<PAGE>
VAN KAMPEN
EUROPEAN EQUITY FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 8
Statement of Operations............................................... 9
Statement of Changes in Net Assets.................................... 10
Financial Highlights ................................................. 11
Notes to Financial Statements......................................... 12
Report of Independent Accountants..................................... 15
Additional Information................................................ 16
</TABLE>
EEQ ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, but fell to 2.3 percent in the second quarter.
The first-quarter expansion was fueled by an increase in consumer spending,
which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although the Fed had expressed a bias toward a series
of rate increases, May's tame CPI report prompted it to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Denmark 2.4%
Finland 3.0%
France 14.3%
Germany 11.2%
Italy 5.1%
Netherlands 5.8%
Spain 4.5%
Sweden 5.6%
Switzerland 12.1%
United Kingdom 29.0%
Short-Term Investment 5.4%
Other 1.6%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
-----------------------------------------------
COMMENCEMENT
AVERAGE ANNUAL SINCE INCEPTION DATE
------------------------------- -------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE***
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Class A Shares 0.61% 6.75% 9/25/98
- --------------------------------------------------------------------------
Class B Shares 1.26% 6.26% 9/25/98
- --------------------------------------------------------------------------
Class C Shares 4.96% 5.96% 9/25/98
- --------------------------------------------------------------------------
MSCI Europe Index N/A 14.15% N/A
- --------------------------------------------------------------------------
</TABLE>
The MSCI Europe Index is an unmanaged market value weighted index of common
stocks listed on the stock exchanges of countries in Europe (assumes dividends
are reinvested).
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY COUNTRY NET ASSETS
- -------------------------- --------------- ----------
<S> <C> <C>
Cie Financiere Richemont
AG 'A' Switzerland 3.2%
Nestle S.A. (Registered) Switzerland 3.1%
Total S.A. 'B' France 2.0%
British Telecommunications
plc United Kingdom 2.0%
Telecom Italia S.p.A. Italy 2.0%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ------------------------ --------- -------------
<S> <C> <C>
Consumer Goods $ 2,041 31.1%
Finance 1,536 23.4%
Services 903 13.8%
Energy 785 12.0%
Materials 664 10.1%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
European Equity Fund -
Class A MSCI Europe Index
9/25/98 $9,423 $10,000
12/31/98 10,371 11,698
3/31/99 9,985 9,969
6/30/99 $10,061 $11,415
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE
OF FUTURE 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. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN EUROPEAN EQUITY
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS SINCE THE
INCEPTION OF THE FUND ON SEPTEMBER 25, 1998. THE TEAM IS LED BY PORTFOLIO
MANAGERS MAGGIE NAYLOR AND ALASTAIR ANDERSON OF MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT. THE FOLLOWING EXCERPTS REFLECT THEIR VIEWS ON THE FUND'S
PERFORMANCE DURING THE PERIOD ENDED JUNE 30, 1999.
Q: DESCRIBE THE MARKET CONDITIONS THAT AFFECTED THE FUND DURING THE REPORTING
PERIOD.
A: We launched the Fund toward the end of September, which we felt was a good
time to begin investing in Europe--the dust had settled from the Russian crisis,
investor confidence had returned, and European equity markets were benefiting
from renewed stability. Our optimism turned out to be well founded, as the Fund
returned more than 10 percent through the end of 1998 (Class A shares at net
asset value without sales charge).
3------------------
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
The turning point came in January of 1999, when Europe introduced its new
currency, the euro. While the introduction of the euro went smoothly, economic
weakness, particularly in Germany, contributed to its decline since January.
Decreased exports to Asia and Russia, as well as reduced trade by Eastern
European countries led to lower economic growth and declining corporate
earnings.
The resignation of Oskar LaFontaine, the German Minister of Finance, was an
important recovery point for Europe. His resignation cleared the way for the
European Central Bank to lower interest rates in April, which helped European
markets rebound before the end of the period.
Q: DESCRIBE YOUR INVESTMENT STRATEGY FOR THE FUND IN THIS ENVIRONMENT.
A: We use a value-driven approach and select investments on a
company-by-company basis, regardless of country or sector. Thus, we try to
identify individual stocks that we believe are undervalued. Our primary
indicator of value is price-to-cash flow. We also assess management quality and
the financial structure of a company. In addition, we analyze the market
position or franchise of the business within its competitive market.
Because of our value-driven strategy, we maintained significant positions in
small- and mid-cap companies, consumer staples (such as household goods,
beverages, and tobacco), utilities, and food retailing. Because of Europe's
slowing economic growth during most of the period, investors generally preferred
the more stable earnings associated with large- and mega-cap growth stocks, so
our value-driven strategy underperformed those types of investments.
Although we invest on a company-by-company basis, we found that the Fund
benefited from its exposure to media companies during the period. UK-based WPP
Group, one of the largest advertising firms in the world, appreciated when the
global economy improved and advertising spending increased. Another UK-based
holding, Capital Radio, a dominant FM station in London, did well as the
domestic economy improved when interest rates decreased in the United Kingdom.
Our investment strategy in the banking sector produced mixed results during the
period. We prefer to invest in regional bank franchises, and our holdings in
Scandinavia, Spain, and Ireland benefited the Fund's performance. But, due to
our underweighted position in large United Kingdom and continental banks, we
missed out on return opportunities when those banks performed well during the
period.
Q: WERE THERE ANY OTHER SIGNIFICANT TRENDS THAT AFFECTED THE FUND'S INVESTMENT
STRATEGIES?
A: Yes. During the past 12 months, we have seen better value emerge in the
United Kingdom as opposed to continental Europe. We believe there are many
well-managed franchises in the United Kingdom that are attractively priced
compared to their continental peers and generating strong cash flow.
We took advantage of the underperformance of large-cap stocks in April and May
to invest in some of these companies at attractive valuations. For example, we
purchased Prudential in the United Kingdom. The life insurance company, which
traditionally has been a high-priced stock, decreased in value due to investor
concerns regarding its new Internet banking venture. We, on the other hand,
believe that this venture will have a significant positive impact on banking in
the United Kingdom, as Prudential has already collected a 30 percent share of
the new Internet banking deposit market within its first six months.
Another trend we've sought to capitalize on is the significant underperformance
and corresponding lower stock prices of many of Europe's leading pharmaceutical
companies during the past few months. Because of reduced valuations, we began
increasing our exposure to these companies, although overall we remained
underweighted in that sector. For example, near the end of the period we
purchased Swiss-based Novartis because we believe investor pessimism regarding
the company's growth prospects is high and the stock was trading at an
attractive price.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: The Fund's returns suffered compared to its Index during the period due to
its underweight position in European mega-cap stocks and growth-oriented
investments, which outperformed our value-oriented strategy. The Fund achieved a
total return of 6.75 percent (Class A shares at net asset
- -------------- 4
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
value without sales charge) for the period from September 25, 1998 through June
30, 1999. By comparison, the Morgan Stanley Capital International (MSCI) Europe
Index generated a total return of 14.15 percent. Past performance does not
guarantee future results.
Q: WHAT IS YOUR OUTLOOK FOR THE EUROPEAN MARKETS AND THE FUND'S PORTFOLIO IN
THE MONTHS AHEAD?
A: A weak euro relative to the U.S. dollar will help liquidity in Europe,
particularly for export-driven economies, such as Germany. Similarly, we are
concerned about the value of the U.K. sterling relative to the U.S. dollar. A
weak sterling will benefit some of the Fund's U.K.-based, export-driven holdings
for similar reasons.
We will continue to explore opportunities in Europe's peripheral economies,
including Italy, Spain, and Portugal, which have continued to grow at a faster
rate than France or Germany. In addition, we look for increased
merger-and-acquisition activity and expect to see changes in Europe's
underdeveloped pension fund structure, which should benefit equity markets.
We believe it will be a difficult time for companies that do not have unique
franchises that can provide pricing power. We will continue to focus on small-
and mid-cap European stocks that we consider undervalued yet possess solid
franchises, strong cash flow, and superior economics. However, the recent
slowdown in large-cap stocks may provide attractive opportunities in areas we
have been underweight, such as pharmaceuticals. We feel that our strategy of
holding such companies will help the Fund perform well over the long term.
<TABLE>
<S> <C>
Alastair Anderson Maggie Naylor
PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
5------------------
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
COMMON STOCKS (94.1%)
BELGIUM (0.5%)
Fortis 'B'....................... 550 $ 17
G.I.B. Holdings Ltd.............. 427 16
------
33
------
DENMARK (2.4%)
Novo Nordisk A/S 'B'............. 860 93
Unidanmark A/S 'A'
(Registered)................... 940 63
------
156
------
FINLAND (3.0%)
KCI Konecranes International
plc............................ 525 18
Kone Oyj 'B'..................... 290 36
Merita Ltd. 'A'.................. 14,200 81
Sampo Insurance Co., plc 'A'..... 2,190 64
------
199
------
FRANCE (14.3%)
Alcatel.......................... 460 65
Axa S.A.......................... 330 40
Banque Nationale de Paris........ 225 18
Compagnie de Saint-Gobain........ 490 78
(a)CNP Assurances................ 3,810 104
Elf Aquitaine.................... 455 67
Groupe Danone RFD................ 240 62
Michelin (C.G.D.E.) 'B'.......... 1,940 80
Pernod-Ricard.................... 1,210 81
Rhone-Poulenc S.A. 'A'........... 1,820 83
Schneider S.A.................... 1,570 88
Suez Lyonnaise des Eaux.......... 190 35
(a)Total S.A. 'B'................ 1,035 134
------
935
------
GERMANY (8.1%)
Adidas-Salomon AG................ 462 45
BASF AG.......................... 1,760 77
Bayerische AG.................... 1,275 81
Berliner KraftUnd Litch 'A'...... 2,701 42
Hoechst AG....................... 1,873 85
Mannesmann AG.................... 150 22
Schering AG...................... 680 73
Siemens AG....................... 250 19
Volkswagen AG.................... 1,380 89
------
533
------
IRELAND (1.9%)
Bank of Ireland.................. 5,320 90
Greencore Group plc.............. 12,300 38
------
128
------
ITALY (5.1%)
Banca Popolare di Bergamo........ 3,910 86
Marzotto S.p.A................... 4,630 36
Mediaset S.p.A................... 9,400 84
Telecom Italia S.p.A............. 12,500 130
------
336
------
NETHERLANDS (5.8%)
ABN Amro Holdings N.V............ 1,170 25
Akzo Nobel N.V................... 2,180 92
Benckiser N.V. 'B'............... 700 37
ING Groep N.V.................... 2,235 121
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
Laurus N.V....................... 1,094 $ 26
Philips Electronics N.V.......... 791 78
------
379
------
PORTUGAL (1.8%)
Banco Comercial Portugues S.A.
(Registered)................... 1,550 40
Electricidade de Portugal S.A.... 4,220 76
------
116
------
SPAIN (4.5%)
Banco Popular Espanol S.A........ 550 40
Banco Santander Central Hispano
S.A............................ 3,340 35
Endesa S.A....................... 3,260 69
Iberdrola S.A.................... 4,430 67
(a)Telefonica de Espana.......... 1,714 83
------
294
------
SWEDEN (5.6%)
Autoliv, Inc. SDR................ 2,590 79
Ericsson LM 'B'.................. 1,200 39
ForeningsSparbanker AB........... 1,300 18
Nordbanken Holding AB............ 12,450 73
Svedala Industri AB.............. 3,410 62
Svenska Handelsbanken 'A'........ 7,920 95
------
366
------
SWITZERLAND (12.1%)
Cie Financiere Richemont AG
'A'............................ 108 208
Holderbank Financiere Glarus AG
'B' (Bearer)................... 85 101
Nestle S.A. (Registered)......... 111 200
Novartis AG (Registered)......... 65 95
Roche Holding AG-Genusshein...... 7 72
Schindler Holding AG
(Registered)................... 25 39
Union Bank of Switzerland AG
(Registered)................... 255 76
------
791
------
UNITED KINGDOM (29.0%)
Aegis Group plc.................. 23,560 52
Allied Domecq plc................ 10,570 102
Allied Zurich plc................ 7,950 100
BG plc........................... 13,100 80
BOC Group plc.................... 4,350 85
British Telecommunications plc... 7,950 133
Burmah Castrol plc............... 3,591 68
Capital Radio plc................ 5,950 79
Centrica plc..................... 23,400 55
Diageo plc....................... 5,760 60
Glaxo Wellcome plc............... 1,200 33
Great Universal Stores plc....... 8,800 98
Halma plc........................ 24,800 41
Imperial Tobacco Group plc....... 9,300 102
Lloyds TSB Group plc............. 4,000 54
Morgan Crucible Co. plc.......... 10,900 46
Prudential Corp. plc............. 5,800 85
Reckitt & Colman plc............. 11,294 118
Royal & Sun Alliance Insurance
Group plc...................... 6,473 58
Royal Bank of Scotland Group
plc............................ 5,320 71
Sainsbury (J) plc................ 5,000 32
Scottish & Southern Energy plc... 8,200 84
Shell Transport & Trading Co.
plc............................ 5,600 42
Smith & Nephew plc............... 26,700 81
SSL International plc............ 3,200 37
Tesco plc........................ 10,800 28
</TABLE>
- -----------------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
<S> <C> <C>
</TABLE>
UNITED KINGDOM (CONT.)
<TABLE>
<S> <C> <C>
United News & Media plc.......... 200 $ 2
WPP Group plc.................... 9,100 77
------
1,903
------
TOTAL COMMON STOCKS.............................. 6,169
------
PREFERRED STOCKS (3.1%)
GERMANY (3.1%)
Fresenius AG..................... 684 120
Henkel KGaA AG................... 735 52
Suedzucker AG-Varzug............. 84 33
------
TOTAL PREFERRED STOCKS........................... 205
------
TOTAL LONG-TERM INVESTMENTS (97.2%) (COST
$6,205).......................................... 6,374
------
<CAPTION>
PAR
VALUE
(000)
----------
<S> <C> <C>
SHORT-TERM INVESTMENT (5.4%)
REPURCHASE AGREEMENT (5.4%)
Chase Securities, Inc., 4.55%,
dated 6/30/99, $ 354
due 7/1/99, to be repurchased at $354,
collateralized by $295 U.S. Treasury Bonds,
11.125%, due 8/15/03, valued at $364 (COST
$354)...................................... 354
TOTAL INVESTMENTS IN SECURITIES (102.6%) (COST
$6,559).......................................... 6,728
------
FOREIGN CURRENCY (0.3%) (COST $18)............... 18
------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
<S> <C> <C>
- ---------------------------------------------------------
TOTAL INVESTMENTS (102.9%) (COST $6,577)......... $6,746
LIABILITIES IN EXCESS OF OTHER ASSETS (-2.9%).... (187)
------
NET ASSETS (100%)................................ $6,559
------
------
</TABLE>
- ---------------
(a) -- Non-income producing security
RFD -- Ranked for Dividend
SDR -- Swedish Depositary Receipt
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
PERCENT
OF
VALUE NET
INDUSTRY (000) ASSETS
- ---------------------------------------- -------- --------
<S> <C> <C>
Consumer Goods.......................... $ 2,041 31.1%
Finance................................. 1,536 23.4
Services................................ 903 13.8
Energy.................................. 785 12.0
Materials............................... 664 10.1
Capital Equipment....................... 445 6.8
-------- ---
$ 6,374 97.2%
-------- ---
-------- ---
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- --------------------------------------------------------------------
ASSETS:
Investments in Securities, at Value (Cost $6,559)......... $6,728
Foreign Currency (Cost $18)............................... 18
Cash...................................................... 8
Receivable for:
Investments Sold........................................ 33
Fund Shares Sold........................................ 25
Dividends............................................... 15
Foreign Withholding Tax Reclaim......................... 6
------
Total Assets.......................................... 6,833
------
LIABILITIES:
Payable for:
Investments Purchased................................... 144
Filing and Registration Fees............................ 34
Professional Fees....................................... 29
Custody Fees............................................ 23
Shareholder Reporting Expenses.......................... 14
Distribution Fees....................................... 8
Advisory Fees........................................... 7
Transfer Agent Fees..................................... 6
Directors' Fees and Expenses............................ 5
Administrative Fees..................................... 2
Fund Shares Redeemed.................................... 1
Other..................................................... 1
------
Total Liabilities..................................... 274
------
NET ASSETS.................................................. $6,559
------
------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares Authorized
2,625,000,000).......................................... $ 1
Paid in Capital in Excess of Par.......................... 6,296
Net Unrealized Appreciation on Investments................ 169
Accumulated Net Investment Income......................... 73
Accumulated Net Realized Gain............................. 20
------
NET ASSETS.................................................. $6,559
------
------
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share (Based on
Net Assets of $2,020,496 and 189,743 Shares
Outstanding)............................................ $10.65
------
------
Maximum Sales Charge...................................... 5.75%
Maximum Offering Price Per Share (Net Asset Value Per
Share x 100/ (100 - maximum sales charge)).............. $11.30
------
------
CLASS B SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $3,081,562 and 290,172 Shares Outstanding)*... $10.62
------
------
CLASS C SHARES:
Net Asset Value and Offering Price Per Share (Based on Net
Assets of $1,456,542 and 137,493 Shares Outstanding)*... $10.59
------
------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SEPTEMBER 25, 1998* TO JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- -------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 130
Interest.................................................. 18
Less Foreign Taxes Withheld............................... (17)
-----
Total Income............................................. 131
-----
EXPENSES:
Shareholder Reports....................................... 51
Custodian Fees............................................ 39
Investment Advisory Fees.................................. 39
Filing and Registration Fees.............................. 38
Professional Fees......................................... 35
Distribution Fees (Attributed to Classes A, B, and C of
$3, $17, and $10, respectively)......................... 30
Administrative Fees....................................... 14
Directors' Fees and Expenses.............................. 6
Transfer Agent Fees....................................... 6
Other..................................................... 2
-----
Total Expenses........................................... 260
Less Expense Reductions.................................. (173)
-----
Net Expenses............................................. 87
-----
Net Investment Income/Loss.................................. 44
-----
NET REALIZED GAIN/LOSS ON:
Investments............................................... 20
Foreign Currency Transactions............................. (9)
-----
Net Realized Gain/Loss................................... 11
-----
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period................................... --
-----
End of the Period:
Investments............................................. 169
-----
Net Unrealized Appreciation/Depreciation During the
Period.................................................... 169
-----
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation................................. 180
-----
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 224
-----
-----
</TABLE>
- ---------------
* Commencement of operations
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SEPTEMBER 25, 1998* TO JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ---------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss................................ $ 44
Net Realized Gain/Loss.................................... 11
Net Unrealized Appreciation/Depreciation.................. 169
-------
Net Increase/Decrease in Net Assets Resulting from
Operations.............................................. 224
-------
DISTRIBUTIONS:
Net Investment Income:
Class A................................................... (3)
Class B................................................... (1)
Class C................................................... (1)
-------
Net Decrease in Net Assets Resulting from Distributions... (5)
-------
CAPITAL SHARES TRANSACTIONS (1):
Subscribed................................................ 4,084
Distributions Reinvested.................................. 1
Redeemed.................................................. (745)
-------
Net Increase/Decrease in Net Assets Resulting from Capital
Share Transactions...................................... 3,340
-------
Total Increase/Decrease in Net Assets..................... 3,559
NET ASSETS--Beginning of Period............................. 3,000
-------
NET ASSETS--End of Period (Including accumulated net
investment income of $73 at June 30, 1999)................ $ 6,559
-------
-------
- ---------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (000):
(1) Class A:
------------
Shares:
Subscribed (Initial Shares of 100)..................... 205
Distributions Reinvested............................... --
Redeemed............................................... (15)
-------
Net Increase/Decrease in Class A Shares Outstanding...... 190
-------
-------
Dollars:
Subscribed............................................. $ 1,098
Distributions Reinvested............................... 1
Redeemed............................................... (157)
-------
Net Increase/Decrease.................................... $ 942
-------
-------
Beginning Paid in Capital................................ $ 1,000
-------
-------
Ending Paid in Capital................................... $ 1,942+
-------
-------
Class B:
------------
Shares:
Subscribed (Initial Shares of 100)..................... 305
Distributions Reinvested............................... --
Redeemed............................................... (15)
-------
Net Increase/Decrease in Class B Shares Outstanding...... 290
-------
-------
Dollars:
Subscribed............................................. $ 2,142
Distributions Reinvested............................... --
Redeemed............................................... (152)
-------
Net Increase/Decrease.................................... $ 1,990
-------
-------
Beginning Paid in Capital................................ $ 1,000
-------
-------
Ending Paid in Capital................................... $ 2,990+
-------
-------
Class C:
------------
Shares:
Subscribed (Initial Shares of 100)..................... 179
Distributions Reinvested............................... --
Redeemed............................................... (42)
-------
Net Increase/Decrease in Class C Shares Outstanding...... 137
-------
-------
Dollars:
Subscribed $ 844
Distributions Reinvested............................... --
Redeemed............................................... (436)
-------
Net Increase/Decrease.................................... $ 408
-------
-------
Beginning Paid in Capital................................ $ 1,000
-------
-------
Ending Paid in Capital................................... $ 1,408+
-------
-------
</TABLE>
------------------
* Commencement of operations
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- ---------------------- ----------------------
SEPTEMBER 25, 1998* TO SEPTEMBER 25, 1998* TO SEPTEMBER 25, 1998* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1999# JUNE 30, 1999# JUNE 30, 1999#
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD......... $10.000 $10.000 $10.000
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............... 0.133 0.078 0.065
Net Realized and Unrealized Gain/Loss.... 0.541 0.548 0.534
------- ------- -------
Total From Investment Operations......... 0.674 0.626 0.599
------- ------- -------
DISTRIBUTIONS
Net Investment Income.................... (0.025) (0.006) (0.006)
------- ------- -------
NET ASSET VALUE, END OF PERIOD............... $10.649 $10.620 $10.593
------- ------- -------
------- ------- -------
TOTAL RETURN (1)............................. 6.75%** 6.26%** 5.96%**
------- ------- -------
------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $ 2,020 $ 3,082 $ 1,457
Ratio of Expenses to Average Net Assets...... 1.70% 2.45% 2.45%
Ratio of Net Investment Income/Loss to
Average Net Assets......................... 1.64% 0.96% 0.81%
Portfolio Turnover Rate...................... 51%** 51%** 51%**
- -------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During
the Period
Per Share Benefit to Net Investment
Income/Loss................................ $ 0.36 $ 0.34 $ 0.40
Ratios Before Expense Limitation:
Expenses to Average Net Assets............. 6.20% 6.61% 7.33%
Net Investment Income/Loss to Average Net
Assets................................... (2.87)% (3.20)% (4.13)%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen European Equity Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland Corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation. The Fund commenced operations on September 25, 1998.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
------------------------
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------- ----------- -----------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
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 between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. 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 Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: The Fund 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 Fund as
unrealized gain or loss on foreign currency translation.
Assets and liabilities denominated in foreign currencies and commitments under
forward currency contracts are translated into U.S. dollars at the mean of the
quoted bid and asked prices. Purchases and sales of portfolio securities are
translated at the rate of exchange prevailing when such securities were
purchased or sold. Income and expenses are
- -----------------------
12
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
translated at rates prevailing when accrued. Realized and unrealized gains and
losses on securities are not segregated for financial reporting purposes from
amounts arising from changes in the market prices of securities. Realized gains
and losses on foreign currency includes the net realized amount from the sale of
the currency and the amount realized between trade date and settlement date on
security and income transactions. However, 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.
Risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts. Risks may also arise
from the unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund 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, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- --------- ----------- ----------- ---------------
<S> <C> <C> <C>
$ 6,565 $ 458 $ (295) $ 163
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: 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.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par. For
the year ended June 30, 1999, approximately $43,000 has been reclassified from
paid in capital in excess of par with approximately $34,000 posted to
accumulated net investment income and approximately $9,000 posted to accumulated
net realized gain.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.), and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary 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 Fund, 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------- --------------- ---------------
<S> <C> <C>
1.00% 1.70% 2.45%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$3,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
At June 30, 1999, Van Kampen Funds, Inc. owned 53%, 35%, and 73% of the shares
outstanding of each Class A, B, and C shares in the Fund.
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 the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
------------------
13
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $27,564 for Class A shares and deferred sales charges of $1,486 and
$1,142 for Class B shares and Class C shares, respectively.
Prior to October 1, 1998, the Fund's assets held outside the United States were
held by Morgan Stanley Trust Company ("MSTC"), a former affiliate of the
Subadvisers. On October 1, 1998, the Chase Manhattan Bank purchased MSTC.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
During the period ended June 30, 1999, the Fund incurred approximately $2,000 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/ dealer.
C. INVESTMENT TRANSACTIONS: For the period ended June 30, 1999, the Fund made
purchases of approximately $8,423,000 and sales of approximately $2,244,000 of
investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sale of long-term U.S.
government securities.
- -----------------------
14
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen European Equity Fund:
In our opinion, the accompanying statement 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 Van Kampen European Equity Fund
(the "Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the
results of its operations, the changes in its net assets and the financial
highlights for the period September 25, 1998 (commencement of operations)
through June 30, 1999, 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 audit. We conducted our audit 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 audit, which included
confirmation of securities at June 30, 1999 by correspondence with the custodian
and brokers, provides a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
------------------
15
<PAGE>
VAN KAMPEN EUROPEAN EQUITY FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the Fund intends to pass through foreign tax
credits of $16,827 and has derived gross income from sources within foreign
countries amounting to $130,739.
- -----------------------
16
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
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.
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
[LOGO]
1 Parkview Plaza - P.O. Box 5555 - Oakbrook Terrace, IL 60181-5555 -
www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
GLOBAL FRANCHISE FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 7
Statement of Operations............................................... 8
Statement of Changes in Net Assets.................................... 9
Financial Highlights ................................................. 10
Notes to Financial Statements......................................... 11
Report of Independent Accountants..................................... 14
Additional Information................................................ 15
</TABLE>
GLF ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, but fell to 2.3 percent in the second quarter.
The first-quarter expansion was fueled by an increase in consumer spending,
which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although the Fed had expressed a bias toward a series
of rate increases, May's tame CPI report prompted it to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Canada 4.0%
Finland 4.4%
France 9.9%
Italy 4.8%
Netherlands 4.7%
Switzerland 13.6%
United Kingdom 33.4%
United States 23.2%
Other 2.0%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
-----------------------------------------------------
AVERAGE ANNUAL SINCE INCEPTION
------------------------------------ COMMENCEMENT
WITH WITHOUT DATE
SALES CHARGE* SALES CHARGE*** ---------------
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares 14.25 % 21.22 % 9/25/98
- -----------------------------------------------------------------------------
Class B Shares 15.40 % 20.40 % 9/25/98
- -----------------------------------------------------------------------------
Class C Shares 20.40 % 21.40 % 9/25/98
- -----------------------------------------------------------------------------
MSCI World Net
Dividends Index N/A 28.82 % N/A
- -----------------------------------------------------------------------------
</TABLE>
The Morgan Stanley Capital International (MSCI) World Net Dividends Index is an
unmanaged index which includes securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand, and the Far East and
assumes dividends are reinvested net of withholding tax.
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY COUNTRY NET ASSETS
- --------------------------- --------------- ---------------
<S> <C> <C>
Cie Financiere Richement AG
'A' Switzerland 8.1%
WPP Group plc United Kingdom 6.5%
New York Times Co. 'A' United States 6.2%
Brown-Foreman Corp. 'B' United States 4.8%
Benckiser N.V. 'B' Netherlands 4.7%
</TABLE>
<TABLE>
<CAPTION>
TOP SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- --------------------------- --------- -------------
<S> <C> <C>
Consumer Goods $ 1,170 51.2%
Services 846 37.0%
Capital Equipment 175 7.7%
Energy 100 4.4%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI WORLD NET
GLOBAL FRANCHISE FUND-CLASS A DIVIDENDS INDEX
<S> <C> <C>
9/25/98 $9,428 $10,000
12/31/98 $10,408 $10,591
3/31/99 $10,581 $10,477
6/30/99 $11,425 $12,882
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE 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. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING.
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN GLOBAL FRANCHISE
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS SINCE THE
INCEPTION OF THE FUND ON SEPTEMBER 25, 1998. THE FUND IS MANAGED BY PORTFOLIO
MANAGER ANDREW BROWN, MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. THE
FOLLOWING EXCERPTS REFLECT HIS VIEWS ON THE FUND'S PERFORMANCE FROM ITS
INCEPTION UNTIL JUNE 30, 1999.
Q: DESCRIBE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED DURING THE PERIOD.
A: During the third quarter of 1998, continued economic weakness in Asia spread
to Russia, and there were warning signs that Asia's problems were beginning to
affect Europe and the United States. The defining moment of the period came in
mid-August when Russia devalued its currency and defaulted on its debt, sending
financial and currency markets worldwide into a tailspin. Paced by the Federal
Reserve Board and the European Central Bank (ECB), central banks worldwide
lowered interest rates during the fourth quarter of 1998. The interest-rate cuts
renewed investor confidence and helped revive stock markets in Europe and the
United States.
3------------------
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Global economic recovery became the story of the first half of 1999, as economic
activity increased in most regions of the world. The U.S. economy resumed its
impressive performance with strong growth and minimal inflation. Meanwhile,
declining interest rates, a focus on corporate cost-cutting, and fiscal reforms
helped revive many emerging markets, particularly in Asia.
In Europe, the introduction of the euro went smoothly, but economic weakness,
particularly in Germany, contributed to its decline since January. Decreased
exports to Asia and Russia, as well as reduced trade by Eastern European
countries, led to lower economic growth and falling corporate earnings.
Q: DESCRIBE THE STRATEGY YOU USE TO MANAGE THE FUND.
A: We look around the world for businesses with superior economics that we
consider undervalued. We focus on businesses that we think are capable of
earning above-average returns on their capital employed throughout economic
cycles. The decisive strengths of such businesses tend to lie in intangible
assets--such as brand names, copyrights, or customer relationships--that are
hard to create, and therefore difficult for competitors to replicate. We use the
word "franchise" to describe the collection of intangible assets that enables a
business to earn superior returns, and we search for franchises globally. That's
why we call it the Global Franchise Fund.
When their stock prices are reasonable, we buy companies that fit our
requirements with the intention of holding for the long term. It's hard to find
this combination of quality and value; the fund was invested in just 29 stocks
at the end of June.
Q: HOW DID THIS STRATEGY AFFECT THE FUND'S PERFORMANCE THROUGH THE END OF 1998?
A: The Fund was established at the end of September, 1998. During the final
three months of the calendar year, the Fund did not keep pace with the strong
rebound in world markets. Although we choose stocks on a company-by-company
basis, the Fund was overweighted in the United Kingdom and continental Europe,
and dramatically underweighted in Asia. This breakdown penalized the Fund's
return as the U.K. disappointed and we missed the rally in Asian markets.
Major contributors to the Fund's return in 1998 were gains recorded by WPP
Group, one of the world's largest advertising firms; Benckiser, the world's
largest marketer of automatic dishwashing detergent; and New York Times, a
publisher. The only significant negatives were the declines of Reckitt & Colman
and Pernod Ricard. Reckitt, a household products company, suffered from exposure
to struggling Brazil and a decrease in inventory among many of North America's
major retailers during the fourth quarter of 1998. Pernod, a French beverage
company, depreciated when French authorities held up the sale of its Orangina
soft-drink business to Coca-Cola because of antitrust concerns. We still expect
both of these stocks to perform well over the long term and continue to hold
them.
Q: HOW DID THE FUND'S HOLDINGS AFFECT PERFORMANCE IN 1999?
A: The Fund benefited significantly from the rally in value-oriented stocks
near the end of the period. As investors' concerns about a potential rise in
interest rates grew, traditional growth stocks appeared less attractive and more
investors began purchasing consumer staples such as household goods, beverages,
and tobacco--the types of stocks we hold. This helped the price appreciation of
many of these stocks and, consequently, the Fund.
We were rewarded for our patience with Allied Domecq--a company with a great
business married to an inferior one. Allied, the number-two wine and spirit
marketer in the world with brands such as Beefeater gin, Kahlua liqueur, and
Sauza tequila is a high-return-on-capital business. Unfortunately, it also owns
3,600 pubs in the U.K. We feel capital-intensive businesses such as restaurants
and pubs produce inferior long-term returns, and we tend not to purchase these
stocks. When we first purchased Allied, we felt that its price could not go much
lower and that its management understood that the pubs were a drag on overall
profitability. During the second quarter of this year, the Fund benefited when
Allied announced that it was selling the pubs to another operator, which
resulted in an increase in Allied's stock price.
Other holdings that have helped the Fund's performance in 1999 include Aegis
Group, the U.K.-based parent of Carat, the world's leading independent media
planning and buying agency, and Cie
- -------------- 4
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Financiere Richemont, the Swiss-based tobacco and luxury products group. One
significant negative was the decline of U.S.-based tobacco company Phillip
Morris during the first quarter of 1999 amid negative litigation. Its stock
bounced back near the end of the period, however, and contributed positively to
the Fund's overall returns when the tide of litigation turned in its favor.
Q: HAVE YOU PURCHASED ANY NEW STOCKS, AND WHY?
A: Our buy-and-hold strategy leads to a very low turnover rate in the Fund. So
far in 1999 we have sold only one stock and bought two. One purchase was
Bestfoods in the United States. In general, slow growth in domestic consumption
and rapid consolidation in the supermarket industry have hurt the stock market
valuations of U.S. food companies. Although Bestfoods is based in the United
States--and its valuation has suffered along with its U.S. peer group--a
majority of its business is overseas. Europe is its largest market and is
showing good growth particularly Eastern Europe, where it is expanding rapidly.
Its strongest brands are Hellmann's mayonnaise and dressings and Knorr, which
makes dehydrated soups, sauces, and bullion cubes. We purchased Bestfoods
because of the high returns on capital generated by its core businesses, the
growth potential offered by its strong market positions in dynamic markets such
as Eastern Europe and Latin America, and because it was reasonably priced.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: After lagging its benchmark in the final quarter of 1998, the Fund has
regained some of its relative performance in the first six months of 1999. The
Fund achieved a total return of 21.22 percent (Class A shares at net asset value
without sales charge) for the period from September 25, 1998, through June 30,
1999. By comparison, the Morgan Stanley Capital International (MSCI) World Net
Dividends Index generated a total return of 28.82 percent. Past performance does
not guarantee future results.
Q: WHAT IS YOUR OUTLOOK FOR THE FUND IN THE MONTHS AHEAD?
A: Recently, concerns about inflation have returned to the world's equity
markets. When this happens, the future of growth stocks appear less promising to
investors. We believe that this environment will be beneficial to value-oriented
investments like the Fund.
As always, we will maintain our strategy of buying and holding companies whose
strength lies in unique intangible assets because we believe these companies
will be solid long-term performers.
Andrew Brown
PORTFOLIO MANAGER
MSDW INVESTMENT MANAGEMENT
5------------------
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ------------------------------------------------------
COMMON STOCKS (100.3%)
CANADA (4.0%)
Torstar Corp. 'B'................ 8,230 $ 92
------
FINLAND (4.4%)
Kone Corp. 'B'................... 615 77
(a)Rapala Normark Corp........... 3,350 24
------
101
------
FRANCE (9.9%)
Groupe Danone RFD................ 292 76
Pernod-Ricard.................... 1,315 88
Societe Television Francaise 1... 267 62
------
226
------
ITALY (4.8%)
Mediaset S.p.A................... 7,050 63
Seat Pagine Gialle S.p.A......... 33,900 46
------
109
------
NETHERLANDS (4.7%)
Benckiser N.V. 'B'............... 2,020 108
------
SPAIN (2.3%)
Zardoya-Otis S.A................. 2,079 52
------
SWITZERLAND (13.6%)
Cie Financiere Richemont AG
'A'............................ 96 185
Lindt & Spruengli AG............. 20 51
Nestle S.A. (Registered)......... 41 74
------
310
------
UNITED KINGDOM (33.4%)
Aegis Group plc.................. 38,150 84
Allied Domecq plc................ 10,050 97
Burmah Castrol plc............... 2,187 42
Capital Radio plc................ 5,890 78
Great Universal Stores plc....... 5,250 58
Imperial Tobacco Group plc....... 9,260 101
Reckitt & Colman plc............. 9,324 97
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ------------------------------------------------------
Scottish Media Group plc......... 3,430 $ 47
Time Products plc................ 6,800 11
WPP Group plc.................... 17,560 149
------
764
------
UNITED STATES (23.2%)
Bestfoods........................ 1,900 94
Brown-Forman Corp. 'B'........... 1,670 109
New York Times Co. 'A'........... 3,865 142
Philip Morris Cos., Inc.......... 1,978 80
Snap-on, Inc..................... 1,260 46
WD-40 Co......................... 2,330 58
------
529
------
TOTAL LONG-TERM INVESTMENTS (100.3%) (COST
$2,057)....................................... 2,291
------
FOREIGN CURRENCY (0.1%) (COST $2)............. 2
------
TOTAL INVESTMENTS (100.4%) (COST $2,059)...... 2,293
LIABILITIES IN EXCESS OF OTHER ASSETS
(-0.4%)..................................... (10)
------
NET ASSETS (100%)............................. $2,283
------
------
</TABLE>
- ---------------
(a) -- Non-income producing security
RFD -- Ranked for Dividend
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
PERCENT
OF
VALUE NET
INDUSTRY (000) ASSETS
- ---------------------------------------- -------- --------
<S> <C> <C>
Consumer Goods.......................... $ 1,170 51.2%
Services................................ 846 37.0
Capital Equipment....................... 175 7.7
Energy.................................. 100 4.4
-------- --------
$ 2,291 100.3%
-------- --------
-------- --------
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ---------------------------------------------
ASSETS:
Investments at Value (Cost
$2,057).......................... $2,291
Foreign Currency (Cost $2)......... 2
Cash............................... 66
Receivable for:
Dividends........................ 8
Foreign Witholding Tax Reclaim... 1
Net Unrealized Gain on Foreign
Currency Exchange Contracts...... 18
Receivable from Investment
Adviser.......................... 15
------
Total Assets................... 2,401
------
LIABILITIES:
Payable for:
Professional Fees................ 48
Filing and Registration Fees..... 34
Shareholder Reporting Expenses... 14
Directors' Fees and Expenses..... 8
Custody Fees..................... 5
Transfer Agent Fees.............. 5
Distribution Fees................ 2
Administrative Fees.............. 1
Other.............................. 1
------
Total Liabilities.............. 118
------
NET ASSETS........................... $2,283
------
------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ --
Paid in Capital in Excess of Par... 1,953
Net Unrealized Appreciation on
Investments and Foreign Currency
Translations..................... 253
Accumulated Net Investment
Income........................... 48
Accumulated Net Realized Gain...... 29
------
NET ASSETS........................... $2,283
------
------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $1,189,338 and 99,280
Shares Outstanding).............. $11.98
------
------
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100
/ (100 - maximum sales
charge))......................... $12.71
------
------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$614,254 and 51,522 Shares
Outstanding)*.................... $11.92
------
------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$479,666 and 39,914 Shares
Outstanding)*.................... $12.02
------
------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SEPTEMBER 25, 1998* TO JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- --------------------------------------------
INVESTMENT INCOME:
Dividends.......................... $ 42
Interest........................... 4
Less Foreign Taxes Withheld........ (5)
-----
Total Income..................... 41
-----
EXPENSES:
Professional Fees.................. 52
Filing and Registration Fees....... 49
Shareholder Reports................ 22
Investment Advisory Fees........... 12
Custodian Fees..................... 10
Directors' Fees and Expenses....... 8
Distribution Fees (Attributed to
Classes A, B, and C of $2, $3,
and $3, respectively)............ 8
Administrative Fees................ 7
Transfer Agent Fees................ 7
Other.............................. 2
-----
Total Expenses..................... 177
Less Expense Reductions............ (150)
-----
Net Expenses....................... 27
-----
Net Investment Income/Loss........... 14
-----
NET REALIZED GAIN/LOSS ON:
Investments........................ 29
Foreign Currency Transactions...... (7)
-----
Net Realized Gain/Loss........... 22
-----
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ --
-----
End of the Period:
Investments...................... 234
Foreign Currency Translations.... 19
-----
Net Unrealized
Appreciation/Depreciation During
the Period......................... 253
-----
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... 275
-----
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $ 289
-----
-----
</TABLE>
- ---------------
* Commencement of operations
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SEPTEMBER 25, 1998* TO JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ----------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ 14
Net Realized Gain/Loss.......................... 22
Net Unrealized Appreciation/Depreciation........ 253
------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 289
------
DISTRIBUTIONS:
Net Investment Income:
Class A......................................... (7)
Class B......................................... (4)
Class C......................................... (5)
------
Net Decrease in Net Assets Resulting from
Distributions................................. (16)
------
CAPITAL SHARES TRANSACTIONS (1):
Subscribed...................................... 1,012
Distributions Reinvested........................ 3
Redeemed........................................ (5)
------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... 1,010
------
Total Increase/Decrease in Net Assets........... 1,283
NET ASSETS--Beginning of Period................... 1,000
------
NET ASSETS--End of Period (Including accumulated
net investment income of $48 at June 30,
1999)........................................... $ 2,283
------
------
- ----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (000):
(1) CLASS A:
Shares:
Subscribed (Initial Shares of 40)............ 99
Distributions Reinvested..................... --
Redeemed..................................... --
------
Net Increase/Decrease in Class A Shares
Outstanding.................................... 99
------
------
Dollars:
Subscribed................................... $ 667
Distributions Reinvested..................... 2
Redeemed..................................... (2)
------
Net Increase/Decrease.......................... $ 667
------
------
Beginning Paid in Capital...................... $ 400
------
------
Ending Paid in Capital......................... $ 1,067+
------
------
CLASS B:
Shares:
Subscribed (Initial Shares of 30)............ 52
Distributions Reinvested..................... --
Redeemed..................................... --
------
Net Increase/Decrease in Class B Shares
Outstanding.................................... 52
------
------
Dollars:
Subscribed................................... $ 242
Distributions Reinvested..................... 1
Redeemed..................................... --
------
Net Increase/Decrease.......................... $ 243
------
------
Beginning Paid in Capital...................... $ 300
------
------
Ending Paid in Capital......................... $ 543+
------
------
CLASS C:
Shares:
Subscribed (Initial Shares of 30)............ 40
Distributions Reinvested..................... --
Redeemed..................................... --
------
Net Increase/Decrease in Class C Shares
Outstanding.................................... 40
------
------
Dollars:
Subscribed................................... $ 103
Distributions Reinvested..................... --
Redeemed..................................... (3)
------
Net Increase/Decrease.......................... $ 100
------
------
Beginning Paid in Capital...................... $ 300
------
------
Ending Paid in Capital......................... $ 400+
------
------
</TABLE>
- ---------------
* Commencement of operations
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- ---------------------- ----------------------
SEPTEMBER 25, 1998* TO SEPTEMBER 25, 1998* TO SEPTEMBER 25, 1998* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1999# JUNE 30, 1999# JUNE 30, 1999#
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 10.000 $ 10.000 $ 10.000
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... 0.136 0.066 0.059
Net Realized and Unrealized
Gain/Loss........................ 1.969 1.962 2.065
------- ------- -------
Total From Investment Operations... 2.105 2.028 2.124
------- ------- -------
DISTRIBUTIONS
Net Investment Income.............. (0.125) (0.106) (0.106)
------- ------- -------
NET ASSET VALUE, END OF PERIOD....... $ 11.980 $ 11.922 $ 12.018
------- ------- -------
------- ------- -------
TOTAL RETURN (1)..................... 21.22%** 20.40%** 21.40%**
------- ------- -------
------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $ 1,189 $ 614 $ 480
Ratio of Expenses to Average Net
Assets............................. 1.80% 2.55% 2.55%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. 1.57% 0.77% 0.69%
Portfolio Turnover Rate.............. 9%** 9%** 9%**
- ----------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period.......
Per Share Benefit to Net Investment
Income/Loss...................... $ 1.02 $ 1.02 $ 1.16
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 13.55% 14.45% 16.07%
Net Investment Income/Loss to
Average Net Assets............... (10.17)% (11.12)% (12.83)%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen Global Franchise Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland Corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation. The Fund commenced operations on September 25, 1998.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
---------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------------ -------- --------
<S> <C> <C>
First..................................... 5.00% 1.00%
Second.................................... 4.00% None
Third..................................... 3.00% None
Fourth.................................... 2.50% None
Fifth..................................... 1.50% None
Thereafter................................ None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
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 between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. 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 Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income transactions. However, 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.
------------------
11
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund 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, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- --------- ----------- ----------- ---------------
<S> <C> <C> <C>
$ 2,057 $ 301 $ (67) $ 234
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: 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.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par. For
the year ended June 30, 1999, approximately $57,000 has been reclassified from
paid in capital in excess of par with approximately $50,000 posted to
accumulated net investment income and approximately $7,000 posted to accumulated
net realized gain.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary 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 Fund, 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------- ----------------- -----------------
<S> <C> <C>
1.00% 1.80% 2.55%
</TABLE>
At June 30, 1999, Van Kampen Funds, Inc. owned 40%, 58%, and 75% of the shares
outstanding of each Class A, B, and C shares in the Fund.
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 the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the period ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $12,307 for Class A shares and a deferred sales charge of $30 for
Class C shares.
Prior to October 1, 1998, the Fund's assets held outside the United States were
held by Morgan Stanley Trust Company ("MSTC"), a former affiliate of the
Subadvisers. Through September 30, 1998, the Fund incurred MSTC fees of $394. On
October 1, 1998, the Chase Manhattan Bank purchased MSTC.
- ------------------
12
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
During the year ended June 30, 1999, the Fund incurred $314 as brokerage
commissions with Morgan Stanley & Co. Incorporated, an affiliated broker/dealer.
C. INVESTMENT TRANSACTIONS: For the period ended June 30, 1999, the Fund made
purchases of approximately $2,165,000 and sales of approximately $131,000 of
investment securities other than long-term U.S. government securities and short-
term investments. There were no purchases or sales of long-term U.S. government
securities.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to a security whose value is "derived" from the value of an
underlying asset, reference rate or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's foreign currency exposure. All of the
Fund's portfolio holdings, including derivative instruments, are
marked-to-market each day with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when exercising a call option contract or taking
delivery of a security underlying a forward contract. In this instance, the
recognition of gain or loss is postponed until the disposal of the security
underlying the option or forward contract. Risks may arise as a result of the
potential inability of the counterparties to meet the terms of their contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. FORWARD CURRENCY CONTRACTS: These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
At June 30, 1999, the Fund has outstanding forward currency contracts as
follows:
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
VALUE DEPRECIATION
FORWARD CURRENCY CONTRACTS (000) (000)
- ---------------------------------------- ----------- -----------------
<S> <C> <C>
SHORT CONTRACTS:
Euro,
100,000 expiring 11/10/99............. $ 104 $ 5
British Pounds,
235,000 expiring 11/10/99............. 371 13
----- ---
$ 475 $ 18
----- ---
----- ---
</TABLE>
------------------
13
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen Global Franchise Fund:
In our opinion, the accompanying statement 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 Van Kampen Global Franchise Fund
(the "Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the
results of its operations, the changes in its net assets and the financial
highlights for the period September 25, 1998 (commencement of operations)
through June 30, 1999, 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 audit. We conducted our audit 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 audit, which included
confirmation of securities at June 30, 1999 by correspondence with the
custodian, provides a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
- ------------------
14
<PAGE>
VAN KAMPEN GLOBAL FRANCHISE FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the percentage of dividends paid that qualify
for the 70% dividend received deduction for corporate shareholders is 6.00%.
For the year ended June 30, 1999, the Fund intends to pass through foreign tax
credits of $4,701 and has derived gross income from sources within foreign
countries amounting to $34,964.
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate Corporation and
Allstate Insurance Company
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.
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/ National Research
Council, and former Chairman of the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR
REPRESENTATIVE OR THE INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
[LOGO]
1 Parkview Plaza - P.O. Box 5555 - Oakbrook Terrace, IL
60181-5555 - www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
EMERGING MARKETS FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 9
Statement of Operations............................................... 10
Statement of Changes in Net Assets.................................... 11
Financial Highlights ................................................. 12
Notes to Financial Statements......................................... 13
Report of Independent Accountants..................................... 16
Additional Information................................................ 17
</TABLE>
MSEM ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, and by 2.3 percent in the second quarter. The
expansion was fueled by an increase in consumer spending, which was attributed
to vibrant consumer confidence as a result of the strong job market.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although it had expressed a bias toward a series of
rate increases, May's tame CPI report prompted the Fed to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the
closing midline federal funds rate on the
last day of each month. Inflation is
indicated by the annual percentage change
of the Consumer Price Index for all urban
consumers at the end of each month.
- --------------
2
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Brazil 10.8%
India 8.4%
Indonesia 3.4%
Korea 16.7%
Mexico 12.9%
Russia 4.0%
South Africa 6.9%
Taiwan 10.8%
Thailand 3.1%
Turkey 4.0%
Short-Term Investment 2.0%
Other 17.0%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
---------------------------------------------------------------------
COMMENCEMENT DATE
-----------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION
------------------------ ------------------------
WITHOUT WITHOUT
WITH SALES SALES WITH SALES SALES
CHARGE* CHARGE*** CHARGE* CHARGE***
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares 16.74 % 23.92 % -2.55 % -1.39 % 7/6/94
- ---------------------------------------------------------------------------------------------
Class B Shares 17.99 % 22.99 % -0.82 % -0.25 % 8/1/95
- ---------------------------------------------------------------------------------------------
Class C Shares 22.09 % 23.09 % -2.09 % -2.09 % 7/6/94
- ---------------------------------------------------------------------------------------------
IFC Global Total
Return Composite Index N/A 29.66 % N/A -1.01 % N/A
- ---------------------------------------------------------------------------------------------
</TABLE>
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).
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY COUNTRY NET ASSETS
- ---------------------------- --------- -------------
<S> <C> <C>
Korea Telecom Corp. Korea 4.0%
Telmex Mexico 3.6%
Televisa Mexico 2.8%
Korea Electric Power Corp. Korea 2.7%
FEMSA Mexico 2.2%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ---------------------------- --------- -------------
<S> <C> <C>
Services $ 39,145 31.7%
Finance 22,009 17.8%
Consumer Goods 16,671 13.5%
Capital Equipment 16,595 13.4%
Materials 12,824 10.4%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Emerging Markets Fund Class A IFC Global Total Return Composite Index
7/6/94 $9,500 $10,000
6/30/95 $8,422 $9,868
6/30/96 $9,614 $10,698
6/30/97 $10,915 $11,908
6/30/98 $7,096 $7,314
6/30/99 $8,793 $9,899
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN EMERGING MARKETS
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST 12 MONTHS. THE TEAM IS LED BY PORTFOLIO MANAGERS ROBERT MEYER AND ANDY SKOV
OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. MR. MEYER HAS BEEN A MEMBER
OF THE FUND'S MANAGEMENT TEAM SINCE 1997, WHILE MR. SKOV JOINED THE TEAM IN
1998. THE FOLLOWING EXCERPTS REFLECT THEIR VIEWS ON THE FUND'S PERFORMANCE
DURING THE 12-MONTH PERIOD ENDED JUNE 30, 1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST YEAR?
A: During the third quarter of 1998, continued economic weakness in Asia spread
to Russia, and there were warning signs that Asia's problems were beginning to
affect Europe and the United States. The defining moment of the period came in
mid-August when Russia devalued its currency
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.
3------------------
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
AND DEFAULTED ON ITS DEBT, SENDING FINANCIAL AND CURRENCY MARKETS WORLDWIDE INTO
A TAILSPIN. PACED BY THE FEDERAL RESERVE BOARD AND THE EUROPEAN CENTRAL BANK
(ECB), CENTRAL BANKS WORLDWIDE LOWERED INTEREST RATES DURING THE FOURTH QUARTER
OF 1998. THE INTEREST-RATE CUTS RENEWED INVESTOR CONFIDENCE AND HELPED REVIVE
STOCK MARKETS IN EUROPE AND THE UNITED STATES.
In 1999, declining interest rates and a focus on corporate cost-cutting helped
revive many emerging markets, particularly in Asia. In Latin America, the most
notable market event was Brazil's devaluation of its currency in January.
Despite a nearly 40 percent correction, the Brazilian stock market rebounded
quickly. Some of the rebound can be attributed to the unexpected appointment of
Arminio Fraga as head of the Central Bank. Fraga's financial market expertise
and shareholder focus has aided market sentiment toward Brazil, and in turn,
Latin America.
Q: WHAT OTHER FACTORS AIDED THE RECOVERY IN EMERGING MARKETS?
A: Both internal and external factors drove the recovery. Externally, the
emerging markets have been supported by a recovery in global economic growth,
low interest rates, improving investor sentiment, and recovering commodity
prices. Specifically, Latin America has benefited from a benign U.S. economic
environment; Asian markets have benefited from positive signs of growth in
Japan; and emerging European countries have been supported by increasingly
resilient economic numbers from Western Europe. Finally, rising oil prices have
positively affected the trade accounts of countries that export oil, such as
Mexico, Russia, Venezuela, Indonesia, Egypt, and Colombia.
Internally, the emerging markets have begun to focus on better macroeconomic
management and corporate restructuring, particularly in Asia. For example, South
Korean officials have significantly reduced domestic interest rates and
corporations are focusing on cost efficiencies and profit margin improvements.
As a result, investor sentiment has improved and the emerging markets have
surged.
Q: WHAT STRATEGIES DID YOU PURSUE IN THIS ENVIRONMENT?
A: Our investment strategy is to identify the potential for positive change,
first at the country level and then at the stock level. For this reason, we seek
out countries with an improving economic, social, and political climate, and
favor markets that we believe to be undervalued. We then research stocks in
these countries, selecting those with strong earnings potential and reasonable
valuations.
During the period, we increased our overweighted position in Asia due to current
account and fiscal surpluses, strong foreign direct investment, company-level
reforms (e.g., bankruptcy laws), and declining interest rates (below precrisis
levels in some countries). We added to our oil sector stocks in order to
participate in the recovery of oil prices. In addition, we increased our
exposure to Mexico given its sound economic management and attractive stock
opportunities. Finally, we increased our banking exposure in markets where we
saw, or anticipated, declines in real interest rates, such as Israel, Turkey,
and South Africa.
The economic crisis in emerging markets made stock selection difficult during
the first six months of the period. The Fund's performance was hindered by large
positions in Turkey, Brazil, and Mexico, countries that did not perform well,
coupled with underweight exposure to Greece, which was up nearly 23 percent
during the second half of 1998. Disappointing stock returns in Asia also
detracted from the Fund's performance, but we did recover some of our losses
with significant positions in Korea and Thailand that benefited the Fund's
return. Another notable setback at this time was our overweighted position in
Pakistan.
Q: HOW DID THE SITUATION IMPROVE IN 1999?
A: During the first quarter of 1999, our stock selection and allocation
decisions in Brazil had the greatest effect on the Fund's performance.
Specifically, we underweighted the Fund in Brazil prior to its currency
devaluation and quickly increased our exposure after this event, which helped
the Fund return nearly 12 percent during the first three months of the year.
Other positive contributors to performance during this quarter included our
underweighted positions in Columbia and Venezuela, two countries that
disappointed, as well as strong stock selection in Mexico, India, South Korea,
and Thailand.
During the second quarter of 1999, we increased the Fund's exposure to Russia
and Indonesia, oil exporters that benefited when oil prices increased. We also
took advantage of declining interest
- -------------- 4
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
rates in Brazil and Asia by overweighting the banking sector in both of these
regions. In addition, Asia's focus on bank reforms helped the Fund as we
increased its exposure to South Korea and Indonesia.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: After a disappointing first three months, the Fund's performance rebounded
strongly. Specifically, the Fund fell 24 percent during the first three months
of the period. At that time, the Russian ruble devalued leading to a widespread
sell-off across the emerging markets. During the last nine months of the period,
however, the Fund appreciated nearly 64 percent. Its recovery was primarily
driven by strong returns in Asia. In the past nine months, Asia has surged more
than 100 percent, while Europe and the Middle East have gained 55 percent and
Latin America has risen more than 40 percent.
For Class A shares at net asset value without sales charge, the Fund generated a
total return of 23.92 percent for the 12 months ended June 30, 1999. By
comparison, the IFC Global Total Return Composite Index generated a total return
of 29.66 percent for the same period. Past performance does not guarantee future
results.
Q: WHAT IS YOUR OUTLOOK IN THE MONTHS AHEAD?
A: While it is difficult to predict the short-term outlook for the markets, we
believe that the rally that began during the fourth quarter of 1998 is the
beginning of a long-term bull run for many of the emerging markets. We look for
additional corporate cost-cutting and banking reforms in Asia to provide
attractive investment options for the Fund and will continue to seek out
opportunities in eastern Europe as countries there improve their fiscal
discipline in order to qualify for monetary union.
Robert Meyer Andy Skov
PORTFOLIO PORTFOLIO
MANAGER MANAGER
5------------------
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ------------------------------------------------------------
COMMON STOCKS (90.4%)
ARGENTINA (0.7%)
Telecom Argentina ADR............ 28,526 $ 763
Telefonica de Argentina ADR...... 3,248 102
--------
865
--------
BRAZIL (4.4%)
CEMIG ADR........................ 19,217 408
Coteminas........................ 1,384,100 70
(b,c)Coteminas ADR............... 12,645 32
(a)CRT........................... 3,828,145 519
CVRD ADR......................... 31,619 628
Eletrobras ADR................... 24,520 247
Eletrobras S.A................... 2,328,560 44
Embratel Participacoes ADR....... 21,814 303
(a)Lojas Arupau ADR.............. 14,225 --
Pao de Acucar.................... 4,660,000 87
Pao de Acucar ADR................ 3,367 63
Petrobras ADR.................... 4,950 76
Tele Celular Sul ADR............. 2,790 61
Tele Centro Oeste Sul............ 2,311,729 2
Tele Centro Sul.................. 3,818 212
Tele Nordeste Celular ADR........ 1,095 30
Tele Norte Leste................. 12,849 239
Telemig Celular ADR.............. 1,365 34
Telesp Celular ADR............... 18,207 487
Telesp........................... 7,480 171
TeleSudeste Celular.............. 3,523 102
Unibanco GDR..................... 62,551 1,505
USIMINAS ADR (Registered
Shares)........................ 6,605 22
--------
5,342
--------
CHILE (0.6%)
CCU ADR.......................... 7,506 215
ENDESA ADR....................... 12,984 157
Enersis ADR...................... 13,863 317
(a)Santa Isabel ADR.............. 5,015 51
--------
740
--------
CHINA (0.7%)
Huaneng Power International, Inc.
ADR............................ 14,095 241
Yanzhou Coal Mining Co. ADR...... 18,228 324
Zhenhai Refining & Chemical Co.
`H'............................ 1,117,000 338
--------
903
--------
CZECH REPUBLIC (0.6%)
SPT Telecom a.s.................. 37,872 611
SPT Telecom a.s. GDR............. 10,260 166
--------
777
--------
EGYPT (0.6%)
(a)Al-Ahram Beverages Co. S.A.E.
GDR............................ 5,988 170
Eastern Tobacco.................. 7,721 188
Egypt Gas Co..................... 2,900 119
Egyptian Co. for Mobile
Services....................... 10,098 228
Industrial & Engineering......... 4,975 39
--------
744
--------
GREECE (2.0%)
Commercial Bank of Greece S.A.... 613 44
OTE S.A.......................... 60,701 1,303
OTE S.A. ADR..................... 98,506 1,089
--------
2,436
--------
HUNGARY (0.8%)
Matav Rt......................... 19,822 107
Matav Rt. ADR.................... 11,640 320
Matav Rt. ADR.................... 9,549 263
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ------------------------------------------------------------
MOL Magyar Olaj-es Gazipari Rt.
GDR............................ 3,796 $ 91
OPT Bank Rt...................... 5,985 250
--------
1,031
--------
INDIA (8.4%)
Bharat Heavy Electricals Ltd..... 155,500 881
Container Corp. of India Ltd..... 109,500 459
Gujarat Ambuja Cements Ltd....... 23,500 173
Hero Honda Motors Ltd............ 41,305 1,028
Hindustan Lever Ltd.............. 17,100 938
Housing Development Finance
Corp., Ltd..................... 7,644 391
Infosys Technologies Ltd......... 22,300 1,863
ITC Limited...................... 9,000 206
ITC Limited...................... 20,100 507
Larson & Tourbo Ltd. `A'......... 68,700 453
Mahanagar Telephone Nigam Ltd.... 53,000 220
Mahanagar Telephone Nigam Ltd.... 40,000 171
MRF Ltd.......................... 5,000 220
NIIT Ltd......................... 12,000 562
Satyam Computer Services Ltd..... 28,000 818
(a)State Bank of India........... 102,100 558
Tata Engineering & Locomotive
Co., Ltd....................... 49,500 235
Videsh Sanchar Nigam Ltd. GDR.... 8,900 114
(a)Zee Telefilms Ltd............. 18,000 603
--------
10,400
--------
INDONESIA (3.4%)
PT Gudang Garam Tbk (Foreign).... 563,925 1,532
PT Indah Kiat Pulp & Paper Corp.
(Foreign)...................... 1,260,080 586
PT Semen Gresik Tbk.............. 224,700 489
PT Telekomunikasi Indonesia
ADR............................ 129,384 1,609
--------
4,216
--------
ISRAEL (2.9%)
(a)Amdocs Ltd.................... 22,700 516
(a)BackWeb Technologies Ltd...... 2,280 62
Bank Hapoalim Ltd................ 96,700 248
Bank Leumi Le-Israel Ltd......... 124,800 236
(a)Comverse Technology, Inc...... 2,907 220
ECI Telecommunications Ltd....... 16,214 538
Elbit Systems Ltd................ 1 --
(a)Gilat Satellite Networks
Ltd............................ 10,332 543
Koor Industries Ltd.............. 3,056 353
(a)NICE-Systems Ltd.............. 2,319 63
(a)NICE-Systems Ltd. ADR......... 6,220 171
(a)Orbotech Ltd.................. 5,256 274
Teva Pharmaceutical Industries
Ltd. ADR....................... 6,615 324
--------
3,548
--------
KOREA (16.6%)
Daewoo Securities, Co............ 19,040 370
Good Morning Securities Co.,
Ltd............................ 74,860 462
Hana Bank........................ 34,640 509
Hankuk Glass Industry Co.,
Ltd............................ 9,660 259
Housing & Commercial Bank........ 39,250 1,238
Kookmin Bank..................... 68,800 1,397
Kookmin Bank GDR................. 1,708 35
Koram Bank....................... 34,740 435
Korea Electric Power Corp........ 32,690 1,358
Korea Electric Power Corp. ADR... 94,180 1,931
Korea Exchange Bank.............. 85,920 482
(b)Korea Telecom Corp............ 39,080 2,593
(a)Korea Telecom Corp. ADR....... 58,600 2,344
LG Securities Co................. 4,820 81
LG Chemical Ltd.................. 13,140 358
(b)Pohang Iron & Steel Ltd.
(Foreign)...................... 15,866 1,953
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<S> <C> <C>
Samsung Electro-Mechanics Co..... 10,829 $ 374
Samsung Electronics Co.
(Foreign)...................... 27,321 2,998
Shinhan Bank Co. Ltd............. 37,000 415
(b)SK Telecom Co., Ltd........... 539 740
SK Telecom Co., Ltd. ADR......... 12,890 219
--------
20,551
--------
MALAYSIA (3.0%)
Commerce Asset-Holdings Bhd...... 205,000 507
Malayan Banking Bhd.............. 267,000 801
Nestle Bhd....................... 60,000 237
Public Bank Bhd.................. 236,000 180
Rothmans of Pall Mall Bhd........ 73,000 552
Telekom Malaysia Bhd............. 292,000 1,091
Tenaga Nasional Bhd.............. 150,000 345
--------
3,713
--------
MEXICO (12.9%)
Alfa............................. 71,278 296
Banacci `L'...................... 177,316 433
Banacci `O'...................... 129,543 327
(a)Carso `A1'.................... 68,984 320
Cemex `B'........................ 8,992 45
Cemex `B' ADR.................... 85,345 843
Cemex CPO........................ 205,048 1,014
Cemex CPO ADR.................... 52,824 502
(a)Cifra `C'..................... 155,524 285
(a)Cifra `V'..................... 42,653 83
(a)Cifra `V' ADR................. 21,660 415
FEMSA............................ 361,047 1,445
FEMSA ADR........................ 30,581 1,219
(a)Grupo Financiero Bancomer S.A.
de C.V. `O'.................... 447,556 162
(c)Grupo Financiero Bancomer S.A.
de C.V. `O' ADR................ 31,915 231
Kimberly `A'..................... 120,293 495
Telmex ADR....................... 54,613 4,413
(a)Televisa CPO GDR.............. 76,887 3,436
--------
15,964
--------
PAKISTAN (0.4%)
Fauji Fertilizer Co., Ltd........ 256,900 200
Pakistan State Oil Co., Ltd...... 125,572 221
Pakistan Telecommunication Corp.
`A'............................ 144,300 55
--------
476
--------
PHILIPPINES (1.0%)
Manila Electric Co. `B'.......... 90,610 327
San Miguel Corp. `B'............. 267,557 585
SM Prime Holdings, Inc........... 1,560,940 353
--------
1,265
--------
POLAND (2.5%)
(a)Bank Polska Kasa Opieki Pekao
S.A............................ 5,979 69
Elektrim S.A..................... 32,995 466
Powszechny Bank Kredytowy S.A.... 4,503 108
(a)Powszechny Bank Kredytowy S.A.
`C'............................ 1,125 20
Prokom Software GDR.............. 14,833 243
(a)Telekomunikacja Polska GDR.... 287,808 2,029
Wielkopolski Bank Kredytowy...... 15,798 93
--------
3,028
--------
RUSSIA (3.5%)
A.O. Tatneft ADR................. 4,300 16
Lukoil Oil Co. ADR............... 36,053 1,474
(a,b)Mustcom..................... 4,570,885 954
(a,b,d)Storyfirst Communications,
Inc............................ 600 453
Surgutneftegaz ADR............... 147,009 1,240
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ------------------------------------------------------------
RAO Unified Energy Systems GDR... 15,080 $ 146
--------
4,283
--------
SINGAPORE (0.9%)
(a)Asia Pulp & Paper Co., Ltd.
ADR............................ 113,725 1,095
--------
SOUTH AFRICA (6.9%)
Amalgamated Banks of South
Africa......................... 101,910 577
(a)Anglo American plc............ 3,500 166
(a)Anglo American plc............ 18,340 857
(a)Anglo American plc ADR........ 220 11
B.O.E. Corp., Ltd. `N'........... 833,254 663
B.O.E. Corp., Ltd................ 104,460 104
Bidvest Group Ltd................ 128,640 1,074
Billiton Plc..................... 84,200 291
Comparex Holdings Ltd............ 25,640 161
De Beers Centenary AG............ 10,840 260
De Beers Consolidated Mines
ADR............................ 5,220 125
Ellerine Holdings Ltd............ 60,710 241
Firstrand Ltd.................... 616,420 705
Liberty Life Association of
Africa Ltd..................... 20,518 263
Nedcor Ltd....................... 23,750 545
(a)New Africa Investments Ltd.
`N'............................ 394,410 232
Rembrant Group Ltd............... 85,390 712
(a)Sanlam Ltd.................... 354,900 421
Sasol Ltd........................ 19,800 141
(a)South African Breweries
Ltd............................ 87,490 749
(a)South African Breweries
Ltd............................ 13,140 114
The Education Investment Corp.,
Ltd............................ 147,892 139
--------
8,551
--------
TAIWAN (10.8%)
(a)Acer, Inc..................... 138,000 350
(a)Advanced Semiconductor
Engineering, Inc............... 182,000 614
Asustek Computer, Inc............ 195,980 2,209
Bank Sinopac..................... 415,000 289
Cathay Life Insurance Co.,
Ltd............................ 111,000 399
Chang Hwa Commercial Bank........ 122,000 183
(a)China Development Corp........ 47,000 117
China Steel Corp................. 682,500 516
(a)Chinatrust Commercial Bank.... 317,000 381
Compal Electronics, Inc.......... 149,760 589
(a)E. Sun Commercial Bank........ 173,000 96
(a)Far Eastern Textile Ltd....... 562,000 835
First Commercial Bank............ 110,000 209
Formosa Plastics Corp............ 213,000 448
(a)Hon Hai Precision Industry.... 115,000 1,040
Hua Nan Commercial Bank.......... 134,000 266
International Commercial Bank of
China.......................... 259,000 335
Nan Ya Plastic Corp.............. 276,000 457
(a)President Chain Store Corp.... 64,153 217
Quanta Computer Inc.............. 24,120 289
(a)Shinkong Synthetic Fibers
Corp........................... 1 --
(a)Siliconware Precision
Industries Co.................. 220,349 420
(a)Taishin International Bank.... 464,000 345
(a)Taiwan Semiconductor Co....... 645,750 2,469
(a)Taiwan Semiconductor Co.
ADR............................ 3,996 136
United World Chinese Commercial
Bank........................... 77,000 119
--------
13,328
--------
THAILAND (2.8%)
Advanced Info Service Public Co.,
Ltd. (Foreign)................. 93,200 1,263
BEC World Public Co., Ltd........ 65,100 406
Delta Electronics Public Co.,
Ltd. (Foreign)................. 54,337 457
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------
<S> <C> <C>
THAILAND (CONT.)
Shin Corp. Public Co., Ltd.
(Foreign)...................... 123,280 $ 575
Siam City Cement Public Co., Ltd.
(Foreign)...................... 146,833 605
Thai Farmer's Bank Public Co.
Ltd. (Foreign)................. 29,000 90
--------
3,396
--------
TURKEY (4.0%)
Akbank T.A.S..................... 35,010,500 515
(c)Akbank T.A.S. ADR............. 8,080 24
Dogan Sirketler Grupo Holdings
A.S............................ 44,840,000 595
Ege Biracilik Ve Malt Sanayii.... 3,565,500 266
(a)Erciyas Biracilik Ve Malt
Sanayii........................ 1,555,488 36
Kos Holdings A.S................. 2,912,000 183
Migros Turk T.A.S................ 174,000 217
Sabanci Holding.................. 10,227,000 228
Turkiye Petrol Rafinerileri
A.S............................ 1,910,000 127
(a)Turkiye Garanti Bankasi....... 39,243,400 293
Turkiye Is Bankasi, `C'.......... 14,848,000 264
(a)Vestel Elektronik Sanayii ve
Ticaret A.S.................... 4,563,470 498
Yapi Ve Kredi Bankasi A.S........ 112,988,405 1,633
--------
4,879
--------
TOTAL COMMON STOCKS............................... 111,531
--------
PREFERRED STOCKS (6.7%)
BRAZIL (6.4%)
(a,b)Banco Nacional.............. 11,156,000 --
Brahma........................... 596,081 336
CRT.............................. 3,828,145 939
CEMIG............................ 35,414,681 745
CVRD `A'......................... 31,083 615
Eletrobras `B'................... 3,592,000 72
Embratel Participacoes `A'....... 8,970,552 124
(a)Lojas Arapua.................. 12,437,000 --
Petrobras........................ 7,248,400 1,122
Telebras ADR..................... 4,839 436
Telebras......................... 14,958,000 1,338
Tele Celular Sul ADR............. 51,006,152 107
Tele Centro Sul.................. 33,238,552 368
Tele Nordeste Celular............ 11,378,752 15
Tele Norte Leste................. 5,725,552 104
Tele Sudeste Celular............. 46,446,552 262
Telemig Celular.................. 56,455,552 71
Telerj Celular................... 2,082,000 68
Telesp........................... 6,990,552 160
Telesp Celular................... 33,604,552 348
Telesp Celular................... 9,786,261 509
(a)USIMINAS...................... 37,900 128
--------
7,867
--------
COLOMBIA (0.0%)
BanColombia...................... 7,150 10
--------
THAILAND (0.3%)
(a)Siam Commercial Bank.......... 238,800 340
--------
TOTAL PREFERRED STOCKS............................ 8,217
--------
INVESTMENT COMPANIES (0.0%)
UNITED STATES (0.0%)
(e)Morgan Stanley Dean Witter
Africa Investment Fund, Inc.... 4,470 45
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF VALUE
RIGHTS (000)
<S> <C> <C>
- ------------------------------------------------------------
RIGHTS (0.1%)
BRAZIL (0.0%)
(a,b)CRT......................... 3,828,145 $ --
--------
KOREA (0.1%)
(a,b)SK Telecom Co., Ltd......... 499 63
--------
SOUTH AFRICA (0.0%)
(a)Liberty Internationl plc...... 9,565 63
--------
TOTAL RIGHTS...................................... 126
--------
NO. OF
WARRANTS
-----------
WARRANTS (0.3%)
THAILAND
(a)Siam Commercial Bank (expiring
12/31/02)...................... 111,466 --
(a)Siam Commercial Bank (expiring
5/10/02)....................... 658,000 424
--------
424
--------
<CAPTION>
PAR
VALUE
(000)
-----------
<S> <C> <C>
CONVERTIBLE DEBENTURE (0.5%)
RUSSIA (0.5%)
(a,b)Svyaz Finance Ltd. 17.00%,
8/11/99........................ $ 2,684,488 660
--------
TOTAL LONG-TERM INVESTMENTS (98.0%) (COST
$110,577)......................................... 121,003
--------
SHORT-TERM INVESTMENT (2.0%)
REPURCHASE AGREEMENT (2.0%)
Chase Securities, Inc., 4.55%,
dated 6/30/99, 2,404
due 7/1/99, to be repurchased at $2,404
collateralized by $2,235 Treasury Bonds,
7.250%, due 5/15/16, valued at $2,484
(COST $2,404)................................. 2,404
--------
TOTAL INVESTMENTS IN SECURITIES (100.0%) (COST
$112,981)......................................... 123,407
--------
FOREIGN CURRENCY (0.6%) (COST $776)............... 774
--------
TOTAL INVESTMENTS (100.6%) (COST $113,757)........ 124,181
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.6%)..... (713)
--------
NET ASSETS (100%)................................. $123,468
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
(b) -- Security valued at fair value-see note A-1 to financial statements
(c) -- 144A Security - Certain conditions for public sale may exist.
(d) -- Restricted as to public resale. Total value of restricted securities
at June 30, 1999 was $453,000 or 0.37% of net assets (Total cost
$1,500,000).
(e) -- 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
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- ------------------------------------------ --------- -------------
<S> <C> <C>
Services.................................. $ 39,145 31.7%
Finance................................... 22,009 17.8
Consumer Goods............................ 16,671 13.5
Capital Equipment......................... 16,595 13.4
Materials................................. 12,824 10.4
Energy.................................... 11,488 9.3
Multi-Industry............................ 2,271 1.9
--------- ---
$ 121,003 98.0%
--------- ---
--------- ---
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- -----------------------------------------------
ASSETS:
Investments in Securities, at Value
(Cost $112,981).................. $123,407
Foreign Currency (Cost $776)....... 774
Receivable for:
Investments Sold................. 1,779
Dividends........................ 508
Fund Shares Sold................. 446
Interest......................... 406
Foreign Withholding Tax Reclaim.... 2
Other.............................. 18
--------
Total Assets..................... 127,340
--------
LIABILITIES:
Payable for:
Investments Purchased............ 2,866
Custody Fees..................... 246
Deferred Country Tax............. 231
Distribution Fees................ 134
Fund Shares Redeemed............. 131
Investment Advisory Fees......... 81
Bank Overdraft................... 58
Professional Fees................ 35
Administrative Fees.............. 25
Transfer Agent Fees.............. 25
Shareholder Reporting Expenses... 24
Directors' Fees and Expenses..... 14
Other.............................. 2
--------
Total Liabilities................ 3,872
--------
NET ASSETS........................... $123,468
--------
--------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 13
Paid in Capital in Excess of Par... 172,856
Net Unrealized Appreciation on
Investments and Foreign Currency
Translations*.................... 10,264
Accumulated Net Investment Loss.... (554)
Accumulated Net Realized Loss...... (59,111)
--------
NET ASSETS........................... $123,468
--------
--------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $63,273,132 and
6,413,606 Shares Outstanding).... $ 9.87
--------
--------
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100/
(100 - maximum sales charge)).... $ 10.47
--------
--------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$38,312,954 and 4,010,764 Shares
Outstanding)**................... $ 9.55
--------
--------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$21,882,158 and 2,286,771 Shares
Outstanding)**................... $ 9.57
--------
--------
</TABLE>
- ---------------
* Net of accrual for deferred country tax of approximately U.S.
$144,000.
