<PAGE>
VAN KAMPEN
VALUE FUND
DISTRIBUTED BY VAN KAMPEN FUNDS INC.
SEMI-ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
VAN KAMPEN VALUE FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Letter to Shareholders................................................ 1
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
</TABLE>
MSVL SAR 2/99
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
January 20, 1999
Dear Shareholder,
The past decade has been a remarkable time for investors. Together, we've
witnessed one of the greatest bull markets in investment history, unprecedented
growth in mutual fund investing, and a surge in personal retirement planning.
The coming millennium promises to hold even more opportunities.
To lead us into this new era of investing, Richard F. Powers III has joined Van
Kampen as Chairman and Chief Executive Officer. He comes to us from our parent
company, Morgan Stanley Dean Witter & Co., where he served as Executive Vice
President and Director of Marketing. He brings 27 years of experience in the
financial services industry, including an extensive background in product
management, strategic planning and brand development.
Although former Chairman Don G. Powell retired on January 1, he will remain
active in the industry and the community. Mr. Powell plans to continue his
service as a member of the board of directors of the Investment Company
Institute, the leading mutual fund industry association, and he will remain a
trustee of your fund.
ECONOMIC OVERVIEW
Despite a stormy year in the global economy, the United States ended 1998 with
only a moderate slowdown in growth. The nation's gross domestic product, a
measure of economic health, grew 3.9 percent during the year, matching 1997's
growth rate and indicating that our nation's economy remains strong. A
continuation of low inflation--only a 1.6 percent increase in the consumer price
index over the last 12 months--also helped sustain the domestic economy and kept
inflation-adjusted interest rates attractive.
Although the year ended on a positive note, the economic environment was quite
unsettled in the third quarter, with the Asian financial crisis contributing to
slowing corporate profits in the United States. Given the uncertainty
surrounding emerging market nations and the near-collapse of a major U.S. hedge
fund, the stock and bond markets experienced significant volatility during this
period. With instability as a backdrop, American and foreign investors alike
pursued a flight to quality--seeking the relative safety of large-company stocks
and government bonds.
In the last few months of the year the global financial situation improved in
conjunction with the Federal Reserve's interest rate decreases. In response to
declining corporate profits and mounting international concerns, the Fed lowered
interest rates three times, with 0.25 percent cuts in September, October, and
November. These rate cuts, coupled with a wave of corporate mergers and
cost-cutting measures, lent the support needed to keep the economy growing.
Dozens of foreign central banks also reduced interest rates in an effort to
stimulate their economies. These actions gave a boost to investor confidence and
encouraged a return to a more diversified range of investments in the last few
months of the year.
MARKET REVIEW
Despite bouts of volatility, the stock market experienced impressive returns
during 1998. Large-company stocks were responsible for much of this as investors
favored the perceived stability of established, high-quality companies. The Dow
Jones Industrial Average rose more than 16 percent during the year and hit a
record high of 9374 in November before falling back to more moderate levels.
Technology companies generally fared well during the year, with the
technology-heavy Nasdaq composite index up almost 40 percent for the year. On
the other hand, commodity-based stocks--especially those of oil companies--
suffered from declining commodity prices. Small-company stocks also
significantly underperformed the rest of the market, with the Russell 2000 Stock
Index actually losing 3.45 percent during the 12-month period.
OUTLOOK
Our outlook for the domestic economy is positive, and we anticipate continued
low inflation and healthy economic growth. However, the aftereffects of the
global economic slowdown may continue to put pressure on corporate earnings in
the first half of the year. Internationally, we anticipate that low interest
rates and declining inflation will lead to improvements in troubled areas such
as Asia and Latin America. With the successful launch of the euro, the new
European transnational currency, we believe that many foreign markets will
become increasingly attractive in 1999.
In the long term, we are optimistic that the stock market will continue its
record growth, although we could experience additional volatility in the months
ahead if concerns about high stock valuations and increasing earnings pressure
become more pronounced. Combined with growing questions about corporate and
government reactions to the Year 2000 computer problem, we could see an
increasingly cautious market by mid-year.
------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Additional details about your fund, including an investment overview section
with your portfolio management team, are provided in this report. As always, we
are pleased to have the opportunity to share with you the progress of your
investment.
