VALUE, END OF PERIOD $ 11.12 $ 11.08 $ 11.07
------- ----------------- -------
------- ----------------- -------
TOTAL RETURN (1) 11.38% 10.84% 10.74%
------- ----------------- -------
------- ----------------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 80,508 $ 623,229 $ 69,572
Ratio of Expenses to Average Net Assets 1.70%** 2.45%** 2.45%**
Ratio of Net Investment Income to
Average Net Assets 0.88%** 0.12%** 0.13%**
Portfolio Turnover Rate 4% 4% 4%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total returns for periods of less than one year are not
annualized.
-----------------------
119
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
GLOBAL EQUITY ALLOCATION FUND
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998# 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 16.57 $ 14.75 $ 12.60 $ 11.99 $ 11.09
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) 0.21 0.10 0.19 0.12 0.10
Net Realized and
Unrealized Gain 2.07 2.76 2.82 0.67 0.90
------------ ------------ ------------ ------------ ------------
Total From Investment
Operations 2.28 2.86 3.01 0.79 1.00
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income (0.35) (0.55) (0.39) -- (0.03)
In Excess of Net
Investment Income -- -- -- (0.05) --
Net Realized Gain (1.83) (0.49) (0.47) (0.13) (0.07)
------------ ------------ ------------ ------------ ------------
Total Distributions (2.18) (1.04) (0.86) (0.18) (0.10)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 16.67 $ 16.57 $ 14.75 $ 12.60 $ 11.99
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN (1) 16.17% 20.61% 24.62% 6.69% 9.02%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 261,633 $ 72,704 $ 63,706 $ 42,586 $ 33,425
Ratio of Expenses to
Average Net Assets 1.61% 1.70% 1.70% 1.70% 1.70%
Ratio of Net Investment
Income (Loss) to
Average Net Assets 1.30% 0.59% 0.71% 1.01% 0.98%
Portfolio Turnover Rate 108% 45% 44% 39% 30%
- ---------------------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to
Net Investment Income $ 0.02 $ 0.03 $ 0.10 $ 0.04 $ 0.09
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 1.62% 1.90% 2.06% 2.03% 2.58%
Net Investment Income
(Loss) to Average Net
Assets 1.30% 0.40% 0.35% 0.68% 0.10%
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
AUGUST 1,
YEAR ENDED YEAR ENDED 1995+
SELECTED PER SHARE DATA JUNE 30, JUNE 30, TO JUNE 30,
AND RATIOS 1998# 1997 1996
<S> <C> <C> <C>
- -------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 16.15 $ 14.46 $ 13.01
------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) 0.09 (0.05) 0.30
Net Realized and
Unrealized Gain 2.01 2.73 1.98
------------ ------------ ------------
Total From Investment
Operations 2.10 2.68 2.28
------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income (0.28) (0.50) (0.35)
In Excess of Net
Investment Income -- -- --
Net Realized Gain (1.83) (0.49) (0.48)
------------ ------------ ------------
Total Distributions (2.11) (0.99) (0.83)
------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 16.14 $ 16.15 $ 14.46
------------ ------------ ------------
------------ ------------ ------------
TOTAL RETURN (1) 15.33% 19.64% 18.08%
------------ ------------ ------------
------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 225,797 $ 38,962 $ 14,786
Ratio of Expenses to
Average Net Assets 2.35% 2.45% 2.45%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets 0.60% (0.11)% 0.45%**
Portfolio Turnover Rate 108% 45% 44%
- ------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to
Net Investment Income $ 0.02 $ 0.09 $ 0.22
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 2.36% 2.65% 2.81%**
Net Investment Income
(Loss) to Average Net
Assets 0.60% (0.30)% 0.09%**
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.24 $ 14.49 $ 12.43 $ 11.90
----------------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.08 (0.03) 0.12 0.04
Net Realized and Unrealized Gain 2.05 2.73 2.75 0.65
----------------- -------- -------- --------
Total From Investment Operations 2.13 2.70 2.87 0.69
----------------- -------- -------- --------
DISTRIBUTIONS
Net Investment Income (0.24) (0.46) (0.33) --
In Excess of Net Investment Income -- -- -- (0.03)
Net Realized Gain (1.83) (0.49) (0.48) (0.13)
----------------- -------- -------- --------
Total Distributions (2.07) (0.95) (0.81) (0.16)
----------------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 16.30 $ 16.24 $ 14.49 $ 12.43
----------------- -------- -------- --------
----------------- -------- -------- --------
TOTAL RETURN (1) 15.37% 19.69% 23.65% 5.84%
----------------- -------- -------- --------
----------------- -------- -------- --------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 108,650 $ 78,199 $ 63,025 $ 40,460
Ratio of Expenses to Average Net
Assets 2.55% 2.45% 2.45% 2.45%
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.52% (0.16)% (0.04)% 0.25%
Portfolio Turnover Rate 108% 45% 44% 39%
- --------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.02 $ 0.03 $ 1.16 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets 2.56% 2.65% 2.81% 2.78%
Net Investment Income (Loss) to
Average Net Assets 0.52% (0.34)% (0.40)% (0.08)%
<CAPTION>
YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1994
<S> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.05
--------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.06
Net Realized and Unrealized Gain 0.86
--------
Total From Investment Operations 0.92
--------
DISTRIBUTIONS
Net Investment Income --
In Excess of Net Investment Income --
Net Realized Gain (0.07)
--------
Total Distributions (0.07)
--------
NET ASSET VALUE, END OF PERIOD $ 11.90
--------
--------
TOTAL RETURN (1) 8.34%
--------
--------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 29,892
Ratio of Expenses to Average Net
Assets 2.45%
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.23%
Portfolio Turnover Rate 30%
- ----------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.12
Ratios Before Expense Limitation:
Expenses to Average Net Assets 3.34%
Net Investment Income (Loss) to
Average Net Assets (0.66)%
</TABLE>
- --------------------------------------------------------------------------------
** Annualized
+ The Fund began offering Class B shares on August 1, 1995.
(1) Total return is calculated exclusive sale charges or deferred sales
charges. Total return for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
- ------------------
120
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
GLOBAL FIXED INCOME FUND
<TABLE>
<CAPTION>
CLASS B
CLASS A ------------
----------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998# 1997 1996 1995 1994 1998#
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.95 $ 9.94 $ 10.23 $ 9.53 $ 10.55 $ 9.91
------------ ------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.39 0.44 0.53 0.56 0.52 0.32
Net Realized and
Unrealized Gain
(Loss) 0.13 (0.02) (0.01) 0.50 (0.42) 0.13
------------ ------------ ------------ ------------ ------------ ------------
Total From Investment
Operations 0.52 0.42 0.52 1.06 0.10 0.45
------------ ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income (0.39) (0.35) (0.79) (0.36) (0.50) (0.33)
In Excess of Net
Investment Income (0.01) (0.06) (0.02) -- (0.12) (0.01)
Net Realized Gain (0.05) -- -- -- (0.47) (0.05)
In Excess of Net
Realized Gain -- -- -- -- (0.03) --
------------ ------------ ------------ ------------ ------------ ------------
Total Distributions (0.45) (0.41) (0.81) (0.36) (1.12) (0.39)
------------ ------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 10.02 $ 9.95 $ 9.94 $ 10.23 $ 9.53 $ 9.97
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
TOTAL RETURN (1) 5.36% 4.27% 5.20% 11.41% 0.41% 4.65%
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 4,413 $ 6,407 $ 7,432 $ 11,092 $ 10,369 $ 1,425
Ratio of Expenses to
Average Net Assets 1.45% 1.45% 1.45% 1.45% 1.45% 2.20%
Ratio of Net Investment
Income to Average Net
Assets 3.94% 4.40% 5.02% 5.84% 4.70% 3.21%
Portfolio Turnover Rate 78% 170% 223% 169% 168% 78%
- -------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During
the Period
Per Share Benefit to
Net Investment Income $ 0.15 $ 0.12 $ 0.07 $ 0.07 $ 0.11 $ 0.15
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 3.00% 2.57% 2.16% 2.22% 2.48% 3.75%
Net Investment Income
to Average Net Assets 2.42% 3.25% 4.31% 5.07% 3.67% 1.65%
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AUGUST 1,
YEAR ENDED 1995+ TO
SELECTED PER SHARE DATA JUNE 30, JUNE 30,
AND RATIOS 1997 1996
<S> <C> <C>
- -------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.91 $ 10.24
------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.41 0.64
Net Realized and
Unrealized Gain
(Loss) (0.07) (0.26)
------------ ------------
Total From Investment
Operations 0.34 0.38
------------ ------------
DISTRIBUTIONS
Net Investment Income (0.29) (0.69)
In Excess of Net
Investment Income (0.05) (0.02)
Net Realized Gain -- --
In Excess of Net
Realized Gain -- --
------------ ------------
Total Distributions (0.34) (0.71)
------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 9.91 $ 9.91
------------ ------------
------------ ------------
TOTAL RETURN (1) 3.48% 3.76%
------------ ------------
------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 1,716 $ 1,440
Ratio of Expenses to
Average Net Assets 2.20% 2.20%**
Ratio of Net Investment
Income to Average Net
Assets 3.65% 3.38%**
Portfolio Turnover Rate 170% 223%
- --------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During
the Period
Per Share Benefit to
Net Investment Income $ 0.13 $ 0.12
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 3.37% 3.57%**
Net Investment Income
to Average Net Assets 2.45% 2.01%**
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998# 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.90 $ 9.90 $ 10.20 $ 9.54 $ 10.56
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.32 0.39 0.37 0.49 0.43
Net Realized and
Unrealized Gain
(Loss) 0.13 (0.05) 0.08 0.47 (0.40)
------------ ------------ ------------ ------------ ------------
Total From Investment
Operations 0.45 0.34 0.45 0.96 0.03
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income (0.33) (0.29) (0.73) (0.30) (0.44)
In Excess of Net
Investment Income (0.01) (0.05) (0.02) -- (0.11)
Net Realized Gain (0.05) -- -- -- (0.47)
In Excess of Net
Realized Gain -- -- -- -- (0.03)
------------ ------------ ------------ ------------ ------------
Total Distributions (0.39) (0.34) (0.75) (0.30) (1.05)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 9.96 $ 9.90 $ 9.90 $ 10.20 $ 9.54
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN (1) 4.65% 3.48% 4.47% 10.24% (0.25)%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Asets, End of Period
(000's) $ 1,888 $ 2,445 $ 2,844 $ 5,965 $ 5,407
Ratio of Expenses to
Average Net Assets 2.20% 2.20% 2.20% 2.20% 2.20%
Ratio of Net Investment
Income to Average Net
Assets 3.21% 3.65% 4.35% 5.09% 3.95%
Portfolio Turnover Rate 78% 170% 223% 169% 168%
- ---------------------------------------------------------------------------------------------------------
Effect of Voluntary
Expense
Limitation During the
Period
Per Share Benefit to
Net Investment Income $ 0.15 $ 0.12 $ 0.06 $ 0.08 $ 0.12
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 3.75% 3.35% 2.87% 2.97% 3.29%
Net Investment Income
to Average Net Assets 1.67% 2.48% 3.68% 4.32% 2.86%
</TABLE>
- --------------------------------------------------------------------------------
** Annualized
+ The Fund began offering Class B shares on August 1, 1995.