** Redemption price may be subject to a contingent deferred sales charge.
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- -----------------------------------------------
INVESTMENT INCOME:
Dividends.......................... $ 2,508
Interest........................... 607
Less Foreign Taxes Withheld........ (136)
--------
Total Income...................... 2,979
--------
EXPENSES:
Investment Advisory Fees........... 1,337
Distribution Fees (Attributed to
Classes A, B, and C of $141,
$299, and $205, respectively).... 645
Custodian Fees..................... 476
Administrative Fees................ 285
Country Tax Expense................ 88
Transfer Agent Fees................ 71
Shareholder Reports................ 64
Professional Fees.................. 52
Interest Expense................... 45
Filing and Registration Fees....... 38
Directors' Fees and Expenses....... 11
Other.............................. 12
--------
Total Expenses................... 3,124
Less Expense Reductions.......... (239)
--------
Net Expenses..................... 2,885
--------
Net Investment Income/Loss........... 94
--------
NET REALIZED GAIN/LOSS ON:
Investments........................ (31,019)
Foreign Currency Transactions...... (120)
Swaps.............................. (226)
--------
Net Realized Gain/Loss............ (31,365)
--------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ (37,352)
--------
End of the Period:
Investments...................... 10,426
Foreign Currency Translations.... (162)
--------
10,264
--------
Net Unrealized
Appreciation/Depreciation During
the Period......................... 47,616
--------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... 16,251
--------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $ 16,345
--------
--------
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ 94 $ (617)
Net Realized Gain/Loss.......................... (31,365) (23,236)
Net Unrealized Appreciation/Depreciation........ 47,616 (57,677)
-------- ---------------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 16,345 (81,530)
-------- ---------------
DISTRIBUTIONS:
Net Realized Gain:
Class A......................................... -- (6,225)
Class B......................................... -- (3,112)
Class C......................................... -- (2,878)
In Excess of Net Realized Gain:
Class A......................................... (1) (2,361)
Class B......................................... (1) (1,180)
Class C......................................... (1) (1,091)
-------- ---------------
(3) (16,847)
-------- ---------------
Return of Capital:
Class A......................................... (29) --
Class B......................................... (14) --
Class C......................................... (9) --
-------- ---------------
(52) --
-------- ---------------
Net Decrease in Net Assets Resulting from
Distributions................................... (55) (16,847)
-------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed...................................... 59,525 160,772
Distributions Reinvested........................ 54 15,915
Redeemed........................................ (92,463) (151,194)
-------- ---------------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... (32,884) 25,493
-------- ---------------
Total Increase/Decrease in Net Assets........... (16,594) (72,884)
NET ASSETS--Beginning of Period................... 140,062 212,946
-------- ---------------
NET ASSETS--End of Period (Including accumulated
net investment loss of $(554) and $(1,090),
respectively)................................... $ 123,468 $140,062
-------- ---------------
-------- ---------------
- ---------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
----------
Shares:
Subscribed................................... 6,660 10,304
Distributions Reinvested..................... 4 891
Redeemed..................................... (9,639) (10,645)
-------- ---------------
Net Increase/Decrease in Class A Shares
Outstanding.................................. (2,975) 550
-------- ---------------
-------- ---------------
Dollars:
Subscribed................................... $ 48,869 $114,410
Distributions Reinvested..................... 30 8,101
Redeemed..................................... (68,213) (115,555)
-------- ---------------
Net Increase/Decrease.......................... $ (19,314) $ 6,956
-------- ---------------
-------- ---------------
Ending Paid in Capital......................... $ 88,430+ $107,744
-------- ---------------
-------- ---------------
Class B:
----------
Shares:
Subscribed................................... 935 2,827
Distributions Reinvested..................... 2 457
Redeemed..................................... (1,605) (1,321)
-------- ---------------
Net Increase/Decrease in Class B Shares
Outstanding.................................. (668) 1,963
-------- ---------------
-------- ---------------
Dollars:
Subscribed................................... $ 7,223 $ 33,891
Distributions Reinvested..................... 14 4,064
Redeemed..................................... (11,281) (13,053)
-------- ---------------
Net Increase/Decrease.......................... $ (4,044) $ 24,902
-------- ---------------
-------- ---------------
Ending Paid in Capital......................... $ 52,409+ $ 56,453
-------- ---------------
-------- ---------------
Class C:
----------
Shares:
Subscribed................................... 462 1,061
Distributions Reinvested..................... 1 421
Redeemed..................................... (1,857) (2,173)
-------- ---------------
Net Increase/Decrease in Class C Shares
Outstanding.................................. (1,394) (691)
-------- ---------------
-------- ---------------
Dollars:
Subscribed................................... $ 3,433 $ 12,471
Distributions Reinvested..................... 10 3,750
Redeemed..................................... (12,969) (22,586)
-------- ---------------
Net Increase/Decrease.......................... $ (9,526) $ (6,365)
-------- ---------------
-------- ---------------
Ending Paid in Capital......................... $ 32,835+ $ 42,361
-------- ---------------
-------- ---------------
</TABLE>
- ---------------
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------- JULY 6, 1994* TO
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 1996 JUNE 30, 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 7.984 $ 13.47 $ 12.06 $ 10.61 $ 12.00
------- ------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss....... 0.032 -- 0.01 0.05 0.05
Net Realized and Unrealized
Gain/Loss...................... 1.853 (4.49) 1.57 1.44 (1.44)
------- ------- -------- -------- -------
Total From Investment
Operations..................... 1.885 (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... (0.004) (0.27) -- -- --
Return of Capital................ (0.000)++ -- -- -- --
------- ------- -------- -------- -------
Total Distributions.............. (0.004) (1.00) (0.17) (0.04) --
------- ------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD....... $ 9.865 $ 7.98 $ 13.47 $ 12.06 $ 10.61
------- ------- -------- -------- -------
------- ------- -------- -------- -------
TOTAL RETURN (1)..................... 23.92% (34.31)% 13.54% 14.16% (11.58)%**
------- ------- -------- -------- -------
------- ------- -------- -------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $63,273 $74,959 $119,022 $114,850 $ 26,091
Ratio of Expenses to Average Net
Assets............................. 2.34% 2.27% 2.21% 2.16% 2.33%
Ratio of Net Investment Income/ Loss
to Average Net Assets.............. 0.44% 0.04% (0.06)% 0.93% 0.81%
Portfolio Turnover Rate.............. 132% 99% 82% 42% 32%**
- ------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.02 $ 0.03 $ 0.03 $ 0.02 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.56% 2.60% 2.41% 2.56% 3.10%
Net Investment Income/Loss to
Average Net Assets............... 0.22% (0.24)% (0.27)% 0.53% 0.04%
Ratio of Expenses to Average Net
Assets excluding country tax
expense and interest expense....... 2.15% 2.15% 2.15% 2.15% 2.15%
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
----------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------- AUGUST 1, 1995+
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 7.784 $ 13.24 $ 11.94 $ 10.91
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss....... (0.021) (0.07) (0.03) 0.01
Net Realized and Unrealized
Gain/Loss...................... 1.794 (4.39) 1.50 1.02
------- ------- ------- -------
Total From Investment
Operations..................... 1.773 (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... (0.004) (0.27) -- --
Return of Capital................ (0.000)++ -- -- --
------- ------- ------- -------
Total Distributions.............. (0.004) (1.00) (0.17) --
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD....... $ 9.553 $ 7.78 $ 13.24 $ 11.94
------- ------- ------- -------
------- ------- ------- -------
TOTAL RETURN (1)..................... 22.99% (34.76)% 12.67% 9.45%**
------- ------- ------- -------
------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $38,313 $36,423 $35,966 $ 10,416
Ratio of Expenses to Average Net
Assets............................. 3.09% 3.02% 2.96% 2.91%
Ratio of Net Investment Income/ Loss
to Average Net Assets.............. (0.29)% (0.67)% (0.64)% 0.30%
Portfolio Turnover Rate.............. 132% 99% 82% 42%**
- ------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.02 $ 0.03 $ 0.01 $ 0.02
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 3.31% 3.35% 3.17% 3.31%
Net Investment Income/Loss to
Average Net Assets............... (0.51)% (0.97)% (0.87)% (0.10)%
Ratio of Expenses to Average Net
Assets excluding country tax
expense and interest expense....... 2.90% 2.90% 2.90% 2.90%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------- JULY 6, 1994* TO
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 1996 JUNE 30, 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 7.791 $ 13.26 $ 11.93 $ 10.53 $ 12.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss....... (0.023) (0.08) (0.08) (0.01) --
Net Realized and Unrealized
Gain/Loss...................... 1.805 (4.39) 1.55 1.41 (1.47)
------- ------- ------- ------- -------
Total From Investment
Operations..................... 1.782 (4.47) 1.47 1.40 (1.47)
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income............ -- -- -- -- --
In Excess of Net Investment
Income......................... -- -- (0.01) -- --
Realized Gain.................... -- (0.73) (0.13) -- --
In Excess of Net Realized Gain... (0.004) (0.27) -- -- --
Return of Capital................ (0.000)++ -- -- -- --
------- ------- ------- ------- -------
Total Distributions.............. (0.004) (1.00) (0.14) -- --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD....... $ 9.569 $ 7.79 $ 13.26 $ 11.93 $ 10.53
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN (1)..................... 23.09% (34.73)% 12.66% 13.30% (12.25)%**
------- ------- ------- ------- -------
------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $21,882 $28,680 $57,958 $43,601 $ 22,245
Ratio of Expenses to Average Net
Assets............................. 3.09% 3.01% 2.96% 2.91% 3.08%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (0.32)% (0.76)% (0.79)% (0.11)% 0.06%
Portfolio Turnover Rate.............. 132% 99% 82% 42% 32%**
- ----------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.02 $ 0.03 $ 0.02 $ 0.03 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 3.31% 3.34% 3.17% 3.34% 3.90%
Net Investment Income/Loss to
Average Net Assets............... (0.54)% (1.03)% (1.00)% (0.54)% (0.76)%
Ratio of Expenses to Average Net
Assets excluding country tax
expense and interest expense....... 2.90% 2.90% 2.90% 2.90% 2.90%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Non-Annualized
+ The Fund began offering Class B shares on August 1, 1995.
++ Amount is less than $0.001 per share.
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
- --------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen Emerging Markets Fund, (the "Fund") is organized as a separate
non-diversified fund of Van Kampen Series Fund, Inc., a Maryland Corporation,
which is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective
seeks long-term capital appreciation by investing primarily in equity securities
of emerging country issues. The Fund commenced operations on July 6, 1994.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
--------------------
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------- --------- ---------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
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.
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 between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. 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 Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income transactions. However, 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.
------------------
13
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
The net assets of the Fund include issuers located in emerging markets. There
are certain risks inherent in these investments not typically associated with
investments in the United States, including the smaller size of the markets
themselves, lesser liquidity, greater volatility and potentially less publicly
available information. Emerging markets may be subject to a greater degree of
government involvement in the economy and greater economic and political
uncertainty, which has the potential to extend to government imposed
restrictions on exchange traded transactions and currency transactions. These
restrictions may impact the Fund's ability to buy or sell certain securities or
to repatriate certain currencies to U.S. dollars. Additionally, changes in
currency exchange rates will affect the value of and investment income from such
securities.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund 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, 1999, the Fund had a capital loss carryforward for U.S. Federal
income tax purposes of approximately $45,443,000 which will expire June 30,
2007.
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 the Fund 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 Fund's next
taxable year. For the period from November 1, 1998 to June 30, 1999 the Fund
incurred and elected to defer until July 1, 1999, for U.S. Federal income tax
purposes, net currency and capital losses of approximately $10,331,000.
At June 30, 1999, cost and unrealized appreciation/ depreciation for the U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. (DEPREC.) DEPRECIATION
(000) (000) (000) (000)
------------ ------- ---------- ---------------
<S> <C> <C> <C>
$ 116,854 $26,914 $ (20,361) $ 6,553
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: 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 to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, paid in capital in excess of par. For the
year ended June 30, 1999, approximately $805,000 has been reclassified from paid
in capital in excess of par with approximately $442,000 posted to accumulated
net investment loss and approximately $363,000 posted to accumulated net
realized loss.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary 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 Fund, 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------- ----------------- -----------------
<S> <C> <C>
1.25% 2.15% 2.90%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$5,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
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 the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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
- -----------------------
14
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
Adviser 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
Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B and Class C shares of the Fund, on an
annualized basis, of the average daily net assets attributable to each Class.
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 the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $154,972 for Class A shares and deferred sales charges of $9,133,
$174,193, and $5,977 for Class A shares, Class B shares, and Class C shares,
respectively.
Prior to October 1, 1998, the Fund's assets held outside the United States were
held by Morgan Stanley Trust Company ("MSTC"), a former affiliate of the
Subadvisers. Through September 30, 1998, the Fund incurred MSTC fees of
approximately $104,000. On October 1, 1998, the Chase Manhattan Bank purchased
MSTC.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
During the year ended June 30, 1999, the Fund incurred approximately $49,000 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/ dealer.
At June 30, 1999, the Fund owned shares of affiliated funds for which the Fund
earned dividend income of approximately $30,000 during the period.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $137,936,000 and sales of approximately $171,006,000
of investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sales of long-term U.S.
government securities.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to security whose value is "derived" from the value of an
underlying asset, reference rate or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, foreign currency
exposure, maturity and duration. All of the Fund's portfolio holdings, including
derivative instruments, are marked-to-market each day with the change in value
reflected in unrealized appreciation/depreciation. Upon disposition, a realized
gain or loss is recognized accordingly, except when exercising a call option
contract or taking delivery of a security underlying a forward contract. In this
instance, the recognition of gain or loss is postponed until the disposal of the
security underlying the option or forward contract. Risks may arise as a result
of the potential inability of the counterparties to meet the terms of their
contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. SWAP AGREEMENTS: The Fund may enter into total return 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. Total return swaps involve commitments to pay interest in
exchange for a market-linked return based on a notional amount. To the extent
the total return of the security or index underlying the transactions exceeds or
falls short of the offsetting interest obligation, the Fund 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 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 Fund 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.
------------------
15
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen Emerging Markets Fund:
In our opinion, the accompanying statement 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 Van Kampen Emerging Markets Fund
(the "Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the
results of its operations, the changes in its 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
- -----------------------
16
<PAGE>
VAN KAMPEN EMERGING MARKETS FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the Fund intends to pass through foreign tax
credits of $144,398 and has derived gross income from sources within foreign
countries amounting to $3,308,358.
------------------
17
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at www.vankampen.com --
to view a prospectus, select DOWNLOAD 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.vankampen.com
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest which, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
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
Retired, Formerly 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
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606-8256
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza - P.O. Box 5555 - Oakbrook Terrace, IL
60181-5555 - www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
AMERICAN VALUE FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 9
Statement of Operations............................................... 10
Statement of Changes in Net Assets.................................... 11
Financial Highlights ................................................. 12
Notes to Financial Statements......................................... 13
Report of Independent Accountants..................................... 15
Additional Information................................................ 16
</TABLE>
MSAV ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
/s/ RICHARD F. POWERS, III /s/ DENNIS J. MCDONNELL
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, but fell to 2.3 percent in the second quarter.
The first-quarter expansion was fueled by an increase in consumer spending,
which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although the Fed had expressed a bias toward a series
of rate increases, May's tame CPI report prompted it to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Goods 11.0%
Chemicals 3.3%
Communications 6.8%
Computers 5.0%
Consumer-Retail 6.2%
Energy 6.5%
Financial Services 4.3%
Health Care 6.1%
Real Estate 5.4%
Transportation 4.5%
Short-Term Investment 12.5%
Other 28.4%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY SECTOR NET ASSETS
- ---------------------------------------- ----------------- ----------
<S> <C> <C>
Bally Total Fitness Holdings Co. Entertainment 2.3%
Sunglass Hut International, Inc. Consumer - Retail 2.1%
New Holland N.V. Capital Goods 1.8%
AMB Property Corp. Real Estate 1.7%
Pinnacle Systems, Inc. Computers 1.6%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ---------------------------------------- ------- ----------
<S> <C> <C>
Capital Goods $93,438 11.0%
Communications 57,754 6.8%
Energy 54,955 6.5%
Consumer - Retail 53,017 6.2%
Health Care 51,977 6.1%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
------------------------------------------------------------------------------
AVERAGE ANNUAL
-----------------------------------------
ONE YEAR FIVE YEAR SINCE INCEPTION COMMENCEMENT
------------------- ------------------- ------------------- DATE
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> <C>
Class A
Shares 10.66% 17.41% 20.16% 21.59% 17.25% 18.47% 10/18/93
- ------------------------------------------------------------------------------------------
Class B
Shares 11.50% 16.50% N/A N/A 21.38% 21.74% 8/1/95
- ------------------------------------------------------------------------------------------
Class C
Shares 15.55% 16.55% 20.66% 20.66% 17.56% 17.56% 10/18/93
- ------------------------------------------------------------------------------------------
Russell
2500
Small
Company
Index N/A 5.35% N/A 17.89% N/A 14.38% N/A
- ------------------------------------------------------------------------------------------
S&P 500
Index N/A 22.75% N/A 27.87% N/A 23.36% N/A
- ------------------------------------------------------------------------------------------
</TABLE>
The Russell 2500 Small Company Index and the Standard & Poor's 500 Index are
unmanaged indices of common stocks. The S&P 500 Index assumes dividends are
reinvested.
*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.
***Assumes reinvestment of all distributions for the period and does not include
payment of the maximum sales charge (5.75% for Class A shares) or contingent
deferred sales charge for early withdrawal (5% for Class B shares and 1% for
Class C shares).
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AMERICAN VALUE FUND - RUSSELL 2500
CLASS A SMALL COMPANY INDEX S&P 500 INDEX
<S> <C> <C> <C>
10/18/93 $10,000 $10,000 $10,000
6/30/94 $9,418 $9,409 $9,662
6/30/95 $10,831 $11,560 $12,205
6/30/96 $12,717 $14,355 $15,376
6/30/97 $16,619 $17,239 $20,711
6/30/98 $21,094 $20,539 $26,921
6/30/99 $24,767 $22,569 $33,046
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE 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.
WE RECENTLY SPOKE TO THE MANAGEMENT TEAM OF THE VAN KAMPEN AMERICAN VALUE FUND
ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE PAST
12 MONTHS. THE TEAM INCLUDES WILLIAM GERLACH, CHRIS LEAVY, AND GARY SCHLARBAUM,
PORTFOLIO MANAGERS, MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. MR.
GERLACH HAS BEEN A MEMBER OF THE FUND'S MANAGEMENT TEAM SINCE ITS INCEPTION IN
1996, WHILE MR. SCHLARBAUM AND MR. LEAVY JOINED THE TEAM IN 1997. THE FOLLOWING
EXCERPTS REFLECT THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE 12-MONTH
REPORTING PERIOD ENDED JUNE 30, 1999.
------------------
3
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q: CAN YOU DESCRIBE THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED?
A: It was a volatile 12 months for stock investors. The stock market began the
reporting period on a positive note with the Dow Jones Industrial Average
setting a then-record high in July 1998. Trouble was on the horizon, however, as
investors feared disappointing corporate earnings reports and other effects of
international economic troubles. By the end of August, the Dow had fallen 19
percent from its high.
Following a series of interest-rate cuts by the Federal Reserve Board, U.S.
companies began to report better-than-expected earnings, reassuring investors
that the U.S. economy, though slowing, was still fundamentally sound. These
events helped place the stock market on an upward trend that continued through
the rest of the reporting period. In the second quarter of 1999, enthusiasm for
large, growth-oriented stocks began to subside as investors felt more confident
looking beyond the perceived stability of stocks with more predictable earnings.
As a result, traditional value stocks in cyclical sectors such as basic
materials, energy, and producer manufacturing, began to outperform growth stocks
for the first time in several years.
Q: HOW DID THIS SHIFT FROM GROWTH TO VALUE AFFECT THE FUND, WHICH INVESTS
PREDOMINANTLY IN VALUE COMPANIES?
A: Current market conditions typically have a secondary impact on our overall
management strategy, as we primarily employ a "bottom-up" stock-selection
method. In other words, we evaluate each stock individually, investing in it if
it meets our criteria and, if not, avoiding it. While the majority of the
reporting period was challenging due to investors' preference for growth stocks,
the shift toward value investments in the second quarter of 1999 meant better
performance for the Fund on an absolute basis.
Q: IN WHICH AREAS OF THE STOCK MARKET DID YOU FIND IT EASIEST TO IDENTIFY GOOD
INVESTMENTS?
A: The three areas where we had the best results in picking stocks--and where we
saw the best contribution to the Fund's return--were heavy industry, technology,
and retail. Of course, because of our bottom-up strategy, we didn't make a
strategic decision to increase our holdings in these areas. We simply responded
to the opportunities we uncovered through our research. As a result, positive
and negative contributions to the Fund's returns stemmed from the performance of
individual securities.
Q: COULD YOU SPECIFY SOME STOCKS IN THESE AREAS THAT HELPED THE FUND'S RETURN
DURING THE REPORTING PERIOD?
A: Sure. In the area of heavy industry, we were pleased with the performance of
Cummins Engine, a worldwide engine manufacturer, and New Holland, which makes
agricultural and industrial equipment.
In technology, digital editing has been a burgeoning industry in very high
demand now. Pinnacle Systems, which develops computer-based video editing tools,
has been able to manufacture its products more cheaply than its competition, so
it was gaining market share and, at the same time, experiencing general growth.
In other areas of technology, BEA Systems, which develops software that
facilitates electronic commerce, was another great stock for us, as was
Electronics for Imaging, which specializes in enhancing digital copiers and
printers. All of these stocks paid off nicely for the Fund.
In retail, we had a handful of successes, but our best investment was Sunglass
Hut, which we owned throughout the second quarter. This stock rewarded the Fund
with a 61 percent return during that period. Sunglass Hut has been one of the
Fund's largest holdings throughout the year.
Although these stocks were some of our best investments, others in the Fund
didn't perform as well. Also, keep in mind that there's no guarantee that these
stocks will continue to outperform in the future.
- --------------
4
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q: DID ANY OF YOUR INVESTMENTS DISAPPOINT YOU?
A: Our biggest disappointment during the period was Fresh Del Monte Produce, a
company best known for bananas and pineapples. Banana prices were weak, and so
was the stock. In the area of health care, Quadramed and Steris were poor
investments for the Fund, as both companies reported disappointing sales.
Stage Stores, a department-store chain concentrated in the southwest United
States, had its problems early in the reporting period. Droughts in that region
of the country had a severe impact on local residents, which spilled over to
extremely poor earnings for the company.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: Despite the underperformance of value stocks relative to growth stocks during
most of the reporting period, the Fund performed well, especially when compared
to its peers. We attributed this strong performance to good stock selection and
to the resurgence of value investments late in the reporting period. For the
12-month period ended June 30, 1999, the Fund's total return was 17.41 percent
(Class A shares at net asset value). By comparison, the Russell 2500 Small
Company Index, an unmanaged index of common stocks, returned 5.35 percent.
Compared to its peers, the Fund has excelled. For the 12-month period ended June
30, 1999, the Fund's total return (Class A shares at net asset value) ranked it
100 out of 698 funds in the small-cap category, according to Lipper Analytical
Services, while the Fund ranked 3 out of 400 for the three-year period and 31
out of 238 for the five-year period. Lipper calculations are based on changes in
net asset value with dividends reinvested. Lipper calculations do not include
sales charges; if they had, results might have been less favorable. Past
performance does not guarantee future results.
Q: WHAT DO YOU SEE ON THE HORIZON FOR THE FUND?
A: We believe that if the market broadens and small- and mid-sized companies see
an improvement in their business prospects, the wide valuation gap between
large-cap stocks and small- and mid-cap stocks could narrow. Such a recovery
would likely be uneven and would require investors to be selective when
investing in the many cyclical areas of the small- and mid-cap market. This
could be a favorable situation for the Fund, as we have positioned the Fund to
take advantage of cyclical companies with low valuations.
William Gerlach Chris Leavy Gary Schlarbaum
PORTFOLIO PORTFOLIO PORTFOLIO
MANAGER MANAGER MANAGER
------------------
5
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ----------------------------------------------------------
COMMON STOCKS (89.0%)
AEROSPACE (0.8%)
(a)Alliant TechSystems,
Inc......................... 29,800 $ 2,578
(a)Gulfstream Aerospace
Corp........................ 64,900 4,385
--------
6,963
--------
BANKING (3.3%)
Bank United Corp. 'A'......... 105,200 4,228
Comerica, Inc................. 74,200 4,410
Greenpoint Financial Corp..... 101,700 3,337
Hudson United Bancorp......... 117,900 3,610
Mellon Bank Corp.............. 143,700 5,227
Mercantile Bankshares Corp.... 44,600 1,578
New England Community Bancorp,
Inc. 'A'.................... 39,800 1,097
Prime Bancshares, Inc......... 117,200 2,095
TCF Financial Corp............ 67,400 1,879
Western Bancorp............... 10,000 435
--------
27,896
--------
BUILDING (1.4%)
Vulcan Materials Co........... 36,500 1,761
York International Corp....... 236,900 10,142
--------
11,903
--------
CAPITAL GOODS (11.0%)
(a)Aeroflex, Inc.............. 265,900 5,251
(a)Asyst Technologies, Inc.... 193,400 5,790
(a)Atmel Corp................. 160,600 4,206
Cummins Engine Co., Inc....... 147,300 8,414
(a)Electronics for Imaging,
Inc......................... 149,500 7,680
Flowserve Corp................ 218,200 4,132
Manitowoc Co., Inc............ 58,550 2,437
(a)Mentor Graphics Corp....... 346,200 4,436
New Holland N.V............... 913,400 15,642
(a)PRI Automation, Inc........ 44,100 1,599
(a)Republic Services, Inc.
'A'......................... 146,500 3,626
(a)Safety-Kleen Corp.......... 244,575 4,433
Stewart & Stevenson Services,
Inc......................... 618,100 9,426
Tecumseh Products Co. 'A'..... 47,500 2,877
Titan International, Inc...... 91,000 1,081
(a)Tower Automotive, Inc...... 487,800 12,408
--------
93,438
--------
CHEMICALS (3.3%)
Lubrizol Corp................. 105,800 2,883
M.A. Hanna Co................. 214,900 3,532
Quaker Chemical Corp.......... 17,400 283
(a)W.R. Grace & Co............ 429,000 7,883
Wellman, Inc.................. 530,300 8,452
Witco Corp.................... 260,300 5,206
--------
28,239
--------
COMMUNICATIONS (6.8%)
A. Schulman, Inc.............. 85,500 1,469
ADTRAN, Inc................... 210,500 7,657
(a)Advanced Radio Telecom
Corp........................ 1,200 17
(a)Aerial Communications,
Inc......................... 63,500 857
Cincinnati Bell, Inc.......... 143,200 3,571
(a)Digital Microwave Corp..... 142,400 1,816
(a)General Instrument Corp.... 151,000 6,417
(a)GST Telecommunications,
Inc......................... 2,000 26
(a)IDT Corp................... 131,200 2,919
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ----------------------------------------------------------
(a)ITC DeltaCom, Inc.......... 69,600 $ 1,949
(a)Journal Register Co........ 56,400 1,269
(a)Pacific Gateway Exchange,
Inc......................... 109,400 3,186
(a)Powerwave Technologies,
Inc......................... 275,000 8,869
(a)QUALCOMM, Inc.............. 37,600 5,396
(a)RCN Corp................... 41,800 1,740
(a)Saville Systems plc ADR.... 66,900 970
(a)VoiceStream Wireless
Corp........................ 220,200 6,262
(a)Winstar Communications,
Inc......................... 69,000 3,364
--------
57,754
--------
COMPUTERS (5.0%)
(a)BEA Systems, Inc........... 248,100 7,086
(a)Complete Business
Solutions................... 25,500 458
(a)GenRad, Inc................ 281,100 5,850
(a)Goto.com, Inc.............. 17,600 493
(a)Network Solutions, Inc.
'A'......................... 20,300 1,606
(a)Networks Associates,
Inc......................... 358,400 5,264
(a)Pinnacle Systems, Inc...... 404,700 13,608
Ryder Systems, Inc............ 90,200 2,345
(a)SanDisk Corp............... 10,600 477
(a)SoftNet Systems, Inc....... 112,400 3,133
(a)WorldGate Communications,
Inc......................... 37,200 1,907
--------
42,227
--------
CONSUMER--DURABLES (1.3%)
Arvin Industries, Inc......... 15,300 579
Earthgrains Co................ 90,200 2,328
Michael Foods, Inc............ 72,300 1,699
(a)Splash Technology Holdings,
Inc......................... 149,900 1,054
(a)Sybron International
Corp........................ 185,600 5,116
--------
10,776
--------
CONSUMER--RETAIL (6.2%)
(a)Action Performance Cos.,
Inc......................... 55,900 1,845
(a)American Eagle Outfitters,
Inc......................... 34,000 1,547
(a)Ames Department Stores,
Inc......................... 137,500 6,273
(a)Ann Taylor Stores Corp..... 109,000 4,905
Bausch & Lomb, Inc............ 23,400 1,790
(a)Blyth Industries, Inc...... 115,300 3,963
Callaway Golf Co.............. 82,500 1,207
Casey's General Stores,
Inc......................... 140,300 2,104
Claire's Stores, Inc.......... 73,500 1,883
(a)Dress Barn, Inc............ 151,800 2,429
(a)Sunglass Hut International,
Inc......................... 1,031,600 17,731
Tandy Corp.................... 64,400 3,148
(a)Zale Corp.................. 104,800 4,192
--------
53,017
--------
CONSUMER--SERVICE & GROWTH (1.8%)
(a)NOVA Corp.................. 23,000 575
(a)Quanta Services, Inc....... 303,800 13,367
(a)School Specialty, Inc...... 89,900 1,444
--------
15,386
--------
CONSUMER STAPLES (1.9%)
Alpharma, Inc................. 167,500 5,957
(a)800-JR Cigar, Inc.......... 101,400 1,255
(a)Fresh Del Monte Produce,
Inc......................... 479,400 6,772
(a)General Cigar Holdings,
Inc......................... 121,400 948
(a)Omega Protein Corp......... 238,500 1,252
--------
16,184
--------
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ----------------------------------------------------------
<S> <C> <C>
ELECTRIC (1.9%)
(a)Cherry Corp................ 2,600 $ 37
DPL, Inc...................... 152,600 2,804
(a)Electroglas, Inc........... 70,000 1,400
Florida Progress Corp......... 26,900 1,111
(a)LTX Corp................... 115,400 1,536
Potomac Electric Power Co..... 321,400 9,461
--------
16,349
--------
ENERGY (6.5%)
(a)BJ Services Co............. 179,400 5,281
Black Hills Corp.............. 2,700 63
Energy East Corp.............. 129,700 3,372
(a)Global Marine, Inc......... 761,000 11,748
(a)Grey Wolf, Inc............. 134,400 336
Illinova Corp................. 394,400 10,747
MCN Corp...................... 33,700 699
Minnesota Power & Light Co.... 61,100 1,214
Nicor, Inc.................... 14,700 560
(a)Ocean Energy, Inc.......... 639,924 6,159
(a)Smith International,
Inc......................... 126,000 5,473
Suburban Propane Partners,
L.P......................... 38,000 741
Sunoco, Inc................... 46,400 1,401
Union Pacific Resources Group,
Inc......................... 124,200 2,026
Valero Energy Corp............ 197,000 4,223
(a)Wisconsin Energy Corp...... 36,400 912
--------
54,955
--------
ENTERTAINMENT (2.3%)
(a)Bally Total Fitness
Holdings Co................. 686,500 19,480
(a)Imax Corp.................. 9,300 209
--------
19,689
--------
FINANCIAL SERVICES (4.3%)
(a)Billing Concepts Corp...... 127,500 1,426
Federated Investors, Inc...... 176,900 3,173
Heller Financial, Inc......... 355,300 9,882
Hospitality Properties,
Inc......................... 316,500 8,585
Investors Financial Services
Corp........................ 49,800 1,992
(a)Knight/Trimark Group, Inc.
'A'......................... 86,600 5,283
Reliastar Financial Corp...... 139,600 6,107
--------
36,448
--------
HEALTH CARE (6.1%)
(a)Amerisource Health Corp.
'A'......................... 85,900 2,190
(a)Centocor, Inc.............. 103,900 4,844
(a)Coulter Pharmaceutical,
Inc......................... 66,300 1,496
(a)Coventry Health Care,
Inc......................... 189,900 2,077
(a)Del Global Technologies
Corp........................ 600,400 5,854
(a)Guilford Pharmaceuticals,
Inc......................... 181,000 2,308
(a)Henry Schein, Inc.......... 113,600 3,600
ICN Pharmaceuticals, Inc...... 198,600 6,392
(a)MedImmune, Inc............. 21,100 1,430
(a)MedPartners, Inc........... 530,900 4,015
(a)Mid Atlantic Medical
Services, Inc............... 265,000 2,617
Teva Pharmaceutical Industries
Ltd. ADR.................... 100,700 4,934
(a)Trigon Healthcare, Inc..... 245,700 8,937
(a)VISX, Inc.................. 16,200 1,283
--------
51,977
--------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ----------------------------------------------------------
INDUSTRIAL (2.4%)
(a)Cooper Cameron Corp........ 190,700 $ 7,068
(a)Global Industries Ltd...... 396,400 5,079
(a)Nabors Industries, Inc..... 253,600 6,197
(a)Precision Drilling Corp.... 97,100 1,851
ProLogis Trust................ 9,600 195
--------
20,390
--------
INSURANCE (1.6%)
Allmerica Financial Corp...... 41,500 2,524
American Medical Security
Group....................... 241,300 2,081
Everest Reinsurance Holdings,
Inc......................... 87,400 2,851
Nationwide Health Properties,
Inc......................... 16,300 311
Reinsurance Group of America,
Inc......................... 85,400 3,010
XL Capital Ltd. 'A'........... 42,600 2,407
--------
13,184
--------
METALS (2.7%)
Agnico-Eagle Mines Ltd........ 169,600 1,049
Ashann Goldfields............. 140,300 973
Barrick Gold Corp............. 158,000 3,061
(a)Lone Star Technologies,
Inc......................... 27,600 490
(a)Mueller Industries, Inc.... 87,400 2,966
(a)Steel Dynamics, Inc........ 148,400 2,296
(a)Stillwater Mining Co....... 82,950 2,712
Tosco Corp.................... 359,700 9,330
--------
22,877
--------
PAPER & PACKAGING (1.1%)
Boise Cascade Corp............ 23,600 1,015
(a)Valassis Communications,
Inc......................... 231,050 8,462
--------
9,477
--------
REAL ESTATE (5.4%)
AMB Property Corp............. 598,900 14,074
Arden Realty Group, Inc....... 210,500 5,184
(a)Cadillac Fairview Corp..... 21,700 410
Cousins Properties, Inc....... 50,100 1,694
Crescent Real Estate Equities
Co. REIT.................... 235,100 5,584
Developers Diversified Realty
Corp........................ 155,700 2,588
Duke Realty Investment, Inc.
REIT........................ 207,900 4,691
First Washinton Realty Trust,
Inc......................... 35,000 818
Glenborough Realty Trust,
Inc......................... 26,500 464
JDN Realty Corp............... 57,000 1,275
Lasalle Hotel Properties
REIT........................ 36,100 553
Liberty Property Trust REIT... 48,600 1,209
Manufactured Home Communities,
Inc. REIT................... 58,500 1,521
(a)NBTY, Inc.................. 382,700 2,487
Newhall Land & Farming Co.,
L.P......................... 28,800 709
Radian Group, Inc............. 29,700 1,450
Simon Property Group, Inc..... 49,300 1,251
(a)Wellsford Properties,
Inc......................... 5,250 56
--------
46,018
--------
RESTAURANTS (0.6%)
CKE Restaurants, Inc.......... 240,100 3,902
(a)Friendly Ice Cream Corp.... 152,700 1,221
--------
5,123
--------
SERVICES (2.6%)
(a)AC Nielsen Corp............ 136,500 4,129
(a)Corinthian Colleges,
Inc......................... 29,000 547
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ----------------------------------------------------------
<S> <C> <C>
</TABLE>
SERVICES (CONT.)
<TABLE>
<S> <C> <C>
(a)Innotrac Corp.............. 48,600 $ 984
Luby's, Inc................... 190,300 2,855
Ogden Corp.................... 26,800 722
Olsten Corp................... 305,300 1,927
(a)Snyder Communications,
Inc......................... 180,700 5,918
(a)Tetra Technologies, Inc.... 525,900 4,832
--------
21,914
--------
TECHNOLOGY (2.6%)
Adobe Systems, Inc............ 21,800 1,791
(a)Barnesandnoble.com, Inc.... 57,300 1,031
(a)Galileo International,
Inc......................... 223,300 11,933
Galileo Technology Ltd........ 36,300 1,645
(a)Go2Net, Inc................ 10,900 1,001
(a)Veritas DGC, Inc........... 135,500 2,481
(a)Webtrends, Inc............. 42,200 1,947
--------
21,829
--------
TRANSPORTATION (4.5%)
Air Express International
Corp........................ 210,700 5,347
Canadian National Railway
Co.......................... 42,900 2,874
CNF Transportation, Inc....... 75,700 2,905
(a)Gaylord Container Corp.
'A'......................... 1,303,100 10,343
(a)Jevic Transportation,
Inc......................... 15,000 208
(a)Navistar International
Corp........................ 99,800 4,990
SkyWest, Inc.................. 59,100 1,474
Teekay Shipping Corp.......... 70,400 1,241
(a)U.S. Xpress Enterprises,
Inc. 'A'.................... 55,700 595
Wabash National Corp.......... 372,800 7,223
Wisconsin Central
Transportation Corp......... 78,700 1,486
--------
38,686
--------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ----------------------------------------------------------
UTILITIES (1.6%)
Allegheny Energy, Inc......... 84,100 $ 2,697
CalEnergy Co., Inc............ 207,400 7,181
Eastern Entreprises........... 15,500 616
Montana Power Co.............. 26,000 1,833
Public Service Co. of New
Mexico...................... 45,200 898
SJW Corp...................... 5,300 422
--------
13,647
--------
TOTAL LONG-TERM INVESTMENTS (89.0%) (COST
$674,747) 756,346
--------
<CAPTION>
PAR
VALUE
(000)
---------
<S> <C> <C>
SHORT-TERM INVESTMENT (12.5%)
REPURCHASE AGREEMENT (12.5%)
Chase Securities, Inc., 4.55%,
dated $ 106,601
6/30/99, due 7/1/99, to be repurchased
at $106,614, collateralized by $111,955
Federal National Mortgage Association,
5.125%, due 2/13/04, valued at $109,546
(COST $106,601)........................... 106,601
--------
TOTAL INVESTMENTS (101.5%) (COST $781,348)...... 862,947
LIABILITIES IN EXCESS OF OTHER ASSETS (-1.5%)... (12,684)
--------
NET ASSETS (100%)............................... $850,263
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
ADR -- American Depositary Receipt
REIT -- Real Estate Investment Trust
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
- -----------------------------------------------
<S> <C>
ASSETS:
Investments at Value (Cost
$781,348) (including repurchase
agreement of $106,601)........... $862,947
Cash............................... 7
Receivable for:
Investments Sold................. 24,576
Fund Shares Sold................. 4,800
Dividends........................ 351
Interest......................... 14
Other.............................. 27
--------
Total Assets..................... 892,722
--------
LIABILITIES:
Payable for:
Investments Purchased............ 37,629
Fund Shares Redeemed............. 3,038
Distribution Fees................ 871
Investment Advisory Fees......... 521
Administrative Fees.............. 154
Transfer Agent Fees.............. 93
Shareholder Reporting Expenses... 64
Professional Fees................ 40
Custody Fees..................... 26
Directors' Fees and Expenses..... 21
Other.............................. 2
--------
Total Liabilities................ 42,459
--------
NET ASSETS......................... $850,263
--------
--------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 36
Paid in Capital in Excess of Par... 730,047
Unrealized Appreciation on
Investments...................... 81,599
Accumulated Net Realized Gain...... 38,603
Accumulated Net Investment Loss.... (22)
--------
NET ASSETS........................... $850,263
--------
--------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $343,003,465 and
14,545,320 Shares Outstanding)... $ 23.58
--------
--------
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100
/ (100 - maximum sales
charge))......................... $ 25.02
--------
--------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$341,908,423 and 14,721,507
Shares Outstanding)*............. $ 23.23
--------
--------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$165,351,391 and 7,116,164 Shares
Outstanding)*.................... $ 23.24
--------
--------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
- -----------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends.......................... $ 6,513
Interest........................... 3,071
--------
Total Income...................... 9,584
--------
EXPENSES:
Investment Advisory Fees........... 5,367
Distribution Fees (Attributed to
Classes A, B, and C of $540,
$2,840, and $1,313,
respectively).................... 4,693
Administrative Fees................ 1,590
Transfer Agent Fees................ 326
Custodian Fees..................... 197
Shareholder Reports................ 170
Professional Fees.................. 82
Filing and Registration Fees....... 67
Directors' Fees and Expenses....... 16
Other.............................. 17
--------
Total Expenses.................... 12,525
--------
Net Investment Income/Loss........ (2,941)
--------
NET REALIZED GAIN/LOSS ON:
Investments........................ 44,491
--------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ 16,746
--------
End of the Period
Investments...................... 81,599
--------
Net Unrealized
Appreciation/Depreciation During
the Period......................... 64,853
--------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... 109,344
--------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $106,403
--------
--------
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ (2,941) $ (1,791)
Net Realized Gain/Loss.......................... 44,491 45,496
Net Unrealized Appreciation/Depreciation........ 64,853 4,044
---------- ---------------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 106,403 47,749
---------- ---------------
DISTRIBUTIONS:
In Excess of Net Investment Income:
Class A......................................... -- (122)
Class B......................................... -- (29)
Class C......................................... -- (25)
---------- ---------------
-- (176)
---------- ---------------
Net Realized Gain:
Class A......................................... (12,659) (5,303)
Class B......................................... (17,437) (5,203)
Class C......................................... (7,981) (3,629)
---------- ---------------
(38,077) (14,135)
---------- ---------------
Net Decrease in Net Assets Resulting from
Distributions................................. (38,077) (14,311)
---------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed...................................... 344,367 558,778
Distributions Reinvested........................ 31,597 12,507
Redeemed........................................ (211,364) (69,473)
---------- ---------------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... 164,600 501,812
---------- ---------------
Total Increase/Decrease in Net Assets........... 232,926 535,250
NET ASSETS--Beginning of Period................... 617,337 82,087
---------- ---------------
NET ASSETS--End of Period (Including
accumulated/distributions in excess of net
investment income/loss of $(22) and $(6),
respectively)................................... $ 850,263 $617,337
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
Shares:
Subscribed................................... 8,979 9,937
Distributions Reinvested..................... 579 269
Redeemed..................................... (5,327) (1,843)
---------- ---------------
Net Increase/Decrease in Class A Shares
Outstanding.................................. 4,231 8,363
---------- ---------------
---------- ---------------
Dollars:
Subscribed................................... $ 190,079 $205,042
Distributions Reinvested..................... 11,025 5,049
Redeemed..................................... (104,033) (37,455)
---------- ---------------
Net Increase/Decrease.......................... $ 97,071 $172,636
---------- ---------------
---------- ---------------
Ending Paid in Capital......................... $ 295,061+ $197,990
---------- ---------------
---------- ---------------
Class B:
Shares:
Subscribed................................... 4,895 12,495
Distributions Reinvested..................... 769 239
Redeemed..................................... (3,673) (875)
---------- ---------------
Net Increase/Decrease in Class B Shares
Outstanding.................................. 1,991 11,859
---------- ---------------
---------- ---------------
Dollars:
Subscribed................................... $ 98,965 $257,479
Distributions Reinvested..................... 14,494 4,461
Redeemed..................................... (70,265) (18,025)
---------- ---------------
Net Increase/Decrease.......................... $ 43,194 $243,915
---------- ---------------
---------- ---------------
Ending Paid in Capital......................... $ 301,083+ $257,889
---------- ---------------
---------- ---------------
Class C:
Shares:
Subscribed................................... 2,707 4,675
Distributions Reinvested..................... 322 160
Redeemed..................................... (1,921) (671)
---------- ---------------
Net Increase/Decrease in Class C Shares
Outstanding.................................. 1,108 4,164
---------- ---------------
---------- ---------------
Dollars:
Subscribed................................... $ 55,323 $ 96,257
Distributions Reinvested..................... 6,078 2,997
Redeemed..................................... (37,066) (13,993)
---------- ---------------
Net Increase/Decrease.......................... $ 24,335 $ 85,261
---------- ---------------
---------- ---------------
Ending Paid in Capital......................... $ 134,054+ $109,719
---------- ---------------
---------- ---------------
</TABLE>
- ---------------
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 21.339 $ 17.59 $ 14.63 $ 12.89 $ 11.70
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... 0.006 (0.02) 0.20 0.27 0.27
Net Realized and Unrealized
Gain/Loss........................ 3.437 4.84 4.05 1.94 1.44
-------- -------- ------- ------- -------
Total from Investment Operations... 3.443 4.82 4.25 2.21 1.71
-------- -------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income.............. -- (0.03) (0.20) (0.27) (0.28)
In Excess of Net Investment
Income........................... -- (0.00)++ (0.00)++ (0.01) --
Net Realized Gain.................. (1.200) (1.04) (1.09) (0.19) (0.24)
-------- -------- ------- ------- -------
Total Distributions................ (1.200) (1.07) (1.29) (0.47) (0.52)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD....... $ 23.582 $ 21.34 $ 17.59 $ 14.63 $ 12.89
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
TOTAL RETURN (1)..................... 17.41% 28.26% 30.68% 17.41% 15.01%
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $343,004 $220,100 $34,331 $19,674 $20,675
Ratio of Expenses to Average Net
Assets............................. 1.49% 1.50% 1.50% 1.50% 1.50%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. 0.03% (0.09)% 1.25% 1.90% 2.29%
Portfolio Turnover Rate.............. 283% 207% 73% 41% 23%
- ---------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ -- $ 0.02 $ 0.04 $ 0.04 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... -- 1.58% 1.76% 1.81% 1.96%
Net Investment Income/Loss to
Average Net Assets............... -- (0.18)% 0.98% 1.59% 1.83%
- ---------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
---------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------- AUGUST 1, 1995+
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 TO JUNE 30, 1996
- -------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 21.196 $ 17.59 $ 14.63 $ 13.37
-------- -------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... (0.142) (0.17) 0.09 0.15
Net Realized and Unrealized
Gain/Loss........................ 3.371 4.83 4.05 1.46
-------- -------- ------- ------
Total from Investment Operations... 3.229 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.................. (1.200) (1.04) (1.09) (0.19)
-------- -------- ------- ------
Total Distributions................ (1.200) (1.05) (1.18) (0.35)
-------- -------- ------- ------
NET ASSET VALUE, END OF PERIOD....... $ 23.225 $ 21.20 $ 17.59 $ 14.63
-------- -------- ------- ------
-------- -------- ------- ------
TOTAL RETURN (1)..................... 16.50% 27.30% 29.77% 12.29%*
-------- -------- ------- ------
-------- -------- ------- ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $341,908 $269,836 $15,331 $ 2,485
Ratio of Expenses to Average Net
Assets............................. 2.24% 2.25% 2.25% 2.25%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (0.72)% (0.84)% 0.40% 1.18%
Portfolio Turnover Rate.............. 283% 207% 73% 41%*
- ---------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ -- $ 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
----------------------------------------------------------------------------
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA ----------------------------------------------------------------------------
AND RATIOS 1999# 1998# 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 21.205 $ 17.59 $ 14.64 $ 12.89 $ 11.69
------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income/Loss.......... (0.142) (0.17) 0.08 0.16 0.17
Net Realized and
Unrealized
Gain/Loss............ 3.373 4.83 4.05 1.94 1.44
------------ ------------ ------------ ------------ ------------
Total from Investment
Operations........... 3.231 4.66 4.13 2.10 1.61
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment
Income............... -- (0.01) (0.09) (0.15) (0.17)
In Excess of Net
Investment Income.... -- (0.00)++ (0.00)++ (0.01) --
Net Realized Gain...... (1.200) (1.04) (1.09) (0.19) (0.24)
------------ ------------ ------------ ------------ ------------
Total Distributions.... (1.200) (1.05) (1.18) (0.35) (0.41)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD................. $ 23.236 $ 21.20 $ 17.59 $ 14.64 $ 12.89
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN (1)......... 16.55% 27.28% 29.67% 16.50% 14.13%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's)................ $ 165,351 $ 127,401 $ 32,425 $ 21,193 $ 13,867
Ratio of Expenses to
Average Net Assets..... 2.24% 2.25% 2.25% 2.25% 2.25%
Ratio of Net Investment
Income/Loss to Average
Net Assets............. (0.72)% (0.84)% 0.49% 1.17% 1.54%
Portfolio Turnover
Rate................... 283% 207% 73% 41% 23%
- ---------------------------------------------------------------------------------------------------------
Effect of Voluntary
Expense
Limitation During the
Period
Per Share Benefit to
Net Investment
Income/Loss.......... $ -- $ 0.02 $ 0.04 $ 0.04 $ 0.05
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets............... -- 2.33% 2.47% 2.58% 2.71%
Net Investment
Income/Loss to
Average Net Assets... -- (0.92)% 0.22% 0.84% 1.08%
</TABLE>
- --------------------------------------------------------------------------------
* Non-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.
# Changes per share are based upon monthly average shares outstanding.
- --------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen American Value Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland Corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks high
total return by investing in equity securities of small-
to medium-sized corporations. The Fund commenced operations on October 18, 1993.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
----------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------- ------- -------
<S> <C> <C>
First................................ 5.00% 1.00%
Second............................... 4.00% None
Third................................ 3.00% None
Fourth............................... 2.50% None
Fifth................................ 1.50% None
Thereafter........................... None None
</TABLE>
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.
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. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on an accrual basis except where collection is in
doubt. 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 Fund are recorded on the
ex-distribution date.
4. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
Net capital losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 to June 30, 1999 the Fund incurred and elected
to defer until July 1, 1999, for U.S. Federal income tax purposes, net capital
losses of approximately $599,000.
At June 30, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- ---------- ---------- ---------- ------------
<S> <C> <C> <C>
$ 783,848 $ 105,035 $ (25,936) $ 79,099
</TABLE>
5. Distribution of Income and Gains: 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.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital. For the year ended June
30, 1999, approximately $2,810,000 has been reclassified from accumulated net
realized gain/loss and approximately $115,000 has been reclassified from paid in
capital, totaling approximately $2,925,000 posted to accumulated net investment
income/loss.
------------------
13
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.), Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), and Miller Anderson & Sherrerd LLP, 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 Fund, 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- --------------- ----------------- -----------------
<S> <C> <C>
0.85% 1.50% 2.25%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$31,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
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 the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $1,637,168 for Class A shares and deferred sales charges of $11,295,
$1,191,362, and $79,195 for Class A shares, Class B shares, and Class C shares,
respectively.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $1,731,740,000 and sales of approximately
$1,633,241,000 of investment securities other than long-term U.S. government
securities and short-term investments. There were no purchases or sales of
long-term U.S. government securities.
- -----------------------
14
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc. --
Van Kampen American Value Fund:
In our opinion, the accompanying statement 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 Van Kampen American Value Fund (the
"Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the results of
its operations, the changes in its 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, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
------------------
15
<PAGE>
VAN KAMPEN AMERICAN VALUE FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the percentage of dividends paid that qualify
for the 70% dividend received deduction for corporate shareholders is 5.51%.
The Fund designated and paid $5,760,049 as a 20% rate gain distribution.
Shareholders were sent a 1998 Form 1099-DIV in January 1999 representing their
proportionate share of this capital gain distribution.
- -----------------------
16
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
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.
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of
Sciences/National Research Council, and former Chairman of the
German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISERS
Morgan Stanley Dean Witter Investment 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.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 418256
Kansas City, Missouri 64121
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
1 Parkview Plaza / P.O. Box 5555 / Oakbrook Terrace, IL
60181-5555 / www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
GLOBAL EQUITY FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 8
Statement of Operations............................................... 9
Statement of Changes in Net Assets.................................... 10
Financial Highlights ................................................. 11
Notes to Financial Statements......................................... 12
Report of Independent Accountants..................................... 15
Additional Information................................................ 16
</TABLE>
MSGL ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, and by 2.3 percent in the second quarter. The
expansion was fueled by an increase in consumer spending, which was attributed
to vibrant consumer confidence as a result of the strong job market.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although it had expressed a bias toward a series of
rate increases, May's tame CPI report prompted the Fed to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Canada 2.4%
France 10.1%
Germany 4.6%
Italy 3.0%
Japan 9.3%
Netherlands 4.4%
Spain 3.5%
Switzerland 8.9%
United Kingdom 11.0%
United States 33.7%
Short-Term Investment 2.7%
Other 6.4%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
-----------------------------------------------------
AVERAGE ANNUAL COMMENCEMENT
ONE YEAR SINCE INCEPTION DATE
----------------- ----------------- -------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE*** CHARGE* CHARGE***
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Class A Shares -1.95% 4.05% 5.43% 9.24% 10/29/97
- ----------------------------------------------------------------------------------------------------
Class B Shares -1.71% 3.29% 6.17% 8.45% 10/29/97
- ----------------------------------------------------------------------------------------------------
Class C Shares 2.39% 3.39% 8.45% 8.45% 10/29/97
- ----------------------------------------------------------------------------------------------------
MSCI World Net Dividends Index N/A 15.67% N/A 22.60% N/A
- ----------------------------------------------------------------------------------------------------
</TABLE>
The Morgan Stanley Capital International (MSCI) World Net Dividends Index is an
unmanaged index which includes securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand, and the Far East and
assumes dividends are reinvested net of withholding tax.
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY COUNTRY NET ASSETS
- ------------------------------------------------------------ ------------- ----------
<S> <C> <C>
Cie Financiere Richemont AG Switzerland 3.6%
Philip Morris Cos., Inc. United States 3.5%
Albertson's, Inc. United States 3.1%
Nippon Telegraph & Telephone Corp. ADR Japan 3.0%
Nestle S.A. (Registered) Switzerland 2.9%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- --------------------- ----------- ----------
<S> <C> <C>
Consumer Goods $ 227,232 30.9%
Services 162,862 22.1%
Finance 131,976 17.9%
Materials 73,622 10.0%
Energy 64,180 8.7%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B shares and Class C shares will vary based upon the sales
charge and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Global Equity Fund Class A MSCI World Net Dividends Index
10/29/97 $9,500 $10,000
6/30/98 $10,495 $11,321
6/30/99 $10,923 $13,095
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE COUNTRY-SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MSCI WORLD NET DIVIDENDS 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.
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN GLOBAL EQUITY FUND
ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE PAST
12 MONTHS. THE TEAM IS LED BY PORTFOLIO MANAGERS RICHARD BOON, PAUL BOYNE, AND
FRANCES CAMPION OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. MR. BOON,
MR. BOYNE, AND MS. CAMPION HAS BEEN A MEMBER OF THE FUND'S MANAGEMENT TEAM SINCE
ITS INCEPTION IN 1996. THE FOLLOWING EXCERPTS REFLECT THEIR VIEWS ON THE FUND'S
PERFORMANCE DURING THE 12-MONTH PERIOD ENDED JUNE 30, 1999.
3------------------
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST YEAR?
A: During the third quarter of 1998, continued economic weakness in Asia spread
to Russia, and there were warning signs that Asia's problems were beginning to
affect Europe and the United States. The defining moment of the period came in
mid-August when Russia devalued its currency and defaulted on its debt, sending
financial and currency markets worldwide into a tailspin. Paced by the Federal
Reserve Board and the European Central Bank (ECB), central banks worldwide
lowered interest rates during the fourth quarter of 1998. The interest-rate cuts
renewed investor confidence and helped revive stock markets in Europe and the
United States.
Global economic recovery became the story of the first half of 1999, as economic
activity increased in most regions of the world. The U.S. economy resumed its
impressive climb with strong growth and minimal inflation. Meanwhile, declining
interest rates and a focus on corporate cost-cutting and other fiscal reforms
helped revive many emerging markets, particularly in Asia.
In Europe, the introduction of the euro went smoothly, but economic weakness,
particularly in Germany, and the unfavorable interest rates compared to the
United States, contributed to its decline since January. Decreased exports to
Asia and Russia, as well as reduced trade activity with Eastern European
countries led to lower economic growth and falling corporate earnings.
Q: WHAT STRATEGIES DID YOU PURSUE IN THIS ENVIRONMENT?
A: We use a value-driven approach and select investments on a
company-by-company basis, regardless of country or sector. Thus, we try to
identify individual stocks that we believe are undervalued or "on sale." Our
primary indicator of value is strong cash flow. We also assess the quality of
management and the financial structure of a company. In addition, we analyze the
company's market position or franchise relative to the competition to assess
whether a catalyst exists that could cause the stock's price to rebound or
appreciate to fair value. Because of the economic uncertainty in most global
markets, investors generally preferred the more stable earnings associated with
large- and mega-cap growth stocks, so our value-oriented strategy underperformed
those types of investments.
During most of the period we positioned the Fund defensively in anticipation of
continued volatility in the financial markets. As a result, we maintained
significant positions in noncyclical industries, which have typically weathered
market volatility well. These include consumer staples (such as household goods,
beverages, and tobacco), utilities, telecommunications, and food retailing.
Throughout most of the period, but primarily in the first three months of 1999,
this strategy hindered Fund performance as cyclical stocks outperformed
noncyclical stocks. Near the end of the period, however, cyclical stocks
rebounded and the Fund benefited.
Another strategy we pursued was to remain underweighted in the United States and
Japan. During the period we sold many of our U.S. holdings when they reached
what we felt was fair value, which helped benefit the Fund. In Japan, finding
undervalued companies was not the problem, but finding high-quality, undervalued
companies was more difficult. Our pharmaceutical exposure in Japan has performed
particularly well.
Q: HOW IS THE FUND CURRENTLY POSITIONED?
A: In 1998, the trend was to invest in mega-cap growth stocks based in
theUnited States. In 1999, on the other hand, we have seen investor sentiment
change. Rising interest rates have benefited cyclical small- and mid-cap stocks,
and investors have returned to those areas of the market. In addition, while the
U.S. economy continues to flourish due to low inflation, high consumer
confidence, and strong consumer spending, the global economy is beginning to
recover as well. Japan is showing signs of bottoming and Europe may not be as
weak as analysts first thought, as interest rate cuts by the ECB have helped
their economies.
As a result, we are underweighted in technology and pharmaceuticals because of
concerns about high stock valuations. We have, however, found selective value in
Japanese pharmaceuticals like Fujisawa, which has benefited from
higher-than-expected profits. Although we are underweighted in banks, we are
invested in European regional bank franchises, for example Bank of Ireland.
- -------------- 4
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Finally, we have limited exposure to companies whose businesses involve tradable
goods, such as pulp mills, hotels, or container ships. If a business whose
primary assets are physical--earns a superior return on its assets, this gives
competitors an incentive to create identical or even more up-to-date versions of
those assets. This can lead to overcapacity, which transforms superior returns
into inferior returns, or even losses. Generally, our strategy is to seek
companies that are insulated from world trade because competition is fiercest
and deflation most evident among tradable goods. For example, we own Mediaset,
which is a leading commercial television broadcaster in Italy. Its business is
exclusively domestic with no exposure to tradable goods, it has a strong and
hard-to-replicate market position, and it's in the rare situation of being able
to increase its prices--and hence potentially revenues and earnings.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: The Fund's returns suffered during the period due to its underweight
position in mega-cap stocks and growth-oriented investments, which outperformed
our value-oriented strategy. For Class A shares without sales charge at net
asset value, the Fund generated a total return of 4.05 percent(1) for the 12
months ended June 30, 1999. By comparison, the Morgan Stanley Capital
International (MSCI) World Net Dividends Index generated a total return of 15.67
percent for the same period. Past performance does not guarantee future results.
Q: WHAT IS YOUR OUTLOOK FOR THE FUND IN THE MONTHS AHEAD?
A: We will remain cautious on the United States because of high stock
valuations and concerns about the sustainability of consumer spending due to
rising interest rates. In particular, mega-cap stocks in the United States
appear vulnerable because of excessive valuations, particularly among
pharmaceutical and technology growth stocks, a segment of the market we've
tended to avoid. We are also monitoring Europe carefully because expected growth
is low.
We believe the coming months will be difficult for companies that do not have
unique franchises that can provide pricing power. We will continue to focus on
small- and mid-cap stocks that we consider undervalued yet possess solid
franchises, strong cash flow, and superior economics. We feel that our strategy
of holding such companies will help the Fund over the long term.
<TABLE>
<S> <C> <C>
Richard Boon Paul Boyne Frances Campion
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
5------------------
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------------------
COMMON STOCKS (96.5%)
AUSTRALIA (0.9%)
CSR Ltd....................................... 2,291,600 $ 6,528
--------
BELGIUM (1.0%)
Delhaize Freres et Cie 'Le Lion' S.A.......... 84,360 7,191
--------
CANADA (2.4%)
BCT.Telus Communications, Inc................. 281,524 6,761
BCT.Telus Communications, Inc. 'A'............ 93,841 2,219
Potash Corp. of Saskatchewan, Inc............. 131,600 6,798
(a)Renaissance Energy Ltd..................... 130,000 1,746
--------
17,524
--------
DENMARK (0.5%)
Danisco A/S................................... 82,550 3,726
--------
FRANCE (10.1%)
Bongrain S.A.................................. 17,664 6,675
Elf Aquitaine................................. 100,760 14,805
France Telecom S.A............................ 149,900 11,338
Groupe Danone RFD............................. 54,800 14,146
Michelin (C.G.D.E.) 'B'....................... 82,420 3,376
Pernod-Ricard................................. 74,200 4,980
Rhone-Poulenc S.A. 'A'........................ 221,500 10,134
Scor.......................................... 171,450 8,515
--------
73,969
--------
GERMANY (3.8%)
BASF AG....................................... 264,350 11,628
Bayer AG...................................... 138,100 5,753
Veba AG....................................... 182,400 10,773
--------
28,154
--------
IRELAND (2.4%)
Bank of Ireland............................... 725,436 12,207
Green Property plc............................ 988,900 5,463
--------
17,670
--------
ITALY (3.0%)
Mediaset S.p.A................................ 1,029,600 9,164
Telecom Italia S.p.A.......................... 2,326,400 12,635
--------
21,799
--------
JAPAN (9.3%)
Daiichi Pharmaceutical Co., Ltd............... 457,000 7,101
Fuji Photo Film Co............................ 313,000 11,860
Hitachi Ltd................................... 665,000 6,244
KAO Corp...................................... 607,000 17,074
Nippon Telegraph & Telephone Corp. ADR........ 1,905 22,223
Sumitomo Marine & Fire Insurance Co........... 626,000 3,781
--------
68,283
--------
NETHERLANDS (4.4%)
ABN Amro Holding N.V.......................... 316,300 6,858
Benckiser N.V. 'B'............................ 135,935 7,264
ING Groep N.V................................. 201,980 10,949
Philips Electronics N.V....................... 76,728 7,578
--------
32,649
--------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------------------
PORTUGAL (0.7%)
Cimpor-Cimentos de Portugal S.A............... 192,720 $ 4,975
--------
SPAIN (3.5%)
Iberdrola S.A................................. 738,500 11,263
(a)Telefonica de Espana....................... 302,302 14,580
--------
25,843
--------
SWEDEN (0.9%)
Nordbanken Holding AB......................... 1,120,650 6,576
--------
SWITZERLAND (8.9%)
Cie Financiere Richemont AG 'A'............... 13,720 26,437
Forbo Holding AG (Registered)................. 13,100 5,217
Holderbank Financiere Glarus AG 'B'
(Bearer).................................... 7,404 8,756
Nestle S.A. (Registered)...................... 11,680 21,084
Swisscom AG (Registered)...................... 10,500 3,958
--------
65,452
--------
UNITED KINGDOM (11.0%)
Allied Domecq plc............................. 1,047,200 10,110
Blue Circle Industries plc.................... 823,750 5,484
Burmah Castrol plc............................ 409,487 7,777
Imperial Tobacco Group plc.................... 665,300 7,262
Invensys plc.................................. 1,447,940 6,858
Reckitt & Colman plc.......................... 1,353,243 14,121
Royal & Sun Alliance Insurance Group plc...... 1,138,911 10,222
Sainsbury (J) plc............................. 1,479,600 9,336
Wolseley plc.................................. 618,100 4,656
WPP Group plc................................. 633,000 5,357
--------
81,183
--------
UNITED STATES (33.7%)
Albertson's, Inc.............................. 446,418 23,018
Aluminum Co. of America....................... 68,000 4,208
(a)BJ's Wholesale Club, Inc................... 273,200 8,213
Boise Cascade Corp............................ 135,900 5,844
Borg-Warner Automotive, Inc................... 126,450 6,955
(a)Cadiz Land Co., Inc........................ 403,898 3,812
Chase Manhattan Corp.......................... 88,950 7,705
COMSAT Corp................................... 453,700 14,745
(a)Data General Corp.......................... 522,100 7,603
Enhance Financial Services Group, Inc......... 393,000 7,762
FINOVA Group, Inc............................. 192,605 10,136
(a)GenRad, Inc................................ 415,500 8,648
Georgia-Pacific Corp.......................... 79,700 3,776
Goodrich (B.F.) Co............................ 169,200 7,191
Houghton Mifflin Co........................... 350,963 16,517
IBP, Inc...................................... 200,000 4,750
MBIA, Inc..................................... 215,110 13,928
Mellon Bank Corp.............................. 312,100 11,353
(a)NCR Corp................................... 98,900 4,828
(a)Noble Drilling Corp........................ 190,700 3,754
(a)Ocean Energy, Inc.......................... 498,070 4,794
Pharmacia & Upjohn, Inc....................... 33,200 1,886
Philip Morris Cos., Inc....................... 640,970 25,759
Rite Aid Corp................................. 143,400 3,531
Sears, Roebuck & Co........................... 6,500 290
Tenneco, Inc.................................. 149,400 3,567
Terra Nova (Bermuda) Holdings Ltd. 'A'........ 199,100 5,363
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (CONT.)
Tupperware Corp............................... 320,400 $ 8,170
Unicom Corp................................... 337,700 13,023
U.S. Bancorp.................................. 105,600 3,590
UST Corp...................................... 124,100 3,754
--------
248,473
--------
TOTAL COMMON STOCKS.......................................... 709,995
--------
PREFERRED STOCK (0.8%)
GERMANY (0.8%)
Volkswagen AG................................. 163,600 6,149
--------
TOTAL LONG-TERM INVESTMENTS (97.3%) (COST $654,745).......... 716,144
--------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<S> <C> <C>
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENT (2.7%)
REPURCHASE AGREEMENT (2.7%)
Chase Securities, Inc., 4.55%, dated 6/30/99, $ 19,800
due 7/1/99, to be repurchased at $19,803,
collateralized by $13,255 U.S. Treasury
Bonds, 11.25%, due 2/15/15, valued at
$20,426 (COST $19,800)................................. $ 19,800
--------
TOTAL INVESTMENTS IN SECURITIES (100.0%) (COST $674,545)..... 735,944
FOREIGN CURRENCY (0.1%) (COST $1,140)........................ 1,139
--------
TOTAL INVESTMENTS (100.1%) (COST $675,685)................... 737,083
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.1%)................ (873)
--------
NET ASSETS (100%)............................................ $736,210
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
ADR -- American Depositary Receipt
RFD -- Ranked for Dividend
- --------------------------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- ------------------------------------------------------------------------- --------- -------------
<S> <C> <C>
Consumer Goods........................................................... $ 227,232 30.9%
Services................................................................. 162,862 22.1
Finance.................................................................. 131,976 17.9
Materials................................................................ 73,622 10.0
Energy................................................................... 64,180 8.7
Capital Equipment........................................................ 45,847 6.3
Diversified Operations................................................... 10,425 1.4
--------- ---
$ 716,144 97.3%
--------- ---
--------- ---
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- -----------------------------------------------
ASSETS:
Investments in Securities, at Value
(Cost $674,545).................. $735,944
Foreign Currency (Cost $1,140)..... 1,139
Receivable for:
Dividends........................ 2,320
Foreign Withholding Tax
Reclaim......................... 678
Investments Sold................. 498
Fund Shares Sold................. 379
Interest......................... 3
Deferred Organizational Costs...... 15
Other.............................. 90
--------
Total Assets..................... 741,066
--------
LIABILITIES:
Payable for:
Investments Purchased............ 1,371
Fund Shares Redeemed............. 1,175
Distribution Fees................ 1,132
Investment Advisory Fees......... 605
Administrative Fees.............. 152
Transfer Agent Fees.............. 101
Custody Fees..................... 96
Shareholder Reporting Expenses... 88
Professional Fees................ 73
Bank Overdraft................... 22
Directors' Fees and Expenses..... 41
--------
Total Liabilities................ 4,856
--------
NET ASSETS......................... $736,210
--------
--------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 64
Paid in Capital in Excess of Par... 650,388
Net Unrealized Appreciation on
Investments and Foreign Currency
Translations..................... 61,356
Accumulated Net Realized Gain...... 24,214
Undistributed Net Investment
Income........................... 188
--------
NET ASSETS........................... $736,210
--------
--------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $76,730,861 and
6,690,456 Shares Outstanding).... $ 11.47
--------
--------
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100/
(100 - maximum sales charge)).... $ 12.17
--------
--------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$596,339,278 and 52,200,891
Shares Outstanding)*............. $ 11.42
--------
--------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$63,139,799 and 5,527,471 Shares
Outstanding)*.................... $11.42...
--------
--------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ----------------------------------------------
INVESTMENT INCOME:
Dividends.......................... $15,474
Interest........................... 1,303
Less Foreign Taxes Withheld........ (1,258)
-------
Total Income...................... 15,519
-------
EXPENSES:
Investment Advisory Fees........... 7,424
Distribution Fees (Attributed to
Classes A, B, and C of $191,
$6,007, and $657,
respectively).................... 6,855
Administrative Fees................ 1,867
Shareholder Reports................ 311
Transfer Agent Fees................ 264
Custodian Fees..................... 214
Professional Fees.................. 115
Filing and Registration fees....... 75
Amortization of Organizational
Costs............................ 38
Directors' Fees and Expenses....... 32
Other.............................. 33
-------
Total Expenses.................... 17,228
-------
Net Investment Income/Loss........... (1,709)
-------
NET REALIZED GAIN/LOSS ON:
Investments........................ 24,305
Foreign Currency Transactions...... (535)
-------
Net Realized Gain/Loss............ 23,770
-------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ 61,355
-------
End of the Period:
Investments...................... 61,399
Foreign Currency Translations.... (43)
-------
61,356
-------
Net Unrealized
Appreciation/Depreciation During
the Period......................... 1
-------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... 23,771
-------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $22,062
-------
-------
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OCTOBER 29, 1997*
YEAR ENDED TO
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ (1,709) $ 844
Net Realized Gain/Loss.......................... 23,770 1,689
Net Unrealized Appreciation/Depreciation........ 1 61,355
-------- --------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 22,062 63,888
-------- --------
DISTRIBUTIONS:
Net Investment Income:
Class A......................................... (532) (88)
Class B......................................... (472) (188)
Class C......................................... (52) (18)
In Excess of Net Investment Income:
Class A......................................... (94) --
Class B......................................... (83) --
Class C......................................... (9) --
-------- --------
(1,242) (294)
-------- --------
Net Realized Gain:
Class A......................................... (97) --
Class B......................................... (796) --
Class C......................................... (87) --
-------- --------
(980) --
-------- --------
Net Decrease in Net Assets Resulting from
Distributions................................. (2,222) (294)
-------- --------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed...................................... 166,640 739,265
Distributions Reinvested........................ 2,068 276
Redeemed........................................ (225,647) (29,826)
-------- --------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... (56,939) 709,715
-------- --------
Total Increase/Decrease in Net Assets........... (37,099) 773,309
NET ASSETS--Beginning of Period................... 773,309 --
-------- --------
NET ASSETS--End of Period (Including undistributed
net investment income of $188 and $1,301,
respectively)................................... $ 736,210 $ 773,309
-------- --------
-------- --------
- ------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
Shares:
Subscribed................................... 7,057 7,876
Distributions Reinvested..................... 60 8
Redeemed..................................... (7,666) (645)
-------- --------
Net Increase/Decrease in Class A Shares
Outstanding.................................. (549) 7,239
-------- --------
-------- --------
Dollars:
Subscribed................................... $ 76,578 $ 81,031
Distributions Reinvested..................... 652 78
Redeemed..................................... (82,720) (7,009)
-------- --------
Net Increase/Decrease.......................... $ (5,490) $ 74,100
-------- --------
-------- --------
Ending Paid in Capital......................... $ 68,606+ $ 74,096
-------- --------
-------- --------
Class B:
- --------------------------------------------------
Shares:
Subscribed................................... 7,094 57,900
Distributions Reinvested..................... 118 19
Redeemed..................................... (11,280) (1,650)
-------- --------
Net Increase/Decrease in Class B Shares
Outstanding.................................. (4,068) 56,269
-------- --------
-------- --------
Dollars:
Subscribed................................... $ 75,705 $ 588,891
Distributions Reinvested..................... 1,280 180
Redeemed..................................... (120,388) (17,780)
-------- --------
Net Increase/Decrease.......................... $ (43,403) $ 571,291
-------- --------
-------- --------
Ending Paid in Capital......................... $ 527,856+ $ 571,259
-------- --------
-------- --------
Class C:
- --------------------------------------------------
Shares:
Subscribed................................... 1,344 6,752
Distributions Reinvested..................... 13 2
Redeemed..................................... (2,112) (472)
-------- --------
Net Increase in Class C Shares Outstanding..... (755) 6,282
-------- --------
-------- --------
Dollars:
Subscribed................................... $ 14,357 $ 69,343
Distributions Reinvested..................... 136 18
Redeemed..................................... (22,539) (5,037)
-------- --------
Net Increase/Decrease.......................... $ (8,046) $ 64,324
-------- --------
-------- --------
Ending Paid in Capital......................... $ 56,274+ $ 64,320
-------- --------
-------- --------
- ---------------
* Commencement of operations
+ Ending Paid in Capital amounts do not reflect
permanent book to tax differences.
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------- --------------------------------------
YEAR ENDED OCTOBER 29, 1997* YEAR ENDED OCTOBER 29, 1997*
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1999# TO JUNE 30, 1998 JUNE 30, 1999# TO JUNE 30, 1998
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 11.122 $ 10.00 $ 11.076 $ 10.00
------- ------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............ 0.047 0.06 (0.033) 0.01
Net Realized and Unrealized
Gain/Loss........................... 0.404 1.08 0.405 1.07
------- ------- -------- --------
Total From Investment Operations...... 0.451 1.14 0.372 1.08
------- ------- -------- --------
DISTRIBUTIONS
Net Investment Income................. (0.076) (0.02) (0.008) --
In Excess of Net Investment Income.... (0.014) -- (0.002) --
Net Realized Gain..................... (0.014) -- (0.014) --
------- ------- -------- --------
Total Distributions................... (0.104) (0.02) (0.024) --
------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD.......... $ 11.469 $ 11.12 $ 11.424 $ 11.08
------- ------- -------- --------
------- ------- -------- --------
TOTAL RETURN (1)........................ 4.05% 11.38%** 3.29% 10.84%**
------- ------- -------- --------
------- ------- -------- --------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....... $ 76,731 $ 80,508 $ 596,339 $ 623,229
Ratio of Expenses to Average Net
Assets................................ 1.65% 1.70% 2.40% 2.45%
Ratio of Net Investment Income/Loss to
Average Net Assets.................... 0.44% 0.88% (0.31)% 0.12%
Portfolio Turnover Rate................. 40% 4%** 40% 4%**
<CAPTION>
CLASS C
--------------------------------------
YEAR ENDED OCTOBER 29, 1997*
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1999# TO JUNE 30, 1998
<S> <C> <C>
- ----------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 11.075 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............ (0.034) 0.01
Net Realized and Unrealized
Gain/Loss........................... 0.406 1.06
------- -------
Total From Investment Operations...... 0.372 1.07
------- -------
DISTRIBUTIONS
Net Investment Income................. (0.008) --
In Excess of Net Investment Income.... (0.002) --
Net Realized Gain..................... (0.014) --
------- -------
Total Distributions................... (0.024) --
------- -------
NET ASSET VALUE, END OF PERIOD.......... $ 11.423 $ 11.07
------- -------
------- -------
TOTAL RETURN (1)........................ 3.39% 10.74%**
------- -------
------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....... $ 63,140 $ 69,572
Ratio of Expenses to Average Net
Assets................................ 2.40% 2.45%
Ratio of Net Investment Income/Loss to
Average Net Assets.................... (0.32)% 0.13%
Portfolio Turnover Rate................. 40% 4%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen Global Equity Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland Corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation by investing primarily in equity securities of issuers
throughout the world, including U.S. issuers. The Fund commenced operations on
October 29, 1997.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
------------------------
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------- ----------- -----------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
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 between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. 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 Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income and expenses transactions.
However, 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.
- -----------------------
12
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
The net assets of the Fund may include issuers located in emerging markets.
There are certain risks inherent in these investments not typically associated
with investments in the United States, including the smaller size of the markets
themselves, lesser liquidity, greater volatility, and potentially less publicly
available information. Emerging markets may be subject to a greater degree of
government involvement in the economy and greater economic and political
uncertainty, which has the potential to extend to government imposed
restrictions on exchange traded transactions and currency transactions. These
restrictions may impact the Fund's ability to buy or sell certain securities or
to repatriate certain currencies to U.S. dollars. Additionally, changes in
currency exchange rates will affect the value of and investment income from such
securities.
5. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of the initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during the amortization period, the Fund will be reimbursed
for any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
6. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. 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.
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 Fund's next
taxable year. For the period from November 1, 1998 to June 30, 1999 the Fund
incurred and elected to defer until July 1, 1999 for U.S. Federal income tax
purposes, net currency losses of approximately $147,000.