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>
- --------------
2
<PAGE>
VAN KAMPEN
VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
(UNAUDITED)
THE PERFORMANCE RESULTS PROVIDED IN THIS OVERVIEW ARE FOR INFORMATIONAL PURPOSES
ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF THE FUND'S FUTURE
PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
COMPOSITION OF NET ASSETS (AT DECEMBER 31, 1998)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Capital Equipment 18.5%
Consumer Products - Miscellaneous 32.6%
Energy 4.1%
Finance 25.7%
Materials 3.7%
Services 7.0%
Short-Term Investments 7.8%
Other 0.6%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS**
-------------------------------------------------------------------
AVERAGE ANNUAL
SIX MONTHS ONE YEAR SINCE INCEPTION
------------------- ------------------- -------------------
WITH WITHOUT WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES SALES SALES
CHARGE* CHARGE CHARGE* CHARGE CHARGE* CHARGE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares -12.19% -6.86% -8.02% -2.37% -4.28% -0.39%
- ---------------------------------------------------------------------------------------------
Class B Shares -11.83% -7.28% -7.91% -3.17% -3.76% -1.15%
- ---------------------------------------------------------------------------------------------
Class C Shares -8.01% -7.10% -4.02% -3.07% -1.14% -1.14%
- ---------------------------------------------------------------------------------------------
S&P 500 Index N/A 9.22% N/A 28.57% N/A 24.17%
- ---------------------------------------------------------------------------------------------
</TABLE>
* The returns above with sales charge are calculated using the applicable sales
charge for Class A shares and applicable deferred sales charge for Class B
and Class C shares.
** Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waivers and reimbursements, total
returns would be lower.
THE S&P 500 INDEX IS AN UNMANAGED INDEX OF COMMON STOCKS. THE S&P 500 INDEX
ASSUMES DIVIDENDS ARE REINVESTED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
ISSUER SECTOR NET ASSETS
- ------------------------------ ------------------- ---------------
<S> <C> <C>
General Motors Corp. Consumer Products -
Miscellaneous 3.9%
International Business Consumer Products -
Machines Corp. Miscellaneous 3.0%
Ford Motor Co. Consumer Products -
Miscellaneous 2.9%
Chase Manhattan Corp. Finance 2.7%
First Union Corp. Finance 2.5%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
<S> <C> <C>
VALUE PERCENT OF
SECTOR (000) NET ASSETS
-------------------- --------- -------------
Consumer Products -
Miscellaneous $90,468 32.6%
Finance 71,269 25.7%
Capital Equipment 51,168 18.5%
Services 19,453 7.0%
Energy 11,318 4.1%
</TABLE>
The Van Kampen Value Fund seeks to achieve above-average total return over a
market cycle of three to five years, consistent with reasonable risk. The Fund
invests in a diversified portfolio of common stocks and other equity securities
that are believed to be undervalued on the basis of key valuation parameters,
including price-to-earnings (P/E), price-to-sales, and price-to-cash flow
ratios. In general, the Fund benefits from investing in the stocks of companies
with relative valuations below that which is merited based upon the company's
relative growth and profit characteristics.
PERFORMANCE
For the six months ended December 31, 1998, the Van Kampen Value Fund returned
- -6.86 percent versus 9.22 percent for the Standard & Poor's 500 Index. The S&P
500 Index is a broad-based, unmanaged index that reflects the general
performance of the stock market.
Both stock selection and sector allocation contributed to the significant
underperformance of the portfolio. Relative performance was affected by poor
stock selection, particularly in health care, technology, and telephone
services. The Fund's overweighting in many cyclical sectors, such as heavy
industry, consumer durables, transportation, and basic materials, also hurt
relative performance. In addition, we were significantly overweighted in the
economically sensitive and financial-service sectors, which substantially
underperformed the Fund's benchmark. Individual holdings in the heavy industry,
technology, health care, and retail sectors generated the bulk of the
underperformance in stock selection.
MARKET OVERVIEW
The year was extraordinary in that every investment style and strategy employed
by the Fund significantly underperformed its counterpart. For example, stocks
with high P/E ratios significantly outperformed stocks with low P/Es, growth
stocks outperformed value stocks, stable/defensive stocks outperformed
cyclical/economically sensitive stocks, and mega-cap stocks significantly
outperformed large-cap stocks. Despite these challenges, the Fund remained true
to its investment objectives, because we have confidence that doing so should be
rewarding in the long run.
------------------
3
<PAGE>
VAN KAMPEN
VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
(UNAUDITED)
STRATEGY
As stated above, high-P/E stocks outperformed low-P/E stocks. The Fund simply
cannot own most of the very high-P/E stocks in any sector--including energy,
health care, telephones, food, personal care, technology, and heavy industry; to
do so would violate our low-P/E discipline. As a result, the Fund's performance
suffered.