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total returns for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
-----------------------
121
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.0469 0.0443 0.0464 0.0448 0.0243
Net Realized and
Unrealized Gain
(Loss) -- -- (0.0011) -- 0.0011
------------ ------------ ------------ ------------ ------------
Total From Investment
Operations 0.0469 0.0443 0.0453 0.0448 0.0254
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income (0.0469) (0.0443) (0.0464) (0.0448) (0.0243)
Net Realized Gain -- -- (0.0001) -- (0.0011)
------------ ------------ ------------ ------------ ------------
Total Distributions (0.0469) (0.0443) (0.0465) (0.0448) (0.0254)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN 4.79% 4.53% 4.72% 4.58% 2.45%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 56,302 $ 94,768 $ 145,978 $ 67,505 $ 102,551
Ratio of Expenses to
Average Net Assets 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of Net Investment
Income to Average Net
Assets 4.64% 4.43% 4.68% 4.61% 2.40%
- ---------------------------------------------------------------------------------------------------------
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 1.22% 1.27% 1.24% 1.12% 1.22%
Net Investment Income
to Average Net Assets 4.38% 4.10% 4.39% 4.44% 2.13%
</TABLE>
- --------------------------------------------------------------------------------
- ------------------
122
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
HIGH YIELD & TOTAL RETURN FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------ ----------------
YEAR ENDED YEAR ENDED MAY 1, 1996* TO YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1998#
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.86 $ 11.92 $ 12.00 $ 12.86
------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.97 1.07 0.13 0.87
Net Realized and Unrealized Gain
(Loss) 0.35 0.99 (0.09) 0.34
------ ------ ------ -------
Total From Investment Operations 1.32 2.06 0.04 1.21
------ ------ ------ -------
DISTRIBUTION:
Net Investment Income (0.97) (1.07) (0.12) (0.89)
Net Realized Gain (0.55) (0.05) -- (0.55)
------ ------ ------ -------
Total Distributions (1.52) (1.12) (0.12) (1.44)
------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $ 12.66 $ 12.86 $ 11.92 $ 12.63
------ ------ ------ -------
------ ------ ------ -------
TOTAL RETURN (1) 10.81% 18.12% 0.29% 9.86%
------ ------ ------ -------
------ ------ ------ -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 7,813 $ 8,980 $ 3,907 $ 18,420
Ratio of Expenses to Average Net
Assets 1.25% 1.25% 1.25%** 2.00%
Ratio of Net Investment Income to
Average Net Assets 7.42% 8.83% 6.85%** 6.70%
Portfolio Turnover Rate 81% 104% 10% 81%
- ---------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation
During the Period Per Share Benefit
to Net Investment Income $ 0.08 $ 0.10 $ 0.04 $ 0.08
Ratios Before Expense Limitation:
Expenses to Average Net Assets 1.89% 2.04% 3.51%** 2.64%
Net Investment Income to Average
Net Assets 6.78% 8.04% 4.59%** 6.04%
<CAPTION>
YEAR ENDED MAY 1, 1996* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1997 JUNE 30, 1996
<S> <C> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.93 $ 12.00
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.98 0.12
Net Realized and Unrealized Gain
(Loss) 0.99 (0.09)
------ ------
Total From Investment Operations 1.97 0.03
------ ------
DISTRIBUTION:
Net Investment Income (0.99) (0.10 )
Net Realized Gain (0.05) --
------ ------
Total Distributions (1.04) (0.10 )
------ ------
NET ASSET VALUE, END OF PERIOD $ 12.86 $ 11.93
------ ------
------ ------
TOTAL RETURN (1) 17.22% 0.21%
------ ------
------ ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 8,617 $ 3,421
Ratio of Expenses to Average Net
Assets 2.00% 2.00%**
Ratio of Net Investment Income to
Average Net Assets 7.99% 6.08%**
Portfolio Turnover Rate 104% 10%
- ---------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation
During the Period Per Share Benefit
to Net Investment Income $ 0.10 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets 2.82% 4.25%**
Net Investment Income to Average
Net Assets 7.17% 3.83%**
<CAPTION>
CLASS C
------------------------------------------------------------
YEAR ENDED YEAR ENDED MAY 1, 1996* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.86 $ 11.93 $ 12.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.86 0.99 0.12
Net Realized and Unrealized Gain
(Loss) 0.35 0.98 (0.09)
------ ------ ------
Total From Investment Operations 1.21 1.97 0.03
------ ------ ------
DISTRIBUTION:
Net Investment Income (0.89) (0.99) (0.10)
Net Realized Gain (0.55) (0.05) --
------ ------ ------
Total Distributions (1.44) (1.04) (0.10)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 12.63 $ 12.86 $ 11.93
------ ------ ------
------ ------ ------
TOTAL RETURN (1) 9.86% 17.21% 0.21%
------ ------ ------
------ ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 8,145 $ 4,970 $ 3,316
Ratio of Expenses to Average Net
Assets 2.00% 2.00% 2.00%**
Ratio of Net Investment Income to
Average Net Assets 6.63% 8.03% 6.07%**
Portfolio Turnover Rate 81% 104% 10%
- ---------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation
During the Period Per Share Benefit
to Net Investment Income $ 0.08 $ 0.11 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets 2.64% 2.88% 4.25%**
Net Investment Income to Average
Net Assets 6.01% 7.15% 3.82%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total returns for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
-----------------------
123
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
INTERNATIONAL MAGNUM FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------------- ---------------------------- ----------------------------
JULY 1, JULY 1, JULY 1,
YEAR ENDED 1996* TO YEAR ENDED 1996* TO YEAR ENDED 1996* TO
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998# 1997 1998# 1997 1998# 1997
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 13.91 $ 12.00 $ 13.84 $ 12.00 $ 13.83 $ 12.00
------------ ------------ ------------ ------------ ------------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.17 0.17 0.05 0.10 0.05 0.06
Net Realized and
Unrealized Gain 0.96 1.88 0.97 1.85 0.99 1.88
------------ ------------ ------------ ------------ ------------ ------
Total From Investment
Operations 1.13 2.05 1.02 1.95 1.04 1.94
------------ ------------ ------------ ------------ ------------ ------
DISTRIBUTIONS
Net Investment Income (0.18) (0.13) (0.13) (0.10) (0.08) (0.10)
Net Realized Gain (0.01) (0.01) (0.01) (0.01) (0.01) (0.01)
------------ ------------ ------------ ------------ ------------ ------
Total Distributions (0.19) (0.14) (0.14) (0.11) (0.09) (0.11)
------------ ------------ ------------ ------------ ------------ ------
NET ASSET VALUE, END OF
PERIOD $ 14.85 $ 13.91 $ 14.72 $ 13.84 $ 14.78 $ 13.83
------------ ------------ ------------ ------------ ------------ ------
------------ ------------ ------------ ------------ ------------ ------
TOTAL RETURN (1) 8.32% 17.30% 7.55% 16.40% 7.55% 16.27%
------------ ------------ ------------ ------------ ------------ ------
------------ ------------ ------------ ------------ ------------ ------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 66,817 $ 21,961 $ 51,541 $ 18,215 $ 15,520 $ 9,156
Ratio of Expenses to
Average Net Assets 1.65% 1.65%** 2.40% 2.40%** 2.40% 2.40%**
Ratio of Net Investment
Income to Average Net
Assets 1.19% 1.39%** 0.40% 0.54%** 0.36% 0.29%**
Portfolio Turnover Rate 35% 22% 35% 22% 35% 22%
- -------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to
Net Investment Income $ 0.02 $ 0.11 $ 0.02 $ 0.17 $ 0.02 $ 0.21
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 1.82% 2.50%** 2.57% 3.34%** 2.56% 3.45%**
Net Investment Income
(Loss) to Average Net
Assets 1.02% 0.52%** 0.23% (0.42)%** 0.20%** (0.77)%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total returns for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