At June 30, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- --------- --------- --------- -------------
<S> <C> <C> <C>
$ 674,545 $ 104,455 $(43,056) $ 61,399
</TABLE>
7. DISTRIBUTION OF INCOME AND GAINS: 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, and gains on certain securities of corporations
designated as "passive foreign investment companies."
Permanent book to 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 in excess of par. For
the year ended June 30, 1999, approximately $2,284,000 has been reclassified
from paid in capital in excess of par with $1,838,000 posted to undistributed
net investment income and $446,000 posted to accumulated net realized gain.
Permanent book to tax basis differences 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.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary 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 Fund, 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- --------------- ------------------- -------------------
<S> <C> <C>
1.00% 1.80% 2.55%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$35,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
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 the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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
------------------
13
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
Adviser 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
Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $431,221 for Class A shares and deferred sales charges of $40,909,
$2,591,742, and $53,302 for Class A shares, Class B shares, and Class C shares,
respectively.
Prior to October 1, 1998, the Fund's assets held outside the United States were
held by Morgan Stanley Trust Company ("MSTC"), a former affiliate of the
Subadvisers. Through September 30, 1998, the Fund incurred MSTC fees of
approximately $49,000. On October 1, 1998, the Chase Manhattan Bank purchased
MSTC.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
During the year ended June 30, 1999, the Fund incurred approximately $106,000 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/ dealer.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $287,379,000 and sales of approximately $318,704,000
of investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sales of long-term U.S.
government securities.
- -----------------------
14
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen Global Equity Fund:
In our opinion, the accompanying statement 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 Van Kampen Global Equity Fund (the
"Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the results of
its operations, the changes in its 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, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
------------------
15
<PAGE>
VAN KAMPEN GLOBAL EQUITY FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the percentage of dividends paid that qualify
for the 70% dividend received deduction for corporate shareholders is 74.78%.
For the year ended June 30, 1999, the Fund intends to pass through foreign tax
credits of $1,258,328 and has derived gross income from sources within foreign
countries amounting to $9,311,055.
The Fund designated and paid $1,000 as a 20% rate gain distribution.
Shareholders were sent a 1998 Form 1099-DIV in January 1999 representing their
proportionate share of this capital gain distribution.
- -----------------------
16
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at www.vankampen.com --
to view a prospectus, select DOWNLOAD 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.vankampen.com
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
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
Retired, Formerly 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
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the
German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
[VAN KAMPEN FUNDS]
1 Parkview Plaza - P.O. Box 5555 - Oakbrook Terrace, IL 60181-5555
- www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
AGGRESSIVE EQUITY FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 7
Statement of Operations............................................... 8
Statement of Changes in Net Assets.................................... 9
Financial Highlights ................................................. 10
Notes to Financial Statements......................................... 11
Report of Independent Accountants..................................... 14
Additional Information................................................ 15
</TABLE>
MSAE ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, but fell to 2.3 percent in the second quarter.
The first-quarter expansion was fueled by an increase in consumer spending,
which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although the Fed had expressed a bias toward a series
of rate increases, May's tame CPI report prompted it to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing midline federal funds rate on the
last day of each month. Inflation is indicated by the annual percentage change
of the Consumer Price Index for all urban consumers at the end of each month.
- --------------
2
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Goods 24.3%
Communication Services 12.1%
Consumer Cyclicals 13.6%
Consumer Staples 7.7%
Financial 3.0%
Health Care 13.0%
Technology 20.2%
Utilities 2.5%
Short Term Investment 2.6%
Other 1.0%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
------------------------------------------------------------------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION COMMENCEMENT DATE
------------------------ --------------------------- -----------------
WITHOUT
WITH SALES SALES WITH SALES WITHOUT SALES
CHARGE* CHARGE*** CHARGE* CHARGE***
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Class A Shares 18.35 % 25.57 % 28.61 % 30.80 % 1/2/96
- ------------------------------------------------------------------------------------------------
Class B Shares 19.59 % 24.59 % 29.48 % 29.85 % 1/2/96
- ------------------------------------------------------------------------------------------------
Class C Shares 23.67 % 24.67 % 29.85 % 29.85 % 1/2/96
- ------------------------------------------------------------------------------------------------
Lipper Capital
Appreciation Index N/A 20.28 % N/A 20.11 % N/A
- ------------------------------------------------------------------------------------------------
S&P 500 Index N/A 22.75 % N/A 27.73 % N/A
- ------------------------------------------------------------------------------------------------
</TABLE>
The Lipper Capital Appreciation Fund Index is a composite of mutual funds
managed for maximum capital gains. The Standard & Poor's 500 Index is an
unmanaged index of common stocks. The S&P 500 Index assumes dividends are
reinvested.
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY SECTOR NET ASSETS
- -------------------------- -------------------- -------------
<S> <C> <C>
Tyco International Ltd. Manufacturing
(Diversified) 7.8%
General Electric Co. Electrical Equipment 5.8%
Cisco Systems, Inc. Computers
(Networking) 5.5%
Microsoft Corp. Computers (Software
& Services) 4.7%
Abercrombie & Fitch Co. Retail (Specialty)
'A' 4.3%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ------------------------------ --------- -------------
<S> <C> <C>
Capital Goods $ 67,344 24.3%
Technology 55,986 20.2%
Consumer Cyclicals 37,691 13.6%
Health Care 36,134 13.0%
Communication Services 33,507 12.1%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Aggressive Equity Lipper Capital
Fund Class A Appreciation Index S&P 500 Index
1/02/96 $10,000 $10,000 $10,000
6/30/96 $9,500 $10,000 $10,000
6/30/97 $11,480 $10,950 $11,009
6/30/98 $14,801 $12,578 $14,829
6/30/99 $24,083 $19,025 $23,482
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE 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.
WE RECENTLY SPOKE TO THE MANAGEMENT TEAM OF THE VAN KAMPEN AGGRESSIVE EQUITY
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST 12 MONTHS. SINCE 1998 THE FUND'S MANAGEMENT TEAM HAS INCLUDED PHIL W.
FRIEDMAN, WILLIAM S. AUSLANDER, AND KENNY RADER, PORTFOLIO MANAGERS, MORGAN
STANLEY DEAN WITTER INVESTMENT MANAGEMENT. THE FOLLOWING EXCERPTS REFLECT THEIR
VIEWS ON THE FUND'S PERFORMANCE DURING THE 12-MONTH REPORTING PERIOD ENDED JUNE
30, 1999.
Q: CAN YOU DESCRIBE THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED?
A: It was a volatile 12 months for stock investors. The stock market began the
reporting period on a positive note with the Dow Jones Industrial Average
setting a then-record high in July 1998. Trouble was on the horizon, however, as
investors feared disappointing corporate earnings reports and other effects of
international economic troubles. By the end of August, the Dow had fallen 19
percent from its high.
3------------------
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Following a series of interest-rate cuts by the Federal Reserve Board, U.S.
companies began to report better-than-expected earnings, reassuring investors
that the U.S. economy, though slowing, was still fundamentally sound. These
events helped place the stock market on an upward trend that continued through
the rest of the reporting period. In the second quarter of 1999, enthusiasm for
large, growth-oriented stocks began to subside as investors felt more confident
looking beyond the perceived stability of growth stocks. As a result,
traditional value stocks in cyclical sectors such as basic materials, energy,
and producer manufacturing, began to outperform growth stocks for the first time
in several years.
Q: HOW DID THIS SHIFT FROM GROWTH TO VALUE AFFECT THE FUND, WHICH INVESTS
PREDOMINANTLY IN GROWTH COMPANIES?
A: We fared relatively well during the shift, largely because the Fund invested
in some "less traditional" growth companies that helped spare us the brunt of
growth's recent underperformance. These companies, which included firms such as
Tyco International and United Technologies, are expected to grow at healthy
rates but lack the premiums being paid for more familiar names such as
Microsoft, General Electric, or Cisco. We did invest in these and other
"classic" growth stocks, but our willingness to expand our conception of what
constitutes a growth company definitely helped our results.
Q: HOW DID YOU SELECT THE INVESTMENTS IN THE FUND?
A: As always, we continued to take advantage of the Fund's flexibility, which
enables us to invest up to 25 percent of the Fund's total assets in a particular
stock if we have a great deal of conviction that it may outperform. As a result,
the performance of individual securities can have a significant impact on the
Fund's overall return during the reporting period. In other words, the more we
own of a company, the more its stock performance will affect how the Fund
performs.
Q: WHAT STOCKS MOST HELPED THE FUND'S PERFORMANCE DURING THE REPORTING PERIOD?
A: AT&T, which appreciated 43 percent during the period, made the greatest
contribution to the Fund's return. In recent years, AT&T has undergone a
dramatic transformation from a mature, slow-growth company to a dynamic,
high-growth enterprise. The company's chief executive, Michael Armstrong, has
used the cash flow generated by AT&T's reliable long-distance business to enter
into exciting growth areas such as Internet, broadband, and wireless
communications.
Associated Group, a holding company with considerable media and
telecommunications assets, was another of the Fund's best performers. We viewed
this company as both a growth opportunity and an "asset play"--meaning we felt
the stock's market price vastly understated the value of the company's assets.
The Fund's performance also benefited from investments in Nielsen Media, the
leading provider of television rating services in the U.S. and Canada, and
Montana Power, a utility company that does much of its business in the
telecommunications area.
Q: MANY GROWTH FUNDS ARE HEAVILY INVESTED IN THE INTERNET. HOW DID YOU TAKE
ADVANTAGE OF THIS AREA OF THE MARKET?
A: We are very excited about the Internet, a technological innovation that will
continue to change the world. However, we are also concerned about the high
valuations of pure Internet companies-- commonly referred to as the
"dot-coms"--and believe that the risk involved with investing in these
businesses is substantial and difficult to quantify. We prefer to take advantage
of this growth area by investing in more traditional companies that are
positioned to benefit from the Internet boom--for example, Cisco Systems, which
makes the routers that enable Internet connections. This company performed very
well for the Fund during the last 12 months, boosting our total return.
Another indirect approach to Internet investing can be found in Clear Channel
Communications, which specializes in radio, television, and outdoor advertising.
This was another successful investment during the reporting period. Although
some investors are concerned that the Internet will divert advertising dollars
from traditional media, we believe that the lack of barriers to entry on the
Internet will force these new companies to use traditional media to increase
traffic on their Web sites.
Of course, not all the stocks in the Fund performed as well as those mentioned
here, nor is there any guarantee that they'll continue to do so in the future.
- -------------- 4
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q: WHAT STOCKS HURT THE FUND'S PERFORMANCE?
A: Because we are able to hold concentrated positions in those stocks in which
we have the most confidence, the Fund's return can be hurt by underperformance
on a security by security basis. Along those lines, Continental Airlines had the
single largest negative impact on the Fund during the last 12 months. This
company did not fare well during the third-quarter market drop. Airline stocks
have typically been very sensitive to the economy, so during that time people
were eager to sell stocks like Continental that were vulnerable to market
weakness. We gradually eliminated our position in this company, but not before
it could drag the Fund's return substantially.
Case, which manufactures farm equipment machinery, also did not meet our
expectations during the reporting period. The company's stock performed poorly
as a result of weak Asian demand for its products and a subsequent decline in
food commodity prices. The severity of this decline in food prices was followed
by reductions in earnings estimates for the company.
Franchise and membership marketing company Cendant was another business whose
stock performance was a disappointment. Following the announcement of Cendant's
accounting irregularities, disclosed in April 1998, we continued to hold the
stock, as we were cautiously optimistic that the company would recover. This did
not happen as quickly as we had hoped, leading us to eliminate our
position--though not soon enough to escape some damage to the Fund's return.
Q: SO, HOW DID THE FUND PERFORM DURING THE 12-MONTH REPORTING PERIOD?
A: It was a tale of two periods: the third quarter was very difficult for the
Fund due to the stock market decline, but the Fund's subsequent performance was
very positive. We attribute this to our stock selection and portfolio
management, which enabled the Fund to weather the market's shift from growth to
value.
Overall, the Fund achieved a 12-month total return of 25.57 percent (Class A
shares at net asset value) as of June 30, 1999. By comparison, the Standard &
Poor's 500 Index returned 22.75 percent, while the Lipper Capital Appreciation
Fund Index, which more closely resembles the Fund, returned 20.28 percent. Past
performance is no guarantee of future results.
Q: WHAT DO YOU SEE AHEAD FOR THE FUND DURING THE NEXT SIX MONTHS?
A: We rarely make predictions about the market environment, as we prefer to
focus our energies on learning more about the stocks we own, as well as the
stocks we may wish to own in the future. Our management team is committed to a
"bottom-up" stock-selection strategy--before investing, we look at companies
individually and seek to understand everything we can about them. Despite market
volatility, we have confidence that our investment strategy and our research
staff will help uncover those stocks that we believe will enhance the Fund's
performance. We can't guarantee that all of our investments will turn out as
planned, but our discipline is designed to make our disappointments as small as
possible.
<TABLE>
<S> <C> <C>
Philip Friedman William S. Auslander Kenny Rader
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
5------------------
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------
COMMON STOCKS (96.4%)
CAPITAL GOODS (24.3%)
AEROSPACE/DEFENSE (1.0%)
(a)Gulfstream Aerospace
Corp........................ 42,600 $ 2,878
--------
ELECTRICAL EQUIPMENT (5.8%)
General Electric Co........... 141,200 15,956
--------
MANUFACTURING (DIVERSIFIED) (14.0%)
Textron, Inc.................. 77,500 6,379
Tyco International Ltd........ 227,900 21,594
United Technologies Corp...... 152,500 10,932
--------
38,905
--------
OFFICE EQUIPMENT & SUPPLIES (3.5%)
Pitney Bowes, Inc............. 149,500 9,605
--------
TOTAL CAPITAL GOODS........................ 67,344
--------
COMMUNICATION SERVICES (12.1%)
TELECOMMUNICATIONS (CELLULAR/WIRELESS)
(5.0%)
(a)Associated Group, Inc.
'A'......................... 39,200 2,553
(a)Associated Group, Inc.
'B'......................... 174,100 11,349
--------
13,902
--------
TELECOMMUNICATIONS (LONG DISTANCE) (4.4%)
American Telephone & Telegraph
Co.......................... 35,675 1,991
(a)MCI WorldCom, Inc.......... 116,900 10,083
--------
12,074
--------
TELEPHONE (2.7%)
Bell Atlantic Corp............ 115,200 7,531
--------
TOTAL COMMUNICATION SERVICES............... 33,507
--------
CONSUMER CYCLICALS (13.6%)
RETAIL (BUILDING SUPPLIES) (2.4%)
Home Depot, Inc............... 103,400 6,663
--------
RETAIL (GENERAL MERCHANDISE) (3.1%)
(a)Costco Cos., Inc........... 106,000 8,486
--------
RETAIL (SPECIALTY) (6.1%)
(a)Abercrombie & Fitch Co.
'A'......................... 250,000 12,000
Gap, Inc...................... 98,475 4,961
--------
16,961
--------
SERVICES (COMMERCIAL & CONSUMER) (2.0%)
(a)Nielsen Media Research,
Inc......................... 190,800 5,581
--------
TOTAL CONSUMER CYCLICALS................... 37,691
--------
CONSUMER STAPLES (7.7%)
BROADCASTING (TV, RADIO, & CABLE) (5.3%)
(a)AT&T Corp. Liberty Media
'A'......................... 57,400 2,109
(a)Chancellor Media Corp.
'A'......................... 48,300 2,663
(a)Clear Channel
Communications, Inc......... 141,400 9,748
--------
14,520
--------
FOODS (1.2%)
(a)Keebler Foods Co........... 111,600 3,390
--------
HOUSEHOLD PRODUCTS (NON-DURABLES) (1.2%)
Procter & Gamble Co........... 38,400 3,427
--------
TOTAL CONSUMER STAPLES..................... 21,337
--------
FINANCIAL (3.0%)
BANKS (MAJOR REGIONAL) (1.6%)
Bank of New York Co., Inc..... 121,600 4,461
--------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------
FINANCIAL (DIVERSIFIED) (1.4%)
Citigroup, Inc................ 82,500 $ 3,919
--------
TOTAL FINANCIAL............................ 8,380
--------
HEALTH CARE (13.0%)
HEALTH CARE (DIVERSIFIED) (6.7%)
Bristol-Myers Squibb Co....... 116,300 8,192
Warner-Lambert Co............. 151,000 10,476
--------
18,668
--------
HEALTH CARE (DRUGS--GENERIC & OTHERS)
(2.7%)
(a)Amgen, Inc................. 123,800 7,536
--------
HEALTH CARE (DRUGS--MAJOR
PHARMACEUTICALS) (3.6%)
Pfizer, Inc................... 37,700 4,137
Schering-Plough Corp.......... 109,300 5,793
--------
9,930
--------
TOTAL HEALTH CARE.......................... 36,134
--------
TECHNOLOGY (20.2%)
COMMUNICATION EQUIPMENT (4.1%)
(a)American Tower Corp. 'A'... 245,900 5,902
Motorola, Inc................. 56,700 5,372
--------
11,274
--------
COMPUTERS (NETWORKING) (5.5%)
(a)Cisco Systems, Inc......... 235,600 15,196
--------
COMPUTERS (SOFTWARE & SERVICES) (6.6%)
(a)America Online, Inc........ 35,700 3,945
(a)Juniper Networks, Inc...... 7,700 1,147
(a)Microsoft Corp............. 145,700 13,141
--------
18,233
--------
ELECTRONICS (SEMICONDUCTORS) (2.0%)
Intel Corp.................... 95,400 5,676
--------
EQUIPMENT (SEMICONDUCTORS) (2.0%)
(a)Applied Materials, Inc..... 75,900 5,607
--------
TOTAL TECHNOLOGY........................... 55,986
--------
UTILITIES (2.5%)
ELECTRIC COMPANIES (2.5%)
Montana Power Co.............. 98,200 6,923
--------
TOTAL LONG-TERM INVESTMENTS (96.4%) (COST
$228,806).................................... 267,302
--------
<CAPTION>
PAR
VALUE
(000)
------
<S> <C> <C>
SHORT-TERM INVESTMENT (2.6%)
REPURCHASE AGREEMENT (2.6%)
Chase Securities, Inc., 4.55%, $7,218
dated 6/30/99, due 7/1/99,
to be repurchased at $7,219
collateralized by $6,705
U.S. Treasury Bonds, 7.25%,
due 5/15/16, valued at
$7,452 (COST $7,218)........ 7,218
TOTAL INVESTMENTS (99.0%) (COST $236,024) 274,520
--------
OTHER ASSETS IN EXCESS OF LIABILITIES
(1.0%)..................................... 2,687
--------
NET ASSETS (100%)............................ $277,207
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- -----------------------------------------------
ASSETS:
Investments at Value (Cost
$236,024)........................ $274,520
Receivable for:
Investments Sold................. 4,394
Fund Shares Sold................. 1,909
Dividends........................ 65
Interest......................... 1
Deferred Organizational Costs...... 15
Other.............................. 11
--------
Total Assets..................... 280,915
--------
LIABILITIES:
Payable for:
Investments Purchased............ 2,163
Fund Shares Redeemed............. 853
Distribution Fees................ 348
Investment Advisory Fees......... 148
Administrative Fees.............. 54
Transfer Agent Fees.............. 46
Shareholder Reporting Expenses... 33
Professional Fees................ 28
Directors' Fees and Expenses..... 15
Custody Fees..................... 13
Other.............................. 7
--------
Total Liabilities................ 3,708
--------
NET ASSETS......................... $277,207
--------
--------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 12
Paid in Capital in Excess of Par... 221,070
Unrealized Appreciation on
Investments...................... 38,496
Accumulated Net Realized Gain...... 17,644
Accumulated Net Investment Loss.... (15)
--------
NET ASSETS........................... $277,207
--------
--------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $73,828,526 and
3,212,182 Shares Outstanding).... $ 22.98
--------
--------
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100/
(100 - maximum sales charge)).... $ 24.38
--------
--------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$176,188,744 and 7,872,472 Shares
Outstanding)*.................... $ 22.38
--------
--------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$27,189,247 and 1,215,821 Shares
Outstanding)*.................... $ 22.36
--------
--------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ----------------------------------------------
INVESTMENT INCOME:
Dividends.......................... $ 1,309
Interest........................... 431
-------
Total Income...................... 1,740
-------
EXPENSES:
Investment Advisory Fees........... 2,068
Distribution Fees (Attributed to
Classes A, B, and C of $155,
$1,433, and $244,
respectively).................... 1,832
Administrative Fees................ 579
Transfer Agent Fees................ 157
Custodian Fees..................... 96
Shareholder Reports................ 90
Filing and Registration Fees....... 52
Professional Fees.................. 49
Directors' Fees and Expenses....... 11
Amortization of Organizational
Costs............................ 11
Other.............................. 8
-------
Total Expenses.................... 4,953
Less Expense Reductions........... (252)
-------
Net Expenses...................... 4,701
-------
Net Investment Income/Loss........ (2,961)
-------
NET REALIZED GAIN/LOSS ON:
Investments........................ 24,769
Securities Sold Short.............. (176)
-------
Net Realized Gain/Loss............ 24,593
-------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ 6,123
-------
End of the Period
Investments....................... 38,496
-------
Net Unrealized
Appreciation/Depreciation During
the Period......................... 32,373
-------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... 56,966
-------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $54,005
-------
-------
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ (2,961) $ (1,097)
Net Realized Gain/Loss.......................... 24,593 23,029
Net Unrealized Appreciation/Depreciation........ 32,373 2,644
-------- ---------------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 54,005 24,576
-------- ---------------
DISTRIBUTIONS:
Net Realized Gain:
Class A......................................... (4,962) (3,187)
Class B......................................... (11,751) (5,696)
Class C......................................... (2,021) (1,157)
-------- ---------------
Net Decrease in Net Assets Resulting from
Distributions................................. (18,734) (10,040)
-------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed...................................... 95,378 171,376
Distributions Reinvested........................ 17,353 9,563
Redeemed........................................ (90,199) (42,384)
-------- ---------------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... 22,532 138,555
-------- ---------------
Total Increase/Decrease in Net Assets........... 57,803 153,091
NET ASSETS--Beginning of Period................... 219,404 66,313
-------- ---------------
NET ASSETS--End of Period (Including accumulated
net investment loss of $(15) and $(4),
respectively)................................... $ 277,207 $219,404
-------- ---------------
-------- ---------------
- ---------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) CLASS A
Shares:
Subscribed................................... 1,623 3,038
Distributions Reinvested..................... 266 177
Redeemed..................................... (1,877) (1,340)
-------- ---------------
Net Increase/Decrease in Class A Shares
Outstanding.................................. 12 1,875
-------- ---------------
-------- ---------------
Dollars:
Subscribed................................... $ 31,396 $ 59,406
Distributions Reinvested..................... 4,594 3,064
Redeemed..................................... (34,991) (26,003)
-------- ---------------
Net Increase/Decrease.......................... $ 999 $ 36,467
-------- ---------------
-------- ---------------
Ending Paid in Capital......................... $ 57,462+ $ 56,463
-------- ---------------
-------- ---------------
CLASS B:
Shares:
Subscribed................................... 2,694 4,818
Distributions Reinvested..................... 650 314
Redeemed..................................... (2,106) (539)
-------- ---------------
Net Increase/Decrease in Class B Shares
Outstanding.................................. 1,238 4,593
-------- ---------------
-------- ---------------
Dollars:
Subscribed................................... $ 50,034 $ 92,956
Distributions Reinvested..................... 10,965 5,363
Redeemed..................................... (38,411) (10,091)
-------- ---------------
Net Increase/Decrease.......................... $ 22,588 $ 88,228
-------- ---------------
-------- ---------------
Ending Paid in Capital......................... $ 142,680+ $120,092
-------- ---------------
-------- ---------------
CLASS C:
Shares:
Subscribed................................... 744 982
Distributions Reinvested..................... 106 67
Redeemed..................................... (900) (343)
-------- ---------------
Net Increase/Decrease in Class C Shares
Outstanding.................................. (50) 706
-------- ---------------
-------- ---------------
Dollars:
Subscribed................................... $ 13,948 $ 19,014
Distributions Reinvested..................... 1,794 1,136
Redeemed..................................... (16,797) (6,290)
-------- ---------------
Net Increase/Decrease.......................... $ (1,055) $ 13,860
-------- ---------------
-------- ---------------
Ending Paid in Capital......................... $ 20,928+ $ 21,983
-------- ---------------
-------- ---------------
</TABLE>
- ---------------
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------- JANUARY 2, 1996*
SELECTED PER SHARE DATA AND RATIOS 1999 # 1998 # 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $20.007 $ 16.98 $ 14.40 $ 12.00
------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... (0.141) (0.07) 0.01 0.06
Net Realized and Unrealized
Gain/Loss........................ 4.712 5.03 3.95 2.40
------- ------- ------- ------
Total From Investment Operations... 4.571 4.96 3.96 2.46
------- ------- ------- ------
DISTRIBUTIONS
Net Investment Income.............. -- -- (0.03) (0.06)
Net Realized Gain.................. (1.594) (1.93) (1.35) --
------- ------- ------- ------
Total Distributions................ (1.594) (1.93) (1.38) (0.06)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD....... $22.984 $ 20.01 $ 16.98 $ 14.40
------- ------- ------- ------
------- ------- ------- ------
TOTAL RETURN (1)..................... 25.57% 30.93% 28.93% 20.52%**
------- ------- ------- ------
------- ------- ------- ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $73,829 $64,035 $22,521 $ 5,382
Ratio of Expenses to Average Net
Assets............................. 1.50% 1.50% 1.57% 2.03%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (0.73)% (0.37)% (0.04)% 1.22%
Portfolio Turnover Rate.............. 282% 308% 241% 204%**
- ----------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.02 $ 0.04 $ 0.02 $ 0.06
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 1.61% 1.71% 2.38% 3.26%
Net Investment Income/Loss to
Average Net Assets............... (0.84)% (0.59)% (0.85)% (0.01)%
Ratio of Expenses to Average Net
Assets excluding dividend expense
on securities sold short........... 1.50% 1.50% 1.50% 1.50%
- ----------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------- JANUARY 2, 1996*
SELECTED PER SHARE DATA AND RATIOS 1999 # 1998 # 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 19.670 $ 16.85 $ 14.38 $ 12.00
-------- -------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... (0.282) (0.21) (0.02) 0.03
Net Realized and Unrealized
Gain/Loss........................ 4.586 4.96 3.86 2.39
-------- -------- ------- ------
Total From Investment Operations... 4.304 4.75 3.84 2.42
-------- -------- ------- ------
DISTRIBUTIONS
Net Investment Income.............. -- -- (0.02) (0.04)
Net Realized Gain.................. (1.594) (1.93) (1.35) --
-------- -------- ------- ------
Total Distributions................ (1.594) (1.93) (1.37) (0.04)
-------- -------- ------- ------
NET ASSET VALUE, END OF PERIOD....... $ 22.380 $ 19.67 $ 16.85 $ 14.38
-------- -------- ------- ------
-------- -------- ------- ------
TOTAL RETURN (1)..................... 24.59% 29.94% 28.01% 20.18%**
-------- -------- ------- ------
-------- -------- ------- ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $176,189 $130,497 $34,382 $ 2,426
Ratio of Expenses to Average Net
Assets............................. 2.25% 2.25% 2.32% 2.67%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (1.50)% (1.11)% (0.83)% 0.43%
Portfolio Turnover Rate.............. 282% 308% 241% 204%**
- ----------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.02 $ 0.04 $ 0.02 $ 0.07
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.36% 2.47% 2.88% 3.79%
Net Investment Income/Loss to
Average Net Assets............... (1.61)% (1.34)% (1.43)% (0.69)%
Ratio of Expenses to Average Net
Assets excluding dividend expense
on securities sold short........... 2.25% 2.25% 2.25% 2.25%
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------- JANUARY 2, 1996*
SELECTED PER SHARE DATA AND RATIOS 1999 # 1998 # 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 19.655 $ 16.83 $14.37 $ 12.00
-------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... (0.278) (0.21) (0.06) 0.03
Net Realized and Unrealized
Gain/Loss........................ 4.580 4.97 3.89 2.38
-------- ------- ------ ------
Total From Investment Operations... 4.302 4.76 3.83 2.41
-------- ------- ------ ------
DISTRIBUTIONS
Net Investment Income................ -- -- (0.02) (0.04)
Net Realized Gain.................... (1.594) (1.93) (1.35) --
-------- ------- ------ ------
Total Distributions.................. (1.594) (1.93) (1.37) (0.04)
-------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD....... $ 22.363 $ 19.66 $16.83 $ 14.37
-------- ------- ------ ------
-------- ------- ------ ------
TOTAL RETURN (1)..................... 24.67% 29.90% 28.04% 20.10%**
-------- ------- ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $ 27,189 $24,872 $9,410 $ 2,582
Ratio of Expenses to Average Net
Assets............................. 2.25% 2.25% 2.32% 2.67%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (1.48)% (1.13)% (0.77)% 0.44%
Portfolio Turnover Rate.............. 282% 308% 241% 204%**
- ----------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.02 $ 0.04 $ 0.02 $ 0.07
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.36% 2.25% 3.23% 3.80%
Net Investment Income/Loss to
Average Net Assets............... (1.59)% (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% 2.25%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen Aggressive Equity Fund (the "Fund") is organized as a separate
non-diversified fund of Van Kampen Series Fund, Inc., a Maryland Corporation,
which is registered as an open-end management investment corporation, under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to seek capital appreciation by investing primarily in a non-diversified
portfolio of corporate equity and equity linked securities. The Fund commenced
operations on January 2, 1996.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------- ----------- -----------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
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. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on an accrual basis except where collection is in
doubt. 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 Fund are recorded on the
ex-distribution date.
4. SHORT SALES: The Fund may sell securities short. A short sale is a
transaction in which the Fund sells securities it may or may not own, but has
borrowed, in anticipation of a decline in the market price of the securities.
The Fund is obligated to purchase securities at the market price to replace the
borrowed securities at the time of replacement. The Fund may have to pay a
premium to borrow the securities as well as pay dividends or interest payable on
the securities until they are replaced. The Fund's 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 Fund
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 Fund involve certain risks and special considerations.
Possible losses from short sales differ from
------------------
11
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
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.
5. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of the initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during the amortization period, the Fund will be reimbursed
for any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
6. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
At June 30, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPECIATION
(000) (000) (000) (000)
- ---------- --------- --------- ------------
<S> <C> <C> <C>
$ 236,420 $ 40,268 $ (2,168) $ 38,100
</TABLE>
7. DISTRIBUTION OF INCOME AND GAINS: 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.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital. For the year ended June
30, 1999 approximately $2,962,000 has been reclassified from accumulated net
realized gain/loss with approximately $2,950,000 posted to accumulated net
investment income/loss and approximately $12,000 posted to paid in capital.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary 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 Fund, 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
ADVISORY MAX. OPERATING MAX. OPERATING
FEE EXPENSE RATIO EXPENSE RATIO
- ----------- --------------- ---------------
<S> <C> <C>
0.90% 1.50% 2.25%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$9,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
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 the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $584,668 for Class A shares and deferred sales charges of $613,437
and $30,933 for Class B shares and Class C shares, respectively.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen.
- ------------------
12
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
Under the deferred compensation plan, Directors 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 Director's years
of service to the Fund. The maximum annual benefit per director under the plan
is $2,500.
During the year ended June 30, 1999, the Fund incurred approximately $14,000 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/ dealer.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $631,670,000 and sales of approximately $630,129,000
of investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sales of long-term U.S.
government securities.
------------------
13
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen Aggressive Equity Fund:
In our opinion, the accompanying statement 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 Van Kampen Aggressive Equity Fund
(the "Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the
results of its operations, the changes in its 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
- --------------
14
<PAGE>
VAN KAMPEN AGGRESSIVE EQUITY FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the percentage of dividends paid that qualify
for the 70% dividend received deduction for corporate shareholders is 4.01%.
The Fund designated and paid $525,655 as a 20% rate gain distribution.
Shareholders were sent a 1998 Form 1099-DIV in January 1999 representing their
proportionate share of this capital gain distribution.
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the
Allstate Corporation and Allstate Insurance Company
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.
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISERS
Morgan Stanley Dean Witter Investment 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.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 418256
Kansas City, Missouri 64241
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
[LOGO]
1 Parkview Plaza - P.O. Box 5555 - Oakbrook Terrace, IL 60181-5555
-www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
EQUITY GROWTH FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 7
Statement of Operations............................................... 8
Statement of Changes in Net Assets.................................... 9
Financial Highlights ................................................. 10
Notes to Financial Statements......................................... 11
Report of Independent Accountants..................................... 13
Additional Information................................................ 14
</TABLE>
EQG ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, and by 2.3 percent in the second quarter. The
expansion was fueled by an increase in consumer spending, which was attributed
to vibrant consumer confidence as a result of the strong job market.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although it had expressed a bias toward a series of
rate increases, May's tame CPI report prompted the Fed to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Goods 20.9%
Communication Services 6.6%
Consumer Cyclicals 13.9%
Consumer Staples 14.5%
Financial 4.6%
Health Care 13.2%
Technology 23.8%
Short-Term Investment and Other 2.5%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
--------------------------------------------------------
AVERAGE ANNUAL COMMENCEMENT
ONE YEAR SINCE INCEPTION DATE
----------------- ----------------- ------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE*** CHARGE* CHARGE***
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
Class A Shares 14.86% 21.90% 16.59% 23.10% 5/29/98
- ----------------------------------------------------------------------------------
Class B Shares 16.14% 21.14% 18.68% 22.29% 5/29/98
- ----------------------------------------------------------------------------------
Class C Shares 20.04% 21.04% 22.20% 22.20% 5/29/98
- ----------------------------------------------------------------------------------
Lipper Growth Fund
Index N/A 21.69% N/A 24.06% N/A
- ----------------------------------------------------------------------------------
S&P 500 Index N/A 22.75% N/A 24.53% N/A
- ----------------------------------------------------------------------------------
</TABLE>
The Lipper Growth Fund Index is an unmanaged index composed of funds in this
investment objective. The S&P 500 Index is an unmanaged index of common stocks
and assumes dividends are reinvested.
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF NET
SECURITY SECTOR ASSETS
- ------------------------- ------------- ---------------
<S> <C> <C>
Tyco International Ltd. Capital Goods 7.1%
Microsoft Corp. Technology 4.6%
General Electric Co. Capital Goods 4.3%
Cisco Systems, Inc. Technology 3.9%
United Technologies Corp. Capital Goods 3.9%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ---------------------- --------- -------------
<S> <C> <C>
Technology $11,551 23.8%
Capital Goods 10,184 20.9%
Consumer Staples 7,064 14.5%
Consumer Cyclicals 6,741 13.9%
Health Care 6,398 13.2%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Equity Growth Lipper Growth
Fund Class A Fund Index S&P 500 Index
5/29/98 $10,000 $10,000 $10,000
6/30/99 $11,822 $12,169 $12,275
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE 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.
WE RECENTLY SPOKE TO THE MANAGEMENT TEAM OF THE VAN KAMPEN EQUITY GROWTH FUND
ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE PAST
12 MONTHS. SINCE 1998 THE FUND HAS BEEN MANAGED BY PHIL W. FRIEDMAN, MARGARET K.
JOHNSON (SINCE INCEPTION), AND WILLIAM S. AUSLANDER, PORTFOLIO MANAGERS, MORGAN
STANLEY DEAN WITTER INVESTMENT MANAGEMENT. THE FOLLOWING EXCERPTS REFLECT THEIR
VIEWS ON THE FUND'S PERFORMANCE DURING THE 12-MONTH REPORTING PERIOD ENDED JUNE
30, 1999.
Q: CAN YOU DESCRIBE THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED?
A: It was a volatile 12 months for stock investors. The stock market began the
reporting period on a positive note with the Dow Jones Industrial Average
setting a then-record high in July 1998. Trouble was on the horizon, however, as
investors feared disappointing corporate earnings reports and other effects of
international economic troubles. By the end of August, the Dow had fallen 19
percent from its high.
3------------------
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Following a series of interest-rate cuts by the Federal Reserve Board, U.S.
companies began to report better-than-expected earnings, reassuring investors
that the U.S. economy, though slowing, was still fundamentally sound. These
events helped place the stock market on an upward trend that continued through
the rest of the reporting period. In the second quarter of 1999, enthusiasm for
large, growth-oriented stocks began to subside as investors felt more confident
looking beyond the perceived stability of growth stocks. As a result,
traditional value stocks in cyclical sectors such as basic materials, energy,
and producer manufacturing, began to outperform growth stocks for the first time
in several years.
Q: HOW DID THIS SHIFT FROM GROWTH TO VALUE AFFECT THE FUND, WHICH INVESTS
PREDOMINANTLY IN GROWTH COMPANIES?
A: We fared relatively well during the shift, largely because the Fund invested
in some "less traditional" growth companies that helped spare us the brunt of
growth's recent underperformance. These companies, which included Tyco
International and United Technologies, are expected to grow at healthy rates but
lack the premiums being paid for more familiar names such as Microsoft, General
Electric, or Cisco. We did invest in these and other "classic" growth stocks,
but our willingness to expand our conception of what constitutes a growth
company definitely helped our results.
Q: HOW DID YOU SELECT THE INVESTMENTS IN THE FUND?
A: As always, we continued to employ our management strategy of "opportunistic
concentration," or holding up to 10 percent of the portfolio in a particular
stock if we have a great deal of conviction that it may outperform. By
prospectus, up to 25 percent of the Fund's total assets can be opportunistically
concentrated. As a result, the performance of individual securities can have a
significant impact on the Fund's overall return. In other words, the more we own
of a company, the more its stock performance will affect how the Fund performs.
Q: WHAT STOCKS MOST HELPED THE FUND'S PERFORMANCE DURING THE REPORTING PERIOD?
A: Tyco International and United Technologies were the Fund's two best
performers during the past 12 months. The success of these two stocks had the
greatest positive impact on the Fund's return.
Tyco was the Fund's largest holding for much of the reporting period. During the
12 months Tyco acquired both AMP and U.S. Surgical, acquisitions that we believe
may lead to continued rising earnings and cash flows. These prospects, along
with what appears to us to be a very attractive price, lead us to anticipate
continued success with the stock. At the end of the reporting period, Tyco
occupied the largest position in the Fund's portfolio.
United Technologies was the second-biggest contributor to the Fund's
performance. The stock was hard-hit by last year's third-quarter market decline,
as investors feared Asian economic difficulties would hurt this company, which
obtains a significant percentage of its profits from that region. Because we
were optimistic about the company's potential, we took the low prices as an
opportunity to add to our position in the stock. Since then, United Technologies
has been an outstanding performer.
Q: MANY GROWTH FUNDS ARE HEAVILY INVESTED IN THE INTERNET. HOW DID YOU TAKE
ADVANTAGE OF THIS AREA OF THE MARKET?
A: We are very excited about the Internet, a technological innovation that will
continue to change the world. However, we are also concerned about the high
valuations of pure Internet companies-- commonly referred to as the
"dot-coms"--and believe that the risk involved with investing in these
businesses is substantial and difficult to quantify. We prefer to take advantage
of this growth area by investing in more traditional companies that are
positioned to benefit from the Internet boom--for example, Cisco Systems, which
makes the routers that enable Internet connections. This company performed very
well for the Fund during the last 12 months.
Another indirect approach to Internet investing can be found in Clear Channel
Communications, which specializes in radio, television, and outdoor advertising.
This was another successful
- -------------- 4
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
investment during the reporting period. Although some investors are concerned
that the Internet will divert advertising dollars from traditional media, we
believe that the lack of barriers to entry on the Internet will force these new
companies to use traditional media to increase traffic on their Web sites.
Of course, not all the stocks in the Fund performed as well as those mentioned
here, nor is there any guarantee that they'll continue to do so in the future.
Q: WHAT STOCKS HURT THE FUND'S PERFORMANCE?
A: Because we are able to hold concentrated positions in those stocks in which
we have the most confidence, the Fund's return can be hurt by underperformance
on a security-by-security basis. Without question, Continental Airlines had the
single largest negative impact on the Fund during the last 12 months. This
company did not fare well during the third-quarter market drop. Airline stocks
have typically been very sensitive to the economy, so during that time, as
people became more concerned about prospects for economic growth, many people
were eager to sell stocks like Continental. We gradually eliminated our position
in this company, but not before it damaged the Fund's return substantially.
Case, which manufactures farm equipment machinery, also did not meet our
expectations during the reporting period. The company's stock performed poorly
as a result of weak Asian demand for its products and a subsequent decline in
food commodity prices. The severity of this decline in food prices was followed
by reductions in earnings estimates for the company.
Franchise and membership marketing company Cendant was another business whose
stock performance was a disappointment. Following the announcement of Cendant's
accounting irregularities, disclosed in April 1998, we continued to hold the
stock, as we were cautiously optimistic that the company would recover. This did
not happen as quickly as we had hoped, leading us to eliminate our
position--though not soon enough to escape some damage to the Fund's return.
Q: SO, HOW DID THE FUND PERFORM DURING THE 12-MONTH REPORTING PERIOD?
A: It was a tale of two periods: the third quarter was very difficult for the
Fund due to the stock market decline, but the Fund's subsequent performance was
very positive. We attribute this to our stock selection and portfolio
management, which enabled the Fund to weather the market's shift from growth to
value.
Overall, the Fund achieved a 12-month total return of 21.90 percent (Class A
shares at net asset value without sales charge) as of June 30, 1999. By
comparison, the Standard & Poor's 500 Index returned 22.75 percent, while the
Lipper Growth Fund Index, which more closely resembles the Fund, returned 21.69
percent. Past performance is no guarantee of future results.
Q: WHAT DO YOU SEE AHEAD FOR THE FUND DURING THE NEXT SIX MONTHS?
A: We rarely make predictions about the future market environment, as we focus
our energies on learning more about the stocks we own, as well as the stocks we
may wish to own in the future. The Fund is committed to a "bottom-up"
stock-selection strategy--before investing, we look at companies individually
and seek to understand everything we can about them. Despite market volatility,
we have confidence that our investment strategy and our research staff will help
uncover those stocks that we believe will enhance the Fund's performance. We
can't guarantee that all of our investments will turn out as planned, but our
discipline is designed to make our disappointments as small as possible.
Phil W. Friedman William S. Auslander Margaret K. Johnson
PORTFOLIO PORTFOLIO MANAGER PORTFOLIO MANAGER
MANAGER
5------------------
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------
COMMON STOCKS (98.2%)
CAPITAL GOODS (20.9%)
General Electric Co........... 18,600 $ 2,102
(a)Gulfstream Aerospace
Corp........................ 14,600 986
Pitney Bowes, Inc............. 16,400 1,054
Textron, Inc.................. 7,600 626
Tyco International Ltd........ 36,300 3,439
United Technologies Corp...... 26,300 1,885
(a)WESCO International,
Inc......................... 4,500 92
-------
10,184
-------
COMMUNICATION SERVICES (6.6%)
American Telephone & Telegraph
Co.......................... 14,402 804
Bell Atlantic Corp............ 11,100 725
(a)Crown Castle International
Corp........................ 11,600 241
(a)MCI WorldCom, Inc.......... 16,600 1,432
-------
3,202
-------
CONSUMER CYCLICALS (13.9%)
(a)Abercrombie & Fitch Co.
'A'......................... 12,800 614
(a)Berkshire Hathaway, Inc.
'B'......................... 274 616
(a)Best Buy Co., Inc.......... 1,400 95
(a)Costco Cos., Inc........... 12,300 985
Gap, Inc...................... 15,050 758
Harley-Davidson, Inc.......... 200 11
Home Depot, Inc............... 19,900 1,282
Intimate Brands, Inc.......... 6,405 303
(a)Nielsen Media Research,
Inc......................... 6,599 193
(a)Office Depot, Inc.......... 16,300 360
Omnicom Group, Inc............ 6,800 544
Wal-Mart Stores, Inc.......... 20,300 980
-------
6,741
-------
CONSUMER STAPLES (14.5%)
Anheuser-Busch Cos., Inc.
'A'......................... 4,000 284
(a)AT&T Corp., Liberty Media
Group 'A'................... 23,200 853
(a)Brinker International,
Inc......................... 4,900 133
(a)Chancellor Media Corp.
'A'......................... 8,800 485
(a)Clear Channel
Communications, Inc......... 22,500 1,551
Coca-Cola Enterprises, Inc.... 8,000 238
Comcast Corp. 'A'............. 2,600 93
Comcast Corp. 'A' (Special)... 21,400 823
(a)Keebler Foods Co........... 7,300 222
(a)MediaOne Group, Inc........ 300 22
Philip Morris Cos., Inc....... 13,400 538
Procter & Gamble Co........... 6,500 580
Time Warner, Inc.............. 16,900 1,242
-------
7,064
-------
ENERGY (0.4%)
Exxon Corp.................... 2,400 185
-------
FINANCIAL (4.6%)
American Express Co........... 6,800 885
Bank of New York Co., Inc..... 15,300 561
Citigroup, Inc................ 16,750 796
(a)E-LOAN, Inc................ 100 4
-------
2,246
-------
HEALTH CARE (13.2%)
American Home Products
Corp........................ 3,800 219
(a)Amgen, Inc................. 10,200 621
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------
Bristol-Myers Squibb Co....... 16,900 $ 1,190
Eli Lilly & Co................ 3,300 236
Johnson & Johnson............. 4,800 471
Merck & Co., Inc.............. 15,800 1,169
Pfizer, Inc................... 7,800 856
Pharmacia & Upjohn, Inc....... 3,700 210
Schering-Plough Corp.......... 7,800 413
Warner-Lambert Co............. 14,600 1,013
-------
6,398
-------
TECHNOLOGY (23.8%)
(a)America Online, Inc........ 5,400 597
(a)American Tower Corp. 'A'... 13,300 319
(a)Applied Materials, Inc..... 6,600 488
Ask Jeeves, Inc............... 300 4
(a)At Home Corp. 'A'.......... 2,300 124
(a)BMC Software, Inc.......... 3,600 194
(a)CIENA Corp................. 1,500 45
(a)Cisco Systems, Inc......... 29,500 1,903
Clarent Corp.................. 100 2
(a)Compuware Corp............. 6,700 213
(a)General Motors Corp. 'H'... 3,600 203
Intel Corp.................... 21,800 1,297
(a)Juniper Networks, Inc...... 1,300 194
(a)L-3 Communications
Holdings, Inc............... 2,200 106
(a)Litton Industries, Inc..... 4,700 337
(a)Loral Space &
Communications Ltd.......... 19,100 344
Lucent Technologies, Inc...... 6,700 452
(a)Microsoft Corp............. 24,900 2,246
Motorola, Inc................. 8,900 843
(a)New Era of Networks,
Inc......................... 4,100 180
(a)Novell, Inc................ 11,900 315
(a)Oracle Corp................ 3,400 126
(a)Quantum Corp............... 8,600 208
(a)Sun Microsystems, Inc...... 2,800 193
Texas Instruments, Inc........ 2,200 319
(a)Uniphase Corp.............. 1,800 299
-------
11,551
-------
UTILITIES (0.3%)
Montana Power Co.............. 2,000 141
-------
TOTAL LONG-TERM INVESTMENTS (98.2%) (COST
$38,538)...................................... 47,712
-------
<CAPTION>
PAR
VALUE
(000)
-------
<S> <C> <C>
SHORT-TERM INVESTMENT (2.5%)
REPURCHASE AGREEMENT (2.5%)
Chase Securities, Inc., 4.55%,
dated $ 1,242
6/30/99, due 7/1/99, to be repurchased
at $1,242, collateralized by $1,155
U.S. Treasury Bonds, 7.25%, due
5/15/16
valued at $1,284 (COST $1,242)........ 1,242
-------
TOTAL INVESTMENTS (100.7%) (COST $39,780)..... 48,954
LIABILITIES IN EXCESS OF OTHER ASSETS
(-0.7%)..................................... (356)
-------
NET ASSETS (100%)............................. $48,598
-------
-------
</TABLE>
- ---------------
(a) -- Non-income producing security
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ----------------------------------------------
ASSETS:
Investments at Value (Cost
$39,780)......................... $48,954
Receivable for:
Investments Sold................. 515
Fund Shares Sold................. 254
Dividends........................ 25
Deferred Organizational Costs...... 15
Other.............................. 8
-------
Total Assets..................... 49,771
-------
LIABILITIES:
Payable for:
Investments Purchased............ 1,000
Distribution Fees................ 56
Fund Shares Redeemed............. 31
Investment Advisory Fees......... 19
Professional Fees................ 18
Custody Fees..................... 11
Shareholder Reporting Expenses... 11
Administrative Fees.............. 10
Directors' Fees and Expenses..... 9
Transfer Agent Fees.............. 6
Bank Overdraft................... 2
-------
Total Liabilities.............. 1,173
-------
NET ASSETS........................... $48,598
-------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 4
Paid in Capital in Excess of Par... 39,285
Net Unrealized Appreciation on
Investments...................... 9,174
Accumulated Net Realized Gain...... 143
Accumulated Net Investment Loss.... (8)
-------
NET ASSETS........................... $48,598
-------
-------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $17,185,350 and
1,370,069 Shares Outstanding).... $ 12.54
-------
-------
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share x 100/
(100 - maximum sales charge)).... $ 13.31
-------
-------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$23,977,419 and 1,926,071 Shares
Outstanding)*.................... $ 12.45
-------
-------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$7,435,116 and 597,570 Shares
Outstanding)*.................... $ 12.44
-------
-------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ---------------------------------------------
INVESTMENT INCOME:
Dividends.......................... $ 230
Interest........................... 85
------
Total Income..................... 315
------
EXPENSES:
Investment Advisory Fees........... 274
Distribution Fees (Attributed to
Classes A, B, and C of $30, $163,
and $58, respectively)........... 251
Custodian Fees..................... 85
Filing and Registration Fees....... 30
Administrative Fees................ 91
Professional Fees.................. 25
Shareholder Reports................ 35
Amortization of Organizational
Costs............................ 19
Directors' Fees and Expenses....... 9
Transfer Agent Fees................ 17
Other.............................. 7
------
Total Expenses................... 843
Less Expense Reductions.......... (164)
------
Net Expenses..................... 679
------
Net Investment Income/Loss........... (364)
------
NET REALIZED GAIN/LOSS ON:
Investments........................ 502
------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ 138
------
End of the Period
Investments...................... 9,174
------
Net Unrealized
Appreciation/Depreciation During
the Period......................... 9,036
------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... 9,538
------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $9,174
------
------
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAY 29, 1998*
YEAR ENDED TO JUNE 30,
JUNE 30, 1999 1998
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ (364) $ --
Net Realized Gain/Loss.......................... 502 5
Net Unrealized Appreciation/Depreciation........ 9,036 138
-------- ------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 9,174 143
-------- ------
DISTRIBUTIONS:
Net Realized Gain:
Class A......................................... (3) --
Class B......................................... (4) --
Class C......................................... (1) --
-------- ------
Net Decrease in Net Assets Resulting from
Distributions................................. (8) --
-------- ------
CAPITAL SHARES TRANSACTIONS (1):
Subscribed...................................... 47,489 --
Distributions Reinvested........................ 8 --
Redeemed........................................ (13,208) --
-------- ------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... 34,289 --
-------- ------
Total Increase/Decrease in Net Assets........... 43,455 --
NET ASSETS--Beginning of Period................... 5,143 5,000
-------- ------
NET ASSETS--End of Period (Including accumulated
net investment loss of $(8) at June 30, 1999)... $ 48,598 $ 5,143
-------- ------
-------- ------
- ---------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) CLASS A:
Shares:
Subscribed................................... 1,629 200
Distributions Reinvested..................... -- --
Redeemed..................................... (459) --
-------- ------
Net Increase/Decrease in Class A Shares
Outstanding.................................... 1,170 200
-------- ------
-------- ------
Dollars:
Subscribed................................... $ 16,596 --
Distributions Reinvested..................... 3 --
Redeemed..................................... (4,778) --
-------- ------
Net Increase/Decrease.......................... $ 11,821 --
-------- ------
-------- ------
Ending Paid in Capital......................... $ 13,821 $ 2,000
-------- ------
-------- ------
CLASS B:
Shares:
Subscribed................................... 2,258 150
Distributions Reinvested..................... -- --
Redeemed..................................... (482) --
-------- ------
Net Increase/Decrease in Class B Shares
Outstanding.................................... 1,776 150
-------- ------
-------- ------
Dollars:
Subscribed................................... $ 23,038 --
Distributions Reinvested..................... 4 --
Redeemed..................................... (5,054) --
-------- ------
Net Increase/Decrease $ 17,988 --
-------- ------
-------- ------
Ending Paid in Capital......................... $ 19,488 $ 1,500
-------- ------
-------- ------
CLASS C:
Shares:
Subscribed................................... 788 150
Distributions Reinvested..................... -- --
Redeemed..................................... (340) --
-------- ------
Net Increase/Decrease in Class C Shares
Outstanding 448 150
-------- ------
-------- ------
Dollars:
Subscribed................................... $ 7,855 --
Distributions Reinvested..................... 1 --
Redeemed..................................... (3,376) --
-------- ------
Net Increase/Decrease.......................... $ 4,480 --
-------- ------
-------- ------
Ending Paid in Capital......................... $ 5,980 $ 1,500
-------- ------
-------- ------
- ---------------
* Commencement of operations
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------------- -----------------------------------
YEAR ENDED MAY 29, 1998* YEAR ENDED MAY 29, 1998*
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1999# TO JUNE 30, 1998 JUNE 30, 1999# TO JUNE 30, 1998
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 10.291 $ 10.00 $ 10.284 $ 10.00
------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... (0.062) -- (0.144) --
Net Realized and Unrealized
Gain/Loss........................ 2.317 0.29 2.312 0.28
------- ------ ------- ------
Total From Investment Operations... 2.255 0.29 2.168 0.28
------- ------ ------- ------
DISTRIBUTIONS
Net Realized Gain.................. (0.003) -- (0.003) --
------- ------ ------- ------
NET ASSET VALUE, END OF PERIOD....... $ 12.543 $ 10.29 $ 12.449 $ 10.28
------- ------ ------- ------
------- ------ ------- ------
TOTAL RETURN (1)..................... 21.90% 2.90%** 21.14% 2.80%**
------- ------ ------- ------
------- ------ ------- ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $ 17,185 $ 2,057 $ 23,978 $ 1,543
Ratio of Expenses to Average Net
Assets............................. 1.50% 1.50% 2.25% 2.25%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (0.57)% 0.51% (1.34)% (0.25)%
Portfolio Turnover Rate.............. 126% 19%** 126% 19%**
- ---------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.05 $ 0.02 $ 0.05 $ 0.02
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 1.98% 4.06% 2.72% 4.81%
Net Investment Income/Loss to
Average Net Assets............... (1.05)% (2.05)% (1.81)% (2.81)%
<CAPTION>
CLASS C
-----------------------------------
YEAR ENDED MAY 29, 1998*
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1999# TO JUNE 30, 1998
<S> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 10.284 $ 10.00
------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... (0.141) --
Net Realized and Unrealized
Gain/Loss........................ 2.302 0.28
------- --------
Total From Investment Operations... 2.161 0.28
------- --------
DISTRIBUTIONS
Net Realized Gain.................. (0.003) --
------- --------
NET ASSET VALUE, END OF PERIOD....... $ 12.442 $ 10.28
------- --------
------- --------
TOTAL RETURN (1)..................... 21.04% 2.80%**
------- --------
------- --------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $ 7,435 $ 1,543
Ratio of Expenses to Average Net
Assets............................. 2.25% 2.25%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (1.32)% (0.25)%
Portfolio Turnover Rate.............. 126% 19%**
- -----------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.05 $ 0.02
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.75% 4.81%
Net Investment Income/Loss to
Average Net Assets............... (1.81)% (2.81)%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen Equity Growth Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland Corporation, which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek
long-term capital appreciation by investing primarily in growth-oriented equity
securities of medium and large capitalization companies. The Fund commenced
operations on May 29, 1998.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
---------------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------------ -------- --------
<S> <C> <C>
First..................................... 5.00% 1.00%
Second.................................... 4.00% None
Third..................................... 3.00% None
Fourth.................................... 2.50% None
Fifth..................................... 1.50% None
Thereafter................................ None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
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. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis except where collection is in
doubt. 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 Fund are recorded on the
ex-distribution date.
4. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of the initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during the amortization period, the Fund will be reimbursed
for any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
At June 30, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- --------- --------- ----------- -------------
<S> <C> <C> <C>
$ 40,175 $ 9,158 $ (379) $ 8,779
</TABLE>
------------------
11
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
6. DISTRIBUTION OF INCOME AND GAINS: 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.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par. For
the year ended June 30, 1999, approximately $356,000 has been reclassified from
accumulated net realized gain and posted to accumulated net investment loss.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary 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 Fund 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------- --------------- ---------------
<S> <C> <C>
0.80% 1.50% 2.25%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$3,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
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 the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B and Class C shares of the Fund, on an
annualized basis, of the average daily net assets attributable to each Class.
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 the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $449,522 for Class A shares and deferred sales charges of $1,488,
$69,097, and $6,772 for Class A shares, Class B shares, and Class C shares,
respectively.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
During the year ended June 30, 1999, the Fund incurred approximately $2,000 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/dealer.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $73,882,000 and sales of approximately $40,725,000 of
investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sales of long-term U.S.
government securities.
- -----------------------
12
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen Equity Growth Fund:
In our opinion, the accompanying statement 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 Van Kampen Equity Growth Fund (the
"Fund", a fund of Van Kampen Series Fund Inc.), at June 30, 1999, the results of
its operations, the changes in its 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, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
------------------
13
<PAGE>
VAN KAMPEN EQUITY GROWTH FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the percentage of dividends paid that qualify
for the 70% dividend received deduction for corporate shareholders is 47.15%.
- -----------------------
14
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate Corporation and
Allstate Insurance Company
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
Retired, Formerly 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
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/ National Research
Council, and former Chairman of the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
1 Parkview Plaza - P.O. Box 5555 - Oakbrook Terrace, IL
60181-5555 - www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
HIGH YIELD & TOTAL RETURN FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 5
Statement of Assets and Liabilities................................... 8
Statement of Operations............................................... 9
Statement of Changes in Net Assets.................................... 10
Financial Highlights ................................................. 11
Notes to Financial Statements......................................... 12
Report of Independent Accountants..................................... 15
Additional Information................................................ 16
</TABLE>
MSHY ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
/s/ RICHARD F. POWERS III /s/ DENNIS J. MCDONNELL
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, but fell to 2.3 percent in the second quarter.
The first-quarter expansion was fueled by an increase in consumer spending,
which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although the Fed had expressed a bias toward a series
of rate increases, May's tame CPI report prompted it to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MONTH INTEREST RATES INFLATION
<S> <C> <C>
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Broadcast - Radio & Television 4.50%
Cable Television 3.90%
Chemicals 3.20%
Energy 3.30%
Environmental Controls 2.20%
Gaming & Lodging 6.90%
Health Care Supplies &
Services 7.30%
Multi-Industry 3.10%
Retail-General 4.80%
Telecommunications 31.50%
Short-Term Investment 2.10%
Other 27.20%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
--------------------------------------------------------
AVERAGE ANNUAL COMMENCEMENT
ONE YEAR SINCE INCEPTION DATE
------------------- ------------------- ------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE*** CHARGE* CHARGE***
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Class A Shares -2.93% 1.90% 7.93% 9.60% 5/1/96
- -------------------------------------------------------------------------------------------------------
Class B Shares -2.41% 1.28% 8.16% 8.80% 5/1/96
- -------------------------------------------------------------------------------------------------------
Class C Shares 0.35% 1.28% 8.80% 8.80% 5/1/96
- -------------------------------------------------------------------------------------------------------
CS First Boston High Yield Index N/A -0.85% N/A 7.97% N/A
- -------------------------------------------------------------------------------------------------------
</TABLE>
The CS First Boston High Yield Index is an unmanaged index of high yield
corporate bonds.
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (4% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
TOP FIVE ISSUERS
PERCENT OF
ISSUER INDUSTRY NET ASSETS
- ----------------------- ------------------ ---------------
<S> <C> <C>
Health Care
Supplies &
Columbia/HCA Healthcare Services 4.3%
Nextel Communications,
Inc. Telecommunications 4.0%
DR Securitized Lease
Trust Retail -- General 2.2%
RSL Communications plc Telecommunications 2.2%
Station Casinos, Inc. Gaming & Lodging 1.9%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- -------------------- --------- -------------
<S> <C> <C>
Telecommunications $ 12,187 31.5%
Health Care Supplies
& Services 2,819 7.3%
Gaming & Lodging 2,680 6.9%
Retail -- General 1,866 4.8%
Broadcast -- Radio &
Television 1,772 4.5%
</TABLE>
<TABLE>
<CAPTION>
YIELD INFORMATION AS OF JUNE 30, 1999
- ---------------------------------------------
30-DAY CURRENT YIELD+
- ---------------------------------------------
<S> <C>
Class A 8.52 %
- ---------------------------------------------
Class B 8.18 %
- ---------------------------------------------
Class C 8.18 %
- ---------------------------------------------
</TABLE>
+ The current 30-day yield reflects the net investment income generated by the
Fund over the 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.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD & TOTAL RETURN CS FIRST BOSTON
FUNDCLASS A HIGH YIELD INDEX
<S> <C> <C>
5/1/96 $9,500 $10,000
6/30/96 $9,553 $10,501
6/30/97 $11,284 $12,040
6/30/98 $12,493 $13,362
6/30/99 $12,730 $13,248
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE 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.
------------------
3
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN HIGH YIELD & TOTAL
RETURN FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
DURING THE PAST 12 MONTHS. THE TEAM IS LED BY ROBERT ANGEVINE, PORTFOLIO
MANAGER, AND INCLUDES THOMAS L. BENNETT AND STEPHEN F. ESSER. THE FOLLOWING
EXCERPTS REFLECT THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE 12-MONTH
PERIOD ENDED JUNE 30, 1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST 12 MONTHS?
A: The second half of 1998 was marked by volatility, as the fixed-income market
was unsettled by global economic weakness and a subsequent flight to quality. A
series of fourth-quarter interest-rate cuts by the Federal Reserve Board
restored order and paved the way for recovery in the first quarter of 1999, as
investors gained confidence in the strength of the economy and modest inflation.
Consequently, yield spreads narrowed between treasuries and other fixed-income
products (such as corporate, high-yield, and government securities).
However, this good news for fixed-income products was quelled in the second
quarter of 1999 by a slight increase in inflation and warnings of interference
from the Fed. This prompted yield spreads to widen once again, although not to
the record-high levels seen last fall. The market breathed a sigh of relief at
the end of the reporting period, as the Fed approved a 0.25 percent hike while
reassuring fixed-income investors that additional action seemed unnecessary.
Q: HOW DID HIGH-YIELD BONDS REACT TO THESE CONDITIONS?
A: The high-yield market continued to make progress from last fall's lows, when
growing concerns about the global economy sparked a flight to quality that
created one of the most difficult periods on record for high-yield bonds. In the
first six months of 1999, high-yield bonds initially performed well, as they
were supported by positive fund flows and merger and investment activity in the
dominant telecommunications and cable industries. Activity in these industries
has generally been favorable for the overall credit quality of high-yield
issuers--even those securities not directly involved in a transaction--because
these deals provided a basis from which to value the equity of issuers. By May,
however, liquidity concerns, technical conditions, and rising rates contributed
to lower prices.
Q: HOW DID THE FUND PERFORM DURING THE PERIOD? SPECIFICALLY, WHAT FACTORS
CONTRIBUTED TO ITS RETURN?
A: The Fund's 12-month return of 1.90 percent (Class A shares at net asset value
without sales charge) outperformed the -0.85 percent return of the unmanaged CS
First Boston High Yield Index. The Fund's exposure to non-U.S. issues and the
telecommunications and cable sectors had the largest positive impact on the
portfolio's results. Because the telecommunications sector has been a driving
force for the high-yield market for the past few years, we continued to focus on
this industry, selecting those issuers that we view as having fundamental
strength.
We also found attractive yields and good value in the Fund's modest yet
important allocation to non-U.S. holdings. Country allocation continued to be
broad as we focused on diversifying this portion of the portfolio. Canada,
Germany, and Mexico remained among our largest non-U.S. holdings.
Holdings in the health-care, retail, and gaming sectors also supported the
Fund's performance. However, our underweight positions in the strong-performing
cyclical sectors, such as commodities, detracted from the Fund's return.
Q: WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A: We expect economic growth to moderate and inflation to remain close to
current levels, which should provide an excellent environment for high-yield
bonds. Backed by a favorable credit environment, we continue to believe that
high-yield bonds offer attractive value on a risk-adjusted expected return
basis. As a result, our outlook is positive, and we will continue to pursue
opportunities to support the Fund's objective of providing high current income
and total return.
<TABLE>
<S> <C> <C>
Robert Angevine Thomas L. Bennett Stephen F. Esser
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
- -----------------------
4
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<C> <S> <C>
- ---------------------------------------------------------------------------
CORPORATE BONDS & NOTES (89.3%)
AEROSPACE & DEFENSE (1.6%)
$ 200 Jet Equipment Trust, Series C-1, 11.79%,
6/15/13........................................ $ 248
(b)300 Jet Equipment Trust, Series 1995-D, 11.44%,
11/1/14........................................ 369
-------
617
-------
AUTOMOTIVE (1.0%)
(b)405 Hayes Lemmerz International 8.25%, 12/15/08...... 385
-------
BROADCAST--RADIO & TELEVISION (3.8%)
575 Chancellor Media Corp., Series B, 8.125%,
12/15/07....................................... 558
180 Chancellor Media Corp. 9.00%, 10/1/08............ 182
(b)240 RBS Participacoes S.A. 11.00%, 4/1/07............ 161
775 TV Azteca S.A. de CV, Series B, 10.50%,
2/15/07........................................ 583
-------
1,484
-------
BUILDING MATERIALS & COMPONENTS (1.7%)
275 American Standard Cos., Inc. 7.375%, 2/1/08...... 258
(b)410 Nortek, Inc. 8.875%, 8/1/08...................... 404
-------
662
-------
CABLE TELEVISION (3.9%)
200 Adelphia Communications, Series B, 7.50%,
1/15/04........................................ 191
125 Adelphia Communications, Series B, 9.875%,
3/1/07......................................... 130
165 Adelphia Communications, Series B, 8.375%,
2/1/08......................................... 159
255 CSC Holdings, Inc. 9.875%, 5/15/06............... 271
125 CSC Holdings, Inc. 7.25%, 7/15/08................ 118
290 Lenfest Communications, Inc. 8.375%, 11/1/05..... 307
300 Rogers Cablesystems Ltd., Series B, 10.00%,
3/15/05........................................ 323
-------
1,499
-------
CAPITAL GOODS/CONSTRUCTION (1.1%)
460 D.R. Horton, Inc. 8.00%, 2/1/09.................. 432
-------
CHEMICALS (3.2%)
600 ISP Holdings, Inc., Series B, 9.00%, 10/15/03.... 598
(b)400 Huntsman ICI Chemicals 10.125%, 7/1/09........... 401
(b)250 Lyondell Chemical Co. 9.625%, 5/1/07............. 255
-------
1,254
-------
COMPUTERS (0.5%)
(d)300 Wam!Net, Inc., Series B, 0.00%, 3/1/05........... 177
-------
CONSTRUCTION & MINING (0.6%)
275 Murrin Murrin Holdings 9.375%, 8/31/07........... 242
-------
ENERGY (3.3%)
395 CMS Energy 7.50%, 1/15/09........................ 370
(d)205 Husky Oil Ltd. 8.90%, 8/15/28.................... 197
100 Quezon Power Ltd. 8.86%, 6/15/17................. 81
440 Snyder Oil Corp. 8.75%, 6/15/07.................. 433
125 Vintage Petroleum 9.75%, 6/30/09................. 128
50 Vintage Petroleum 8.625%, 2/1/09................. 48
-------
1,257
-------
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<C> <S> <C>
- ---------------------------------------------------------------------------
ENVIRONMENTAL CONTROLS (2.2%)
$ 210 Allied Waste of North America 7.875%, 1/1/09..... $ 195
(d)600 Norcal Waste Systems, Series B, 13.50%,
11/15/05....................................... 663
-------
858
-------
FINANCE (1.0%)
(b,d)180 Fuji JGB Investments LLC, Series A, 9.87%,
12/31/49....................................... 157
(b,d)235 SB Treasury Co. LLC 9.40%, 12/29/49.............. 229
-------
386
-------
FOOD (1.7%)
700 Smithfield Foods, Inc. 7.625%, 2/15/08........... 637
-------
FOOD SERVICE & LODGING (1.9%)
400 Hilton Hotels 7.95%, 4/15/07..................... 405
335 Host Marriott Travel Plaza, Series B, 9.50%,
5/15/05........................................ 344
-------
749
-------
FOREST PRODUCTS & PAPER (1.8%)
215 Asia Pulp & Paper Co., Ltd., Series A, 12.00%,
2/15/04........................................ 141
140 Pindo Deli Fin Mauritius 10.75%, 10/1/07......... 97
305 SD Warren Co., Series B, 12.00%, 12/15/04........ 325
145 Tembec Industries, Inc. 8.625%, 6/30/09.......... 144
-------
707
-------
GAMING & LODGING (6.9%)
515 Harrahs Operating Co., Inc. 7.875%, 12/15/05..... 500
(b)460 Horseshoe Gaming Holdings 8.652%, 5/15/09........ 445
(b)590 International Game Technology 8.375%, 5/15/09.... 583
425 Park Place Entertainment 7.875%, 12/15/05........ 404
405 Station Casinos, Inc. 10.125%, 3/15/06........... 418
60 Station Casinos, Inc. 9.75%, 4/15/07............. 61
275 Station Casinos, Inc. 8.875%, 12/1/08............ 269
-------
2,680
-------
HEALTH CARE SUPPLIES & SERVICES (7.3%)
130 Columbia/HCA Healthcare, 8.13%, 8/4/03 MTN....... 128
650 Columbia/HCA Healthcare, 6.91%, 6/15/05.......... 601
525 Columbia/HCA Healthcare, 8.85%, 1/1/07 MTN....... 528
200 Columbia/HCA Healthcare, 7.00%, 7/1/07........... 181
275 Columbia/HCA Healthcare, 7.69%, 6/15/25.......... 228
270 Fresenius Medical Capital Trust II 7.875%,
2/1/08......................................... 254
920 Tenet Healthcare Corp. 8.625%, 1/15/07........... 899
-------
2,819
-------
MINING (0.9%)
410 Glencore Nickel Property Ltd. 9.00%, 12/1/14..... 353
-------
MULTI-INDUSTRY (3.1%)
185 Applied Power, Inc. 8.75%, 4/1/09................ 179
150 Axia, Inc. 10.75%, 7/15/08....................... 148
550 Outdoor Systems, Inc., 8.875%, 6/15/07........... 574
(d)380 PTC International Finance BV 0.00%, 7/1/07....... 281
-------
1,182
-------
</TABLE>
-----------------------
5
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, 1999
<TABLE>
<CAPTION>
PAR
VALUE VALUE
(000) (000)
- ---------------------------------------------------------------------------
<C> <S> <C>
PAPER & PACKAGING (1.8%)
$ 750 Indah Kiat Financial Mauritius 10.00%, 7/1/07.... $ 517
170 Norampac, Inc. 9.50%, 2/1/08..................... 174
-------
691
-------
REAL ESTATE (2.1%)
850 HMH Properties, Inc. Series A 7.875%, 8/1/05..... 803
-------
RETAIL--GENERAL (4.8%)
375 DR Securitized Lease Trust, Series 1993-K1, Class
A2, 7.43%, 8/15/18............................. 338
436 DR Securitized Lease Trust, Series 1994-K1, Class
A1, 7.60%, 8/15/07............................. 428
100 DR Securitized Lease Trust, Series 1994-K1, Class
A2, 8.375%, 8/15/15............................ 99
150 Fred Meyer, Inc. 7.375%, 3/1/05.................. 152
375 Kmart Funding Corp., Series F, 8.80%, 7/1/10..... 384
75 Musicland Group, Inc. 9.00%, 6/15/03............. 73
400 Musicland Group, Inc. 9.875%, 3/15/08............ 392
-------
1,866
-------
SERVICES (0.6%)
240 CEX Holdings, Inc. 9.625%, 6/1/08................ 226
-------
TECHNOLOGY (1.5%)
(b)150 AST Research, Inc. 7.45%, 10/1/02................ 144
75 Entex Information Services 12.50%, 8/1/06........ 45
(b)325 Hyundai Semiconductor 8.625%, 5/15/07............ 261
(d)240 Rhythms Netconnections, Inc., Series B, 0.00%,
5/15/08........................................ 127
-------
577
-------
TELECOMMUNICATIONS (29.9%)
305 American Cellular Corp. 10.50%, 5/15/08.......... 313
300 American Communications Lines LLC, Series B,
10.25%, 6/30/08................................ 300
300 AMSC Acquisition Co., Inc., Series B, 12.25%,
4/1/08......................................... 230
(b)285 Centennial Cellular Holdings 10.75%, 12/15/08.... 294
(d)90 Dial Call Communications, Series B, 10.25%,
12/15/05....................................... 92
275 Dobson Communications Corp. 11.75%, 4/15/07...... 289
(d)405 Dolphin Telecommunications plc 0.00%, 6/1/08..... 202
(b)410 Echostar DBS Corp. 9.375%, 2/1/09................ 417
315 Global Crossing Holdings, Ltd. 9.625%, 5/15/08... 332
305 Globalstar LP/Capital 11.375%, 2/15/04........... 201
45 Globalstar LP/Capital 11.50%, 6/1/05............. 29
275 Hermes Europe Railtel BV 11.50%, 8/15/07......... 289
(d)520 Hyperion Telecommunications 0.00%, 4/15/03....... 430
(d)885 Intermedia Communications, Series B, 0.00%,
7/15/07........................................ 632
375 Iridium LLC/Capital Corp., Series A, 13.00%,
7/15/05........................................ 75
115 IXC Communications, Inc. 9.00%, 4/15/08.......... 110
150 Lenfest Communications, Inc. 7.625%, 2/15/08..... 154
205 Metromedia Fiber Network 10.00%, 11/15/08........ 211
360 Multicanal S.A. 10.50%, 2/1/07................... 296
315 National Steel Corp., Series D, 9.875%, 3/1/09... 320
(d)300 Nextel Communications, Inc. 9.75%, 8/15/04....... 304
(d)1700 Nextel Communications, Inc. 0.00%, 9/15/07....... 1,241
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<C> <S> <C>
- ---------------------------------------------------------------------------
$ (d)590 NEXTLINK Communications, Inc. 0.00%, 4/15/08..... $ 353
(b)90 NEXTLINK Communications, Inc. 10.75%, 11/15/08... 92
(d)660 NTL, Inc. 0.00%, 4/1/08.......................... 447
(d)400 Occidente Y Caribe 0.00%, 3/15/04................ 268
(b)195 OnePoint Communications Corp., 14.50%, 6/1/08.... 106
315 Philippine Long Distance Telephone Co. 7.85%,
3/6/07......................................... 269
370 Primus Telecommunications Group, Series B,
9.875%, 5/15/08................................ 351
225 PSINet, Inc., Series B, 10.00%, 2/15/05.......... 224
(d)250 RCN Corp. 0.00%, 10/15/07........................ 168
(b,d)370 RCN Corp. 0.00%, 2/15/08......................... 230
150 Rogers Cantel, Inc. 8.30%, 10/1/07............... 148
650 Rogers Communications, Inc. 8.875%, 7/15/07...... 658
60 Rogers Communications, Inc. 9.125%, 1/15/06...... 61
17 RSL Communications plc. 12.25%, 11/15/06......... 18
(d)675 RSL Communications plc 0.00%, 3/1/08............. 405
470 RSL Communications plc 9.125%, 3/1/08............ 431
55 Satelites Mexicanos S.A. Series B, 10.125%,
11/1/04........................................ 44
(b)160 Tele1 Europe BV 13.00%, 5/15/09.................. 166
(b)180 Total Access Communications PCL 2.00%, 5/31/06... 164
(d)320 Viatel, Inc. Series A 0.00%, 4/15/08............. 206
-------
11,570
-------
UTILITIES (1.1%)
435 AES Corp. 8.50%, 11/1/07......................... 409
-------
TOTAL CORPORATE BONDS & NOTES..................................... 34,522
-------
ASSET BACKED SECURITIES (1.5%)
AEROSPACE & DEFENSE (0.4%)
157 Aircraft Lease Portfolio Securitization
Ltd.,Series 1996-1, Class D, 12.75%, 6/15/06... 157
-------
FINANCIAL SERVICES (1.1%)
(b)233 CA FM Lease Trust 8.50%, 7/15/17................. 217
226 Commercial Financial Services, Inc., Series
1997-5, Class A1 7.72%, 6/15/05................ 56
(b)122 Federal Mortgage Acceptance Corporation, Series
1996-B, Class C, 7.929%, 11/1/18............... 93
71 Long Beach Acceptance Auto Grantor Trust 1997-1,
Class B, 14.22%, 10/26/03...................... 70
-------
436
-------
TOTAL ASSET BACKED SECURITIES..................................... 593
-------
FOREIGN GOVERNMENT BONDS (2.5%)
BONDS (2.5%)
(c)693 Republic of Argentina, Series L, 5.938%,
3/31/05........................................ 592
470 United Mexican States Par Bond 6.25%, 12/31/19... 350
-------
TOTAL FOREIGN GOVERNMENT BONDS.................................... 942
-------
PREFERRED STOCKS (2.2%)
BROADCAST--RADIO & TELEVISION (0.7%)
(a)3,200 Paxson Communications 11.625%.................... 288
-------
</TABLE>
- -----------------------
6
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, 1999
<TABLE>
<CAPTION>
PAR
VALUE VALUE
(000) (000)
- ---------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS (1.5%)
$ (a)1,819 Concentric Network Corp. 13.50%.................. $ 172
(a,b)1,500 Dobson Communications Corp. 13.00%............... 145
(a)260 IXC Communications, Inc. PIK 9.00%............... 251
-------
568
-------
TOTAL PREFERRED STOCKS............................................ 856
-------
</TABLE>
<TABLE>
<CAPTION>
NO. OF
WARRANTS
<C> <S> <C>
- --------------
WARRANTS (0.5%)
COMPUTERS (0.0%)
(a)9,000 Wam!Net, Inc., expiring 3/1/05................... 21
-------
TECHNOLOGY (0.4%)
(a,b)9,600 Rhythms Netconnections, Inc., expiring 5/15/08... 138
-------
TELECOMMUNICATIONS (0.1%)
(a,b)3,000 American Mobile Satellite Corp., expiring
4/1/08......................................... 11
(a,b)210 Globalstar Telecom, expiring 2/15/04............. 11
(a,b)16,000 Occidente Y Caribe, expiring 3/15/04............. 27
(a,b)1,950 OnePoint Communications Corp., expiring 6/1/08... --
-------
49
-------
TOTAL WARRANTS.................................................... 208
-------
TOTAL LONG-TERM INVESTMENTS (96.0%) (COST $38,915)................ 37,121
-------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
<C> <S> <C>
- --------------
SHORT-TERM INVESTMENT (2.1%)
REPURCHASE AGREEMENT (2.1%)
$ 797 Chase Securities, Inc. 4.55%, dated 6/30/99, due
7/1/99, to be repurchased at $797, collaterized
by $740 U.S. Treasury Bonds, 7.250%, due
5/15/16, valued at $822 (COST $797)............ 797
-------
TOTAL INVESTMENTS (98.1%) (COST $39,712).......................... 37,918
OTHER ASSETS IN EXCESS OF LIABILITIES (1.9%)...................... 748
-------
NET ASSETS (100%)................................................. $38,666
-------
-------
</TABLE>
- ---------------
(a) -- Non-income producing security
(b) -- 144A Security--Certain conditions for public sale may exist.