Our discipline precluded ownership of many stable, growth industries. It should
be noted that our valuation discipline precluded us from owning many of the
currently "hot" sectors of the stock market. Health care, technology, and
telecommunication services were three top-performing sectors in which we had few
opportunities to invest during the period. Currently, we hold positions in IBM,
Avnet, Arrow Electronics, Tektronix, and First Data. But new positions in
technology stocks were and continue to be very difficult to establish within the
context of our valuation discipline. Technology companies with good fundamentals
generally have high valuations, as do the large number of technology companies
without profits. The Fund's underweighting in the technology sector versus the
S&P 500 was its largest since 1990. We believe that the current "techmania" will
run its course as investors face deteriorating fundamentals for
technology-related capital spending as well as spending uncertainties related to
the "Year 2000" computer problem. We look forward to using any period of
relative weakness to reestablish larger holdings in the sector.
For a value portfolio, the Fund was light on energy and utility shares.
Fundamental earnings problems resulting from plunging energy prices prevented us
from expanding our positions in this sector. Electric utilities remained a large
component of our low P/E investible universe, while representing a much smaller
part of the portfolio. We continue to have doubts regarding the industry's
ability to weather the shift from a monopolistic to a competitive environment
without suffering serious earnings problems. Telephone utilities are
conceptually appealing to us, but Bell Atlantic is the only company we can own
due to our value-investing requirements. The company represented one of our top
ten holdings at 2 percent of the portfolio.
Our current investment strategy reflects the sector breakdown of the low-P/E
universe. Our largest sector allocations remain in sectors with economic
sensitivity such as consumer durables, transportation, heavy industry, and basic
materials as well as the financial-services sector. This sector allocation
remains consistent with that used in 1998, although we believe it will generate
much more acceptable relative performance in the year ahead. Financials,
cyclicals, and retail stocks constituted about 80 percent of the Fund's
investible universe, and these industries are therefore heavily represented in
our portfolio.
It is difficult to categorize our outlook for the equity market because,
arguably, a homogeneous stock market does not exist anymore. In most sectors of
the S&P 500, the largest large-cap stocks appear quite expensive, especially
relative to declining earnings growth rates and negative earnings estimate
revisions.
While the S&P 500 itself appears richly priced, many of the remaining companies
in the stock market appear to offer reasonable value. Large-cap, economically
sensitive companies of all industries offer attractive values. Just note the
portfolio of high-quality companies we have constructed with a current P/E ratio
of 12.5 times estimated earnings. They may be shunned by domestic investors, but
American auto, airline, capital goods, basic materials, and financial companies
are world-class businesses with attractive growth and profitability
characteristics. Similar industries in other developed countries' equity markets
currently trade for significantly higher absolute valuations. For example,
German auto and basic materials companies and Japanese machinery and financials
trade for 20 times earnings and up. Obviously, the current American disdain for
economic and interest rate sensitivity is not universally shared. Although not a
primary focus of the portfolio, small and mid-cap stocks appear quite reasonably
priced to us as well.
OUTLOOK
As for the outlook for low-P/E investing, we continue to have faith in the
philosophy and processes that have generated significant returns over time.
Low-P/E investing periodically has poor years.
- --------------
4
<PAGE>
VAN KAMPEN
VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
(UNAUDITED)
Though quite remarkable in relative magnitude, the past five quarters represent
one such period. Unless the laws of large numbers and supply and demand are
repealed in the business world, we believe modestly valued companies with
average growth prospects should continue to generate attractive relative returns
over the full market cycle. Value investing in general, and low-P/E investing in
particular, should come into favor again. Market conditions today are
reminiscent of 1972, the heyday for the "pay any price for growth" days. After
that enthusiasm for growth investing waned, value investing thrived and
substantially outperformed the growth style during the next ten years.
It remains our belief that the market can not ignore for much longer these
compelling valuation characteristics. As in the past, patient investors in value
stocks may be well-rewarded when market rotation again favors those stocks that
meet our low-P/E value criteria.