- ------------------
124
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
LATIN AMERICAN FUND
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
JULY 6,
YEAR ENDED YEAR ENDED YEAR ENDED 1994*
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998# 1997 1996 1995
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 17.39 $ 12.63 $ 9.08 $ 12.00
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) (0.01) 0.02 0.10 (0.02)
Net Realized and
Unrealized Gain
(Loss) (2.73) 6.46 3.47 (2.70)
------------ ------------ ------------ ------------
Total From Investment
Operations (2.74) 6.48 3.57 (2.72)
------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income -- -- (0.02) --
In Excess of Net
Investment Income -- (0.09) -- --
Net Realized Gain (1.92) (1.63) -- --
In Excess of Net
Realized Gain (1.31) -- -- --
Return of Capital -- -- -- (0.20)
------------ ------------ ------------ ------------
Total Distributions (3.23) (1.72) (0.02) (0.20)
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD $ 11.42 $ 17.39 $ 12.63 $ 9.08
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
TOTAL RETURN (1) (17.37)% 57.32% 39.35% (23.07)%
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 44,439 $ 84,401 $ 18,701 $ 7,658
Ratio of Expenses to
Average Net Assets 2.25% 2.24% 2.11% 2.46%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.09)% (0.08)% 1.18% (0.44)%**
Portfolio Turnover Rate 249% 241% 131% 107%
- ---------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to
Net Investment Income $ 0.02 $ 0.10 $ 0.09 $ 0.13
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 2.41% 2.77% 3.28% 4.30%**
Net Investment Income
(Loss) to Average Net
Assets (0.24)% (0.61)% 0.01% (2.26)%**
Ratio of Expenses to
Average Net Assets
excluding country tax
expense 2.10% 2.10% 2.10% 2.10%**
- ---------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
----------------------------------------------
AUGUST 1,
YEAR ENDED YEAR ENDED 1995+ TO
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998# 1997 1996
<S> <C> <C> <C>
- -------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 16.99 $ 12.45 $ 9.58
------------ ------------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) (0.08) (0.03) 0.03
Net Realized and
Unrealized Gain
(Loss) (2.65) 6.28 2.84
------------ ------------ ------
Total From Investment
Operations (2.73) 6.25 2.87
------------ ------------ ------
DISTRIBUTIONS
Net Investment Income -- -- --
In Excess of Net
Investment Income -- (0.08) --
Net Realized Gain (1.92) (1.63) --
In Excess of Net
Realized Gain (1.31) -- --
Return of Capital -- -- --
------------ ------------ ------
Total Distributions (3.23) (1.71) --
------------ ------------ ------
NET ASSET VALUE, END OF
PERIOD $ 11.03 $ 16.99 $ 12.45
------------ ------------ ------
------------ ------------ ------
TOTAL RETURN (1) (17.82)% 56.17% 29.26%
------------ ------------ ------
------------ ------------ ------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 24,206 $ 14,314 $ 2,041
Ratio of Expenses to
Average Net Assets 2.99% 2.99% 2.87%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.58)% (0.78)% 0.88%**
Portfolio Turnover Rate 249% 241% 131%
- ---------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to
Net Investment Income $ 0.02 $ 0.02 $ 0.04
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 3.16% 3.55% 3.89%**
Net Investment Income
(Loss) to Average Net
Assets (0.73)% (1.34)% (0.14)%**
Ratio of Expenses to
Average Net Assets
excluding country tax
expense 2.85% 2.85% 2.85%**
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------
JULY 6,
YEAR ENDED YEAR ENDED YEAR ENDED 1994*
SELECTED PER SHARE DATA JUNE 30, JUNE 30, JUNE 30, JUNE 30,
AND RATIOS 1998# 1997 1996 1995
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 17.01 $ 12.43 $ 8.99 $ 12.00
------------ ------------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss) (0.11) (0.07) 0.04 (0.08)
Net Realized and
Unrealized Gain
(Loss) (2.63) 6.31 3.40 (2.73)
------------ ------------ ------ ------
Total From Investment
Operations (2.74) 6.24 3.44 (2.81)
------------ ------------ ------ ------
DISTRIBUTIONS
In Excess of Net
Investment Income -- (0.03) -- --
Net Realized Gain (1.92) (1.63) -- --
In Excess of Net
Realized Gain (1.31) -- -- --
Return of Capital -- -- -- (0.20)
------------ ------------ ------ ------
Total Distributions (3.23) (1.66) -- (0.20)
------------ ------------ ------ ------
NET ASSET VALUE, END OF
PERIOD $ 11.04 $ 17.01 $ 12.43 $ 8.99
------------ ------------ ------ ------
------------ ------------ ------ ------
TOTAL RETURN (1) (17.86)% 56.04% 38.26% (23.83)%
------------ ------------ ------ ------
------------ ------------ ------ ------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's) $ 14,577 $ 20,345 $ 6,780 $ 4,085
Ratio of Expenses to
Average Net Assets 3.00% 2.99% 2.86% 3.20%**
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.77)% (0.79)% 0.42% (1.16)%**
Portfolio Turnover Rate 249% 241% 131% 107%
- -----------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to
Net Investment Income $ 0.02 $ 0.05 $ 0.12 $ 0.12
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 3.16% 3.56% 4.06% 5.20%**
Net Investment Income
(Loss) to Average Net
Assets (0.93)% (1.36)% (0.78)% (3.16)%**
Ratio of Expenses to
Average Net Assets
excluding country tax
expense 2.85% 2.85% 2.85% 2.85%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations.
** Annualized
+ The Fund began offering Class B shares on August 1, 1995
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total return for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
-----------------------
125
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
MONEY MARKET FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0472 0.0450 0.0463 0.0446
Net Realized and Unrealized Gain (Loss) -- -- (0.0006) 0.0001
-------- -------- -------- --------
Total From Investment Operations 0.0472 0.0450 0.0457 0.0447
-------- -------- -------- --------
DISTRIBUTIONS:
Net Investment Income (0.0472) (0.0450) (0.0463) (0.0446)
Net Realized Gain -- -- -- (0.0001)
-------- -------- -------- --------
Total Distributions (0.0472) (0.0450) (0.0463) (0.0447)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
-------- -------- -------- --------
TOTAL RETURN (1) 4.83% 4.60% 4.72% 4.55%
-------- -------- -------- --------
-------- -------- -------- --------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 119,376 $ 138,422 $ 170,973 $ 171,515
Ratio of Expenses to Average Net Assets 0.98% 0.98% 0.98% 0.98%
Ratio of Net Investment Income to Average Net
Assets 4.72% 4.50% 4.65% 4.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios Before Expense Limitation:
Expenses to Average Net Assets 1.10% 1.27% 1.22% 1.18%
Net Investment Income to Average Net Assets 4.61% 4.20% 4.41% 4.25%
<CAPTION>
YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1994
<S> <C>
- -----------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
--------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.0246
Net Realized and Unrealized Gain (Loss) --
--------
Total From Investment Operations 0.0246
--------
DISTRIBUTIONS:
Net Investment Income (0.0246)
Net Realized Gain --
--------
Total Distributions (0.0246)
--------
NET ASSET VALUE, END OF PERIOD $ 1.00
--------
--------
TOTAL RETURN (1) 2.49%
--------
--------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 176,599
Ratio of Expenses to Average Net Assets 0.98%
Ratio of Net Investment Income to Average Net
Assets 2.45%
- ------------------------------------------------------------------------------------
Ratios Before Expense Limitation:
Expenses to Average Net Assets 1.19%
Net Investment Income to Average Net Assets 2.24%
</TABLE>
- --------------------------------------------------------------------------------
(1) Total returns for periods of less than one year are not annualized.