(c) -- Variable/floating rate security--rate disclosed is as of June 30,
1999.
(d) -- Step Bond--coupon rate increases in increments to maturity. Rate
disclosed is as of June 30, 1999. Maturity date disclosed is the
ultimate maturity date.
EUR -- Euro
MTN -- Medium Term Note
PCL -- Public Company Limited
PIK -- Payment-In-Kind. Income may be received in additional securities or
cash at the discretion of the issuer.
----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY COUNTRY
<TABLE>
<CAPTION>
VALUE PERCENT OF
COUNTRY (000) NET ASSETS
- ---------------------------------- --------- -------------
<S> <C> <C>
United States..................... $ 28,187 72.9%
Canada............................ 1,705 4.4
Germany........................... 1,397 3.6
Mexico............................ 978 2.5
Argentina......................... 888 2.3
Indonesia......................... 755 2.0
Japan............................. 647 1.7
Australia......................... 595 1.5
United Kingdom.................... 574 1.5
Philippines....................... 350 0.9
Colombia.......................... 295 0.8
Poland............................ 281 0.7
Thailand.......................... 164 0.4
Brazil............................ 161 0.4
Korea............................. 144 0.4
--------- ---
$ 37,121 96.0%
--------- ---
--------- ---
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ----------------------------------------------
ASSETS:
Investments at Value (Cost
$39,712)......................... $37,918
Receivable for:
Interest......................... 714
Investments Sold................. 491
Fund Shares Sold................. 48
Deferred Organizational Costs...... 11
-------
Total Assets..................... 39,182
-------
LIABILITIES:
Payable for:
Dividends Declared............... 242
Bank Overdraft................... 108
Distribution Fees................ 56
Fund Shares Redeemed............. 35
Professional Fees................ 23
Directors' Fees and Expenses..... 12
Investment Advisory Fees......... 11
Administrative Fees.............. 9
Shareholder Reporting Expense.... 9
Transfer Agent Fees.............. 6
Custody Fees..................... 3
Other.............................. 2
-------
Total Liabilities................ 516
-------
NET ASSETS........................... $38,666
-------
-------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 3
Paid in Capital in Excess of Par... 40,797
Accumulated Net Investment
Income........................... 95
Distributions in Excess of Net
Realized Gain.................... (435)
Net Unrealized Depreciation on
Investments...................... (1,794)
-------
NET ASSETS........................... $38,666
-------
-------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $8,120,144 and 695,094
Shares Outstanding).............. $ 11.68
-------
-------
Maximum Sales Charge............... 4.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share x 100/
(100 - maximum sales charge)).... $ 12.26
-------
-------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$22,666,658 and 1,944,751 Shares
Outstanding)*.................... $ 11.66
-------
-------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$7,878,820 and 675,698 Shares
Outstanding)*.................... $ 11.66
-------
-------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ----------------------------------------------
INVESTMENT INCOME:
Dividends.......................... $ 12
Interest........................... 3,684
-------
Total Income..................... 3,696
-------
EXPENSES:
Distribution Fees (Attributed to
Classes A, B, and C of $23, $209,
and $82, respectively)........... 314
Investment Advisory Fees........... 288
Administrative Fees................ 99
Filing and Registration Fees....... 44
Professional Fees.................. 37
Shareholder Reports................ 34
Custodian Fees..................... 22
Transfer Agent Fees................ 22
Directors' Fees and Expenses....... 10
Other.............................. 10
-------
Total Expenses................... 880
Less Expense Reductions.......... (180)
-------
Net Expenses..................... 700
-------
Net Investment Income/Loss........... 2,996
-------
NET REALIZED GAIN/LOSS ON:
Investments........................ (344)
-------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ 210
-------
End of the Period
Investments........................ (1,794)
-------
Net Unrealized
Appreciation/Depreciation During
the Period......................... (2,004)
-------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... (2,348)
-------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $ 648
-------
-------
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ 2,996 $ 1,701
Net Realized Gain/Loss.......................... (344) 1,119
Net Unrealized Appreciation /Depreciation....... (2,004) (585)
-------- --------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 648 2,235
-------- --------
DISTRIBUTIONS:
Net Investment Income:
Class A......................................... (749) (525)
Class B......................................... (1,540) (854)
Class C......................................... (603) (343)
-------- --------
(2,892) (1,722)
-------- --------
Net Realized Gain:
Class A......................................... (61) (236)
Class B......................................... (152) (415)
Class C......................................... (59) (120)
In Excess of Net Realized Gain:
Class A......................................... (97) --
Class B......................................... (244) --
Class C......................................... (94) --
-------- --------
(707) (771)
-------- --------
Net Decrease in Net Assets Resulting from
Distributions................................... (3,599) (2,493)
-------- --------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed...................................... 27,018 32,419
Distributions Reinvested........................ 2,061 1,273
Redeemed........................................ (21,840) (21,623)
-------- --------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... 7,239 12,069
-------- --------
Total Increase/Decrease in Net Assets........... 4,288 11,811
NET ASSETS--Beginning of Period................... 34,378 22,567
-------- --------
NET ASSETS--End of Period (Including accumulated
net investment income of $95 and $36,
respectively)................................... $ 38,666 $ 34,378
-------- --------
-------- --------
- ------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
----------
Shares:
Subscribed................................... 1,215 786
Distributions Reinvested..................... 43 33
Redeemed..................................... (1,180) (900)
-------- --------
Net Increase/Decrease in Class A Shares
Outstanding.................................. 78 (81)
-------- --------
-------- --------
Dollars:
Subscribed................................... $ 14,702 $ 10,149
Distributions Reinvested..................... 520 420
Redeemed..................................... (14,249) (11,731)
-------- --------
Net Increase/Decrease.......................... $ 973 $ (1,162)
-------- --------
-------- --------
Ending Paid in Capital......................... $ 8,385+ $ 7,412
-------- --------
-------- --------
Class B:
----------
Shares:
Subscribed................................... 768 1,167
Distributions Reinvested..................... 89 48
Redeemed..................................... (371) (427)
-------- --------
Net Increase/Decrease in Class B Shares
Outstanding.................................. 486 788
-------- --------
-------- --------
Dollars:
Subscribed................................... $ 9,251 $ 15,056
Distributions Reinvested..................... 1,068 615
Redeemed..................................... (4,454) (5,588)
-------- --------
Net Increase/Decrease.......................... $ 5,865 $ 10,083
-------- --------
-------- --------
Ending Paid in Capital......................... $ 24,185+ $ 18,320
-------- --------
-------- --------
Class C:
----------
Shares:
Subscribed................................... 255 562
Distributions Reinvested..................... 40 19
Redeemed..................................... (264) (323)
-------- --------
Net Increase/Decrease in Class C Shares
Outstanding.................................. 31 258
-------- --------
-------- --------
Dollars:
Subscribed................................... $ 3,065 $ 7,214
Distributions Reinvested..................... 473 238
Redeemed..................................... (3,137) (4,304)
-------- --------
Net Increase/Decrease.......................... $ 401 $ 3,148
-------- --------
-------- --------
Ending Paid in Capital......................... $ 8,227+ $ 7,826
-------- --------
-------- --------
</TABLE>
- -----------------
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
- ------------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------
YEAR ENDED JUNE 30,
------------------------- MAY 1, 1996* TO
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 JUNE 30, 1996
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $12.661 $ 12.86 $ 11.92 $ 12.00
------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................................ 1.006 0.97 1.07 0.13
Net Realized and Unrealized Gain/Loss..................... (0.790) 0.35 0.99 (0.09)
------- ------- ------- ------
Total From Investment Operations.......................... 0.216 1.32 2.06 0.04
------- ------- ------- ------
DISTRIBUTIONS
Net Investment Income..................................... (0.967) (0.97) (1.07) (0.12)
Net Realized Gain......................................... (0.088) (0.55) (0.05) --
In Excess of Net Realized Gain............................ (0.140) -- -- --
------- ------- ------- ------
Total Distributions....................................... (1.195) (1.52) (1.12) (0.12)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD.............................. $11.682 $ 12.66 $ 12.86 $ 11.92
------- ------- ------- ------
------- ------- ------- ------
TOTAL RETURN (1)............................................ 1.90% 10.81% 18.12% 0.29%**
------- ------- ------- ------
------- ------- ------- ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $ 8,120 $ 7,813 $ 8,980 $ 3,907
Ratio of Expenses to Average Net Assets..................... 1.25% 1.25% 1.25% 1.25%
Ratio of Net Investment Income/Loss to Average Net Assets... 8.39% 7.42% 8.83% 6.85%
Portfolio Turnover Rate..................................... 41% 81% 104% 10%**
- ---------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During the Period
Per Share Benefit to Net Investment Income/Loss........... $ 0.06 $ 0.08 $ 0.10 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets............................ 1.72% 1.89% 2.04% 3.51%
Net Investment Income/Loss to Average Net Assets.......... 7.93% 6.78% 8.04% 4.59%
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
-------------------------------------------
YEAR ENDED JUNE 30,
------------------------- MAY 1, 1996* TO
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 JUNE 30, 1996
<S> <C> <C> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $12.630 $ 12.86 $ 11.93 $ 12.00
------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss................................ 0.912 0.87 0.98 0.12
Net Realized and Unrealized Gain/Loss..................... (0.776) 0.34 0.99 (0.09)
------- ------- ------- ------
Total From Investment Operations.......................... 0.136 1.21 1.97 0.03
------- ------- ------- ------
DISTRIBUTIONS
Net Investment Income..................................... (0.883) (0.89) (0.99) (0.10)
Net Realized Gain......................................... (0.088) (0.55) (0.05) --
In Excess of Net Realized Gain............................ (0.140) -- -- --
------- ------- ------- ------
Total Distributions....................................... (1.111) (1.44) (1.04) (0.10)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD.............................. $11.655 $ 12.63 $ 12.86 $ 11.93
------- ------- ------- ------
------- ------- ------- ------
TOTAL RETURN (1)............................................ 1.28% 9.86% 17.22% 0.21%**
------- ------- ------- ------
------- ------- ------- ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $22,667 $18,420 $ 8,617 $ 3,421
Ratio of Expenses to Average Net Assets..................... 2.00% 2.00% 2.00% 2.00%
Ratio of Net Investment Income/Loss to Average Net Assets... 7.63% 6.70% 7.99% 6.08%
Portfolio Turnover Rate..................................... 41% 81% 104% 10%**
- ---------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During the Period
Per Share Benefit to Net Investment Income/Loss........... $ 0.06 $ 0.08 $ 0.10 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets............................ 2.48% 2.64% 2.82% 4.25%
Net Investment Income/Loss to Average Net Assets.......... 7.16% 6.04% 7.17% 3.83%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------
YEAR ENDED JUNE 30,
------------------------- MAY 1, 1996* TO
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 JUNE 30, 1996
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $12.634 $ 12.86 $ 11.93 $ 12.00
------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income /Loss............................... 0.912 0.86 0.99 0.12
Net Realized and Unrealized Gain/Loss..................... (0.775) 0.35 0.98 (0.09)
------- ------- ------- ------
Total From Investment Operations.......................... 0.137 1.21 1.97 0.03
------- ------- ------- ------
DISTRIBUTIONS
Net Investment Income..................................... (0.883) (0.89) (0.99) (0.10)
Net Realized Gain......................................... (0.088) (0.55) (0.05) --
In Excess of Net Realized Gain............................ (0.140) -- -- --
------- ------- ------- ------
Total Distributions....................................... (1.111) (1.44) (1.04) (0.10)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD.............................. $11.660 $ 12.63 $ 12.86 $ 11.93
------- ------- ------- ------
------- ------- ------- ------
TOTAL RETURN (1)............................................ 1.28% 9.86% 17.21% 0.21%**
------- ------- ------- ------
------- ------- ------- ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $ 7,879 $ 8,145 $ 4,970 $ 3,316
Ratio of Expenses to Average Net Assets..................... 2.00% 2.00% 2.00% 2.00%
Ratio of Net Investment Income/Loss to Average Net Assets... 7.61% 6.63% 8.03% 6.07%
Portfolio Turnover Rate..................................... 41% 81% 104% 10%**
- ---------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation During the Period
Per Share Benefit to Net Investment Income/Loss........... $ 0.06 $ 0.08 $ 0.11 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets............................ 2.48% 2.64% 2.88% 4.25%
Net Investment Income/Loss to Average Net Assets.......... 7.14% 6.01% 7.15% 3.82%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen High Yield & Total Return Fund (the "Fund") is organized as a
separate diversified fund of Van Kampen Series Fund, Inc., a Maryland
Corporation, which is registered as an open-end management investment Company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective seeks to maximize total return by investing in a diversified portfolio
of high-yield, high-risk income that offer a yield above what is generally
available on debt securities in the four highest categories of the recognized
rating services. The Fund commenced operations on May 1, 1996.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 4.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------- ----------- -----------
<S> <C> <C>
First........................................ 4.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
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. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between 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 takes 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. 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, 1999, approximately 86% of the net assets of the Fund 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 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. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Fund may invest in repurchase agreements, which are short-term investments in
which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on an 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. 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 Fund are recorded on the ex-distribution date.
4. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's
- -----------------------
12
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
commencement of operations. The Adviser has agreed that in the event any of the
initial shares of the Fund originally purchased by Van Kampen are redeemed by
the Fund during the amortization period, the Fund will be reimbursed for any
unamortized organizational costs in the same proportion as the number of shares
redeemed bears to the number of initial shares at the time of redemption.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
Net capital losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 to June 30, 1999 the Fund incurred and elected
to defer until July 1, 1999, for U.S. Federal income tax purposes, net capital
losses of approximately $435,000.
At June 30, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- ------------ ------------ ------------ ------------
<S> <C> <C> <C>
$39,712 $614 $(2,408) $(1,794)
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: 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.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par. For
the year ended June 30, 1999, approximately $45,000 has been reclassified from
accumulated net investment income with approximately $42,000 posted to
distributions in excess of net realized gain and approximately $3,000 posted to
paid in capital in excess of par.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.), Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), and Miller Anderson & Sherrerd LLP, 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 Fund, 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ----------------- ----------------- -----------------
<S> <C> <C>
0.75% 1.25% 2.00%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$1,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
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 the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $65,881 for Class A shares and deferred sales charges of $49,073 and
$6,313 for Class B shares and Class C shares, respectively.
------------------
13
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
Prior to October 1, 1998, the Fund's assets held outside the United States were
held by Morgan Stanley Company ("MSTC"), a former affiliate of the Subadvisers.
On October 1, 1998, the Chase Manhattan purchased MSTC.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $25,944,000 and sales of approximately $14,451,000 of
investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sales of long-term U.S.
government securities.
- -----------------------
14
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen High Yield & Total Return Fund:
In our opinion, the accompanying statement 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 Van Kampen High Yield & Total
Return Fund (the "Fund", a fund of Van Kampen Series Fund, Inc.) at June 30,
1999, the results of its operations, the changes in its 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, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
------------------
15
<PAGE>
VAN KAMPEN HIGH YIELD & TOTAL RETURN FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the percentage of dividends paid that qualify
for the 70% dividend received deduction for corporate shareholders is 1.02%.
The Fund designated and paid $316,364 as a 20% rate gain distribution.
Shareholders were sent a 1998 Form 1099-DIV in January 1999 representing their
proportionate share of this capital gain distribution.
- -----------------------
16
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate Corporation and
Allstate Insurance Company
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.
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/ National Research
Council, and former Chairman of the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISERS
Morgan Stanley Dean Witter Investment 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.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
[LOGO]
1 Parkview Plaza / P.O. Box 5555 / Oakbrook Terrace, IL 60181-5555 /
www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
GLOBAL FIXED INCOME FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 7
Statement of Operations............................................... 8
Statement of Changes in Net Assets.................................... 9
Financial Highlights ................................................. 10
Notes to Financial Statements......................................... 11
Report of Independent Accountants..................................... 14
Additional Information................................................ 15
</TABLE>
MSGF ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
/s/ RICHARD F. POWERS III /s/ DENNIS J. MCDONNELL
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, but fell to 2.3 percent in the second quarter.
The first-quarter expansion was fueled by an increase in consumer spending,
which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although the Fed had expressed a bias toward a series
of rate increases, May's tame CPI report prompted it to drop this
bias when announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Australian Dollar 1.7%
British Pound 7.4%
Canadian Dollar 3.9%
Danish Krone 7.0%
Euro 34.1%
Japanese Yen 10.5%
Swedish Krona 4.5%
United States Dollar 30.5%
Other 0.4%
</TABLE>
<TABLE>
<CAPTION>
YIELD INFORMATION AS OF JUNE
30, 1999
- -------------------------------
30 DAY
CURRENT
YIELD+
- -------------------------------
<S> <C>
Class A 2.76%
- -------------------------------
Class B 2.14%
- -------------------------------
Class C 2.14%
- -------------------------------
</TABLE>
+ The current 30-day yield reflects the net investment income generated by the
Fund over the 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.
<TABLE>
<CAPTION>
TOTAL RETURNS**
------------------------------------------------------------------------
AVERAGE ANNUAL
---------------------------------------
ONE YEAR FIVE YEAR SINCE INCEPTION COMMENCEMENT
----------------- ----------------- ----------------- DATE
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> <C>
Class A Shares -3.85% 0.95% 4.35% 5.38% 4.65% 5.44% 1/4/93
- --------------------------------------------------------------------------------------------------
Class B Shares -3.72% 0.05% N/A N/A 2.49% 3.04% 8/1/95
- --------------------------------------------------------------------------------------------------
Class C Shares -0.89% 0.05% 4.53% 4.53% 4.61% 4.61% 1/4/93
- --------------------------------------------------------------------------------------------------
J.P. Morgan Traded
Global Bond Index N/A 3.63% N/A 6.56% N/A 6.91% N/A
- --------------------------------------------------------------------------------------------------
</TABLE>
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.
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (4% for Class B shares
and 1% for Class C shares).
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
J.P. Morgan Traded
Global Fixed Income Fund - Class A Global Bond Index
1/4/1993 $9,500 $10,000
6/30/1993 $10,289 $10,760
6/30/1994 $10,331 $11,187
6/30/1995 $11,509 $13,139
6/30/1996 $12,107 $13,408
6/30/1997 $12,624 $14,009
6/30/1998 $13,300 $14,831
6/30/1999 $13,427 $15,369
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE 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. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING. YIELDS WILL FLUCTUATE AS MARKET
CONDITIONS CHANGE.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY CURRENCY NET ASSETS
- ----------------------- ------------------- -------------
<S> <C> <C>
Deutschland Republic
8.375%, 5/21/01 Euro 10.7%
United Kingdom Treasury
Gilt 8.50%, 7/16/07 British Pound 7.4%
U.S. Treasury Bond United States
6.25%, 8/15/23 Dollar 7.2%
U.S. Treasury Note United States
6.25%, 10/31/01 Dollar 6.9%
Government of Japan
0.90%, 12/22/08 Japanese Yen 5.9%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE CURRENCY DENOMINATIONS
VALUE PERCENT OF
CURRENCY (000) NET ASSETS
- ------------------------- --------- -------------
<S> <C> <C>
Euro $ 2,196 34.1%
United States Dollar 1,963 30.5%
Japanese Yen 673 10.5%
British Pound 474 7.4%
Danish Krone 448 7.0%
</TABLE>
------------------
3
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN GLOBAL FIXED INCOME
FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE
PAST 12 MONTHS. THE TEAM IS LED BY PORTFOLIO MANAGERS MICHAEL B. KUSHMA, J.
DAVID GERMANY, AND PAUL F. O'BRIEN OF MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT. MR. KUSHMA HAS BEEN A MEMBER OF THE FUND'S MANAGEMENT TEAM SINCE
1995, WHILE MR. GERMANY JOINED THE TEAM IN 1996, AND MR. O'BRIEN IN 1997. THE
FOLLOWING EXCERPTS REFLECT THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE
12-MONTH PERIOD ENDED JUNE 30, 1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST YEAR?
A: During the third quarter of 1998, continued economic weakness in Asia and
Japan spread to Russia, and there were warning signs that Asia's problems were
beginning to affect Europe and the United States. The defining moment of the
period came in mid-August when Russia devalued its currency and defaulted on its
debt, sending financial and currency markets worldwide into a tailspin.
With turmoil in the emerging markets and a crisis of confidence in domestic and
European markets, many investors moved into high-quality government bonds,
primarily those issued by the United States.
Paced by the Federal Reserve Board and the European Central Bank, central banks
worldwide lowered interest rates during the fourth quarter of 1998. The interest
rate cuts renewed investor confidence and helped revive stock and corporate bond
markets in Europe and the United States.
Global economic recovery became the story of the first half of 1999, as economic
activity increased in most regions of the world. Unfortunately, global bond
markets suffered as low interest rates worldwide led to a sell-off in many of
the world's largest bond markets.
Q: WHAT EFFECT DID RUSSIA HAVE ON EUROPEAN MARKETS DURING THE PERIOD?
A: Slow economic activity and sluggish growth in Eastern Europe caused economic
problems for Europe overall. Due to Russia's proximity to Europe, its problems
hurt European trade during most of the period. Decreased trade between Russia
and Eastern European countries, such as Poland, Hungary, and the Czech Republic,
led to a direct spillover of decreased trade between those countries and
Germany, Europe's dominant economy.
While economic activity in the United States accelerated during late 1998 and
early 1999, the German economy did the opposite--it decelerated. The slowdown in
Germany led to weak economic conditions throughout Europe, which was positive
for bonds as investors sought safer, high-quality investments.
Q: DID ANYTHING SURPRISE YOU DURING THE PERIOD?
A: We were surprised by the continued weakness of the European economy at a
time when the U.S. economy was strong. We anticipated that Russia's problems
would cause some weakness in Europe's household consumer sector, but we did not
anticipate the severity of the slowdown in the industrial and manufacturing
sectors.
As expected, Europe's transition since the introduction of the euro on January
1, 1999, has gone smoothly. The only negative has been the weakness of the new
currency. During the first half of 1999, the euro decreased in value relative to
the U.S. dollar and the Japanese yen, which hurt the Fund's return: we had 34.1
percent exposure to the euro as of June 30, 1999.
Q: WHAT STRATEGIES DID YOU PURSUE IN THESE CONDITIONS?
A: Because interest rates in Japan were so low in the third quarter of 1998, we
maintained an underweight position in Japan, and we took advantage of falling
interest rates elsewhere by investing in Europe and the United States. During
the fourth quarter, we reduced our position in Canadian bonds due to political
rumblings regarding Quebec, and we added a small position of 5-year New Zealand
bonds.
In the first quarter of 1999, we changed our investment strategy to focus on
Japan in order to take advantage of high volatility in that market. During
February we increased our exposure to Japan as
- -----------------------
4
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
interest rates rose to the 2 percent range. At the same time we reduced our
exposure to the yen but recaptured that exposure following the Bank of Japan's
announcement of a fiscal stimulus package. In addition, we sold our New Zealand
government bonds after they appreciated in price.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: The Fund performed well during the first half of the period but was hurt by
the sell-off in global bond markets in 1999. The weak euro contributed
significantly to the Fund's disappointing returns.
For Class A shares at net asset value without sales charge, the Fund generated a
total return of 0.95 percent for the 12 months ended June 30, 1999. By
comparison, the J.P. Morgan Traded Global Bond Index generated a total return of
3.63 percent for the same period. Past performance does not guarantee future
results.
Q: WHAT IS YOUR POSITION ON DOLLAR BLOC NATIONS SUCH AS CANADA?
A: Recent increases in commodity prices, primarily industrial metal and oil
prices, have made the dollar bloc nations attractive. We've noticed a high
correlation between the currencies of these countries and commodity prices--as
their commodity prices recover, their currencies generally strengthen. When the
world economy is strong, we prefer Canadian dollars because they tend to
outperform in this environment. Earlier in 1999, we purchased these as opposed
to the U.S. dollar and the Japanese yen.
Q: DO YOU SEE ANY FINANCIAL DISASTERS SIMILAR TO RUSSIA ON THE HORIZON?
A: No. We believe the global economic recovery that started this year should
continue. In terms of emerging markets, China is the only major country that has
avoided a major financial crisis recently and its leaders continue to do
everything they can to stimulate demand domestically. Therefore, we don't
anticipate a major financial crisis on the horizon.
Q: WHAT DO YOU SEE HAPPENING DURING THE NEXT SIX MONTHS?
A: Until the extent to which the Fed will raise interest rates becomes clear,
bond markets will remain unstable. As expected, the Federal Reserve Board raised
interest rates at the end of the period, but surprised the market by abandoning
its tightening bias. For global bond markets, a slowdown in the United States
would be a welcome development. Two factors, however, have significantly helped
bonds, attractive yields after the global bond sell-off, and attractive yield
curves in Europe.
We believe the European bond markets may benefit from an interest-rate increase
in the United States because their economies are weaker and therefore more
sensitive to global economic conditions than the U.S. bond markets. In Europe,
we will concentrate our holdings in what we believe are the most creditworthy
countries--Germany and France. In addition, among countries not participating in
European economic and monetary union (EMU), we will look for value in Swedish
and Danish bonds. There should be opportunities to take advantage of the
differences in interest rates between these countries and EMU participants, and
we expect these countries to join the next wave of monetary union and thus
comply with the expected standards of EMU.
<TABLE>
<S> <C> <C>
Michael B. Kushma Paul E. O'Brien J. David Germany
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
------------------
5
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<C> <S> <C>
- ---------------------------------------------------------------------------
FIXED INCOME SECURITIES (95.0%)
AUSTRALIAN DOLLAR (1.7%)
U.S. GOVERNMENT & AGENCY OBLIGATIONS--GLOBAL
$ 50 Federal National Mortgage Association 6.50%,
7/10/02........................................ $ 34
60 Federal National Mortgage Association 6.375%,
8/15/07........................................ 39
AUD 50 Government of Australia 10.00%, 10/15/02......... 37
------
110
------
BRITISH POUND (7.4%)
GOVERNMENT BOND
GBP 250 United Kingdom Treasury Gilt 8.50%, 7/16/07...... 474
------
CANADIAN DOLLAR (3.9%)
GOVERNMENT BOND
CAD 320 Government of Canada 8.75%, 12/1/05.............. 255
------
DANISH KRONE (7.0%)
GOVERNMENT BONDS
DKK 1,800 Kingdom of Denmark 8.00%, 5/15/03................ 284
1,000 Kingdom of Denmark 8.00%, 3/15/06................ 164
------
448
------
EURO (34.1%)
GOVERNMENT BONDS
EUR 100 Buoni Poliennali Del Tesoro 9.50%, 2/1/06........ 133
50 Deutsche Ausgleichsbank 4.00%, 7/4/09............ 48
610 Deutschland Republic 8.375%, 5/21/01............. 688
200 Deutschland Republic 6.50%, 10/14/05............. 232
180 Deutschland Republic 6.25%, 1/4/24............... 206
100 Government of France 4.50%, 7/12/02.............. 106
200 Government of France 6.00%, 10/25/25............. 222
200 Government of Spain 5.15%, 7/30/09............... 212
200 Government of The Netherlands 8.25%, 2/15/02..... 231
100 Kingdom of Belgium 9.20%, 6/28/10................ 118
------
2,196
------
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<C> <S> <C>
- ---------------------------------------------------------------------------
JAPANESE YEN (10.5%)
GOVERNMENT BOND (5.9%)
JPY 50,000 Government of Japan 0.90%, 12/22/08.............. $ 378
------
EUROBOND (4.6%)
30,000 IBRD 4.75%, 12/20/04............................. 295
------
TOTAL JAPANESE YEN............................................... 673
------
SWEDISH KRONA (4.5%)
GOVERNMENT BONDS
SEK 1,000 Swedish Government 13.00%, 6/15/01............... 137
1,200 Swedish Government 6.00%, 2/9/05................. 151
------
288
------
UNITED STATES DOLLAR (25.9%)
CORPORATE BOND (0.7%)
$ (a)50 Monsanto Co. 6.60%, 12/1/28...................... 44
------
U.S. TREASURY BONDS (12.7%)
300 8.125%, 8/15/19.................................. 362
460 6.25%, 8/15/23................................... 460
------
822
------
U.S. TREASURY NOTES (12.5%)
440 6.25%, 10/31/01.................................. 446
350 6.25%, 2/15/07................................... 357
------
803
------
TOTAL UNITED STATES DOLLAR....................................... 1,669
------
TOTAL LONG-TERM INVESTMENTS (95.0%) (COST $6,479).................. 6,113
------
SHORT-TERM INVESTMENT (4.6%)
REPURCHASE AGREEMENT (4.6%)
$ 294 Chase Securities, Inc., 4.55%, dated 6/30/99, due
7/1/99, to be repurchased at $294,
collateralized by $275 U.S. Treasury Bonds,
7.25%, due 5/15/16, valued at $306 (COST
$294).......................................... 294
------
TOTAL INVESTMENTS (99.6%) (COST $6,773)............................ 6,407
OTHER ASSETS IN EXCESS OF LIABILITIES (0.4%)....................... 24
------
NET ASSETS (100%).................................................. $6,431
------
------
</TABLE>
- ---------------
(a) 144A Security--Certain conditions for public sale may exist.
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ---------------------------------------------
ASSETS:
Investments at Value (Cost
$6,773).......................... $6,407
Receivable for:
Interest......................... 109
Fund Shares Sold................. 12
Net Unrealized Gain on Foreign
Currency Contracts............... 7
Foreign Witholding Tax Reclaim..... 3
------
Total Assets..................... 6,538
------
LIABILITIES:
Payable for:
Professional Fees................ 25
Dividends Declared............... 21
Fund Shares Redeemed............. 16
Directors' Fees and Expenses..... 12
Shareholder Reporting Expenses... 8
Distribution Fees................ 6
Bank Overdraft................... 5
Custody Fees..................... 4
Transfer Agent Fees.............. 3
Investment Advisory Fees......... 3
Administrative Fees.............. 2
Other.............................. 2
------
Total Liabilities.............. 107
------
NET ASSETS........................... $6,431
------
------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 1
Paid in Capital in Excess of Par... 6,777
Accumulated Net Realized Gain...... 93
Distributions in Excess of Net
Investment Income................ (78)
Net Unrealized Depreciation on
Investments and Foreign Currency
Translations..................... (362)
------
NET ASSETS........................... $6,431
------
------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $3,391,538 and 357,818
Shares Outstanding).............. $ 9.48
------
------
Maximum Sales Charge............... 4.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100/
(100 - maximum sales charge)).... $ 9.95
------
------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$1,556,467 and 165,575 Shares
Outstanding)*.................... $ 9.40
------
------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$1,483,381 and 158,021 Shares
Outstanding)*.................... $ 9.39
------
------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- --------------------------------------------
INVESTMENT INCOME:
Interest........................... $ 369
Less Foreign Taxes Withheld........ (3)
-----
Total Income...................... 366
-----
EXPENSES:
Investment Advisory Fees........... 62
Distribution Fees (Attributed to
Classes A, B, and C of $11, $17,
and $18, respectively)........... 46
Professional Fees.................. 34
Shareholder Reports................ 30
Filing and Registration Fees....... 28
Administrative Fees................ 26
Custodian Fees..................... 14
Transfer Agent Fees................ 13
Directors' Fees and Expenses....... 9
Interest Expense................... 2
Other.............................. 5
-----
Total Expenses.................... 269
Less Expense Reductions........... (122)
-----
Net Expenses...................... 147
-----
Net Investment Income/Loss........... 219
-----
NET REALIZED GAIN/LOSS ON:
Investments........................ 392
Foreign Currency Transactions...... 59
-----
Net Realized Gain/Loss............ 451
-----
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ 60
-----
End of the Period:
Investments....................... (366)
Foreign Currency Translations..... 4
-----
(362)
-----
Net Unrealized
Appreciation/Depreciation During
the Period......................... (422)
-----
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... 29
-----
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $ 248
-----
-----
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ 219 $ 336
Net Realized Gain/Loss.......................... 451 (59)
Net Unrealized Appreciation/Depreciation........ (422) 178
------- -------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 248 455
------- -------
DISTRIBUTIONS:
Net Investment Income:
Class A......................................... (124) (219)
Class B......................................... (38) (49)
Class C......................................... (41) (68)
In Excess of Net Investment Income:
Class A......................................... (47) (4)
Class B......................................... (15) (1)
Class C......................................... (15) (1)
------- -------
(280) (342)
------- -------
Net Realized Gain:
Class A......................................... (144) (30)
Class B......................................... (50) (8)
Class C......................................... (52) (11)
------- -------
(246) (49)
------- -------
Net Decrease in Net Assets Resulting from
Distributions................................. (526) (391)
------- -------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed...................................... 5,081 1,701
Distributions Reinvested........................ 449 329
Redeemed........................................ (6,547) (4,936)
------- -------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... (1,017) (2,906)
------- -------
Total Increase/Decrease in Net Assets........... (1,295) (2,842)
NET ASSETS--Beginning of Period................... 7,726 10,568
------- -------
NET ASSETS--End of Period (Including distributions
in excess of net investment income of $(78) and
$(150), respectively)........................... $ 6,431 $ 7,726
------- -------
------- -------
- ---------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
----------
Shares:
Subscribed................................... 407 72
Distributions Reinvested..................... 28 22
Redeemed..................................... (517) (298)
------- -------
Net Increase/Decrease in Class A Shares
Outstanding.................................. (82) (204)
------- -------
------- -------
Dollars:
Subscribed................................... $ 4,142 $ 714
Distributions Reinvested..................... 285 226
Redeemed..................................... (5,371) (2,981)
------- -------
Net Increase/Decrease.......................... $ (944) $ (2,041)
------- -------
------- -------
Ending Paid in Capital......................... $ 3,508 $ 4,452
------- -------
------- -------
Class B:
----------
Shares:
Subscribed................................... 69 58
Distributions Reinvested..................... 7 4
Redeemed..................................... (53) (92)
------- -------
Net Increase/Decrease in Class B Shares
Outstanding.................................. 23 (30)
------- -------
------- -------
Dollars:
Subscribed................................... $ 707 $ 572
Distributions Reinvested..................... 74 42
Redeemed..................................... (540) (909)
------- -------
Net Increase/Decrease.......................... $ 241 $ (295)
------- -------
------- -------
Ending Paid in Capital......................... $ 1,675 $ 1,434
------- -------
------- -------
Class C:
----------
Shares:
Subscribed................................... 24 42
Distributions Reinvested..................... 8 6
Redeemed..................................... (64) (105)
------- -------
Net Increase/Decrease in Class C Shares
Outstanding.................................. (32) (57)
------- -------
------- -------
Dollars:
Subscribed................................... $ 232 $ 415
Distributions Reinvested..................... 90 61
Redeemed..................................... (636) (1,046)
------- -------
Net Increase/Decrease.......................... $ (314) $ (570)
------- -------
------- -------
Ending Paid in Capital......................... $ 1,595 $ 1,909
------- -------
------- -------
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------------------- ---------------------------------------------
AUGUST 1,
YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 1995+
SELECTED PER SHARE DATA --------------------------------------------------- ----------------------------- TO JUNE 30,
AND RATIOS 1999# 1998# 1997 1996 1995 1999# 1998# 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.022 $ 9.95 $ 9.94 $ 10.23 $ 9.53 $ 9.971 $ 9.91 $ 9.91 $ 10.24
------- ------- ------- ------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income/Loss.......... 0.311 0.39 0.44 0.53 0.56 0.229 0.32 0.41 0.64
Net Realized and
Unrealized
Gain/Loss............ (0.181) 0.13 (0.02) (0.01) 0.50 (0.186) 0.13 (0.07) (0.26)
------- ------- ------- ------- ------- ------- ------- ------- ------
Total From Investment
Operations........... 0.130 0.52 0.42 0.52 1.06 0.043 0.45 0.34 0.38
------- ------- ------- ------- ------- ------- ------- ------- ------
DISTRIBUTIONS
Net Investment
Income............... (0.278) (0.39) (0.35) (0.79) (0.36) (0.234) (0.33) (0.29) (0.69)
In Excess of Net
Investment Income.... (0.106) (0.01) (0.06) (0.02) -- (0.090) (0.01) (0.05) (0.02)
Net Realized Gain...... (0.290) (0.05) -- -- -- (0.290) (0.05) -- --
------- ------- ------- ------- ------- ------- ------- ------- ------
Total Distributions.... (0.674) (0.45) (0.41) (0.81) (0.36) (0.614) (0.39) (0.34) (0.71)
------- ------- ------- ------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD................. $ 9.478 $ 10.02 $ 9.95 $ 9.94 $ 10.23 $ 9.400 $ 9.97 $ 9.91 $ 9.91
------- ------- ------- ------- ------- ------- ------- ------- ------
------- ------- ------- ------- ------- ------- ------- ------- ------
TOTAL RETURN (1)......... 0.95% 5.36% 4.27% 5.20% 11.41% 0.05% 4.65% 3.48% 3.76%*
------- ------- ------- ------- ------- ------- ------- ------- ------
------- ------- ------- ------- ------- ------- ------- ------- ------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's)................ $ 3,392 $ 4,413 $ 6,407 $ 7,432 $11,092 $ 1,556 $ 1,425 $ 1,716 $ 1,440
Ratio of Expenses to
Average Net Assets..... 1.47% 1.45% 1.45% 1.45% 1.45% 2.23% 2.20% 2.20% 2.20%
Ratio of Net Investment
Income/Loss to Average
Net Assets............. 3.03% 3.94% 4.40% 5.02% 5.84% 2.21% 3.21% 3.65% 3.38%
Portfolio Turnover
Rate................... 143% 78% 170% 223% 169% 143% 78% 170% 223%*
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to
Net Investment
Income/Loss.......... $ 0.15 $ 0.15 $ 0.12 $ 0.07 $ 0.07 $ 0.15 $ 0.15 $ 0.13 $ 0.12
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets............... 2.97% 3.00% 2.57% 2.16% 2.22% 3.78% 3.75% 3.37% 3.57%
Net Investment Income
to Average Net
Assets............... 1.54% 2.42% 3.25% 4.31% 5.07% 0.71% 1.65% 2.45% 2.01%
Ratio of Expenses to
Average Net Assets
excluding country tax
expense and interest
expense................ 1.45% 1.45% 1.45% 1.45% 1.45% 2.20% 2.20% 2.20% 2.20%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA AND ---------------------------------------------------
RATIOS 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD................. $ 9.962 $ 9.90 $ 9.90 $ 10.20 $ 9.54
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income/Loss............. 0.230 0.32 0.39 0.37 0.49
Net Realized and
Unrealized Gain/Loss.... (0.191) 0.13 (0.05) 0.08 0.47
------- ------- ------- ------- -------
Total From Investment
Operations.............. 0.039 0.45 0.34 0.45 0.96
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income..... (0.234) (0.33) (0.29) (0.73) (0.30)
In Excess of Net
Investment Income....... (0.090) (0.01) (0.05) (0.02) --
Net Realized Gain......... (0.290) (0.05) -- -- --
------- ------- ------- ------- -------
Total Distributions....... (0.614) (0.39) (0.34) (0.75) (0.30)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD.................... $ 9.387 $ 9.96 $ 9.90 $ 9.90 $ 10.20
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN (1)............ 0.05% 4.65% 3.48% 4.47% 10.24%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's)................... $ 1,483 $ 1,888 $ 2,445 $ 2,844 $ 5,965
Ratio of Expenses to Average
Net Assets................ 2.23% 2.20% 2.20% 2.20% 2.20%
Ratio of Net Investment
Income/Loss to Average Net
Assets.................... 2.22% 3.21% 3.65% 4.35% 5.09%
Portfolio Turnover Rate..... 143% 78% 170% 223% 169%
- -----------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the
Period
Per Share Benefit to Net
Investment
Income/Loss............. $ 0.15 $ 0.15 $ 0.12 $ 0.06 $ 0.08
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets.................. 3.74% 3.75% 3.35% 2.87% 2.97%
Net Investment Income/Loss
to Average Net Assets... 0.75% 1.67% 2.48% 3.68% 4.32%
Ratio of Net Expenses to
Average Net Assets
excluding country tax
expense and interest
expense................... 2.20% 2.20% 2.20% 2.20% 2.20%
</TABLE>
- --------------------------------------------------------------------------------
* Non-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.
# Changes per share are based upon monthly average shares outstanding.
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen Global Fixed Income Fund (the "Fund") is organized as a separate
non-diversified fund of Van Kampen Series Fund, Inc., a Maryland Corporation,
which is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective
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. The Fund commenced operations on January 4, 1993.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 4.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
----------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------- ------- -------
<S> <C> <C>
First................................ 4.00% 1.00%
Second............................... 4.00% None
Third................................ 3.00% None
Fourth............................... 2.50% None
Fifth................................ 1.50% None
Thereafter........................... None None
</TABLE>
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.
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 between 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 takes 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. 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: 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. 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 Fund are recorded
on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount
------------------
11
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
from the sale of the currency and the amount realized between trade date and
settlement date on security and income transactions. However, 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.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund 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.
Net currency losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 to June 30, 1999 the Fund incurred and elected
to defer until July 1, 1999, for U.S. Federal income tax purposes, net currency
losses of approximately $27,000.
At June 30, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- ------ -------------- ------------
<S> <C> <C> <C>
$6,775..
$ 66 $ (434) $ (368)
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: 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, and gains on certain securities of corporations
designated as "passive foreign investment companies."
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par. For
the year ended June 30, 1999, approximately $133,000 has been reclassified from
accumulated net realized gain and posted to distributions in excess of net
investment income.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.), Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser") and Miller Anderson & Sherrerd LLP, 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 Fund, 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ ---------------------- ----------------------
<S> <C> <C>
0.75%
1.45% 2.20%
</TABLE>
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 the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $12,010 for Class A shares and deferred sales charges of $472,
$10,212, and $731 for Class A shares, Class B shares, and Class C shares,
respectively.
Prior to October 1, 1998, the Fund's assets held outside the United States were
held by Morgan Stanley Trust Company ("MSTC"), a former affiliate of the
Subadvisers. Through
- -----------------------
12
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
September 30, 1998, the Fund incurred MSTC fees of approximately $1,000. On
October 1, 1998, the Chase Manhattan Bank purchased MSTC.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $8,110,000 and sales of approximately $8,406,000 of
investment securities other than long-term U.S. government securities and
short-term investments. Purchases and sales of long-term U.S. government
securities for the year ended June 30, 1999 totaled approximately $2,528,000 and
$3,205,000, respectively.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to a security whose value is "derived" from the value of an
underlying asset, reference rate or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, foreign currency
exposure, maturity, and duration. All of the Fund's portfolio holdings,
including derivative instruments, are marked-to-market each day with the change
in value reflected in unrealized appreciation/depreciation. Upon disposition, a
realized gain or loss is recognized accordingly, except when exercising a call
option contract or taking delivery of a security underlying a forward contract.
In this instance, the recognition of gain or loss is postponed until the
disposal of the security underlying the option or forward contract. Risks may
arise as a result of the potential inability of the counterparties to meet the
terms of their contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. FORWARD CURRENCY CONTRACTS: These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
At June 30, 1999, the Fund has outstanding forward currency contracts as
follows:
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
VALUE DEPRECIATION
FORWARD CURRENCY CONTRACTS (000) (000)
- ------------------------------------- ------- -------------
<S> <C> <C>
LONG CONTRACTS:
Australian Dollar,
100,000 expiring 9/16/99........... $ 66 $ --
------- -----
SHORT CONTRACTS:
Australian Dollar,
100,000 expiring 9/16/99........... $ 66 $ --
Euro,
200,000 expiring 7/12/99........... 207 7
------- -----
$ 273 $ 7
------- -----
------- -----
$ 7
-----
-----
</TABLE>
------------------
13
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
REPORT OF INDEPENDENT INCOME ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen Global Fixed Income Fund:
In our opinion, the accompanying statement 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 Van Kampen Global Fixed Income Fund
(the "Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the
results of its operations, the changes in its 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, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
- -----------------------
14
<PAGE>
VAN KAMPEN GLOBAL FIXED INCOME FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the Fund intends to pass through foreign tax
credits of $2,887 and has derived gross income from sources within foreign
countries amounting to $211,534.
For the year ended June 30, 1999, the percentage of income earned from direct
U.S. treasury obligations was 44.04%.
The Fund designated and paid $166,096 as a 20% rate gain distribution.
Shareholders were sent a 1998 Form 1099-DIV in January 1999 representing their
proportionate share of this capital gain distribution.
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
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.
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the German
Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISERS
Morgan Stanley Dean Witter Investment 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.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
1 Parkview Plaza - P.O. Box 5555 - Oakbrook Terrace, IL
60181-5555 - www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
ASIAN GROWTH FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 8
Statement of Operations............................................... 9
Statement of Changes in Net Assets.................................... 10
Financial Highlights ................................................. 11
Notes to Financial Statements......................................... 12
Report of Independent Accountants..................................... 15
</TABLE>
MSAG ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover--and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, but fell to 2.3 percent in the second quarter.
The first-quarter expansion was fueled by an increase in consumer spending,
which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although the Fed had expressed a bias toward a series
of rate increases, May's tame CPI report prompted it to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing midline federal funds rate on the
last day of each month. Inflation is indicated by the annual percentage change
of the Consumer Price Index for all urban consumers at the end of each month.
- --------------
2
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Hong Kong 30.1%
Indonesia 2.2%
Korea 20.1%
Malaysia 5.4%
Philippines 2.3%
Singapore 10.9%
Taiwan 17.1%
Thailand 3.7%
Short-Term Investment 7.5%
Other 0.7%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
-------------------------------------------------------------------------------------
AVERAGE ANNUAL
-------------------------------------------- COMMENCEMENT
ONE YEAR FIVE YEAR SINCE INCEPTION DATE
--------------------- -------------------- -------------------- ------------
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> <C>
- -------------------------------------------------------------------------------------------------------------
Class A Shares 65.56% 75.69% -5.89% -4.76% -0.78% 0.20% 6/23/93
- -------------------------------------------------------------------------------------------------------------
Class B Shares 69.48% 74.48% N/A N/A -9.12% -8.57% 8/1/95
- -------------------------------------------------------------------------------------------------------------
Class C Shares 73.13% 74.13% -5.50% -5.50% -0.55% -0.55% 6/23/93
- -------------------------------------------------------------------------------------------------------------
MSCI CFEF
ex-Japan Index N/A 82.69% N/A -3.17% N/A 2.12% N/A
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The Morgan Stanley Capital International (MSCI) All Country Far East Free (CFEF)
ex-Japan Index is an unmanaged index of common stocks and includes Indonesia,
Hong Kong, the Philippines, Korea, Taiwan, and Thailand (assumes dividends are
reinvested). Beginning December 1, 1998, the index no longer includes Malaysia.
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
ISSUER COUNTRY NET ASSETS
- -------------------------- ----------- -------------
<S> <C> <C>
Hutchison Whampoa Ltd. Hong Kong 6.2%
Sun Hung Kai Properties
Ltd. Hong Kong 4.0%
Cheung Kong Holdings Ltd. Hong Kong 3.8%
Hong Kong
Telecommunications Ltd. Hong Kong 3.7%
Taiwan Semiconductor Co. Taiwan 3.5%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ----------------------- --------- -------------
<S> <C> <C>
Finance $ 44,637 25.9%
Services 37,762 21.9%
Capital Equipment 26,971 15.6%
Consumer Goods 17,049 9.9%
Multi-Industry 14,345 8.3%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Asian Growth Fund MSCI Combined Far East
Class A Free ex-Japan Index
6/23/93 $9,500 $10,000
6/30/94 $9,525 $10,000
6/30/95 $13,472 $15,055
6/30/96 $14,071 $16,286
6/30/97 $13,916 $16,441
6/30/98 $5,431 $6,544
6/30/99 $9,541 $11,345
</TABLE>
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE COUNTRY SPECIFIC PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE AS
MEASURED BY THE MSCI CFEF 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.
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN ASIAN GROWTH FUND
ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE PAST
12 MONTHS. THE TEAM IS LED BY PORTFOLIO MANAGERS TIM JENSEN AND ASHUTOSH SINHA
OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. MR. JENSEN AND MR. SINHA
HAVE BEEN MEMBERS OF THE FUND'S MANAGEMENT TEAM SINCE 1998. THE FOLLOWING
EXCERPTS REFLECT THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE 12-MONTH
PERIOD ENDED JUNE 30, 1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST YEAR?
A: During the third quarter of 1998, continued economic weakness in Asia spread
to Russia, and there were warning signs that Asia's problems were beginning to
affect Europe and the United States. The defining moment of the period came in
mid-August when Russia devalued its currency and defaulted on its debt, sending
financial and currency markets worldwide into a tailspin. Paced by the Federal
Reserve Board and the European Central Bank (ECB), central banks worldwide
lowered interest rates during the fourth quarter of 1998. The interest-rate cuts
renewed investor confidence and helped revive stock markets in Asia, Europe, and
the United States.
3------------------
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Global economic recovery became the story of the first half of 1999, as economic
activity increased in most regions of the world. Declining interest rates and a
focus on corporate cost-cutting helped revive many emerging markets,
particularly in Asia. Several other factors drove Asian equity markets upward
during this time, including improvements in domestic consumption and a
commitment by Asian companies to enhance profitability through corporate
restructuring. Restructuring efforts in Japan began to have a positive effect
the rest of Asia, as many Japanese corporations followed the U.S. model and used
outsourcing to cut costs.
Q: WHAT STRATEGIES DID YOU PURSUE IN THIS ENVIRONMENT?
A: Because markets across Asia are so different, it is very difficult to use
one particular investment style, such as growth or value investing, throughout
the entire region. We believe that visiting a company is the best way to
understand its management and financial potential. We've found that company
visits give us the opportunity to determine whether we feel the stock may exceed
or fall short of market expectations. Our team has been on more than 300 Company
visits during the past 12 months. On average we meet with the management of our
key positions two or three times per quarter.
For example, we own several technology stocks in Taiwan whose future earnings
depend on their ability to continue their growth pattern. Our team has to know
the management and understand each company's inventory, demand, and pricing
structure in order to determine whether we believe they can maintain this
growth. Rather than simply studying the market fundamentals of the personal
computer industry to make this determination, we research the individual stocks
to ascertain their future viability.
Q: DISCUSS HOW THESE STRATEGIES CONTRIBUTE TO THE FUND'S PERFORMANCE.
A: Because we are bottom-up stock pickers, our stock selection resulted in an
overweighted position in the technology sector during the period. These holdings
consisted primarily of electronics companies in Taiwan, Korea, and Singapore.
The performance of these stocks was more influenced by their local markets near
the end of 1998 than by individual company fundamentals. While these stocks
benefited the Fund during most of the period, particularly in 1999, they did
underperform during the fourth quarter of 1998, which hindered the Fund's
return.
By selecting stocks with the solid company fundamentals, the Fund benefited from
economic improvements in 1999, particularly during March, May, and June.
Positive factors that contributed to market strength included falling domestic
interest rates, government policy initiatives, and exchange rate stability.
Q: CAN YOU PROVIDE EXAMPLES OF SUCCESSES?
A: We have significant positions in two Singaporean electronic manufacturing
services companies, NatSteel Electronics and Venture Manufacturing. Both stocks
contributed significantly to the Fund's returns during the period. Venture
supports companies that make PCs and focuses on the initial stages of product
design. NatSteel Electronics is the fifth-largest contract manufacturer in the
world--Apple Computer is its largest customer--and concentrates its business on
volume, as opposed to design. We invested in these businesses because they allow
U.S. companies to outsource manufacturing to Asia and provide smart engineering
and low cost labor.
Our research office is in Singapore, and we consider our knowledge of these
companies to be part of our "home-field advantage." We identified these stocks
earlier than most of the market, which allowed us to build a good relationship
with their management, who have kept us informed on how their businesses are
doing.
Q: DID ANYTHING DISAPPOINT YOU DURING THE PERIOD?
A: We continuously underestimated the return potential of banks in Thailand. We
believe the situation in Thailand is similar to Mexico's problems of a few years
ago. In fact, according to our research Thailand has had more underperforming
loans than Mexico did, which in our opinion makes it a riskier investment. As a
result, we were underweighted in Thai banks through most of the period and
continuously missed out on returns when these banks outperformed expectations.
Therefore, we've had to play catch up. We recently purchased stock in a Thai
bank that has helped improve the Fund's return, but we should have invested in
this area sooner.
- -------------- 4
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: For Class A shares at net asset value without sales charge, the Fund
generated a total return of 75.69 percent for the 12 months ended June 30, 1999.
By comparison, the MSCI All Country Far East Free (CFEF) ex-Japan Index
generated a total return of 82.69 percent for the same period. Past performance
does not guarantee future results.
Q: WHAT IS YOUR OUTLOOK IN THE MONTHS AHEAD?
A: Currently we are in the midst of a strong domestic- and foreign-driven
liquidity rally. Investors, primarily institutions, are reallocating their
portfolios with greater exposure to Asia. As a result, liquidity is high and
certain stock valuations are exceeding fair value, which means things may slow
down a bit in the near term. In addition, we will be monitoring several risk
factors including the performance of the Japanese economy and growth in the
primary markets for Asian exports.
In the long run, we expect the Asian markets will continue to improve as their
economies recover, their governments pursue fiscal reform, and their
corporations practice cost-cutting and restructuring. In the short term, we
expect a little more volatility and wouldn't be surprised to see the markets
appreciate a bit more before leveling off. Once the market settles down, we feel
our strategy of individual stock selection based on in-depth research will help
the Fund in the long run.
<TABLE>
<S> <C>
Tim Jensen Ashutosh Sinha
PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
5------------------
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------------------
COMMON STOCKS (91.5%)
HONG KONG (30.1%)
Asia Satellite Telecommunications
Holdings Ltd......................... 127,000 $ 299
Axa China Region Ltd................... 904,700 723
Cathay Pacific Airways Ltd............. 920,000 1,411
Cheung Kong Holdings Ltd............... 733,000 6,519
China Telecom Ltd...................... 458,000 1,272
Citic Pacific Ltd...................... 396,400 1,265
CLP Holdings Ltd....................... 260,200 1,264
Cosco Pacific Ltd...................... 776,200 645
Dao Heng Bank Group Ltd................ 384,900 1,726
Hengan International Group Co., Ltd.... 1,220,000 617
Hong Kong & China Gas Co., Ltd......... 15,590 23
Hong Kong Telecommunications Ltd....... 2,432,900 6,319
Hutchison Whampoa Ltd.................. 1,186,300 10,742
Johnson Electric Holdings Ltd.......... 118,000 487
Kerry Properties Ltd................... 341,000 451
Li & Fung Ltd.......................... 735,000 1,762
New World Development Co., Ltd......... 536,000 1,606
New World Infrastructure Ltd........... 281,550 530
(a)Shandong International Power
Development Co., Ltd................. 1,626,000 367
SmarTone Telecommunications Holdings
Ltd.................................. 572,900 2,038
Sun Hung Kai Properties Ltd............ 766,000 6,985
Swire Pacific Ltd. 'A'................. 408,000 2,019
Television Broadcasts Ltd.............. 505,000 2,369
Yanzhou Coal Mining Co., Ltd. 'H'...... 1,052,000 377
--------
51,816
--------
INDIA (1.4%)
Castrol Ltd............................ 100 1
Digital Equipment Ltd.................. 32,000 315
Hero Honda Motors Ltd.................. 1,477 37
ICICI Ltd.............................. 550,000 931
NIIT Ltd............................... 5,350 251
Reckitt & Coleman of India Ltd......... 550 6
SmithKline Beecham Consumer Healthcare
Ltd.................................. 50 1
Software Solution Integrated Ltd....... 25,000 249
Tata Infotech Ltd...................... 24,363 597
--------
2,388
--------
INDONESIA (2.2%)
PT Gudang Garam Tbk (Foreign).......... 570,500 1,549
PT Semen Gresik Tbk.................... 270,500 589
PT Telekomunikasi Indonesia ADR........ 113,184 1,408
Unilever Indonesia Tbk (Foreign)....... 34,200 199
--------
3,745
--------
KOREA (20.1%)
Daewoo Securities, Co.................. 33,290 647
Good Morning Securities Co., Ltd....... 67,740 418
Hana Bank.............................. 51,740 760
Hankuk Glass Industry Co., Ltd......... 16,740 448
Housing & Commercial Bank.............. 57,530 1,814
Kookmin Bank........................... 33,060 671
(a)Kookmin Bank GDR.................... 13,600 277
Koram Bank............................. 59,960 751
Korea Chemical Co., Ltd................ 8,860 796
Korea Electric Power Corp.............. 22,340 928
Korea Electric Power Corp. ADR......... 239,490 4,910
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------------------
Korea Exchange Bank.................... 138,110 $ 776
(b)Korea Telecom Corp.................. 20,220 1,342
(a)Korea Telecom Corp. ADR............. 97,900 3,916
LG Chemical Ltd........................ 17,390 473
LG Electronics......................... 37,810 1,045
Pohang Iron & Steel Co., Ltd. ADR...... 44,900 1,510
(b)Pohang Iron & Steel Co., Ltd.
(Foreign)............................ 17,579 2,164
Samsung Electro-Mechanics Co........... 36,152 1,249
Samsung Electronics Co. (Foreign)...... 49,376 5,418
Samsung Fire & Marine Insurance........ 2,642 1,860
(b)SK Telecom Co., Ltd................. 604 829
SK Telecom Co., Ltd. ADR............... 39,920 679
SK Corp................................ 35,799 1,030
--------
34,711
--------
MALAYSIA (5.4%)
Carlsberg Brewery Malaysia Bhd......... 542,000 1,541
Commerce Asset-Holding Bhd............. 199,000 492
Malayan Banking Bhd.................... 445,400 1,336
Nestle Bhd............................. 262,000 1,034
Public Bank Bhd........................ 643,000 489
Rothmans of Pall Mall Bhd.............. 318,000 2,406
Telekom Malaysia Bhd................... 563,000 2,104
--------
9,402
--------
PHILIPPINES (2.1%)
(a)La Tondena Distillers, Inc.......... 452,850 537
Manila Electric Co. 'B'................ 149,230 538
Philippine Long Distance Telephone Co.
'B' ADR.............................. 18,090 553
(a)Philippine National Bank............ 150,680 409
San Miguel Corp. 'B'................... 509,905 1,114
SM Prime Holdings, Inc. 'B'............ 1,891,680 428
--------
3,579
--------
SINGAPORE (9.9%)
(a)Asia Pulp & Paper Co., Ltd. ADR..... 40,500 390
City Developments Ltd.................. 203,000 1,300
Gul Technologies....................... 333,000 317
NatSteel Electronics Ltd............... 378,000 1,654
Oversea-Chinese Banking Corp., Ltd.
(Foreign)............................ 204,000 1,702
Overseas Union Bank Ltd. (Foreign)..... 155,000 747
Parkway Holdings Ltd................... 210,000 518
Rothmans Industries Ltd................ 49,000 412
Sembcorp Logistics Ltd................. 220,900 869
(a)Singapore Airlines Ltd.............. 3,184,000 2,843
Singapore Press Holdings Ltd........... 144,200 2,456
Singapore Technology Engineering Ltd... 553,000 627
United Overseas Bank Ltd. (Foreign).... 187,000 1,307
Venture Manufacturing Ltd.............. 256,800 1,976
--------
17,118
--------
TAIWAN (17.1%)
(a)Advanced Semiconductor Engineering,
Inc.................................. 210,000 709
(a)Asia Cement Corp.................... 360,000 323
Asustek Computer, Inc.................. 268,396 3,025
Bank Sinopac........................... 910,000 634
Cathay Life Insurance Co., Ltd......... 226,000 812
China Steel Corp....................... 1,170,100 884
China Steel Corp. GDR.................. 21,105 327
(a)Chinatrust Business Bank............ 654,000 786
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -------------------------------------------------------------------
<S> <C> <C>
</TABLE>
TAIWAN (CONT.)
<TABLE>
<S> <C> <C>
Compal Electronics, Inc................ 339,218 $ 1,334
(a)Compeq Manufacturing Co., Ltd....... 62,700 355
(a)CTCI Corp........................... 284,000 337
(a)E. Sun Commercial Bank.............. 853,000 475
(a)Evergreen Marine Corp............... 255,000 319
(a)Far Eastern International Bank...... 860,000 315
(a)Far Eastern Textile Ltd............. 1,117,343 1,660
First Commercial Bank.................. 167,000 318
Formosa Chemicals & Fibre Corp......... 404,000 493
(a)Hon Hai Precision Industry.......... 338,400 3,059
Hua Nan Commercial Bank................ 158,000 313
International Commercial Bank of
China................................ 714,000 924
Nan Ya Plastic Corp.................... 713,000 1,181
(a)President Chain Store Corp.......... 199,000 675
Quanta Computer Inc.................... 57,120 684
Siliconware Precision Industries Co.... 327,696 624
(a)Taishin International Bank.......... 1,178,000 875
(a)Taiwan Semiconductor Co............. 1,565,935 5,987
(a)United Micro Electronics Corp.,
Ltd.................................. 591,650 1,273
United World Chinese Commercial Bank... 302,000 467
Yang Ming Marine Transport............. 481,000 313
--------
29,481
--------
THAILAND (3.2%)
Advanced Information Services Public
Co., Ltd. (Foreign).................. 99,800 1,353
BEC World Public Co., Ltd. (Foreign)... 151,100 942
Delta Electronics Public Co., Ltd.
(Foreign)............................ 78,855 663
(b)Golden Land Property Development
Public Co., Ltd...................... 745,000 439
Shin Corp. Public Co., Ltd.
(Foreign)............................ 40,300 188
Siam Cement Public Co., Ltd.
(Foreign)............................ 22,900 695
Siam City Cement Public Co., Ltd.
(Foreign)............................ 162,733 671
Thai Farmer's Bank Public Co., Ltd.
(Foreign)............................ 189,300 585
--------
5,536
--------
TOTAL COMMON STOCKS...................................... 157,776
--------
PREFERRED STOCK (0.1%)
THAILAND (0.1%)
(a)Siam Commercial Bank Public Co.,
Ltd. 5.25% (Foreign)................. 114,300 163
--------
<CAPTION>
NO. OF
RIGHTS
----------
<S> <C> <C>
RIGHT (0.0%)
KOREA (0.0%)
(a,b)SK Telecom Co., Ltd., expiring
7/27/99.............................. 604 76
--------
<CAPTION>
NO. OF
WARRANTS
----------
<S> <C> <C>
WARRANTS (1.2%)
HONG KONG (0.3%)
(a)Credit Lyonnais HSBC Holdings,
expiring 10/13/99.................... 919,000 462
--------
</TABLE>
<TABLE>
<CAPTION>
NO. OF VALUE
WARRANTS (000)
<S> <C> <C>
- -------------------------------------------------------------------
PHILIPPINES (0.2%)
(a)Jollibee Food, expiring 3/24/03..... 536,000 $ 275
--------
SINGAPORE (0.3%)
(a)Oversea-Chinese Banking Corp.,
expiring 3/28/02..................... 708,000 528
--------
THAILAND (0.4%)
(a)Siam Commercial Bank Public Co.,
Ltd., expiring 5/10/02............... 1,066,300 686
--------
TOTAL WARRANTS......................................... 1,951
--------
<CAPTION>
PAR
VALUE
(000)
----------
<S> <C> <C>
CONVERTIBLE DEBENTURE (0.7%)
SINGAPORE (0.7%)
Finlayson Global Corp. 0.00%,
2/19/04.............................. $ 780 1,178
--------
TOTAL LONG-TERM INVESTMENTS (93.5%) (COST $115,649)...... 161,144
--------
SHORT-TERM INVESTMENT (7.5%)
REPURCHASE AGREEMENT (7.5%)
Chase Securities, Inc., 4.55%, dated 12,988
6/30/99, due 7/1/99, to be repurchased
at $12,990 collateralized by $13,640
Federal National Mortgage
Association, 5.125%, due 2/13/04,
valued at $13,347 (COST $12,988)................. 12,988
--------
TOTAL INVESTMENTS IN SECURITIES (101.0%) (COST
$128,637)................................................ 174,132
--------
FOREIGN CURRENCY (0.7%) (COST $1,318).................... 1,310
--------
TOTAL INVESTMENTS (101.7%) (COST $129,955)............... 175,442
LIABILITIES IN EXCESS OF OTHER ASSETS (-1.7%)............ (3,023)
--------
NET ASSETS (100%)........................................ $172,419
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
(b) -- Security valued at fair value -- see note A-1 to financial statements.
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
PERCENT
OF
VALUE NET
INDUSTRY (000) ASSETS
- ---------------------------------------- -------- --------
<S> <C> <C>
Finance................................. $ 44,637 25.9%
Services................................ 37,762 21.9
Capital Equipment....................... 26,971 15.6
Consumer Goods.......................... 17,049 9.9
Multi-Industry.......................... 14,345 8.3
Materials............................... 12,350 7.2
Energy.................................. 8,030 4.7
-------- ---
$161,144 93.5%
-------- ---
-------- ---
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- -------------------------------------------------------------
ASSETS:
Investments in Securities, at Value (Cost
$128,637)..................................... $ 174,132
Foreign Currency (Cost $1,318).................. 1,310
Receivable for:
Fund Shares Sold.............................. 2,168
Dividends..................................... 468
Investments Sold.............................. 327
Foreign Withholding Tax Reclaim............... 41
Interest Receivable........................... 2
Other........................................... 38
---------
Total Assets................................ 178,486
---------
LIABILITIES:
Payable for:
Investments Purchased......................... 3,488
Fund Shares Redeemed.......................... 796
Deferred Country Tax.......................... 670
Bank Overdraft................................ 552
Custody Fees.................................. 157
Distribution Fees............................. 155
Investment Advisory Fees...................... 99
Shareholder Reporting Expenses................ 35
Professional Fees............................. 35
Administrative Fees........................... 32
Transfer Agent Fees........................... 32
Directors' Fees and Expenses.................. 14
Other........................................... 2
---------
Total Liabilities........................... 6,067
---------
NET ASSETS........................................ $ 172,419
---------
---------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par value, Shares
Authorized 2,625,000,000)..................... $ 15
Paid in Capital in Excess of Par................ 254,175
Net Unrealized Appreciation on Investments and
Foreign Currency Translations*................ 44,850
Accumulated Net Investment Loss................. (25)
Accumulated Net Realized Loss................... (126,596)
---------
NET ASSETS........................................ $ 172,419
---------
---------
CLASS A SHARES:
Net Asset Value and Redemption Price Per Share
(Based on Net Assets of $88,808,301 and
7,733,211 Shares Outstanding)................. $ 11.48
---------
---------
Maximum Sales Charge............................ 5.75%
Maximum Offering Price Per Share (Net Asset
Value Per Share X 100/ (100 - maximum sales
charge))...................................... $ 12.18
---------
---------
CLASS B SHARES:
Net Asset Value and Offering Price Per Share
(Based on Net Assets of $42,905,212 and
3,897,898 Shares Outstanding)**............... $ 11.01
---------
---------
CLASS C SHARES:
Net Asset Value and Offering Price Per Share
(Based on Net Assets of $40,705,672 and
3,709,699 Shares Outstanding)**............... $ 10.97
---------
---------
</TABLE>
- ---------------
* Net of accrual for deferred country tax of approximately U.S.
$632,000.
** Redemption price may be subject to a contingent deferred sales charge.
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ------------------------------------------------------------
INVESTMENT INCOME:
Dividends....................................... $ 2,517
Interest........................................ 163
Less Foreign Taxes Withheld..................... (195)
--------
Total Income................................... 2,485
--------
EXPENSES:
Investment Advisory Fees........................ 1,108
Distribution Fees (Attributed to Classes A, B,
and C of $130, $291, and $295,
respectively)................................. 716
Administrative Fees............................. 287
Custodian Fees.................................. 250
Shareholder Reports............................. 83
Transfer Agent Fees............................. 82
Professional Fees............................... 39
Filing & Registration Fees...................... 36
Interest Expense................................ 36
Country Tax Expense............................. 28
Directors' Fees and Expenses.................... 13
Other........................................... 17
--------
Total Expenses................................. 2,695
Less Expense Reductions........................ (85)
--------
Net Expenses................................... 2,610
--------
Net Investment Income/Loss........................ (125)
--------
NET REALIZED GAIN/LOSS ON:
Investments..................................... 280
Foreign Currency Transactions................... (285)
--------
Net Realized Gain/Loss........................ (5)
--------
NET UNREALIZED APPRECIATION/DEPRECIATION:
Beginning of the Period......................... (23,483)
--------
End of the Period:
Investments................................... 45,495
Foreign Currency Translations................. (645)
--------
44,850
--------
Net Unrealized Appreciation/Depreciation During
the Period........................................ 68,333
--------
Net Realized Gain/Loss and Net Unrealized
Appreciation/Depreciation......................... 68,328
--------
NET INCREASE/DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................................ $ 68,203
--------
--------
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ (125) $ (1,379)
Net Realized Gain/Loss ......................... (5) (117,195)
Net Unrealized Appreciation/Depreciation........ 68,333 (58,612)
-------- ---------------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 68,203 (177,186)
-------- ---------------
DISTRIBUTIONS:
In Excess of Net Realized Gain:
Class A......................................... -- (135)
Class B......................................... -- (60)
Class C......................................... -- (84)
-------- ---------------
Net Decrease in Net Assets Resulting from
Distributions................................. -- (279)
-------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed...................................... 84,305 114,898
Distributions Reinvested........................ -- 258
Redeemed........................................ (82,166) (188,300)
-------- ---------------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... 2,139 (73,144)
-------- ---------------
Total Increase/Decrease in Net Assets........... 70,342 (250,609)
NET ASSETS--Beginning of Period................... 102,077 352,686
-------- ---------------
NET ASSETS--End of Period (Including accumulated
net investment loss of $(25) and $(1,200),
respectively)................................... $ 172,419 $102,077
-------- ---------------
-------- ---------------
- ---------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
--------
Shares:
Subscribed...................................... 8,906 9,205
Distributions Reinvested........................ -- 15
Redeemed........................................ (8,391) (12,556)
-------- ---------------
Net Increase/Decrease in Class A Shares
Outstanding..................................... 515 (3,336)
-------- ---------------
-------- ---------------
Dollars:
Subscribed...................................... $ 70,587 $ 80,960
Distributions Reinvested........................ -- 125
Redeemed........................................ (61,673) (123,834)
-------- ---------------
Net Increase/Decrease............................. $ 8,914 $(42,749)
-------- ---------------
-------- ---------------
Ending Paid in Capital............................ $ 121,936+ $113,022
-------- ---------------
-------- ---------------
Class B:
- -------
Shares:
Subscribed...................................... 944 2,181
Distributions Reinvested........................ -- 7
Redeemed........................................ (1,189) (1,929)
-------- ---------------
Net Increase/Decrease in Class B Shares
Outstanding..................................... (245) 259
-------- ---------------
-------- ---------------
Dollars:
Subscribed...................................... $ 7,734 $ 19,723
Distributions Reinvested........................ -- 55
Redeemed........................................ (8,813) (19,925)
-------- ---------------
Net Increase/Decrease............................. $ (1,079) $ (147)
-------- ---------------
-------- ---------------
Ending Paid in Capital............................ $ 62,911+ $ 63,990
-------- ---------------
-------- ---------------
Class C:
- -------
Shares:
Subscribed...................................... 807 1,702
Distributions Reinvested........................ -- 10
Redeemed........................................ (1,680) (4,222)
-------- ---------------
Net Increase/Decrease in Class C Shares
Outstanding..................................... (873) (2,510)
-------- ---------------
-------- ---------------
Dollars:
Subscribed...................................... $ 5,984 $ 14,215
Distributions Reinvested........................ -- 78
Redeemed........................................ (11,680) (44,541)
-------- ---------------
Net Increase/Decrease............................. $ (5,696) $(30,248)
-------- ---------------
-------- ---------------
Ending Paid in Capital............................ $ 70,942+ $ 76,638
-------- ---------------
-------- ---------------
</TABLE>
- ---------------
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
---------------------------------------------------- -------------------------------------------
AUGUST 1,
YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, 1995+
SELECTED PER SHARE DATA ---------------------------------------------------- ------------------------------ TO JUNE
AND RATIOS 1999# 1998# 1997 1996 1995 1999# 1998# 1997 30, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 6.529 $ 16.62 $ 17.15 $ 16.42 $ 15.50 $ 6.306 $ 16.17 $ 16.81 $ 16.51
------- -------- --------- --------- -------- -------- -------- -------- ----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income/Loss.......... 0.022 (0.04) (0.06) (0.04) -- (0.033) (0.10) (0.16) (0.03)
Net Realized and
Unrealized
Gain/Loss............ 4.933 (10.03) (0.14) 0.77 1.43 4.734 (9.74) (0.15) 0.33
------- -------- --------- --------- -------- -------- -------- -------- ----------
Total From Investment
Operations........... 4.955 (10.07) (0.20) 0.73 1.43 4.701 (9.84) (0.31) 0.30
------- -------- --------- --------- -------- -------- -------- -------- ----------
DISTRIBUTIONS
Net Realized Gain...... -- -- -- -- (0.49) -- -- (0.33) --
In Excess of Net
Realized Gain........ -- (0.02) (0.33) -- (0.02) -- (0.02) -- --
------- -------- --------- --------- -------- -------- -------- -------- ----------
Total Distributions.... -- (0.02) (0.33) -- (0.51) -- (0.02) (0.33) --
------- -------- --------- --------- -------- -------- -------- -------- ----------
NET ASSET VALUE, END OF
PERIOD................. $11.484 $ 6.53 $ 16.62 $ 17.15 $ 16.42 $ 11.007 $ 6.31 $ 16.17 $ 16.81
------- -------- --------- --------- -------- -------- -------- -------- ----------
------- -------- --------- --------- -------- -------- -------- -------- ----------
TOTAL RETURN (1)......... 75.69% (60.57)% (1.10)% 4.45% 9.50% 74.48% (60.89)% (1.79)% 1.82%*
------- -------- --------- --------- -------- -------- -------- -------- ----------
------- -------- --------- --------- -------- -------- -------- -------- ----------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's)................ $88,808 $ 47,128 $ 175,440 $ 248,009 $178,667 $ 42,905 $ 26,126 $ 62,786 $ 52,853
Ratio of Expenses to
Average Net Assets..... 1.95% 1.90% 1.84% 1.88% 1.90% 2.70% 2.65% 2.59% 2.61%
Ratio of Net Investment
Income/Loss to Average
Net Assets............. 0.28% (0.39)% (0.31)% (0.16)% 0.04% (0.44)% (1.01)% (1.04)% (0.52)%
Portfolio Turnover
Rate................... 138% 130% 74% 38% 34% 138% 130% 74% 38%*
- ---------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to
Net Investment
Income/Loss.......... $ 0.01 $ 0.01 $ -- $ -- $ -- $ 0.01 $ 0.02 $ -- $ --
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets............... 2.03% 2.21% -- -- -- 2.78% 2.96% -- --
Net Investment
Income/Loss to
Average Net Assets... 0.20% (0.53)% -- -- -- (0.52)% (1.15)% -- --
Ratio of Net Expenses to
Average Net Assets
excluding country tax
expense and interest
expense................ 1.90% 1.90% -- -- -- 2.65% 2.65% -- --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 6.290 $ 16.14 $ 16.78 $ 16.19 $ 15.40
------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... (0.035) (0.12) (0.21) (0.13) (0.12)
Net Realized and Unrealized
Gain/Loss........................ 4.718 (9.71) (0.10) 0.72 1.42
------- ------- -------- -------- --------
Total From Investment Operations... 4.683 (9.83) (0.31) 0.59 1.30
------- ------- -------- -------- --------
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....... $10.973 $ 6.29 $ 16.14 $ 16.78 $ 16.19
------- ------- -------- -------- --------
------- ------- -------- -------- --------
TOTAL RETURN (1)..................... 74.13% (60.88)% (1.79)% 3.64% 8.71%
------- ------- -------- -------- --------
------- ------- -------- -------- --------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $40,706 $28,823 $114,460 $168,070 $139,497
Ratio of Expenses to Average Net
Assets............................. 2.70% 2.65% 2.59% 2.63% 2.63%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (0.48)% (1.17)% (1.06)% (0.94)% (0.77)%
Portfolio Turnover Rate.............. 138% 130% 74% 38% 34%
- ----------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.01 $ 0.01 $ -- $ -- $ --
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.78% 2.96% -- -- --
Net Investment Income/Loss to
Average Net Assets............... (0.56)% (1.31)% -- -- --
Ratio of Net Expenses to Average Net
Assets excluding country tax
expense and interest expense....... 2.65% 2.65% -- -- --
</TABLE>
- --------------------------------------------------------------------------------
* Non-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.