Richard Behler Nicholas Kovich Robert Marcin
PORTFOLIO MANAGER PORTFOLIO MANAGER PORTFOLIO MANAGER
------------------
5
<PAGE>
VAN KAMPEN
VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------------
COMMON STOCKS (91.6%)
CAPITAL EQUIPMENT (18.5%)
CHEMICALS--DIVERSIFIED (1.3%)
96,780 Rohm & Haas Co................................... $ 2,916
29,700 The Lubrizol Corp................................ 763
--------
3,679
--------
CONSTRUCTION & HOUSING (1.4%)
113,020 Owens Corning.................................... 4,005
--------
ELECTRIC UTILITIES (2.2%)
54,880 DTE Energy Co.................................... 2,353
55,990 Entergy Corp..................................... 1,743
68,400 Southern Co...................................... 1,988
--------
6,084
--------
ELECTRONIC COMPONENTS--MISCELLANEOUS (3.6%)
(a)125,060 Arrow Electronics, Inc........................... 3,338
52,500 Avnet, Inc....................................... 3,176
114,610 Tektronix, Inc................................... 3,445
--------
9,959
--------
HEALTHCARE--MEDICAL DEVICE (1.5%)
76,230 Beckman Coulter, Inc............................. 4,135
--------
INDUSTRIAL COMPONENTS (1.2%)
109,590 Aeroquip-Vickers, Inc............................ 3,281
--------
MACHINERY & ENGINEERING (4.7%)
126,600 Case Corp........................................ 2,761
109,200 Cummins Engine................................... 3,877
300 Deere & Co....................................... 10
141,660 Harnischfeger Industries, Inc.................... 1,443
67,550 Kennametal, Inc.................................. 1,435
105,525 Parker-Hannifin Corp............................. 3,456
--------
12,982
--------
MANUFACTURING (2.1%)
20,500 Eaton Corp....................................... 1,449
(a)32,210 FMC Corp......................................... 1,804
52,870 Tecumseh Products Co. 'A'........................ 2,465
--------
5,718
--------
PROFESSIONAL SERVICES (0.5%)
179,670 Olsten Corp...................................... 1,325
--------
TOTAL CAPITAL EQUIPMENT........................................... 51,168
--------
CONSUMER PRODUCTS--MISCELLANEOUS (32.6%)
AUTOMOBILES (11.1%)
88,890 Dana Corp........................................ 3,633
137,330 Ford Motor Co.................................... 8,060
152,580 General Motors Corp.............................. 10,919
98,200 Goodyear Tire & Rubber Co........................ 4,953
59,260 TRW, Inc......................................... 3,330
--------
30,895
--------
CONSUMER SERVICES (3.4%)
33,770 Standard Register Co............................. 1,045
45,700 International Business Machines Corp............. 8,443
--------
9,488
--------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------------
HEALTHCARE SUPPLIES & SERVICES (6.7%)
114,770 Columbia HCA/Healthcare Corp..................... $ 2,841
(a)143,000 Foundation Health Systems 'A'.................... 1,707
(a)305,300 HEALTHSOUTH Corp................................. 4,713
35,210 Mallinckrodt, Inc................................ 1,085
(a)159,800 Tenet Healthcare Corp............................ 4,195
92,200 United HealthCare Corp........................... 3,970
--------
18,511
--------
RETAIL--MAJOR DEPARTMENT STORES (3.3%)
95,620 Dillards, Inc., 'A'.............................. 2,713
75,900 Sears, Roebuck & Co.............................. 3,226
(a)196,240 Toys 'R' Us, Inc................................. 3,312
--------
9,251
--------
TEXTILE & APPAREL (4.4%)
156,600 Liz Claiborne, Inc............................... 4,943
49,620 Springs Industries, Inc. 'A'..................... 2,056
109,740 VF Corp.......................................... 5,144
--------
12,143
--------
TOBACCO (3.7%)
103,140 Philip Morris Cos., Inc.......................... 5,518
157,040 RJR Nabisco Holdings Corp........................ 4,662
--------
10,180
--------
TOTAL CONSUMER PRODUCTS--MISCELLANEOUS............................ 90,468
--------
ENERGY (4.1%)
ELECTRIC--INTEGRATED (1.8%)
33,770 Cinergy Corp..................................... 1,161
28,000 Duke Power Co.................................... 1,794
44,340 GPU, Inc......................................... 1,959
--------
4,914
--------
OIL & GAS (2.3%)
(a)126,300 Nabors Industries, Inc........................... 1,713
41,860 Phillips Petroleum Co............................ 1,784
119,870 Ultramar Diamond Shamrock Corp................... 2,907
--------
6,404
--------
TOTAL ENERGY...................................................... 11,318
--------
FINANCE (25.7%)
BANKING (7.6%)
2 Associates First Capital Corp. 'A'............... --
75,100 BankAmerica Corp................................. 4,515
46,600 BankBoston Corp.................................. 1,814
111,440 Chase Manhattan Corp............................. 7,585
159,900 First Data Corp.................................. 5,067
47,740 Republic New York Corp........................... 2,175
--------
21,156
--------
INSURANCE (6.2%)
117,380 Allstate Corp.................................... 4,534
71,740 Hartford Financial Services Group................ 3,937
109,405 Old Republic International Corp.................. 2,462
163,750 Washington Mutual, Inc........................... 6,253
--------
17,186
--------
</TABLE>
- --------------
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN
VALUE FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONT.)