- ------------------
126
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
U.S. REAL ESTATE FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
---------------------------------------------------- --------------------------------
YEAR ENDED YEAR ENDED MAY 1, 1996* TO YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1998# JUNE 30, 1997
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.39 $ 12.52 $ 12.00 $ 16.36 $ 12.52
------- ------------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.50 0.37 0.08 0.39 0.15
Net Realized and Unrealized Gain 0.88 4.03 0.48 0.82 4.12
------- ------------- ------ ------- ------
Total From Investment Operations 1.38 4.40 0.56 1.21 4.27
------- ------------- ------ ------- ------
DISTRIBUTIONS:
Net Investment Income (0.51) (0.29) (0.04) (0.39) (0.19)
In Excess of Net Investment Income (0.05) -- -- (0.04) --
Net Realized Gain (1.60) (0.24) -- (1.60) (0.24)
------- ------------- ------ ------- ------
Total Distributions (2.16) (0.53) (0.04) (2.03) (0.43)
------- ------------- ------ ------- ------
NET ASSET VALUE, END OF PERIOD $ 15.61 $ 16.39 $ 12.52 $ 15.54 $ 16.36
------- ------------- ------ ------- ------
------- ------------- ------ ------- ------
TOTAL RETURN (1) 8.27% 35.75% 4.63% 7.23% 34.58%
------- ------------- ------ ------- ------
------- ------------- ------ ------- ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 16,873 $ 14,827 $ 1,829 $ 15,197 $ 7,120
Ratio of Expenses to Average Net
Assets 1.55% 1.55% 1.55%** 2.30% 2.30%
Ratio of Net Investment Income to
Average Net Assets 2.99% 2.33% 4.11%** 2.36% 1.49%
Portfolio Turnover Rate 130% 143% 0% 130% 143%
- -----------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.09 $ 0.16 $ 0.08 $ 0.09 $ 0.11
Ratios Before Expense Limitation:
Expenses to Average Net Assets 2.09% 2.51% 5.58%** 2.84% 3.39%
Net Investment Income (Loss) to
Average Net Assets 2.45% 1.36% 0.08%** 1.82% 0.39%
<CAPTION>
CLASS C
----------------------------------------------------
MAY 1, 1996* TO YEAR ENDED YEAR ENDED MAY 1, 1996* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1996 JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996
<S> <C> <C> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.00 $ 16.36 $ 12.52 $ 12.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.07 0.39 0.20 0.07
Net Realized and Unrealized Gain 0.48 0.83 4.07 0.48
------ ------ ------ ------
Total From Investment Operations 0.55 1.22 4.27 0.55
------ ------ ------ ------
DISTRIBUTIONS:
Net Investment Income (0.03) (0.39) (0.19) (0.03)
In Excess of Net Investment Income -- (0.04) -- --
Net Realized Gain -- (1.60) (0.24) --
------ ------ ------ ------
Total Distributions (0.03) (2.03) (0.43) (0.03)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 12.52 $ 15.55 $ 16.36 $ 12.52
------ ------ ------ ------
------ ------ ------ ------
TOTAL RETURN (1) 4.54% 7.20% 34.56% 4.54%
------ ------ ------ ------
------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 2,197 $ 4,187 $ 2,369 $ 1,782
Ratio of Expenses to Average Net
Assets 2.30%** 2.30% 2.30% 2.30%**
Ratio of Net Investment Income to
Average Net Assets 3.35%** 2.31% 1.46% 3.39%**
Portfolio Turnover Rate 0% 130% 143% 0%
- -----------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.07 $ 0.09 $ 0.17 $ 0.08
Ratios Before Expense Limitation:
Expenses to Average Net Assets 6.34%** 2.83% 3.58% 6.32%**
Net Investment Income (Loss) to
Average Net Assets (0.69)%** 1.78% 0.16% (0.63)%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total returns for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
-----------------------
127
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
VALUE FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------ ------------ ------------
JULY 7, JULY 7, JULY 7,
1997* 1997* 1997*
JUNE 30, JUNE 30, JUNE 30,
SELECTED PER SHARE DATA AND RATIOS 1998# 1998# 1998#
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00 $ 10.00
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.11 0.03 0.03
Net Realized and Unrealized Gain 0.56 0.56 0.55
------------ ------------ ------------
Total From Investment Operations 0.67 0.59 0.58
------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income (0.08) (0.03) (0.03)
In Excess of Net Investment Income (0.01) (0.00)++ (0.00)++
Net Realized Gain (0.05) (0.05) (0.05)
------------ ------------ ------------
Total Distributions (0.14) (0.08) (0.08)
------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 10.53 $ 10.51 $ 10.50
------------ ------------ ------------
------------ ------------ ------------
TOTAL RETURN (1) 6.74% 6.01% 5.83%
------------ ------------ ------------
------------ ------------ ------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 137,447 $ 142,741 $ 35,564
Ratio of Expenses to Average Net Assets 1.45%** 2.20%** 2.20%**
Ratio of Net Investment Income to
Average Net Assets 1.02%** 0.28%** 0.29%**
Portfolio Turnover Rate 38% 38% 38%
- ----------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income $ 0.01 $ 0.01 $ 0.01
Ratios Before Expense Limitation:
Expenses to Average Net Assets 1.60%** 2.35%** 2.35%**
Net Investment Income to Average Net
Assets 0.88%** 0.14%** 0.15%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Annualized
++ Amount is less than $0.01 per share
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total returns for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
- ------------------
128
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
WORLDWIDE HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.26 $ 12.47 $ 11.57 $ 12.17
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 1.15 1.25 1.36 1.26
Net Realized and Unrealized Gain
(Loss) (0.67) 2.30 0.80 (0.52)
------- ------- ------- -------
Total From Investment Operations 0.48 3.55 2.16 0.74
------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income (1.09) (1.25) (1.26) (1.22)
Net Realized Gain (1.19) (0.51) -- (0.12)
------- ------- ------- -------
Total Distributions (2.28) (1.76) (1.26) (1.34)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.46 $ 14.26 $ 12.47 $ 11.57
------- ------- ------- -------
------- ------- ------- -------
TOTAL RETURN (1) 3.40% 30.29% 19.61% 6.87%
------- ------- ------- -------
------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 91,579 $ 76,439 $ 41,493 $ 14,819
Ratio of Expenses to Average Net
Assets 1.45% 1.52% 1.55% 1.55%
Ratio of Net Investment Income to
Average Net Assets 8.36% 9.73% 11.95% 11.53%
Portfolio Turnover Rate 156% 157% 220% 178%
- --------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ -- $ -- $ 0.02 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets -- -- 1.69% 1.97%
Net Investment Income to Average
Net Assets -- -- 11.81% 11.11%
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
--------------------------------------------------------------
APRIL 21, 1994* YEAR ENDED YEAR ENDED AUGUST 1, 1995+
SELECTED PER SHARE DATA AND RATIOS TO JUNE 30, 1994 JUNE 30, 1998# JUNE 30, 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.00 $ 14.20 $ 12.44 $ 11.63
------ ----------------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.18 1.04 1.07 1.18
Net Realized and Unrealized Gain
(Loss) 0.16 (0.65) 2.35 0.72
------ ----------------- ------- -------
Total From Investment Operations 0.34 0.39 3.42 1.90
------ ----------------- ------- -------
DISTRIBUTIONS
Net Investment Income (0.17) (1.00) (1.15) (1.09)
Net Realized Gain -- (1.19) (0.51) --
------ ----------------- ------- -------
Total Distributions (0.17) (2.19) (1.66) (1.09)
------ ----------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.17 $ 12.40 $ 14.20 $ 12.44
------ ----------------- ------- -------
------ ----------------- ------- -------
TOTAL RETURN (1) 2.86% 2.63% 29.14% 17.07%
------ ----------------- ------- -------
------ ----------------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 6,857 $ 146,401 $ 78,340 $ 26,174
Ratio of Expenses to Average Net
Assets 1.55%** 2.20% 2.27% 2.30%**
Ratio of Net Investment Income to
Average Net Assets 8.29%** 7.64% 8.86% 12.06%**
Portfolio Turnover Rate 19% 156% 157% 220%
- --------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.02 $ -- $ -- $ 0.02
Ratios Before Expense Limitation:
Expenses to Average Net Assets 3.23%** -- -- 2.47%**
Net Investment Income to Average
Net Assets 6.61%** -- -- 11.89%**
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1998# JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1995
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.21 $ 12.45 $ 11.58 $ 12.16
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 1.04 1.16 1.30 1.17
Net Realized and Unrealized Gain
(Loss) (0.66) 2.26 0.77 (0.50)
------- ------- ------- -------
Total From Investment Operations 0.38 3.42 2.07 0.67
------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income (1.00) (1.15) (1.20) (1.13)
Net Realized Gain (1.19) (0.51) -- (0.12)
------- ------- ------- -------
Total Distributions (2.19) (1.66) (1.20) (1.25)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.40 $ 14.21 $ 12.45 $ 11.58
------- ------- ------- -------
------- ------- ------- -------
TOTAL RETURN (1) 2.55% 29.12% 18.71% 6.20%
------- ------- ------- -------
------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 60,197 $ 41,709 $ 28,094 $ 11,880
Ratio of Expenses to Average Net
Assets 2.20% 2.27% 2.30% 2.30%
Ratio of Net Investment Income to
Average Net Assets 7.62% 9.04% 11.40% 10.72%
Portfolio Turnover Rate 156% 157% 220% 178%
- --------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ -- $ -- $ 0.04 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets -- -- 2.44% 2.74%
Net Investment Income to Average
Net Assets -- -- 11.26% 10.28%
<CAPTION>
APRIL 21, 1994*
SELECTED PER SHARE DATA AND RATIOS TO JUNE 30, 1994
<S> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.00
------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.17
Net Realized and Unrealized Gain
(Loss) 0.15
------
Total From Investment Operations 0.32
------
DISTRIBUTIONS
Net Investment Income (0.16)
Net Realized Gain --
------
Total Distributions (0.16)
------
NET ASSET VALUE, END OF PERIOD $ 12.16
------
------
TOTAL RETURN (1) 2.62%
------
------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's) $ 6,081
Ratio of Expenses to Average Net
Assets 2.30%**
Ratio of Net Investment Income to
Average Net Assets 7.54%**
Portfolio Turnover Rate 19%
- --------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income $ 0.06
Ratios Before Expense Limitation:
Expenses to Average Net Assets 4.00%**
Net Investment Income to Average
Net Assets 5.84%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Annualized
+ The Fund began offering Class B shares on August 1, 1995.