# Changes per share are based upon monthly average shares outstanding.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen Asian Growth Fund (the "Fund") is organized as a separate
diversified fund of Van Kampen Series Fund, Inc., a Maryland Corporation which
is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation through investment primarily in equity securities of Asian
issuers, excluding Japan. The Fund commenced operations on June 23, 1993.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
----------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------- ------- -------
<S> <C> <C>
First................................ 5.00% 1.00%
Second............................... 4.00% None
Third................................ 3.00% None
Fourth............................... 2.50% None
Fifth................................ 1.50% None
Thereafter........................... None None
</TABLE>
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.
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 between 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 takes 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. 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. 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 Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from
- -----------------------
12
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
changes in the market prices of securities. Realized gains and losses on foreign
currency includes the net realized amount from the sale of the currency and the
amount realized between trade date and settlement date on security and income
transactions. However, 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.
The net assets of the Fund may include issuers located in emerging markets.
There are certain risks inherent in these investments not typically associated
with investments in the United States, including the smaller size of the markets
themselves, lesser liquidity, greater volatility, and potentially less publicly
available information. Emerging markets may be subject to a greater degree of
government involvement in the economy and greater economic and political
uncertainty, which has the potential to extend to government imposed
restrictions on exchange traded transactions and currency transactions. These
restrictions may impact the Fund's ability to buy or sell certain securities or
to repatriate certain currencies to U.S. dollars. Additionally, changes in
currency exchange rates will affect the value of and investment income from such
securities.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund 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, 1999, the Fund had available capital loss carryforwards to offset
future net capital gains, to the extent provided by U.S. Federal income tax
regulations, of approximately $53,293,000 and $69,761,000 which will expire on
June 30, 2006 and June 30, 2007, respectively.
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 the Fund 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 losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 to June 30, 1999, the Fund incurred and elected
to defer until July 1, 1999, for U.S. Federal income tax purposes, net capital
losses of approximately $999,000.
At June 30, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- --------- ----------- ----------- -------------
<S> <C> <C> <C>
$ 131,179 $ 45,500 $ (2,547) $ 42,953
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: 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, and
foreign taxes on net realized gains.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par. For
the year ended June 30, 1999 approximately $1,599,000 has been reclassified from
paid in capital in excess of par with approximately $1,300,000 posted to
accumulated net investment loss and approximately $299,000 posted to accumulated
net realized loss.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary 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 Fund, 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------- --------------- ---------------
<S> <C> <C>
1.00% 1.90% 2.65%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$3,000 representing legal services
------------------
13
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
provided by Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the
Fund, of which a director of the Fund is an affiliated person.
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 the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Portfolio a distribution fee, which
is accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $180,695 for Class A shares and deferred sales charges of $4,722,
$184,325, and $27,849 for Class A shares, Class B shares, and Class C shares,
respectively.
Prior to October 1, 1998, the Fund's assets held outside the United States were
held by Morgan Stanley Trust Company ("MSTC"), a former affiliate of the
Subadvisers. Through September 30, 1998, the Fund incurred MSTC fees of
approximately $48,000. On October 1, 1998, the Chase Manhattan Bank purchased
MSTC.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
During the year ended June 30, 1999, the Fund incurred approximately $54,000 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/dealer.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $149,702,000 and sales of approximately $149,321,000
of investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sales of long-term U.S.
government securities.
- -----------------------
14
<PAGE>
VAN KAMPEN ASIAN GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen Asian Growth Fund:
In our opinion, the accompanying statement 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 Van Kampen Asian Growth Fund (the
"Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the results of
its operations, the changes in its 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, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate Corporation and
Allstate Insurance Company
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.
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/National Research
Council, and former Chairman of the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
VAN KAMPEN
FUNDS
1 Parkview Plaza - P.O. Box 5555 - Oakbrook Terrace, IL
60181-5555 - www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN K AMPEN
INTERNATIONAL MAGNUM FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 9
Statement of Operations............................................... 10
Statement of Changes in Net Assets.................................... 11
Financial Highlights ................................................. 12
Notes to Financial Statements......................................... 13
Report of Independent Accountants..................................... 16
Additional Information................................................ 17
</TABLE>
MSIM ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
/s/ RICHARD F. POWERS, III /s/ DENNIS J. MCDONNELL
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, and by 2.3 percent in the second quarter. The
expansion was fueled by an increase in consumer spending, which was attributed
to vibrant consumer confidence as a result of the strong job market.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although it had expressed a bias toward a series of
rate increases, May's tame CPI report prompted the Fed to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MONTH INTEREST RATES INFLATION
<S> <C> <C>
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
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, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Australia 2.8%
France 10.3%
Germany 7.7%
Italy 3.5%
Japan 24.9%
Netherlands 4.2%
Spain 3.4%
Sweden 4.0%
Switzerland 8.6%
United Kingdom 19.7%
Other 10.9%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
----------------------------------------------------------------
AVERAGE ANNUAL
ONE YEAR SINCE INCEPTION
--------------------- --------------------- COMMENCEMENT
WITH WITHOUT WITH WITHOUT DATE
SALES SALES SALES SALES ------------
CHARGE* CHARGE*** CHARGE* CHARGE***
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares -11.00% -5.54% 4.20% 6.28% 7/1/96
- ------------------------------------------------------------------------------------------
Class B Shares -10.85% -6.28% 4.57% 5.48% 7/1/96
- ------------------------------------------------------------------------------------------
Class C Shares -7.16% -6.25% 5.47% 5.47% 7/1/96
- ------------------------------------------------------------------------------------------
MSCI EAFE Index N/A 7.62% N/A 8.79% N/A
- ------------------------------------------------------------------------------------------
</TABLE>
The Morgan Stanley International (MSCI) EAFE Index is an unmanaged index of
common stocks and includes Europe, Australasia, and the Far East (assumes
dividends are reinvested net of withholding taxes).
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for A shares) or
contingent deferred sales charge for early withdrawal (5% for B shares and
1% for C shares).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF NET
ISSUER COUNTRY ASSETS
- ---------------------- --------------- ---------------
<S> <C> <C>
Cie Financiere
Richemont AG 'A' Switzerland 2.2%
Nestle S.A. Switzerland 2.1%
Total S.A. 'B' France 1.7%
British
Telecommunications
plc United Kingdom 1.4%
ING Groep N.V. Netherlands 1.4%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- -------------------- --------- -------------
<S> <C> <C>
Consumer Goods $ 31,260 29.0%
Finance 21,222 19.7%
Capital Equipment 18,558 17.2%
Services 15,655 14.5%
Materials 10,462 9.7%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
International Magnum
Fund - Class A MSCI EAFE Index
7/1/1996 $9,500 $10,000
6/30/1997 $11,173 $11,284
6/30/1998 $11,977 $11,613
6/30/1999 $11,312 $12,498
</TABLE>
PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE
PERFORMANCE.
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN INTERNATIONAL
MAGNUM FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
DURING THE PAST 12 MONTHS. THE TEAM IS LED BY PORTFOLIO MANAGER FRANCINE BOVICH
OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. MS. BOVICH HAS BEEN A
MEMBER OF THE FUND'S MANAGEMENT TEAM SINCE ITS INCEPTION IN 1996. THE FOLLOWING
EXCERPTS REFLECT HER VIEWS ON THE FUND'S PERFORMANCE DURING THE 12 MONTHS ENDED
JUNE 30, 1999.
Q: DESCRIBE THE MARKET CONDITIONS THAT AFFECTED THE FUND DURING THE REPORTING
PERIOD.
A: The beginning of the period was volatile for international markets. During
the third quarter of 1998, continued economic weakness in Asia spread to Russia,
and there were warning signs that Asia's problems were beginning to affect
Europe. The defining moment of the period came in mid-August when Russia
devalued its currency and defaulted on its debt, sending financial and currency
markets worldwide into a tailspin. Paced by the Federal Reserve Board (the Fed)
and the European Central Bank (ECB), central banks worldwide lowered interest
rates during the fourth quarter of 1998. The interest-rate cuts renewed investor
confidence and helped revive global equity markets, with Asia benefiting
significantly and outperforming all other developed-market regions.
------------------
3
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Global economic recovery became the story of the first half of 1999, as economic
activity increased in most regions of the world. In Asia, declining interest
rates, corporate cost-cutting, and other fiscal reforms helped revive many
emerging markets. Japan, with the support of international investors, became one
of the world's top-performing markets.
In January of 1999, Europe introduced its new currency, the euro. While the
introduction of the euro went smoothly, economic weakness, particularly in
Germany, contributed to its decline since January. Decreased exports to Asia and
Russia, as well as reduced trade by Eastern European countries, led to lower
economic growth and falling corporate earnings. The resignation of Oskar
LaFontaine, the German Minister of Finance, was an important recovery point for
Europe. His resignation cleared the way for the ECB to lower interest rates in
April, which helped European markets rebound before the end of the period.
Q: DESCRIBE YOUR INVESTMENT STRATEGIES FOR THE FUND IN THIS ENVIRONMENT.
A: Within Europe, our value-oriented strategy led us to maintain significant
positions in undervalued industries such as consumer staples (e.g. household
goods, beverages, and tobacco), utilities, and food retailing. Simultaneously,
we avoided the highly valued, mega-cap stocks generally preferred by investors
during the market volatility at the end of 1998. Additionally, we maintained
commitments to small- and mid-cap holdings that had attractive valuations.
In Japan our strategy remained consistent throughout the period as we
concentrated the Fund on companies that we felt would benefit from financial-
and corporate-sector deregulation and restructuring. In addition, we continued
to avoid the volatile Japanese banking sector. In the rest of Asia, we remained
committed to high-quality global franchise companies that we expected to benefit
from the economic recovery, as well as from expansionary monetary policy and
government and corporate restructuring efforts.
From a regional allocation perspective, the Fund was overweighted in Europe and
underweighted in Japan and Asia during the first six months of the period. We
reduced our exposure in Europe during the first half of 1999 and ended the
period underweighted relative to our benchmark index. In Asia, we increased our
weighting in both Japan and non-Japan Asia, due to our improved outlook for the
region.
The Fund benefited significantly as we increased its exposure to Japan and
decreased its exposure to Europe during the first quarter of 1999. Returns did,
however, suffer from an overweighted position in European small-cap stocks.
Beginning in April, the Fund was helped by the resurgence of value-oriented
stocks, as well as from its allocation strategy. We further increased the Fund's
exposure to Japan and the rest of Asia, while decreasing its exposure to Europe.
Stock selection, especially within Europe and Japan, also contributed favorably
to returns as the Fund's value orientation benefited from the recovery of
cyclical stocks.
Finally, in April and May we began to see a comeback for value-oriented
investments, as consumer staple stocks, including household goods, beverages,
and tobacco, began to outperform growth-oriented stocks.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: For the 12-month period ending June 30, 1999, the Fund's total return of
- -5.54 percent (Class A shares at net asset value without sales charge)
underperformed the Morgan Stanley Capital International (MSCI) Europe,
Australasia, and Far East (EAFE) Index total return of 7.62 percent. Past
performance does not guarantee future results.
The Fund's performance was dominated by the returns generated in the fourth
quarter of 1998. During this volatile time the Fund was underweighted in
European growth-oriented, mega-cap stocks, which outperformed their value-based
counterparts. Although the first six months of the period were difficult, the
Fund performed well during the latter half due to the resurgence of value-
- -----------------------
4
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
oriented equities, particularly in Europe. Strong stock selection in both Europe
and Japan during the first half of 1999 also contributed significantly to the
Fund's performance. Despite this strong recovery, returns for the twelve-month
period failed to outperform the index.
Q: WHAT HELPED OR HURT THE FUND'S PERFORMANCE DURING THE PERIOD?
A: During the first six months of the period, the portfolio benefited from
strong stock selection in Japan and Asia, and consumer-oriented stocks in
Europe, including Telecom Italia, Nestle, Imperial Tobacco, and France Telecom.
The Fund's performance was hindered by holdings in oil (such as Premier Oil and
Total) as prices dropped, and weak stock selection in the United Kingdom. Our
strategy in Japan was successful relative to our benchmark as we focused on
blue-chip exporters and avoided banks and domestic-based stocks. During the
fourth quarter, the Fund's return did not benefit from this strategy as the
rapid appreciation of the yen hurt our export-oriented stocks and led investors
to become concerned that exporters' profits might suffer.
Q: WHAT IS YOUR OUTLOOK FOR JAPAN AND THE REST OF ASIA AND THE FUND'S PORTFOLIO
IN THE MONTHS AHEAD?
A: We expect Japan to outperform other developed markets in the medium to long
term as authorities and business leaders remain committed to reforms. The Fed's
neutral bias, coupled with the Bank of Japan's current policy of nonexistent
short-term interest rates, should allow Japan to accelerate restructuring and
provide a platform for economic recovery. While we are increasingly positive on
Japan, we intend to keep our highly selective stock and sector weightings.
Asian markets have been driven by low interest rates and high liquidity, as well
as rising commodity prices. Overall, improving consumer and business confidence
is evident, and recovery should continue as long as these markets keep on
restructuring, stabilizing current account deficits, and improving their balance
sheets. We will monitor Asia carefully in the coming months for signs of
continued progress in the restructuring of its banking and corporate sectors.
The concern remains, however, that government and business may--in light of
recent economic and market strength--disregard the policies necessary for
reform. In addition, if the Fed continues to tighten monetary policy during the
course of the year, Hong Kong's growth prospects could suffer, as its dollar and
interest rates are pegged to those of the United States. Due to the recent
market rallies, stock valuations have become extended. As a result, policies
that hinder growth could adversely affect Asia. If this were the case, we would
expect to reduce the Fund's exposure to the region.
Q: WHAT IS YOUR OUTLOOK FOR EUROPE IN THE MONTHS AHEAD?
A: The forecasted economic recovery in Europe is proceeding at a frustratingly
slow pace, although the prospects for the second half of 1999 seem to be
improving. As the euro continues its weakening trend, European exporters should
benefit both from this weakness as well as from a pick-up in demand from
strengthening Asian economies. Strong domestic demand due to the lagged effects
of monetary easing and a more relaxed fiscal policy, coupled with
stronger-than-expected factory orders in Italy and Germany, could signal further
recovery in the euro economy. Encouragingly, Europe's governments appear to
realize the need to tackle structural problems, as evidenced by a statement
released following the recent summit of 15 European union heads of state.
Current reform proposals will be key to improving long-term growth and
investment prospects, and should make Europe a more attractive place to invest.
Based on these forecasts, we have positioned the Fund with an underweighted
position in Europe, an overweighted position in Japan, and neutral in the rest
of Asia.
Francine Bovich
PORTFOLIO MANAGER
------------------
5
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- --------------------------------------------------------
COMMON STOCKS (97.8%)
AUSTRALIA (2.8%)
AMP Ltd.......................... 8,250 $ 90
Brambles Industries Ltd.......... 5,000 131
Broken Hill Proprietary Co.,
Ltd............................ 17,750 205
Cable & Wireless Optus Ltd....... 36,900 84
Colonial Ltd..................... 25,550 90
Fosters Brewing Group Ltd........ 64,900 182
Lend Lease Corp., Ltd............ 13,800 189
National Australia Bank Ltd...... 24,300 401
News Corp., Ltd.................. 37,740 321
Normandy Mining Ltd.............. 71,300 47
Oil Search Ltd................... 58,200 86
Quantas Airlines................. 36,400 120
Rio Tinto Ltd.................... 17,150 280
Telstra Corp., Ltd............... 74,950 428
Westpac Banking Corp., Ltd....... 40,150 259
WMC Ltd.......................... 16,950 72
--------
2,985
--------
BELGIUM (0.2%)
Fortis 'B'....................... 6,400 201
--------
DENMARK (1.2%)
Nova Nordisk A/S 'B'............. 9,110 983
Unidanmark A/S 'A'
(Registered)................... 4,300 287
--------
1,270
--------
FINLAND (2.2%)
KCI Konecranes International
plc............................ 9,370 322
Kone Oyj 'B'..................... 3,285 411
Merita Ltd. 'A' plc.............. 166,970 950
Sampo Insurance Co., Ltd. 'A'.... 24,580 713
--------
2,396
--------
FRANCE (10.3%)
Alcatel Alsthom.................. 4,380 617
Axa.............................. 3,710 453
Cie de Saint Gobain.............. 5,492 876
(a)CNP Assurances................ 47,350 1,295
Elf Aquitaine.................... 5,180 761
Groupe Danone RFD................ 2,793 721
Michelin (C.G.D.E.) 'B'.......... 24,930 1,021
Pernod-Ricard.................... 15,110 1,014
Rhone-Poulenc S.A. 'A'........... 20,400 934
Suez Lyonnaise des Eaux.......... 2,200 397
Schneider S.A.................... 21,630 1,216
(a)Total S.A. 'B'................ 14,110 1,823
--------
11,128
--------
GERMANY (5.9%)
Adidas-Salomon AG................ 5,250 512
BASF AG.......................... 21,260 935
Bayer AG......................... 19,200 1,223
Bewag AG......................... 20,907 324
Hoechst AG....................... 20,000 902
Mannesmann AG.................... 1,740 261
Schering AG...................... 8,660 926
Siemens AG....................... 3,150 243
Volkswagen AG.................... 15,270 987
--------
6,313
--------
HONG KONG (2.7%)
Cathay Pacific Airways Ltd....... 55,900 86
Cheung Kong Holdings Ltd......... 67,500 600
China Telecom Ltd................ 103,500 288
Dao Heng Bank Group Ltd.......... 19,000 85
Hong Kong & Shanghai Bank
Holdings plc................... 7,400 270
Hong Kong Telecommunications
Ltd............................ 106,600 277
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- --------------------------------------------------------
Hutchison Whampoa Ltd............ 50,600 $ 458
Li & Fung Ltd.................... 55,900 134
New World Development Co. Ltd.... 22,000 66
SmarTone Telecom Holdings Ltd.... 34,300 122
Sun Hung Kai Properties Ltd...... 39,300 358
Swire Pacific Ltd. 'A'........... 30,000 149
Television Broadcasts Ltd........ 12,000 56
--------
2,949
--------
IRELAND (1.3%)
Bank of Ireland.................. 60,004 1,010
Greencore Group plc.............. 127,000 393
--------
1,403
--------
ITALY (3.5%)
Banca Popolare di Bergamo
S.p.A.......................... 44,660 982
Marzotto (Gaetano) & Figli
S.p.A.......................... 53,300 415
Mediaset S.p.A................... 105,500 939
Telecom Italia S.p.A............. 140,000 1,457
--------
3,793
--------
JAPAN (24.9%)
Aiwa Co., Ltd.................... 8,000 265
Amada Co., Ltd................... 53,000 375
Canon, Inc....................... 29,000 835
Casio Computer Co., Ltd.......... 35,000 266
Dai Nippon Printing Co., Ltd..... 26,000 416
Daicel Chemical Industries
Ltd............................ 96,000 353
Daifuku Co., Ltd................. 51,000 357
Daikin Industries Ltd............ 46,000 535
FamilyMart Co., Ltd.............. 7,200 331
Fuji Machine Manufacturing Co.... 19,000 586
Fuji Photo Film Co............... 20,000 758
Fujitec Co. Ltd.................. 32,000 304
Fujitsu Ltd...................... 54,000 1,088
Furukawa Electric Co., Ltd....... 77,000 354
Hitachi Credit Corp.............. 19,700 390
Hitachi Ltd...................... 109,000 1,023
Kaneka Corp...................... 66,000 622
Kurita Water Industries Ltd...... 22,000 395
Kyocera Corp..................... 8,400 493
Kyudenko Co., Ltd................ 25,000 143
Lintec Corp...................... 20,000 201
Matsushita Electric Industrial
Co., Ltd....................... 36,000 700
Minebea Co., Ltd................. 36,000 402
Mitsubishi Chemical Corp......... 90,000 312
Mitsubishi Estate Co., Ltd....... 40,000 391
Mitsubishi Heavy Industries
Ltd............................ 97,000 394
Mitsumi Electric Co., Ltd........ 25,000 699
NEC Corp......................... 77,000 959
Nifco, Inc....................... 25,000 241
Nintendo Corp., Ltd.............. 8,300 1,168
Nippon Telegraph & Telephone
Corp. ADR...................... 78 910
Nissan Motor Co., Ltd............ 150,000 717
Nissha Printing Co., Ltd......... 20,000 146
Ono Pharmaceutical Co., Ltd...... 15,000 521
Ricoh Co., Ltd................... 70,000 965
Rinnai Corp...................... 13,900 320
Rohm Co.......................... 3,000 470
Ryosan Co........................ 10,000 199
Sangetsu Co., Ltd................ 9,000 192
Sankyo Co., Ltd.................. 32,000 807
Sanwa Shutter Corp............... 44,000 239
Sekisui Chemical Co.............. 42,000 244
Sekisui House Ltd................ 34,000 367
Shin-Etsu Polymer Co., Ltd....... 44,000 247
Sony Corp........................ 8,400 907
Suzuki Motor Co., Ltd............ 31,000 494
</TABLE>
- -----------------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------
<S> <C> <C>
TDK Corp......................... 8,000 $ 733
Toshiba Corp..................... 133,000 950
Toyota Motor Corp................ 21,000 665
Tsubakimoto Chain Co............. 76,000 271
Yamaha Corp...................... 30,000 361
Yamanouchi Pharmaceutical Co..... 21,000 804
--------
26,885
--------
NETHERLANDS (4.2%)
ABN Amro Holdings N.V............ 10,200 221
Akzo Nobel N.V................... 32,315 1,362
Benckiser N.V. 'B'............... 7,900 422
ING Groep N.V.................... 27,573 1,495
Laurus N.V....................... 6,150 143
Philips Electonics N.V........... 9,075 896
--------
4,539
--------
NEW ZEALAND (0.1%)
Telecom Corp. of New Zealand
Ltd............................ 30,000 129
--------
PORTUGAL (1.0%)
Banco Comercial Portugues S.A.
(Registered)................... 2,600 68
Electricidade de Portugal S.A.... 54,150 976
--------
1,044
--------
SINGAPORE (1.8%)
City Developments Ltd............ 25,900 166
Development Bank of Singapore
Ltd. (Foreign)................. 28,000 342
NatSteel Ltd..................... 40,000 175
Oversea-Chinese Banking Corp.,
Ltd. (Foreign)................. 17,000 142
Overseas Union Bank Ltd.
(Foreign)...................... 23,000 111
Sembcorp Logistics Ltd........... 19,000 75
Singapore Airlines Ltd.
(Foreign)...................... 22,000 209
Singapore Press Holdings Ltd..... 15,000 255
Singapore Telecommunications
Ltd............................ 87,000 149
United Overseas Bank Ltd.
(Foreign)...................... 17,000 119
Venture Manufacturing Ltd........ 24,000 185
--------
1,928
--------
SPAIN (3.4%)
Banco Popular Espanol S.A........ 6,310 455
Banco Santander Central Hispano
S.A............................ 42,000 438
Endesa S.A....................... 34,300 732
Iberdrola S.A.................... 50,800 775
(a)Telefonica de Espana.......... 25,320 1,221
--------
3,621
--------
SWEDEN (4.0%)
Autoliv, Inc. SDR................ 29,000 887
Ericsson LM 'B'.................. 8,850 285
ForeningsSparbanken AB........... 6,900 98
Nordbanken Holding AB............ 160,200 940
Svedala Industri AB.............. 50,000 903
Svenska Handelsbanken 'A'........ 101,100 1,217
--------
4,330
--------
SWITZERLAND (8.6%)
Cie Financiere Richemont AG
'A'............................ 1,238 2,386
Holderbank Financiere Glarus AG
'B' (Bearer)................... 982 1,161
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- --------------------------------------------------------
Nestle S.A. (Registered)......... 1,275 $ 2,302
Novartis AG (Registered)......... 470 688
Roche Holding AG-Genusshein...... 68 700
Schindler Holding AG
(Registered)................... 269 416
Swisscom AG (Registered)......... 2,110 795
Union Bank of Switzerland AG
(Registered)................... 2,900 867
--------
9,315
--------
UNITED KINGDOM (19.7%)
Aegis Group plc.................. 270,280 597
Allied Domecq plc................ 110,800 1,070
Allied Zurich plc................ 91,400 1,150
BG plc........................... 148,428 907
BOC Group plc.................... 49,250 963
British Telecommunications plc... 90,800 1,523
Burmah Castrol plc............... 40,217 764
Capital Radio plc................ 75,000 994
Centrica plc..................... 227,790 535
Diageo plc....................... 66,983 700
Glaxo Wellcome plc............... 13,400 373
Great Universal Stores plc....... 102,670 1,139
Halma plc........................ 417,400 698
Imperial Tobacco Group plc....... 106,300 1,160
Lloyds TSB Group plc............. 47,400 643
Morgan Crucible Co. plc.......... 107,300 454
Prudential Corp. plc............. 66,100 974
Reckitt & Colman plc............. 138,768 1,448
Royal & Sun Alliance Insurance
Group plc...................... 73,977 664
Royal Bank of Scotland Group
plc............................ 61,082 809
Sainsbury (J) plc................ 62,000 391
Scottish & Southern Energy plc... 102,400 1,048
Shell Transport & Trading Co.
plc............................ 66,400 498
Smith & Nephew plc............... 50,900 155
SSL International plc............ 36,400 418
Tesco plc........................ 128,300 330
WPP Group plc.................... 99,600 843
--------
21,248
--------
TOTAL COMMON STOCKS........................... 105,477
--------
PREFERRED STOCKS (1.8%)
GERMANY (1.8%)
Fresenius AG..................... 7,915 1,389
Henkel KGaA AG................... 8,300 581
--------
1,970
--------
TOTAL LONG-TERM INVESTMENTS (99.6%) (COST
$99,365)...................................... 107,447
--------
FOREIGN CURRENCY (1.7%) (COST $1,799)......... 1,793
--------
TOTAL INVESTMENTS (101.3%) (COST $101,164).... 109,240
LIABILITIES IN EXCESS OF OTHER ASSETS
(-1.3%)..................................... (1,384)
--------
NET ASSETS (100%)............................. $107,856
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
ADR -- American Depositary Receipt
RFD -- Ranked for Dividend
SDR -- Swedish Depositary Receipt
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
- --------------------------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- ----------------------------------------------------------------------------- --------- -------------
<S> <C> <C>
Consumer Goods............................................................... $ 31,260 29.0%
Finance...................................................................... 21,222 19.7
Capital Equipment............................................................ 18,558 17.2
Services..................................................................... 15,655 14.5
Materials.................................................................... 10,462 9.7
Energy....................................................................... 9,435 8.7
Multi-Industry............................................................... 855 0.8
--------- ---
$ 107,447 99.6%
--------- ---
--------- ---
</TABLE>
- -----------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
- -----------------------------------------------
<S> <C>
ASSETS:
Investments at Value (Cost
$99,365)......................... $107,447
Foreign Currency (Cost $1,799)..... 1,793
Margin Deposit on Futures.......... 701
Receivable for:
Investments Sold................. 734
Dividends........................ 320
Fund Shares Sold................. 294
Foreign Withholding Tax
Reclaim......................... 90
Net Unrealized Gain on Foreign
Currency Exchange Contracts...... 8
Other.............................. 20
--------
Total Assets..................... 111,407
--------
LIABILITIES:
Payable for:
Custodian Overdraft.............. 1,666
Investments Purchased............ 1,362
Fund Shares Redeemed............. 165
Distribution Fees................ 123
Custody Fees..................... 65
Investment Advisory Fees......... 65
Administrative Fees.............. 25
Professional Fees................ 24
Transfer Agent Fees.............. 21
Shareholder Reporting Expense.... 19
Directors' Fees and Expenses..... 14
Other.............................. 2
--------
Total Liabilities................ 3,551
--------
NET ASSETS........................... $107,856
--------
--------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 8
Paid in Capital in Excess of Par... 106,226
Net Unrealized Appreciation on
Investments and Foreign Currency
Translations..................... 8,068
Distributions in Excess of Net
Investment Income................ (23)
Accumulated Net Realized Loss...... (6,423)
--------
NET ASSETS........................... $107,856
--------
--------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $45,573,218 and
3,358,578 Shares Outstanding).... $ 13.57
--------
--------
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100
/ (100 - maximum sales
charge))......................... $ 14.40
--------
--------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$48,095,622 and 3,571,823 Shares
Outstanding)*.................... $ 13.47
--------
--------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$14,187,085 and 1,049,263 Shares
Outstanding)*.................... $ 13.52
--------
--------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
- ----------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividends.......................... $ 2,262
Interest........................... 441
Less Foreign Taxes Withheld........ (256)
-------
Total Income...................... 2,447
-------
EXPENSES:
Investment Advisory Fees........... 943
Distribution Fees (Attributed to
Classes A, B, and C of $138,
$482, and $144, respectively).... 764
Administrative Fees................ 318
Custodian Fees..................... 139
Transfer Agent Fees................ 116
Shareholder Reports................ 66
Professional Fees.................. 43
Filing and Registration Fees....... 40
Directors' Fees and Expenses....... 11
Amortization of Organizational
Costs............................ 8
Other.............................. 32
-------
Total Expenses.................... 2,480
Less Expense Reductions........... (39)
-------
Net Expenses...................... 2,441
-------
Net Investment Income/Loss........... 6
-------
NET REALIZED GAIN/LOSS ON:
Investments........................ (5,131)
Foreign Currency Transactions...... (1,176)
Futures............................ (544)
-------
Net Realized Gain/Loss............ (6,851)
-------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ 10,250
-------
End of the Period:
Investments...................... 8,082
Foreign Currency Translations.... (14)
-------
8,068
-------
Net Unrealized
Appreciation/Depreciation During
the Period......................... (2,182)
-------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... (9,033)
-------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $(9,027)
-------
-------
</TABLE>
- ------------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- -------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss......... $ 6 $ 679
Net Realized Gain/Loss............. (6,851) 1,875
Net Unrealized
Appreciation/Depreciation........ (2,182) 6,066
------------- -------------
Net Increase/Decrease in Net Assets
Resulting from Operations........ (9,027) 8,620
------------- -------------
DISTRIBUTIONS:
Net Investment Income:
Class A............................ (1,075) (488)
Class B............................ (551) (330)
Class C............................ (161) (53)
In Excess of Net Investment Income:
Class A............................ (14) --
Class B............................ (7) --
Class C............................ (2) --
------------- -------------
(1,810) (871)
------------- -------------
Net Realized Gain:
Class A............................ -- (33)
Class B............................ -- (31)
Class C............................ -- (9)
In Excess of Net Realized Gain:
Class A............................ (709) --
Class B............................ (611) --
Class C............................ (179) --
------------- -------------
(1,499) (73)
------------- -------------
Net Decrease in Net Assets
Resulting from Distributions..... (3,309) (944)
------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed......................... 79,794 106,801
Distributions Reinvested........... 2,837 850
Redeemed........................... (96,317) (30,781)
------------- -------------
Net Increase/Decrease in Net Assets
Resulting from Capital Share
Transactions..................... (13,686) 76,870
------------- -------------
Total Increase/Decrease in Net
Assets........................... (26,022) 84,546
NET ASSETS--Beginning of Period...... 133,878 49,332
------------- -------------
NET ASSETS--End of Period (Including
distributions in
excess/undistributed net investment
income of $(23) and $1,524,
respectively)...................... $ 107,856 $ 133,878
------------- -------------
------------- -------------
- -------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
Shares:
Subscribed...................... 1,848 4,160
Distributions Reinvested........ 120 38
Redeemed........................ (3,110) (1,276)
------------- -------------
Net Increase/Decrease in Class A
Shares Outstanding.............. (1,142) 2,922
------------- -------------
------------- -------------
Dollars:
Subscribed...................... $ 24,712 $ 58,246
Distributions Reinvested........ 1,503 473
Redeemed........................ (40,959) (17,581)
------------- -------------
Net Increase/Decrease............. $ (14,744) $ 41,138
------------- -------------
------------- -------------
Ending Paid in Capital............ $ 46,134+ $ 60,878
------------- -------------
------------- -------------
Class B:
Shares:
Subscribed...................... 1,344 2,713
Distributions Reinvested........ 84 26
Redeemed........................ (1,357) (556)
------------- -------------
Net Increase/Decrease in Class B
Shares Outstanding.............. 71 2,183
------------- -------------
------------- -------------
Dollars:
Subscribed...................... $ 17,633 $ 37,386
Distributions Reinvested........ 1,048 322
Redeemed........................ (17,469) (7,487)
------------- -------------
Net Increase/Decrease............. $ 1,212 $ 30,221
------------- -------------
------------- -------------
Ending Paid in Capital............ $ 48,048+ $ 46,836
------------- -------------
------------- -------------
Class C:
Shares:
Subscribed...................... 2,928 809
Distributions Reinvested........ 23 4
Redeemed........................ (2,952) (425)
------------- -------------
Net Increase/Decrease in Class C
Shares Outstanding.............. (1) 388
------------- -------------
------------- -------------
Dollars:
Subscribed...................... $ 37,449 $ 11,169
Distributions Reinvested........ 286 55
Redeemed........................ (37,889) (5,713)
------------- -------------
Net Increase/Decrease............. $ (154) $ 5,511
------------- -------------
------------- -------------
Ending Paid in Capital............ $ 13,362+ $ 13,516
------------- -------------
------------- -------------
</TABLE>
- ---------------
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
YEAR ENDED
JUNE 30,
------------------- JULY 1, 1996* TO
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# JUNE 30, 1997
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $14.845 $ 13.91 $ 12.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... 0.049 0.17 0.17
Net Realized and Unrealized
Gain/Loss........................ (0.910) 0.96 1.88
------- ------- -------
Total From Investment Operations..... (0.861) 1.13 2.05
------- ------- -------
DISTRIBUTIONS
Net Investment Income................ (0.248) (0.18) (0.13)
In Excess of Net Investment Income... (0.003) -- --
Net Realized Gain.................... -- (0.01) (0.01)
In Excess of Net Realized Gain....... (0.164) -- --
------- ------- -------
Total Distributions.................. (0.415) (0.19) (0.14)
------- ------- -------
NET ASSET VALUE, END OF PERIOD....... $13.569 $ 14.85 $ 13.91
------- ------- -------
------- ------- -------
TOTAL RETURN (1)..................... (5.54)% 8.32% 17.30%**
------- ------- -------
------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $45,573 $66,817 $ 21,961
Ratio of Expenses to Average Net
Assets............................. 1.65% 1.65% 1.65%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. 0.37% 1.19% 1.39%
Portfolio Turnover Rate.............. 70% 35% 22%**
- --------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.00+ $ 0.02 $ 0.11
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 1.71% 1.82% 2.50%
Net Investment Income/Loss to
Average Net Assets............... 0.33% 1.02% 0.52%
- --------------------------------------------------------------------------------------
<CAPTION>
CLASS B
--------------------------------------------
YEAR ENDED
JUNE 30,
------------------- JULY 1, 1996* TO
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# JUNE 30, 1997
- -------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $14.724 $ 13.84 $ 12.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... (0.043) 0.05 0.10
Net Realized and Unrealized
Gain/Loss........................ (0.903) 0.97 1.85
------- ------- -------
Total From Investment Operations..... (0.946) 1.02 1.95
------- ------- -------
DISTRIBUTIONS
Net Investment Income................ (0.147) (0.13) (0.10)
In Excess of Net Investment Income... (0.002) -- --
Net Realized Gain.................... -- (0.01) (0.01)
In Excess of Net Realized Gain....... (0.164) -- --
------- ------- -------
Total Distributions.................. (0.313) (0.14) (0.11)
------- ------- -------
NET ASSET VALUE, END OF PERIOD....... $13.465 $ 14.72 $ 13.84
------- ------- -------
------- ------- -------
TOTAL RETURN (1)..................... (6.28)% 7.55% 16.40%**
------- ------- -------
------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $48,096 $51,541 $ 18,215
Ratio of Expenses to Average Net
Assets............................. 2.40% 2.40% 2.40%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (0.33)% 0.40% 0.54%
Portfolio Turnover Rate.............. 70% 35% 22%**
- --------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.00+ $ 0.02 $ 0.17
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.46% 2.57% 3.34%
Net Investment Income/Loss to
Average Net Assets............... (0.37)% 0.23% (0.42)%
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------
YEAR ENDED JULY 1,
JUNE 30, 1996* TO
SELECTED PER SHARE DATA ---------------------------- JUNE 30,
AND RATIOS 1999# 1998# 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 14.782 $ 13.83 $ 12.00
------------ ------------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income/Loss.......... (0.034) 0.05 0.06
Net Realized and
Unrealized
Gain/Loss............ (0.914) 0.99 1.88
------------ ------------ ------
Total From Investment
Operations............. (0.948) 1.04 1.94
------------ ------------ ------
DISTRIBUTIONS
Net Investment
Income............... (0.147) (0.08) (0.10)
In Excess of Net
Investment Income.... (0.002) -- --
Net Realized Gain...... -- (0.01) (0.01)
In Excess of Net
Realized Gain........ (0.164) -- --
------------ ------------ ------
Total Distributions...... (0.313) (0.09) (0.11)
------------ ------------ ------
NET ASSET VALUE, END OF
PERIOD................. $ 13.521 $ 14.78 $ 13.83
------------ ------------ ------
------------ ------------ ------
TOTAL RETURN (1)......... (6.25)% 7.55% 16.27%**
------------ ------------ ------
------------ ------------ ------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's)................ $ 14,187 $ 15,520 $ 9,156
Ratio of Expenses to
Average Net Assets..... 2.40% 2.40% 2.40%
Ratio of Net Investment
Income/Loss to Average
Net Assets............. (0.26)% 0.36% 0.29%
Portfolio Turnover
Rate................... 70% 35% 22%**
- -------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to
Net Investment
Income/Loss.......... $ 0.00+ $ 0.02 $ 0.21
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets............... 2.46% 2.56% 3.45%
Net Investment
Income/Loss to
Average Net Assets... (0.30)% 0.20% (0.77)%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Non-Annualized
+ Amount is less than $0.01 per share.
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
- ------------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen International Magnum Fund (the "Fund") is organized as a separate
non-diversified fund of Van Kampen Series Fund, Inc., a Maryland Corporation,
which is registered as an open-end management company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks long-term
capital appreciation by investing primarily in equity securities of non-U.S.
issuers in accordance with EAFE country weightings determined by the Adviser.
The Fund commenced operations on July 1, 1996.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
------------------------
YEAR OF REDEMPTION CLASS B CLASS C
- --------------------------------------------- ----------- -----------
<S> <C> <C>
First........................................ 5.00% 1.00%
Second....................................... 4.00% None
Third........................................ 3.00% None
Fourth....................................... 2.50% None
Fifth........................................ 1.50% None
Thereafter................................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
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: 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 between the current bid and asked prices obtained from reputable
brokers. 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. 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 Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income transactions. However, 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.
5. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of the initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during
------------------
13
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
the amortization period, the Fund will be reimbursed for any unamortized
organizational costs in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.
6. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund 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.
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 Fund for gains realized and not distributed. To the extent that capital
gains are so offset, such gains will not be distributed to shareholders.
At June 30, 1999, the Fund had available capital loss carryforward for U.S.
Federal income tax purposes of approximately $2,624,000 which will expire June
30, 2007.
Net capital losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 to June 30, 1999 the Fund incurred and elected
to defer until July 1, 1999, for U.S. Federal income tax purposes, net capital
losses of approximately $3,163,000.
At June 30, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- -------- ------- ------- -------------
<S> <C> <C> <C>
$100,001 $12,463 $(5,017) $7,446
</TABLE>
7. DISTRIBUTION OF INCOME AND GAINS: 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 to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss and paid in capital in excess of par. For the
year ended June 30, 1999, approximately $1,310,000 has been reclassified from
paid in capital in excess of par with approximately $257,000 posted to
distributions in excess of net investment income and approximately $1,053,000
posted to accumulated net realized loss.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary 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 Fund, 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
ADVISORY MAX. OPERATING MAX. OPERATING
FEE EXPENSE RATIO EXPENSE RATIO
- ---------- --------------- ---------------
<S> <C> <C>
0.80% 1.65% 2.40%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$4,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
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 the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Portfolio a distribution fee, which
is accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to
- -----------------------
14
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
1.00% of the Class B and Class C shares of the Fund, on an annualized basis, of
the average daily net assets attributable to each Class.
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 the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $239,826 for Class A shares and deferred sales charges of $8,799,
$206,929, and $28,632 for Class A shares, Class B shares, and Class C shares,
respectively.
Prior to October 1, 1998, the Fund's assets held outside the United States were
held by Morgan Stanley Trust Company ("MSTC"), a former affiliate of the
Subadvisers. Through September 30, 1998, the Fund incurred MSTC fees of
approximately $27,000. On October 1, 1998, the Chase Manhattan Bank purchased
MSTC.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
During the year ended June 30, 1999, the Fund incurred approximately $8,000 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/ dealer.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Portfolio made
purchases of approximately $77,070,000 and sales of approximately $77,028,000 of
investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sales of long-term U.S.
government securities.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to a security whose value is "derived" from the value of an
underlying asset, reference rate or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's foreign currency exposure. All of the
Fund's portfolio holdings, including derivative instruments, are
marked-to-market each day with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when exercising a call option contract or taking
delivery of a security underlying a forward contract. In this instance, the
recognition of gain or loss is postponed until the disposal of the security
underlying the option or forward contract. Risks may arise as a result of the
potential inability of the counterparties to meet the terms of their contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. FORWARD CURRENCY CONTRACTS: These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
At June 30, 1999, the Fund has outstanding forward currency contracts as
follows:
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
VALUE DEPRECIATION
FORWARD CURRENCY CONTRACTS (000) (000)
- ---------------------------------------- -------- --------
<S> <C> <C>
SHORT CONTRACTS:
Japanese Yen,
322,227,600 expiring 7/19/99.......... $ 2,674 $ 8
--
--
--------
--------
</TABLE>
2. FUTURES CONTRACTS: A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in futures of U.S. Treasury Notes and typically closes
the contract prior to the delivery date.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, securities with a value equal to its obligation
under the futures contracts. During the period the futures contract is open,
payments are received from or made to the broker based upon changes in the value
of the contract (the variation margin). The potential risk of loss associated
with a futures contract is in excess of the variation margin reflected on the
Statement of Assets and Liabilities. The cost of securities acquired through
delivery under a contract is adjusted by the unrealized gain or loss on the
contract.
Transactions in futures contracts for the year ended June 30, 1999, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS
- ------------------------------------- ---------
<S> <C>
Outstanding at June 30, 1998......... -0-
Futures Opened....................... 516
Futures Closed....................... (516 )
---
Outstanding at June 30, 1999......... -0-
---
---
</TABLE>
------------------
15
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen International Magnum Fund:
In our opinion, the accompanying statement 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 Van Kampen International Magnum
Fund (the "Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the
results of its operations, the changes in its 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
- -----------------------
16
<PAGE>
VAN KAMPEN INTERNATIONAL MAGNUM FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the Fund intends to pass through foreign tax
credits of $280,963 and has derived gross income from sources within foreign
countries amounting to $2,005,820.
The Fund designated and paid $528,537 as a 20% rate gain distribution.
Shareholders were sent a 1998 Form-DIV in January 1999 representing their
proportionate share of this capital gain distribution.
------------------
17
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the
Allstate Corporation and Allstate Insurance Company
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
Retired, Formerly 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
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of
Sciences/National Research Council, and former Chairman of
the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 418256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
1 Parkview Plaza / P.O. Box 5555 / Oakbrook Terrace, IL
60181-5555 / www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
LATIN AMERICAN FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 5
Statement of Assets and Liabilities................................... 7
Statement of Operations............................................... 8
Statement of Changes in Net Assets.................................... 9
Financial Highlights ................................................. 10
Notes to Financial Statements......................................... 12
Report of Independent Accountants..................................... 15
Additional Information................................................ 16
</TABLE>
MSLA ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
/s/ RICHARD F. POWERS, III /s/ DENNIS J. MCDONNELL
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, and by 2.3 percent in the second quarter. The
expansion was fueled by an increase in consumer spending, which was attributed
to vibrant consumer confidence as a result of the strong job market.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although it had expressed a bias toward a series of
rate increases, May's tame CPI report prompted the Fed to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
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, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Argentina 6.4%
Brazil 35.3%
Chile 8.8%
Colombia 0.4%
Mexico 44.6%
Peru 1.1%
Venezuela 2.1%
Short-Term Investment and Other 1.3%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
-------------------------------------------------------
AVERAGE ANNUAL COMMENCEMENT
ONE YEAR SINCE INCEPTION DATE
------------------- ------------------- -------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE*** CHARGE* CHARGE***
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
Class A Shares -2.95% 3.00% 6.26% 7.52% 7/6/94
- ---------------------------------------------------------------------------------
Class B Shares -2.53% 2.47% 14.26% 14.69% 8/1/95
- ---------------------------------------------------------------------------------
Class C Shares 1.28% 2.28% 6.70% 6.70% 7/6/94
- ---------------------------------------------------------------------------------
MSCI Latin America
Global Index N/A 7.65% N/A 3.36% N/A
- ---------------------------------------------------------------------------------
</TABLE>
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).
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS(1)
PERCENT OF
SECURITY COUNTRY NET ASSETS
- ------------------------ --------- -------------
<S> <C> <C>
Telmex Mexico 10.7%
Televisa Mexico 4.5%
Kimberly 'A' Mexico 3.9%
Petrobras Brazil 3.1%
Telecom Argentina Argentina 2.6%
</TABLE>
(1) excludes Short-Term Investment
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ------------------------ ----------- -------------
<S> <C> <C>
Services $ 29,030 46.0%
Energy 9,257 14.7%
Consumer Goods 9,248 14.7%
Materials 7,414 11.8%
Finance 4,510 7.1%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Latin American MSCI Latin America
Fund Class A Global Index
7/6/94 $9,500 $10,000
6/30/95 $7,327 $8,517
6/30/96 $10,210 $10,002
6/30/97 $16,062 $14,587
6/30/98 $13,136 $10,952
6/30/99 $13,531 $11,790
</TABLE>
PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE
PERFORMANCE.
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN LATIN AMERICAN FUND
ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE PAST
12 MONTHS. THE TEAM IS LED BY PORTFOLIO MANAGERS ROBERT L. MEYER, MICHAEL PERL,
AND ANDY SKOV OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. MR. MEYER AND
MR. SKOV HAVE BEEN MEMBERS OF THE FUND'S MANAGEMENT TEAM SINCE ITS INCEPTION IN
1994, WHILE MR. PERL JOINED THE TEAM IN 1998. THE FOLLOWING EXCERPTS REFLECT
THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE 12-MONTH PERIOD ENDED JUNE 30,
1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST YEAR?
A: The market environment during the past twelve months was volatile. The third
quarter of 1998 was an extremely disappointing quarter for investors in Latin
America, as the region fell more than 20 percent. News of Russia's ruble
devaluation in August sparked a worldwide equity sell-off on concerns that other
emerging economies, particularly Brazil, would follow suit. During the fourth
quarter, Latin America regained some of its losses, appreciating more than 7
percent. These gains were fueled by positive events in Brazil, including the
re-election of President Cardoso.
3------------------
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
In early January, the investment environment in Brazil turned volatile when
Brazil devalued its currency 40 percent. However, Brazil's ability to quickly
recover from its currency devaluation resulted in improved investor sentiment.
Factors that supported Brazil's recovery included President Cardoso's
willingness to address fiscal imbalances and the hiring of Arminio Fraga as head
of the Central Bank, particularly his ability to reduce domestic interest rates.
In addition, Mexico's ability to differentiate itself from the rest of Latin
America led to its strong performance in the first half of 1999.
Considering Brazil's early setback, Latin America has performed extremely well
during the first half of 1999, returning 31 percent. Key themes in Latin
America's recovery included declining interest rates in Brazil and a rebound in
oil prices, which benefited countries that export oil, such as Mexico,
Venezuela, and Colombia.
Q: WHAT STRATEGIES DID YOU PURSUE IN THIS ENVIRONMENT?
A: Our investment strategy is to identify the potential for positive change,
first at the country level and then at the stock level. For this reason, we seek
out countries with an improving economic, social, and political climate, and
favor markets that we believe to be undervalued. We then research stocks in
these countries, selecting those with strong earnings potential and reasonable
valuations.
Our focus during the past twelve months has been on Mexico and Brazil, which has
helped the Fund's performance. Mexico's market was supported by falling interest
rates, increasing oil prices, attractive corporate earnings, and strong economic
growth in the United States. Given strong consumer demand, we have increased our
overweight in Mexico, where the Fund has benefited from focusing on
consumer-related industries, including telecommunications, broadcasting and
publishing, beverages, retailing, and health and personal care.
Within Brazil, we continued to focus on telecommunications companies, such as
Telebras. This former telecommunications holding company was split into 12
companies in 1998 and offered great potential for revenue growth because of
strong management, high demand, and capacity for cost efficiencies.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: After a disappointing first three months, the Fund's performance rebounded
strongly. Specifically, the Fund fell 31 percent during the first three months
of the period. At that time, the Russian ruble devalued leading to enormous
pressure on Brazil's currency and on the asset class in general. During the last
nine months of the period, however, the Fund appreciated nearly 50 percent. Its
recovery was primarily driven by our exposure to Mexico, whose equity market
surged 68 percent.
For Class A shares at net asset value without sales charge, the Fund generated a
total return of 3.0 percent for the 12 months ended June 30, 1999. By
comparison, the Morgan Stanley Capital International (MSCI) Latin America Global
Index generated a total return of 7.65 percent for the same period. Past
performance does not guarantee future results.
Q: WHAT IS YOUR OUTLOOK FOR THE FUND IN THE MONTHS AHEAD?
A: While it is difficult to predict the short-term outlook for the markets, we
believe that the rally that began in 1999 is the beginning of a long-term bull
cycle for this asset class. In terms of strategy, we will continue to overweight
Mexico (given its good economic management and attractive stock opportunities)
and Brazil (given our expectation for lower inflation, better than expected
economic performance, and continued interest rate reductions).
Robert Meyer Michael Perl Andy Skov
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
- -------------- 4
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------------
COMMON STOCKS (75.3%)
ARGENTINA (6.4%)
Banco Rio de La Plata ADR........ 24,505 $ 233
Quilmes Industrial ADR........... 100,955 1,249
Telecom Argentina ADR............ 62,418 1,670
Telefonica de Argentina ADR...... 27,398 859
-------
4,011
-------
BRAZIL (11.9%)
CEMIG ADR........................ 31,273 665
(c)CEMIG ADR..................... 835 18
(a)Cia Electric de Est Rio
Janerio........................ 1,911,759,000 454
Copel 'B' ADR.................... 37,525 314
Cia Siderurgica Nacional......... 18,244,000 477
Coteminas........................ 2,492,000 127
(b,c)Coteminas ADR............... 22,545 57
CVRD 'A'......................... 5,000 70
Eletrobras ADR................... 5,440 52
Eletrobras 'B' ADR............... 43,930 442
Eletrobras S.A................... 21,024,000 397
Embratel Participacoes ADR....... 64,520 895
(a)Lojas Arupau ADR.............. 10,410 --
(c)Petrobras ADR................. 22,943 358
Petrobras ADR.................... 15,640 241
(c)Rossi Residencial S.A. GDR.... 44,287 50
Rossi Residencial S.A. GDS....... 187,805 211
Tele Leste Celular ADR........... 1,160 35
Tele Norte Leste ADR............. 23,523 437
Tele Sudeste Celular ADR......... 2,290 66
Telesp Celular ADR............... 21,330 571
Telesp ADR....................... 25,710 588
Unibanco GDR..................... 40,390 972
(a)Vale Do Rio Doce ADR.......... 31,997 --
-------
7,497
-------
CHILE (8.8%)
Banco Edwards ADR................ 25,362 368
Banco Santander ADR.............. 7,549 117
Banco Santiago ADR............... 13,910 267
CCU ADR.......................... 28,067 803
Chilectra ADR.................... 49,206 1,033
CTC ADR.......................... 65,225 1,614
D & S ADR........................ 18,265 342
ENDESA ADR....................... 15,387 187
Enersis ADR...................... 14,450 331
Quinenco ADR..................... 27,439 257
(a)Santa Isabel ADR.............. 20,698 210
-------
5,529
-------
COLOMBIA (0.4%)
Bavaria.......................... 46,693 175
Valores Bavaria.................. 74,594 62
-------
237
-------
MEXICO (44.6%)
Alfa............................. 238,666 992
(a)Banacci 'L'................... 154,310 377
(a)Banacci 'O'................... 106,488 269
(a)Carso Global Telecom 'A1'..... 155,952 988
Cemex 'B' ADR.................... 131,309 1,297
Cemex CPO........................ 243,975 1,207
Cemex CPO ADR.................... 31,930 303
Cemex 'B'........................ 262,774 1,305
(a)Cifra 'C'..................... 488,695 895
(a)Cifra 'V'..................... 168,221 327
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------------
(a)Cifra 'V' ADR................. 11,324 $ 217
Empresas ICA S.A................. 153,950 170
Empresas S.A. ADR................ 36,571 247
FEMSA............................ 364,497 1,458
FEMSA ADR........................ 33,521 1,337
(a)Grupo Carso 'A1'.............. 182,724 847
Grupo Modelo 'C'................. 185,448 529
(a)Grupo Financiero Banorte S.A.
de C.V. 'O'.................... 333,298 481
Grupo Financiero Bancomer S.A. de
C.V. 'O'....................... 1,462,500 528
(a)Grupo Industrial Bimbo S.A. de
CV 'A'......................... 73,595 163
Kimberly 'A'..................... 594,916 2,450
(a)Seminis, Inc. 'A'............. 32,800 494
Soriana 'B'...................... 253,815 1,196
TAMSA ADR........................ 20,777 226
Telmex ADR....................... 83,206 6,724
(a)Televisa CPO GDR.............. 62,941 2,820
Vitro ADR........................ 58,008 297
-------
28,144
-------
PERU (1.1%)
Tel Peru 'B' ADR................. 47,863 724
-------
VENEZUELA (2.1%)
CANTV ADR........................ 49,285 1,343
-------
TOTAL COMMON STOCKS................................. 47,485
-------
PREFERRED STOCKS (23.4%)
BRAZIL (23.4%)
Banco Bradesco................... 15,930,000 80
(a,b)Banco Nacional.............. 8,115,000 --
(a)Celular CRT Participacoes
S.A............................ 6,717,974 911
CEMIG............................ 45,693,270 961
Copel............................ 164,715,900 1,340
CRT.............................. 5,099,574 1,251
CVRD 'A'......................... 61,289 1,212
CVRD............................. 28,970 576
Eletrobras 'B'................... 24,984,200 504
Embratel Participacoes 'A'....... 60,563,000 835
Gerdau........................... 29,631,867 494
Globex Utilidades S.A............ 8,000 42
Iven............................. 600,500 78
Itaubanco........................ 1,090,641 558
(a)Lojas Arapua S.A.............. 19,195,300 --
Petrobras........................ 12,662,697 1,961
Telebras ADR..................... 7,941 716
Tele Centro Sul.................. 35,820,560 396
Tele Leste Celular............... 370,217,700 226
Tele Nordeste Celular............ 78,574,300 106
Tele Norte Celular............... 339,309,000 196
Tele Norte Leste................. 63,958,000 1,157
Tele Sudeste Celular............. 53,316,960 301
Telesp Celular................... 28,850,730 298
Telesp........................... 3,521,000 416
Usiminas......................... 52,200 176
-------
TOTAL PREFERRED STOCK............................... 14,791
-------
<CAPTION>
NO. OF
RIGHTS
-------------
<S> <C> <C>
RIGHTS (0.0%)
BRAZIL (0.0%)
(a,b)CRT......................... 2,184,997 --
-------
TOTAL LONG-TERM INVESTMENTS (98.7%) (COST
$61,089)............................................ 62,276
-------
</TABLE>
-----------------------
5
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<S> <C> <C>
- -------------------------------------------------------------
SHORT-TERM INVESTMENT (4.8%)
REPURCHASE AGREEMENT (4.8%)
Chase Securities, Inc., 4.55%,
dated $ 3,032
6/30/99, due 7/1/99, to be
repurchased at $3,032,
collaterized by $3,175 U.S.
Treasury Bill, 4.58%, due
1/6/00, valued at $3,096
(COST $3,032)................................. $ 3,032
-------
TOTAL INVESTMENTS IN SECURITIES (103.5%) (COST
$64,121).......................................... 65,308
-------
FOREIGN CURRENCY (0.2%) (COST $127)................. 128
-------
TOTAL INVESTMENTS (103.7%) (COST $64,248)........... 65,436
LIABILITIES IN EXCESS OF OTHER ASSETS (-3.7%)....... (2,340)
-------
NET ASSETS (100%)................................... $63,096
-------
-------
</TABLE>
- ---------------
(a) -- Non-income producing security
(b) -- Security valued at fair value -- see note A-1 to financial statements.
(c) -- 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
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
PERCENT
OF
VALUE NET
INDUSTRY (000) ASSETS
- ---------------------------------------- -------- --------
<S> <C> <C>
Services................................ $ 29,030 46.0%
Energy.................................. 9,257 14.7
Consumer Goods.......................... 9,248 14.7
Materials............................... 7,414 11.8
Finance................................. 4,510 7.1
Multi-Industry.......................... 2,174 3.4
Capital Equipment....................... 643 1.0
-------- ---
$ 62,276 98.7%
-------- ---
-------- ---
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- -----------------------------------------------
ASSETS:
Investments in Securities, at Value
(Cost $64,121)................... $ 65,308
Foreign Currency (Cost $127)....... 128
Receivable for:
Investments Sold................. 1,092
Dividends........................ 260
Fund Shares Sold................. 59
Foreign Witholding Tax Reclaim... 3
Other.............................. 4
--------
Total Assets..................... 66,854
--------
LIABILITIES:
Payable for:
Investments Purchased............ 3,391
Fund Shares Redeemed............. 94
Distribution Fees................ 66
Custody Fees..................... 59
Investment Advisory Fees......... 49
Professional Fees................ 27
Transfer Agent Fees.............. 17
Shareholder Reporting Expenses... 16
Administrative Fees.............. 13
Directors' Fees and Expenses..... 13
Deferred Country Tax............. 6
Other.............................. 7
--------
Total Liabilities................ 3,758
--------
NET ASSETS........................... $ 63,096
--------
--------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 6
Paid in Capital in Excess of Par... 90,512
Net Unrealized Appreciation on
Investments and Foreign Currency
Translations..................... 1,156
Distributions in Excess of Net
Investment Income................ (158)
Accumulated Net Realized Loss...... (28,420)
--------
NET ASSETS........................... $ 63,096
--------
--------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $34,139,111 and
2,957,664 Shares Outstanding).... $ 11.54
--------
--------
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100/
(100 - maximum sales charge)).... $ 12.24
--------
--------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$18,569,829 and 1,659,653 Shares
Outstanding)*.................... $ 11.19
--------
--------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$10,387,176 and 928,886 Shares
Outstanding)*.................... $ 11.18
--------
--------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- -----------------------------------------------
INVESTMENT INCOME:
Dividends.......................... $ 1,694
Interest........................... 121
Less Foreign Taxes Withheld........ (10)
--------
Total Income...................... 1,805
--------
EXPENSES:
Investment Advisory Fees........... 710
Distribution Fees (Attributed to
Classes A, B, and C of $75, $169,
and $96, respectively)........... 340
Administrative Fees................ 161
Custodian Fees..................... 117
Country Tax Expense................ 60
Shareholder Reports................ 57
Transfer Agent Fees................ 53
Professional Fees.................. 37
Filing and Registration Fees....... 33
Directors' Fees and Expenses....... 9
Amortization of Organizational
Costs............................ 3
Other.............................. 9
--------
Total Expenses.................... 1,589
Less Expense Reductions........... (137)
--------
Net Expenses...................... 1,452
--------
Net Investment Income/Loss........... 353
--------
NET REALIZED GAIN/LOSS ON:
Investments........................ (18,585)
Foreign Currency Transactions...... (111)
--------
Net Realized Gain/Loss........... (18,696)
--------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ (13,340)
--------
End of the Period:
Investments...................... 1,187
Foreign Currency Translations.... (31)
--------
1,156
--------
Net Unrealized
Appreciation/Depreciation During
the Period......................... 14,496
--------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... (4,200)
--------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $ (3,847)
--------
--------
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- --------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ 353 $ (380)
Net Realized Gain/Loss.......................... (18,696) 4,576
Net Unrealized Appreciation/Depreciation........ 14,496 (27,206)
------------- -------------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... (3,847) (23,010)
------------- -------------
DISTRIBUTIONS:
Net Investment Income:
Class A......................................... (120) --
Class B......................................... (17) --
Class C......................................... (10) --
In Excess of Net Investment Income:
Class A......................................... (182) --
Class B......................................... (26) --
Class C......................................... (15) --
------------- -------------
(370) --
------------- -------------
Net Realized Gain:
Class A......................................... -- (7,513)
Class B......................................... -- (3,444)
Class C......................................... -- (2,645)
In Excess of Net Realized Gain:
Class A......................................... (153) (5,098)
Class B......................................... (100) (2,337)
Class C......................................... (57) (1,795)
------------- -------------
(310) (22,832)
------------- -------------
Net Decrease in Net Assets Resulting from
Distributions................................. (680) (22,832)
------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed...................................... 37,085 115,672
Distributions Reinvested........................ 580 20,476
Redeemed........................................ (53,264) (126,144)
------------- -------------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... (15,599) 10,004
------------- -------------
Total Increase/Decrease in Net Assets........... (20,126) (35,838)
NET ASSETS--Beginning of Period................... 83,222 119,060
------------- -------------
NET ASSETS--End of Period (Including distributions
in excess of net investment income of $(158) and
$(95), respectively)............................ $ 63,096 $ 83,222
------------- -------------
------------- -------------
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
---------
Shares:
Subscribed................................... 2,939 4,455
Distributions Reinvested..................... 46 920
Redeemed..................................... (3,917) (6,340)
------------- -------------
Net Increase/Decrease in Class A Shares
Outstanding.................................. (932) (965)
------------- -------------
------------- -------------
Dollars:
Subscribed................................... $ 28,926 $ 72,239
Distributions Reinvested..................... 389 11,506
Redeemed..................................... (37,394) (98,189)
------------- -------------
Net Increase/Decrease.......................... $ (8,079) $ (14,444)
------------- -------------
------------- -------------
Ending Paid in Capital......................... $ 46,039+ $ 54,118
------------- -------------
------------- -------------
Class B:
---------
Shares:
Subscribed................................... 386 1,661
Distributions Reinvested..................... 15 443
Redeemed..................................... (936) (752)
------------- -------------
Net Increase/Decrease in Class B Shares
Outstanding.................................. (535) 1,352
------------- -------------
------------- -------------
Dollars:
Subscribed................................... $ 3,651 $ 26,168
Distributions Reinvested..................... 124 5,380
Redeemed..................................... (8,006) (10,163)
------------- -------------
Net Increase/Decrease.......................... $ (4,231) $ 21,385
------------- -------------
------------- -------------
Ending Paid in Capital......................... $ 29,066+ $ 33,297
------------- -------------
------------- -------------
Class C:
---------
Shares:
Subscribed................................... 508 1,071
Distributions Reinvested..................... 8 296
Redeemed..................................... (908) (1,242)
------------- -------------
Net Increase/Decrease in Class C Shares
Outstanding.................................. (392) 125
------------- -------------
------------- -------------
Dollars:
Subscribed................................... $ 4,508 $ 17,265
Distributions Reinvested..................... 67 3,590
Redeemed..................................... (7,864) (17,792)
------------- -------------
Net Increase/Decrease.......................... $ (3,289) $ 3,063
------------- -------------
------------- -------------
Ending Paid in Capital......................... $ 15,478+ $ 18,767
------------- -------------
------------- -------------
</TABLE>
- ---------------
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------- JULY 6, 1994* TO
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 1996 JUNE 30, 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 11.424 $ 17.39 $ 12.63 $ 9.08 $ 12.00
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss....... 0.093 (0.01) 0.02 0.10 (0.02)
Net Realized and Unrealized
Gain/Loss...................... 0.182 (2.73) 6.46 3.47 (2.70)
-------- -------- -------- -------- -------
Total From Investment
Operations..................... 0.275 (2.74) 6.48 3.57 (2.72)
-------- -------- -------- -------- -------
DISTRIBUTIONS
Net Investment Income............ (0.041) -- -- (0.02) --
In Excess of Net Investment
Income......................... (0.063) -- (0.09) -- --
Net Realized Gain................ -- (1.92) (1.63) -- --
In Excess of Net Realized Gain... (0.052) (1.31) -- -- --
Return of Capital................ -- -- -- -- (0.20)
-------- -------- -------- -------- -------
Total Distributions.............. (0.156) (3.23) (1.72) (0.02) (0.20)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD....... $ 11.543 $ 11.42 $ 17.39 $ 12.63 $ 9.08
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
TOTAL RETURN (1)..................... 3.00% (17.37)% 57.32% 39.35% (23.07)%**
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $ 34,139 $ 44,439 $ 84,401 $ 18,701 $ 7,658
Ratio of Expenses to Average Net
Assets............................. 2.20% 2.25% 2.24% 2.11% 2.46%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. 0.98% (0.09)% (0.08)% 1.18% (0.44)%
Portfolio Turnover Rate.............. 163% 249% 241% 131% 107%**
- ----------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.02 $ 0.02 $ 0.10 $ 0.09 $ 0.13
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.44% 2.41% 2.77% 3.28% 4.30%
Net Investment Income/Loss to
Average Net Assets............... 0.74% (0.24)% (0.61)% 0.01% (2.26)%
Ratio of Expenses to Average Net
Assets excluding country tax
expense and interest expense....... 2.10% 2.10% 2.10% 2.10% 2.10%
- ----------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
-----------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------ AUGUST 1, 1995+ TO
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 JUNE 30, 1996
<S> <C> <C> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 11.030 $ 16.99 $ 12.45 $ 9.58
-------- -------- -------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss....... 0.019 (0.08) (0.03) 0.03
Net Realized and Unrealized
Gain/Loss...................... 0.215 (2.65) 6.28 2.84
-------- -------- -------- ------
Total From Investment
Operations..................... 0.234 (2.73) 6.25 2.87
-------- -------- -------- ------
DISTRIBUTIONS
Net Investment Income............ (0.009) -- -- --
In Excess of Net Investment
Income......................... (0.014) -- (0.08) --
Net Realized Gain................ -- (1.92) (1.63) --
In Excess of Net Realized Gain... (0.052) (1.31) -- --
Return of Capital................ -- -- -- --
-------- -------- -------- ------
Total Distributions.............. (0.075) (3.23) (1.71) --
-------- -------- -------- ------
NET ASSET VALUE, END OF PERIOD....... $ 11.189 $ 11.03 $ 16.99 $ 12.45
-------- -------- -------- ------
-------- -------- -------- ------
TOTAL RETURN (1)..................... 2.47% (17.82)% 56.17% 29.26%**
-------- -------- -------- ------
-------- -------- -------- ------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $ 18,570 $ 24,206 $ 14,314 $ 2,041
Ratio of Expenses to Average Net
Assets............................. 2.96% 2.99% 2.99% 2.87%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. 0.20% (0.58)% (0.78)% 0.88%
Portfolio Turnover Rate.............. 163% 249% 241% 131%**
- ----------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.02 $ 0.02 $ 0.02 $ 0.04
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 3.20% 3.16% 3.55% 3.89%
Net Investment Income/Loss to
Average Net Assets............... (0.04)% (0.73)% (1.34)% (0.14)%
Ratio of Expenses to Average Net
Assets excluding country tax
expense and interest expense....... 2.85% 2.85% 2.85% 2.85%
- ----------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations.
** Non-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.
# Changes per share are based upon monthly average shares outstanding.
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
FINANCIAL HIGHLIGHTS (CONT.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------ JULY 6, 1994* TO
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 1996 JUNE 30, 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $11.037 $ 17.01 $ 12.43 $ 8.99 $ 12.00
------- ------- ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss....... 0.021 (0.11) (0.07) 0.04 (0.08)
Net Realized and Unrealized
Gain/Loss...................... 0.199 (2.63) 6.31 3.40 (2.73)
------- ------- ------- ------ -------
Total From Investment
Operations..................... 0.220 (2.74) 6.24 3.44 (2.81)
------- ------- ------- ------ -------
DISTRIBUTIONS
Net Investment Income............ (0.009) -- -- -- --
In Excess of Net Investment
Income......................... (0.014) -- (0.03) -- --
Net Realized Gain................ -- (1.92) (1.63) -- --
In Excess of Net Realized Gain... (0.052) (1.31) -- -- --
Return of Capital................ -- -- -- -- (0.20)
------- ------- ------- ------ -------
Total Distributions.............. (0.075) (3.23) (1.66) -- (0.20)
------- ------- ------- ------ -------
NET ASSET VALUE, END OF PERIOD....... $11.182 $ 11.04 $ 17.01 $12.43 $ 8.99
------- ------- ------- ------ -------
------- ------- ------- ------ -------
TOTAL RETURN (1)..................... 2.28% (17.86)% 56.04% 38.26% (23.83)%**
------- ------- ------- ------ -------
------- ------- ------- ------ -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $10,387 $14,577 $20,345 $6,780 $ 4,085
Ratio of Expenses to Average Net
Assets............................. 2.96% 3.00% 2.99% 2.86% 3.20%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. 0.23% (0.77)% (0.79)% 0.42% (1.16)%
Portfolio Turnover Rate.............. 163% 249% 241% 131% 107%**
- ---------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ 0.02 $ 0.02 $ 0.05 $ 0.12 $ 0.12
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 3.20% 3.16% 3.56% 4.06% 5.20%
Net Investment Income/Loss to
Average Net Assets............... (0.01)% (0.93)% (1.36)% (0.78)% (3.16)%
Ratio of Expenses to Average Net
Assets excluding country tax
expense and interest expense....... 2.85% 2.85% 2.85% 2.85% 2.85%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations.
** Non-Annualized
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen Latin American Fund (the "Fund") is organized as a separate
non-diversified fund of Van Kampen Series Fund, Inc., a Maryland Corporation
which is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended. The Fund's investment objective
seeks long-term capital appreciation by investing primarily in equity securities
of Latin American issuers and investing in debt securities issued or guaranteed
by Latin American governments or governmental entities. The Fund commenced
operations on July 6, 1994.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- -------------------------------------------- ----------- -----------
<S> <C> <C>
First....................................... 5.00% 1.00%
Second...................................... 4.00% None
Third....................................... 3.00% None
Fourth...................................... 2.50% None
Fifth....................................... 1.50% None
Thereafter.................................. None None
</TABLE>
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.
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 between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date, net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. 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 Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income transactions. However, the
foreign currency portion
- -----------------------
12
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
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.
The net assets of the Fund include issuers located in emerging markets. There
are certain risks inherent in these investments not typically associated with
investments in the United States, including the smaller size of the markets
themselves, lesser liquidity, greater volatility and potentially less publicly
available information. Emerging markets may be subject to a greater degree of
government involvement in the economy and greater economic and political
uncertainty, which has the potential to extend to government imposed
restrictions on exchange traded transactions and currency transactions. These
restrictions may impact the Fund's ability to buy or sell certain securities or
to repatriate certain currencies to U.S. dollars. Additionally, changes in
currency exchange rates will affect the value of and investment income from such
securities
5. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of the initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during the amortization period, the Fund will be reimbursed
for any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
6. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund 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, 1999, the Fund had a capital loss carryforward for U.S. Federal
income tax purposes of approximately $16,568,000 which will expire June 30,
2007.
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 the Fund 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 Fund's next
taxable year. For the period from November 1, 1998 to June 30, 1999 the Fund
incurred and elected to defer until July 1, 1999, for U.S. Federal income tax
purposes, net currency and capital losses of approximately $6,068,000.
At June 30, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- --------- ----------- --------- -------------
<S> <C> <C> <C>
$ 70,009 $ 7,722 $ (12,423) $ (4,701)
</TABLE>
7. DISTRIBUTION OF INCOME AND GAINS: 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 to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss and paid in capital in excess of par. For the
year ended June 30, 1999, approximately $65,000 has been reclassified from paid
in capital in excess of par and approximately $46,000 has been reclassified from
distributions in excess of net investment income, totaling $111,000 posted to
accumulated net realized loss.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary 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 Fund, 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
ADVISORY MAX. OPERATING MAX. OPERATING
FEE EXPENSE RATIO EXPENSE RATIO
- ----------- --------------- ---------------
<S> <C> <C>
1.25% 2.10% 2.85%
</TABLE>
------------------
13
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$2,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
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 the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $98,029 for Class A shares and deferred sales charges of $105,678 and
$13,387 for Class B shares and Class C shares, respectively.
Prior to October 1, 1998, the Fund's assets held outside the United States were
held by Morgan Stanley Trust Company ("MSTC"), a former affiliate of the
Subadvisers. Through September 30, 1998, the Fund incurred MSTC fees of
approximately $20,000. On October 1, 1998, the Chase Manhattan Bank purchased
MSTC.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
During the year ended June 30, 1999, the Fund incurred approximately $8,000 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/ dealer.
D. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $89,489,000 and sales of approximately $102,312,000
of investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sales of long-term U.S.
government securities.
- -----------------------
14
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen Latin American Fund:
In our opinion, the accompanying statement 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 Van Kampen Latin American Fund (the
"Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the results of
its operations, the changes in its 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, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. RANDOLPH DR.
CHICAGO, ILLINOIS 60601
AUGUST 6, 1999
------------------
15
<PAGE>
VAN KAMPEN LATIN AMERICAN FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the Fund intends to pass through foreign tax
credits of $10,110 and has derived gross income from sources within foreign
countries amounting to $1,696,527.
- -----------------------
16
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select
DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
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
Retired, Formerly 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
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the
German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606-8256
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT 1-800-341-2911.
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.
<PAGE>
[LOGO]
1 Parkview Plaza / / P.O. Box 5555 / / Oakbrook Terrace, IL 60181-5555
/ / www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
VALUE FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN VALUE FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 8
Statement of Operations............................................... 9
Statement of Changes in Net Assets.................................... 10
Financial Highlights ................................................. 11
Notes to Financial Statements......................................... 12
Report of Independent Accountants..................................... 14
Additional Information................................................ 15
</TABLE>
MSVL ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
/s/ RICHARD F. POWERS III /s/ DENNIS J. MCDONNELL
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, but fell to 2.3 percent in the second quarter.
The first-quarter expansion was fueled by an increase in consumer spending,
which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although the Fed had expressed a bias toward a series
of rate increases, May's tame CPI report prompted it to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN VALUE FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Equipment 18.3%
Consumer Products - Miscellaneous 28.5%
Energy 6.4%
Finance 21.9%
Materials 6.7%
Services 17.7%
Short Term Investment & Other 0.5%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
-------------------------------------------------------------
AVERAGE ANNUAL COMMENCEMENT
ONE YEAR SINCE INCEPTION DATE
------------------- ------------------- --------------
WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES
CHARGE* CHARGE*** CHARGE* CHARGE***
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Class A Shares -0.24% 5.83% 3.21% 6.34% 7/7/97
- --------------------------------------------------------------------------------
Class B Shares 0.02% 5.02% 3.64% 5.57% 7/7/97
- --------------------------------------------------------------------------------
Class C Shares 4.13% 5.13% 5.53% 5.53% 7/7/97
- --------------------------------------------------------------------------------
S&P 500 Index N/A 22.75% N/A 24.76% N/A
- --------------------------------------------------------------------------------
</TABLE>
The Standard & Poor's 500 Index is an unmanaged index of common stocks. The S&P
500 Index assumes dividends are reinvested.
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (5.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (5% for Class B shares
and 1% for Class C shares).