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------------
<C> <S> <C>
LIFE INSURANCE (0.8%)
28,740 American General Corp............................ 2,242
--------
LIFE/HEALTH INSURANCE (2.0%)
70,800 CIGNA Corp....................................... $ 5,474
--------
REINSURANCE (3.1%)
80,610 Everest Reinsurance Holdings, Inc................ 3,139
62,580 Reliastar Financial Corp......................... 2,887
33,765 Transatlantic Holdings, Inc...................... 2,551
--------
8,577
--------
SUPER-REGIONAL BANKS--U.S. (6.0%)
83,700 Bank One Corp.................................... 4,274
115,589 First Union Corp. (N.C.)......................... 7,029
98,500 PNC Bank Corp.................................... 5,331
--------
16,634
--------
TOTAL FINANCE..................................................... 71,269
--------
MATERIALS (3.7%)
CHEMICALS (2.7%)
66,200 Air Products & Chemicals, Inc.................... 2,648
74,900 IMC Global, Inc.................................. 1,601
40,300 Morton International, Inc........................ 987
(a)135,400 W.R. Grace & Co.................................. 2,124
--------
7,360
--------
FOREST PRODUCTS & PAPER (0.4%)
42,820 Westvaco Corp.................................... 1,148
--------
METALS-STEEL (0.6%)
103,300 Inland Steel Industries, Inc..................... 1,743
--------
TOTAL MATERIALS................................................... 10,251
--------
SERVICES (7.0%)
FOOD--MISCELLANEOUS (2.4%)
10,400 Dole Food Co..................................... 312
80,310 IBP, Inc......................................... 2,339
142,120 Universal Foods Corp............................. 3,899
--------
6,550
--------
TELECOMMUNICATIONS EQUIPMENT (1.6%)
84,700 Bell Atlantic Corp............................... 4,489
--------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------------
TRANSPORTATION--AIRLINES (2.5%)
(a)57,880 AMR Corp......................................... $ 3,437
67,200 Delta Airlines, Inc.............................. 3,494
--------
6,931
--------
TRANSPORTATION--RAIL (0.5%)
18,900 Burlington Northern Railroad Co.................. 638
22,500 CNF Transportation, Inc.......................... 845
--------
1,483
--------
TOTAL SERVICES.................................................... 19,453
--------
TOTAL COMMON STOCKS (COST $268,097)................................. 253,927
--------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
<C> <S> <C>
- ----------------
STRUCTURED INVESTMENT (1.0%)
(b)$125 Merrill Lynch & Co., Inc. Single Stock Linked
Note, 3.00% plus dividends on Case Corp. stock,
8/13/99
(COST $3,969).................................. 2,726
--------
SHORT-TERM INVESTMENT (7.8%)
REPURCHASE AGREEMENT (7.8%)
21,558 Chase Securities, Inc., 4.45%, dated 12/31/98,
due 1/4/99, to be repurchased at $21,569,
collateralized by $12,965 U.S. Treasury Bonds,
11.25%, due 2/15/15, valued at $22,008 (COST
$21,558)....................................... 21,558
--------
TOTAL INVESTMENTS (100.4%) (COST $293,624).......................... 278,211
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.4%)....................... (1,143)
--------
NET ASSET (100%).................................................... $277,068
--------
--------
</TABLE>
- ---------------
(a) -- Non-income producing security
(b) -- Security is linked to the performance of the common stock of Case
Corp.