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total return for periods of less than one year are not
annualized.
# Net investment income and capital charges per share are based upon
monthly average shares outstanding.
-----------------------
129
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
- --------------------------------------------------------------------------------
Van Kampen Series Fund, Inc. (formerly Morgan Stanley Fund, Inc.) (the "Fund")
was incorporated under the laws of Maryland on August 14, 1992 and commenced
operations on January 4, 1993. The Fund is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company
which offers redeemable shares of diversified and non-diversified investment
portfolios.
As of June 30, 1998, the Fund had sixteen separate active investment portfolios:
Van Kampen Aggressive Equity Fund (formerly Morgan Stanley Aggressive Equity
Fund), Van Kampen American Value Fund (formerly Morgan Stanley American Value
Fund), Van Kampen Asian Growth Fund (formerly Morgan Stanley Asian Growth Fund),
Van Kampen Emerging Markets Fund (formerly Morgan Stanley Emerging Markets
Fund), Van Kampen Equity Growth Fund, Van Kampen Global Equity Fund (formerly
Morgan Stanley Global Equity Fund), Van Kampen Global Equity Allocation Fund
(formerly Morgan Stanley Global Equity Allocation Fund), Van Kampen Global Fixed
Income Fund (formerly Morgan Stanley Global Fixed Income Fund), Morgan Stanley
Government Obligations Money Market Fund, Van Kampen High Yield & Total Return
Fund (formerly Morgan Stanley High Yield Fund), Van Kampen International Magnum
Fund (formerly Morgan Stanley International Magnum Fund), Van Kampen Latin
American Fund (formerly Morgan Stanley Latin American Fund), Morgan Stanley
Money Market Fund, Van Kampen U.S. Real Estate Fund (formerly Morgan Stanley
U.S. Real Estate Fund), Van Kampen Value Fund (formerly Morgan Stanley Value
Fund), and Van Kampen Worldwide High Income Fund (formerly Morgan Stanley
Worldwide High Income Fund) (referred to herein respectively as "Aggressive
Equity Fund," "American Value Fund," "Asian Growth Fund," "Emerging Markets
Fund," "Equity Growth Fund," "Global Equity Fund", "Global Equity Allocation
Fund," "Global Fixed Income Fund," "Government Obligations Money Market Fund"
"High Yield & Total Return Fund," "International Magnum Fund," "Latin American
Fund," "Money Market Fund," "U.S. Real Estate Fund," "Value Fund," "Worldwide
High Income Fund," and individually a "Portfolio" and collectively as the
"Portfolios"). The financial statements of the Equity Growth Fund are presented
separately.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
Shares (with the exception of the Government Obligations Money Market and Money
Market Funds). Class A shares are sold with a front-end sales charge of up to
5.75% (4.75% for shares sold in the Global Fixed Income Fund, High Yield & Total
Return Fund and the Worldwide High Income Fund). For certain purchases of Class
A shares, the front-end sales charge may be waived and a contingent deferred
sales charge of 1.00% imposed in the event of certain redemptions within one
year of the purchase. Class B shares are sold with a contingent deferred sales
charge on redemptions made within 5 years of purchase which declines annually
from 5% for redemptions made in year one, down to 1.50% in year five. The
contingent deferred sales charge is based on the lesser of the current market
value of the shares redeemed or the total cost of such shares. Class B shares
will automatically convert to Class A shares after the eighth year following
purchase. Class C shares are sold with a contingent deferred sales charge of 1%
for shares that are redeemed within one year of purchase, based on the lesser of
the current market value of the shares redeemed or the total cost of such
shares. All three classes of shares have identical voting, dividend, liquidation
and other rights. The Fund began offering the current Class B shares on August
1, 1995. Class B shares held prior to May 1, 1995 were renamed Class C shares.
The Global Equity Fund, and Value Fund commenced operations on October 29, 1997
and July 7, 1997 respectively.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Securities listed on a foreign exchange are valued at their
closing price. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average of the current bid and asked prices obtained from reputable brokers.
Bonds and other fixed income securities may be valued according to the broadest
and most representative market. In addition, bonds and other fixed income
securities may be valued on the basis of prices provided by a pricing service
which take into account institutional size trading in similar groups of
securities. Debt securities purchased with remaining maturities of 60 days or
less are valued at amortized cost, if it approximates market value. Securities
owned by the Government Obligations Money Market and Money Market Funds are
stated at amortized cost, which approximates market value. All other securities
and assets for which market values are not readily available are valued at fair
value as determined in good faith by the Board of Directors, although the actual
calculations may be done by others.
At June 30, 1998, approximately 93% and 91% of the net assets of the High Yield
& Total Return Fund and the Worldwide High Income Fund, respectively, consisted
of high yield securities rated below investment grade. Investments in high yield
securities are accompanied by a greater degree of credit risk and the risk tends
to be more
- -----------------------
130
<PAGE>
VAN KAMPEN SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
sensitive to economic conditions than higher rated securities. Certain
securities may be valued on the basis of bid prices provided by one principal
market maker.
2. TAXES: It is each portfolio's intention to qualify as a regulated investment
company and distribute all of its taxable income. Accordingly, no provision for
Federal income taxes is required in the financial statements. A portfolio may be
subject to taxes imposed by countries in which it invests. Such taxes are
generally based on income earned or gains realized or repatriated. Taxes are
accrued and applied to net investment income, net realized capital gains and net
unrealized appreciation, as applicable, as the income is earned or capital gains
are recorded.
At June 30, 1998, the following Portfolios had available capital loss
carryforwards to offset future net capital gains, to the extent provided by U.S.
Federal income tax regulations, through the indicated expiration dates:
<TABLE>
<CAPTION>
EXPIRATION DATE EXPIRATION DATE
JUNE 30, 2004 JUNE 30, 2006
PORTFOLIOS (000) (000)
- ------------------------------------- ----------------------- -----------------------
<S> <C> <C>
Asian Growth......................... -- $ 53,293
Government Obligations Money
Market............................. $ 88 --
Money Market......................... $ 70 --
</TABLE>
To the extent that capital loss carryforwards are used to offset any future net
capital gains realized during the carryforward period as provided by U.S.
Federal income tax regulations, no capital gains tax liability will be incurred
by a Portfolio for gains realized and not distributed. To the extent that
capital gains are so offset, such gains will not be distributed to shareholders.
Net capital and net currency losses incurred after October 31 and within the
taxable year are deemed to arise on the first business day of the Portfolio's
next taxable year. For the period from November 1, 1997 to June 30, 1998 certain
Portfolios incurred and elected to defer until July 1, 1998, for U.S. Federal
income tax purposes, net currency and capital losses of approximately:
<TABLE>
<CAPTION>
CURRENCY
AND CAPITAL
LOSSES
PORTFOLIOS (000)
- ------------------------------------- -------------------
<S> <C>
Asian Growth......................... $ 71,758
Global Fixed Income.................. 89
Emerging Markets..................... 26,330
Latin American....................... 6,468
</TABLE>
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the underlying
securities, with a market value at least equal to the amount of the repurchase
transaction, including principal and accrued interest. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: The books and records
of the Fund are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the mean of the bid and asked prices of such
currencies against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rates of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the period, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of the securities held at period end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of securities sold during the period.
Accordingly, realized and unrealized foreign currency gains (losses) on
investments are included in the reported net realized and unrealized gains
(losses) on investments. However, pursuant to U.S. Federal income tax
regulations, the foreign currency portion of gains and losses realized on sales
and maturities of foreign denominated debt securities is treated as ordinary
income for U.S. Federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from forward foreign currency exchange
contracts, disposition of foreign currencies, currency gains or losses realized
between the trade and settlement dates on securities transactions, and the
difference between the amount of investment income and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent amounts actually
received or paid. Net unrealized currency gains (losses) from valuing foreign
currency denominated assets and liabilities at period end exchange rates are
reflected as a component of unrealized appreciation (depreciation) on
investments and foreign currency translations in the Statement of Assets and
Liabilities. The change in net unrealized currency gains (losses) for the period
is reflected on the Statement of Operations.
The net assets of certain Portfolios include issuers located in emerging
markets. There will be certain considerations and risks of these investments not
typically associated with investments in the United States. Changes in currency
------------------
131
<PAGE>
VAN KAMPEN SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
exchange rates will affect the value of and investment income from such
securities. The smaller size of the markets themselves, lesser liquidity and
greater volatility contribute to risks in valuation as compared with the U.S.
securities markets. Also there is often substantially less publicly available
information about these issuers. Emerging markets may be subject to a greater
degree of governmental involvement in the economy and greater economic and
political uncertainty. Accordingly the price which the Fund realizes upon the
sale of securities in such markets may not be equal to its value as presented in
the financial statements.