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS (1)
PERCENT OF
SECURITY SECTOR NET ASSETS
- ----------------------- ------------------ ---------------
<S> <C> <C>
General Motors Corp. Automobiles 4.1%
International Business
Machines Corp. Computers/Software 3.3%
Chase Manhattan Corp. Banking 3.2%
Washington Mutual, Inc. Insurance 2.7%
Cummins Engine Co., Machinery &
Inc. Engineering 2.7%
</TABLE>
(1) excludes Short-Term Investment
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ---------------------------------- --------- -------------
<S> <C> <C>
Consumer Products - Miscellaneous $71,905 28.5%
Finance 55,170 21.9%
Capital Equipment 46,150 18.3%
Services 44,742 17.7%
Materials 16,854 6.7%
</TABLE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE FUND CLASS A S&P 500 INDEX
<S> <C> <C>
7/7/1997 $9,500 $10,000
9/30/1997 $9,849 $10,429
12/31/1997 $9,598 $10,727
3/31/1998 $10,464 $12,221
6/30/1998 $10,060 $12,623
6/30/1999 $10,646 $15,495
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE
OF FUTURE 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.
WE RECENTLY SPOKE TO THE MANAGEMENT TEAM OF THE VAN KAMPEN VALUE FUND ABOUT THE
KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE PAST 12
MONTHS. THE TEAM INCLUDES RICHARD BEHLER, NICHOLAS KOVICH, AND ROBERT MARCIN,
PORTFOLIO MANAGERS, MILLER ANDERSON & SHERRERD, LLP. THEY HAVE MANAGED THE FUND
SINCE ITS INCEPTION IN 1997. THE FOLLOWING EXCERPTS REFLECT THEIR VIEWS ON THE
FUND'S PERFORMANCE DURING THE 12-MONTH REPORTING PERIOD ENDED JUNE 30, 1999.
Q: CAN YOU DESCRIBE THE MARKET ENVIRONMENT IN WHICH THE FUND OPERATED?
A: Beginning in June of 1998, it was a volatile 12 months for stock investors.
The stock market began the reporting period on a positive note with the Dow
Jones Industrial Average setting a then-record high in July 1998. Trouble seemed
to be on the horizon, however, as investors feared disappointing corporate
earnings reports and other negative effects of international economic troubles.
By the end of August, the Dow had fallen 19 percent from its high.
------------------
3
<PAGE>
VAN KAMPEN VALUE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Following a series of interest-rate cuts by the Federal Reserve Board, the U.S.
economy, though slowing, was still fundamentally sound. These events helped
place the stock market on an upward trend that continued through the rest of the
reporting period. In the second quarter of 1999, enthusiasm for large,
growth-oriented stocks began to subside as investors felt more confident in the
global economic outlook. As a result, traditional value stocks in cyclical
sectors such as basic materials, energy, and producer manufacturing, began to
outperform growth stocks for the first time in several years.
Some of the fundamental factors contributing to the change in investor sentiment
included rising interest and inflation rates in early 1999, accelerating growth
rates and more promising earnings expectations for U.S. companies, and
meaningful recoveries in many foreign economies.
Q: COULD YOU EXPLAIN YOUR MANAGEMENT STRATEGY FOR THE VALUE FUND?
A: We adhere to a strict investment approach: we construct a broadly diversified
portfolio of stocks with low price-to-earnings (P/E) ratios. We sell a stock if
its price rises to the point where its perceived value is achieved. We see a low
P/E ratio as the best single indicator of attractive valuations and believe that
we can achieve favorable long-term results by investing in companies that sell
at low P/Es and holding them until their valuations return to normal levels.
Q: HOW DID THIS STRATEGY AFFECT THE FUND'S PERFORMANCE DURING THE REPORTING
PERIOD?
A: For the first three quarters of the reporting period, the Fund was simply
unable to make purchases in the types of stocks--such as energy,
telecommunications, food, personal care, and technology--that were being
rewarded by prevailing market sentiment. To have done so would have violated our
low P/E discipline, as stocks in these industries had acquired high valuations
relative to their earnings. We remained true to our investment philosophy
because we believed that doing so would be rewarding in the long run. This
adherence came at a short-term price, however, because the Fund lacked the
flexibility to invest in stocks that would have offered more immediate gains.
Instead, the Fund's total return suffered during this period.
During the final quarter of the period as the shift from growth to value took
place, our strategy began to pay off for the Fund. For the first time in recent
years, the trend of outperformance by the market's very largest companies was
broken. Generally, the investment styles that had suffered during the previous
months recovered--cyclical, large-cap value, and low-P/E stocks all reversed
course and thrived. This led to a vastly better environment for the Fund--we
outperformed our benchmark index, the Standard & Poor's 500, by more than eight
percentage points during the quarter.
Q: HOW DID YOU STRUCTURE THE FUND'S PORTFOLIO, AND HOW DID THAT AFFECT
PERFORMANCE?
A: Both stock selection and sector allocation contributed to the Fund's weak
performance during the first part of the reporting period. Poor stock
performance--particularly in health care, technology, and telecommunications
services--was a significant drag on the Fund's return. The Fund's overweighting
in many underperforming cyclical sectors, such as heavy industry, consumer
durables, transportation, and basic materials, also hurt relative performance,
as did our overweighting in the financial-service industry. As we mentioned, our
investment discipline precluded us from buying companies in stable, growth
industries, which, at the time, were outperforming.
Buying opportunities in the area of health-care services surfaced in the first
quarter of 1999. We took advantage of that opportunity to add to our positions
in United HealthCare, Foundation HealthSystems, and HEALTHSOUTH, as we believe
many HMO and hospital management stocks have attractive long-term growth
opportunities, stable demand characteristics, promising demographics, and
compelling valuations.
During the second quarter of 1999 in particular, individual holdings in health
care, technology, and heavy industry performed extremely well. In this quarter,
stock selection, rather than sector allocation, had the greatest impact on the
Fund's performance. Some of the stocks that helped boost the Fund's performance
were International Business Machines, up 46 percent for the period; industrial
concern Cummins Engine, which lagged much of the year but did extremely well
between April and June; and health-care stocks Columbia/HCA Healthcare,
Foundation Health Systems, and United HealthCare.
- --------------
4
<PAGE>
VAN KAMPEN VALUE FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q: GIVEN CONTRASTING MARKET ENVIRONMENTS WITHIN THE 12-MONTH REPORTING PERIOD,
HOW DID THE FUND PERFORM OVERALL?
A: For the 12-month period ended June 30, 1999, the Fund achieved a total return
of 5.83 percent (Class A shares at net asset value). By comparison, the Standard
& Poor's 500 Index returned 22.75 percent. Past performance does not guarantee
future results.
Q: WHAT DO YOU SEE ON THE HORIZON FOR THE FUND?
A: We remain cautiously optimistic--cautious towards the many fairly valued or
expensive sectors, but optimistic that the recent rebound of value stocks set
the stage for favorable returns for good companies with attractive valuations.
The combination of a still-healthy U.S. economy, global economic healing, and
Federal Reserve Board policies that appear to confirm the nation's economic
health may spur continued growth among value stocks. This situation would
benefit the Fund and its value style, which, over the long term, has
historically performed well.
<TABLE>
<S> <C> <C>
Richard Behler Nicholas Kovich Robert Marcin
PORTFOLIO PORTFOLIO PORTFOLIO
MANAGER MANAGER MANAGER
</TABLE>
------------------
5
<PAGE>
VAN KAMPEN VALUE FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------
COMMON STOCKS (99.5%)
CAPITAL EQUIPMENT (18.3%)
CHEMICALS--DIVERSIFIED (2.1%)
Eastman Chemical Co............ 5,800 $ 300
Lubrizol Corp.................. 127,400 3,472
Rohm & Haas Co................. 33,380 1,431
--------
5,203
--------
CONSTRUCTION & HOUSING (1.2%)
Owens Corning.................. 89,020 3,060
--------
ELECTRICAL & ELECTRONICS (0.5%)
Entergy Corp................... 44,090 1,378
--------
ELECTRONIC COMPONENTS--MISCELLANEOUS
(2.6%)
(a)Arrow Electronics, Inc...... 98,460 1,871
Avnet, Inc..................... 43,500 2,023
Tektronix, Inc................. 90,310 2,726
--------
6,620
--------
ENERGY EQUIPMENT & SERVICES (1.6%)
GTE Corp....................... 38,000 2,878
Peco Energy Co................. 27,200 1,139
--------
4,017
--------
MACHINERY & ENGINEERING (6.3%)
Case Corp...................... 78,100 3,758
Cummins Engine Co., Inc........ 118,000 6,741
Deere & Co..................... 300 12
Kennametal, Inc................ 53,250 1,651
Parker-Hannifin Corp........... 83,125 3,803
--------
15,965
--------
MANUFACTURING (3.6%)
Eaton Corp..................... 29,400 2,705
(a)FMC Corp.................... 49,310 3,368
Tecumseh Products Co. 'A'...... 48,570 2,942
--------
9,015
--------
PROFESSIONAL SERVICES (0.4%)
Olsten Corp.................... 141,370 892
--------
TOTAL CAPITAL EQUIPMENT.................... 46,150
--------
CONSUMER PRODUCTS--MISCELLANEOUS (28.5%)
APPLIANCES & HOUSEHOLD DURABLES (1.1%)
Whirlpool Corp................. 37,600 2,782
--------
AUTOMOBILES (10.9%)
Dana Corp...................... 80,890 3,726
Ford Motor Co.................. 114,130 6,441
General Motors Corp............ 157,580 10,400
Goodyear Tire & Rubber Co...... 20,000 1,176
(a)Navistar International
Corp......................... 45,900 2,295
TRW, Inc....................... 62,860 3,450
--------
27,488
--------
COMPUTERS/SOFTWARE (8.2%)
First Data Corp................ 96,200 4,708
Intel Corp..................... 43,800 2,606
International Business Machines
Corp......................... 63,400 8,194
(a)Quantum Corp................ 214,000 5,163
--------
20,671
--------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------
RECREATION, OTHER CONSUMER GOODS (0.3%)
Standard Register Co........... 26,670 $ 820
--------
RETAIL--MAJOR DEPARTMENT STORES (3.0%)
Dillards, Inc. 'A'............. 55,020 1,933
Sears, Roebuck & Co............ 52,500 2,339
(a)Toys 'R' Us, Inc............ 154,440 3,195
--------
7,467
--------
TEXTILES & APPAREL (4.6%)
Liz Claiborne, Inc............. 123,300 4,500
Springs Industries, Inc. 'A'... 41,920 1,829
VF Corp........................ 126,140 5,392
--------
11,721
--------
TOBACCO (0.4%)
(a)R.J. Reynolds Tobacco
Holdings, Inc................ 30,346 956
--------
TOTAL CONSUMER PRODUCTS--MISCELLANEOUS..... 71,905
--------
ENERGY (6.4%)
ELECTRIC--INTERGRATED (0.8%)
Cinergy Corp................... 18,570 594
GPU, Inc....................... 34,940 1,474
--------
2,068
--------
OIL & GAS (3.8%)
Coastal Corp................... 37,100 1,484
(a)Nabors Industries, Inc...... 136,500 3,336
Tosco Corp..................... 44,200 1,146
Transocean Offshore, Inc....... 46,600 1,223
Ultramar Diamond Shamrock
Corp......................... 106,570 2,325
--------
9,514
--------
UTILITIES--ELECTRICAL & GAS (1.8%)
DTE Energy Co.................. 43,280 1,731
Duke Power Co.................. 22,100 1,202
Southern Co.................... 58,700 1,556
--------
4,489
--------
TOTAL ENERGY............................... 16,071
--------
FINANCE (21.9%)
BANKING (6.6%)
Associates First Capital Corp.
'A'.......................... 2 --
Bank of America................ 56,500 4,142
BankBoston Corp................ 42,400 2,168
Chase Manhattan Corp........... 94,240 8,163
UnionBanCal Corp............... 58,400 2,110
--------
16,583
--------
INSURANCE (7.2%)
ACE Ltd........................ 45,200 1,277
Allstate Corp.................. 92,580 3,321
American General Corp.......... 22,640 1,706
Hartford Financial Services
Group........................ 59,540 3,472
Old Republic International
Corp......................... 86,105 1,491
Washington Mutual, Inc......... 192,450 6,808
--------
18,075
--------
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -------------------------------------------------------
<S> <C> <C>
LIFE/HEALTH INSURANCE (2.0%)
CIGNA Corp..................... 21,400 $ 1,905
Reliastar Financial Corp....... 70,280 3,075
--------
4,980
--------
REINSURANCE (0.8%)
Everest Reinsurance Holdings,
Inc.......................... 66,210 2,160
--------
SUPER--REGIONAL BANKS--U.S. (5.3%)
Bank One Corp.................. 65,800 3,919
First Union Corp. (N.C.)....... 40,589 1,908
KeyCorp........................ 74,500 2,393
PNC Bank Corp.................. 89,400 5,152
--------
13,372
--------
TOTAL FINANCE.............................. 55,170
--------
MATERIALS (6.7%)
CHEMICALS (4.7%)
Air Products & Chemicals,
Inc.......................... 42,500 1,711
Engelhard Corp................. 160,100 3,622
IMC Global, Inc................ 112,400 1,981
Solutia, Inc................... 99,100 2,112
(a)W.R. Grace & Co............. 127,300 2,339
--------
11,765
--------
METALS--STEEL (0.8%)
Ryerson Tull, Inc.............. 85,700 1,934
--------
TELECOMMUNICATIONS EQUIPMENT (1.2%)
U.S. West, Inc................. 53,700 3,155
--------
TOTAL MATERIALS............................ 16,854
--------
SERVICES (17.7%)
BUSINESS & PUBLIC SERVICES (1.0%)
Service Corp. International.... 135,500 2,608
--------
FOOD--MISCELLANEOUS/DIVERSIFIED (2.7%)
IBP, Inc....................... 63,310 1,504
Nabisco Group Holdings Corp.... 156,340 3,058
Universal Foods Corp........... 111,820 2,362
--------
6,924
--------
HEALTHCARE SUPPLIES & SERVICES (7.2%)
Beckman Coulter, Inc........... 60,030 2,919
Columbia HCA/Healthcare
Corp......................... 63,770 1,455
(a)Foundation Health Systems
'A'.......................... 78,000 1,170
(a)HEALTHSOUTH Corp............ 418,000 6,244
(a)LifePoint Hospitals, Inc.... 4,761 64
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -------------------------------------------------------
(a)Tenet Healthcare Corp....... 155,400 $ 2,885
(a)Triad Hospitals, Inc........ 4,761 64
United HealthCare Corp......... 51,500 3,225
--------
18,026
--------
TELECOMMUNICATIONS (3.8%)
(a)AMR Corp.................... 74,980 5,117
Bell Atlantic Corp............. 66,700 4,361
--------
9,478
--------
TRANSPORTATION--AIRLINES (1.9%)
CNF Transportation, Inc........ 30,800 1,182
Delta Airlines, Inc............ 64,100 3,694
--------
4,876
--------
TRANSPORTATION--RAIL (0.5%)
Burlington Northern Railroad
Co........................... 40,300 1,249
--------
TRANSPORTATION--TRUCKING (0.6%)
Ryder Systems, Inc............. 60,800 1,581
--------
TOTAL SERVICES............................. 44,742
--------
TOTAL LONG-TERM INVESTMENTS (99.5%) (COST
$233,558).................................. 250,892
--------
<CAPTION>
PAR
VALUE
(000)
------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.3%)
REPURCHASE AGREEMENT (3.3%)
Chase Securities, Inc., 4.55%,
dated $8,469
6/30/99, due 7/1/99, to be
repurchased at
$8,470, collaterized by $7,040 U.S.
Treasury Bonds, 11.125%, due 8/15/03,
valued at $8,693 (COST $8,469)....... 8,469
--------
TOTAL INVESTMENTS (102.8%) (COST $242,027)... 259,361
LIABILITIES IN EXCESS OF OTHER ASSETS
(-2.8%).................................... (7,104)
--------
NET ASSETS (100%)............................ $252,257
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- -----------------------------------------------
ASSETS:
Investments at Value (Cost
$242,027)........................ $259,361
Receivable for:
Investments Sold................. 1,619
Fund Shares Sold................. 351
Dividends........................ 205
Interest......................... 1
Deferred Organizational Costs...... 4
Other Assets....................... 12
--------
Total Assets................... 261,553
--------
LIABILITIES:
Payable for:
Investments Purchased............ 7,881
Fund Shares Redeemed............. 786
Distribution Fees................ 303
Investment Advisory Fees......... 133
Administrative Fees.............. 52
Transfer Agent Fees.............. 41
Professional Fees................ 34
Shareholder Reporting Expenses... 29
Directors' Fees and Expenses..... 20
Custody Fees..................... 9
Other.............................. 8
--------
Total Liabilities.............. 9,296
--------
NET ASSETS........................... $252,257
--------
--------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 23
Paid in Capital in Excess of Par... 244,212
Unrealized Appreciation on
Investments...................... 17,334
Distributions in Excess of Net
Investment Income................ (1)
Accumulated Net Realized Loss...... (9,311)
--------
NET ASSETS......................... $252,257
--------
--------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $95,207,962 and
8,747,187 Shares Outstanding).... $ 10.88
--------
--------
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100
/ (100 - maximum sales
charge))......................... $ 11.54
--------
--------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$127,977,872 and 11,807,261
Shares Outstanding)*............. $ 10.84
--------
--------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$29,071,184 and 2,683,913 Shares
Outstanding)*.................... $ 10.83
--------
--------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
- ------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ----------------------------------------------
INVESTMENT INCOME:
Dividends.......................... $ 4,804
Interest........................... 984
-------
Total Income...................... 5,788
-------
EXPENSES:
Investment Advisory Fees........... 2,131
Distribution Fees (Attributed to
Classes A, B, and C of $270,
$1,279, and $306,
respectively).................... 1,855
Administrative Fees................ 672
Transfer Agent Fees................ 140
Shareholder Reports................ 78
Professional Fees.................. 59
Filing and Registration Fees....... 56
Custodian Fees..................... 56
Directors' Fees and Expenses....... 15
Amortization of Organizational
Costs............................ 2
Other.............................. 9
-------
Total Expenses.................... 5,073
Less Expense Reductions........... (43)
-------
Net Expenses...................... 5,030
-------
Net Investment Income/Loss........... 758
-------
NET REALIZED GAIN/LOSS ON:
Investments........................ (9,132)
-------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ 1,221
-------
End of the Period
Investments...................... 17,334
-------
Net Unrealized
Appreciation/Depreciation During
the Period......................... 16,113
-------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... 6,981
-------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $ 7,739
-------
-------
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 7, 1997* TO
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ 758 $ 1,260
Net Realized Gain/Loss.......................... (9,132) 5,893
Net Unrealized Appreciation /Depreciation....... 16,113 1,221
---------- ----------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 7,739 8,374
---------- ----------
DISTRIBUTIONS:
Net Investment Income:
Class A......................................... (601) (930)
Class B......................................... (91) (264)
Class C......................................... (23) (66)
In Excess of Net Investment Income:
Class A......................................... (1) (77)
Class B......................................... -- (22)
Class C......................................... -- (6)
---------- ----------
(716) (1,365)
---------- ----------
Net Realized Gain:
Class A......................................... -- (502)
Class B......................................... -- (431)
Class C......................................... -- (95)
In Excess of Net Realized Gain:
Class A......................................... (2,049) --
Class B......................................... (2,409) --
Class C......................................... (584) --
---------- ----------
(5,042) (1,028)
---------- ----------
Net Decrease in Net Assets Resulting from
Distributions................................. (5,758) (2,393)
---------- ----------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed...................................... 63,721 354,369
Distributions Reinvested........................ 5,042 2,140
Redeemed........................................ (134,239) (49,738)
---------- ----------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... (65,476) 306,771
---------- ----------
Total Increase/Decrease in Net Assets........... (63,495) 312,752
NET ASSETS--Beginning of Period................... 315,752 3,000
---------- ----------
NET ASSETS--End of Period (Including distributions
in excess of net investment income of $(1) and
$(45), respectively)............................ $ 252,257 $ 315,752
---------- ----------
---------- ----------
- ------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (000):
(1) Class A:
----------
Shares:
Subscribed (Initial Shares of 100)........... 2,585 16,264
Distributions Reinvested..................... 259 136
Redeemed..................................... (7,154) (3,343)
---------- ----------
Net Increase/Decrease in Class A Shares
Outstanding.................................. (4,310) 13,057
---------- ----------
---------- ----------
Dollars:
Subscribed................................... $ 24,777 $ 167,353
Distributions Reinvested..................... 2,427 1,393
Redeemed..................................... (69,185) (35,499)
---------- ----------
Net Increase/Decrease.......................... $ (41,981) $ 133,247
---------- ----------
---------- ----------
Ending Paid in Capital......................... $ 92,241+ $ 134,222
---------- ----------
---------- ----------
Class B:
----------
Shares:
Subscribed (Initial Shares of 100)........... 3,052 14,654
Distributions Reinvested..................... 225 60
Redeemed..................................... (5,046) (1,138)
---------- ----------
Net Increase/Decrease in Class B Shares
Outstanding.................................. (1,769) 13,576
---------- ----------
---------- ----------
Dollars:
Subscribed................................... $ 29,487 $ 150,818
Distributions Reinvested..................... 2,115 607
Redeemed..................................... (48,333) (12,023)
---------- ----------
Net Increase/Decrease.......................... $ (16,731) $ 139,402
---------- ----------
---------- ----------
Ending Paid in Capital......................... $ 123,644+ $ 140,375
---------- ----------
---------- ----------
Class C:
----------
Shares:
Subscribed (Initial Shares of 100)........... 988 3,584
Distributions Reinvested..................... 53 14
Redeemed..................................... (1,743) (212)
---------- ----------
Net Increase/Decrease in Class C Shares
Outstanding.................................. (702) 3,386
---------- ----------
---------- ----------
Dollars:
Subscribed................................... $ 9,457 $ 36,198
Distributions Reinvested..................... 500 140
Redeemed..................................... (16,721) (2,216)
---------- ----------
Net Increase/Decrease.......................... $ (6,764) $ 34,122
---------- ----------
---------- ----------
Ending Paid in Capital......................... $ 28,352+ $ 35,116
---------- ----------
---------- ----------
- ---------------------------
* Commencement of operations
+ Ending Paid in Capital amounts do not reflect
permanent book to tax differences.
</TABLE>
- ------------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- ---------------------------------------
YEAR ENDED JULY 7, 1997* TO YEAR ENDED JULY 7, 1997* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1999# JUNE 30, 1998# JUNE 30, 1999# JUNE 30, 1998#
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 10.526 $ 10.00 $ 10.514 $ 10.00
------- ---------- ---------------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............ 0.072 0.11 (0.003) 0.03
Net Realized and Unrealized
Gain/Loss........................... 0.512 0.56 0.509 0.56
------- ---------- ---------------- ----------
Total From Investment Operations...... 0.584 0.67 0.506 0.59
------- ---------- ---------------- ----------
DISTRIBUTIONS
Net Investment Income................. (0.052) (0.08) (0.007) (0.03)
In Excess of Net Investment Income.... (0.000)+ (0.01) -- (0.00)+
Net Realized Gain..................... -- (0.05) -- (0.05)
In Excess of Net Realized Gain........ (0.174) -- (0.174) --
------- ---------- ---------------- ----------
Total Distributions................... (0.226) (0.14) (0.181) (0.08)
------- ---------- ---------------- ----------
NET ASSET VALUE, END OF PERIOD.......... $ 10.884 $ 10.53 $ 10.839 $ 10.51
------- ---------- ---------------- ----------
------- ---------- ---------------- ----------
TOTAL RETURN (1)........................ 5.83% 6.74%** 5.02% 6.01%**
------- ---------- ---------------- ----------
------- ---------- ---------------- ----------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....... $ 95,208 $ 137,447 $ 127,978 $ 142,741
Ratio of Expenses to Average Net
Assets................................ 1.45% 1.45% 2.20% 2.20%
Ratio of Net Investment Income/Loss to
Average Net Assets.................... 0.74% 1.02% (0.03)% 0.28%
Portfolio Turnover Rate................. 64% %*38* 64% %*38*
- -----------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss......................... $ 0.00+ $ 0.01 $ 0.00+ $ 0.01
Ratios Before Expense Limitation:
Expenses to Average Net Assets........ 1.48% 1.60% 2.23% 2.35%
Net Investment Income/Loss to Average
Net Assets.......................... 0.73% 0.88% (0.05)% 0.14%
<CAPTION>
CLASS C
---------------------------------------
YEAR ENDED JULY 7, 1997* TO
SELECTED PER SHARE DATA AND RATIOS JUNE 30, 1999# JUNE 30, 1998#
<S> <C> <C>
- ----------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 10.503 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss............ (0.002) 0.03
Net Realized and Unrealized
Gain/Loss........................... 0.512 0.55
------- -------
Total From Investment Operations...... 0.510 0.58
------- -------
DISTRIBUTIONS
Net Investment Income................. (0.007) (0.03)
In Excess of Net Investment Income.... -- (0.00)+
Net Realized Gain..................... -- (0.05)
In Excess of Net Realized Gain........ (0.174) --
------- -------
Total Distributions................... (0.181) (0.08)
------- -------
NET ASSET VALUE, END OF PERIOD.......... $ 10.832 $ 10.50
------- -------
------- -------
TOTAL RETURN (1)........................ 5.13% 5.83%**
------- -------
------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....... $ 29,071 $ 35,564
Ratio of Expenses to Average Net
Assets................................ 2.20% 2.20%
Ratio of Net Investment Income/Loss to
Average Net Assets.................... (0.02)% 0.29%
Portfolio Turnover Rate................. 64% %*38*
- -----------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense Limitation
During the Period
Per Share Benefit to Net Investment
Income/Loss......................... $ 0.00+ $ 0.01
Ratios Before Expense Limitation:
Expenses to Average Net Assets........ 2.23% 2.35%
Net Investment Income/Loss to Average
Net Assets.......................... (0.03)% 0.15%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Non-Annualized
+ Amount is less than $0.01 per share.
(1) Total return is calculated exclusive of sales charges or deferred
sales charges.
# Changes per share are based upon monthly average shares outstanding.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen Value Fund (the "Fund") is organized as a separate diversified
fund of Van Kampen Series Fund, Inc., a Maryland Corporation, which is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective seeks to
achieve above-average total return over a market cycle of three to five years,
consistent with reasonable risk. The Fund commenced operations on July 7, 1997.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
----------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------- ------- -------
<S> <C> <C>
First................................ 5.00% 1.00%
Second............................... 4.00% None
Third................................ 3.00% None
Fourth............................... 2.50% None
Fifth................................ 1.50% None
Thereafter........................... None None
</TABLE>
All three classes of shares have identical voting, dividend, liquidation and
other rights.
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. Unlisted securities and listed securities not traded on the
valuation date for which market quotations are readily available are valued at
the average between the current bid and asked prices obtained from reputable
brokers. Debt securities purchased with remaining maturities of 60 days or less
are valued at amortized cost, if it 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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements which are short-term investments in
which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt securities. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
Interest income is recognized on an accrual basis except where collection is in
doubt. 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 Fund are recorded on the
ex-distribution date.
4. ORGANIZATIONAL COSTS: The organizational costs of the Fund are being
amortized on a straight line basis over a period of five years beginning with
the Fund's commencement of operations. The Adviser has agreed that in the event
any of its initial shares of the Fund originally purchased by Van Kampen are
redeemed by the Fund during the amortization period, the Fund will be reimbursed
for any unamortized organization costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
At June 30, 1999, the Fund had a capital loss carryforward for U.S. Federal
Income tax purposes of approximately $4,433,000 which will expire June 30, 2007.
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 the Fund for
- -----------------------
12
<PAGE>
VAN KAMPEN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
gains realized and not distributed. To the extent that capital gains are so
offset, such gains will not be distributed to shareholders.
Net capital losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 to June 30, 1999 the Fund incurred and elected
to defer until July 1, 1999, for U.S. Federal income tax purposes, net capital
losses of approximately $1,606,000.
At June 30, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- --------- ----------- ----------- ---------------
<S> <C> <C> <C>
$ 245,340 $ 30,340 $ (16,319) $ 14,021
</TABLE>
6. DISTRIBUTION OF INCOME AND GAINS: 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.
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital. For the year ended June
30, 1999, approximately $2,000 has been reclassified from paid in capital and
posted to accumulated net investment income/loss.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.), Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser") and Miller Anderson & Sherrerd LLP, 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 Fund, 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------- ----------------- -----------------
<S> <C> <C>
0.80% 1.45% 2.20%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$15,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
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 the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund, on
an annualized basis, of the average daily net assets attributable to each Class.
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $470,484 for Class A shares and deferred sales charges of $9,521,
$835,926, and $22,202 for Class A shares, Class B shares, and Class C shares,
respectively.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $158,329,000 and sales of approximately $186,083,000
of investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sales of long-term U.S.
government securities.
------------------
13
<PAGE>
VAN KAMPEN VALUE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen Value Fund:
In our opinion, the accompanying statement 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 Van Kampen Value Fund (the "Fund",
a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the results of its
operations, the changes in its 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, 1999 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
- -----------------------
14
<PAGE>
VAN KAMPEN VALUE FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the percentage of dividends paid that qualify
for the 70% dividend received deduction for corporate shareholders is 51.27%.
------------------
15
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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.
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISERS
Morgan Stanley Dean Witter Investment 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.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 418256
Kansas City, Missouri 64121
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
[VAN KAMPEN FUNDS]
1 Parkview Plaza / / P.O. Box 5555 / / Oakbrook Terrace, IL 60181-5555 /
/ www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
GLOBAL EQUITY ALLOCATION FUND
[PHOTO]
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 21
Statement of Operations............................................... 22
Statement of Changes in Net Assets.................................... 23
Financial Highlights ................................................. 24
Notes to Financial Statements......................................... 25
Report of Independent Accountants..................................... 29
Additional Information................................................ 30
</TABLE>
MSGE ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, and by 2.3 percent in the second quarter. The
expansion was fueled by an increase in consumer spending, which was attributed
to vibrant consumer confidence as a result of the strong job market.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although it had expressed a bias toward a series of
rate increases, May's tame CPI report prompted the Fed to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
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.
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Australia 2.6%
France 1.8%
Germany 3.5%
Italy 2.5%
Japan 10.9%
Netherlands 3.5%
Spain 2.1%
Switzerland 2.2%
United Kingdom 10.6%
United States 42.1%
Short-Term Investment 11.2%
Other 7.0%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS (1)
SECURITY COUNTRY
- ----------------------------------------------------------------------------------------------------------- ---------------
<S> <C>
Microsoft Corp. United States
General Electric Co. United States
Nippon Telegraph & Telephone Corp.
Japan
Royal Dutch Petroleum Co. Netherlands
BP Amoco plc United Kingdom
<CAPTION>
TOP FIVE HOLDINGS (1)
PERCENT OF
SECURITY NET ASSETS
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
Microsoft Corp. 1.0%
General Electric Co. 0.9%
Nippon Telegraph & Telephone Corp.
0.9%
Royal Dutch Petroleum Co. 0.9%
BP Amoco plc 0.7%
</TABLE>
(1) Excludes Short-Term Investment
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE
SECTOR (000)
- ------------------------------------------------------------------------------------------------------------------ ---------
<S> <C> <C>
Finance $ 114,118
Services 112,281
Consumer Goods 97,450
Capital Goods & Equipment 74,713
Energy 49,083
<CAPTION>
TOP FIVE SECTORS
PERCENT OF
SECTOR NET ASSETS
- ------------------------------------------------------------------------------------------------------------------ -------------
<S> <C>
Finance 19.9%
Services 19.6%
Consumer Goods 17.0%
Capital Goods & Equipment 13.0%
Energy 8.6%
</TABLE>
<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***
COMMENCEMENT
DATE
------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Class A Shares 2.16% 8.41% 13.74% 15.09% 13.72% 14.76% 1/4/93
- --------------------------------------------------------------------------------------------------------
Class B Shares 2.50% 7.50% N/A N/A 14.99% 15.41% 8/1/95
- --------------------------------------------------------------------------------------------------------
Class C Shares 6.61% 7.61% 14.23% 14.23% 13.92% 13.92% 1/4/93
- --------------------------------------------------------------------------------------------------------
MSCI World Net
Dividends Index N/A 15.67% N/A 16.75% N/A 16.99% N/A
- --------------------------------------------------------------------------------------------------------
</TABLE>
The Morgan Stanley Capital International (MSCI) World Net Dividends Index is an
unmanaged index that includes securities listed on the stock exchanges of the
United States, Europe, Canada, Australia, New Zealand, and the Far East and
assumes dividends are reinvested net of withholding tax.
*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.
***Assumes reinvestment of all distributions for the period and does not include
payment of the maximum sales charge (5.75% for Class A shares) or contingent
deferred sales charge for early withdrawal (5% for Class B shares and 1% for
Class C shares).
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below 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 shares. The
performance of Class B shares and Class C shares will vary based upon the sales
charge and fees assessed to each Class.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Global Equity Allocation Fund - Class
A MSCI World Net Dividends Index
1/4/93 $9,500 $10,000
6/30/93 $10,563 $11,515
6/30/94 $11,516 $12,696
6/30/95 $12,286 $14,050
6/30/96 $15,311 $16,640
6/30/97 $18,467 $20,346
6/30/98 $21,227 $21,840
6/30/99 $23,013 $25,262
</TABLE>
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN GLOBAL EQUITY
ALLOCATION FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
DURING THE PAST 12 MONTHS. THE TEAM IS LED BY PORTFOLIO MANAGERS BARTON M. BIGGS
AND ANNE D. THIVIERGE OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT. MR.
BIGGS HAS BEEN A MEMBER OF THE FUND'S MANAGEMENT TEAM SINCE ITS INCEPTION IN
1993, WHILE MS. THIVIERGE JOINED THE TEAM IN 1995. THE FOLLOWING EXCERPTS
REFLECT THEIR VIEWS ON THE FUND'S PERFORMANCE DURING THE 12-MONTH PERIOD ENDED
JUNE 30, 1999.
------------------
3
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST YEAR?
A: During the third quarter of 1998, continued economic weakness in Asia spread
to Russia, and there were warning signs that Asia's problems were beginning to
affect Europe and the United States. The defining moment of the period came in
mid-August when Russia devalued its currency and defaulted on its debt, sending
financial and currency markets worldwide into a tailspin. Paced by the Federal
Reserve Board and the European Central Bank (ECB), central banks worldwide
lowered interest rates during the fourth quarter of 1998. The interest rate cuts
renewed investor confidence and helped revive stock markets in Europe and the
United States.
Global economic recovery became the story of the first half of 1999, as economic
activity increased in most regions of the world. The U.S. economy resumed its
impressive climb with strong growth and minimal inflation. Meanwhile, declining
interest rates and a focus on corporate cost-cutting fiscal reforms helped
revive many emerging markets, particularly in Asia.
In Europe, the introduction of the euro went smoothly, but economic weakness,
particularly in Germany, contributed to its decline since January. Decreased
exports to Asia, Russia, and Eastern European countries led to lower economic
growth and falling corporate earnings.
Q: WHAT STRATEGIES DID YOU PURSUE IN THIS ENVIRONMENT?
A: During the volatile summer of 1998, we anticipated the economic slowdown in
Europe and significantly reduced our positions in core Europe, particularly
Germany and Switzerland, and moved assets into cash. The Fund's substantial cash
position benefited the Fund when troubles in Asia and Russia intensified.
Through September we remained significantly underweighted in Asia and Japan but
increased our exposure in the fourth quarter when we detected signs of economic
recovery in those regions. This strategy also helped the Fund's performance.
Throughout the period, we remained underweighted in the United States because
stock valuations appeared high. This strategy hindered performance as the U.S.
economy continued its strong growth. Finally, our positions in the peripheral
European economies, including Italy, Spain, and Portugal, helped the Fund's
performance.
Q: HOW HAVE YOU POSITIONED THE FUND RECENTLY?
A: Early in the year we visited Singapore, Hong Kong, and Japan to talk with
government officials, central bankers, businesses, and other investors. Although
these meetings reinforced our belief that Asia and Japan have a long way to go
in their recoveries, we believe their commitment to restructure their economies
could lead to a long-lasting recovery in profitability and stock prices. In
addition, we were impressed with Singapore's fervor for restructuring and
belt-tightening and, as a result, significantly increased the Fund's exposure to
that country.
Another country we overweighted was Australia, which like Singapore, did a good
job of weathering the financial downturn in Asia. Australia has had fantastic
economic growth and we believe the sound government policies and restructured
labor markets should be a long-term positive.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: Despite global economic turmoil during the first half of the period, the Fund
performed well through the end of 1998 as a result of our favorable asset and
country allocations. Returns suffered during the past six months, however, due
to the Fund's underweight position in the United States and significant exposure
to Europe. For Class A shares at net asset value without sales charge, the Fund
generated a total return of 8.41 percent for the 12 months ended June 30, 1999.
By comparison, the Morgan Stanley Capital International (MSCI) World Net
Dividends Index generated a total return of 15.67 percent for the same period.
Past performance does not guarantee future results.
- -----------------------
4
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
Q: WHAT DO YOU SEE HAPPENING DURING THE NEXT SIX MONTHS?
A: In the short term, we remain cautious on the United States because of high
stock valuations and Europe because of full valuations and inconsistent economic
performance. As a result, the risk of policy mistakes within Europe is great,
and the challenge facing the ECB will be difficult. Japan's economy, although
bottoming, faces large obstacles as unemployment rises and the fiscal spending
proposal diminishes. We are optimistic that additional restructuring should
increase corporate earnings.
In the rest of Asia, we look for improvements in Australia and Singapore to
continue, but we will monitor China carefully. In the long-term, we believe
China will succeed, but in the short term we are unsure whether it will devalue
its currency, and the government's commitment to maintaining its unproductive
state-owned enterprise system is troubling. Overall, we have positioned the
portfolio to be less defensive than it was during the volatile third quarter of
1998, and have reduced our cash holdings as a result.
<TABLE>
<S> <C> <C>
Barton M. Biggs Ann D. Thivierge
PORTFOLIO MANAGER PORTFOLIO MANAGER
</TABLE>
------------------
5
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
COMMON STOCKS (86.8%)
AUSTRALIA (2.4%)
Amcor Ltd........................ 43,942 $ 243
AMP Ltd.......................... 63,305 690
Australian Gas Light Co., Ltd.... 25,593 155
Boral Ltd........................ 76,468 129
Brambles Industries Ltd.......... 14,761 387
Broken Hill Proprietary Co.,
Ltd............................ 135,000 1,558
Coca-Cola Amatil Ltd............. 64,066 257
Coles Myer Ltd................... 73,971 429
Colonial Ltd..................... 60,692 214
CSL Ltd.......................... 7,167 62
CSR Ltd.......................... 69,030 197
Faulding (F.H.) & Co. Ltd........ 8,373 51
Fosters Brewing Ltd.............. 119,412 335
General Property Trust........... 92,060 149
GIO Australia Holdings Ltd....... 45,469 110
Goodman Fielder Ltd.............. 90,483 80
Leighton Holdings Ltd............ 18,450 72
Lend Lease Corp., Ltd............ 36,172 495
Mayne Nickless Ltd............... 24,819 85
National Australia Bank Ltd...... 89,258 1,471
News Corp., Ltd.................. 126,779 1,078
Normandy Mining Ltd.............. 133,037 88
North Broken Hill Peko Ltd....... 64,684 131
Orica Ltd........................ 19,541 106
Pacific Dunlop Ltd............... 72,472 104
Pioneer International Ltd........ 62,368 158
QBE Insurance Group Ltd.......... 27,089 103
Rio Tinto Ltd.................... 12,573 205
Santos Ltd....................... 40,735 133
Schroders Property Fund.......... 26,497 41
Smith (Howard) Ltd............... 13,530 103
Southcorp Holdings Ltd........... 42,987 173
(a)Stockland Trust Group......... 441 1
Stockland Trust Group............ 21,230 48
Suncorp-Metway Ltd............... 21,378 127
TABCORP Holdings Ltd............. 22,004 148
Telstra Corp., Ltd............... 326,031 1,861
Wesfarmers Ltd................... 12,783 115
Westfield Trust.................. 86,614 175
(a)Westfield Trust (New)......... 1,438 3
Westpac Banking Corp., Ltd....... 122,607 792
WMC Ltd.......................... 121,589 520
Woolworths Ltd................... 76,969 255
--------
13,637
--------
AUSTRIA (0.7%)
Austria Mikro Systems
International AG............... 503 18
Austria Tabakwerke AG............ 3,719 217
Austrian Airlines Osterreichische
Luftverkehrs AG................ 4,142 100
Bank Austria AG.................. 19,144 1,008
Bau Holdings AG.................. 795 25
Boehler-Udderholm AG............. 1,866 93
BWT AG........................... 285 54
Flughafen Wein AG................ 3,589 151
Generali AG...................... 1,197 220
Lenzing AG....................... 625 36
Mayr-Melnhof Karton AG........... 2,026 92
Oesterreichische
Brau-Beteiligungs AG........... 1,548 69
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
Oesterreichish Elektrizitaets
'A'............................ 5,159 $ 752
OMV AG........................... 4,517 403
Radex-Heraklith Industriebet
AG............................. 2,366 64
VA Technologies AG............... 2,535 230
Wienerberger Baustoffindustrie
AG............................. 11,680 303
--------
3,835
--------
CANADA (1.2%)
Abitibi-Consolidated, Inc........ 4,200 48
Agrium, Inc...................... 3,100 27
Alberta Energy Co., Ltd.......... 2,400 77
Alcan Aluminum Ltd............... 4,900 155
(a)Anderson Exploration Ltd...... 2,800 37
Bank of Montreal................. 5,600 203
Bank of Nova Scotia.............. 10,100 219
Barrick Gold Corp................ 8,200 159
Barrick Gold Corp................ 9,400 181
BCE, Inc......................... 13,500 657
(a)BCT.Telus Communications,
Inc............................ 1,865 45
BCT.Telus Communications, Inc.
'A'............................ 621 15
Bombardier, Inc. 'A'............. 13,800 211
Cameco Corp...................... 1,200 25
(a)Canadian Hunter Exploration
Ltd............................ 1,350 20
Canadian Imperial Bank of
Commerce....................... 8,400 200
(a)Canadian Natural Resources
Ltd............................ 2,100 41
Canadian Occidental Petroleum
Ltd............................ 3,000 48
Canadian Pacific Ltd............. 7,300 173
Canadian Tire Corp. 'A'.......... 2,000 58
Cominco Ltd...................... 1,900 32
Dofasco, Inc..................... 2,200 36
Edperbarascan Corp. 'A'.......... 3,600 55
(a)Fairfax Financial Holdings
Ltd............................ 200 54
George Weston Ltd................ 2,900 128
(a)Gulf Canada Resources Ltd..... 19,900 82
Imasco Ltd....................... 9,000 242
Imperial Oil Ltd................. 10,000 190
Inco Ltd......................... 3,600 64
Laidlaw, Inc. 'B'................ 7,100 52
(a)Loewen Group, Inc............. 1,600 1
Macmillan Bloedel Ltd............ 3,000 54
Magna International, Inc. 'A'.... 1,600 90
MDS Inc. 'B'..................... 1,300 28
National Bank of Canada.......... 3,800 50
(a)Newbridge Networks Corp....... 3,600 103
Nexfor, Inc...................... 2,354 15
Noranda, Inc..................... 5,400 71
Northern Telecom Ltd............. 13,600 1,162
NOVA Chemicals Corp.............. 208 5
Petro-Canada..................... 6,200 85
Placer Dome, Inc................. 22,560 262
(a)Poco Petroleums Ltd........... 3,200 26
Potash Corp. of Saskatchewan,
Inc............................ 1,200 62
Power Corp. of Canada............ 3,600 69
Quebecor, Inc. 'B'............... 1,700 41
(a)Renaissance Energy Ltd........ 3,200 43
(a)Rogers Communication, Inc.
'B'............................ 3,700 59
Royal Bank of Canada............. 6,500 287
Seagram Co., Ltd................. 7,400 368
Suncor Energy, Inc............... 2,400 98
(a)Talisman Energy, Inc.......... 2,300 62
Thomson Corp..................... 12,600 380
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
CANADA (CONT.)
<TABLE>
<S> <C> <C>
TransAlta Corp................... 1,800 $ 27
Transcanada Pipelines Ltd........ 10,344 146
Westcoast Energy, Inc............ 2,600 51
--------
7,179
--------
FRANCE (1.8%)
Accor S.A........................ 396 100
Alcatel.......................... 5,046 711
Axa.............................. 3,452 422
Banque Nationale de Paris........ 2,154 180
BIC Corp......................... 643 34
Bouygues......................... 292 77
Canal Plus....................... 322 90
Cap Gemini S.A................... 1,817 286
Carrefour S.A.................... 2,406 354
Cie de Saint-Gobain.............. 1,041 166
Dassault Systemes S.A............ 3,172 105
Elf Aquitaine.................... 2,911 428
Eridania Beghin-Say S.A.......... 451 65
Essilor International............ 141 44
Etablissements Economiques du
Casino Guichard-Perrachon...... 800 70
France Telecom S.A............... 6,286 475
Groupe Danone RFD................ 658 170
Klepierre........................ 6,678 627
L'air Liquide.................... 959 151
L'Oreal.......................... 688 466
Lafarge S.A...................... 1,141 109
Lagardere S.C.A.................. 1,495 56
Legrand S.A...................... 299 61
(a)LVMH Moet Hennessy Louis
Vuitton........................ 921 270
Michelin (C.G.D.E.) 'B'.......... 2,247 92
Paribas.......................... 1,846 207
Pernod-Ricard.................... 742 50
Pinault-Printemps-Redoute........ 1,235 212
Promodes......................... 198 130
PSA Peugeot Citroen S.A.......... 549 87
Rhone-Poulenc S.A. 'A'........... 3,917 179
Sagem............................ 30 20
Sanofi-Synthelabo S.A............ 4,528 192
Schneider S.A.................... 1,810 102
Silic............................ 1,723 271
Simco S.A. (Registered).......... 8,930 756
Societe Fonciere Lyonnaise....... 1,725 246
Societe Generale................. 1,008 178
Sodexho S.A...................... 650 112
Suez Lyonnaise des Eaux.......... 1,493 270
Thomson CSF S.A.................. 1,735 60
(a)Total S.A. 'B'................ 2,710 350
Unibail.......................... 6,450 826
Usinor Sacilor................... 3,012 45
(a)Valeo S.A..................... 935 77
Vivendi.......................... 4,941 401
--------
10,380
--------
GERMANY (3.4%)
Adidas-Salomon AG................ 1,483 145
Agiv AG.......................... 1,450 33
Allianz AG....................... 7,292 2,040
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
AMB Aachener & Muenchener
Beteiligungs AG................ 600 $ 60
BASF AG.......................... 18,500 814
Bayer AG......................... 21,300 887
Bayer Vereinsbank AG............. 12,025 766
Bilfinger & Berger Bau AG........ 1,950 48
Brau und Brunnen AG.............. 33 2
CKAG Colonia Konzern AG.......... 717 68
Continental AG................... 3,533 85
Daimler-Chrysler AG.............. 1 -
Daimler-Chrysler AG.............. 29,729 2,600
(a)Degussa AG.................... 2,183 91
Deutsche Bank AG................. 15,100 921
(a)Deutsche Telekom AG........... 39,688 1,670
Dresdner Bank AG................. 14,617 569
FAG Kugelfischer Georg Schaefer
AG............................. 4,500 44
Heidelberger Zement AG........... 603 49
Hochtief AG...................... 3,183 145
Karstadt AG...................... 350 167
Kloeckner-Humboldt-Deutz AG...... 2,067 14
Linde AG......................... 233 140
Lufthansa AG..................... 10,700 195
MAN AG........................... 3,500 119
Mannesmann AG.................... 6,620 991
Merck KGaA AG.................... 6,440 209
Metro AG......................... 7,057 450
(a)Metro AG...................... 600 3
Muenchener Rueckversicherungs-
Gesellschaft AG (Registered)... 2,447 462
Muenchener Rueckversicherungs-
Gesellschaft AG (Registered)... 2,447 457
Preussag AG...................... 5,000 270
RWE AG........................... 12,704 589
SAP AG........................... 1,727 593
Schering AG...................... 2,300 246
Siemens AG....................... 16,783 1,296
(a)Thyssen AG.................... 12,170 267
VEBA AG.......................... 14,733 870
Viag AG.......................... 845 393
Volkswagen AG.................... 8,730 564
--------
19,332
--------
GREECE (0.0%)
Alpha Credit Bank S.A............ 1,387 90
--------
HONG KONG (1.0%)
Bank of East Asia................ 41,800 106
Cathay Pacific Airways Ltd....... 93,000 143
Cheung Kong Holdings Ltd......... 72,000 640
CLP Holdings Ltd................. 79,500 386
Dickson Concepts International
Ltd............................ 25,000 18
Hang Lung Development Corp....... 48,000 59
Hang Seng Bank Ltd............... 59,200 662
(a)Hong Kong & China Gas Co.,
Ltd............................ 150,000 217
Hong Kong Land Holdings Ltd...... 508 1
Hong Kong Shanghai Hotels........ 22,000 19
Hong Kong Telecommunications
Ltd............................ 358,800 932
Hopewell Holdings Ltd............ 51,000 39
Hutchison Whampoa Ltd............ 108,000 978
Hysan Development Co............. 33,781 51
Johnson Electric Holdings Ltd.... 26,000 107
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
HONG KONG (CONT.)
<TABLE>
<S> <C> <C>
New World Development Co.,
Ltd............................ 67,000 $ 201
Shangri-La Asia Ltd.............. 32,000 39
Sino Land Co..................... 74,001 42
South China Morning Post......... 62,000 35
Sun Hung Kai Properties Ltd...... 67,000 611
Swire Pacific Ltd. 'A'........... 48,500 240
Television Broadcasting Ltd...... 11,000 52
Wharf Holdings Ltd............... 68,000 212
--------
5,790
--------
ITALY (2.5%)
Alitalia......................... 62,254 162
Assicurazioni Generali S.p.A..... 44,676 1,550
Banca Commerciale Italiana....... 81,300 594
Banco Ambrosiano Veneto.......... 85,900 413
Banco Popolare di Milano......... 11,000 85
Benetton Group S.p.A............. 76,300 150
Burgo Cartiere S.p.A............. 3,700 24
CIR-Compagnie Industriali Riunite
S.p.A.......................... 700 1
Credito Italiano S.p.A........... 196,215 863
Edison S.p.A..................... 31,000 269
Ente Nazionale Idrocarburi
S.p.A.......................... 360,000 2,152
Falck Acciaierie & Ferriere
Lombarde....................... 2,000 15
Fiat S.p.A....................... 261,630 829
Fiat S.p.A. di Risp NCS.......... 44,970 77
Impreglio S.p.A.................. 21,000 18
Istituto Nazionale delle
Assicurazioni (INA)............ 176,680 410
Italcementi S.p.A................ 7,300 93
Italcementi S.p.A................ 10,150 51
Italgas.......................... 20,400 86
La Rinascente S.p.A.............. 9,878 75
Magneti Marelli S.p.A............ 14,000 19
Mediaset S.p.A................... 49,000 436
Mediobanca S.p.A................. 29,260 307
Montedison S.p.A................. 92,616 151
Montedison S.p.A. di Risp NCS.... 30,628 36
(a)Olivetti Group................ 76,180 183
Parmalat Finanziaria S.p.A....... 79,640 104
Pirelli S.p.A.................... 100,000 273
R.A.S............................ 21,769 212
R.A.S. di Risp................... 462 4
S.A.I............................ 250 1
S.A.I............................ 6,100 63
San Paolo-Imi S.p.A.............. 62,176 847
Sirti S.p.A...................... 8,000 39
Snia BPD S.p.A................... 41,000 51
Telecom Italia Mobile S.p.A...... 178,400 1,067
Telecom Italia Mobile S.p.A.
RNC............................ 43,400 160
Telecom Italia S.p.A............. 30,162 164
Telecom Italia S.p.A............. 96,388 1,003
Unione Immobiliare S.p.A......... 2,666,907 1,184
--------
14,221
--------
JAPAN (10.9%)
Acom Co., Ltd.................... 4,500 389
Ajinomoto Co., Inc............... 45,800 523
(a)Aoki Corp..................... 47,800 30
Asahi Bank Ltd................... 64,500 310
Asahi Breweries Ltd.............. 29,000 361
Asahi Chemical Industry Co.,
Ltd............................ 85,400 474
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
Asahi Glass Co................... 80,600 $ 523
Bank of Tokyo-Mitsubishi Ltd..... 180,600 2,574
Bank of Yokohama................. 23,500 60
Bridgestone Corp................. 32,000 969
Canon, Inc....................... 34,800 1,002
Casio Computer Co., Ltd.......... 17,000 129
Chiba Bank Ltd................... 22,800 84
Chugai Pharmaceutical Ltd........ 29,800 321
Credit Saison Co., Ltd........... 5,100 107
Dai Nippon Printing Co., Ltd..... 32,800 525
Daiei, Inc....................... 29,800 102
Daikin Industries Ltd............ 28,800 335
Daiwa House Industry............. 29,800 314
Daiwa Securities Co., Ltd........ 108,000 715
Denso Corp....................... 10,600 216
East Japan Railway Co............ 170 914
Ebara Corp....................... 19,800 236
Fanuc Co......................... 12,200 656
Fuji Bank........................ 171,000 1,194
Fuji Photo Film Co............... 17,000 644
Fujitsu Ltd...................... 70,600 1,422
Furukawa Electric Co., Ltd....... 20,800 96
Gunma Bank Ltd................... 11,000 69
Hankyu Corp...................... 37,000 147
(a)Hazama Corp................... 28,000 23
Hitachi Ltd...................... 143,000 1,343
Honda Motor Co................... 34,000 1,443
Industrial Bank of Japan Ltd..... 79,000 627
Ito-Yokado Co., Ltd.............. 14,000 938
Japan Airlines Co., Ltd.......... 90,000 298
Japan Energy Corp................ 67,600 79
Joyo Bank........................ 11,800 46
Jusco Co......................... 14,800 269
Kajima Corp...................... 55,600 202
Kansai Electric Power Co......... 36,600 696
KAO Corp......................... 37,800 1,063
Kawasaki Steel Corp.............. 45,600 85
Kinki Nippon Railway Co., Ltd.... 65,600 323
Kirin Brewery Co., Ltd........... 57,600 691
Komatsu Ltd...................... 52,600 336
Kubota Corp...................... 81,400 244
Kumagai Gumi Co., Ltd............ 88,600 99
Kyocera Corp..................... 8,500 499
Kyowa Hakko Kogyo Co., Ltd....... 26,800 154
Marubeni Corp.................... 77,200 162
Marui Co., Ltd................... 6,800 113
Matsushita Electric Industrial
Co., Ltd....................... 72,400 1,408
Mitsubishi Chemical Corp......... 86,000 298
Mitsubishi Corp.................. 76,000 516
Mitsubishi Electric Corp......... 101,400 390
Mitsubishi Estate Co., Ltd....... 24,000 234
Mitsubishi Heavy Industries
Ltd............................ 155,000 630
Mitsubishi Materials Corp........ 54,600 122
Mitsubishi Trust and Banking
Corp........................... 38,000 370
Mitsui & Co...................... 78,200 546
Mitsui Engineering & Shipbuilding
Co., Ltd....................... 56,600 64
Mitsui Fudosan Co., Ltd.......... 18,000 146
Mitsui Trust & Banking Co.,
Ltd............................ 1,400 2
Mitsukoshi Ltd................... 29,800 130
Murata Manufacturing Co., Inc.... 12,000 790
Mycal Corp....................... 18,800 118
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
JAPAN (CONT.)
<TABLE>
<S> <C> <C>
NEC Corp......................... 50,600 $ 630
New OJI Paper Co., Ltd........... 57,600 334
NGK Insulators Ltd............... 29,800 312
Nippon Express Co., Ltd.......... 22,000 132
Nippon Fire & Marine Insurance
Co............................. 26,800 91
Nippon Light Metal Co............ 26,800 40
Nippon Meat Packers, Inc......... 26,800 350
Nippon Oil Co.................... 82,600 349
Nippon Steel Corp................ 320,000 744
Nippon Telegraph & Telephone
Corp. ADR...................... 433 5,051
Nippon Yusen Kabushiki Kaisha.... 80,400 310
Nissan Fire & Marine Insurance
Co., Ltd....................... 350 1
Nissan Motor Co., Ltd............ 102,400 490
NKK Corp......................... 168,000 138
Nomura Securities Co., Ltd....... 55,000 645
Odakyu Electric Railway Co....... 31,800 107
Orix Corp........................ 1,300 116
Osaka Gas Co..................... 114,200 388
Penta-Ocean Construction Co.,
Ltd............................ 26,800 47
Pioneer Electronic Corp.......... 8,000 156
Rohm Co.......................... 3,000 470
Sakura Bank Ltd.................. 108,200 411
Sankyo Co., Ltd.................. 21,800 550
Sanwa Bank Ltd................... 80,000 788
Sanyo Electric Co., Ltd.......... 73,400 299
Secom Co......................... 6,800 709
Sega Enterprises Ltd............. 5,800 77
Sekisui House Ltd................ 28,800 311
Sharp Corp....................... 48,600 575
Shimano Inc...................... 8,000 190
Shimizu Corp..................... 40,800 159
Shin-Etsu Chemical Co............ 12,000 402
Shiseido Co., Ltd................ 13,000 195
Shizuoka Bank.................... 15,800 158
Showa Denko K.K.................. 54,600 70
SMC Corp......................... 2,100 235
Softbank Corp.................... 900 183
Sony Corp........................ 12,000 1,296
Sumitomo Bank Ltd................ 69,000 857
Sumitomo Chemical Co............. 108,200 497
Sumitomo Corp.................... 55,400 406
Sumitomo Electric Industries..... 38,800 442
Sumitomo Forestry Co., Ltd....... 17,000 132
Sumitomo Metal Industries Ltd.... 103,400 129
Sumitomo Metal Mining Co......... 28,000 116
Sumitomo Osaka Cement Co.,
Ltd............................ 27,800 54
Taisei Corp., Ltd................ 57,600 127
Taisho Pharmaceutical Co......... 17,000 563
Taiyo Yuden Co., Ltd............. 33,000 542
Takeda Chemical Industries....... 32,800 1,522
Teijin Ltd....................... 57,600 234
The 77 Bank Ltd.................. 12,000 105
Tobu Railway Co.................. 36,800 104
Tohoku Electric Power Co.,
Ltd............................ 19,500 296
Tokai Bank Ltd................... 53,600 306
Tokio Marine & Fire Insurance
Co............................. 79,400 864
Tokyo Electric Power Co.......... 47,300 1,000
Tokyo Electron Ltd............... 4,000 272
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
Tokyo Gas Co..................... 108,200 $ 267
Tokyu Corp....................... 45,800 116
Toppan Printing Co., Ltd......... 37,800 422
Toray Industries, Inc............ 84,500 424
Toto Ltd......................... 29,800 231
Toyobo Ltd....................... 58,600 89
Toyota Motor Corp................ 118,000 3,739
Ube Industries Ltd............... 54,600 118
Yokogawa Electric Corp........... 30,000 177
--------
62,598
--------
NETHERLANDS (3.5%)
ABN Amro Holdings N.V............ 58,059 1,259
Aegon N.V........................ 22,400 1,627
Akzo Nobel N.V................... 13,319 561
Buhrmann N.V..................... 122 2
Elsevier N.V..................... 24,030 279
Getronics N.V.................... 2,861 110
Hagemeyer N.V.................... 4,384 143
Heineken N.V..................... 12,409 636
ING Groep N.V.................... 37,247 2,019
KLM Royal Dutch Airlines N.V..... 3,379 96
Koninklijke Ahold N.V............ 23,809 821
KPN N.V.......................... 11,250 529
Oce N.V.......................... 3,679 94
Philips Electronics N.V.......... 13,222 1,306
Royal Dutch Petroleum............ 85,956 5,041
Royal Dutch Petroleum Co., New
York Shares.................... 28,700 1,729
Schlumberger Ltd................. 7,900 503
Stork N.V........................ 120 3
TNT Post Group N.V............... 19,569 468
(a)Unilever N.V. CVA............. 23,294 1,572
(a)Unilever N.V.................. 7,500 523
Vedior N.V....................... 2,920 50
Wolters Kluwer N.V............... 11,684 466
--------
19,837
--------
SINGAPORE (1.5%)
City Developments Ltd............ 99,000 634
Comfort Group Ltd................ 65,000 40
Creative Technology Ltd.......... 11,150 145
Cycle & Carriage Ltd............. 19,000 109
DBS Land Ltd..................... 131,000 262
Development Bank of Singapore
Ltd. (Foreign)................. 76,000 929
First Capital Corp............... 36,000 56
Fraser & Neave Ltd............... 36,000 160
Hotel Properties Ltd............. 49,000 51
Inchcape Bhd..................... 5,000 8
Keppel Corp...................... 105,000 358
NatSteel Ltd..................... 45,000 79
Neptune Orient Lines Ltd......... 28,000 34
Oversea-Chinese Banking Corp.,
Ltd. (Foreign)................. 119,000 993
Overseas Union Enterprise Ltd.... 20,000 63
Parkway Holdings Ltd............. 45,000 111
Sembcorp Industries Ltd.......... 148,235 235
Singapore Airlines Ltd.
(Foreign)...................... 112,000 1,066
Singapore Press Holdings......... 45,000 767
Singapore Technology Engineering
Ltd............................ 355,000 403
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
SINGAPORE (CONT.)
<TABLE>
<S> <C> <C>
Singapore Telecommunications
Ltd............................ 702,000 $ 1,204
Straits Trading Co., Ltd......... 13,000 17
United Industrial Corp., Ltd..... 167,000 113
United Overseas Bank Ltd.
(Foreign)...................... 87,000 608
United Overseas Land Ltd......... 74,000 83
Venture Manufacturing Ltd........ 25,000 192
--------
8,720
--------
SPAIN (2.1%)
Acerinox S.A..................... 3,764 110
ACS S.A.......................... 2,802 80
Argentaria S.A................... 26,319 600
Autopistas Concesionaria Espanola
S.A............................ 13,943 163
Azucarere Ebro Agricolas S.A..... 3,766 58
Banco Bilbao Vizcaya S.A.
(Registered)................... 104,767 1,516
Banco Santander Central Hispano
S.A............................ 179,712 1,874
Corporacion Financiera Alba
S.A............................ 753 122
Corporacion Mapfre S.A........... 3,696 75
Empresa Nacional de Cellulosas
S.A............................ 34 1
Endesa S.A....................... 49,484 1,057
Energia y Industrias Aragonesas
S.A............................ 12 -
Fomento de Construcciones y
Contratas S.A.................. 3,764 216
Gas Natural SDG S.A. 'E'......... 7,527 548
General de Aguas de Barcelona
S.A............................ 2,379 124
Gropo Dragados, S.A.............. 8,955 105
Iberdrola S.A.................... 45,207 689
Immobiliaria Metropolitana Vasco
Central
S.A............................ 27,499 539
Prima Inmobiliaria S.A........... 30,600 237
Repsol S.A....................... 48,858 999
Sol Melia S.A.................... 1,647 70
Tabacalera S.A. 'A'.............. 8,964 181
(a)Telefonica S.A................ 33,095 1,596
(a)TelePizza S.A................. 10,943 57
Union Electrica Fenosa S.A....... 14,986 196
Vallehermoso S.A................. 90,415 877
(a)Viscofan Industria Navarra de
Envolturas Calulosicas S.A..... 68 1
Zardoya-Otis S.A................. 1,264 32
--------
12,123
--------
SWEDEN (1.7%)
ABB AB 'A'....................... 9,900 132
ABB AB 'B'....................... 700 9
(a)ABB Ltd....................... 3,005 282
AGA AG 'B'....................... 8,400 104
Atlas Copco AB 'A'............... 6,650 182
Atlas Copco AB 'B'............... 3,600 97
Castellum AB..................... 31,600 299
Diligentia AB.................... 51,786 404
Drott AB 'B'..................... 32,300 263
Electrolux AB 'B'................ 15,900 334
Ericsson AB...................... 68,700 2,211
Fastighets AB Tornet............. 17,610 240
ForeningsSparbanken AB........... 27,450 389
Hennes & Mauritz AB 'B'.......... 42,400 1,051
(a)NetCom Systems AB 'B'......... 3,400 115
OM Gruppen AB.................... 3,800 43
Sandvik AB 'A'................... 10,200 223
Sandvik AB 'B'................... 4,200 93
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
SCA AB 'B'....................... 11,500 $ 299
Securitas AB 'B'................. 20,200 303
Skandia Forsakrings AB........... 26,700 501
Skandinaviska Enskilda Banken AB
'A'............................ 31,100 364
Skanska AB 'B'................... 6,500 246
SKF AB 'B'....................... 4,500 83
Svenska Handelsbanken 'A'........ 33,600 405
Svenskt Stal AB 'A'.............. 6,300 79
Trelleborg AB 'B'................ 7,600 67
Volvo AB 'A'..................... 7,600 220
Volvo AB 'B'..................... 15,900 463
Wm-Data AB 'B'................... 2,700 103
--------
9,604
--------
SWITZERLAND (2.2%)
ABB Ltd. (New)................... 3,969 375
Adecco S.A. (Registered)......... 470 252
Alusuisse-Lonza Holding AG
(Registered)................... 160 187
CS Holding AG (Registered)....... 6,850 1,188
Georg Fischer AG (Registered).... 85 28
Holderbank Financiere Glarus AG
(Bearer)....................... 175 207
Nestle S.A. (Registered)......... 1,005 1,814
Novartis AG (Registered)......... 1,636 2,393
Roche Holding AG (Bearer)........ 42 693
Roche Holding AG-Genusshein...... 177 1,823
Sairgroup (Registered)........... 405 85
Schweizerische Rueckver
(Registered)................... 375 715
SGS Societe Generale de
Surveillance Holding S.A.
(Bearer)....................... 50 52
SMH AG (Bearer).................. 135 91
Sulzer AG (Registered)........... 110 67
Swisscom AG (Registered)......... 1,090 411
UBS AG (Registered).............. 5,181 1,549
Valora Holding AG (Registered)... 165 38
Zurich Allied AG (New)........... 1,205 686
--------
12,654
--------
UNITED KINGDOM (10.5%)
Abbey National plc............... 40,603 763
Albert Fisher Group plc.......... 58,227 12
Alldays plc...................... 3,096 4
Allders plc...................... 4,039 9
Allied Zurich plc................ 43,182 543
Amec plc......................... 11,811 48
Anglian Water plc................ 31,582 350
Arjo Wiggins Appleton plc........ 28,433 99
Associated British Foods plc..... 25,719 170
Associated British Ports Holdings
plc............................ 83,014 376
AstraZeneca Group................ 13,873 537
AstraZeneca plc.................. 26,569 1,038
BAA plc.......................... 31,685 305
Barclays plc..................... 40,838 1,189
Barrat Developments plc.......... 16,890 95
Bass plc......................... 23,324 339
BBA Group plc.................... 2,022 16
Beazer Group plc................. 38,215 121
Berisford plc.................... 26,471 101
BG plc........................... 112,642 689
BICC plc......................... 31,967 46
Blue Circle Industries plc....... 52,594 350
</TABLE>
- --------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
UNITED KINGDOM (CONT.)
<TABLE>
<S> <C> <C>
BOC Group plc.................... 16,708 $ 327
Boots Co. plc.................... 28,579 340
BP Amoco plc..................... 234,126 4,199
BPB Industries plc............... 77,860 462
British Aerospace plc............ 55,389 360
British Airways plc.............. 31,222 216
British American Tobacco plc..... 43,182 406
British Land Co. plc............. 224,516 1,879
British Sky Broadcasting Group
plc............................ 46,468 431
British Steel plc................ 78,328 203
British Telecommunications plc... 103,228 1,731
Burmah Castrol plc............... 34,128 648
Cable & Wireless plc............. 37,650 480
Cadbury Schweppes plc............ 55,210 352
Capital Shopping Centers plc..... 60,550 384
Caradon plc...................... 97,945 232
Carpetright plc.................. 16,769 104
Centrica plc..................... 128,580 302
Cobham plc....................... 19,249 307
Commercial Union plc............. 27,431 397
Compass Group plc................ 20,035 199
Delta plc........................ 3,953 9
Diageo plc....................... 98,750 1,032
Dialog Corporation plc........... 7,331 11
Emap plc......................... 9,770 171
EMI Group plc.................... 80,014 642
Enterprise Oil plc............... 40,199 262
Firstgroup plc................... 38,972 212
FKI plc.......................... 31,227 97
General Electric plc............. 79,686 813
GKN plc.......................... 42,906 733
Glaxo Wellcome plc............... 85,295 2,372
Granada Group plc................ 25,911 481
Grantchester Holdings plc........ 273,830 741
Great Portland Estates plc....... 140,530 486
Great Universal Stores plc....... 29,417 326
Greycoat plc..................... 8,968 36
Halifax plc...................... 66,139 790
Hammerson plc.................... 100,910 756
Hanson plc....................... 59,228 526
Hilton Group plc................. 43,911 174
House of Fraser plc.............. 22,703 31
HSBC Holdings plc................ 66,014 2,339
Hyder plc........................ 39,193 467
IMI plc.......................... 37,585 152
Imperial Chemical Industries
plc............................ 21,041 208
Invensys plc..................... 215,159 1,019
Jarvis plc....................... 21,676 101
JBA Holdings plc................. 2,387 4
Johnson Matthey plc.............. 44,295 433
Kingfisher plc................... 43,082 496
Laird Group plc.................. 10,539 44
Land Securities plc.............. 201,165 2,707
Lasmo plc........................ 135,898 311
Legal & General Group plc........ 149,612 381
Lex Service plc.................. 21,762 201
LIMIT plc........................ 87,179 184
Lloyds TSB Group plc............. 144,074 1,955
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
London Clubs International plc... 31,795 $ 72
London Forfaiting Co., plc....... 11,737 11
Lonmin plc....................... 35,802 333
Low & Bonar plc.................. 3,132 10
Manchester United plc............ 3,027 10
Marks & Spencer plc.............. 79,288 459
Mayflower Corporation plc........ 396 1
McKechnie plc.................... 3,630 28
Meggitt plc...................... 9,288 29
MEPC plc......................... 169,153 1,377
Mirror Group News Ord plc........ 32,562 127
Misys plc........................ 72,884 624
National Power plc............... 36,850 269
Next plc......................... 42,540 517
NFC plc.......................... 64,004 208
Ocean Group plc.................. 1,489 25
(a)Parity plc.................... 14,245 140
Pearson plc...................... 1 -
Peninsular & Oriental Steam
Navigation Co.................. 21,474 323
Pennon Group plc................. 17,517 293
Pilkington plc................... 213,754 311
Powerscreen International plc.... 3,303 10
Provident Financial plc.......... 7 -
Prudential Corp. plc............. 54,935 809
Racal Electronic plc............. 15,431 94
Railtrack Group plc.............. 13,746 281
Rank Group plc................... 68,009 271
Reed International plc........... 33,290 222
Rentokil Initial plc............. 78,591 307
Reuters Holdings plc............. 40,134 528
Rexam plc........................ 22,695 92
Rio Tinto plc.................... 31,413 527
RMC Group plc.................... 12,110 195
Rolls-Royce plc.................. 56,619 240
Royal & Sun Alliance Insurance
Group plc...................... 38,002 341
Rugby Group plc.................. 20,156 36
Safeway plc...................... 30,418 122
Sainsbury (J) plc................ 52,895 334
Schroders Property Fund.......... 4,417 90
Scotia Holdings plc.............. 8,881 16
Scottish & Southern Energy plc... 34,834 357
Scottish Power plc............... 36,236 313
Skillsgroup plc.................. 2,700 13
Slough Estates plc............... 189,716 1,077
SmithKline Beecham plc........... 146,865 1,910
Smiths Industries plc............ 8,351 110
Stagecoach Holdings plc.......... 68,744 246
Tarmac plc....................... 40,831 77
Tate & Lyle plc.................. 21,085 132
Taylor Woodrow plc............... 19,736 57
Tesco plc........................ 89,024 229
Thames Water plc................. 14,894 236
The Berkeley Group plc........... 10,202 123
TI Group plc..................... 17,948 120
Torotrac plc..................... 2,634 8
Unilever plc..................... 95,100 847
United Utilities................. 19,397 236
Vickers plc...................... 4,410 11
Vodafone Group plc............... 49,284 972
Wickes plc....................... 1,852 11
William Baird plc................ 25,635 46
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
UNITED KINGDOM (CONT.)
<TABLE>
<S> <C> <C>
WPP Group plc.................... 45,398 $ 384
Yorkshire Water plc.............. 29,111 203
--------
60,262
--------
UNITED STATES (41.4%)
A.G. Edwards, Inc................ 2,500 81
A.H. Belo Corp., 'A'............. 4,200 83
A.O. Smith Corp.................. 6,800 190
AAR Corp......................... 6,600 150
Abbott Laboratories.............. 20,600 937
(a)Abercrombie & Fitch Co. 'A'... 3,000 144
ABM Industries, Inc.............. 4,600 141
(a)Acnielsen Corp................ 2,100 64
(a)Acxiom Corp................... 14,500 362
Adac Laboratories, Inc........... 4,300 31
(a)ADC Telecom, Inc.............. 3,900 178
(a)Advo Inc...................... 4,600 95
(a)AES Corp...................... 3,600 209
AETNA, Inc....................... 2,400 215
AFLAC, Inc....................... 7,400 354
AGL Resources, Inc............... 2,100 39
Air Express International
Corp........................... 8,100 206
Air Products & Chemicals, Inc.... 5,500 221
Airborne Freight Corp............ 2,000 55
AK Steel Holding Corp............ 2,900 65
(a)Alaska Air Group, Inc......... 1,100 46
Albertson's, Inc................. 6,146 317
Alcoa, Inc....................... 6,900 427
Aliant Communications, Inc....... 1,500 69
Allegheny Energy, Inc............ 3,100 99
Alliant Energy Corp.............. 3,800 108
(a)Alliant Techsystems, Inc...... 2,800 242
Allied Signal, Inc............... 7,900 498
(a)Allied Waste Industries,
Inc............................ 5,400 107
Allstate Corp.................... 11,300 405
Alltel Corp...................... 3,800 272
Alpharma, Inc.................... 5,900 210
(a)Altera Corp................... 5,600 206
(a)Alza Corp. 'A'................ 3,000 153
AMBAC Finacial Group, Inc........ 2,000 114
Amerada Hess Corp................ 2,400 143
Ameren Corp...................... 1,800 69
American Bankers Insurance Group,
Inc............................ 9,100 495
American Electric Power Co.,
Inc............................ 2,700 101
American Express Co.............. 5,900 768
American Financial Group, Inc.... 2,200 75
American General Corp............ 4,100 309
American Home Products Corp...... 17,600 1,012
American International Group,
Inc............................ 19,230 2,251
(a)American Management Systems,
Inc............................ 8,500 273
(a)American Power Conversion
Corp........................... 5,600 113
(a)American Standard Companies,
Inc............................ 2,400 115
(a)American Telephone & Telegraph
Co............................. 45,145 2,520
American Water Works, Inc........ 2,400 74
(a)Americredit Corp.............. 13,500 216
Ameritech Corp................... 15,100 1,110
(a)Amgen, Inc.................... 7,300 444
(a)AMR Corp...................... 2,400 164
(a)Analog Devices................ 5,000 251
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
Analogic Corp.................... 3,000 $ 93
Analysts International Corp...... 5,200 75
Anchor Bancorp Wisconsin, Inc.... 3,500 62
Anheuser-Busch Cos., Inc. 'A'.... 6,900 489
(a)Anixter International, Inc.... 10,800 197
(a)Ann Taylor Stores Corp........ 4,800 216
Aon Corp......................... 4,500 186
Apogee Enterprises, Inc.......... 9,400 126
(a)Apollo Group, Inc. 'A'........ 2,600 69
Applebee's International, Inc.... 6,400 193
Applied Industrial Technologies,
Inc............................ 7,300 139
(a)Applied Material, Inc......... 6,000 443
Applied Power, Inc. 'A'.......... 8,300 227
Aptar Group, Inc................. 8,500 255
Arch Chemicals, Inc.............. 1,200 29
Archer Daniels Midland Co........ 9,500 147
(a)Arrow Electronics, Inc........ 3,600 68
Arvin Industries, Inc............ 1,500 57
(a)Aspect Telecommunications
Corp........................... 11,200 109
Associated Banc-Corp............. 2,400 100
Associates First Capital Corp.