-----------------------
7
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
(000)
<S> <C>
- --------------------------------------------------------
ASSETS:
Investments in Securities, at Value
(Investments at Cost $293,624) $ 278,211
Cash 1
Receivable for:
Dividends 365
Fund Shares Sold 271
Interest 93
Deferred Organizational Costs 4
--------
Total Assets 278,945
--------
LIABILITIES:
Payable for:
Fund Shares Redeemed 753
Investments Purchased 395
Distribution Fees 340
Investment Advisory Fees 154
Administrative Fees 64
Custody Fees 50
Shareholder Reporting Expenses 47
Transfer Agent Fees 40
Professional Fees 20
Directors' Fees and Expenses 7
Filing and Registration Fees 7
--------
Total Liabilities 1,877
--------
NET ASSETS $ 277,068
--------
--------
NET ASSETS CONSIST OF:
Capital Stock at Par $ 29
Paid in Capital in Excess of Par 299,066
Undistributed Net Investment Income 128
Accumulated Net Realized Loss (6,742)
Unrealized Depreciation on
Investments (15,413)
--------
NET ASSETS $ 277,068
--------
--------
CLASS A SHARES:
Net Assets $ 112,676
Shares Issued and Outstanding
($.001 par value) (Authorized
2,625,000,000) 11,749
Net Asset Value and Redemption
Price Per Share (Based on Net
Assets of $112,675,485 and
11,748,962 Shares Outstanding) $ 9.59
--------
--------
Maximum Sales Charge 5.75%
Maximum Offering Price Per Share
(Net Asset Value Per Share X 100
/ (100 - maximum sales charge)) $ 10.18
--------
--------
CLASS B SHARES:
Net Assets $ 132,582
Shares Issued and Outstanding
($.001 par value) (Authorized
2,625,000,000) 13,847
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$132,582,317 and 13,847,281
Shares Outstanding)* $ 9.57
--------
--------
CLASS C SHARES:
Net Assets $ 31,810
Shares Issued and Outstanding
($.001 par value) (Authorized
2,625,000,000) 3,325
Net Asset Value and Offering Price
Per Share (Based on Net Assets of
$31,809,821 and 3,325,288 Shares
Outstanding)* $ 9.57
--------
--------
</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
- --------------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
(000)
<S> <C>
- --------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 2,495
Interest 880
--------
Total Income 3,375
--------
EXPENSES:
Investment Advisory Fees 1,150
Less: Fees Waived (82)
--------
Net Investment Advisory Fees 1,068
Distribution Fees
Class A 150
Class B 671
Class C 165
Administrative Fees 362
Filing and Registration Fees 58
Transfer Agent Fees 49
Shareholder Reports 45
Professional Fees 35
Custodian Fees 15
Directors' Fees and Expenses 2
Amortization of Organizational
Costs 2
Other 5
--------
Net Expenses 2,627
--------
Net Investment Income 748
--------
NET REALIZED GAIN (LOSS) ON:
Investments (6,563)
--------
CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments (16,634)
--------
Net Realized Loss and Change in
Unrealized
Appreciation/Depreciation (23,197)
--------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ (22,449)
--------
--------
</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>
SIX MONTHS ENDED
DECEMBER 31,1998 JULY 7, 1997* TO
(UNAUDITED) JUNE 30, 1998
(000) (000)
<S> <C> <C>
- ------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 748 $ 1,260
Net Realized Gain (Loss) (6,563) 5,893
Change in Unrealized Appreciation/Depreciation (16,634) 1,221
---------- ----------
Net Increase (Decrease) in Net Assets Resulting
from Operations (22,449) 8,374
---------- ----------
DISTRIBUTIONS:
Net Investment Income:
Class A (462) (930)
Class B (91) (264)
Class C (22) (66)
In Excess of Net Investment Income:
Class A -- (77)
Class B -- (22)
Class C -- (6)
---------- ----------
(575) (1,365)
---------- ----------
Net Realized Gain:
Class A (2,049) (502)
Class B (2,409) (431)
Class C (584) (95)
---------- ----------
(5,042) (1,028)
---------- ----------
Net Decrease in Net Assets Resulting from
Distributions (5,617) (2,393)
---------- ----------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 45,673 354,369
Distributions Reinvested 4,917 2,140
Redeemed (61,208) (49,738)
---------- ----------
Net Increase (Decrease) in Net Assets Resulting
from Capital Share Transactions (10,618) 306,771
---------- ----------
Total Increase (Decrease) in Net Assets (38,684) 312,752
NET ASSETS--Beginning of Period 315,752 3,000
---------- ----------
NET ASSETS--End of Period (Including undistributed
(distributions in excess of) net investment
income of $128 and $(45), respectively) $ 277,068 $ 315,752
---------- ----------
---------- ----------
- ------------------------------------------------------------------------------------------
Capital Share Transactions:
(1) Class A:
---------------------
Shares:
Subscribed 1,799 16,264
Distributions Reinvested 246 136
Redeemed (3,353) (3,343)
---------- ----------
Net Increase (Decrease) in Class A Shares
Outstanding (1,308) 13,057
---------- ----------
---------- ----------
Dollars:
Subscribed $ 16,847 $ 167,353
Distributions Reinvested 2,302 1,393
Redeemed (32,054) (35,499)
---------- ----------
Net Increase (Decrease) $ (12,905) $ 133,247
---------- ----------