Prior governmental approval for foreign investments may be required under
certain circumstances in some countries, and the extent of foreign investment in
domestic companies may be subject to limitations in other countries. Foreign
ownership limitations also may be imposed by the charters of individual
companies to prevent, among other concerns, violation of foreign investment
limitations. As a result, an additional class of shares (identified as "Foreign"
in the Portfolio of Investments) may be created and offered for investment. The
"local" and "foreign" shares' market values may vary.
5. FOREIGN CURRENCY EXCHANGE CONTRACTS: Certain Portfolios may enter into
foreign currency exchange contracts to attempt to protect securities and related
receivables and payables against changes in future foreign currency exchange
rates. A currency exchange contract is an agreement between two parties to buy
or sell currency at a set price on a future date. The market value of the
contract will fluctuate with changes in currency exchange rates. The contract is
marked-to-market daily and the change in market value is recorded by the
Portfolio as unrealized gain or loss on foreign currency translation. The
Portfolio records realized gains or losses on foreign translation when the
contract is closed, equal to the difference between the value of the contract at
the time it was opened and the value of the contract at the time it was closed.
Risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts but is generally limited
to the amount of unrealized gain on the contracts, if any, at the date of
default. Risks may also arise from the unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
6. SHORT SALES: Certain Portfolios may sell securities short. A short sale is a
transaction in which the Portfolios sell securities it may or may not own, but
has borrowed, in anticipation of a decline in the market price of the
securities. The Portfolios are obligated to purchase securities at the market
price to replace the borrowed securities at the time of replacement. The
Portfolios may have to pay a premium to borrow the securities as well as pay
dividends or interests payable on the securities until they are replaced. The
Portfolios' obligation to replace the securities borrowed in connection with a
short sale will generally be secured by collateral deposited with the broker
that consists of cash, U.S. government securities or other liquid, high grade
debt obligations. In addition, the Portfolios will place in a segregated account
with its Custodian an amount of cash, U.S. government securities or other liquid
high grade debt obligations equal to the difference, if any, between (1) the
market value of the securities sold at the time they were sold short, and (2)
any cash, U.S. government securities, or other liquid high grade debt
obligations deposited as collateral with the broker in connection with the short
sale (not including the proceeds of the short sale). Short sales by the
Portfolios involve certain risks and special considerations. Possible losses
from short sales differ from losses that could be incurred from the purchase of
a security, because losses from short sales may be unlimited, whereas losses
from purchases cannot exceed the total amount invested.
7. PURCHASED OPTIONS: Certain Portfolios may purchase call or put options on
their portfolio securities. A Portfolio may purchase call options to protect
against an increase in the price of a security it anticipates purchasing. A
Portfolio may purchase put options on securities which it holds to protect
against a decline in the value of the security. Risks may arise from an
imperfect correlation between the change in market value of the securities held
by the Portfolio and the prices of options relating to the securities purchased
or sold by the Portfolio and from the possible lack of a liquid secondary market
for an option. The maximum exposure to loss for any purchased option is limited
to the premium initially paid for the option.
8. SECURITY LENDING: Certain Portfolios may lend investment securities to
qualified institutional investors who borrow securities in order to complete
certain transactions. By lending its investment securities, a Portfolio attempts
to increase its net investment income through the receipt of interest on the
loan. Any gain or loss in the market price of the securities loaned that might
occur and any interest earned or dividends declared during the term of the loan
would accrue to the account of the Portfolio. Risks of delay in recovery of the
securities or even loss of rights in the collateral may occur should the
borrower of the securities fail financially. Risks may also arise to the extent
that the value of the collateral decreases below the value of the securities
loaned.
Portfolios that lend securities receive cash, securities issued or guaranteed by
the U.S. Government or letters of credit as collateral in an amount equal to or
exceeding 100% of the current market value of the loaned securities. Any cash
received as collateral is invested in interest bearing repurchase agreements
with approved counterparties. A portion of the interest received on the
repurchase agreements is retained by the Fund and the remainder is rebated to
the borrower of the securities. The net amount of interest earned and interest
rebated is included in the
- -----------------------
132
<PAGE>
VAN KAMPEN SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
Statement of Operations as interest income. The value of loaned securities and
related collateral outstanding at June 30, 1998 is as follows:
<TABLE>
<CAPTION>
VALUE OF LOANED VALUE OF
SECURITIES COLLATERAL
PORTFOLIO (000) (000)
- ------------------------------------- ----------------------- -----------
<S> <C> <C>
Global Equity Allocation............. $ 19,776 $ 21,788
</TABLE>
At June 30, 1998, the Fund had invested the cash collateral in a repurchase
agreement with Goldman Sachs. Such repurchase agreement was collateralized by
U.S. Treasury obligations.
Morgan Stanley Trust Company, an affiliate of the Investment Sub-Adviser,
administers the security lending program and for its services the Fund incurred
fees in the amount of $29,000 for the year ended June 30, 1998.
9. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: Each
Portfolio may make forward commitments to purchase or sell securities. Payment
and delivery for securities which have been purchased or sold on a forward
commitment basis can take place a month or more (not exceeding 120 days) after
the date of the transaction. Additionally each Portfolio may purchase securities
on a when-issued or delayed delivery basis. Securities purchased on a
when-issued or delayed delivery basis are purchased for delivery beyond the
normal settlement date at a stated price and no income accrues to the Portfolio
on such securities prior to delivery. When the Portfolio enters into a purchase
transaction on a when-issued or delayed basis, it establishes a segregated
account in which it maintains liquid assets in an amount at least equal in value
to the Portfolio's commitments to purchase such securities. Purchasing
securities on a forward commitment or when-issued or delayed delivery basis may
involve a risk that the market price at the time of delivery may be lower than
the agreed upon purchase price, in which case there could be an unrealized loss
at the time of delivery.
10. STRUCTURED SECURITIES: The Worldwide High Income Fund may invest in
interests in entities organized and operated solely for the purpose of
restructuring the investment characteristics of sovereign debt obligations. This
type of restructuring involves the deposit with or purchase by an entity of
specified instruments and the issuance by that entity of one or more classes of
securities ("Structured Securities") backed by, or representing interests in,
the underlying instruments. Structured Securities generally will expose the
Portfolio to credit risks equivalent to that of the underlying instruments.
Structured Securities are typically sold in private placement transactions with
no active trading market. Investments in Structured Securities may be more
volatile than their underlying instruments, however, any loss is limited to the
amount of the original investment.
11. ORGANIZATIONAL COSTS: The organizational costs of the Portfolios are being
amortized on a straight line basis over a period of five years beginning with
each respective Portfolio's commencement of operations. Van Kampen Investments
Inc. has agreed that in the event any of its initial shares in a Portfolio which
comprised the Fund at its inception are redeemed, the proceeds on redemption
will be reduced by the pro-rata portion of any unamortized organizational costs
in the same proportion as the number of shares redeemed bears to the initial
shares held at the same time of redemption.
12. FUTURES CONTRACTS: Certain Portfolios may purchase and sell futures
contracts. Future contracts provide for the sale by one party and purchase by
another party of a specified amount of a specified security, instrument or
basket of instruments. Futures contracts (secured by cash and securities
deposited with brokers as "initial margin") are valued based upon their quoted
daily settlement prices; changes in initial settlement value (represented by
cash paid to or received from brokers as "variation margin") are accounted for
as unrealized appreciation (depreciation). When futures contracts are closed,
the difference between the opening value at the date of purchase and the value
at closing is recorded as realized gains or losses in the Statement of
Operations.
Certain Portfolios may use futures contracts in order to hedge against
unfavorable changes in the value of securities or to remain fully invested and
to reduce transaction costs. Futures contracts involve market risk in excess of
the amounts recognized in the Statement of Assets and Liabilities. Risks arise
from the possible movements in security values underlying these instruments
applied to the notional value of the contract. The change in value of futures
contracts primarily corresponds with the value of their underlying instruments,
which may not correlate with the change in value of the hedged investments. In
addition, there is the risk that a Portfolio may not be able to enter into a
closing transaction because of an illiquid secondary market.
13. SWAP AGREEMENTS: Certain Portfolios may enter into swap agreements to
exchange the return generated by one security, instrument or basket of
instruments for the return generated by another security, instrument or basket
of instruments. The following summarizes swaps which may be entered into by the
Portfolios:
Interest Rate Swaps: Interest rate swaps involve the exchange of commitments to
pay and receive interest based on a notional principal amount. Net periodic
interest payments to be received or paid are accrued daily and are recorded in
the Statement of Operations as an adjustment to interest income. Interest rate
swaps are marked-to-market daily based upon quotations from market makers and
the change, if any, is recorded as unrealized appreciation or depreciation in
the Statement of Operations.
Total Return Swaps: Total return swaps involve commitments to pay interest in
exchange for a market-linked
------------------
133
<PAGE>
VAN KAMPEN SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
return based on a notional amount. To the extent the total return of the
security or index underlying the transaction exceeds or falls short of the
offsetting interest obligation, the Portfolio will receive a payment from or
make a payment to the counterparty, respectively. Total return swaps are
marked-to-market daily based upon quotations from market makers and the change,
if any, is recorded as unrealized gains or losses in the Statement of
Operations. Periodic payments received or made at the end of each measurement
period, but prior to termination, are recorded as realized gains or losses in
the Statement of Operations.