'A'............................ 9,603 426
(a)Astec Industries, Inc......... 4,200 171
Astoria Financial Corp........... 11,700 514
AT&T Corp. Liberty Media 'A'..... 11,576 425
Atlantic Richfield Co............ 5,000 418
(a)Atmel Corp.................... 4,100 107
Atmos Energy Corp................ 5,700 142
Automatic Data Processing,
Inc............................ 7,900 348
Avery Dennison Corp.............. 3,000 181
(a)Avid Technology, Inc.......... 5,500 89
Avnet, Inc....................... 1,400 65
Avon Products, Inc............... 4,200 233
Baker Hughes, Inc................ 5,600 188
Baldor Electric Co............... 9,500 189
Ballard Medical Products......... 7,300 170
Bank of New York Co., Inc........ 9,300 341
Bank One Corp.................... 15,900 947
BankAmerica Corp................. 23,000 1,686
BankBoston Corp.................. 4,400 225
Banknorth Group, Inc............. 3,200 106
(a)Barnes & Noble, Inc........... 2,100 57
Barnes Group, Inc................ 5,000 109
(a)Barr Laboratories, Inc........ 4,700 187
(a)Barrett Resources Corp........ 5,800 223
Baxter International, Inc........ 4,300 261
BB&T Corp........................ 4,900 180
(a)BE Aerospace, Inc............. 5,200 97
Beckman Coulter, Inc............. 1,200 58
Becton & Dickinson & Co.......... 4,500 135
(a)Bed Bath & Beyond, Inc........ 4,000 154
Belden, Inc...................... 8,900 213
Bell Atlantic Corp............... 21,000 1,373
BellSouth Corp................... 26,300 1,233
Bergen Brunswig Corp. 'A'........ 3,000 52
(a)Best Buy Co., Inc............. 6,000 405
Bestfoods........................ 4,300 213
(a)Billing Concepts Corp......... 7,300 82
Bindley Western Industries,
Inc............................ 6,667 154
(a)Biogen, Inc................... 4,200 270
(a)BISYS Group, Inc.............. 6,200 363
</TABLE>
- --------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<S> <C> <C>
(a)BJ Services Co................ 2,700 $ 79
(a)BJ's Wholesale Club, Inc...... 2,800 84
Black & Decker Corp.............. 2,400 151
Blout International, Inc. 'A'.... 8,900 242
(a)BMC Software, Inc............. 7,185 388
Boeing Co........................ 13,800 610
Borg-Warner Automotive, Inc...... 5,035 277
(a)Boston Scientific Corp........ 6,900 303
Bowater, Inc..................... 2,000 95
Bowne & Co....................... 8,500 111
Brady Corp. 'A'.................. 4,900 159
(a,c)BREED Technologies, Inc..... 13,300 30
(a)Brightpoint, Inc.............. 11,800 72
(a)Brinker International, Inc.... 2,500 68
Bristol-Myers Squibb Co.......... 27,000 1,902
Browning-Ferris Industries,
Inc............................ 3,100 133
Brush Wellman, Inc............... 6,100 111
(a)Buckeye Technologies, Inc..... 8,500 129
Burlington Northern Railroad
Co............................. 5,700 177
Burlington Resources, Inc........ 3,100 134
(a)Burr-Brown Corp............... 8,000 293
(a)C-Cube Microsystems, Inc...... 8,400 266
(a)Cable Design Technologies
Corp........................... 6,900 107
Cabot Corp....................... 2,600 63
Cabot Oil & Gas Corp. 'A'........ 6,800 127
(a)Cadence Design Systems,
Inc............................ 6,500 83
Cambrex Corp..................... 6,300 165
(a)Cambridge Tech Partner,
Inc............................ 1,900 33
Campbell Soup Co................. 5,400 250
(a)Canandaigua Brands, Inc.
'A'............................ 3,800 199
Capital One Financial Corp....... 3,300 184
Capital Re Corp.................. 7,700 124
Caraustar Industries, Inc........ 6,000 148
Cardinal Health, Inc............. 4,258 273
Carlisle Cos., Inc............... 1,100 53
Carolina Power & Light Co........ 1,900 81
Carpenter Technology Corp........ 1,200 34
Case Corp........................ 9,200 443
Caseys General Stores, Inc....... 12,000 180
(a)Catalina Marketing Corp....... 3,800 350
Caterpillar, Inc................. 6,000 360
Cato Corp., 'A'.................. 7,000 81
CBRL Group, Inc.................. 2,500 43
(a)CBS, Inc...................... 10,900 473
CCB Financial Corp............... 1,300 69
(a)CDI Corp...................... 4,900 167
(a)CEC Entertainment, Inc........ 3,600 152
(a)Cendant Corp.................. 13,100 269
(a)Centocor, Inc................. 2,200 103
Central & South West Corp........ 2,600 61
Central Hudson Gas & Electric
Corp........................... 3,800 160
Central Parking Corp............. 6,000 205
Centura Banks, Inc............... 4,900 276
Century Telephone Enterprises,
Inc............................ 3,900 155
(a)Ceridian Corp................. 2,600 85
(a)Cerner Corp................... 6,400 134
(a)Champion Enterprises, Inc..... 10,000 186
Charter One Financial, Inc....... 4,000 111
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
Chase Manhattan Corp............. 12,000 $ 1,039
Chemed Corp...................... 4,000 133
ChemFirst, Inc................... 4,600 112
Chevron Corp..................... 8,800 838
Chiquita Brands International,
Inc............................ 13,900 125
(a)Chiron Corp................... 5,500 114
(a)Chris-Craft Industries,
Inc............................ 1,545 73
Chubb Corp....................... 2,400 167
(a)Ciber, Inc.................... 11,100 212
Cigna Corp....................... 3,100 276
CILCORP, Inc..................... 3,100 194
Cincinnati Bell, Inc............. 4,500 112
Cincinnati Financial Corp........ 2,900 109
Cinergy Corp..................... 2,200 70
Cintas Corp...................... 3,100 208
(a)Cisco Systems, Inc............ 42,600 2,748
Citigroup, Inc................... 46,200 2,194
(a)Citrix Systems, Inc........... 2,600 147
City National Corp............... 1,500 56
Cke Restaurants, Inc............. 10,200 166
CLARCOR, Inc..................... 6,000 115
Clayton Homes, Inc............... 4,800 55
(a)Clear Channel Communications,
Inc............................ 3,800 262
Clorox Co........................ 1,988 212
CMS Energy Corp.................. 2,800 117
CNF Transportation, Inc.......... 1,800 69
Coastal Corp..................... 4,600 184
Coca-Cola Bottling Co............ 2,100 118
Coca-Cola Co..................... 32,600 2,037
Coca-Cola Enterprises, Inc....... 5,900 176
(a)Cognex Corp................... 8,000 252
Colgate Palmolive Co............. 4,100 405
Columbia HCA/Healthcare Corp..... 10,400 237
Comair Holdings, Inc............. 18,900 393
Comcast Corp..................... 10,400 400
Comdisco, Inc.................... 4,800 123
Comerica, Inc.................... 2,500 149
Commerce Bancorp, Inc............ 4,700 201
Commercial Federal Corp.......... 12,700 294
Commercial Metals Co............. 5,000 142
Commonwealth Energy Systems...... 4,200 176
(a)CommScope, Inc................ 8,800 271
Compaq Computer Corp............. 23,500 557
Computer Associates
International, Inc............. 7,800 429
(a)Computer Sciences Corp........ 2,400 166
Computer Task Group, Inc......... 4,700 80
Comsat Corp...................... 900 29
(a)Comverse Technology, Inc...... 1,950 147
Conagra, Inc..................... 7,300 194
(a)Concord EFS, Inc.............. 2,900 123
Conectiv, Inc.................... 4,100 100
(a)Conexant Systems, Inc......... 1,800 105
Conseco, Inc..................... 4,400 134
Consolidated Edison, Inc......... 3,500 158
(a)Consolidated Graphics, Inc.... 3,300 165
Consolidated Papers, Inc......... 3,900 104
(a)Consolidated Stores Corp...... 2,400 65
(a)Convergys Corp................ 4,400 85
Cooper Companies, Inc............ 4,400 110
</TABLE>
-----------------------
13
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<S> <C> <C>
Cooper Industries, Inc........... 3,000 $ 156
Corn Products International,
Inc............................ 7,100 216
Corning, Inc..................... 3,900 273
(a)Costco Cos., Inc.............. 3,200 256
Countrywide Credit Industries,
Inc............................ 2,200 94
(a)Covance, Inc.................. 1,800 43
(a)Coventry Health Care, Inc..... 12,000 131
Crompton & Knowles Corp.......... 2,800 55
Cross Timbers Oil Co............. 10,600 158
CSX Corp......................... 3,500 159
CTS Corp......................... 4,100 287
Cullen/Frost Bankers, Inc........ 10,600 292
Cummins Engine................... 300 17
CVS Corp......................... 5,800 297
D.R. Horton, Inc................. 12,000 199
Dallas Semiconductor Corp........ 6,700 338
Dana Corp........................ 4,000 184
Dayton Hudson Corp............... 6,700 435
Dean Foods Co.................... 1,200 50
Deere & Co....................... 3,700 147
(a)Dell Computer Corp............ 35,000 1,295
(a)Delphi Automotive Systems
Corp........................... 6,709 125
Delphi Financial Group, Inc.
'A'............................ 4,692 168
Delta & Pine Land Co............. 8,000 252
Delta Airlines, Inc.............. 1,900 109
DENTSPLY International, Inc...... 2,300 66
Devon Energy Corp................ 7,000 250
(a)DeVry, Inc.................... 13,800 309
Diagnostic Products Corp......... 5,000 138
Dial Corp........................ 3,200 119
Diebold, Inc..................... 1,900 55
Dime Bancorp, Inc................ 2,500 50
Dimon, Inc....................... 9,100 47
(a)Dionex Corp................... 5,000 202
(a)Discount Auto Parts, Inc...... 4,600 111
Dole Food Co., Inc............... 2,000 59
(a)Dollar Tree Stores, Inc....... 1,900 84
Dominion Resources, Inc.......... 3,600 156
Donaldson Co., Inc............... 3,400 83
Dover Corp....................... 4,300 150
Dow Chemical Co.................. 4,200 533
Downey Financial Corp............ 5,900 129
DPL, Inc......................... 3,700 68
(a)Dress Barn, Inc............... 7,100 114
DTE Energy Co.................... 1,800 72
Du Pont (EI) de Nemours Co....... 16,000 1,093
Duke Power Co.................... 4,500 245
Dun & Brandstreet Corp........... 4,000 142
(a)E*TRADE Group, Inc............ 43,600 1,741
Earthgrains Co................... 8,300 214
Eastern Utilities Association.... 5,600 163
Eastman Kodak Co................. 4,700 318
Eaton Vance Corp................. 6,100 210
Edison International Corp........ 5,100 136
El Paso Energy Corp.............. 3,100 109
Electronic Data Systems Corp..... 6,900 390
Electronics For Imaging, Inc..... 2,000 109
Eli Lilly & Co................... 14,900 1,067
(a)EMC Corp...................... 14,000 770
Emerson Electric Co.............. 5,800 365
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
Energen Corp..................... 6,400 $ 119
Energy East Corp................. 3,600 94
Enhance Financial Services Group,
Inc............................ 8,100 160
Enron Corp....................... 4,900 401
Ensco International, Inc......... 4,200 84
Entergy Corp..................... 3,700 116
(a)Enzo Biochem, Inc............. 9,800 97
Equifax, Inc..................... 2,300 82
(a)Etec Systems, Inc............. 5,000 166
Ethan Allen Interiors, Inc....... 9,600 362
Executive Risk, Inc.............. 3,000 255
Expeditors International of
Washington, Inc................ 10,000 272
(a)Express Scripts, Inc. 'A'..... 6,700 403
Exxon Corp....................... 32,200 2,483
Fair, Issac & Co., Inc........... 3,600 126
Family Dollar Stores, Inc........ 5,400 130
(a)Family Golf Centers, Inc...... 5,800 45
Fannie Mae Corp.................. 13,600 930
Fastenal Co...................... 1,400 73
(a)FDX Corp...................... 5,000 271
Federal Home Loan Mortgage
Corp........................... 8,700 505
Federal Signal Corp.............. 2,400 51
Federal-Mogul Corp............... 2,000 104
(a)Federated Department Stores... 3,900 206
Fidelity National Financial,
Inc............................ 6,270 132
Fifth Third Bancorp.............. 4,000 266
Finova Group, Inc................ 1,700 89
First American Financial Corp.... 10,800 193
First Data Corp.................. 6,700 328
First Midwest Bancorp, Inc....... 5,900 235
First Security Corp.............. 5,100 139
First Tennessee National Corp.... 3,500 134
First Union Corp. (N.C.)......... 12,800 602
First Virginia Banks, Inc........ 1,500 74
Firstbancorp/Puerto Rico......... 6,000 135
Firstenergy Corp................. 3,500 109
Firstmerit Corp.................. 13,000 365
(a)Fiserv, Inc................... 3,300 103
Fleet Financial Group, Inc....... 7,200 319
Fleming Cos., Inc................ 10,100 117
Florida Progress Corp............ 1,900 78
Florida Rock Industries, Inc..... 4,300 196
Flowers Industries, Inc.......... 3,700 80
(a)Foodmaker, Inc................ 8,600 244
(a)Footstar, Inc................. 5,500 205
Ford Motor Co.................... 17,100 965
(a)Forest Laboratories, Inc.
'A'............................ 2,500 116
Fort James Corp.................. 4,100 155
Fortune Brands, Inc.............. 3,300 137
(a)Foundation Health Systems
'A'............................ 6,600 99
FPL Group, Inc................... 2,100 115
(a)Franklin Covey Co............. 6,700 49
Franklin Resources, Inc.......... 3,900 158
Fremont General Corp............. 13,700 259
Frontier Corp.................... 3,100 183
Frontier Insurance Group, Inc.... 9,400 145
(a)Furniture Brands
International, Inc............. 1,800 50
G & K Services Inc. 'A'.......... 4,500 236
Gallagher (Arthur J.) & Co....... 3,200 158
Gannett Co., Inc................. 3,900 278
</TABLE>
- --------------
14
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<S> <C> <C>
Gap, Inc......................... 12,525 $ 631
(a)Gateway 2000, Inc............. 2,600 153
Gatx Corp........................ 2,600 99
General Dynamics Corp............ 2,200 151
General Electric Co.............. 45,700 5,164
General Mills, Inc............... 2,700 217
General Motors Corp.............. 9,600 634
(a)Genesis Health Ventures,
Inc............................ 8,800 26
(a)Gentex Corp................... 13,800 386
(a)Genzyme Corp.................. 2,400 116
(a)Genzyme Surgical Products..... 429 2
Geon Co.......................... 5,200 168
Georgia-Pacific Corp............. 6,600 313
Georgia-Pacific Corp. (Timber
Group)......................... 3,100 78
Gerber Scientific, Inc........... 5,900 130
Gillette Co...................... 15,300 627
(a)Global Marine, Inc............ 5,800 90
(a)Golden State Bancorp, Inc..... 1,000 1
Golden West Financial Corp....... 1,100 108
Goodyear Tire & Rubber Co........ 4,200 247
GPU, Inc......................... 2,100 89
Graco, Inc....................... 3,700 109
Greenpoint Financial Corp........ 2,400 79
GTE Corp......................... 13,100 992
Guidant Corp..................... 4,500 231
Guilford Mills, Inc.............. 9,500 99
(a)Gulfstream Aerospace Corp..... 2,400 162
H.J. Heinz Co.................... 5,100 256
(a)Ha-Lo Industries, Inc......... 8,850 87
(a)Hadco Corp.................... 3,000 119
Halliburton Co................... 6,300 285
Hannaford Brothers Co............ 1,900 102
Harley-Davidson, Inc............. 4,700 256
Harman International Industries,
Inc............................ 4,400 194
Harsco Corp...................... 1,500 48
Hartford Financial Services
Group.......................... 3,000 175
(a)Health Management Associates,
Inc. 'A'....................... 7,400 83
(a)HEALTHSOUTH Corp.............. 9,000 134
(a)Heartland Express, Inc........ 7,000 115
Henry (Jack) & Associates........ 4,100 161
Herman Miller, Inc............... 2,500 53
Hershey Foods Corp............... 2,100 125
Hewlett-Packard Co............... 14,500 1,457
Hibernia Corp. 'A'............... 5,100 80
Hillenbrand Industries, Inc...... 2,200 95
Hilton Hotels Corp............... 4,500 64
(a)HNC Software, Inc............. 5,200 160
Home Depot, Inc.................. 19,600 1,263
HON INDUSTRIES, Inc.............. 2,100 61
Honeywell, Inc................... 2,100 243
Hormel Foods Corp................ 2,400 97
Household Internaional, Inc...... 6,800 322
Hubbell Inc. 'B'................. 2,900 132
Hudson United Bancorp............ 8,000 245
Hughes Supply, Inc............... 6,200 184
Huntington Bancshares, Inc....... 3,700 130
(a)Hutchinson Technology, Inc.... 5,700 158
(a)Hyperion Solutions Corp....... 6,000 107
IBP, Inc......................... 3,200 76
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
ICN Pharmaceuticals, Inc......... 2,800 $ 90
(a)IDEXX Laboratories, Inc....... 8,100 189
(a)IHOP Corp..................... 5,200 125
Illinois Tool Works, Inc......... 4,000 328
Illinova Corp.................... 2,900 79
IMC Global, Inc.................. 4,000 71
IMS Health, Inc.................. 5,600 175
(a)Inacom Corp................... 6,272 79
(a)Incyte Pharmaceuticals,
Inc............................ 6,300 167
(a)Informix Corp................. 5,600 48
Ingersoll-Rand Co................ 2,800 181
(a)Input/Output, Inc............. 10,300 78
(a)Insituform Technologies, Inc.
'A'............................ 8,200 177
(a)Integrated Health Services,
Inc............................ 12,400 99
Intel Corp....................... 45,600 2,713
Inter-Tel, Inc................... 6,100 111
Interface, Inc................... 13,000 112
(a)Interim Services, Inc......... 10,600 219
Intermet Corp.................... 6,000 91
International Business Machines
Corp........................... 25,400 3,283
International Game Technology.... 4,000 74
International Paper Co........... 6,400 323
(a)International Rectifier
Corp........................... 14,200 189
Interstate Bakeries Corp......... 2,300 52
(a)Intuit, Inc................... 1,700 153
(a)Ionics, Inc................... 4,400 161
IPALCO Enterprises, Inc.......... 3,400 72
ITT Industries, Inc.............. 2,400 92
Ivacare Corp..................... 6,800 182
J.C. Penney Co., Inc............. 3,900 189
Jefferson-Pilot Corp............. 1,500 99
JLG Industries, Inc.............. 9,500 194
John H. Harland Co............... 7,100 142
Johnson & Johnson................ 17,800 1,744
(a)Jones Apparel Group, Inc...... 3,300 113
Jones Pharma., Inc............... 6,200 244
JSB Financial.................... 1,800 92
(a)Just For Feet, Inc............ 7,300 47
Justin Industries................ 7,300 102
Kaman Corp. 'A'.................. 7,600 119
Kansas City Southern Industries,
Inc............................ 3,300 211
Kaydon Corp...................... 1,300 44
(a)Keane, Inc.................... 2,000 45
Kellogg Co....................... 5,100 168
Kellwood Co...................... 5,600 152
Kelly Services Inc. 'A'.......... 1,600 51
(a)Kemet Corp.................... 8,600 197
(a)Kent Electronics Corp......... 8,300 164
Keycorp.......................... 6,500 209
Keyspan Energy Corp.............. 4,100 108
Keystone Financial, Inc.......... 11,900 352
Kimberly-Clark Corp.............. 7,400 422
(a)Kirby Corp.................... 3,600 76
(a)Kmart Corp.................... 9,700 159
KN Energy, Inc................... 2,200 29
(a)Kohls Corp.................... 2,600 201
(a)Kroger Co..................... 13,200 369
(a)Kulicke & Soffa Industries.... 5,900 158
La-Z-Boy, Inc.................... 10,900 251
(a)Lakes Gaming, Inc............. 2,950 32
</TABLE>
-----------------------
15
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<S> <C> <C>
Lancaster Colony Corp............ 1,900 $ 66
(a)Landstar System, Inc.......... 2,100 76
(a)Lattice Semiconductor Corp.... 5,000 311
(a)Lear Corp..................... 2,100 104
Lee Enterprises.................. 2,700 82
(a)Legato Systems, Inc........... 1,100 64
Legg Mason, Inc.................. 12,300 474
Leggett & Platt, Inc............. 5,800 161
Lehman Brothers Holdings, Inc.... 3,500 218
(a)Lexmark International Group,
Inc............................ 3,800 251
LG&E Energy Corp................. 2,900 61
Libbey, Inc...................... 3,700 107
(a)LifePoint Hospitals, Inc...... 547 7
Lilly Industries, Inc. 'A'....... 5,200 97
(a)Lincare Holdings, Inc......... 2,100 53
Lincoln National Corp............ 3,200 167
Linear Technology Corp........... 4,400 296
(a)Linens 'n Things, Inc......... 7,800 341
Litton Industries, Inc........... 1,500 108
Lockheed Martin Corp............. 5,900 220
Loews Corp....................... 1,800 142
Lone Star Industries, Inc........ 5,300 199
Lowe's Cos., Inc................. 8,840 501
Lubrizol Corp.................... 3,100 84
Luby's Cafeterias, Inc........... 8,800 132
Lucent Technologies, Inc......... 41,045 2,768
Lyondell Petrochemical Co........ 2,900 60
Macdermid, Inc................... 5,400 251
(a)Macromedia, Inc............... 8,300 293
Maf Bancorp, Inc................. 2,800 68
(a)Mandalay Resort Group......... 3,700 78
Manitowoc Co., Inc............... 5,550 231
Manpower, Inc.................... 2,700 61
Marriott International 'A'....... 4,700 176
Marsh & McLennan Cos., Inc....... 3,600 272
Marshall & Ilsley Corp........... 2,900 187
(a)Marshall Industries........... 6,700 241
Martin Marietta Corp............. 1,700 100
Masco Corp....................... 5,300 153
Mattel, Inc...................... 4,200 111
(a)Maxim Integrated Products..... 3,800 253
May Department Stores Co......... 6,000 245
Maytag Corp...................... 2,400 167
MBIA, Inc........................ 2,300 149
MBNA Corp........................ 10,300 315
McCormick & Co., Inc............. 2,900 92
McDonald's Corp.................. 18,300 756
McGraw-Hill Cos., Inc............ 3,700 200
MCI WorldCom, Inc................ 24,200 2,087
Mckesson Corp.................... 7,699 247
MCN Corp......................... 2,400 50
Media General, Inc. 'A'.......... 1,400 71
(a)MediaOne Group, Inc........... 8,400 625
(a)Medimmune, Inc................ 10,700 725
(a)Medquist, Inc................. 4,900 214
Medtronic, Inc................... 6,700 522
Mellon Bank Corp................. 7,200 262
(a)Men's Warehouse, Inc.......... 6,800 173
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
Mercantile Bancorp............... 2,600 $ 149
Mercantile Bankshares Corp....... 2,600 92
Merck & Co., Inc................. 31,700 2,346
(a)Mercury Interactive........... 7,600 269
Merrill Lynch & Co., Inc......... 4,900 392
Methode Electronics 'A'.......... 8,600 197
(a)Metro Networks, Inc........... 3,500 187
MGIC Investment Corp............. 2,500 122
(a)Michaels Stores, Inc.......... 6,400 196
(a)Microchip Technology, Inc..... 1,600 76
(a)Micron Technology, Inc........ 3,800 153
(a)Micros Systems, Inc........... 3,500 119
(a)Microsoft Corp................ 66,200 5,970
MidAmerican Energy Holdings
Co............................. 2,300 80
Midas, Inc....................... 1 -
(a)Midway Games, Inc............. 8,800 114
Minnesota Mining & Manufacturing
Co............................. 5,800 504
Minnesota Power & Light Co....... 3,000 60
Mississippi Chemical Corp........ 7,300 72
Mobil Corp....................... 10,500 1,039
(a)Modis Professional Services,
Inc............................ 3,800 52
(a)Mohawk Industries, Inc........ 10,600 322
Molex, Inc....................... 4,800 178
Monsanto......................... 8,800 347
Montana Power Co................. 1,500 106
Morgan (J.P.) & Co., Inc......... 2,700 379
(a)Morrison Knudsen Corp......... 13,600 140
Motorola, Inc.................... 9,100 862
(a)MS Carriers................... 4,700 139
(a)Mueller Industries, Inc....... 8,800 299
Murphy Oil Corp.................. 2,500 122
Mutual Risk Management Ltd....... 7,700 257
Myers Industries, Inc............ 5,000 100
Mylan Laboratories, Inc.......... 3,900 103
Nabisco Group Holdings Corp...... 4,700 92
(a)Nabors Industries, Inc........ 3,400 83
National City Corp............... 3,900 255
National Computer Systems,
Inc............................ 6,500 219
National Data Corp............... 8,300 355
National Fuel Gas Co............. 1,400 68
(a)National Instruments Corp..... 6,600 266
(a)Nautica Enterprises, Inc...... 8,500 143
(a)NBTY, Inc..................... 13,900 90
NCR Corp......................... 3,100 151
(a)NCS Healthcare, Inc........... 5,300 29
(a)Networks Associates, Inc...... 3,700 54
Nevada Power Co.................. 3,100 78
New England Business Services,
Inc............................ 3,500 108
New England Electric System...... 2,100 105
New Jersey Resources Corp........ 4,100 153
New York Times Co. 'A'........... 3,100 114
Newell Rubbermaid Inc............ 5,501 256
(a)Newfield Exploration Co....... 7,600 216
(a)Nextel Communications Inc.
'A'............................ 5,600 281
(a)NFO Worldwide, Inc............ 12,600 176
Nike, Inc. 'B'................... 4,500 285
NiSource Inc..................... 2,500 65
Noble Affiliates, Inc............ 2,300 65
(a)Noble Drilling Corp........... 4,000 79
Norfolk Southern Corp............ 5,200 157
</TABLE>
- --------------
16
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<S> <C> <C>
Norrell Corp..................... 7,700 $ 145
Nortel Networks Corp............. 8,800 764
(a)North American Vaccine,
Inc............................ 6,400 31
North Fork Bancorp, Inc.......... 2,900 62
(a)Northeast Utilities........... 4,000 71
Northern Trust Corp.............. 2,100 204
Northwest Natural Gas Co......... 5,500 133
(a)Nova Corp/Georgia............. 2,200 55
(a)Novell, Inc................... 5,900 156
(a)Novellus Systems, Inc......... 7,700 526
(a)O'Reilly Automotive, Inc...... 4,800 242
(a)Oak Industries, Inc........... 4,300 188
Oakwood Homes Corp............... 10,100 133
Occidental Petroleum Corp........ 5,300 112
(a)Office Depot, Inc............. 11,250 248
Ogden Corp....................... 2,000 54
OGE Energy Corp.................. 4,400 105
Old Kent Financial Corp.......... 3,045 128
Old Republic International
Corp........................... 3,100 54
Olin Corp........................ 2,400 32
Om Group, Inc.................... 5,600 193
Omnicare, Inc.................... 2,800 35
Omnicon Group, Inc............... 3,300 264
(a)Oracle System Corp............ 20,100 746
Orange & Rockland Utilities,
Inc............................ 2,200 129
(a)Orbital Sciences Corp......... 7,700 182
Orion Capital Corp............... 6,700 240
(a)Orthodontic Centers of
America........................ 11,500 162
(a)Outback Steakhouse, Inc....... 2,400 94
Owens & Minor, Inc............... 8,800 97
(a)Owens-Illinois, Inc........... 3,300 108
(a)Oxford Health Plans, Inc...... 2,600 40
Pacific Century Financial
Corp........................... 3,400 73
(a)Pacific Sunwear of
California..................... 6,000 146
(a)Pacificare Health Systems..... 1,400 101
PacifiCorp....................... 4,400 81
Paine Webber Group, Inc.......... 4,000 187
(a)Parexel International Corp.... 4,700 63
(a)Park Place Entertainment
Corp........................... 11,800 114
(a)Patterson Dental Co........... 6,200 215
(a)Paxar......................... 11,100 100
Paychex, Inc..................... 3,750 120
Peco Energy Co................... 3,100 130
(a)Pediatrix Medical Group,
Inc............................ 3,400 72
Pennsylvania Enterprises, Inc.... 4,000 123
Pentair, Inc..................... 1,500 69
Pepsico, Inc..................... 20,100 778
Pfizer, Inc...................... 17,600 1,932
PG&E Corp........................ 5,700 185
(a)Pharmaceutical Product
Development.................... 4,900 134
Pharmacia & Upjohn, Inc.......... 7,300 415
Philadelphia Suburban Corp....... 6,300 145
Philip Morris Cos., Inc.......... 32,600 1,310
Phillips Petroleum Co............ 4,100 206
Phillips-Van Heusen Corp......... 9,800 97
(a)Photronics, Inc............... 5,900 145
(a)Phycor, Inc................... 16,500 122
Piedmont Natural Gas Co.......... 4,800 149
Pier 1 Imports, Inc.............. 21,800 245
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
Pillowtex Corp................... 3,900 $ 64
Pinnacle West Capital Corp....... 2,300 93
(a)Pioneer Group, Inc............ 6,400 110
Pioneer Hi-Bred International,
Inc............................ 3,700 144
Pitney Bowes, Inc................ 4,400 283
Pittston Brinks Group............ 1,800 48
(a)Plains Resources, Inc......... 5,900 112
(a)Platinum Technology, Inc...... 2,800 82
PMI Group, Inc................... 1,000 63
PNC Bank Corp.................... 4,100 236
Pogo Producing Co................ 10,800 201
Polaris Industries, Inc.......... 5,300 231
(a)Policy Management Systems
Corp........................... 1,200 36
Potomac Electric Power Co........ 3,000 88
PPG Industries, Inc.............. 4,600 272
Praxair, Inc..................... 3,500 171
Premark International, Inc....... 2,500 94
(a)Prepaid Legal Services,
Inc............................ 5,400 147
(a)Pride International, Inc...... 10,900 115
(a)Primark Corp.................. 5,600 157
(a)Prime Hospitality Corp........ 14,200 170
(a)Priority Healthcare Corp...... 3,426 118
Procter & Gamble Co.............. 17,600 1,571
(a)Progress Software Corp........ 3,700 105
Progressive Corp................. 1,200 174
(a)Promus Company, Inc........... 2,800 87
Protective Life Corp............. 2,300 76
(a)Protein Design Labs, Inc...... 3,800 84
Provident Financial Group........ 1,400 61
Providian Financial Corp......... 2,750 257
Public Service Co. of New
Mexico......................... 2,600 52
Public Service Enterprise Group,
Inc............................ 3,000 123
Puget Sound Energy, Inc.......... 3,000 72
Quaker Oats, Co.................. 2,600 173
(a)Qualcomm, Inc................. 4,200 603
(a)Quantum Corp.................. 5,300 128
Queens County Bancorp, Inc....... 4,400 142
Questar Corp..................... 2,900 55
(a)Quintiles Transnational
Corp........................... 7,996 336
(a)R.J. Reynolds Tobacco
Holdings, Inc.................. 1,566 49
(a)Ralcorp Holdings, Inc......... 7,000 112
Ralston-Ralston Purina Group..... 4,700 143
Raymond James Financial, Inc..... 10,100 242
Rayonier, Inc.................... 1,400 70
Raytheon Co., 'B'................ 5,500 387
(a)Read-Rite Corp................ 10,800 67
Regal Beloit..................... 4,900 116
Regions Financial Corp........... 3,700 142
Regis Corp....................... 7,650 147
Reliance Steel & Aluminum........ 4,000 156
Reliant Energy, Inc.............. 3,800 105
Reliastar Financial Corp......... 2,300 101
(a)Renal Care Group, Inc......... 9,200 238
Republic New York Corp........... 1,800 123
(a)Respironics, Inc.............. 7,000 106
Reynolds & Reynolds Co. 'A'...... 2,700 63
Richfood Holdings, Inc........... 9,900 174
Riggs National Corp. of
Washington D.C................. 5,800 119
Rite Aid Corp.................... 3,800 94
(a)Robert Half International,
Inc............................ 2,800 73
</TABLE>
-----------------------
17
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<S> <C> <C>
(a)Roberts Pharmaceutical
Corp........................... 7,400 $ 179
Rockwell International Corp...... 3,800 231
Rohm & Haas Co................... 5,100 219
Rollins Truck Leasing Corp....... 12,600 140
Roper Industries, Inc............ 8,000 256
Ross Stores, Inc................. 1,400 71
RPM, Inc......................... 4,700 67
Ruby Tuesday, Inc................ 7,300 139
Russ Berrie & Co., Inc........... 5,600 139
(a)Ryan's Family Steak Houses,
Inc............................ 11,400 133
(a)Safe Skin Corp................ 11,000 132
Safeco Corp...................... 2,200 97
(a)Saks, Inc..................... 4,100 118
(a)Samina Corp................... 8,500 645
(a)Santa Fe Snyder Corp.......... 36,455 278
Sara Lee Corp.................... 12,700 288
SBC Communications, Inc.......... 25,798 1,496
Scana Corp....................... 2,500 58
Schering-Plough Corp............. 19,900 1,055
Schwab (Charles) Corp............ 5,900 648
(a)SCI Systems, Inc.............. 1,900 90
(a)Seagate Technology, Inc....... 3,900 100
Seagram Co., Ltd................. 5,400 272
Sears, Roebuck & Co.............. 5,800 258
SEI Corp......................... 3,700 327
Selective Insurance Group,
Inc............................ 7,200 137
Sempra Energy.................... 4,401 100
(a)Sepracor Inc.................. 800 65
Service Corp. International...... 3,900 75
(a)Service Experts, Inc.......... 4,300 94
(a)Shaw Industries, Inc.......... 4,400 73
Sherwin-Williams Co.............. 4,300 119
(a)Shopko Stores, Inc............ 5,900 214
(a)Shorewood Packaging........... 6,200 114
(a)Siebel Systems, Inc........... 2,500 166
(a)Sierra Health Services,
Inc............................ 6,700 97
Sierra Pac Res Com............... 4,700 171
(a)Silicon Valley Bancshares..... 4,900 121
Skywest, Inc..................... 4,900 122
SLM Holding Corp................. 2,500 115
(a)Smith International, Inc...... 1,700 74
(a)Smithfield Foods, Inc......... 7,700 257
(a)Snyder Communications, Inc.... 2,100 69
(a)Sola International, Inc....... 6,400 124
Solutia, Inc..................... 3,400 72
Sonat, Inc....................... 2,500 83
Sonoco Products Co............... 3,100 93
Sotheby's Holdings, Inc. 'A'..... 2,100 80
Southdown, Inc................... 1,500 96
Southern Co...................... 10,700 284
Southtrust Corp.................. 4,600 177
Southwest Airlines Co............ 4,200 131
Southwest Gas Corp............... 6,400 183
Southwestern Energy Co........... 8,500 90
Sovereign Bancorp, Inc........... 5,800 70
Sprint Corp...................... 11,800 623
(a)Sprint Corp................... 3,050 174
(a)SPS Technologies, Inc......... 2,900 109
(a)SPX Corp...................... 1,200 100
St. John Knits, Inc.............. 4,400 129
St. Paul Bancorp, Inc............ 7,600 194
St. Paul Cos., Inc............... 4,901 156
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
Standard Motor Products.......... 3,700 $ 91
Standard Products Co............. 6,400 164
(a)Staples, Inc.................. 7,250 224
(a)Starbucks Corp................ 5,400 203
Statestreet Corp................. 3,000 256
(a)Steris Corp................... 2,100 41
(a)Sterling Commerce, Inc........ 2,600 95
(a)Sterling Software, Inc........ 2,500 67
Stewart Enterprises, Inc. 'A'.... 3,600 52
(a)Stillwater Mining Co.......... 7,200 235
Stone & Webster, Inc............. 3,700 99
(a)Storage Technology Corp....... 3,000 68
Stride Rite Corp................. 9,700 100
Stryker Corp..................... 2,800 168
Sturm Ruger & Co., Inc........... 6,700 72
Summit Bancorp................... 3,200 134
(a)Sun Microsystems, Inc......... 10,800 744
(a)Sunguard Data Systems, Inc.... 3,000 104
(a)Sunrise Medical, Inc.......... 7,900 56
Suntrust Banks, Inc.............. 3,100 215
(a)Superior Services, Inc........ 5,900 157
Susquehanna Bancshares, Inc...... 6,100 108
(a)Sybron International Corp..... 3,300 91
Symbol Technologies, Inc......... 2,700 100
(a)Synopsys, Inc................. 2,000 110
Synovus Financial Corp........... 4,400 87
Sysco Corp....................... 5,600 167
T. Rowe Price Associates, Inc.... 3,500 134
(a)TALK.com, Inc................. 15,000 169
TCA Cable TV, Inc................ 1,800 100
TCF Financial Corp............... 2,500 70
(a)Tech Data Corp................ 1,600 61
Technitrol, Inc.................. 4,300 139
(a)Technology Solutions Co....... 9,700 105
Teco Energy, Inc................. 2,900 66
Teleflex, Inc.................... 1,700 74
Telephone & Data Systems, Inc.... 2,100 153
(a)Tellabs, Inc.................. 8,000 540
(a)Tenet Healthcare Corp......... 5,200 97
(a)Teradyne, Inc................. 2,500 179
Texaco, Inc...................... 7,200 450
Texas Industries, Inc............ 4,600 178
Texas Instruments, Inc........... 5,600 812
Texas Utilities Co............... 3,900 161
Textron, Inc..................... 3,000 247
(a)The Cheesecake Factory,
Inc............................ 4,600 140
The Interpublic Group of Cos.,
Inc............................ 2,800 243
The Limited, Inc................. 4,100 186
The Marcus Corporation........... 7,900 97
(a)The Scott Company............. 4,500 214
Thomas Industries, Inc........... 5,300 109
(a)3Com Corp..................... 5,200 139
Tidewater, Inc................... 2,000 61
Tiffany & Co..................... 1,300 125
(a)Timberland Co. 'A'............ 3,000 204
Time Warner, Inc................. 16,400 1,205
Times Mirror Co. 'A'............. 1,300 77
TJX Companies, Inc............... 5,000 167
TNP Enterprises, Inc............. 3,300 120
(a)Toll Brothers, Inc............ 7,800 167
Torchmark Corp................... 2,300 78
Tosco Corp....................... 4,600 119
(a)Total Renal Care Holdings,
Inc............................ 2,600 40
</TABLE>
- --------------
18
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
</TABLE>
UNITED STATES (CONT.)
<TABLE>
<S> <C> <C>
Transamerica Corp................ 1,700 $ 128
Transocean Offshore, Inc......... 2,900 76
Tredegar Industries, Inc......... 7,100 154
Trenwick Group, Inc.............. 3,000 74
(a)Triad Hospitals, Inc.......... 547 7
(a)Triarc Companies.............. 6,800 144
Tribune Co....................... 2,200 192
(a)Tricon Global Restaurants,
Inc............................ 2,400 130
(a)Trigon Healthcare, Inc........ 1,600 58
Trinity Industries, Inc.......... 1,500 50
True North Communications,
Inc............................ 9,500 285
Trustco Bank Corp................ 5,000 134
TRW, Inc......................... 2,500 137
(a)Tuboscope, Inc................ 10,900 149
Tyco International Ltd........... 12,328 1,168
Tyson Foods, Inc................. 6,500 146
(a)U.S. Airways Group, Inc....... 1,600 70
U.S. Bancorp..................... 10,400 354
(a)U.S. Foodservice, Inc......... 1,500 64
U.S. Freightways Corp............ 5,500 255
(a)U.S. Home Corp................ 3,700 131
(a)U.S. Onconlogy, Inc........... 7,000 84
U.S. Trust Corp.................. 3,500 324
U.S. West, Inc................... 6,800 399
Ultramar Diamond Shamrock
Corp........................... 2,900 63
(a)Ultratech Stepper, Inc........ 5,200 78
Unicom Corp...................... 3,700 143
Union Carbide Corp............... 3,600 175
Union Pacific Corp............... 3,600 210
Union Planters Corp.............. 2,600 116
(a)Unisys Corp................... 4,000 156
United Bankshares, Inc........... 7,400 196
United Healthcare Corp........... 3,500 219
United Illuminating Co........... 3,400 144
United Technologies Corp......... 7,948 570
United Water Resources, Inc...... 8,600 195
(a)Unitrode Corp................. 8,500 244
Universal Corp................... 1,500 43
Universal Foods Corp............. 2,600 55
(a)Universal Health Services,
Inc............................ 7,000 334
Unocal Corp...................... 4,500 178
UNUM Corp........................ 2,300 126
UST, Inc......................... 3,100 91
USX-Marathon Group............... 5,000 163
UtliCorp. United, Inc............ 3,750 91
(a)Valassis Communications,
Inc............................ 10,950 401
Valmont Industries............... 5,700 97
(a)Vertex Pharmaceuticals,
Inc............................ 5,500 133
(a)Viacom, Inc., 'B'............. 10,200 449
Viad Corp........................ 3,300 102
(a)Vicor Corp.................... 11,800 250
Vintage Petroleum, Inc........... 13,000 140
(a)Visx, Inc..................... 12,400 982
(a)Vitesse Semiconductor......... 14,500 978
Vodafone Group plc ADR........... 4,200 827
Vulcan Materials Co.............. 3,300 159
Wabash National Corp............. 6,400 124
Wachovia Corp.................... 2,600 222
Wal-Mart Stores, Inc............. 59,984 2,894
Walgreen Co...................... 12,900 379
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
Wallace Computer Services,
Inc............................ 2,100 $ 53
Walt Disney Co................... 27,900 860
Warnaco Group.................... 2,100 56
Warner-Lambert Co................ 11,200 777
Washington Mutual, Inc........... 8,100 287
Washington Post Co. 'B'.......... 400 215
Waste Management, Inc............ 8,200 441
Watsoc, Inc...................... 5,200 85
(a)Watson Pharmaceuticals,
Inc............................ 2,600 91
WD-40 Co......................... 6,000 150
(a)Weatherford International,
Inc............................ 3,500 128
Wells Fargo Co................... 21,400 915
Werner Enterprises, Inc.......... 9,900 205
Westpoint Stevens, Inc........... 2,300 69
(a)Westwood One Inc.............. 7,100 253
Weyerhaeuser Co.................. 4,500 309
Whitman Corp..................... 3,800 68
Whitney Holding Corp............. 4,100 163
(a)Whittman-Hart, Inc............ 9,800 311
(a)Whole Foods Market, Inc....... 5,300 255
Wicor, Inc....................... 9,800 274
Williams Cos., Inc............... 6,500 277
(a)Williams-Sonoma, Inc.......... 11,200 390
Wilmington Trust Corp............ 1,200 69
Winn-Dixie Stores, Inc........... 2,200 81
Wisconsin Energy................. 3,100 78
WM. Wrigley Jr. Co............... 1,900 171
Wolverine World Wide, Inc........ 11,800 165
(a)World Color Press, Inc........ 8,000 220
Wynn's International Inc......... 5,300 98
Xerox Corp....................... 9,500 561
(a)Xilinx, Inc................... 4,200 240
(a)Xircom, Inc................... 4,700 141
XL Capital Ltd. 'A'.............. 3,385 191
(a)Yellow Corp................... 6,400 114
York International Corp.......... 2,200 94
(a)Zale Corp..................... 7,800 312
(a)Zebra Technologies Corp.
'A'............................ 6,700 258
Zenith National Insurance........ 4,000 99
Zions Bancorp.................... 2,200 140
--------
237,535
--------
TOTAL COMMON STOCKS.............................. 497,797
--------
PREFERRED STOCKS (0.3%)
AUSTRALIA (0.2%)
News Corp., Ltd.................. 112,250 852
--------
AUSTRIA (0.0%)
Bau Holdings AG.................. 5 --
--------
GERMANY (0.1%)
SAP AG........................... 1,226 488
Volkswagen AG.................... 2,800 105
--------
593
--------
ITALY (0.0%)
Fiat S.p.A. (Privilegiate)....... 57,550 93
--------
NETHERLANDS (0.0%)
(a)Unilever N.V.................. 26,089 140
--------
TOTAL PREFERRED STOCKS........................... 1,678
--------
</TABLE>
-----------------------
19
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANIES (0.8%)
UNITED STATES (0.8%)
(b)Latin American Discovery Fund,
Inc............................ 381,900 $ 3,580
(a,b)Morgan Stanley Asia-Pacific
Fund, Inc...................... 124,800 1,201
--------
TOTAL INVESTMENT COMPANIES....................... 4,781
--------
<CAPTION>
NO. OF
RIGHTS
----------
<S> <C> <C>
RIGHTS (0.0%)
FRANCE (0.0%)
(a)Bouygues...................... 292 1
(a)LVMH Moet Hennessy Louis
Vuitton........................ 921 27
--------
28
--------
ITALY (0.0%)
(a)Olivetti S.p.A................ 76,180 15
--------
TOTAL RIGHTS..................................... 43
--------
<CAPTION>
NO. OF
WARRANTS
----------
<S> <C> <C>
WARRANTS (0.0%)
HONG KONG (0.0%)
(a)Hong Kong and China Gas Co.,
Ltd., expiring 9/30/99......... 15,300 2
--------
<CAPTION>
PAR
VALUE
(000)
----------
<S> <C> <C>
CONVERTIBLE DEBENTURES (0.0%)
FRANCE (0.0%)
Casino Guichard Perrachon 4.50%,
7/12/01........................ FRF 32 28
Sodexho S.A., 6.00%, 6/7/04...... -- 4
--------
32
--------
PORTUGAL (0.0%)
(a)Jeromimo Martins.............. $ 34 21
--------
TOTAL CONVERTIBLE DEBENTURES..................... 53
--------
TOTAL LONG-TERM INVESTMENTS (87.9%) (COST
$426,747)........................................ 504,354
--------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<S> <C> <C>
- -----------------------------------------------------------
SHORT-TERM INVESTMENT (11.2%)
REPURCHASE AGREEMENT (11.2%)
Chase Securities, Inc., 4.55%,
dated $ 64,369
6/30/99, due 7/1/99, to be repurchased at
$64,377, collateralized by $67,600
Federal National Mortgage Association,
5.125%, due 2/13/04, valued at $65,779
(COST $64,369).............................
$ 64,369
--------
TOTAL INVESTMENTS IN SECURITIES (99.1%) (COST
$491,116)........................................ 568,723
FOREIGN CURRENCY (0.2%) (COST $1,098)............ 1,090
--------
TOTAL INVESTMENTS (99.3%) (COST $492,214)........ 569,813
OTHER ASSETS IN EXCESS OF LIABILITIES (0.7%)..... 3,965
--------
NET ASSETS (100%)................................ $573,778
--------
--------
</TABLE>
(a) -- Non-income producing security
(b) -- The Fund is advised by an affiliate which earns a management fee as
advisor to the Fund.
(c) -- All or a portion of security on loan at June 30, 1999.
ADR -- American Depositary Receipt
CVA -- Share Certificates
FRF -- French Franc
NCS -- Non Convertible Shares
RFD -- Ranked for Dividend
RNC -- Non-Convertible Savings Shares
- ----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- ---------------------------------- --------- -------------
<S> <C> <C>
Finance........................... $ 114,118 19.9%
Services.......................... 112,281 19.6
Consumer Goods.................... 97,450 17.0
Capital Goods & Equipment......... 74,713 13.0
Energy............................ 49,083 8.6
Materials......................... 29,424 5.1
Multi-Industry.................... 19,677 3.4
Investment Companies.............. 4,781 0.8
Technology........................ 2,739 0.5
Gold Mines........................ 88 0.0
--------- ---
$ 504,354 87.9%
--------- ---
--------- ---
</TABLE>
- --------------
20
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ----------------------------------------------------
ASSETS:
Investments in Securities, at Value
(Cost $491,116) (including
repurchase agreement of
$64,369)......................... $ 568,723
Foreign Currency (Cost $1,098)..... 1,090
Cash............................... 68
Margin Deposit on Futures.......... 1,903
Receivable for:
Fund Shares Sold................. 3,579
Variation of Futures Contracts... 1,199
Dividends........................ 894
Investments Sold................. 531
Foreign Withholding Tax
Reclaim......................... 210
Security Lending Income.......... 19
Interest......................... 9
Cash, Held as Collateral for
Securities Loaned................ 25
Other.............................. 28
-------------
Total Assets..................... 578,278
-------------
LIABILITIES:
Payable for:
Fund Shares Redeemed............. 1,038
Investments Purchased............ 689
Distribution Fees................ 689
Investment Advisory Fees......... 393
Custody Fees..................... 195
Administrative Fees.............. 121
Shareholder Reporting Expenses... 87
Directors' Fees and Expenses..... 53
Professional Fees................ 50
Collateral on Securities
Loaned.......................... 25
Securities Lending Expense....... 14
Net Unrealized Loss on Foreign
Currency Exchange Contracts...... 982
Other.............................. 164
-------------
Total Liabilities................ 4,500
-------------
NET ASSETS......................... $ 573,778
-------------
-------------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 35
Paid in Capital in Excess of Par... 474,021
Net Unrealized Appreciation on
Investments, Foreign Currency
Translations and Futures......... 77,822
Accumulated Net Realized Gain...... 22,117
Distributions in Excess of Net
Investment Income................ (217)
-------------
NET ASSETS........................... $ 573,778
-------------
-------------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $240,121,069 and
14,242,656 Shares Outstanding)... $ 16.86
-------------
-------------
Maximum Sales Charge............... 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share x 100
/ (100 - maximum sales
charge))......................... $ 17.89
-------------
-------------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$232,643,456 and 14,287,124
Shares Outstanding)*............. $ 16.28
-------------
-------------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$101,013,000 and 6,136,614 Shares
Outstanding)*.................... $ 16.46
-------------
-------------
</TABLE>
- ---------------
* Redemption price may be subject to a contingent deferred sales charge.
-----------------------
21
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- ----------------------------------------------
INVESTMENT INCOME:
Dividends.......................... $ 8,772
Interest........................... 3,795
Security Lending................... 216
Less Foreign Taxes Withheld........ (682)
-------
Total Income...................... 12,101
-------
EXPENSES:
Investment Advisory................ 5,574
Distribution Fees (Attributed to
Classes A, B, and C of $588,
$2,243, and $998,
respectively).................... 3,829
Administrative Fees................ 1,473
Transfer Agent Fees................ 399
Custodian Fees..................... 386
Shareholder Reports................ 235
Professional Fees.................. 58
Filing and Registration Fees....... 49
Other.............................. 40
-------
Total Expenses.................... 12,043
Less Expense Reductions........... (152)
-------
Net Expenses...................... 11,891
-------
Net Investment Income/Loss........... 210
-------
NET REALIZED GAIN/LOSS ON:
Investments........................ 39,780
Foreign Currency Transactions...... (4,520)
Futures............................ 5,283
-------
Net Realized Gain/Loss............ 40,543
-------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ 79,385
-------
END OF THE PERIOD:
Investments........................ 77,607
Foreign Currency Translations...... (992)
Futures............................ 1,207
-------
77,822
-------
Net Unrealized
Appreciation/Depreciation During
the Period......................... (1,563)
-------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... 38,980
-------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $39,190
-------
-------
</TABLE>
- --------------
22
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ------------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ 210 $ 1,993
Net Realized Gain/Loss.......................... 40,543 33,576
Net Unrealized Appreciation/Depreciation........ (1,563) 47,298
---------- ----------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 39,190 82,867
---------- ----------
DISTRIBUTIONS:
Net Investment Income:
Class A........................................... (1,038) (1,628)
Class B........................................... (488) (1,028)
Class C........................................... (217) (1,187)
In Excess of Net Investment Income
Class A........................................... (2,120) --
Class B........................................... (996) --
Class C........................................... (444) --
---------- ----------
(5,303) (3,843)
---------- ----------
Net Realized Gain:
Class A......................................... (12,336) (8,369)
Class B......................................... (12,000) (6,610)
Class C......................................... (5,364) (9,026)
---------- ----------
(29,700) (24,005)
---------- ----------
Net Decrease in Net Assets Resulting from
Distributions................................. (35,003) (27,848)
---------- ----------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed...................................... 172,653 399,475
Distributions Reinvested........................ 31,543 26,341
Redeemed........................................ (230,685) (74,620)
---------- ----------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... (26,489) 351,196
---------- ----------
Total Increase/Decrease in Net Assets........... (22,302) 406,215
NET ASSETS--Beginning of Period................... 596,080 189,865
---------- ----------
NET ASSETS--End of Period (Including
undistributed/distributions in excess of net
investment income of $(217) and $4,082,
respectively)................................... $ 573,778 $ 596,080
---------- ----------
---------- ----------
- ------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
- --------------------------------------------------
Shares:
Subscribed................................... 6,401 13,220
Distributions Reinvested..................... 953 658
Redeemed..................................... (8,806) (2,571)
---------- ----------
Net Increase/Decrease in Class A Shares
Outstanding.................................. (1,452) 11,307
---------- ----------
---------- ----------
Dollars:
Subscribed................................... $ 102,532 $ 193,752
Distributions Reinvested..................... 14,538 9,235
Redeemed..................................... (139,451) (41,983)
---------- ----------
Net Increase/Decrease.......................... $ (22,381) $ 161,004
---------- ----------
---------- ----------
Ending Paid in Capital......................... $ 192,898+ $ 215,279
---------- ----------
---------- ----------
Class B:
- --------------------------------------------------
Shares:
Subscribed................................... 3,651 11,944
Distributions Reinvested..................... 790 533
Redeemed..................................... (4,141) (902)
---------- ----------
Net Increase/Decrease in Class B Shares
Outstanding.................................. 300 11,575
---------- ----------
---------- ----------
Dollars:
Subscribed................................... $ 56,414 $ 170,660
Distributions Reinvested..................... 11,694 7,277
Redeemed..................................... (64,043) (14,280)
---------- ----------
Net Increase/Decrease.......................... $ 4,065 $ 163,657
---------- ----------
---------- ----------
Ending Paid in Capital......................... $ 202,973+ $ 198,908
---------- ----------
---------- ----------
Class C:
- --------------------------------------------------
Shares:
Subscribed................................... 871 2,310
Distributions Reinvested..................... 355 713
Redeemed..................................... (1,755) (1,171)
---------- ----------
Net Increase/Decrease in Class C Shares
Outstanding.................................. (529) 1,852
---------- ----------
---------- ----------
Dollars:
Subscribed................................... $ 13,707 $ 35,063
Distributions Reinvested..................... 5,311 9,829
Redeemed..................................... (27,191) (18,357)
---------- ----------
Net Increase/Decrease.......................... $ (8,173) $ 26,535
---------- ----------
---------- ----------
Ending Paid in Capital......................... $ 78,195+ $ 86,368
---------- ----------
---------- ----------
</TABLE>
- -----------------
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
-----------------------
23
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA ----------------------------------------------------------------
AND RATIOS 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 16.670 $ 16.57 $ 14.75 $ 12.60 $ 11.99
------------ --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income/Loss............ 0.075 0.21 0.10 0.19 0.12
Net Realized and
Unrealized Gain/Loss... 1.211 2.07 2.76 2.82 0.67
------------ --------- --------- --------- ---------
Total From Investment
Operations............. 1.286 2.28 2.86 3.01 0.79
------------ --------- --------- --------- ---------
DISTRIBUTIONS
Net Investment Income... (0.073) (0.35) (0.55) (0.39) --
In Excess of Net
Investment Income...... (0.150) -- -- -- (0.05)
Net Realized Gain....... (0.874) (1.83) (0.49) (0.47) (0.13)
------------ --------- --------- --------- ---------
Total Distributions..... (1.097) (2.18) (1.04) (0.86) (0.18)
------------ --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD................. $ 16.859 $ 16.67 $ 16.57 $ 14.75 $ 12.60
------------ --------- --------- --------- ---------
------------ --------- --------- --------- ---------
TOTAL RETURN (1)......... 8.41% 16.17% 20.61% 24.62% 6.69%
------------ --------- --------- --------- ---------
------------ --------- --------- --------- ---------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's)................ $ 240,121 $ 261,633 $ 72,704 $ 63,706 $ 42,586
Ratio of Expenses to
Average Net Assets..... 1.70% 1.61% 1.70% 1.70% 1.70%
Ratio of Net Investment
Income/Loss to Average
Net Assets............. 0.47% 1.30% 0.59% 0.71% 1.01%
Portfolio Turnover
Rate................... 84% 108% 45% 44% 39%
- ---------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to Net
Investment Income/
Loss................... $ 0.00++ $ 0.02 $ 0.03 $ 0.10 $ 0.04
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets................. 1.73% 1.62% 1.90% 2.06% 2.03%
Net Investment
Income/Loss to Average
Net Assets............. 0.44% 1.30% 0.40% 0.35% 0.68%
- ---------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
-------------------------------------------------------
YEAR ENDED JUNE 30, 1995+
SELECTED PER SHARE DATA --------------------------------------- TO JUNE 30,
AND RATIOS 1999# 1998# 1997 1996
<S> <C> <C> <C> <C>
- -------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 16.144 $ 16.15 $ 14.46 $ 13.01
------------- --------- --------- ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment
Income/Loss............ (0.043) 0.09 (0.05) 0.30
Net Realized and
Unrealized Gain/Loss... 1.164 2.01 2.73 1.98
------------- --------- --------- ------------
Total From Investment
Operations............. 1.121 2.10 2.68 2.28
------------- --------- --------- ------------
DISTRIBUTIONS
Net Investment Income... (0.035) (0.28) (0.50) (0.35)
In Excess of Net
Investment Income...... (0.073) -- -- --
Net Realized Gain....... (0.874) (1.83) (0.49) (0.48)
------------- --------- --------- ------------
Total Distributions..... (0.982) (2.11) (0.99) (0.83)
------------- --------- --------- ------------
NET ASSET VALUE, END OF
PERIOD................. $ 16.283 $ 16.14 $ 16.15 $ 14.46
------------- --------- --------- ------------
------------- --------- --------- ------------
TOTAL RETURN (1)......... 7.50% 15.33% 19.64% 18.08%*
------------- --------- --------- ------------
------------- --------- --------- ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's)................ $ 232,644 $ 225,797 $ 38,962 $ 14,786
Ratio of Expenses to
Average Net Assets..... 2.45% 2.35% 2.45% 2.45%
Ratio of Net Investment
Income/Loss to Average
Net Assets............. (0.27)% 0.60% (0.11)% 0.45%
Portfolio Turnover
Rate................... 84% 108% 45% 44%*
- ---------------------------------------------------------------------------------------------
Effect of Voluntary
Expense Limitation
During the Period
Per Share Benefit to Net
Investment Income/
Loss................... $ 0.00++ $ 0.02 $ 0.09 $ 0.22
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets................. 2.49% 2.36% 2.65% 2.81%
Net Investment
Income/Loss to Average
Net Assets............. (0.30)% 0.60% (0.30)% 0.09%
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 16.298 $ 16.24 $ 14.49 $ 12.43 $ 11.90
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss.......... (0.043) 0.08 (0.03) 0.12 0.04
Net Realized and Unrealized
Gain/Loss.......................... 1.187 2.05 2.73 2.75 0.65
-------- -------- ------- ------- -------
Total From Investment Operations.... 1.144 2.13 2.70 2.87 0.69
-------- -------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income............... (0.035) (0.24) (0.46) (0.33) --
In Excess of Net Investment
Income............................. (0.072) -- -- -- (0.03)
Net Realized Gain................... (0.874) (1.83) (0.49) (0.48) (0.13)
-------- -------- ------- ------- -------
Total Distributions................. (0.981) (2.07) (0.95) (0.81) (0.16)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD....... $ 16.461 $ 16.30 $ 16.24 $ 14.49 $ 12.43
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
TOTAL RETURN (1)..................... 7.61% 15.37% 19.69% 23.65% 5.84%
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $101,013 $108,650 $78,199 $63,025 $40,460
Ratio of Expenses to Average Net
Assets............................. 2.45% 2.55% 2.45% 2.45% 2.45%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. (0.28)% 0.52% (0.16)% (0.04)% 0.25%
Portfolio Turnover Rate.............. 84% 108% 45% 44% 39%
- ---------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss........................ $ 0.00++ $ 0.02 $ 0.03 $ 1.16 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets...... 2.48% 2.56% 2.65% 2.81% 2.78%
Net Investment Income/Loss to
Average Net Assets................. (0.30)% 0.52% (0.34)% (0.40)% (0.08)%
</TABLE>
- --------------------------------------------------------------------------------
* Non-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 sale charges or deferred sales
charges.
# Changes per share are based upon monthly average shares outstanding.
- --------------
24
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen Global Equity Allocation Fund (the "Fund") is organized as a
separate diversified fund of Van Kampen Series Fund, Inc., a Maryland
Corporation, which is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective seeks long-term capital appreciation by investing in equity securities
of U.S. and non-U.S. issuers in accordance with country weightings determined by
the Adviser and with stock selection within each country designed to replicate a
broad market index. The Fund commenced operations on January 4, 1993.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
shares. Class A shares are sold with a front-end sales charge of up to 5.75%.
For certain purchases of Class A shares, the front-end sales charges 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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
----------------
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------- ------- -------
<S> <C> <C>
First................................ 5.00% 1.00%
Second............................... 4.00% None
Third................................ 3.00% None
Fourth............................... 2.50% None
Fifth................................ 1.50% None
Thereafter........................... None None
</TABLE>
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.
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 between 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. Debt securities purchased with
remaining maturities of 60 days or less are valued at amortized cost, if it
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.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date net
of applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on an accrual basis except where
collection is in doubt. 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 Fund are
recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are translated into U.S. dollars at the mean of the quoted bid and
asked prices. Purchases and sales of portfolio securities are translated at the
rate of exchange prevailing when such securities were purchased or sold. Income
and expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized
------------------
25
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
between trade date and settlement date on security and income transactions.
However, 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.
5. SECURITY LENDING: The Fund may lend investment securities to qualified
institutional investors who borrow securities in order to complete certain
transactions. By lending its investment securities, the Fund 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 Fund. 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.
Upon entering into a securities lending transaction the Fund receives 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 generally 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 Statement of
Operations as interest income. The value of loaned securities and related
collateral outstanding at June 30, 1999 is as follows:
<TABLE>
<CAPTION>
VALUE OF LOANED VALUE OF
SECURITIES COLLATERAL
(000) (000)
----------------- ----------
<S> <C>
$18 $25
</TABLE>
Morgan Stanley Trust Company, a former affiliate of the Investment Subadviser,
administers the security lending program and for its services the Fund incurred
fees in the amount of $26,674 for the year ended June 30, 1999.
6. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund 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.
Net currency losses incurred after October 31 and within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. For
the period from November 1, 1998 the Fund incurred and elected to defer until
July 1, 1999, for U.S. Federal income tax purposes, net currency losses of
approximately $3,539,000.
At June 30, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
-------- ------- --------- -------------
<S> <C> <C> <C>
$499,287 $94,317 $(24,881) $69,436
</TABLE>
7. DISTRIBUTION OF INCOME AND GAINS: 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 and gains on certain securities of corporations
designated as "passive foreign investment companies."
Permanent book to 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 in excess of par. For
the year ended June 30, 1999, approximately $2,548,000 has been reclassified
from distributions in excess of net investment income with $2,517,000 posted to
accumulated net realized gain and $31,000 posted to paid in capital in excess of
par.
Permanent book to tax basis differences 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.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser"), a wholly owned subsidiary 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 Fund, 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- ------------ ---------------------- ----------------------
<S> <C> <C>
1.00% 1.70% 2.45%
</TABLE>
- -----------------------
26
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$5,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
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 the Fund, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund on
an annualized basis, of the average daily net assets attributable to each Class.
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $776,766 for Class A shares and deferred sales charges of $2,318,
$477,072, and $10,537 for Class A shares, Class B shares, and Class C shares,
respectively.
Prior to October 1, 1998, the Fund's assets held outside the United States were
held by Morgan Stanley Trust Company ("MSTC"), a former affiliate of the
Subadvisers. Through September 30, 1998, the Fund incurred MSTC fees of
approximately $96,000. On October 1, 1998, the Chase Manhattan Bank purchased
MSTC.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
During the year ended June 30, 1999, the Fund incurred approximately $2,000 as
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/ dealer.
At June 30, 1999, the Fund owned shares of affiliated funds for which the Fund
earned dividend income of approximately $103,000 during the period.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $393,338,000 and sales of approximately $411,550,000
of investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sales of long-term U.S.
government securities.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to a security whose value is "derived" from the value of an
underlying asset, reference rate, or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the Fund's foreign currency exposure. All of the Fund's
portfolio holdings, including derivative instruments, are marked-to-market each
day with the change in value reflected in unrealized appreciation/depreciation.
Upon disposition, a realized gain or loss is recognized accordingly, except when
exercising a call option contract or taking delivery of a security underlying a
forward contract. In this instance, the recognition of gain or loss is postponed
until the disposal of the security underlying the option or forward contract.
Risks may arise as a result of the potential inability of the counterparties to
meet the terms of their contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. FORWARD CURRENCY CONTRACTS: These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The
gain/loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
------------------
27
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
At June 30, 1999, the Fund has outstanding forward currency contracts as
follows:
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
VALUE DEPRECIATION
FORWARD CURRENCY CONTRACTS (000) (000)
- -------------------------------------------------------- ------- -------------
<S> <C> <C>
LONG CONTRACTS:
Australian Dollar, 14,033,089 expiring 7/1/99........... $8,809 $(444)
British Pound, 3,751,000 expiring 8/12/99............... 6,070 151
Japanese Yen, 172,092,000 expiring 8/24/99.............. 1,401 (34)
Swedish Krona, 2,236,649 expiring 7/6/99................ 263 (1)
------- -----
$16,543 (328)
------- -----
------- -----
SHORT CONTRACTS:
Australian Dollar, 14,033,103 expiring 7/1/99........... $9,253 165
British Pound, 3,751,000 expiring 8/12/99............... 5,919 (187)
Euro, 21,158,750 expiring 7/16/99-9/10/99............... 21,942 (285)
Japanese Yen, 2,262,897,090 expiring 8/24/99-9/16/99.... 18,907 (347)
------- -----
$56,021 (654)
------- -----
------- -----
$(982)
-----
-----
</TABLE>
2. FUTURES CONTRACTS: A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in futures of equity indices and typically closes the
contract prior to the delivery date.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, cash and/or securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin). The potential risk of loss
associated with a futures contract in excess of the variation margin is
reflected on the Statement of Assets and Liabilities. The cost of securities
acquired through delivery under a contract is adjusted by the unrealized gain or
loss on the contract.
Transactions in futures contracts for the year ended June 30, 1999, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS
---------
<S> <C>
Outstanding at June 30, 1998......................................... 486
Futures Opened....................................................... 6,574
Futures Closed....................................................... (6,545)
---------
Outstanding at June 30, 1999......................................... 515
---------
---------
</TABLE>
The futures contracts outstanding as of June 30, 1999, and the descriptions and
the unrealized appreciation/ depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
DEPRECIATION
CONTRACTS (000)
--------- -------------
<S> <C> <C>
LONG CONTRACTS:
CAC 40 Index--September 1999 (Current notional value
$4,554 per contract)................................ 291 $ 152
DAX Index--September 1999 (Current notional value
$5,389 per contract)................................ 34 116
MIB 30 Index--September 1999 (Current notional value
$34,993 per contract)............................... 34 (65)
SHORT CONTRACTS:
TOPIX Index--September 1999 (Current notional value
$1,407 per contract)................................ 156 1,004
--- ------
515 $1,207
--- ------
--- ------
</TABLE>
E. 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. Included in these net assets were
cumulative book and tax differences resulting in re-classifications of
undistributed capital gains of $(3,301,076), undistributed net investment income
of $3,342,357, and paid in capital of $(41,281).
- -----------------------
28
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen Global Equity Allocation Fund:
In our opinion, the accompanying statement 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 Van Kampen Global Equity Allocation
Fund (the "Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the
results of its operations, the changes in its 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
------------------
29
<PAGE>
VAN KAMPEN GLOBAL EQUITY ALLOCATION FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30,1999, the percentage of dividends paid that qualify
for the 70% dividend received deduction for corporate shareholders is 26.27%.
The Fund designated and paid $21,681,263 as a 20% rate gain distribution.
Shareholders were sent a 1998 Form 1099-DIV in January, 1999 representing their
proportionate share of this capital gain distribution.
- -----------------------
30
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Small Cap Value
Pace
Real Estate Securities
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
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
Retired, Formerly 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
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of
Sciences/National Research Council, and former Chairman
of the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606-8256
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT 1-800-341-2911.
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.
<PAGE>
VAN KAMPEN FUNDS
1 Parkview Plaza/ /P.O. Box 5555/ /Oakbrook Terrace, IL 60181-5555/
/www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN
WORLDWIDE HIGH INCOME FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 6
Statement of Assets and Liabilities................................... 10
Statement of Operations............................................... 11
Statement of Changes in Net Assets.................................... 12
Financial Highlights ................................................. 13
Notes to Financial Statements......................................... 14
Report of Independent Accountants..................................... 18
</TABLE>
MSWW ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show signs of slowing down. Strong
growth, healthy employment, and low inflation all contributed to the favorable
economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, and by 2.3 percent in the second quarter. The
expansion was fueled by an increase in consumer spending, which was attributed
to vibrant consumer confidence as a result of the strong job market.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although it had expressed a bias toward a series of
rate increases, May's tame CPI report prompted the Fed to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MONTH INTEREST RATES INFLATION
<S> <C> <C>
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the
closing midline federal funds rate on the
last day of each month. Inflation is
indicated by the annual percentage change
of the Consumer Price Index for all urban
consumers at the end of each month.
- --------------
2
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Argentina 12.0%
Brazil 11.2%
Bulgaria 2.5%
Canada 1.6%
Chile 1.6%
Colombia 3.4%
Mexico 12.1%
Russia 2.0%
United Kingdom 2.2%
United States 32.7%
Short-Term Investments 2.6%
Other 16.1%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY COUNTRY NET ASSETS
- ---------------------------------------- --------- ----------
<S> <C> <C>
United Mexican States
10.375%, 2/17/09 Mexico 6.0%
Federative Republic of Brazil
11.625%, 4/15/04 Brazil 4.5%
Republic of Argentina
11.75%, 4/7/09 Argentina 3.8%
Bulgaria Front Loaded Interest Reduction
Bond 2.50%, 7/28/12 Bulgaria 2.5%
Federative Republic of Brazil, Series
EI-L, 5.875%, 4/15/06 Brazil 2.4%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- ---------------------------------------- --------- ----------
<S> <C> <C>
Foreign Government & Agency Obligations $76,998 37.4%
Telecommunications 30,924 15.0%
Services 18,115 8.8%
Broadcast -- Radio & Television 15,637 7.6%
Multi-Industry 15,112 7.3%
</TABLE>
<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***
COMMENCEMENT
DATE
----------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Class A Shares -15.36% -11.14% 7.81% 8.87% 8.09% 9.12% 4/21/94
- -------------------------------------------------------------------------------------------------------------------
Class B Shares -15.01 % -11.82 % N/A N/A 7.90 % 8.34 % 8/1/95
- -------------------------------------------------------------------------------------------------------------------
Class C Shares -12.62 % -11.83 % 8.04 % 8.04 % 8.27 % 8.27 % 4/21/94
- -------------------------------------------------------------------------------------------------------------------
Worldwide High Income
Blended Index N/A -0.23 % N/A 11.07 % N/A 11.12 % N/A
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Worldwide High Income Blended Index is an unmanaged index composed 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.
* 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.
*** Assumes reinvestment of all distributions for the period and does not
include payment of the maximum sales charge (4.75% for Class A shares) or
contingent deferred sales charge for early withdrawal (4% for Class B shares
and 1% for Class C shares).
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
In accordance with SEC regulations, Fund performance since inception as shown
below assumes that: the maximum sales charge was deducted from the initial
investment of $10,000 in Class A shares; and all recurring fees (including
management fees) were deducted; and all dividends and distributions were
reinvested. The graph presents the performance of Class A shares. The
performance of Class B and Class C shares will vary based upon the sales charge
and fees assessed to each Class.
<TABLE>
<CAPTION>
YIELD INFORMATION AS OF JUNE 30, 1999
- -----------------------------------------
30 DAY
CURRENT YIELD+
<S> <C>
- -----------------------------------------
Class A 11.18 %
- -----------------------------------------
Class B 10.97
- -----------------------------------------
Class C 10.97
- -----------------------------------------
</TABLE>
+ The current 30-day yield reflects the net investment income generated by the
Fund over the 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Worldwide High Worldwide High
Income Fund Class A Income Blended Index
4/21/94 $9,500 $10,000
6/30/94 $9,797 $9,741
6/30/95 $10,470 $10,738
6/30/96 $12,524 $12,802
6/30/97 $16,318 $16,431
6/30/98 $16,859 $18,606
6/30/99 $14,980 $18,563
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE 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. PLEASE SEE THE PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISK CONSIDERATIONS
ASSOCIATED WITH INTERNATIONAL INVESTING. YIELDS WILL FLUCTUATE AS MARKET
CONDITIONS CHANGE.
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE VAN KAMPEN WORLDWIDE HIGH
INCOME FUND ABOUT THE KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS
DURING THE PAST 12 MONTHS. THE TEAM IS LED BY PORTFOLIO MANAGERS ROBERT E.
ANGEVINE, THOMAS L. BENNETT, STEPHEN F. ESSER, AND ABIGAIL MCKENNA OF MORGAN
STANLEY DEAN WITTER INVESTMENT MANAGEMENT. THE FOLLOWING EXCERPTS REFLECT THEIR
VIEWS ON THE FUND'S PERFORMANCE DURING THE 12-MONTH PERIOD ENDED JUNE 30, 1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUND OPERATED
DURING THE PAST YEAR?
A: During the third quarter of 1998, continued economic weakness in Asia and
Japan spread to Russia, and there were warning signs that Asia's problems were
beginning to affect Europe and the
------------------
3
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
United States. The defining moment of the period came in mid-August when Russia
devalued its currency and defaulted on its debt, sending financial and currency
markets worldwide into a tailspin. With turmoil in the emerging markets and a
crisis of confidence in domestic and European markets, many investors moved into
high-quality government bonds, primarily those issued by the United States.
From September through the end of the year, the emerging debt markets
effectively bounced back from the Russian crisis, buoyed by interest-rate cuts
in the United States and Europe, the completion of an International Monetary
Fund assistance package for Brazil, and improved investor sentiment.
Emerging market debt continued to stabilize in 1999, as investors decided the
worst, in terms of economic conditions, had passed. Notable factors driving this
optimism included the stabilization of the Japanese economy, which helped the
rest of Asia; an increase in oil prices, on account of a mid-March OPEC
agreement to cut oil production; and lower interest rates in Brazil. Russia
profited significantly from the rebound in oil prices and became one of the
better-performing emerging debt markets in 1999.
Q: WHAT STRATEGIES DID YOU PURSUE IN THESE CONDITIONS?
A: Within the high-yield market, during periods of extreme volatility, such as
the second half of 1998, we generally will focus on larger, higher-quality
credits--a strategy that worked positively for the Fund, helping its return. Due
to the global turmoil, we had a couple of credit problems during the period, and
the Fund's higher-quality securities did a good job of keeping pace with the
rally in U.S. Treasuries after the crisis. In general, we favored bonds issued
by large-cap companies because we believe these companies have greater financial
flexibility and access to capital than smaller companies, which might allow them
to weather difficult financial conditions better. One sector we favored was
telecommunications because it continues to exhibit strong growth and positive
merger-and-acquisition activity.
In high-yield securities, we held significant positions in Columbia Healthcare,
Nextel, Chancellor, and Outdoor Systems, which benefited the Fund. Returns in
high-yield securities continue to be more affected by specific events rather
than general market conditions. For example, merger-and-acquisition activity in
the telecommunications market, including Infinity Broadcasting's purchase of
Outdoor Systems, directly affected the appreciation of high-yield securities
during the period.
Within emerging market debt, during the first quarter of 1999, our asset
allocation decisions in Latin America had the greatest effect on the Fund's
performance. Specifically, in January of 1999 the Fund benefited from
underweighted positions in Ecuador, Brazil, and Venezuela, the three
worst-performing debt markets at that time. Another allocation that helped the
fund was its overweight position in Mexico. After Brazil devalued its currency,
we reallocated our exposure to Latin America, which also helped returns as
overweighted positions in Brazil and Peru performed well in February.
Emerging market debt staged a significant rally in March of this year, with
riskier Latin American credits, producing significant returns. In addition, our
overweighted positions in Bulgaria and South Korea also helped the Fund's
return.
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: For Class A shares at net asset value without sales charge, the Fund
generated a total return of -11.14 percent for the 12 month period and 7.29
percent for the six-month period ended June 30, 1999. By comparison, the
Worldwide High Income Blended Index generated a total return of -0.23% percent
for the same 12-month period and 5.40% for the same six-month period. 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. Past performance does not guarantee future results.
Q: WHAT DO YOU SEE HAPPENING DURING THE NEXT SIX MONTHS?
- -----------------------
4
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
A: In the near term, we do not expect any meaningful sell off in emerging
market debt. Despite the incremental improvement in credit fundamentals, the
market has not rallied substantially this year. At current levels, the downside
risks are less worrisome than in times past, as we believe that a healthy amount
of skepticism is reflected in today's prices. A significant rally in the near
term, however, seems unlikely to us as well. Investors are hesitant to commit
new money to risky asset classes between now and the end of the year due to
concerns over the year 2000 problem and the direction of U.S. monetary policy.
Nevertheless, we are optimistic for growth in larger emerging markets during the
latter part of the year, which will improve the fiscal and balance of payments
positions of many emerging market countries. This should cause investors
perceptions of emerging market risks to fall and allow for a rally in asset
prices.
In high-yield securities, the market has been healthy, and we don't expect much
to change in the short term. Telecommunications continues to drive new issuance,
and we will look for opportunities in that sector. Overall, we will continue to
pursue our objective to seek to provide investors with high current income and
the potential for long-term capital appreciation by maintaining a value-based
strategy within countries that we believe have improving economic and political
conditions.