---------- ----------
Ending Paid in Capital $ 121,317 $ 134,222
---------- ----------
---------- ----------
Class B:
---------------------
Shares:
Subscribed 2,301 14,654
Distributions Reinvested 224 60
Redeemed (2,254) (1,138)
---------- ----------
Net Increase in Class B Shares Outstanding 271 13,576
---------- ----------
---------- ----------
Dollars:
Subscribed $ 21,919 $ 150,818
Distributions Reinvested 2,115 607
Redeemed (21,134) (12,023)
---------- ----------
Net Increase $ 2,900 $ 139,402
---------- ----------
---------- ----------
Ending Paid in Capital $ 143,275 $ 140,375
---------- ----------
---------- ----------
Class C:
---------------------
Shares:
Subscribed 732 3,584
Distributions Reinvested 53 14
Redeemed (846) (212)
---------- ----------
Net Increase (Decrease) in Class C Shares
Outstanding (61) 3,386
---------- ----------
---------- ----------
Dollars:
Subscribed $ 6,907 $ 36,198
Distributions Reinvested 500 140
Redeemed (8,020) (2,216)
---------- ----------
Net Increase (Decrease) $ (613) $ 34,122
---------- ----------
---------- ----------
Ending Paid in Capital $ 34,503 $ 35,116
---------- ----------
---------- ----------
- ------------------------------------------------------------------------------------------
* Commencement of operations
</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 CLASS C
---------------------------- ---------------------------- ----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED JULY 7, ENDED JULY 7, ENDED JULY 7,
DECEMBER 31, 1997* TO DECEMBER 31, 1997* TO DECEMBER 31, 1997* TO
SELECTED PER SHARE DATA AND 1998 JUNE 30, 1998 JUNE 30, 1998 JUNE 30,
RATIOS (UNAUDITED) 1998# (UNAUDITED) 1998# (UNAUDITED) 1998#
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.53 $ 10.00 $ 10.51 $ 10.00 $ 10.50 $ 10.00
------------ ------------ ------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.05 0.11 0.01 0.03 0.01 0.03
Net Realized and Unrealized
Gain (Loss) (0.78) 0.56 (0.77) 0.56 (0.76) 0.55
------------ ------------ ------------ ------------ ------------ ------------
Total From Investment
Operations (0.73) 0.67 (0.76) 0.59 (0.75) 0.58
------------ ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
Net Investment Income (0.04) (0.08) (0.01) (0.03) (0.01) (0.03)
In Excess of Net Investment
Income -- (0.01) -- (0.00)++ -- (0.00)++
Net Realized Gain (0.17) (0.05) (0.17) (0.05) (0.17) (0.05)
------------ ------------ ------------ ------------ ------------ ------------
Total Distributions (0.21) (0.14) (0.18) (0.08) (0.18) (0.08)
------------ ------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 9.59 $ 10.53 $ 9.57 $ 10.51 $ 9.57 $ 10.50
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
TOTAL RETURN (1) (6.86)% 6.74% (7.28)% 6.01% (7.10)% 5.83%
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(000's) $ 112,676 $ 137,447 $ 132,582 $ 142,741 $ 31,810 $ 35,564
Ratio of Expenses to Average
Net Assets 1.45%** 1.45%** 2.20%** 2.20%** 2.20%** 2.20%**
Ratio of Net Investment Income
to Average Net Assets 0.96%** 1.02%** 0.17%** 0.28%** 0.17%** 0.29%**
Portfolio Turnover Rate 27% 38% 27% 38% 27% 38%
- ------------------------------------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period
Per Share Benefit to Net
Investment Income $ -- $ 0.01 $ -- $ 0.01 $ -- $ 0.01
Ratios Before Expense
Limitation:
Expenses to Average Net
Assets 1.49%** 1.60%** 2.24%** 2.35%** 2.24%** 2.35%**
Net Investment Income to
Average Net Assets 0.92%** 0.88%** 0.13%** 0.14%** 0.13%** 0.15%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Annualized
++ Amount is less than $0.01 per share
(1) Total return is calculated exclusive of sales charges or deferred
sales charges. Total returns for periods of less than one year are not
annualized.
# Net investment income and capital changes per share are based upon
monthly average shares outstanding.
-----------------------
11
The accompanying notes are an integral part of the financial statements.
<PAGE>
VAN KAMPEN VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
The Van Kampen Value Fund (the "Fund") is organized as a Maryland Corporation
and is registered under the Investment Company Act of 1940, as amended. The Fund
is a portfolio of the Van Kampen Series Fund, Inc. 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 shares are sold
with a contingent deferred sales charge on redemptions made within 5 years of
purchase which declines annually from 5% for redemptions made in year one, down
to 1.50% in year five. The contingent deferred sales charge is based on the
lesser of the current market value of the shares redeemed or the total cost of
such shares. Class B shares will automatically convert to Class A shares after
the eighth year following purchase. Class C shares are sold with a contingent
deferred sales charge of 1% for shares that are redeemed within one year of
purchase, based on the lesser of the current market value of the shares redeemed
or the total cost of such shares. All three classes of shares have identical
voting, dividend, liquidation and other rights.