Realized gains or losses on maturity or termination of interest rate and total
return swaps are presented in the Statement of Operations. Because there is no
organized market for these swap agreements, the value reported in the Statement
of Net Assets may differ from that which would be realized in the event the
Portfolio terminated its position in the agreement. Risks may arise upon
entering into these agreements from the potential inability of the
counterparties to meet the terms of the agreements and are generally limited to
the amount of net interest payments to be received and/or favorable movements in
the value of the underlying security, if any, at the date of default. Swap
contracts involve market risks in excess of the amounts recognized in the
Statement of Assets and Liabilities.
14. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Dividend income
is recorded on the ex-dividend date (except for certain foreign dividends which
may be recorded as soon as the Portfolio is informed of such dividends), net of
applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on the accrual basis except where
collection is in doubt. Discounts and premiums on securities purchased are
amortized according to the effective yield method over their respective lives.
Most expenses of the Fund can be directly attributed to a particular Portfolio.
Expenses which cannot be directly attributed are apportioned among the
Portfolios based upon relative net assets. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses are allocated to
each class of shares based upon their relative net assets. Distributions from
the Portfolios are recorded on the ex-distribution date.
Certain Portfolios own shares of real estate investment trusts ("REITs") which
report information on the source of their distributions annually. A portion of
distributions received from REITs during the year is estimated to be a return of
capital and is recorded as a reduction of the cost of those securities.
The amount and the character of income and capital gain distributions to be paid
by the Fund are determined in accordance with Federal income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing book and tax treatment for foreign
currency transactions, net operating losses, foreign taxes on net realized
gains, deductibility of interest expense on short sales and gains on certain
securities of corporations designated as "passive foreign investment companies."
Permanent book and tax basis differences relating to shareholder distributions
may result in reclassification among undistributed net investment income (loss),
accumulated net realized gain (loss) and paid in capital.
Permanent book and tax basis differences, if any, are not included in ending
undistributed (distributions in excess of) net investment income for the purpose
of presenting net investment income (loss) per share in the Financial
Highlights.
The reclassifications arising from current book/tax differences resulted in
increases (decreases) to the components of net assets as follows:
<TABLE>
<CAPTION>
ACCUMULATED
NET
UNDISTRIBUTED REALIZED
NET INVESTMENT GAIN PAID IN
INCOME (LOSS) CAPITAL
PORTFOLIO (000) (000) (000)
- ------------------------------------- -------------- ----------- --------
<S> <C> <C> <C>
Aggressive Equity.................... $1,093 $(1,093) $--
American Value....................... 1,962 (2,145) 183
Asian Growth......................... 1,332 (960) (372)
Emerging Markets..................... 186 (186) --
Global Equity........................ 751 (711) (40)
Global Equity Allocation............. 3,267 (5,391) 2,124
Global Fixed Income.................. (81) 81 --
Government Obligations
Money Market......................... 62 -- (62)
High Yield & Total Return............ 19 (19) --
International Magnum................. 949 (949) --
Latin American....................... 296 (296) --
Money Market......................... 62 -- (62)
U.S. Real Estate..................... 95 14 (109)
Value................................ 60 (2) (58)
Worldwide High Income................ (26) 74 (48)
</TABLE>
B. ADVISER: Van Kampen Investment Advisory Corp., (the "Adviser") a wholly owned
subsidiary of Van Kampen Funds Inc. (an indirect wholly owned subsidiary of
Morgan Stanley Dean Witter & Co.), Morgan Stanley Asset Management, Inc. ("MSAM"
or a "Sub-Adviser") and Miller Anderson & Sherred, LLP (a Sub-Adviser) wholly
owned subsidiaries of Morgan Stanley Dean Witter & Co., provide the Fund with
investment advisory services at a fee paid monthly and calculated at the annual
rates based on average daily net assets as indicated below. The Adviser has
agreed to reduce advisory fees payable to it and to reimburse the
- -----------------------
134
<PAGE>
VAN KAMPEN SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
Portfolios, if necessary, if the annual operating expenses, as defined,
expressed as a percentage of average daily net assets, exceed the maximum ratios
indicated as follows:
<TABLE>
<CAPTION>
CLASS B
CLASS A AND CLASS C
MAX. OPERATING MAX. OPERATING
PORTFOLIO ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------------------------------- -------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Aggressive Equity.................... 0.90% 1.50% 2.25%
American Value....................... 0.85% 1.50% 2.25%
Asian Growth......................... 1.00% 1.90% 2.65%
Emerging Markets..................... 1.25% 2.15% 2.90%
Global Equity........................ 1.00% 1.80% 2.55%
Global Equity Allocation............. 1.00% 1.70% 2.45%
Global Fixed Income.................. 0.75% 1.45% 2.20%
Government Obligations Money Market.. 0.45% 0.95% N/A
High Yield & Total Return............ 0.75% 1.25% 2.00%
International Magnum................. 1.00% 1.65% 2.40%
Latin American....................... 1.25% 2.10% 2.85%
Money Market......................... 0.45% 0.98% N/A
U.S. Real Estate..................... 1.00% 1.55% 2.30%
Value................................ 0.80% 1.45% 2.20%
Worldwide High Income................ 0.75% 1.55% 2.30%
</TABLE>
C. ADMINISTRATOR: Van Kampen Investment Advisory Corp. (the "Administrator")
also provides the Fund with administrative services pursuant to an
administrative agreement for a monthly fee which on an annual basis equals 0.25%
of the average daily net assets of each portfolio, plus reimbursement of
out-of-pocket expenses. Under an agreement between the Administrator and The
Chase Manhattan Bank ("Chase"), through its corporate affiliate Chase Global
Funds Services Company ("CGFSC"), Chase provides certain administrative services
to the Fund. Chase is compensated for such services by the Administrator from
the fee it receives from the Fund. Transfer Agency services are provided to the
Fund by Van Kampen Investor Services Inc., an affiliate of the advisor. The
Government Obligations Money Market Fund and the Money Market Fund have an
agreement with the Administrator to provide Transfer Agent services for its
shareholders. In addition, the Latin American Fund incurs local administration
fees in connection with doing business with certain emerging market countries.
D. DISTRIBUTOR: Van Kampen Funds Inc. the ("Distributor") a wholly owned
subsidiary of Morgan Stanley Dean Witter & Co., serves as the Distributor of the
Fund's shares. The Distributor is entitled to receive from most Portfolios a
distribution fee, which is accrued daily and paid quarterly, of an amount up to
0.25% of the Class A shares and up to 1.00%, on an annualized basis, of the
average daily net assets attributable to the Class B and Class C shares of each
Portfolio. The Government Obligations Money Market and Money Market Funds pay
the Distributor a fee which is accrued daily and paid monthly, up to 0.50%, on
an annualized basis, of the average daily net assets of those Portfolios.
The Distributor may receive a front end sales charge for purchases of Class A
shares. In addition, the Distributor may receive a contingent deferred sales
charge for certain redemptions of Class B and Class C shares of each Portfolio
redeemed within one to five years following such purchase. For the year ended
June 30, 1998, the Distributor has advised the Fund that it earned initial sales
charges of $2,944,039 for Class A shares and deferred sales charges of $88,616,
$289,912 and $2,958,940 for Class A shares, Class B shares and Class C shares,
respectively.
E. CUSTODIAN: Morgan Stanley Trust Company ("MSTC"), a wholly owned subsidiary
of Morgan Stanley Dean Witter & Co., acts as custodian for the Fund's assets
held outside the United States in accordance with a custodian agreement.
Custodian fees are computed and payable monthly based on assets held, investment
purchase and sales activity, an account maintenance fee, plus reimbursement for
certain out-of-pocket expenses.
For the year ended June 30, 1998, the following Portfolios incurred custody fees
and had amounts payable to MSTC at June 30, 1998:
<TABLE>
<CAPTION>
MSTC CUSTODY CUSTODY FEES
FEES INCURRED PAYABLE TO MSTC
FUND (000) (000)
- ------------------------------------- -------------------- -----------------------
<S> <C> <C>
Asian Growth......................... $ 414 $ 197
Emerging Markets..................... 746 361
Global Equity........................ 115 78
Global Equity Allocation............. 251 160
Global Fixed Income.................. 8 2
International Magnum................. 140 65
Latin American....................... 188 70
Worldwide High Income................ 11 18
</TABLE>
In addition, a Portfolio may earn interest income or incur interest expense
relating to cash balances with MSTC.