<TABLE>
<S> <C> <C> <C>
Robert E. Angevine Thomas L. Bennett Stephen F. Esser Abigail McKenna
PORTFOLIO PORTFOLIO
PORTFOLIO MANAGER PORTFOLIO MANAGER MANAGER MANAGER
</TABLE>
------------------
5
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<C> <S> <C>
- ----------------------------------------------------------------------------
CORPORATES BONDS & NOTES (51.6%)
ARGENTINA (3.3%)
$ (b)1,100 Cablevision S.A. 13.75%, 5/1/09.................. $ 1,004
ARP (b)6,292 CIA International Telecommunications, 10.375%,
8/1/04......................................... 4,940
$ (b)945 Multicanal S.A. 13.125%, 4/15/09................. 877
--------
6,821
--------
AUSTRALIA (0.7%)
895 Glencore Nickel Property Ltd. 9.00%, 12/1/14..... 770
745 Murrin Murrin Holdings 9.375%, 8/31/07........... 655
--------
1,425
--------
BRAZIL (1.8%)
(b,c)4,500 Banco Nacional Deseny Econ 13.64%, 6/16/08....... 3,780
--------
CANADA (1.6%)
(c)575 Husky Oil Ltd. 8.90%, 8/15/28.................... 553
400 Rogers Cablesystems Ltd. 10.125%, 9/1/12......... 432
865 Rogers Cablesystems Ltd., Series B, 10.00%,
3/15/05........................................ 932
605 Rogers Cantel, Inc. 8.30%, 10/1/07............... 597
250 Rogers Communications, Inc. 9.125%, 1/15/06...... 254
100 Rogers Communications, Inc. 8.875%, 7/15/07
Senior Notes................................... 101
315 Tembec Industries, Inc. 8.625%, 6/30/09.......... 313
--------
3,182
--------
CHILE (0.8%)
(b)1,650 Embotelladora Arica S.A. 9.875%, 3/15/06......... 1,681
--------
COLOMBIA (0.7%)
(d)2,000 Occidente Y Caribe 0.00%, 3/15/04................ 1,320
--------
INDIA (0.2%)
(b)400 Reliance Industries, Inc. 10.50%, 8/6/46......... 342
--------
INDONESIA (0.7%)
300 Indah Kiat International, Series B, 11.875%,
6/15/02........................................ 249
1,500 Tjiwi Kimia International B.V. 13.25%, 8/1/01.... 1,290
--------
1,539
--------
KOREA (0.4%)
(b)785 Samsung Electronics Co. 7.45%, 10/1/02........... 761
--------
LUXEMBOURG (0.2%)
EUR (b)486 Sirona Dental Systems 9.125%, 7/15/08............ 461
--------
MEXICO (4.2%)
$ (c)2,650 Petroleos Mexicanos 9.369%, 7/15/05.............. 2,481
(b)2,850 Petroleos Mexicanos 9.50%, 9/15/27............... 2,736
4,200 TV Azteca S.A. 10.125%, 2/15/04.................. 3,423
--------
8,640
--------
NETHERLANDS (1.4%)
975 Hermes Europe Railtel BV 11.50%, 8/15/07 Senior
Notes.......................................... 1,024
EUR 299 Impress Metal 9.875%, 5/29/07.................... 342
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<C> <S> <C>
- ----------------------------------------------------------------------------
$ (d)730 PTC International Finance BV 0.00%, 7/1/07....... $ 539
EUR 875 Tele 1 Europe B.V. 13.00%, 5/15/09............... 936
--------
2,841
--------
PHILIPPINES (0.5%)
$ 1,300 Philippine Long Distance Telephone Co. 7.85%,
3/6/07......................................... 1,111
--------
POLAND (1.5%)
(a,b,d)1,630 @Entertainment 0.00%, 2/1/09..................... 1,092
EUR 1,900 Netia Holdings 13.50%, 6/15/09................... 2,021
--------
3,113
--------
QUATAR (0.3%)
$ (b)725 Ras Laffan Liquid National Gas 8.294%, 3/15/14... 665
--------
TURKEY (1.2%)
2,440 Cellco Finance 15.00%, 8/1/05.................... 2,526
--------
UNITED KINGDOM (2.2%)
EUR 964 Colt Telecom Group plc 7.625%, 7/31/08........... 993
(d)940 Dolphin Telecommunications plc 0.00%, 6/1/08..... 480
$ (b,d)500 Dolphin Telecommunications plc 0.00%, 5/15/09.... 241
EUR 665 Esprit Telecommunication Group plc 11.00%,
6/15/08........................................ 734
$ 620 HMV Media Group, Inc. 10.875%, 5/15/08........... 1,014
EUR (d)1,611 RSL Communications plc 0.00%, 6/15/08............ 1,025
--------
4,487
--------
UNITED STATES (29.9%)
$ 205 Adelphia Communications, Series B, 7.50%,
1/15/04........................................ 196
800 Adelphia Communications, Series B, 9.875%,
3/1/07......................................... 834
600 Adelphia Communications, Series B, 8.375%,
2/1/08......................................... 577
1,125 AES Corp. 8.50%, 11/1/07......................... 1,059
725 American Cellular Corp. 10.50%, 5/15/08.......... 743
500 American Communications Lines LLC, `B', 10.25%,
6/30/08........................................ 501
EUR 1,150 American Standard Cos., Inc. 7.125%, 6/1/06...... 1,195
$ 885 AMSC Acquisition Co., Inc., Series B, 12.25%,
4/1/08......................................... 677
405 Axia, Inc. 10.75%, 7/15/08....................... 400
(b)932 CA FM Lease Trust 8.50%, 7/15/17................. 866
(b)535 Centennial Cellular Holdings 10.75%, 12/15/08.... 552
600 CEX Holdings, Inc., Series B, 9.625%, 6/1/08..... 564
350 Chancellor Media Corp. 9.00%, 10/1/08............ 355
1,365 Chancellor Media Corp., `B', 8.125%, 12/15/07.... 1,324
850 CMS Energy 7.50%, 1/15/09........................ 796
85 Columbia/HCA Healthcare, 8.13%, 8/4/03 MTN....... 84
425 Columbia/HCA Healthcare, 6.91%, 6/15/05.......... 393
1,325 Columbia/HCA Healthcare, 8.85%, 1/1/07 MTN....... 1,333
2,500 Columbia/HCA Healthcare, 7.69%, 6/15/25.......... 2,070
(d)1,025 Dial Call Communications, Series B, 10.25%,
12/15/05....................................... 1,045
660 Dobson Communications Corp. 11.75%, 4/15/07...... 693
970 D.R. Horton, Inc. 8.00%, 2/1/09.................. 912
762 DR Securitized Lease Trust, Series 1993-K1, Class
A1, 6.66%, 8/15/10............................. 709
</TABLE>
- -----------------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
PAR
VALUE VALUE
(000) (000)
- ----------------------------------------------------------------------------
<C> <S> <C>
$ 891 DR Securitized Lease Trust, Series 1994-K1, Class
A1, 7.60%, 8/15/07............................. $ 874
250 DR Securitized Lease Trust, Series 1994-K1, Class
A2, 8.375%, 8/15/15............................ 247
150 DR Structured Finance, Series 1994-K2, CMO,
9.35%, 8/15/19................................. 151
(b)1,050 Echostar DBS Corp. 9.375%, 2/1/09................ 1,067
(b)300 EES Coke Battery Co., Inc. 9.382%, 4/15/07....... 294
165 Entex Information Services 12.50%, 8/1/06........ 99
900 Fresenius Medical Capital Trust II 7.875%,
2/1/08......................................... 846
(b,d)500 Fuji JGB Investments LLC, Series A, 9.87%,
12/31/49....................................... 438
730 Global Crossing Holdings, Ltd. 9.625%, 5/15/08... 770
770 Globalstar LP/Capital 11.375%, 2/15/04........... 508
125 Globalstar LP/Capital 11.50%, 6/1/05............. 80
1,020 Harrahs Operating Co., Inc. 7.875%, 12/15/05..... 989
930 Hilton Hotels 7.95%, 4/15/07..................... 941
1,355 HMH Properties, Inc. Series A 7.875%, 8/1/05..... 1,280
(b)1,060 Horseshoe Gaming Holdings 8.652%, 5/15/09........ 1,026
950 Host Marriott Travel Plaza, Series B, 9.50%,
5/15/05........................................ 976
(b)1,175 Huntsman ICI Chemicals 10.125%, 7/1/09........... 1,179
EUR (b)1,150 Huntsman ICI Chemicals 10.125%, 7/1/09........... 1,192
$ (d)845 Hyperiom Telecommunications, 0.00%, 4/15/03...... 698
(d)2,765 Intermedia Communications, Series B, 0.00%,
7/15/07........................................ 1,974
815 Iridium LLC/Capital Corp., Series A 13.00%,
7/15/05........................................ 163
(b)300 Jet Equipment Trust, Series C-1, 11.79%,
6/15/13........................................ 372
(b)300 Jet Equipment Trust, Series 1995-D, 11.44%,
11/1/14........................................ 369
500 Kmart Funding Corp. 8.80%, 7/1/10................ 512
500 Mosaic RE Ltd., Class A, 9.60%, 7/9/99........... 500
500 Musicland Group, Inc. 9.00%, 6/15/03............. 485
950 Musicland Group, Inc. 9.875%, 3/15/08............ 931
490 National Steel Corp., Series D, 9.875%, 3/1/09... 497
(d,e)315 Nextel Communications, Inc. 9.75%, 8/15/04....... 320
(d)2,575 Nextel Communications, Inc. 0.00%, 9/15/07....... 1,880
(d)1,760 NEXTLINK Communications, Inc. 0.00%, 4/15/08..... 1,052
(d)990 Norcal Waste Systems 13.50%, 11/15/05............ 1,094
(b,d)1,100 Nortek, Inc. 8.875%, 8/1/08...................... 1,083
(b,f)525 NSM Steel Ltd., 12.25%, 2/1/08................... 1
GBP (d)1800 NTL, Inc. 0.00%, 4/1/08.......................... 1,920
$ (b)188 Oil Purchase Co. 7.10%, 4/30/02.................. 179
(b)735 OnePoint Communications Corp., 14.50%, 6/1/08.... 399
1,020 Outdoor Systems, Inc., 8.875%, 6/15/07........... 1,065
(b)500 Pacifica Papers, Inc. 10.00%, 3/15/09............ 515
970 Park Place Entertainment 7.875%, 12/15/05........ 921
700 Primus Telecommunications Group, Series B,
9.875%, 5/15/08................................ 664
(b)330 Primus Telecommunications Group, 11.25%,
1/15/09........................................ 335
515 PSINet, Inc., Series B, 10.00%, 2/15/05.......... 512
(d)1325 RCN Corp. 0.00%, 10/15/07........................ 888
(d)910 Rhythms Netconnections, Inc., Series B, 0.00%,
5/15/08........................................ 480
35 RSL Communications Ltd. 12.25%, 11/15/06......... 37
(b)740 RSL Communications Ltd. 9.125%, 3/1/08........... 679
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<C> <S> <C>
- ----------------------------------------------------------------------------
$ (b)1,215 Samsung Electronics Co. 9.75%, 5/1/03............ $ 1,262
(b,d)425 SB Treasury Co. LLC 9.40%, 12/29/49.............. 413
800 SD Warren Co., Series B, 12.00%, 12/15/04........ 852
805 Smithfield Foods, Inc. 7.625%, 2/15/08........... 733
1,125 Snyder Oil Corp. 8.75%, 6/15/07.................. 1,108
960 Station Casinos, Inc. 10.125%, 3/15/06........... 990
985 Station Casinos, Inc. 9.75%, 4/15/07............. 1,005
(b)500 Tenet Healthcare Corp. 8.125%, 12/1/08........... 472
1,480 Tenet Healthcare Corp. 8.625%, 1/15/07........... 1,447
(d)1,900 Viatel, Inc., Series A, 0.00%, 4/15/08........... 1,221
450 Vintage Petroleum 8.625%, 2/1/09................. 430
(d)750 Wam!Net, Inc. 0.00%, 3/1/05...................... 443
--------
61,736
--------
TOTAL CORPORATES BONDS & NOTES.................................... 106,431
--------
ASSET BACKED SECURITIES (0.7%)
UNITED STATES (0.7%)
858 Commercial Financial Services, Inc., Series
1997-5, Class A1, 7.72%, 6/15/05............... 214
270 Long Beach Acceptance Auto Grantor Trust 1997-1,
Class B, 14.22%, 10/26/03...................... 268
922 OHA Grantor Trust, 11.00%, 9/15/03............... 918
--------
TOTAL ASSET BACKED SECURITIES..................................... 1,400
--------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.9%)
UNITED STATES (0.9%)
629 Aircraft Lease Portfolio Securitization Ltd.,
Series 1996-1, Class DX, 12.75%, 6/15/06....... 629
(b,c)36,368 DLJ Mortgage Acceptance Corp., Series 1997-CF2,
Class S, IO, 0.36%, 10/15/30................... 777
(b)535 Federal Mortgage Acceptance Corp., Series 1996-B,
Class C, 7.883%, 11/15/18...................... 407
--------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS......................... 1,813
--------
EUROBONDS (1.8%)
ARGENTINA (1.8%)
(c)4,269 Republic of Argentina, Series L, 5.938%,
3/31/05........................................ 3,650
--------
FOREIGN GOVERNMENT & AGENCY OBLIGATIONS (37.3%)
ARGENTINA (6.9%)
2,920 Bonos del Tesoro, Series BT02, 8.75%, 5/9/02..... 2,673
4,000 Republic of Argentina 12.125%, 2/15/19........... 3,640
8,690 Republic of Argentina 11.75%, 4/7/09............. 7,864
--------
14,177
--------
BRAZIL (9.4%)
3,319 Federated Republic of Brazil, `C' PIK, 8.00%,
4/15/14........................................ 2,165
(c)2,080 Federated Republic of Brazil Debt Conversion
Bond, Series Z-L, 5.938%, 4/15/12.............. 1,292
(c)6,289 Federative Republic of Brazil, Series EI-L,
5.875%, 4/15/06................................ 4,968
(c)2,400 Federated Republic of Brazil, Series NMB-L
5.938%, 4/15/09................................ 1,686
9,800 Federated Republic of Brazil 11.625%, 4/15/04.... 9,249
--------
19,360
--------
BULGARIA (2.5%)
(d)8,580 Bulgaria Front Loaded Interest Reduction Bond
2.50%, 7/28/12................................. 5,239
--------
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
PAR
VALUE VALUE
(000) (000)
- ----------------------------------------------------------------------------
<C> <S> <C>
CHILE (0.8%)
$ 1,725 ENDESA 7.75%, 7/15/08............................ $ 1,615
--------
COLOMBIA (2.6%)
600 Republic of Colombia, Global Bond 10.875%,
3/9/04......................................... 576
(c)1,460 Republic of Colombia, 9.705%, 8/13/05............ 1,266
4,250 Republic of Colombia, 9.75%, 4/23/09............. 3,512
--------
5,354
--------
ECUADOR (0.3%)
(c)1,230 Republic of Ecuador Discount Bond 6.00%,
2/28/25........................................ 576
--------
JAMAICA (0.1%)
(b)300 Government of Jamaica 10.875%, 6/10/05........... 279
--------
JORDAN (0.4%)
(c)496 Government of Jordan 6.188%, 12/23/23............ 312
(b,c)828 Government of Jordan 6.188%, 12/23/23............ 522
--------
834
--------
MEXICO (7.9%)
12,100 United Mexican States 10.375%, 2/17/09........... 12,297
3,780 United Mexican States 11.375%, 9/15/16 Global
Bond........................................... 4,065
--------
16,362
--------
NIGERIA (0.4%)
(d)2,100 Government of Nigeria Promissory Notes 5.092%,
1/5/10......................................... 839
--------
PANAMA (1.4%)
1,950 Republic of Panama, 9.375%, 4/1/29............... 1,862
(d)1,305 Republic of Panama Past Due Interest, PIK 4.00%,
7/17/16........................................ 965
--------
2,827
--------
PERU (1.4%)
(b,d)3,950 Republic of Peru Front Loaded Interest Reduction
Bond 3.75%, 3/7/17............................. 2,188
(d)1,140 Republic of Peru Front Loaded Interest Reduction
Bond 3.75%, 3/7/17............................. 631
--------
2,819
--------
RUSSIA (2.0%)
(b)8,370 Government of Russia 11.00%, 7/24/18............. 4,206
--------
VENEZUELA (1.2%)
(c)3,238 Republic of Venezuela Discount Bond, Series L,
6.313%, 12/18/07............................... 2,511
--------
TOTAL FOREIGN GOVERNMENT & AGENCY OBLIGATIONS..................... 76,998
--------
LOAN AGREEMENTS (1.6%)
INDONESIA (0.4%)
(c)300 Republic of Indonesia Syndicated Loan 8.125%,
8/25/00........................................ 280
(c)500 Republic of Indonesia Syndicated Loan 8.375%,
8/25/01........................................ 440
(c)100 Republic of Indonesia Syndicated Loan 8.625%,
8/25/02........................................ 86
--------
806
--------
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<C> <S> <C>
- ----------------------------------------------------------------------------
MOROCCO (1.2%)
$ (c)3,080 Kingdom of Morocco, Series A, 5.906%, 1/1/09..... $ 2,487
--------
TOTAL LOAN AGREEMENTS............................................. 3,293
--------
<CAPTION>
SHARES
- --------------
<C> <S> <C>
PREFERRED STOCKS (0.9%)
UNITED STATES (0.9%)
(a)6,275 Concentric Network Corp. 13.50%.................. 593
(a)679 IXC Communications, Inc., PIK 12.50%............. 655
6,931 Paxson Communications 13.25%..................... 624
--------
TOTAL PREFERRED STOCKS............................................ 1,872
--------
<CAPTION>
NO. OF
WARRANTS
- --------------
<C> <S> <C>
WARRANTS (0.4%)
ARGENTINA (0.0%)
(a)4,750 Republic of Argentina, expiring 2/25/00.......... 5
--------
COLOMBIA (0.1%)
(a,b)80,000 Occidente Y Caribe, expiring 3/15/04............. 135
--------
POLAND (0.0%)
(a,b)6,520 @Entertainment, expiring 2/1/09.................. --
--------
UNITED STATES (0.3%)
(a,b)8,850 American Mobile Satellite Corp., expiring
4/1/08......................................... 32
(a,b)3,323,743 NSM Steel, Inc., expiring 2/1/08................. 4
(a,b)7,350 OnePoint Communications Corp., expiring 6/1/08... 1
(a,b)38,200 Rhythms Netconnections, Inc. expiring 5/15/08.... 550
(a,b)22,500 Wam!Net, Inc., expiring 3/1/05................... 51
--------
638
--------
TOTAL WARRANTS.................................................... 778
--------
TOTAL LONG-TERM INVESTMENTS (95.2%) (COST $199,335)............... 196,235
--------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
<C> <S> <C>
- -------------------
SHORT-TERM INVESTMENTS (2.6%)
TREASURY BILLS (1.3%)
TRL(b)1,146,669,000 Republic of Turkey, Series 14T, 0.00%, 2/9/00.... 1,703
510,772,000 Republic of Turkey, Series 6B, 0.00%, 9/15/99.... 1,032
--------
2,735
--------
REPURCHASE AGREEMENT (1.3%)
$ 2,598 Chase Securities, Inc., 4.55%, dated 6/30/99, due
7/1/99, to be repurchased at $2,598,
collateralized by $2,415 U.S. Treasury Bonds,
7.250% due 5/15/16, valued at $2,684........... 2,598
--------
TOTAL SHORT-TERM INVESTMENTS (2.6%) (COST $5,663)...................... 5,333
--------
</TABLE>
- -----------------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
(000)
<C> <S> <C>
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $204,998) (97.8%)......................... $201,568
OTHER ASSETS IN EXCESS OF LIABILITIES (2.2%)...................... 4,567
--------
NET ASSETS (100%)................................................. $206,135
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
(b) -- 144A Security--Certain conditions for public sale may exist.
(c) -- Variable/floating rate security--rate disclosed is as of June 30,
1999.
(d) -- Step Bond--coupon rate increases in increments to maturity. Rate
disclosed is as of June 30, 1999. Maturity date disclosed is the
ultimate maturity date.
(e) -- Security out on collateral for outstanding futures contracts.
(f) -- Bond is in default.
ARP -- Argentine Peso
CMO -- Collaterized Mortgage Obligation
EUR -- Euro
GBP -- British Pound
IO -- Interest Only
PIK -- Payment-In-Kind. Income may be received in additional securities or
cash at the discretion of the issuer.
MTN -- Medium Term Note
TRL -- Turkish Lira
----------------------------------------------------------------
SUMMARY OF LONG-TERM INVESTMENTS BY INDUSTRY CLASSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT OF
INDUSTRY (000) NET ASSETS
- --------------------------------- --------- -------------
<S> <C> <C>
Foreign Government & Agency
Obligations...................... $ 76,998 37.4%
Telecommunications............... 30,924 15.0
Services......................... 18,115 8.8
Broadcast--Radio & Television.... 15,637 7.6
Multi-Industry................... 15,112 7.3
Finance.......................... 10,797 5.2
Materials........................ 5,243 2.5
Technology....................... 4,926 2.4
Eurobonds........................ 3,650 1.8
Utilities........................ 3,584 1.7
Loan Agreements.................. 3,293 1.6
Collateralized Mortgage
Obligations & Asset Backed
Securities....................... 3,213 1.6
Consumer Goods................... 2,807 1.4
Transportation................... 1,024 0.5
Capital Goods.................... 912 0.4
--------- ---
$ 196,235 95.2%
--------- ---
--------- ---
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- -----------------------------------------------
ASSETS:
Investments at Value (Cost
$204,998)........................ $201,568
Margin Deposit on Futures.......... 199
Receivable for:
Interest......................... 4,781
Investments Sold................. 2,710
Fund Shares Sold................. 328
Variation of Futures Contracts... 33
Foreign Withholding Tax
Reclaim......................... 19
Net Unrealized Gain on Foreign
Currency Exchange Contracts...... 271
Other.............................. 9
--------
Total Assets..................... 209,918
--------
LIABILITIES:
Payable for:
Dividends Declared............... 1,798
Bank Overdraft................... 602
Investments Purchased............ 496
Fund Shares Redeemed............. 293
Distribution Fees................ 284
Investment Advisory Fees......... 127
Administrative Fees.............. 43
Professional Fees................ 42
Transfer Agent Fees.............. 35
Shareholder Reporting Expenses... 23
Custody Fees..................... 22
Directors' Fees and Expenses..... 16
Other.............................. 2
--------
Total Liabilities................ 3,783
--------
NET ASSETS........................... $206,135
--------
--------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 21
Paid in Capital in Excess of Par... 283,951
Accumulated Net Investment
Income........................... 357
Net Unrealized Depreciation on
Investments, Foreign Currency
Translations and Futures......... (3,140)
Accumulated Net Realized Loss...... (75,054)
--------
NET ASSETS........................... $206,135
--------
--------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $58,506,414 and
5,907,569 Shares Outstanding).... $ 9.90
--------
--------
Maximum Sales Charge............... 4.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100/
(100 - maximum sales charge)).... $ 10.39
--------
--------
CLASS B SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$107,012,758 and 10,849,654
Shares Outstanding)*............. $ 9.86
--------
--------
CLASS C SHARES:
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$40,616,194 and 4,116,484 Shares
Outstanding)*.................... $ 9.87
--------
--------
</TABLE>
- -------------
* Redemption price may be subject to a contingent deferred sales charge.
- ------------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
(000)
<S> <C>
- -----------------------------------------------
INVESTMENT INCOME:
Interest........................... $ 27,856
--------
EXPENSES:
Distribution Fees (Attributed to
Classes A, B, and C of $173,
$1,158, and $468,
respectively).................... 1,799
Investment Advisory Fees........... 1,743
Administrative Fees................ 585
Shareholder Reports................ 106
Custodian Fees..................... 124
Transfer Agent Fees................ 108
Professional Fees.................. 66
Filing and Registration Fees....... 44
Directors' Fees and Expenses....... 12
Other.............................. 17
--------
Total Expenses................... 4,604
--------
Net Investment Income/Loss........... 23,252
--------
NET REALIZED GAIN/LOSS ON:
Investments........................ (75,324)
Foreign Currency Transactions...... (393)
Futures............................ 5
--------
Net Realized Gain/Loss........... (75,712)
--------
NET UNREALIZED
APPRECIATION/DEPRECIATION:
Beginning of the Period............ (14,693)
--------
End of the Period:
Investments...................... (3,430)
Foreign Currency Translations.... 257
Futures.......................... 33
--------
(3,140)
--------
Net Unrealized
Appreciation/Depreciation During
the Period......................... 11,553
--------
Net Realized Gain/Loss and Net
Unrealized
Appreciation/Depreciation.......... (64,159)
--------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $(40,907)
--------
--------
</TABLE>
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- -------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss......... $ 23,252 $ 19,591
Net Realized Gain/Loss............. (75,712) 12,018
Net Unrealized
Appreciation/Depreciation........ 11,553 (28,435)
------------- -------------
Net Increase/Decrease in Net Assets
Resulting from Operations........ (40,907) 3,174
------------- -------------
DISTRIBUTIONS:
Net Investment Income:
Class A............................ (7,573) (6,930)
Class B............................ (11,681) (8,313)
Class C............................ (4,723) (3,852)
------------- -------------
(23,977) (19,095)
------------- -------------
Net Realized Gain:
Class A............................ -- (6,907)
Class B............................ -- (8,787)
Class C............................ -- (4,230)
In Excess of Net Realized Gain:
Class A............................ (42) --
Class B............................ (70) --
Class C............................ (29) --
------------- -------------
(141) (19,924)
------------- -------------
Net Decrease in Net Assets
Resulting from Distributions..... (24,118) (39,019)
------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed......................... 83,177 226,529
Distributions Reinvested........... 13,759 25,615
Redeemed........................... (123,953) (114,610)
------------- -------------
Net Increase/Decrease in Net Assets
Resulting from Capital Share
Transactions..................... (27,017) 137,534
------------- -------------
Total Increase/Decrease in Net
Assets........................... (92,042) 101,689
NET ASSETS--Beginning of Period...... 298,177 196,488
------------- -------------
NET ASSETS--End of Period (Including
accumulated net investment income
of $357 and $781, respectively).... $ 206,135 $ 298,177
------------- -------------
------------- -------------
- -------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Class A:
Shares:
Subscribed...................... 3,413 6,811
Distributions Reinvested........ 486 743
Redeemed........................ (5,339) (5,569)
------------- -------------
Net Increase/Decrease in Class A
Shares Outstanding................ (1,440) 1,985
------------- -------------
------------- -------------
Dollars:
Subscribed...................... $ 36,170 $ 93,959
Distributions Reinvested........ 4,873 9,850
Redeemed........................ (53,258) (77,161)
------------- -------------
Net Increase/Decrease............. $ (12,215) $ 26,648
------------- -------------
------------- -------------
Ending Paid in Capital............ $ 80,677+ $ 92,892
------------- -------------
------------- -------------
Class B:
- -------------------------------------
Shares:
Subscribed...................... 3,007 7,464
Distributions Reinvested........ 619 770
Redeemed........................ (4,586) (1,939)
------------- -------------
Net Increase/Decrease in Class B
Shares Outstanding................ (960) 6,295
------------- -------------
------------- -------------
Dollars:
Subscribed...................... $ 31,134 $ 101,066
Distributions Reinvested........ 6,179 10,086
Redeemed........................ (45,561) (26,325)
------------- -------------
Net Increase/Decrease............. $ (8,248) $ 84,827
------------- -------------
------------- -------------
Ending Paid in Capital............ $ 147,844+ $ 156,092
------------- -------------
------------- -------------
Class C:
- -------------------------------------
Shares:
Subscribed...................... 1,545 2,312
Distributions Reinvested........ 270 432
Redeemed........................ (2,552) (825)
------------- -------------
Net Increase/Decrease in Class C
Shares Outstanding................ (737) 1,919
------------- -------------
------------- -------------
Dollars:
Subscribed...................... $ 15,873 $ 31,504
Distributions Reinvested........ 2,707 5,679
Redeemed........................ (25,134) (11,124)
------------- -------------
Net Increase/Decrease............. $ (6,554) $ 26,059
------------- -------------
------------- -------------
Ending Paid in Capital............ $ 55,455+ $ 62,009
------------- -------------
------------- -------------
</TABLE>
- ---------------
+ Ending Paid in Capital amounts do not reflect permanent book to tax
differences.
- ------------------
12
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $12.464 $ 14.26 $ 12.47 $ 11.57 $ 12.17
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... 1.062 1.15 1.25 1.36 1.26
Net Realized and Unrealized
Gain/Loss........................ (2.516) (0.67) 2.30 0.80 (0.52)
------- ------- ------- ------- -------
Total From Investment Operations... (1.454) 0.48 3.55 2.16 0.74
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income.............. (1.100) (1.09) (1.25) (1.26) (1.22)
Net Realized Gain.................. -- (1.19) (0.51) -- (0.12)
In Excess of Net Realized Gain..... (0.006) -- -- -- --
------- ------- ------- ------- -------
Total Distributions................ (1.106) (2.28) (1.76) (1.26) (1.34)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD....... $ 9.904 $ 12.46 $ 14.26 $ 12.47 $ 11.57
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN (1)..................... (11.14)% 3.40% 30.29% 19.61% 6.87%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's).... $58,506 $91,579 $76,439 $41,493 $14,819
Ratio of Expenses to Average Net
Assets............................. 1.45% 1.45% 1.52% 1.55% 1.55%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. 10.55% 8.36% 9.73% 11.95% 11.53%
Portfolio Turnover Rate.............. 121% 156% 157% 220% 178%
- -------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ -- $ -- $ -- $ 0.02 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... -- -- -- 1.69% 1.97%
Net Investment Income/Loss to
Average Net Assets............... -- -- -- 11.81% 11.11%
- -------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------- AUGUST 1, 1995+
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 TO JUNE 30, 1996
<S> <C> <C> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 12.396 $ 14.20 $ 12.44 $ 11.63
-------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... 0.982 1.04 1.07 1.18
Net Realized and Unrealized
Gain/Loss........................ (2.497) (0.65) 2.35 0.72
-------- -------- ------- -------
Total From Investment Operations... (1.515) 0.39 3.42 1.90
-------- -------- ------- -------
DISTRIBUTIONS
Net Investment Income.............. (1.012) (1.00) (1.15) (1.09)
Net Realized Gain.................. -- (1.19) (0.51) --
In Excess of Net Realized Gain..... (0.006) -- -- --
-------- -------- ------- -------
Total Distributions................ (1.018) (2.19) (1.66) (1.09)
-------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD....... $ 9.863 $ 12.40 $ 14.20 $ 12.44
-------- -------- ------- -------
-------- -------- ------- -------
TOTAL RETURN (1)..................... (11.82)% 2.63% 29.14% 17.07%*
-------- -------- ------- -------
-------- -------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's).... $107,013 $146,401 $78,340 $ 26,174
Ratio of Expenses to Average Net
Assets............................. 2.20% 2.20% 2.27% 2.30%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. 9.81% 7.64% 8.86% 12.06%
Portfolio Turnover Rate.............. 121% 156% 157% 220%*
- -------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ -- $ -- $ -- $ 0.02
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... -- -- -- 2.47%
Net Investment Income/Loss to
Average Net Assets............... -- -- -- 11.89%
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999# 1998# 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $12.403 $ 14.21 $ 12.45 $ 11.58 $ 12.16
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income/Loss......... 0.982 1.04 1.16 1.30 1.17
Net Realized and Unrealized
Gain/Loss........................ (2.500) (0.66) 2.26 0.77 (0.50)
------- ------- ------- ------- -------
Total From Investment Operations... (1.518) 0.38 3.42 2.07 0.67
------- ------- ------- ------- -------
DISTRIBUTIONS
Net Investment Income.............. (1.012) (1.00) (1.15) (1.20) (1.13)
Net Realized Gain.................. -- (1.19) (0.51) -- (0.12)
In Excess of Net Realized Gain..... (0.006) -- -- -- --
------- ------- ------- ------- -------
Total Distributions................ (1.018) (2.19) (1.66) (1.20) (1.25)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD....... $ 9.867 $ 12.40 $ 14.21 $ 12.45 $ 11.58
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN (1)..................... (11.83)% 2.55% 29.12% 18.71% 6.20%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net assets, End of Period (000's).... $40,616 $60,197 $41,709 $28,094 $11,880
Ratio of Expenses to Average Net
Assets............................. 2.20% 2.20% 2.27% 2.30% 2.30%
Ratio of Net Investment Income to
Average Net Assets................. 9.81% 7.62% 9.04% 11.40% 10.72%
Portfolio Turnover Rate.............. 121% 156% 157% 220% 178%
- -------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net Investment
Income/Loss...................... $ -- $ -- $ -- $ 0.04 $ 0.05
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... -- -- -- 2.44% 2.74%
Net Investment Income/Loss to
Average Net Assets............... -- -- -- 11.26% 10.28%
</TABLE>
- --------------------------------------------------------------------------------
* Non-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.
# Changes per share are based upon monthly average shares outstanding.
-----------------------
13
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Van Kampen Worldwide High Income Fund (the "Fund") is organized as a
separate non-diversified fund of Van Kampen Series Fund, Inc., a Maryland
Corporation, which is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended. The Fund's investment
objective seeks to offer investors high current income consistent with relative
stability of principal and potential for capital appreciation. The Fund
commenced operations on April 21, 1994.
The Fund currently offers three classes of shares, Class A, Class B, and Class C
Shares. Class A shares are sold with a front-end sales charge of up to 4.75%.
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 and Class C shares
are offered without a front end sales charge, but are subject to a contingent
deferred sales charge ("CDSC"). Class B shares will automatically convert to
Class A shares after the eighth year following purchase. The CDSC will be
imposed on most redemptions made within five years of the purchase for Class B
shares and one year of the purchase for Class C shares as detailed in the
following schedule:
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
SALES CHARGE
YEAR OF REDEMPTION CLASS B CLASS C
- ------------------------------------------ ----------- -----------
<S> <C> <C>
First..................................... 4.00% 1.00%
Second.................................... 4.00% None
Third..................................... 3.00% None
Fourth.................................... 2.50% None
Fifth..................................... 1.50% None
Thereafter................................ None None
</TABLE>
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.
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 between 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 takes 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. 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, 1999, approximately 86% of the net assets of the Worldwide High
Income Fund 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 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. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Fund may invest in repurchase agreements, which are short-term investments
in which the Fund acquires ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. 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.
3. INCOME AND EXPENSES: Dividend income is recorded on the ex-dividend date.
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. 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 Fund are recorded on the ex-distribution date.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: Assets and liabilities
denominated in foreign currencies and commitments under forward currency
contracts are
- -----------------------
14
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
translated into U.S. dollars at the mean of the quoted bid and asked prices.
Purchases and sales of portfolio securities are translated at the rate of
exchange prevailing when such securities were purchased or sold. Income and
expenses are translated at rates prevailing when accrued. Realized and
unrealized gains and losses on securities are not segregated for financial
reporting purposes from amounts arising from changes in the market prices of
securities. Realized gains and losses on foreign currency includes the net
realized amount from the sale of the currency and the amount realized between
trade date and settlement date on security and income transactions. However, 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.
The net assets of the Fund may include issuers located in emerging markets.
There are certain risks inherent in these investments not typically associated
with investments in the United States, including the smaller size of the markets
themselves, lesser liquidity, greater volatility and potentially less publicly
available information. Emerging markets may be subject to a greater degree of
government involvement in the economy and greater economic and political
uncertainty, which has the potential to extend to government imposed
restrictions on exchange traded transactions and currency transactions. These
restrictions may impact the Fund's ability to buy or sell certain securities or
to repatriate certain currencies to U.S. dollars. Additionally, changes in
currency exchange rates will affect the value of and investment income from such
securities.
5. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
The Fund 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, 1999, cost and unrealized appreciation/ depreciation for U.S.
Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
APPRECIATION/
COST APPREC. DEPREC. DEPRECIATION
(000) (000) (000) (000)
- --------- ----------- --------- -------------
<S> <C> <C> <C>
$ 212,269 $ 8,059 $ (18,760) $ (10,701)
</TABLE>
6. DISTRIBUTIONS OF INCOME AND GAINS: 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, and gains on certain securities of corporations
designated as "passive foreign investment companies."
Permanent book to tax basis differences relating to shareholder distributions
may result in reclassification among accumulated net investment income/loss,
accumulated net realized gain/loss, and paid in capital in excess of par. For
the year ended June 30, 1999, approximately $297,000 has been reclassified from
accumulated net realized loss and approximately $4,000 has been reclassified
from paid in capital in excess of par totaling $301,000 posted to accumulated
net investment income.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp. (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.), Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser") and Miller Anderson & Sherrerd LLP, 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 Fund, 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
ADVISORY FEE EXPENSE RATIO EXPENSE RATIO
- --------------- ------------------- -------------------
<S> <C> <C>
0.75% 1.55% 2.30%
</TABLE>
For the year ended June 30, 1999, the Fund recognized expenses of approximately
$12,000 representing legal services provided by Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel to the Fund, of which a director of the Fund is an
affiliated person.
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 the portfolio, plus reimbursement of out-of-pocket expenses. Under an
agreement between the Adviser 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 Adviser 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 Adviser.
------------------
15
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect 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 the Fund a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.25% of the Class A
shares and up to 1.00% of the Class B shares and Class C shares of the Fund on
an annualized basis, of the average daily net assets attributable to each Class.
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 shares and Class C shares of the Fund
redeemed within one to five years following such purchase. For the year ended
June 30, 1999, the Distributor has advised the Fund that it earned initial sales
charges of $308,371 for Class A shares and deferred sales charges of $6,501,
$610,632, and $24,589 for Class A shares, Class B shares, and Class C shares,
respectively.
Prior to October 1, 1998, the Fund's assets held outside the United States were
held by Morgan Stanley Trust Company ("MSTC"), a former affiliate of the
Subadvisers. Through September 30, 1998, the Fund incurred MSTC fees of
approximately $7,000. On October 1, 1998, the Chase Manhattan Bank purchased
MSTC.
Certain officers and directors of the Fund are also officers and directors of
Van Kampen. The Fund does not compensate its officers or directors who are
officers of Van Kampen.
The Fund provides deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Fund. The maximum annual
benefit per director under the plan is $2,500.
C. INVESTMENT TRANSACTIONS: For the year ended June 30, 1999, the Fund made
purchases of approximately $267,604,000 and sales of approximately $287,663,000
of investment securities other than long-term U.S. government securities and
short-term investments. There were no purchases or sales of long-term U.S.
government securities.
D. DERIVATIVE FINANCIAL INSTRUMENTS: A derivative financial instrument in very
general terms refers to a security whose value is "derived" from the value of an
underlying asset, reference rate or index.
The Fund has a variety of reasons to use derivative instruments, such as to
attempt to protect the Fund against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, foreign currency
exposure, maturity and duration. All of the Fund's portfolio holdings, including
derivative instruments, are marked-to-market each day with the change in value
reflected in unrealized appreciation/depreciation. Upon disposition, a realized
gain or loss is recognized accordingly, except when exercising a call option
contract or taking delivery of a security underlying a forward contract. In this
instance, the recognition of gain or loss is postponed until the disposal of the
security underlying the option or forward contract. Risks may arise as a result
of the potential inability of the counterparties to meet the terms of their
contracts.
Summarized below are the specific types of derivative financial instruments used
by the Fund.
1. FORWARD CURRENCY CONTRACTS: These instruments are commitments to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original value of the contract
and the closing value of such contract is included as a component of realized
gain/loss on foreign currency transactions.
At June 30, 1999, the Fund has outstanding forward currency contracts as
follows:
<TABLE>
<CAPTION>
UNREALIZED
CURRENT APPRECIATION/
VALUE DEPRECIATION
FORWARD CURRENCY CONTRACTS (000) (000)
- ---------------------------------------- ----------- ---------------
<S> <C> <C>
SHORT CONTRACTS:
British Pound,
2,005,000 expiring 9/3/99............. $ 3,165 $ 66
Euro,
9,215,000 expiring 7/26/99-8/20/99.... 9,536 205
----------- -----
$ 12,701 $ 271
----------- -----
----------- -----
</TABLE>
2. FUTURES CONTRACTS: A futures contract is an agreement involving the delivery
of a particular asset on a specified future date at an agreed upon price. The
Fund generally invests in futures of foreign government bonds and typically
closes the contract prior to the delivery date. These contracts are generally
used to manage the portfolio's effective maturity and duration.
Upon entering into futures contracts, the Fund maintains, in a segregated
account with its custodian, cash or securities with a value equal to its
obligation under the futures contracts. During the period the futures contract
is open, payments are received from or made to the broker based upon changes in
the value of the contract (the variation margin). The potential risk of loss
associated with a futures contract could be in excess of the variation margin
reflected on the Statement of Assets and Liabilities. The cost of securities
acquired through delivery under a contract is adjusted by the unrealized gain or
loss on the contract.
- -----------------------
16
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
Transactions in futures contracts for the year ended June 30, 1999, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS
- --------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1998......................... -0-
Futures Opened....................................... 69
Futures Closed....................................... (56)
--
Outstanding at June 30, 1999......................... 13
--
--
</TABLE>
The futures contracts outstanding as of June 30, 1999, and the descriptions and
the unrealized appreciation/ depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
DEPRECIATION
CONTRACTS (000)
<S> <C> <C>
- ----------------------------------------------------------------------------------
SHORT CONTRACTS:
U.K. Long Gilt September 1999
(Current notional value $2,329,331)........ 13 $ 33
--
--
---
---
</TABLE>
------------------
17
<PAGE>
VAN KAMPEN WORLDWIDE HIGH INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc.--
Van Kampen Worldwide High Income Fund:
In our opinion, the accompanying statement 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 Van Kampen Worldwide High Income
Fund (the "Fund", a fund of Van Kampen Series Fund, Inc.) at June 30, 1999, the
results of its operations, the changes in its 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
- -----------------------
18
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Fund's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Fund's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Fund. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Fund may invest that, in turn, may adversely affect
the net asset value of the Fund. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate Corporation and
Allstate Insurance Company
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
Retired, Formerly 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
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/ National Research
Council, and former Chairman of the German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment 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.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 218256
Kansas City, Missouri 64121-8256
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
[LOGO]
1 Parkview Plaza - P.O. Box 5555 - Oakbrook Terrace, IL
60181-5555 - www.vankampen.com
-C- Van Kampen Funds Inc. 1999
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT
OBLIGATIONS MONEY MARKET
MORGAN STANLEY MONEY MARKET
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
VAN KAMPEN SERIES FUND, INC.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
Economic Snapshot..................................................... 2
Investment Overview................................................... 3
Portfolio of Investments.............................................. 5
Statements of Assets and Liabilities.................................. 6
Statements of Operations.............................................. 7
Statement of Changes in Net Assets:
Morgan Stanley Government Obligations Money Market Fund............. 8
Morgan Stanley Money Market Fund.................................... 9
Financial Highlights ................................................. 10
Notes to Financial Statements......................................... 11
Report of Independent Accountants..................................... 13
Additional Information................................................ 14
</TABLE>
MSMM ANR 8/99
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
July 20, 1999
Dear Shareholder,
With the volatility that we've experienced recently in many financial markets,
some investors have sold securities because of uncertainty about where the
markets were going, only to be left rethinking whether they made the right
decision. We've witnessed this kind of market activity numerous times over the
past several years, sparked by concerns such as the impact of the Asian economic
crisis, high stock valuations, or, most recently, the stability of many
high-flying technology companies. While these fears eventually subsided,
investors who may have sold during this period were unable to reap the benefits
of the subsequent rally. That's partly because most of the recent big gains
happened in relatively short periods of time. This kind of volatility--and the
danger of making short-term decisions--highlights the importance of investing
for the long term, in accordance with your individual financial objectives.
Although the worst of the Asian crisis appears to be behind us, new concerns are
always emerging. In the coming months, we'll likely hear more about how the year
2000 computer problem may affect the markets or that we're overdue for a
correction. While the markets could undoubtedly suffer as a result of these or
any number of other events, we encourage you to focus on your long-term
investment goals. Although nothing is certain, history has shown us that over
time, the markets tend to recover-- and most investors want to be positioned to
take advantage of any recovery.
If you have concerns about market volatility or questions about how your
portfolio is structured to respond to these events, we encourage you to contact
your financial advisor. Your advisor can talk with you about sustaining a
long-term investment plan through a variety of market conditions. We hope that
Van Kampen Funds will play an important role as you and your advisor build a
portfolio designed to help you weather what the markets have in store.
Sincerely,
<TABLE>
<S> <C>
[/S/ RICHARD F. POWERS III] [/S/ DENNIS J. MCDONNELL]
Richard F. Powers, III Dennis J. McDonnell
Chairman President
Van Kampen Investment Advisory Corp. Van Kampen Investment Advisory Corp.
</TABLE>
------------------
1
<PAGE>
ECONOMIC SNAPSHOT
- --------------------------------------------------------------------------------
The strength of the domestic economy continued to defy expectations in the first
half of 1999, although it finally began to show
signs of slowing down. Strong growth, healthy employment, and low inflation all
contributed to the favorable economic environment.
STRONG ECONOMIC GROWTH
The nation's gross domestic product rose at an impressive rate of 4.3 percent
during the first quarter of 1999, but fell to 2.3 percent in the second quarter.
The first-quarter expansion was fueled by an increase in consumer spending,
which dropped to more moderate levels later in the reporting period.
POSITIVE EMPLOYMENT ENVIRONMENT
In May, the unemployment rate dropped to 4.2 percent--its lowest level in more
than 30 years. Throughout the reporting period, unemployment remained low, the
number of jobs grew, and wages rose. The labor market remained especially tight
in the service industry and most urban areas.
LOW INFLATION
Inflation remained low throughout most of the reporting period, although a sharp
increase in oil prices contributed to a spike in April's consumer price index
report (CPI). Following this up-tick, the Federal Reserve raised interest rates
0.25 percent on June 30. Although the Fed had expressed a bias toward a series
of rate increases, May's tame CPI report prompted it to drop this bias when
announcing the June rate increase.
ECONOMIC OUTLOOK
Our outlook for the economy suggests that the moderate slowdown may continue,
bringing the economy back to historically normal growth levels. Healthy job
growth, which has been supporting the consumer confidence and spending levels,
showed signs of faltering toward the end of the reporting period. However, a
renewed optimism for corporate earnings, low unemployment, and a vibrant housing
market should provide some balance against a slower job growth rate.
INTEREST RATES AND INFLATION
JUNE 30, 1997 THROUGH JUNE 30, 1999
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Month Interest Rates Inflation
Jun-97 6.5000 2.30
Jul-97 6.0000 2.20
Aug-97 5.5000 2.20
Sep-97 6.2500 2.20
Oct-97 5.7500 2.10
Nov-97 5.6875 1.80
Dec-97 6.5000 1.70
Jan-98 5.5625 1.60
Feb-98 5.6250 1.40
Mar-98 6.1250 1.40
Apr-98 5.6250 1.40
May-98 5.6875 1.70
Jun-98 6.0000 1.70
Jul-98 5.5625 1.70
Aug-98 5.9375 1.60
Sep-98 5.7500 1.50
Oct-98 5.2500 1.50
Nov-98 4.8750 1.50
Dec-98 4.0000 1.60
Jan-99 4.8125 1.70
Feb-99 4.8750 1.60
Mar-99 5.1250 1.70
Apr-99 4.9375 2.30
May-99 4.5000 2.10
Jun-99 4.0000 2.00
</TABLE>
Interest rates are represented by the closing
midline federal funds rate on the last day of
each month. Inflation is indicated by the
annual percentage change of the Consumer Price
Index for all urban consumers at the end of
each month.
- --------------
2
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
MORGAN STANLEY MONEY MARKET FUND
INVESTMENT OVERVIEW
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Other 0.9%
U.S. Treasury & Agency
Obligations 93.4%
Repurchase Agreement 5.7%
</TABLE>
<TABLE>
<CAPTION>
YIELD INFORMATION AS OF JUNE 30, 1999
- ---------------------------------------------
7 DAY 7 DAY 30 DAY 30 DAY
CURRENT EFFECTIVE CURRENT COMPARABLE
YIELD+ YIELD+ YIELD++ YIELD+++
<S> <C> <C> <C>
- ---------------------------------------------
3.87% 3.95% 3.89% 4.12%
- ---------------------------------------------
</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 the 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.
+++ IBC's Money Fund Report Averages/Government
U.S. GOVERNMENT SECURITIES ARE BACKED BY THE FULL FAITH AND CREDIT OF THE U.S.
GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES. THE GOVERNMENT BACKING APPLIES
ONLY TO THE TIMELY PAYMENT OF PRINCIPAL AND INTEREST WHEN DUE, ON SPECIFIC
SECURITIES IN THE FUND'S PORTFOLIO, NOT TO SHARES OF THE FUND. FUND SHARES
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE VALUE
OF DEBT SECURITIES WILL FLUCTUATE WITH CHANGES IN MARKET CONDITIONS AND
INTEREST RATES, WHICH WILL EFFECT THE VALUE OF FUND SHARES. SECURITIES WHICH
ARE ISSUED BY PRIVATE ISSUERS INVOLVE GREATER RISK THAN THOSE ISSUED DIRECTLY
BY THE U.S. GOVERNMENT.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY INSTRUMENT NET ASSETS
- -------------------------------------------------------- ----------------------------------- -------------
<S> <C> <C>
Federal Home Loan Mortgage Association
4.93%, 10/27/99 U.S. Government & Agency Obligation 34.6%
Federal National Mortgage Association Discount Notes
4.79%, 7/7/99 U.S. Government & Agency Obligation 17.3%
Federal Mortgage Corporation Discount Notes
4.85%, 7/16/99 U.S. Government & Agency Obligation 17.3%
Federal National Mortgage Association Discount Notes
4.77%, 7/28/99 U.S. Government & Agency Obligation 17.3%
Federal Home Loan Mortgage Association Discount Notes
4.71%, 7/9/99 U.S. Government & Agency Obligation 6.9%
</TABLE>
- --------------------------------------------------------------------------------
MORGAN STANLEY MONEY MARKET FUND
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Commercial Paper 12.5%
U.S. Government & Agency Obligations 74.9%
Other Cash Equivalents 12.6%
</TABLE>
<TABLE>
<CAPTION>
YIELD INFORMATION AS OF JUNE 30, 1999
- ------------------------------------------------
7 DAY 7 DAY 30 DAY 30 DAY
CURRENT EFFECTIVE CURRENT COMPARABLE
YIELD+ YIELD+ YIELD++ YIELD+++
- ------------------------------------------------
<S> <C> <C> <C>
3.85% 3.92% 3.84% 4.31%
- ------------------------------------------------
</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 the 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.
+++ IBC's Money Fund Report Averages/All Taxable
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS(1)
PERCENT OF
SECURITY INSTRUMENT NET ASSETS
- ------------------------------ ----------------------- ----------
<S> <C> <C>
Federal Home Loan Bank
Association Discount Notes U.S. Government &
4.71%, 7/9/99 Agency Obligation 15.6%
Federal Mortgage Corporation
Discount Notes U.S. Government &
4.80%, 7/14/99 Agency Obligation 15.6%
Federal National Mortgage
Association Discount Notes U.S. Government &
4.77%, 7/28/99 Agency Obligation 15.6%
Federal Mortgage Corporation
Discount Notes U.S. Government &
4.80%, 8/19/99 Agency Obligation 15.5%
Federal Mortgage Corporation
Discount Notes U.S. Government &
4.73%, 7/6/99 Agency Obligation 6.3%
</TABLE>
(1) excludes Repurchase Agreement.
INVESTMENTS IN SHARES OF THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT AND THERE IS NO ASSURANCE THAT THE FUNDS WILL MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE. YIELDS WILL FLUCTUATE AS MARKET CONDITIONS
CHANGE.
------------------
3
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
MORGAN STANLEY MONEY MARKET FUND
INVESTMENT OVERVIEW (CONT.)
- --------------------------------------------------------------------------------
WE RECENTLY SPOKE WITH THE MANAGEMENT TEAM OF THE MORGAN STANLEY GOVERNMENT
OBLIGATIONS MONEY MARKET FUND AND THE MORGAN STANLEY MONEY MARKET FUND ABOUT THE
KEY EVENTS AND ECONOMIC FORCES THAT SHAPED THE MARKETS DURING THE PAST 12
MONTHS. THE TEAM IS LED BY ABIGAIL JONES FEDER, PORTFOLIO MANAGER. THE FOLLOWING
EXCERPTS REFLECT HER VIEWS ON THE FUNDS' PERFORMANCE DURING THE 12-MONTH PERIOD
ENDED JUNE 30, 1999.
Q: HOW WOULD YOU CHARACTERIZE THE MARKET CONDITIONS IN WHICH THE FUNDS OPERATED
DURING THE PAST 12 MONTHS?
A: The second half of 1998 was marked by volatility, as the fixed-income market
was unsettled by global economic weakness and a subsequent flight to quality. A
series of fourth-quarter interest-rate cuts by the Federal Reserve Board
restored order and paved the way for recovery in the first quarter of 1999, as
investors gained confidence in the strength of the economy and modest inflation.
Yield spreads narrowed between Treasuries and other fixed-income products, but
this good news was quelled in the second quarter by a slight surge in inflation
and warnings of interference from the Fed.
As interest rates climbed steadily during the first six months of 1999, the
yield curve between six-month and one-year Treasury securities flattened, while
the curve between one- to two-year Treasuries steepened dramatically. This
change became more pronounced as Treasury yields adjusted to reflect the
potential for an increase--or perhaps a series of increases--in the federal
funds rate. The market breathed a sigh of relief in the last few days of the
reporting period, as the Fed approved a 0.25 percent hike and declared a neutral
stance toward raising rates further.
Q: TAKING THE FUNDS' COMMON OBJECTIVE INTO CONSIDERATION, HOW DID YOU MANAGE
THE PORTFOLIOS?
A: We upheld our strategy of investing in very high-quality, short-term
securities by focusing on U.S. dollar-denominated government and corporate money
market securities rated A1/P1 or better. In anticipation of the rising
interest-rate environment and the Fed's rate hike, we also maintained a short
average maturity of approximately 30 to 40 days, thus positioning the Funds to
take advantage of higher rates. As a result, we succeeded in meeting our
objective of maintaining a stable net asset value and preserving shareholders'
principal.
Q: HOW DID THE FUNDS PERFORM DURING THE REPORTING PERIOD?
A: As of June 30, 1999, the 7-day and 30-day current yields for the Morgan
Stanley Money Market Fund were 3.85% percent and 3.84% percent, respectively.
The 7-day and 30-day current yields for the Morgan Stanley Government
Obligations Money Market Fund were 3.87% percent and 3.89% percent,
respectively. These yields assume dividend reinvestment and, as with all money
market portfolios, are not necessarily indicative of future performance.
Q: WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
A: We look for the market to stabilize as it absorbs the effect of the Fed's
rate increase and prepares for the remainder of the year. We anticipate a
moderate slowdown in economic growth in the months ahead, but do not expect this
to have a negative effect on the fixed-income market unless it becomes a
significant downturn. With an eye toward the effect of potential year 2000
computer problems on issuance, we might expect a change in the type of issuance
offered and the level of demand for liquid issues, but we think that supply will
be available. We plan to maintain our investment strategies as we manage the
Funds going forward.
Abigail Jones Feder
PORTFOLIO MANAGER
- --------------
4
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
PAR AMORTIZED
VALUE COST
(000) (000)
<C> <S> <C>
- ---------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (93.4%)
FEDERAL HOME LOAN BANK ASSOCIATION DISCOUNT NOTES (6.9%)
$ 2,000 4.71%, 7/9/99.................................... $ 1,998
-----------
FEDERAL HOME LOAN BANK ASSOCIATION (34.6%)
10,000 4.93%, 10/27/99.................................. 10,000
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT
NOTES (34.6%)
5,000 4.79%, 7/7/99.................................... 4,996
5,000 4.77%, 7/28/99................................... 4,982
-----------
9,978
-----------
FEDERAL MORTGAGE CORPORATION DISCOUNT NOTES (17.3%)
5,000 4.85%, 7/16/99................................... 4,990
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (COST $26,966).....
26,966
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE VALUE
(000) (000)
<C> <S> <C>
- ---------------------------------------------------------------------------
REPURCHASE AGREEMENT (5.7%)
$ 1,645 J.P. Morgan Securities, Inc., 4.65%, dated
6/30/99, due 7/1/99, to be repurchased at
$1,645, collateralized by $1,118 U.S. Treasury
Notes, 12.50%, due 8/15/14, valued at $1,701
(COST $1,645).................................. $ 1,645
-----------
TOTAL INVESTMENTS (99.1%) (COST $28,611)...................... 28,611
OTHER ASSETS IN EXCESS OF LIABILITIES (0.9%).................. 262
-----------
NET ASSETS (100%)............................................. $28,873
-----------
-----------
</TABLE>
- ---------------
Variable/Floating Rate Instruments. These instruments are based upon a
designated base rate. These instruments are payable on demand.
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
PAR AMORTIZED
VALUE COST
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (74.9%)
FEDERAL HOME LOAN BANK ASSOCIATION DISCOUNT NOTES (15.6%)
$ 5,000 4.71%, 7/9/99.................................... $ 4,995
---------
FEDERAL MORTGAGE CORPORATION DISCOUNT NOTES (43.7%)
2,000 4.73%, 7/6/99.................................... 1,999
5,000 4.80%, 7/14/99................................... 4,991
2,000 4.81%, 7/19/99................................... 1,995
5,000 4.80%, 8/19/99................................... 4,967
---------
13,952
---------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES
(15.6%)
5,000 4.77%, 7/28/99................................... 4,982
---------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (COST $23,929)....
23,929
---------
COMMERCIAL PAPER (12.5%)
INSURANCE (3.1%)
1,000 USAA Capital Corp. 5.16%, 7/28/99................ 996
---------
<CAPTION>
PAR AMORTIZED
VALUE COST
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------------------
SERVICES (9.4%)
$ 1,000 Ameritech Capital Corp. 5.17%, 7/22/99........... $ 997
1,000 Dupont Ei Nemour 5.15%, 8/3/99................... 996
1,000 Motorola, Inc. 5.18%, 8/3/99..................... 995
---------
2,988
---------
TOTAL COMMERCIAL PAPER (COST $3,984)......................... 3,984
---------
<CAPTION>
VALUE
(000)
---------
<C> <S> <C>
REPURCHASE AGREEMENT (13.4%)
4,285 J.P. Morgan Securities, Inc., 4.65%, dated
6/30/99, due 7/1/99, to be repurchased at
$4,286, collateralized by $2,911 U.S. Treasury
Notes, 12.50%, due 8/15/14, valued at $4,430
(COST $4,285).................................. 4,285
---------
TOTAL INVESTMENTS (100.8%) (COST $32,198).................... 32,198
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.8%)................ (243 )
---------
NET ASSETS (100%)............................................ $ 31,955
---------
---------
</TABLE>
- ---------------
Variable/Floating Rate Instruments. These instruments are based upon a
designated base rate. These instruments are payable on demand.
-----------------------
5
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
MORGAN STANLEY MONEY MARKET FUND
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
JUNE 30, 1999
<TABLE>
<CAPTION>
MORGAN
STANLEY
GOVERNMENT MORGAN
OBLIGATIONS STANLEY
MONEY MONEY
MARKET MARKET
FUND FUND
(000) (000)
<S> <C> <C>
- ----------------------------------------------------------
ASSETS:
Investments at Value (Cost $28,611
and $32,198, respectively)
(including repurchase agreement
of $1,645 and $4,285,
respectively).................... $ 28,611 $32,198
Cash............................... 1 --
Interest Receivable................ 338 1
Other.............................. 3 2
---------- -------
Total Assets..................... 28,953 32,201
---------- -------
LIABILITIES:
Payable for:
Bank Overdraft................... -- 166
Dividends Declared............... 28 29
Distribution Fees................ 14 13
Investment Advisory Fees......... 12 4
Professional Fees................ 19 18
Administrative Fees.............. 3 2
Shareholder Reporting Expenses... -- 8
Custody Fees..................... 2 3
Transfer Agent Fees.............. 2 3
---------- -------
Total Liabilities................ 80 246
---------- -------
NET ASSETS......................... $ 28,873 $31,955
---------- -------
---------- -------
NET ASSETS CONSIST OF:
Capital Stock at Par ($.001 par
value, Shares Authorized
2,625,000,000)................... $ 29 $ 32
Paid in Capital in Excess of Par... 28,786 31,923
Undistributed Net Investment
Income........................... 144 62
Accumulated Net Realized Loss...... (86) (62)
---------- -------
NET ASSETS........................... $ 28,873 $31,955
---------- -------
---------- -------
CLASS A SHARES:
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $28,873,035 and
$31,954,690 and 28,876,127 and
32,015,859 Shares Outstanding,
respectively).................... $ 1.00 $ 1.00
---------- -------
---------- -------
</TABLE>
- ------------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
MORGAN STANLEY MONEY MARKET FUND
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
MORGAN
STANLEY
GOVERNMENT MORGAN
OBLIGATIONS STANLEY
MONEY MONEY
MARKET MARKET
FUND FUND
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------
INVESTMENT INCOME:
Interest Income.................... $ 3,372 $4,062
---------- ------
EXPENSES:
Investment Advisory Fees........... 294 345
Distribution Fees.................. 326 379
Administrative Fees................ 69 80
Professional Fees.................. 24 29
Filing and Registration Fees....... 26 24
Shareholder Reports................ 16 44
Custodian Fees..................... 18 28
Transfer Agent Fees................ 5 4
Other.............................. 6 9
---------- ------
Total Expenses................... 784 942
Less Expense Reductions.......... (162) (189)
---------- ------
Net Expenses..................... 622 753
---------- ------
Net Investment Income/Loss........... 2,750 3,309
---------- ------
NET REALIZED GAIN/LOSS ON:
Investments........................ 6 9
---------- ------
NET INCREASE/DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $ 2,756 $3,318
---------- ------
---------- ------
</TABLE>
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED JUNE JUNE 30, 1998
30, 1999 (000) (000)
<S> <C> <C>
- -----------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss......... $ 2,750 $ 3,180
Net Realized Gain/Loss............. 6 2
----------------- -------------
Net Increase/Decrease in Net Assets
Resulting from Operations........ 2,756 3,182
----------------- -------------
DISTRIBUTIONS:
Net Investment Income.............. (2,647) (3,204)
----------------- -------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed......................... 404,679 290,344
Distributions Reinvested........... 2,656 3,076
Redeemed........................... (434,873) (331,864)
----------------- -------------
Net Increase/Decrease in Net Assets
Resulting from Capital Share
Transactions..................... (27,538) (38,444)
----------------- -------------
Total Increase/Decrease in Net
Assets........................... (27,429) (38,466)
NET ASSETS--Beginning of Period...... 56,302 94,768
----------------- -------------
NET ASSETS--End of Period (Including
undistributed net investment income
of $144 and $38, respectively)..... $ 28,873 $ 56,302
----------------- -------------
----------------- -------------
- -----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Shares
Subscribed...................... 404,679 290,344
Distributions Reinvested........ 2,656 3,076
Redeemed........................ (434,873) (331,864)
----------------- -------------
Net Increase/Decrease in Shares
Outstanding..................... (27,538) (38,444)
----------------- -------------
----------------- -------------
Ending Paid in Capital............ $ 28,815 $ 56,353
----------------- -------------
----------------- -------------
</TABLE>
- --------------
8
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
INCREASE/DECREASE IN NET ASSETS
OPERATIONS:
Net Investment Income/Loss...................... $ 3,309 $ 7,814
Net Realized Gain/Loss.......................... 9 28
---------- ---------------
Net Increase/Decrease in Net Assets Resulting
from Operations............................... 3,318 7,842
---------- ---------------
DISTRIBUTIONS:
Net Investment Income........................... (3,241) (7,882)
---------- ---------------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed...................................... 402,246 921,486
Distributions Reinvested........................ 3,329 7,384
Redeemed........................................ (493,073) (947,876)
---------- ---------------
Net Increase/Decrease in Net Assets Resulting
from Capital Share Transactions............... (87,498) (19,006)
---------- ---------------
Total Increase/Decrease in Net Assets........... (87,421) (19,046)
NET ASSETS--Beginning of Period................... 119,376 138,422
---------- ---------------
NET ASSETS--End of Period (Including
undistributed/distributions in excess of net
investment income of $62 and $(6),
respectively)................................... $ 31,955 $119,376
---------- ---------------
---------- ---------------
- ---------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1) Shares:
Subscribed................................... 402,246 921,486
Distributions Reinvested..................... 3,329 7,384
Redeemed..................................... (493,073) (947,876)
---------- ---------------
Net Increase/Decrease in Shares Outstanding.... (87,498) (19,006)
---------- ---------------
---------- ---------------
Ending Paid in Capital......................... $ 31,955 $119,453
---------- ---------------
---------- ---------------
</TABLE>
-----------------------
9
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
SELECTED PER SHARE DATA ----------------------------------------------------------------------------
AND RATIOS 1999# 1998 1997 1996 1995
<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/Loss.......... 0.0420 0.0469 0.0443 0.0464 0.0448
Net Realized and
Unrealized
Gain/Loss............ (0.0019) -- -- (0.0011) --
------------ ------------ ------------ ------------ ------------
Total From Investment
Operations........... 0.0401 0.0469 0.0443 0.0453 0.0448
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment
Income............... (0.0401) (0.0469) (0.0443) (0.0453) (0.0448)
Net Realized Gain...... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total Distributions.... (0.0401) (0.0469) (0.0443) (0.0453) (0.0448)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN............. 4.09% 4.79% 4.53% 4.72% 4.58%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(000's)................ $ 28,873 $ 56,302 $ 94,768 $ 145,978 $ 67,505
Ratio of Expenses to
Average Net Assets..... 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of Net Investment
Income/Loss to Average
Net Assets............. 4.20% 4.64% 4.43% 4.68% 4.61%
- ---------------------------------------------------------------------------------------------------------
RATIOS BEFORE EXPENSE
LIMITATION:
Expenses to Average Net
Assets............... 1.20% 1.22% 1.27% 1.24% 1.12%
Net Investment
Income/Loss to
Average Net Assets... 3.95% 4.38% 4.10% 4.39% 4.44%
</TABLE>
- --------------------------------------------------------------------------------
# Changes per share are based upon monthly average shares outstanding.
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------
SELECTED PER SHARE DATA AND RATIOS 1999# 1998 1997 1996 1995
<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/Loss......... 0.0432 0.0472 0.0450 0.0463 0.0446
Net Realized and Unrealized
Gain/Loss........................ (0.0018) -- -- (0.0006) 0.0001
------- -------- -------- -------- --------
Total From Investment Operations... 0.0414 0.0472 0.0450 0.0457 0.0447
------- -------- -------- -------- --------
DISTRIBUTIONS
Net Investment Income.............. (0.0414) (0.0472) (0.0450) (0.0457) (0.0446)
Net Realized Gain.................. -- -- -- -- (0.0001)
------- -------- -------- -------- --------
Total Distributions................ (0.0414) (0.0472) (0.0450) (0.0457) (0.0447)
------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- -------- -------- -------- --------
------- -------- -------- -------- --------
TOTAL RETURN (1)..................... 4.22% 4.83% 4.60% 4.72% 4.55%
------- -------- -------- -------- --------
------- -------- -------- -------- --------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (000's).... $31,955 $119,376 $138,422 $170,973 $171,515
Ratio of Expenses to Average Net
Assets............................. 0.98% 0.98% 0.98% 0.98% 0.98%
Ratio of Net Investment Income/Loss
to Average Net Assets.............. 4.32% 4.72% 4.50% 4.65% 4.45%
- -----------------------------------------------------------------------------------------------------
RATIOS BEFORE EXPENSE LIMITATION:
Expenses to Average Net Assets..... 1.23% 1.10% 1.27% 1.22% 1.18%
Net Investment Income/Loss to
Average Net Assets............... 4.07% 4.61% 4.20% 4.41% 4.25%
</TABLE>
- --------------------------------------------------------------------------------
# Changes per share are based upon monthly average shares outstanding.
- -----------------------
10
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
MORGAN STANLEY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
The Morgan Stanley Government Obligations Money Market Fund and the Morgan
Stanley Money Market Fund (the "Funds") are organized as Maryland Corporations
and are registered under the Investment Company Act of 1940, as amended. The
Funds' investment objective seeks to provide as high a level of current interest
income as is consistent with maintaining liquidity and stability of principal.
The Funds commenced operations on March 12, 1992 and August 4, 1989,
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 Funds 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: Debt securities purchased with remaining maturities of 60
days or less are valued at amortized cost, if it approximates market value.
2. SECURITY TRANSACTIONS: Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
The Funds may invest in repurchase agreements, which are short-term investments
in which the Funds acquire ownership of a debt security and the seller agrees to
repurchase the security at a future time and specified price. Repurchase
agreements are fully collateralized by the underlying debt security. A bank as
custodian for the Funds 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 Funds have 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.
3. INCOME AND EXPENSES: Interest income is recognized on an 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.
Distributions from the Funds are recorded on the ex-distribution date.
4. TAXES: It is each Fund's intention to qualify as a regulated investment
company and distribute substantially all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial statements.
At June 30, 1999, the Funds 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 date:
<TABLE>
<CAPTION>
EXPIRATION DATE
JUNE 30, 2004
FUND (000)
- ------------------------------------------------ -------------------
<S> <C>
Government Obligations Money Market............. $ 82
Money Market.................................... $ 61
</TABLE>
At June 30, 1999, cost for U.S. Federal income tax purposes of the investments
of the Government Obligations Money Market Fund and the Money Market Fund was
approximately $28,611,000 and $32,198,000, respectively.
5. DISTRIBUTION OF INCOME AND GAINS: The amount and the character of income and
capital gain distributions to be paid by the Funds are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
Permanent book to 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. For the year ended June
30, 1999, approximately $3,000 has been reclassified from accumulated net
realized gain/loss and posted to undistributed net investment income/loss for
the Morgan Stanley Government Obligations Money Market Fund.
Permanent book to tax basis differences are not included in ending
undistributed/distributions in excess of net investment income for the purpose
of calculating net investment income/loss per share in the Financial Highlights.
B. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: Van
Kampen Investment Advisory Corp., (the "Adviser"), a wholly owned subsidiary of
Van Kampen Investments Inc. (an indirect wholly owned subsidiary of Morgan
Stanley Dean Witter & Co.) and Morgan Stanley Dean Witter Investment Management
Inc. ("MSDWIM" or a "Subadviser") a wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., provide the Funds 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 Funds, if
------------------
11
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
MORGAN STANLEY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
JUNE 30, 1999
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>
MAX. OPERATING
FUND ADVISORY FEE EXPENSE RATIO
- ---------------------------------- --------------- -------------------
<S> <C> <C>
Government Obligations Money
Market.......................... 0.45% 0.95%
Money Market...................... 0.45% 0.98%
</TABLE>
For the year ended June 30, 1999, the Government Obligations Money Market Fund
and the Money Market Fund recognized expenses of approximately $2,000 and
$5,000, respectively, representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Fund, of which a director of
the Funds is an affiliated person.
Van Kampen Investment Advisory Corp. (the "Administrator") also provides the
Funds with administrative services pursuant to an administrative agreement for a
monthly fee which on an annual basis equals 0.10% of the first $200 million of
the Fund's average daily net assets, 0.075% on the next $200 million of average
daily net assets, 0.05% on the next $200 million of average daily net assets,
and 0.03% on the average daily net assets over $600 million of each Fund, plus
reimbursement of out-of-pocket expenses. Under an agreement between the Adviser
and The Chase Manhattan Bank ("Chase"), through its corporate affiliate Chase
Global Funds Services Company ("CGFSC"), Chase provides certain administrative
services to the Funds. Chase is compensated for such services by the Adviser
from the fee it receives from the Funds. Transfer Agency services are provided
to the Funds by Van Kampen Investor Services Inc., an affiliate of the Adviser.
Van Kampen Funds Inc. the ("Distributor") a wholly owned subsidiary of Van
Kampen Investments Inc., an indirect wholly owned subsidiary of Morgan Stanley
Dean Witter & Co., serves as the Distributor of the Funds' shares. The
Distributor is entitled to receive from the Funds a distribution fee, which is
accrued daily and paid quarterly, of an amount of up to 0.50% annually of the
net asset value.
The Funds provide deferred compensation and retirement plans for its directors
who are not officers of Van Kampen. Under the deferred compensation plan,
Directors 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 Director's years of service to the Funds. The maximum annual
benefit per trustee under the plan is $2,500.
- -----------------------
12
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
MORGAN STANLEY MONEY MARKET FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of Van Kampen Series Fund, Inc. --
Morgan Stanley Government Obligations Money Market Fund
and Morgan Stanley Money Market Fund:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios 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 positions of Morgan Stanley Government
Obligations Money Market Fund and Morgan Stanley Money Market Fund, (each a Fund
of Van Kampen Series Fund, Inc., collectively referred to as the "Funds") at
June 30, 1999, and the results of their operations, the changes in 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 Funds' 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, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
August 6, 1999
------------------
13
<PAGE>
VAN KAMPEN SERIES FUND, INC.
MORGAN STANLEY GOVERNMENT OBLIGATIONS MONEY MARKET FUND
MORGAN STANLEY MONEY MARKET FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Federal Tax Information (Unaudited):
For the year ended June 30, 1999, the percentage of income earned from direct
U.S. treasury obligations was a follows:
<TABLE>
<CAPTION>
FUND INCOME EARNED
- --------------------------------------------------------------------------------------- -----------------
<S> <C>
Government Obligations Money Market.................................................... 31.2%
Money Market........................................................................... 14.4%
</TABLE>
- -----------------------
14
<PAGE>
VAN KAMPEN FUNDS
- --------------------------------------------------------------------------------
EQUITY FUNDS
DOMESTIC
Aggressive Equity
Aggressive Growth
American Value
Comstock
Emerging Growth
Enterprise
Equity Growth
Equity Income
Growth
Growth and Income
Harbor
Pace
Real Estate Securities
Small Cap Value
Technology
Utility
Value
GLOBAL/INTERNATIONAL
Asian Growth
Emerging Markets
European Equity
Global Equity
Global Equity Allocation
Global Franchise
Global Managed Assets
International Magnum
Latin American
FIXED-INCOME FUNDS
INCOME
Corporate Bond
Global Fixed Income
Global Government Securities
Government Securities
High Income Corporate Bond
High Yield
High Yield & Total Return
Limited Maturity Government
Short-Term Global Income
Strategic Income
U.S. Government
U.S. Government Trust for Income
Worldwide High Income
TAX EXEMPT INCOME
California Insured Tax Free
Florida Insured Tax Free Income
High Yield Municipal
Insured Tax Free Income
Intermediate Term Municipal Income
Municipal Income
New York Tax Free Income
Pennsylvania Tax Free Income
Tax Free High Income
CAPITAL PRESERVATION
Reserve
Tax Free Money
SENIOR LOAN FUNDS
Prime Rate Income Trust
Senior Floating Rate
To find out more about any of these funds, ask
your financial advisor for a prospectus, which
contains more complete information, including
sales charges, risks, and expenses. Please read
it carefully before you invest or send money.
To view a current Van Kampen fund
prospectus or to receive additional fund
information, choose from one of the following:
- - visit our Web site at WWW.VANKAMPEN.COM --
to view a prospectus, select DOWNLOAD 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.VANKAMPEN.COM
and selecting CONTACT US
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial, and business organizations, and individuals
around the world, the Funds could be adversely affected if the computer systems
used by the Funds' investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Funds'
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Funds' other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Funds. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Funds may invest that, in turn, may adversely affect
the net asset value of the Funds. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Funds' investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act which may limit the legal rights regarding the use of such
statements in the case of dispute.
<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
Jerry D. Choate
Former Chairman and Chief Executive Officer of the Allstate
Corporation and Allstate Insurance Company
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.
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
Suzanne H. Woolsey, Ph.D.
Chief Operating Officer of the National Academy of Sciences/
National Research Council, and former Chairman of the
German Marshall Fund of the United States
Paul G. Yovovich
Private Investor
INVESTMENT ADVISER AND ADMINISTRATOR
Van Kampen Investment Advisory Corp.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
INVESTMENT SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
DISTRIBUTOR
Van Kampen Funds Inc.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN
PNC Bank N.A.
200 Stevens Drive
Suite 440
Airport Business Center
Lester, Pennsylvania 19113
OFFICERS
Richard F. Powers, III
PRESIDENT
Dennis J. McDonnell
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
A. Thomas Smith III
VICE PRESIDENT AND SECRETARY
Peter W. Hegel
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Paul R. Wolkenberg
VICE PRESIDENT
Edward C. Wood, III
VICE PRESIDENT
Tanya M. Loden
CONTROLLER
DIVIDEND DISBURSING AND TRANSFER AGENT
Van Kampen Investor Services Inc.
P.O. Box 418256
Kansas City, Missouri 64121
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph Dr.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR THE
INVESTOR SERVICES DEPARTMENT AT 1-800-341-2911.
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.
<PAGE>
[LOGO]
1 Parkview Plaza n P.O. Box 5555 n Oakbrook Terrace, IL
60181-5555 n www.vankampen.com
-C- Van Kampen Funds Inc. 1999