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. TAXES: It is the Fund's intention to qualify as a regulated investment
company and distribute all of its taxable income. Accordingly, no provision for
Federal income taxes is required in the financial statements. 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 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.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the underlying
securities, with a market value at least equal to the amount of the repurchase
transaction, including principal and accrued interest. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the collateral.
In the event of default on the obligation to repurchase, the Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. In the event of default or bankruptcy by the counterparty to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
4. 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. Van Kampen Investments Inc. has agreed
that in the event any of its initial shares in the Fund at its inception are
redeemed, the proceeds on redemption will be reduced by the pro-rata portion of
any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the initial shares held at the same time of redemption.
5. STRUCTURED SECURITIES: The Value Fund may invest in interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of sovereign debt obligations. This type of restructuring
involves the deposit with or purchase by an entity of specified instruments and
the issuance by that entity of one or more
- -----------------------
12
<PAGE>
VAN KAMPEN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
classes of securities ("Structured Securities") backed by, or representing
interests in, the underlying instruments. Structured Securities generally will
expose the Fund to credit risks equivalent to that of the underlying
instruments. Structured Securities are typically sold in private placement
transactions with no active trading market. Investments in Structured Securities
may be more volatile than their underlying instruments, however, any loss is
limited to the amount of the original investment.
6. OTHER: Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Dividend income
is recorded on the ex-dividend date. 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.
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 and tax basis differences relating to shareholder distributions
may result in reclassification among undistributed net investment income (loss),
accumulated net realized gain (loss) and paid in capital.
Permanent book and tax basis differences, if any, are not included in ending
undistributed (distributions in excess of) net investment income for the purpose
of presenting net investment income (loss) per share in the Financial
Highlights.
B. ADVISER: 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 "Sub-Adviser") 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>
C. ADMINISTRATOR: Van Kampen Investment Advisory Corp. (the "Administrator")
also provides the Fund with administrative services pursuant to an
administrative agreement for a monthly fee which on an annual basis equals 0.25%
of the average daily net assets of 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.
D. DISTRIBUTOR: 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%, on an annualized basis, of the average daily net
assets attributable to the Class B and Class C shares of the Fund.
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 six months
ended December 31, 1998, the Distributor has advised the Fund that it earned
initial sales charges of $60,573 for Class A shares and deferred sales charges
of $7,062, $432,611 and $15,469 for Class A shares, Class B shares and Class C
shares, respectively.
E. CUSTODIAN: The Chase Manhattan Bank and its affiliates serve as custodian for
the Fund. 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 Sub-Advisers. Custody fees are payable monthly based on assets held in
custody, investment purchase and sales activity, an account maintenance fee,
plus reimbursement for certain out-of-pocket expenses. On October 1, 1998, the
Chase Manhattan Bank purchased MSTC.
F. DIRECTORS' FEES: 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.
G. PURCHASES AND SALES: For the six months ended December 31, 1998, the Fund
made purchases of approximately $74,729,000 and sales of approximately
------------------
13
<PAGE>
VAN KAMPEN VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONT.)
DECEMBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
$66,544,000 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.
H. OTHER: At December 31, 1998, cost and unrealized appreciation (depreciation)
for U.S. Federal income tax purposes of the investments of the Fund was:
<TABLE>
<CAPTION>
NET
COST APPREC. (DEPREC.) (DEPRECIATION)
(000) (000) (000) (000)
- ---------- --------- ----------- -------------
<S> <C> <C> <C>
$293,624 $23,136 $(38,549) $(15,413)
</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
Utility
Value
INTERNATIONAL/GLOBAL
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.
Don G. Powell
Chairman and Director,
Van Kampen Investments Inc.
Phillip B. Rooney
Vice Chairman and Director of The Servicemaster Company
Fernando Sisto
Professor Emeritus Stevens Institute of Technology;
Director, Dynalysis of Princeton
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
INVESTMENT SUB ADVISERS
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
CUSTODIAN
The Chase Manhattan Bank
3 MetroTech Center
Brooklyn, New York 11245
OFFICERS
Dennis J. McDonnell
PRESIDENT
John L. Sullivan
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
Curtis W. Morell
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
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 64141
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
200 E. Randolph St.
Chicago, Illinois 60601
- --------------------------------------------------------------------------------
FOR INFORMATION ON HOW TO INVEST, PLEASE CONTACT YOUR ACCOUNT REPRESENTATIVE OR
THE FUND AT (800) 341-2911.
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
PROSPECTUSES OF THE VAN KAMPEN FUNDS INC. WHICH DESCRIBES IN DETAIL EACH OF THE
INVESTMENT FUNDS' INVESTMENT POLICIES, FEES, AND EXPENSES. PLEASE READ THE
PROSPECTUSES CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
- --------------------------------------------------------------------------------
NOTES:
<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