F. DIRECTORS' FEES: 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.
------------------
135
<PAGE>
VAN KAMPEN SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
JUNE 30, 1998
- --------------------------------------------------------------------------------
G. PURCHASES AND SALES: For the year ended June 30, 1998, purchases and sales of
investment securities other than long-term U.S. Government securities and
short-term investments were:
<TABLE>
<CAPTION>
PURCHASES SALES
FUND (000) (000)
- ------------------------------------- ---------- --------
<S> <C> <C>
Aggressive Equity.................... $ 486,812 $366,496
American Value....................... 1,023,729 607,244
Asian Growth......................... 224,566 296,738
Emerging Markets..................... 191,844 178,043
Global Equity........................ 681,648 19,628
Global Equity Allocation............. 224,465 223,907
Global Fixed Income.................. 5,843 6,860
High Yield & Total Return............ 24,676 17,005
International Magnum................. 88,678 25,857
Latin American....................... 265,425 278,789
U.S. Real Estate..................... 54,250 41,923
Value................................ 328,003 63,695
Worldwide High Income................ 453,341 362,384
</TABLE>
Purchases and sales of long term U.S. Government securities during the year
ended June 30, 1998 occurred in the Global Fixed Income Fund and totaled
approximately $763,000 and $2,031,000, respectively.
H. OTHER: At June 30, 1998, the net assets of certain Portfolios were
substantially comprised of foreign denominated securities and currency. Changes
in currency exchange rates will affect the U.S. dollar value of and investment
income from such securities.
During the year ended June 30, 1998, the Asian Growth Fund, Emerging Markets
Fund, Global Equity Fund, Global Equity Allocation Fund, International Magnum
Fund and Latin American Fund, incurred approximately $157,000, $42,000,
$189,000, $1,000, $8,000 and $53,000, respectively, as brokerage commissions
with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.
At June 30, 1998, the Emerging Markets Fund and the Global Equity Allocation
Fund owned shares of affiliated funds for which the Funds earned dividend income
of approximately $87,400 and $1,298,000 and incurred losses of approximately
$468,000 and $519,000, respectively, on sales of shares in affiliated funds
during the period.
At June 30, 1998, two record shareholders owned 31% of the total shares
outstanding of the Global Fixed Income Fund and Van Kampen Funds Inc. owned 100
shares of each Class A, B, and C in the Van Kampen Value Fund.
At June 30, 1998, cost and unrealized appreciation (depreciation) for U.S.
Federal income tax purposes of the investments of each Portfolio were:
<TABLE>
<CAPTION>
NET
APPRECIATION
COST APPREC. (DEPREC.) (DEPRECIATION)
FUND (000) (000) (000) (000)
- ------------------------- -------- -------- ---------- ---------------
<S> <C> <C> <C> <C>
Aggressive Equity........ $216,709 $ 13,977 $ (11,687) $ 2,290
American Value........... 600,531 39,577 (25,131) 14,446
Asian Growth............. 123,952 3,965 (30,352) (26,387)
Emerging Markets......... 180,545 8,129 (47,334) (39,205)
Global Equity............ 709,740 104,349 (42,902) 61,447
Global Equity
Allocation............. 534,277 94,958 (19,275) 75,683
Global Fixed Income...... 7,552 221 (171) 50
Government Obligations
Money Market........... 56,317 -- -- --
High Yield & Total
Return................. 33,650 834 (629) 205
International Magnum..... 124,130 16,692 (7,319) 9,425
Latin American........... 98,724 -- (16,785) (16,785)
Money Market............. 118,940 -- -- --
U.S. Real Estate......... 35,219 695 (724) (29)
Value.................... 313,647 20,350 (19,349) 1,001
Worldwide High Income.... 294,931 2,691 (17,535) (14,844)
</TABLE>
I. PLAN OF REORGANIZATION: On June 12, 1998, the Global Equity Allocation Fund
acquired all of the assets and liabilities of the Van Kampen American Capital
Global Equity Fund (the "VK Fund"), through a tax-free reorganization approved
by the VK Fund shareholders on June 12, 1998. The Global Equity Allocation Fund
issued the following shares valued at the corresponding net assets in exchange
for VK Fund's net assets.
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES NET ASSETS
- ------------------------------------- ------------------------ ------------
<S> <C> <C>
A.................................... 10,988,132 $178,667,033
B.................................... 9,310,869 146,646,183
C.................................... 1,045,761 16,627,602
</TABLE>
Included in these net assets were unrealized appreciation of $41,291,000, and
cumulative book and tax basis differences related to expenses not yet deductible
for tax purposes of $34,540 as a result of timing differences related to the
directors deferred compensation plan which is a component of undistributed net
investment income. Combined net assets on the date of acquisition were
$595,637,112.
- -----------------------
136
<PAGE>
VAN KAMPEN SERIES FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
Van Kampen Series Fund Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Aggressive Equity Fund,
American Value Fund, Asian Growth Fund, Emerging Markets Fund, Global Equity
Fund, Global Equity Allocation Fund, Global Fixed Income Fund, Government
Obligations Money Market Fund, High Yield & Total Return Fund, International
Magnum Fund, Latin American Fund, Money Market Fund, U.S. Real Estate Fund,
Value Fund and the Worldwide High Income Fund (portfolios of the Van Kampen
Series Fund Inc. hereafter referred to as the "Fund") at June 30, 1998, the
results of each of their operations, the changes in each of their net assets and
the financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph St.
Chicago, Illinois 60601
August 11, 1998
------------------
137
<PAGE>
VAN KAMPEN SERIES FUND, INC.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED):
For the year ended June 30, 1998, the percentage of dividends paid that qualify
for the 70% dividend received deduction for corporate shareholders for the
Aggressive Equity Fund, American Value Fund, Global Equity Fund, Global Equity
Allocation Fund, High Yield & Total Return Fund, and Value Fund is 5.1%, 11.7%,
74.8%, 23.7%, 3.9%, and 44.4%, respectively.
For the year ended June 30, 1998, the following Portfolios intend to pass
through foreign tax credits and have derived gross income from sources within
foreign countries amounting to:
<TABLE>
<CAPTION>
FOREIGN TAX CREDIT FOREIGN SOURCE
PASS-THROUGH INCOME
PORTFOLIO (000) (000)
- ------------------------------------- -------------------------- ----------------------
<S> <C> <C>
Asian Growth......................... $ 373 $ 2,897
Emerging Markets..................... 222 3,734
Global Equity........................ 885 7,006
Global Fixed Income.................. 4 375
International Magnum................. 261 2,083
</TABLE>
For the year ended June 30, 1998, the following Portfolios intend to distribute
long-term capital gains totaling:
<TABLE>
<CAPTION>
LONG-TERM LONG-TERM
CAPITAL GAINS -- 20% CAPITAL GAINS -- 28%
PORTFOLIO (000) (000)
- ------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
Aggressive Equity.................... $ 46 $ 52
American Value....................... 5,221 4,102
Asian Growth......................... -- 279
Emerging Markets..................... 1,939 4,993
Global Equity Allocation............. 14,714 7,923
Global Fixed Income.................. 25 10
High Yield & Total Return............ 107 121
International Magnum................. 30 18
Latin American....................... 307 188
U.S. Real Estate..................... 202 110
</TABLE>
For the year ended June 30, 1998, the percentage of income earned from direct
U.S. treasury obligations was as follows:
<TABLE>
<CAPTION>
FUND INCOME EARNED
- ------------------------------------- ---------------------
<S> <C>
Global Fixed Income.................. 44.9%
Government Obligations Money
Market............................. 84.2%
Money Market......................... 10.0%
</TABLE>
- -----------------------
138
<PAGE>
VAN KAMPEN FUNDS INC.
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
U.S. Real Estate
Utility
Value
INTERNATIONAL/GLOBAL
Asian Growth
Emerging Markets
Global Equity
Global Equity Allocation
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION AND SENIOR LOAN FUNDS
Prime Rate Income Trust
Reserve
Senior Floating Rate
Tax Free Money
To find out more about any of these funds, ask
your financial adviser for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our web site at WWW.VAN-KAMPEN.COM --
to view prospectuses, select INVESTORS'
PLACE, then DOWNLOAD A 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.VAN-KAMPEN.COM
and selecting INVESTORS' PLACE
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
DIRECTORS
Wayne W. Whalen
CHAIRMAN OF THE BOARD
Partner, Skadden, Arps, Slate, Meagher & Flom
(Illinois)
J. Miles Branagan
Private Investor; Formerly Chairman, Chief Executive Officer
and President, MDT Corporation
Richard M. DeMartini
President and Chief Operating Officer, Individual Asset
Management Group, a division of Morgan Stanley Dean Witter & Co.
Linda Hutton Heagy
Co-Managing Partner of Heldrick & Struggles
R. Craig Kennedy
President and Director, German Marshall Fund
of the United States
Jack E. Nelson
President, Nelson Investment Planning Services, Inc.
Don G. Powell
Chairman and Director,
Van Kampen Investments Inc.
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
INVESTMENT SUB ADVISERS
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, Pennsylvania 19428
DISTRIBUTOR
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
CUSTODIANS
Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, New York 11210
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
PNC Bank N.A.
200 Stevens Drive
Suite 440
Airport Business Center
Lester, Pennsylvania 19113
OFFICERS
Dennis J. McDonnell
PRESIDENT
Edward C. Wood III
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
Ronald A. Nyberg
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
John L. Sullivan
TREASURER
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 418256
Kansas City, Missouri 64141
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph St.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR ACCOUNT REPRESENTATIVE OR
THE FUND AT (800) 341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
PROSPECTUSES OF THE VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL EACH OF THE
INVESTMENT FUNDS' INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE
PROSPECTUSES CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
